<PAGE> 1
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/X/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Concurrent Computer Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/X/ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Not Applicable
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
Not Applicable
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): The amount
on which the filing fee is calculated was determined pursuant to Rule
0-11(a)(4) and (c) of the Exchange Act by multiplying 1/50th of 1% by
the sum of (i) $10 million, the stated value of the Concurrent
Preferred Stock to be issued in the transaction, and (ii) a product of
(A) $2.98, the average of the reported high and low sale price of a
share of Concurrent Common Stock on May 23, 1996, and (B) 10,000,000,
the number of shares of Concurrent Common Stock to be issued in the
transaction.
(4) Proposed maximum aggregate value of transaction:
$39,800,000
-------------------------------------------------------------------------
(5) Total fee paid:
$7,960
-------------------------------------------------------------------------
/X/ Fee paid previously with preliminary materials.*
* $4,679.73 of the filing fee was paid upon the filing of the preliminary 14A on
December 14, 1995.
<PAGE> 2
CONCURRENT COMPUTER CORPORATION LOGO
May 23, 1996
Dear Fellow Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
Concurrent Computer Corporation ("Concurrent"), to be held at the Doubletree
Guest Suites, 555 N.W. 62nd Street, Fort Lauderdale, Florida 33309 at 3:30 p.m.,
local time, on June 26, 1996 (the "Concurrent Special Meeting"). A Notice of the
Concurrent Special Meeting, a proxy and a Joint Proxy Statement containing
information about the matters to be acted upon at the Concurrent Special Meeting
are enclosed. All holders of outstanding shares of Concurrent's common stock,
par value $.01 per share ("Concurrent Common Stock"), as of the close of
business on May 14, 1996 (the "Record Date") are entitled to notice of and to
vote at the Concurrent Special Meeting.
At the Concurrent Special Meeting, Concurrent's shareholders will be asked
to consider and vote upon proposals pursuant to a Purchase and Sale Agreement,
dated as of March 26, 1996, as amended and restated on May 23, 1996 (the
"Purchase and Sale Agreement"), between Harris Computer Systems Corporation, a
Florida corporation ("Harris"), and Concurrent for (i) the issuance of shares of
Concurrent Common Stock and (ii) an amendment (the "Concurrent Stock Plan
Amendment") to the Concurrent 1991 Restated Stock Option Plan (the "Concurrent
Stock Plan") described in greater detail in the accompanying Joint Proxy
Statement. Issuance of the Concurrent Common Stock Consideration and the
Additional Common Shares (as such terms are defined below) and implementation of
that portion of the Concurrent Stock Plan Amendment that provides for an
increase in the number of shares of Concurrent Common Stock authorized for
issuance to 9,000,000 shares are each conditioned upon the approval of the other
proposal. Implementation
of the remaining portions of the Concurrent Stock Plan Amendment is conditioned
upon the approval of both (i) the issuance of the Concurrent Common Stock and
the Additional Common Shares and (ii) the increase in the number of shares of
Concurrent Common Stock authorized for issuance under the Concurrent Stock Plan
to 9,000,000 such shares pursuant to the Concurrent Stock Plan Amendment.
As explained in greater detail in the accompanying Joint Proxy Statement,
the Purchase and Sale Agreement provides for the acquisition by Concurrent of
the assets (the "Assets") of Harris's real-time computer business (the "Harris
Real-Time Business"), together with 683,178 newly issued shares (the "Purchased
Harris Shares") of the common stock of Harris, par value $.01 per share (the
"Harris Common Stock"). The Purchased Harris Shares will represent approximately
9% of the shares of Harris Common Stock expected to be outstanding immediately
after the issuance of the Purchased Harris Shares and after giving effect to the
vesting and exercise of all currently outstanding options with respect to Harris
Common Stock. In exchange for the Assets and the Purchased Harris Shares,
Concurrent will (i) issue to Harris 10,000,000 shares of Concurrent Common Stock
(the "Concurrent Common Stock Consideration") which will represent approximately
23% of the shares of Concurrent Common Stock expected to be outstanding
immediately after the issuance of the Concurrent Common Stock Consideration and
after giving effect to the vesting and exercise of all outstanding options with
respect to Concurrent Common Stock (approximately 29% assuming full conversion
of the Concurrent Preferred Stock and Debentures into the Additional Common
Shares, each as defined below), (ii) issue to Harris shares of convertible
exchangeable preferred stock (the "Concurrent Preferred Stock") with a 9%
cumulative annual dividend payable quarterly in arrears and a liquidation
preference of $10,000,000, subject to adjustment to reflect, among other things,
the amount of net current assets of the Harris Real-Time Business transferred in
the Transaction (as defined below) (the "Preferred Stock Consideration"), and
(iii) assume liabilities of Harris relating to the Harris Real-Time Business
(the "Assumed Liabilities"). Pursuant to the terms of the Concurrent Preferred
Stock and the terms
<PAGE> 3
of the debentures (the "Debentures") into which the Concurrent Preferred Stock
is exchangeable, a maximum of 4,000,000 shares, subject to anti-dilution
adjustment, of Concurrent Common Stock (the "Additional Common Shares") may be
issuable upon the conversion of the Concurrent Preferred Stock and the
Debentures. The sale to Concurrent of the Assets and the Purchased Harris Shares
in exchange for the Concurrent Common Stock Consideration, the Preferred Stock
Consideration and the Assumed Liabilities and all other transactions
contemplated thereby are referred to as the "Transaction".
The Purchase and Sale Agreement also contemplates the execution in
connection with the closing of the Transaction of an agreement (the "Share
Holding Agreement") that will contain certain standstill, governance, transfer
and registration provisions. Pursuant to the Purchase and Sale Agreement and the
Share Holding Agreement, immediately after closing, Concurrent's Board of
Directors will consist of not more than nine directors, including three
directors designated by Harris and Harris's Board of Directors will consist of
not more than seven directors, including one director designated by Concurrent.
A copy of the Purchase and Sale Agreement is attached as Annex A and the
form of Share Holding Agreement is attached as Annex F to the accompanying Joint
Proxy Statement. We urge you to read and consider them carefully.
Concurrent's Board of Directors has unanimously approved the Transaction
and recommends a vote FOR approval and adoption of the issuance of both the
Concurrent Common Stock Consideration and the Additional Common Shares and
approval of the Concurrent Stock Plan Amendment by Concurrent shareholders. The
Board reached its conclusion regarding approval of the Transaction after careful
consideration of a number of factors, including the opinion of Berenson Minella
& Company ("Berenson Minella"), Concurrent's financial advisor, to the effect
that the purchase by Concurrent of the Assets and the Purchased Harris Shares
for the Concurrent Common Stock Consideration and the Preferred Stock
Consideration and the assumption of the Assumed Liabilities, taken as a whole,
are fair to Concurrent's shareholders from a financial point of view. The full
text of Berenson Minella's opinion is attached as Annex B to the Joint Proxy
Statement. SHAREHOLDERS ARE URGED TO READ SUCH OPINION IN ITS ENTIRETY FOR A
DISCUSSION OF THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND SCOPE OF THE REVIEW
UNDERTAKEN IN RENDERING SUCH OPINION.
SHAREHOLDERS SHOULD CAREFULLY CONSIDER THE MATTERS DESCRIBED UNDER "SPECIAL
FACTORS" BEFORE VOTING ON THE MATTERS TO BE CONSIDERED AT THE CONCURRENT SPECIAL
MEETING.
With respect to the proposals to be considered by the holders of Concurrent
Common Stock entitled to vote, the affirmative vote of a majority of the
following is required for approval: (i) the total votes cast by the holders of
Concurrent Common Stock with respect to the issuance of both the Concurrent
Common Stock Consideration and the Additional Common Shares and (ii) in a
separate vote, the total votes cast by the holders of Concurrent Common Stock
with respect to the Concurrent Stock Plan Amendment. In addition, the
Transaction is conditioned upon approval by Harris's shareholders of the
Transaction and an amendment to the Harris Stock Plan (as defined in the Joint
Proxy Statement).
In view of the importance of the actions to be taken at the Concurrent
Special Meeting, we urge you to read the enclosed materials carefully and to
complete, sign and date the enclosed proxy card and return it promptly in the
enclosed prepaid envelope whether or not you plan to attend the Concurrent
Special Meeting. If you attend the Concurrent Special Meeting, you may vote your
shares personally whether or not you have previously submitted a proxy. Your
prompt response will be greatly appreciated.
Sincerely yours,
/s/ John T. Stihl
John T. Stihl
Chairman, President and Chief
Executive Officer
Oceanport, New Jersey
2
<PAGE> 4
CONCURRENT COMPUTER CORPORATION LOGO
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held on June 26, 1996
------------------------
TO THE SHAREHOLDERS OF
CONCURRENT COMPUTER CORPORATION:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of Concurrent
Computer Corporation, a Delaware corporation ("Concurrent"), will be held on
June 26, 1996 at 3:30 p.m., local time, at the Doubletree Guest Suites, 555 N.W.
62nd Street, Fort Lauderdale, Florida 33309 (the "Concurrent Special Meeting"),
for the following purposes:
1. To consider and vote upon a proposal pursuant to the Purchase and
Sale Agreement, dated as of March 26, 1996, as amended and restated on May
23, 1996 (the "Purchase and Sale Agreement"), between Harris Computer
Systems Corporation ("Harris") and Concurrent for the issuance of both (i)
10,000,000 shares of common stock, par value $.01 per share ("Concurrent
Common Stock"), which will represent approximately 23% of the shares of
Concurrent Common Stock expected to be outstanding immediately after the
issuance of the shares and after giving effect to the vesting and exercise
of all currently outstanding options with respect to Concurrent Common
Stock (approximately 29% assuming full conversion of the preferred stock
and debentures into the Additional Common Shares, as discussed herein
below) and (ii) a maximum of 4,000,000 shares, subject to anti-dilution
adjustment, of Concurrent Common Stock (the "Additional Common Shares")
which will be issuable upon the conversion of the convertible exchangeable
preferred stock of Concurrent to be issued to Harris upon consummation of
the Purchase and Sale Agreement and the debentures into which such
preferred stock is exchangeable pursuant to the terms of such stock. Such
securities are to be issued in connection with the proposed acquisition by
Concurrent of the assets of the real-time computer business of Harris
Computer Systems Corporation ("Harris") together with 683,178 newly issued
shares of the common stock of Harris, par value $.01 per share (the "Harris
Common Stock"), which will represent approximately 9% of the shares of
Harris Common Stock expected to be outstanding immediately after such
issuance and after giving effect to the vesting and exercise of all
currently outstanding options with respect to the Harris Common Stock.
2. To consider and vote upon 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.
3. To consider and vote upon 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.
4. To transact such other business as may properly come before the
Concurrent Special Meeting.
<PAGE> 5
Adoption of proposals 1 and 2 are each conditioned upon the approval of the
other. Adoption of proposal 3 is conditioned upon the approval of both proposals
1 and 2.
Only holders of record of shares of Concurrent Common Stock, as of the
close of business on May 14, 1996, are entitled to notice of and to vote at the
Concurrent Special Meeting. The list of Concurrent shareholders entitled to vote
at the Concurrent Special Meeting will be available for examination by any
shareholder, for any purpose germane to the Concurrent Special Meeting, during
normal business hours, for ten days prior to the Concurrent Special Meeting at
the principal executive offices of Concurrent, Two Crescent Place, Oceanport,
New Jersey 07757.
Holders of Concurrent Common Stock do not have rights of appraisal under
Delaware law in connection with the matters to be considered at the Concurrent
Special Meeting.
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE THE ACCOMPANYING PROXY AND RETURN
IT PROMPTLY IN THE ADDRESSED ENVELOPE ENCLOSED.
By Order of the Board of Directors
Kevin J. Dell
Secretary
Oceanport, New Jersey
May 23, 1996
2
<PAGE> 6
CONCURRENT COMPUTER CORPORATION
TWO CRESCENT PLACE
OCEANPORT, NEW JERSEY 07757
HARRIS COMPUTER SYSTEMS CORPORATION
2101 WEST CYPRESS CREEK ROAD
FORT LAUDERDALE, FLORIDA 33309
------------------------
JOINT PROXY STATEMENT
------------------------
This Joint Proxy Statement (the "Joint Proxy Statement") is being furnished
to the shareholders of Concurrent Computer Corporation, a Delaware corporation
("Concurrent"), and Harris Computer Systems Corporation, a Florida corporation
("Harris"). The Joint Proxy Statement is being furnished in connection with the
solicitation of proxies by Concurrent's Board of Directors (the "Concurrent
Board") for use at the Special Meeting of Shareholders of Concurrent (the
"Concurrent Special Meeting") to be held at the Doubletree Guest Suites, 555
N.W. 62nd Street, Fort Lauderdale, Florida 33309, on June 26, 1996, at 3:30
p.m., local time. At the Concurrent Special Meeting, shareholders will be asked
to consider and vote on a proposal for the issuance of both (i) 10,000,000
shares (the "Concurrent Common Stock Consideration") of Concurrent's common
stock, par value $.01 per share (the "Concurrent Common Stock"), which will
represent approximately 23% of the shares of Concurrent Common Stock expected to
be outstanding immediately after the issuance of the Concurrent Common Stock
Consideration and after giving effect to the vesting and exercise of currently
outstanding options (the "Concurrent Options") with respect to Concurrent Common
Stock (approximately 29% assuming full conversion of the Concurrent Preferred
Stock and Debentures into the Additional Common Shares, each as defined below)
and (ii) a maximum of 4,000,000 shares, subject to anti-dilution adjustment, of
Concurrent Common Stock (the "Additional Common Shares") which will be issuable
upon the conversion of the Concurrent Preferred Stock and the Debentures into
which the Concurrent Preferred Stock is exchangeable pursuant to its terms. The
Concurrent Common Stock Consideration and the Additional Common Shares are
issuable in connection with the proposed acquisition by Concurrent of (a) the
assets (the "Assets") of the real-time computer business (the "Harris Real-Time
Business") of Harris Computer Systems Corporation, a Florida corporation
("Harris"), together with (b) 683,178 newly issued shares (the "Purchased Harris
Shares") of the common stock of Harris, par value $.01 per share (the "Harris
Common Stock"), which will represent approximately 9% of the shares of Harris
Common Stock expected to be outstanding immediately after the issuance of the
Purchased Harris Shares and after giving effect to the vesting and exercise of
certain currently outstanding options with respect to Harris Common Stock.
Pursuant to the Purchase and Sale Agreement dated as of March 26, 1996, as
amended and restated on May 23, 1996 (the "Purchase and Sale Agreement"),
between Concurrent and Harris, Concurrent shareholders will also be asked to
consider and vote upon an amendment (the "Concurrent Stock Plan Amendment") to
the Concurrent 1991 Restated Stock Option Plan (the "Concurrent Stock Plan") to
(w) 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, (x) 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, (y)
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 (z) 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. Issuance of the Concurrent Common
Stock Consideration and the Additional Common Shares and implementation of that
portion of the Concurrent Stock Plan Amendment that provides for an increase in
the number of shares of Concurrent Common Stock authorized for issuance to
9,000,000 shares are each conditioned upon the approval of the other proposal,
and approval by the Harris shareholders of the Purchase and Sale Agreement and
the transactions contemplated thereby. Implementation of the remaining portions
of the Concurrent Stock Plan Amendment is conditioned upon the approval by the
Concurrent shareholders of both (i) the issuance of
<PAGE> 7
the Concurrent Common Stock Consideration and the Additional Common Shares and
(ii) the increase in the number of shares of Concurrent Common Stock authorized
for issuance under the Concurrent Stock Plan to 9,000,000 such shares. See "THE
PROPOSED TRANSACTION," "TERMS OF THE TRANSACTION," "AMENDMENT TO THE CONCURRENT
STOCK OPTION PLAN" and "OTHER MATTERS FOR CONSIDERATION BY HARRIS SHAREHOLDERS."
Upon the terms and subject to the conditions of the Purchase and Sale
Agreement, Concurrent will acquire the Assets and the Purchased Harris Shares in
exchange for (i) the Concurrent Common Stock Consideration, (ii) shares of
convertible exchangeable preferred stock of Concurrent (the "Concurrent
Preferred Stock") with a 9% cumulative annual dividend payable quarterly in
arrears and a liquidation preference of $10,000,000, subject to adjustment to
reflect, among other things, the amount of net current assets of the Harris
Real-Time Business transferred in the Transaction (the "Preferred Stock
Consideration"), and (iii) the assumption of liabilities of Harris relating to
the Harris Real-Time Business (the "Assumed Liabilities"). The sale to
Concurrent of the Assets and the Purchased Harris Shares in exchange for the
Concurrent Common Stock Consideration, the Preferred Stock Consideration and the
Assumed Liabilities and all other transactions contemplated thereby is referred
to as the "Transaction". See "TERMS OF THE TRANSACTION."
This Joint Proxy Statement is also being furnished in connection with the
solicitation of proxies by Harris's Board of Directors (the "Harris Board") for
use at the Special Meeting of Shareholders in lieu of an annual meeting of
Harris (the "Harris Special Meeting") to be held at the Doubletree Guest Suites,
555 N.W. 62nd Street, Fort Lauderdale, Florida 33309 on June 26, 1996 at 2:00
p.m., local time. At the Harris Special Meeting, Harris's shareholders will be
asked to consider and vote on (i) the Purchase and Sale Agreement and the
transactions contemplated thereby; (ii) an amendment (the "Harris Stock Plan
Amendment") to the Harris Stock Incentive Plan (the "Harris Stock Plan") to
increase the number of shares of Harris Common Stock authorized for issuance
thereunder to 2,025,000 shares of Harris Common Stock and to amend the
director's options portion of the plan; (iii) an amendment to Harris's Articles
of Incorporation to change Harris's corporate name to CyberGuard Corporation
(the "Name Change"); (iv) the election of the class of directors whose term ends
at the 1998 Annual Meeting of Harris shareholders; (v) under certain
circumstances, the adjournment of the Harris Special Meeting; and (vi) the
appointment of KPMG Peat Marwick LLP ("KPMG") as Harris's independent
accountants for fiscal year 1996. The Transaction is conditioned upon the
approval by Concurrent's shareholders of the issuance of both the Concurrent
Common Stock Consideration and the Additional Common Shares and that portion of
the Concurrent Stock Plan Amendment that provides for an increase in the number
of shares of Concurrent Common Stock authorized for issuance to 9,000,000
shares, and the approval by Harris's shareholders of the Harris Stock Plan
Amendment. Other than the Transaction, none of the proposals to be considered at
the Harris Special Meeting is conditioned on the approval of any other proposal.
See "THE PROPOSED TRANSACTION," "TERMS OF THE TRANSACTION," and "OTHER MATTERS
FOR CONSIDERATION BY HARRIS SHAREHOLDERS."
The Harris Real-Time Business represented approximately 82% of the assets
of Harris as of March 30, 1996 and accounted for 83%, 89% and 87% of Harris's
revenues for the six months ended March 30, 1996 and the fiscal years ended
September 30, 1995 and June 30, 1994, respectively.
All information contained in this Joint Proxy Statement relating to Harris
and its subsidiaries has been supplied by Harris and all information relating to
Concurrent and its subsidiaries has been supplied by Concurrent.
Concurrent Common Stock and Harris Common Stock are traded in the
over-the-counter market and price quotations therefor are reported on the
National Association of Securities Dealers Automated Quotation System ("NASDAQ")
National Market System(R) ("Nasdaq/NMS") under the symbols "CCUR" and "NHWK",
respectively. The last reported sale prices per share of Concurrent Common Stock
and Harris Common Stock as of May 22, 1996 (the latest practicable trading day
before the printing of this Joint Proxy Statement) were $3 1/16 and $19 1/2,
respectively. See "MARKET PRICE AND DIVIDENDS."
2
<PAGE> 8
Only shareholders of record of Concurrent Common Stock and Harris Common
Stock at the close of business on May 14, 1996 (the "Record Date") are entitled
to notice of and to vote at the Concurrent Special Meeting and the Harris
Special Meeting, respectively. Each shareholder of Concurrent or Harris, as the
case may be, is entitled to one vote per share on any matter that may properly
come before the Concurrent Special Meeting or the Harris Special Meeting,
respectively. On the Record Date there were 30,652,680 shares of Concurrent
Common Stock and 5,998,415 shares of Harris Common Stock outstanding.
This Joint Proxy Statement and the accompanying form of proxy are first
being sent to Concurrent and Harris shareholders on or about May 28, 1996.
------------------------
SEE "SPECIAL FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY SHAREHOLDERS OF BOTH CONCURRENT
AND HARRIS IN CONNECTION WITH THEIR CONSIDERATION OF THE TRANSACTION.
------------------------
THE DATE OF THIS JOINT PROXY STATEMENT IS MAY 23, 1996.
3
<PAGE> 9
Concurrent expects to file with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (the "Concurrent Form S-3")
with respect to the registration of Concurrent Common Stock issuable to Harris
in connection with the Concurrent Common Stock Consideration and the Additional
Common Shares issuable upon conversion of the Preferred Stock Consideration. In
addition, Concurrent expects to file with the Commission a registration
statement on Form S-3 in connection with Concurrent Common Stock (i) to be sold
in connection with the funding of certain severance obligations of Concurrent,
(ii) to be sold to fund the payment to Berenson Minella & Company ("Berenson
Minella"), financial advisor to Concurrent, pursuant to the engagement letter,
dated June 5, 1995, as amended, between Concurrent and Berenson Minella of a
portion of the advisory fees due thereunder and (iii) to be sold in connection
with the satisfaction of certain obligations to John T. Stihl, Chairman,
President and Chief Executive Officer of Concurrent pursuant to an amendment,
dated November 5, 1995, to the Employment Agreement, dated August 25, 1993, by
and between Concurrent and John T. Stihl. The Form S-3s to be filed by
Concurrent are referred to herein as the Concurrent S-3s. Harris expects to file
with the Commission a separate registration statement on Form S-3 (the "Harris
Form S-3") with respect to the registration of Harris Common Stock issuable to
Concurrent, pursuant to the terms of the Transaction. For information concerning
the effect on Concurrent's share price and Harris's share price with respect to
shares which may become issuable as a result of the Transaction, see "SPECIAL
FACTORS -- Fluctuation in Value of the Consideration to be Issued in the
Transaction; Changes in Market Prices of Concurrent or Harris Common Stock."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which have been filed with the Commission by
Concurrent pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), are incorporated by reference in this Joint Proxy Statement:
(1) Annual Report on Form 10-K for the fiscal year ended June 30, 1995
(the "Concurrent Annual Report").
(2) Quarterly Reports on Form 10-Q for the fiscal quarters ended
September 30, 1995, December 31, 1995 and March 31, 1996.
(3) All documents subsequently filed by Concurrent pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
Concurrent Special Meeting.
Any statement incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Joint Proxy Statement to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this Joint
Proxy Statement.
THIS JOINT PROXY STATEMENT INCORPORATES BY REFERENCE DOCUMENTS RELATING TO
CONCURRENT WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THIS JOINT
PROXY STATEMENT IS ACCOMPANIED BY A COPY OF THE CONCURRENT ANNUAL REPORT. A COPY
OF CONCURRENT'S QUARTERLY REPORT ON FORM 10-Q FOR THE FISCAL QUARTER ENDED MARCH
31, 1996 AND THE OTHER DOCUMENTS INCORPORATED BY REFERENCE (NOT INCLUDING
EXHIBITS TO SUCH DOCUMENTS OTHER THAN EXHIBITS SPECIFICALLY INCORPORATED BY
REFERENCE INTO SUCH DOCUMENTS) ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS JOINT PROXY STATEMENT IS DELIVERED,
UPON WRITTEN OR ORAL REQUEST. REQUESTS FOR SUCH DOCUMENTS SHOULD BE DIRECTED TO
KEVIN J. DELL, VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY, CONCURRENT
COMPUTER CORPORATION, TWO CRESCENT PLACE, OCEANPORT, NEW JERSEY 07757, TELEPHONE
NUMBER (908) 870-4354. IN ORDER TO ENSURE TIMELY DELIVERY OF ANY REQUESTED
DOCUMENT PRIOR TO THE CONCURRENT SPECIAL MEETING, REQUESTS SHOULD BE MADE BY
JUNE 17, 1996.
4
<PAGE> 10
TABLE OF CONTENTS
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PAGE
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<S> <C>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................................... 4
SUMMARY OF JOINT PROXY STATEMENT...................................................... 9
The Companies....................................................................... 9
The Concurrent Special Meeting...................................................... 10
The Harris Special Meeting.......................................................... 11
The Proposed Transaction............................................................ 12
SELECTED HISTORICAL FINANCIAL DATA OF CONCURRENT...................................... 17
SELECTED HISTORICAL FINANCIAL DATA OF HARRIS.......................................... 18
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA OF CONCURRENT.................... 19
MARKET PRICE AND DIVIDENDS............................................................ 20
SPECIAL FACTORS....................................................................... 21
Fluctuation in Value of the Consideration to be Issued in the Transaction; Changes
in Market Prices of Concurrent or Harris Common Stock............................ 21
No Public Market for Concurrent Preferred Stock; Value of Concurrent Preferred
Stock............................................................................ 22
Conditions to the Consummation of the Transaction; Material Adverse Effect.......... 22
Uncertainties in Successfully Integrating the Harris Real-Time Business and
Achieving Cost Savings........................................................... 23
Impact of Transaction-Related Charges and Costs on Financial Performance;
Uncertainty of Transaction-Related Charges and Costs............................. 23
Declining Trend in Net Sales........................................................ 24
History of Operating Losses; Accumulated Deficit.................................... 25
Potential Shortfall in Liquidity.................................................... 25
Potentially Adverse Customer Reaction............................................... 27
Lag in Customer Orders; Long Sales Cycle............................................ 27
Shift in Emphasis Away from Proprietary Systems..................................... 27
Product Obsolescence; Significant Research and Development Expenditures............. 28
Need to Establish Additional Marketing Relationships................................ 29
Harris's Limited Operating History in Trusted Market; Unpredictability of Operating
Results.......................................................................... 29
Limited Protection of Intellectual Property and Proprietary Rights; Risk of
Litigation; Reliance
on Licensed Technology........................................................... 31
Reliance on Government Business..................................................... 31
Harris's Transition to the Commercial Market........................................ 32
Dependence on International Operations.............................................. 32
Competition......................................................................... 33
Limited Sources of Supply........................................................... 33
Potential Need to Expand Infrastructure............................................. 35
Dependence on Key Employees......................................................... 35
Dividend Policy..................................................................... 36
Certain Barriers to Changes of Control; Effects of Changes of Control............... 36
Inadvertent Investment Company...................................................... 36
Limitations on the Use of Certain Tax Loss Carryforwards............................ 37
THE CONCURRENT SPECIAL MEETING........................................................ 38
General............................................................................. 38
Purpose of the Concurrent Special Meeting........................................... 38
</TABLE>
5
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<S> <C>
Place.......................39Record Date; Shares Outstanding....................... 39
Voting at the Concurrent Special Meeting............................................ 39
Solicitation of Proxies............................................................. 40
Effect of Abstentions and "Broker Non-Votes"........................................ 40
Appraisal Rights.................................................................... 40
THE HARRIS SPECIAL MEETING............................................................ 41
General............................................................................. 41
Purpose of the Harris Special Meeting............................................... 41
Date, Time and Place................................................................ 41
Record Date; Shares Outstanding..................................................... 41
Voting at the Harris Special Meeting................................................ 42
Adjournment of the Harris Special Meeting........................................... 42
Solicitation of Proxies............................................................. 43
Effect of Abstentions and "Broker Non-Votes"........................................ 43
Dissenter's Rights.................................................................. 43
THE PROPOSED TRANSACTION.............................................................. 44
General............................................................................. 44
Background of the Transaction....................................................... 44
Recommendations of the Board of Directors of Concurrent and Concurrent's Reasons for
the Transaction.................................................................. 48
Opinion of Concurrent's Financial Advisor........................................... 50
Recommendations of the Special Committee and the Board of Directors of Harris and
Harris's Reasons for the Transaction............................................. 56
Opinion of Harris's Financial Advisor............................................... 58
Interests of Certain Persons in the Transaction..................................... 63
Operations of Harris Following the Transaction...................................... 66
Operations of Concurrent Following the Transaction.................................. 66
TERMS OF THE TRANSACTION.............................................................. 67
The Purchase and Sale Agreement..................................................... 67
The Share Holding Agreement......................................................... 79
Non-Competition Agreement........................................................... 86
Concurrent Preferred Stock.......................................................... 86
Debentures.......................................................................... 90
Accounting Treatment................................................................ 93
Regulatory Filings and Approvals.................................................... 93
State Anti-Takeover Statutes........................................................ 93
Certain Federal Income Tax Consequences of the Transaction.......................... 93
Appraisal Rights.................................................................... 94
DIRECTORS AND EXECUTIVE OFFICERS OF CONCURRENT AFTER CONSUMMATION OF THE
TRANSACTION......................................................................... 95
Executive Officers.................................................................. 95
Directors........................................................................... 95
DIRECTORS AND EXECUTIVE OFFICERS OF HARRIS AFTER CONSUMMATION OF THE TRANSACTION...... 98
Executive Officers.................................................................. 98
Changes in the Composition of the Harris Board...................................... 98
</TABLE>
6
<PAGE> 12
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incumbent Directors Remaining on the Harris Board................................... 99
Directors Whose Terms Expire at the Harris Special Meeting.......................... 99
AMENDMENT TO THE CONCURRENT STOCK OPTION PLAN......................................... 100
Description of the Concurrent Stock Plan............................................ 100
Reasoning Behind the Proposal....................................................... 102
Federal Income Tax Aspects of the Concurrent Stock Plan............................. 102
OTHER MATTERS FOR CONSIDERATION BY HARRIS SHAREHOLDERS................................ 104
Amendment to the Harris Stock Plan.................................................. 104
Change of Harris's Corporate Name................................................... 108
Election of Directors............................................................... 108
Adjournment of the Harris Special Meeting........................................... 109
Approval of Independent Accountants................................................. 109
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF CONCURRENT................... 110
Management's Discussion of the Pro Forma Condensed Consolidated Financial Statements
of Concurrent.................................................................... 117
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF HARRIS....................... 119
PROJECTED FINANCIAL INFORMATION....................................................... 125
CERTAIN INFORMATION REGARDING CONCURRENT.............................................. 127
General............................................................................. 127
Management.......................................................................... 127
Identity of Directors and Officers.................................................. 128
Corporate Governance................................................................ 129
Executive Compensation.............................................................. 130
Option Grants....................................................................... 131
Option Exercises and Values as of March 31, 1996.................................... 133
Severance Arrangements.............................................................. 133
Security Ownership of Certain Beneficial Owners and Management...................... 134
CERTAIN INFORMATION REGARDING HARRIS.................................................. 136
General............................................................................. 136
The Transaction..................................................................... 136
Markets............................................................................. 136
Customers........................................................................... 138
Products and Services -- Real-Time Division......................................... 138
Products and Services -- Trusted Division........................................... 139
Maintenance......................................................................... 140
Products in Development............................................................. 140
Distribution........................................................................ 140
Research and Development............................................................ 141
Manufacturing Operations............................................................ 141
Sources of Supply................................................................... 141
Competition......................................................................... 141
Intellectual Property............................................................... 142
Employees........................................................................... 142
Backlog............................................................................. 142
Properties.......................................................................... 142
</TABLE>
7
<PAGE> 13
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Environmental Matters............................................................... 143
Legal Proceedings................................................................... 143
Regulatory Compliance............................................................... 143
Management.......................................................................... 143
General Information Relating to the Board of Directors.............................. 144
Summary Compensation Table.......................................................... 145
Compensation Plans.................................................................. 147
Compensation and Stock Option Committee Report on Executive Compensation............ 148
Performance Graph................................................................... 152
HARRIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.......................................................................... 153
Results of Operations............................................................... 153
Liquidity and Capital Resources..................................................... 157
Inflation........................................................................... 158
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.......................................................................... 159
OTHER MATTERS......................................................................... 159
DATE FOR SUBMISSION OF PROPOSALS OF HARRIS SHAREHOLDERS............................... 159
INDEX TO FINANCIAL STATEMENTS......................................................... F-1
ANNEXES
ANNEX A PURCHASE AND SALE AGREEMENT
ANNEX B OPINION OF BERENSON MINELLA & COMPANY
ANNEX C OPINION OF BEAR, STEARNS & CO. INC.
ANNEX D AMENDMENT TO THE CONCURRENT STOCK OPTION PLAN
ANNEX E AMENDMENT TO THE HARRIS STOCK PLAN
ANNEX F FORM OF SHARE HOLDING AGREEMENT
ANNEX G FORM OF CERTIFICATE OF DESIGNATION OF CONCURRENT PREFERRED STOCK
ANNEX H DEBENTURE TERM SHEET FOR CONCURRENT SERIES A DEBENTURES
</TABLE>
8
<PAGE> 14
SUMMARY OF JOINT PROXY STATEMENT
The following is a summary of certain information contained elsewhere in
this Joint Proxy Statement, including the Annexes hereto, which are a part of
this Joint Proxy Statement. It is not, and is not intended to be, complete in
itself. Reference is made to, and this summary is qualified in its entirety by,
the more detailed information contained elsewhere in this Joint Proxy Statement.
Shareholders are encouraged to read carefully all of the information contained
in the Joint Proxy Statement. Unless otherwise defined herein, capitalized terms
used in this summary have the respective meanings ascribed to them in this Joint
Proxy Statement. Unless otherwise indicated, references to Harris Common Stock
have been adjusted to give effect to a three-for-one stock split declared in
March 1996.
The Joint Proxy Statement contains forward-looking statements within the
meaning of Section 21E of the Exchange Act. Such statements include, but are not
limited to, projected sales, gross margin, net income, adequacy of capital
resources, plans concerning products and market acceptance, customer reaction to
the Transaction and cost savings to be achieved by the Transaction.
Forward-looking statements are inherently subject to risks and
uncertainties, many of which cannot be predicted with accuracy and some of which
might not even be anticipated. Future events and actual results, financial and
otherwise, could differ materially from those set forth in or contemplated by
the forward-looking statements herein. Important factors that could contribute
to such differences are set forth below under "SPECIAL FACTORS." See also
"PROJECTED FINANCIAL INFORMATION."
FOR A DISCUSSION OF CERTAIN IMPORTANT FACTORS THAT SHOULD BE CONSIDERED BY
CONCURRENT AND HARRIS SHAREHOLDERS IN CONNECTION WITH THEIR CONSIDERATION OF THE
TRANSACTION, SEE "SPECIAL FACTORS."
THE COMPANIES
Concurrent Computer
Corporation.............. Concurrent is engaged in the business of providing
and servicing high-performance real-time computer
systems. The principal executive offices of
Concurrent are located at Two Crescent Place,
Oceanport, New Jersey 07757, and its telephone
number is (908) 870-4500. See "CERTAIN INFORMATION
REGARDING CONCURRENT" and the Concurrent Annual
Report, a copy of which is included with this Joint
Proxy Statement.
Harris Computer Systems
Corporation.............. Harris is engaged in the business of providing and
servicing high-performance real-time and trusted
(i.e., secure) computer systems. The principal
executive offices of Harris are located at 2101
West Cypress Creek, Fort Lauderdale, Florida 33309,
and its telephone number is (305) 974-1700. See
"CERTAIN INFORMATION REGARDING HARRIS."
Trading Markets............ Concurrent Common Stock and Harris Common Stock are
traded in the over-the-counter market and price
quotations therefor are reported on the Nasdaq/NMS
under the symbols "CCUR" and "NHWK", respectively.
The closing prices of Concurrent Common Stock and
Harris Common Stock on November 3, 1995, the last
full trading day immediately prior to the public
announcement of a proposed merger between
Concurrent and Harris (which merger was abandoned
in favor of the Transaction) were $1 17/32 and
$4 1/4 per share, respectively, and on February 7,
1996, the last full trading day prior to the public
announcement of the Transaction, were $ 25/32 per
share and $6 1/2 per share, respectively. On May
22, 1996, the most recent practicable date prior to
the printing of this Joint Proxy Statement, those
closing prices were $3 1/16 and $19 1/2,
respectively. See "MARKET PRICE AND DIVIDENDS."
9
<PAGE> 15
THE CONCURRENT SPECIAL MEETING
Time, Date and Place....... The Concurrent Special Meeting will be held on June
26, 1996, at 3:30 p.m., local time, at the
Doubletree Guest Suites, 555 N.W. 62nd Street, Fort
Lauderdale, Florida 33309. See "THE CONCURRENT
SPECIAL MEETING -- General."
Purpose of the Meeting..... Shareholders will consider and vote upon proposals
to (i) approve the issuance of the Concurrent
Common Stock Consideration and the Additional
Common Shares and (ii) amend the Concurrent Stock
Plan to (w) 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, (x) 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, (y)
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 (z) provide
that each option granted to a non-employee director
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. See "THE
CONCURRENT SPECIAL MEETING," "THE PROPOSED
TRANSACTION" and "AMENDMENT TO THE CONCURRENT STOCK
OPTION PLAN."
Record Date................ Shareholders of record of Concurrent Common Stock
at the close of business on May 14, 1996 (the
"Record Date") are entitled to notice of and to
vote at the Concurrent Special Meeting. See "THE
CONCURRENT SPECIAL MEETING -- Record Date; Shares
Outstanding."
Voting Rights.............. Each share of Concurrent Common Stock is entitled
to one vote with respect to all matters presented
at the Concurrent Special Meeting. See "THE
CONCURRENT SPECIAL MEETING -- Voting at the
Concurrent Special Meeting."
Vote Required.............. The affirmative vote of a majority of the following
is required for approval: (i) the total votes cast
by the holders of Concurrent Common Stock with
respect to the issuance of both the Concurrent
Common Stock Consideration and the Additional
Common Shares and (ii) in a separate vote, the
total votes cast by the holders of Concurrent
Common Stock with respect to the Concurrent Stock
Plan Amendment. Issuance of the Concurrent Common
Stock Consideration and the Additional Common
Shares and implementation of that portion of the
Concurrent Stock Plan Amendment that provides for
an increase in the number of shares of Concurrent
Common Stock authorized for issuance to 9,000,000
shares are each conditioned upon the approval of
the other proposal. Implementation of the remaining
portions of the Concurrent Stock Plan Amendment is
conditioned upon the approval of both (i) the
issuance of the Concurrent Common Stock
Consideration and the Additional Common Shares and
(ii) the increase in the number of shares of
Concurrent Common Stock authorized for issuance
under the Concurrent Stock Plan to 9,000,000 such
shares. In addition, the Transaction is conditioned
upon the approval by Harris's shareholders of the
Transaction (other than the Harris Stock Plan
Amendment) and, in a separate vote, the Harris
Stock Plan Amendment. See "THE CON-
10
<PAGE> 16
CURRENT SPECIAL MEETING -- Voting at the Concurrent
Special Meeting."
Revocability of Proxy...... Any Concurrent shareholder who executes and returns
a proxy may revoke such proxy at any time before it
is voted by (i) notifying in writing the Corporate
Secretary of Concurrent at Two Crescent Place,
Oceanport, New Jersey 07757, (ii) granting a
subsequent proxy or (iii) appearing in person and
voting at the Concurrent Special Meeting.
Attendance at the Concurrent Special Meeting will
not in and of itself constitute revocation of a
proxy. See "THE CONCURRENT SPECIAL
MEETING -- Voting at the Concurrent Special
Meeting."
THE HARRIS SPECIAL MEETING
Time, Date and Place....... The Harris Special Meeting will be held on June 26,
1996 at 2:00 p.m., local time, at the Doubletree
Guest Suites, 555 N.W. 62nd Street, Fort
Lauderdale, Florida 33309. See "THE HARRIS SPECIAL
MEETING -- General."
Purpose of the Meeting..... Shareholders will consider and vote upon proposals
(i) to approve the Transaction; (ii) to approve the
Harris Stock Plan Amendment to increase to
2,025,000 the number of shares of Harris Common
Stock authorized for issuance thereunder and to
amend the director's options portion of the plan;
(iii) to approve an amendment to Harris's Articles
of Incorporation to change Harris's corporate name
to CyberGuard Corporation; (iv) to elect the class
of directors whose term ends at the 1998 Annual
Meeting of Harris shareholders; (v) under certain
circumstances, to adjourn the Harris Special
Meeting; and (vi) to approve the appointment of
KPMG as Harris's independent accountants for fiscal
year 1996. See "THE HARRIS SPECIAL MEETING."
Record Date................ Shareholders of record of Harris Common Stock as of
the close of business on the Record Date are
entitled to notice of and to vote at the Harris
Special Meeting. See "THE HARRIS SPECIAL MEETING --
Record Date; Shares Outstanding."
Voting Rights.............. Each share of Harris Common Stock is entitled to
one vote with respect to all matters presented at
the Harris Special Meeting. See "THE HARRIS SPECIAL
MEETING -- Voting at the Harris Special Meeting."
Vote Required.............. The affirmative vote of the holders of a majority
of the outstanding shares of Harris Common Stock is
required to approve the Transaction and the Name
Change. The affirmative vote of the holders of a
majority of the total votes cast by holders of
Harris Common Stock is required to approve the
Harris Stock Plan Amendment, the election of
directors, the adjournment of the Harris Special
Meeting and the appointment of Harris's independent
accountants. Consummation of the Transaction is
conditioned upon the approval by Concurrent's
shareholders of the issuance of the Concurrent
Common Stock Consideration and the Additional
Common Shares and that portion of the Concurrent
Stock Plan Amendment that provides for an increase
in the number of shares of Concurrent Common Stock
authorized for issuance to 9,000,000 shares, and
the approval by Harris's shareholders of the
Transaction (other than the Harris Stock Plan
Amendment) and, in a separate vote, the Harris
Stock Plan Amendment. See "THE HARRIS SPECIAL
MEETING -- Voting at the Harris Special Meeting."
11
<PAGE> 17
Revocability of Proxy...... Any Harris shareholder who executes and returns a
proxy may revoke such proxy at any time before it
is voted by (i) notifying in writing the Corporate
Secretary of Harris at 2101 West Cypress Creek
Road, Fort Lauderdale, Florida 33309, (ii) granting
a subsequent proxy, or (iii) appearing in person
and voting at the Harris Special Meeting.
Attendance at the Harris Special Meeting will not
in and of itself constitute revocation of a proxy.
See "THE HARRIS SPECIAL MEETING -- Voting at the
Harris Special Meeting."
Adjournment................ The Harris Special Meeting may be adjourned to
another date and/or place for any proper purpose
(including, without limitation, for the purpose of
soliciting additional proxies or in order to obtain
necessary regulatory approvals). See "THE HARRIS
SPECIAL MEETING -- Adjournment of the Harris
Special Meeting."
THE PROPOSED TRANSACTION
Effects of the
Transaction................ Concurrent will, upon the terms and subject to the
conditions of the Purchase and Sale Agreement,
acquire the Assets and the Purchased Harris Shares.
In exchange, Concurrent will (i) deliver to Harris
the Concurrent Common Stock Consideration and
Preferred Stock Consideration and (ii) assume the
Assumed Liabilities. Upon consummation of the
Transaction, Harris will own approximately 23% of
the shares of Concurrent Common Stock expected to
be outstanding immediately after the issuance of
the Concurrent Common Stock Consideration and after
giving effect to the vesting and exercise of all
currently outstanding options with respect to
Concurrent Common Stock (approximately 29% assuming
full conversion of the Concurrent Preferred Stock
and Debentures into the Additional Common Shares)
and Concurrent will own approximately 9% of the
shares of Harris Common Stock expected to be
outstanding immediately after the issuance of the
Purchased Harris Shares and after giving effect to
the vesting and exercise of certain currently
outstanding options with respect to Harris Common
Stock. As more fully described under "TERMS OF THE
TRANSACTION -- The Purchase and Sale Agreement,"
the Purchase and Sale Agreement also contemplates
certain post-closing adjustments that may result in
reductions or increases in the liquidation
preference of Concurrent Preferred Stock received
by Harris at the Closing.
Conditions to the
Transaction................ The Purchase and Sale Agreement provides that the
obligations of the parties to consummate the
Transaction are subject to certain conditions
including, among others, approval by the requisite
vote of Concurrent shareholders with respect to the
issuance of the Concurrent Common Stock
Consideration and the Additional Common Shares and
that portion of the Concurrent Stock Plan Amendment
that provides for an increase in the number of
shares of Concurrent Common Stock authorized for
issuance to 9,000,000 shares, approval by the
requisite vote of Harris shareholders with respect
to the Transaction and the Harris Stock Plan
Amendment, the absence of any material adverse
change in the business, operations or prospects of
Harris or Concurrent, as the case may be, the
consents of all necessary third parties and
effectiveness of the registration statements filed
by Concurrent and Harris with respect to the shares
of each party issued to the other pursuant to the
terms of the Purchase and Sale Agreement and the
transactions contemplated
12
<PAGE> 18
thereby. See "TERMS OF THE TRANSACTION -- The
Purchase and Sale Agreement."
Concurrent has received the consent of its primary
lender with respect to the Transaction. In
addition, Concurrent is in discussions with such
lender to modify the lending agreement,
specifically to increase the amount available under
its revolving credit facility and to modify various
covenants to become effective upon the closing of
the Transaction. The condition under the Purchase
and Sale Agreement to Concurrent's and Harris's
obligation to consummate the Transaction that
Concurrent obtain additional specified consents has
been waived by Concurrent and Harris.
The Purchase and Sale Agreement provides, as a
condition to consummation of the Transaction, that
Harris receive consents under certain agreements,
leases and licenses with third parties. Harris has
received oral consents as to all but one of such
third-party arrangements. As to the remaining
arrangement, the Purchase and Sale Agreement
provides a mechanism to consummate the Transaction
in the event a consent is not received. The cost of
using this mechanism is not expected to be material
to the results of operations of Harris or
Concurrent.
Closing.................... The Transaction is expected to be consummated as
soon as practicable following the satisfaction (or
waiver) of the conditions set forth in the Purchase
and Sale Agreement or at such later date, time or
place as the parties shall mutually agree (the
"Closing Date"). See "TERMS OF THE
TRANSACTION -- The Purchase and Sale Agreement."
Share Holding Agreement.... At the Closing Date, Concurrent and Harris will
execute a Share Holding Agreement (the "Share
Holding Agreement") which contains certain
standstill and governance provisions designed to
restrict each party's ability to control the other
party and to protect each party's public
shareholders. The Share Holding Agreement further
provides Concurrent and Harris with certain
registration rights and transfer restrictions with
respect to the shares of the other party to be
issued to each pursuant to the Transaction. See
"TERMS OF THE TRANSACTION -- The Share Holding
Agreement."
Non-Competition
Agreement.................. The Purchase and Sale Agreement provides that the
parties will enter into a mutually agreed
Non-Competition/Distribution Agreement (the
"Non-Competition Agreement") prior to the Closing
Date.
Recommendations of the
Concurrent Board and
Concurrent's Reasons for
the Transaction.......... Concurrent's Board of Directors (the "Concurrent
Board") has unanimously concluded that the
Transaction is fair to and in the best interests of
Concurrent and its shareholders, has approved the
Purchase and Sale Agreement and recommends that
Concurrent shareholders vote for the approval of
(i) the issuance of the Concurrent Common Stock
Consideration and the Additional Common Shares and
(ii) the Concurrent Stock Plan Amendment
(collectively referred to as the "Concurrent
Proposals"). The Concurrent Board considered many
factors in reaching its conclusion to approve the
Purchase and Sale Agreement and to recommend that
Concurrent shareholders vote for the approval of
the Concurrent Proposals. See "THE PROPOSED
TRANSACTION -- Recommendations of the Board of
Directors of Concurrent and Concur-
13
<PAGE> 19
rent's Reasons for the Transaction," and "AMENDMENT
TO THE CONCURRENT STOCK OPTION PLAN -- Reasoning
Behind the Proposal."
Recommendations of the
Harris
Board and Harris's
Reasons for
the Transaction.......... The Harris Board has unanimously concluded that the
Transaction is fair to and in the best interests of
Harris and its shareholders, has approved the
Transaction and recommends that Harris shareholders
vote to approve the Transaction (other than the
Harris Stock Plan Amendment) and, in a separate
vote, the Harris Stock Plan Amendment. The Harris
Board considered many factors in reaching its
conclusion to approve the Transaction (including
the recommendation of the Special Committee of the
Harris Board) and the Harris Stock Plan Amendment
and to recommend their approval to Harris
shareholders. See "THE PROPOSED
TRANSACTION -- Recommendations of the Special
Committee and the Board of Directors of Harris and
Harris's Reasons for the Transaction" and "OTHER
MATTERS FOR CONSIDERATION BY HARRIS SHAREHOLDERS."
Opinion of Financial
Advisors................... Berenson Minella has delivered a written opinion to
the Concurrent Board, dated as of the date of this
Joint Proxy Statement, to the effect that the
purchase by Concurrent of the Assets and the
Purchased Harris Shares for the Concurrent Common
Stock Consideration and the Preferred Stock
Consideration and the assumption of the Assumed
Liabilities, taken as a whole, are fair to
Concurrent's shareholders from a financial point of
view. See "THE PROPOSED TRANSACTION -- Opinion of
Concurrent's Financial Advisor." Bear, Stearns &
Co. Inc. ("Bear Stearns") has delivered a written
opinion to the Special Committee of the Harris
Board, dated as of the date of this Joint Proxy
Statement, to the effect that the Transaction is
fair to Harris's shareholders from a financial
point of view. See "THE PROPOSED
TRANSACTION -- Opinion of Harris's Financial
Advisor."
Termination; Amendment
and Waiver............... Notwithstanding the approval by the Concurrent
shareholders of the issuance of the Concurrent
Common Stock Consideration and the Additional
Common Shares, and, in separate votes, the
Concurrent Stock Plan Amendment, and the approval
by the Harris shareholders of the Transaction
(other than the Harris Stock Plan Amendment) and,
in a separate vote, the Harris Stock Plan
Amendment, under certain circumstances, the
Purchase and Sale Agreement may be terminated and
the Transaction abandoned prior to the Closing
Date. See "TERMS OF THE TRANSACTION -- The Purchase
and Sale Agreement." Under certain circumstances,
upon termination of the Purchase and Sale Agreement
a termination fee will be payable. See "TERMS OF
THE TRANSACTION -- The Purchase and Sale
Agreement."
At any time prior to the Closing Date, Harris and
Concurrent may (i) extend the time for the
performance of any of the obligations or other acts
to be performed by the other parties, (ii) waive
any inaccuracies in the representations and
warranties by the other parties contained in the
Purchase and Sale Agreement or in any document
delivered pursuant to the Purchase and Sale
Agreement and (iii) waive compliance with any of
the agreements of the other parties or conditions
contained in the
14
<PAGE> 20
Purchase and Sale Agreement, but only by an
instrument in writing signed by Harris and
Concurrent. Neither Concurrent nor Harris intends
to re-solicit its shareholders for approval in the
event that conditions to consummation of the
Transaction are waived. The Purchase and Sale
Agreement may be amended by a written agreement
signed by Harris and Concurrent. See "TERMS OF THE
TRANSACTION -- The Purchase and Sale Agreement."
Interests of Certain
Persons.................... In considering the recommendations of the
Concurrent Board and the Harris Board with respect
to the Purchase and Sale Agreement, shareholders
should be aware that certain members of
Concurrent's and Harris's management and the
Concurrent and Harris Boards have certain interests
in the Transaction that are in addition to the
interests of shareholders of Concurrent and Harris
generally. These interests include that upon
consummation of the Transaction certain executive
officers and directors of Harris are expected to
become executive officers and directors of
Concurrent and certain outstanding stock options
held by employees of Harris and all outstanding
stock options held by employees of Concurrent will
become fully vested and immediately exercisable and
restrictions on shares of Harris Common Stock held
by certain executive officers of Harris will lapse.
Each company's board of directors was aware of
these interests and considered them, among other
matters, in approving the Purchase and Sale
Agreement and the transactions contemplated
thereby. See "THE PROPOSED TRANSACTION -- Interests
of Certain Persons in the Transaction."
Accounting Treatment....... The Transaction will be accounted for under the
"purchase" method of accounting; the purchase price
will be allocated based on the fair value of the
assets acquired and the liabilities assumed. See
"TERMS OF THE TRANSACTION -- Accounting Treatment."
Regulatory Filings and
Approvals................ The consummation of the Transaction may be subject
to certain regulatory approvals. With respect to
governmental review under the Hart-Scott-Rodino
Antitrust Improvements Act (the "HSR Act"),
Concurrent and Harris were informed on May 23, 1996
that the waiting period under the HSR Act has been
terminated.
Certain Federal Income Tax
Consequences of the
Transaction.............. Neither Concurrent nor Harris will recognize gain
or loss for federal income tax purposes in
connection with the issuance of the Concurrent
Common Stock Consideration or the issuance of the
Preferred Stock Consideration or the Purchased
Harris Shares. The sale of the Harris Real-Time
Business will be a taxable transaction to Harris
under applicable federal, state, and local tax
laws. Both Harris's and Concurrent's obligation to
consummate the Transaction is conditioned upon
Harris and Concurrent receiving an opinion from
Holland & Knight, counsel to Harris, concerning the
effect of the Transaction on certain covenants made
by Harris in connection with its 1994 spin-off from
Harris Corporation. See "TERMS OF THE
TRANSACTION -- Certain Federal Income Tax
Consequences of the Transaction."
15
<PAGE> 21
Appraisal and Dissenter's
Rights..................... Holders of Concurrent and Harris Common Stock do
not have appraisal or dissenter's rights,
respectively, in connection with the Transaction.
See "TERMS OF THE TRANSACTION -- Appraisal Rights."
Concurrent Stock Plan
Amendment................ At the Concurrent Special Meeting, Concurrent's
shareholders will be asked to consider and vote
upon the Concurrent Stock Plan to (i) increase the
number of shares of Concurrent Common Stock
authorized for issuance from 4,014,725 to 9,000,000
shares of Concurrent Common Stock, (ii) 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, (iii) 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
(iv) provide that each option granted to a non-
employee director 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.
See "AMENDMENT TO THE CONCURRENT STOCK OPTION
PLAN."
Issuance of the Concurrent Common Stock
Consideration and the Additional Common Shares and
implementation of that portion of the Concurrent
Stock Plan Amendment that provides for an increase
in the number of shares of Concurrent Common Stock
authorized for issuance to 9,000,000 shares are
conditioned upon the approval of each other and the
approval of the Transaction by the Harris
shareholders. Implementation of the remaining
portions of the Concurrent Stock Plan Amendment is
conditioned upon the approval of both (i) the
issuance of the Concurrent Common Stock and the
Additional Common Shares and (ii) the increase in
the number of shares of Concurrent Common Stock
authorized for issuance under the Concurrent Stock
Plan to 9,000,000 such shares. See "AMENDMENT TO
THE CONCURRENT STOCK OPTION PLAN."
Other Matters for
Consideration
by Harris Shareholders... At the Harris Special Meeting, Harris's
shareholders will be asked to consider and vote
upon the Harris Stock Plan Amendment to increase to
2,025,000 the number of shares of Harris Common
Stock available for issuance thereunder and to
amend the director's options portion of the Harris
Stock Plan. Other than the consummation of the
Transaction, which is conditioned upon approval of
the Harris Stock Plan Amendment, none of the
proposals for consideration by Harris shareholders
at the Harris Special Meeting is conditioned on the
approval of any other proposal.
In addition, at the Harris Special Meeting,
Harris's shareholders will be asked to vote on and
approve an amendment to Harris's Articles of
Incorporation to change Harris's corporate name to
CyberGuard Corporation. Harris shareholders will
also be asked to consider and to elect the class of
directors whose term ends at the 1998 Annual
Meeting of Harris shareholders, under certain
circumstances, to adjourn the Harris Special
Meeting and to approve the appointment of KPMG as
Harris's independent accountants for fiscal year
1996. The approval of such proposals is not
conditioned on the approval of any other matter to
be considered at the Harris Special Meeting,
including the Transaction.
16
<PAGE> 22
SELECTED HISTORICAL FINANCIAL DATA OF CONCURRENT
The following table sets forth selected historical consolidated financial
data for Concurrent for each of the last five years in the period ended June 30,
1995, and for the nine month periods ended March 31, 1995 and 1996. Such data
have been derived from, and should be read in conjunction with, the audited
consolidated financial statements and other financial information contained in
Concurrent's Annual Reports on Form 10-K and the unaudited consolidated interim
financial statements contained in Concurrent's Quarterly Report on Form 10-Q for
the nine months ended March 31, 1996, including the notes thereto, incorporated
by reference herein. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
<TABLE>
<CAPTION>
UNAUDITED
NINE MONTHS ENDED
MARCH 31, FISCAL YEARS ENDED JUNE 30,
------------------- ---------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------- -------- -------- -------- -------- --------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales.................... $77,108 $109,638 $140,144 $179,031 $220,464 $ 221,572 $254,945
Gross margin................. 32,682 47,447 60,667 76,041 104,841 104,711 93,659
Income (loss) before
extraordinary gain (loss)
and cumulative effect of
change in accounting
principles................. (5,656) (2,271) (2,006) (11,631) 3,869 (955) (66,834)
Net income (loss)............ (5,656) (2,271) (2,006) (39,824) 3,869 60,147 (66,834)
Income (loss) per share:
Income (loss) before
extraordinary gain (loss)
and cumulative effect of
change in accounting
principles............... $ (0.19) $ (0.08) $ (0.07) $ (0.41) $ 0.40 $ (0.13) $ (35.46)
Net income (loss) per
share...................... $ (0.19) $ (0.08) $ (0.07) $ (1.42) $ 0.40 $ 8.00 $ (35.46)
</TABLE>
<TABLE>
<CAPTION>
UNAUDITED
AT MARCH 31, AT JUNE 30,
------------ ---------------------------------------------------------
1996 1995 1994 1993 1992 1991
------------ -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Cash and short-term
investments............. $ 3,078 $ 5,728 $ 9,374 $ 30,422 $ 20,611 $ 23,439
Working capital........... 7,239 1,865 (616) 36,673 22,742 (146,937)
Total assets.............. 80,506 98,359 123,170 157,086 158,136 213,351
Long-term debt............ 7,129 9,536 13,240 67,938 61,613 2,131
Redeemable preferred
stock................... -- -- -- -- -- 900
Shareholders' equity
(deficiency)............ 30,283 35,170 35,048 18,503 14,739 (69,195)
Book value per share...... $ 0.99 $ 1.16 $ 1.18 $ 1.94 $ 1.61 $ (36.15)
</TABLE>
17
<PAGE> 23
SELECTED HISTORICAL FINANCIAL DATA OF HARRIS
The following table sets forth selected historical financial data for
Harris. The financial data as of September 30, 1995 and 1994 and for the three
months ended September 30, 1994, and the fiscal year ended September 30, 1995
have been derived from the consolidated financial statements of Harris for such
periods audited by KPMG Peat Marwick LLP. The statement of operations data for
the six months ended March 30, 1996 and March 31, 1995 and the balance sheet
data as of March 30, 1996 are unaudited and, in the opinion of Harris, include
all adjustments (consisting of only normal recurring adjustments) necessary to
present fairly the information set forth therein. The results for the six months
ended March 30, 1996 are not necessarily indicative of the results to be
expected for the full fiscal year ending September 30, 1996 or future periods.
Such data have been derived from, and should be read in conjunction with, the
unaudited consolidated financial statements and other financial information,
including the notes thereto, appearing elsewhere in this Joint Proxy Statement.
The consolidated historical financial data as of June 30, 1994 and 1993 and for
the fiscal years ended June 30, 1994 and 1993 have been derived from
consolidated financial statements audited by Ernst & Young LLP. The summary
consolidated historical financial data as of June 30, 1992 and 1991 and for the
fiscal years ended June 30, 1992 and 1991 have been derived from unaudited
consolidated financial statements. Because Harris did not become an independent
entity until October 1994, the historical financial statements for prior periods
do not necessarily reflect the results of operations or financial position that
would have been attained if Harris had been a separate independent company. See
"HARRIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS" and "CONSOLIDATED FINANCIAL STATEMENTS OF HARRIS."
<TABLE>
<CAPTION>
THREE
MONTHS
SIX MONTHS ENDED ENDED FISCAL YEARS ENDED
--------------------- ------------- ---------------------------------------------------------
MARCH 30, MARCH 31, SEPTEMBER 30, SEPTEMBER 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1996 1995 1994(A) 1995 1994 1993 1992 1991
--------- --------- ------------- ------------- -------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Gross sales............ $25,564 $27,786 $ 7,748 $ 45,111 $ 64,640 $ 55,450 $ 60,368 $ 64,866
Cost of sales.......... 13,330 13,323 5,466 25,764 31,236 29,863 30,295 32,975
Gross Income........... 12,234 14,463 2,282 19,347 33,404 25,677 30,073 31,891
Operating income
(loss)............... (3,432) (9) (5,327) (11,540) 5,564 (2,062) 1,578 5,212
Net income (loss)...... (3,275) 215 (7,590) (11,088) 4,392 (457) 1,298 2,740
Net income (loss) per
common share(b)...... (0.55) 0.04 (1.28) (1.88)
</TABLE>
<TABLE>
<CAPTION>
MARCH 30, SEPTEMBER 30, JUNE 30,
--------- ------------------------- ----------------------------------------------
1996 1995 1994 1994 1993 1992 1991
--------- --------- ------------- ------------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets........... 38,552 41,431 54,929 62,092 46,229 43,599 35,411
Total shareholders'
equity............... 29,140 32,096 42,793 50,126 28,701 27,501 25,089
Book value per
share(b)............. 4.86 5.42 7.24
</TABLE>
- ---------------
(a) During fiscal year 1995, Harris changed its fiscal year end from June 30 to
September 30.
(b) Calculation for fiscal years 1991 through June 30, 1994 is not provided
because Harris was not an independent company until its spin-off from Harris
Corporation effective October 7, 1994.
18
<PAGE> 24
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL
DATA OF CONCURRENT
The following table sets forth selected unaudited pro forma combined
financial data for Concurrent for the fiscal year ended June 30, 1995 and for
the nine month period ended March 31, 1996, which are presented to reflect the
estimated impact of the Transaction on the historical consolidated financial
statements of Concurrent, which will be accounted for as a purchase, and the
issuance of the Concurrent Common Stock Consideration and the Preferred Stock
Consideration (assuming a $1.7 million reduction to the liquidation preference
thereof based on the net current assets of Harris's Real-Time Business at March
31, 1996, as provided under the Purchase and Sale Agreement and the Certificate
of Designation, as defined below) and the Berenson Minella Shares (as defined
below). The income statement data assume that the Transaction had been
consummated at the beginning of each period presented. The income statement data
for the year ended June 30, 1995 include the results of operations for
Concurrent for the year ended June 30, 1995 and for the Harris Real-Time
Business for the year ended September 30, 1995. The balance sheet data assume
that the Transaction was consummated on March 31, 1996. The unaudited pro forma
combined financial data do not reflect any synergies anticipated by Concurrent's
and Harris's management as a result of the Transaction (such as savings expected
from consolidation of manufacturing, research and development, selling,
marketing, administrative and other functions). For a description of such
synergies see "THE PROPOSED TRANSACTION -- Recommendations of the Board of
Directors of Concurrent and Concurrent's Reasons for the Transaction," and "PRO
FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF CONCURRENT." The resulting
pro forma combined financial data are not necessarily indicative of the results
of operations or the financial position which would have occurred had the
Transaction been consummated at the beginning of each period presented, nor are
they necessarily indicative of Concurrent's future results of operations or
financial position. The unaudited pro forma combined financial data should be
read in conjunction with the historical consolidated financial statements of
Concurrent, Harris and the unaudited pro forma combined financial information,
including the notes thereto, incorporated by reference or appearing elsewhere in
this Joint Proxy Statement. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE," "TERMS OF THE TRANSACTION -- Accounting Treatment," "PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF CONCURRENT," "PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS OF HARRIS," "PROJECTED FINANCIAL INFORMATION"
and "HARRIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION."
<TABLE>
<CAPTION>
NINE MONTHS ENDED FISCAL YEAR ENDED
MARCH 31, 1996 JUNE 30, 1995
------------------ ------------------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
INCOME STATEMENT DATA
Net sales................................................. $106,087 $180,438
Gross margin.............................................. $ 48,510 $ 80,216
Net loss.................................................. $ (7,567) $ (7,403)
Net loss per share........................................ $ (0.20) $ (0.20)
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31, 1996
------------------
<S> <C> <C>
BALANCE SHEET DATA
Cash and short-term investments............................................... $ 3,155
Working capital............................................................... $ 28,167
Total assets.................................................................. $109,451
Long-term debt................................................................ $ 7,129
Shareholders' equity.......................................................... $ 40,383
Book value per common share................................................... $ 0.99(a)
</TABLE>
- ---------------
(a) Calculated by dividing pro forma shareholders' equity by the sum of
Concurrent Common Stock outstanding as of March 31, 1996 (30,569,049) plus
the number of shares provided to purchase the Harris Real-Time Business
(10,000,000 shares of common stock), plus the pro forma estimated number of
shares of Concurrent Common Stock (320,802) at March 31, 1996 (based on an
estimated average price at such time of $1.43 per share) to be sold by
Concurrent to fund the payment to Berenson Minella of a portion of its
financial advisory fees. Does not include shares of Concurrent Common Stock
issuable upon exercise of options (the "Concurrent Options") or warrants
(the "Concurrent Warrants") or upon the conversion of the Concurrent
Preferred Stock, as well as shares which may be issuable in connection with
the funding of certain severance obligations to certain employees of
Concurrent. See "SPECIAL FACTORS -- Fluctuation in Value of the
Consideration to be Issued in the Transaction; Changes in Market Prices of
Concurrent or Harris Common Stock."
19
<PAGE> 25
MARKET PRICE AND DIVIDENDS
Concurrent Common Stock is quoted and traded on the Nasdaq/NMS under the
symbol "CCUR." Harris Common Stock is quoted and traded on the Nasdaq/NMS under
the symbol "NHWK." The table below sets forth, for the quarters indicated, the
high and low bid prices of Harris Common Stock and Concurrent Common Stock, as
reported by the Nasdaq/NMS. Neither Concurrent nor Harris currently pays, or has
in the past paid, cash dividends.
<TABLE>
<CAPTION>
HARRIS CONCURRENT
COMMON STOCK* COMMON STOCK
-------------- -------------
HIGH LOW HIGH LOW
----- ---- ---- ----
<S> <C> <C> <C> <C>
Fiscal year ended June 30, 1994:
First Quarter.............................................. -- -- 3 9/16 2 1/2
Second Quarter............................................. -- -- 3 1/4 1 1/2
Third Quarter.............................................. -- -- 2 5/16 1
Fourth Quarter............................................. -- -- 2 3/8 1 3/8
Fiscal year ended June 30, 1995:
First Quarter.............................................. -- -- 2 7/16 1 15/16
Second Quarter............................................. 5 11/6 2 21/6 1 15/16 1 1/4
Third Quarter.............................................. 6 3 37/6 1 5/8 25/3
Fourth Quarter............................................. 5 53/6 4 5/6 2 1/2 3/4
Fiscal year ending June 30, 1996:
First Quarter.............................................. 5 3/4 3 53/6 2 21/32 1 1/2
Second Quarter............................................. 5 1/2 3 5/6 2 1 1/4
Third Quarter.............................................. 16 21/64 3 35/6 1 7/8 3/4
Fourth Quarter (through May 22, 1996)...................... 19 1/2 13 3/4 3 7/32 1 5/8
</TABLE>
- ---------------
* Harris's fiscal year ends September 30. Because Harris was not an independent
entity until October 7, 1994, the Harris Common Stock was not publicly traded
prior to that time. Thus, the per share data with respect to Harris is
represented commencing with the fiscal year ended September 30, 1994.
The closing bid prices of Concurrent Common Stock and Harris Common Stock
on November 3, 1995, the last full trading day immediately prior to the public
announcement of a proposed merger between Concurrent and Harris (which merger
was abandoned in favor of the Transaction) as reported on the Nasdaq/NMS were
$1 17/32 and $4 1/4 per share, respectively, and on February 7, 1996, the last
full trading day prior to the public announcement of the Transaction, as
reported by the Nasdaq/NMS, were $ 25/32 per share and $6 1/2 per share,
respectively. The closing prices of Concurrent Common Stock and Harris Common
Stock on May 22, 1996, the most recent practicable date prior to the printing of
this Joint Proxy Statement, as reported by the Nasdaq/NMS, were $3 1/16 per
share and $19 1/2 per share, respectively. SHAREHOLDERS ARE URGED TO OBTAIN
CURRENT MARKET QUOTATIONS.
20
<PAGE> 26
SPECIAL FACTORS
In considering whether to approve and adopt the issuance of the Concurrent
Common Stock Consideration and the Additional Common Stock and the Concurrent
Stock Plan Amendment, the shareholders of Concurrent should consider, and in
considering whether to approve and adopt the Transaction and the Harris Stock
Plan Amendment, the shareholders of Harris should consider, the following
matters.
FLUCTUATION IN VALUE OF THE CONSIDERATION TO BE ISSUED IN THE TRANSACTION;
CHANGES IN MARKET PRICES OF CONCURRENT OR HARRIS COMMON STOCK
General Market Risk
Pursuant to the Purchase and Sale Agreement, Concurrent will issue
10,000,000 shares of Concurrent Common Stock to Harris, and Harris will issue
683,178 shares of Harris Common Stock to Concurrent. The prices of each of the
Concurrent and Harris Common Stock may vary from such prices at the date of this
Joint Proxy Statement and at the date of the Harris Special Meeting and the
Concurrent Special Meeting and may continue to fluctuate thereafter. Such
variations may be the result of changes in the business, operations or prospects
of Concurrent or Harris, market assessments of the likelihood that the
Transaction will be consummated and the timing thereof, regulatory
considerations, general market, economic and industry conditions, the results of
operations, liquidity and the market's perception of prospects of Concurrent or
Harris, as well as other factors affecting Harris and Concurrent including the
Special Factors set forth below.
Issuance of Additional Shares
The trading price of the Concurrent Common Stock may be adversely affected
by shares of Concurrent Common Stock that may be issued and become publicly
tradable at or shortly after the Closing Date. These include (i) shares issuable
upon exercise of options held by optionees of Concurrent Common Stock as
described in "THE PROPOSED TRANSACTION -- Interests of Certain Persons in the
Transaction" (the "Option Shares"), (ii) the shares to be sold by Concurrent to
fund the payment of a portion of the fees of its financial advisor, Berenson
Minella, in connection with Berenson Minella's engagement letter described in
"THE PROPOSED TRANSACTION -- Opinion of Concurrent's Financial Advisor" (the
"Berenson Minella Shares"), (iii) the shares that may be issuable to John T.
Stihl, Chairman, President and Chief Executive Officer of Concurrent, in
connection with an amendment to Mr. Stihl's employment agreement as described in
"THE PROPOSED TRANSACTION -- Interests of Certain Persons in the Transaction"
(the "Stihl Shares"), (iv) shares which may be issuable in connection with
funding certain severance obligations under Concurrent's existing severance
contracts and policies as described in "THE PROPOSED TRANSACTION -- Interests of
Certain Persons in the Transaction" (the "Severance Shares") and (v) shares
issuable upon exercise of Concurrent Warrants to purchase 361,544 shares of
Concurrent Common Stock at $3 per share (the "Warrant Shares"). An aggregate of
approximately 4.3 million Option Shares, Berenson Minella Shares, Stihl Shares,
estimated Severance Shares and Warrant Shares will become issuable and publicly
tradable, representing approximately 9.6% of the shares of Concurrent Common
Stock expected to be outstanding immediately following the Transaction.
Additionally, the Concurrent Preferred Stock is convertible at the option of the
holder into a maximum of 4,000,000 shares of Concurrent Common Stock (assuming
no adjustments to the liquidation preference thereof as provided under the
Purchase and Sale Agreement and the Certificate of Designation (as defined
below)). When the Additional Common Shares issuable upon conversion of the
Concurrent Preferred Stock (assuming full conversion thereof) are aggregated
with the Concurrent Common Stock Consideration, and shares of Concurrent Common
Stock issuable upon exercise of options (the "Concurrent Options"), the Berenson
Minella Shares, the Stihl Shares, the Severance Shares and the Warrant Shares,
the total number of shares of Concurrent Common Stock issuable upon consummation
of the Transaction represents approximately 40.9% of the shares of Concurrent
Common Stock outstanding immediately following the Transaction. As a result of
the Transaction, Concurrent expects that approximately 14 million shares of
Concurrent Common Stock may be issued in the near future consisting of the
Concurrent Common Stock Consideration, the Option Shares, the Berenson Minella
Shares, the Severance Shares, and the Stihl Shares.
21
<PAGE> 27
For purposes of the calculations set forth above, the number of Berenson
Minella Shares, Stihl Shares and Severance Shares was determined based on a per
share market price for the Concurrent Common Stock of $3 1/16 (the closing price
on May 22, 1996). To the extent the per share price increases above $3 1/16, the
number of Berenson Minella Shares would increase and the number of Stihl Shares
and Severance Shares would decrease. To the extent the per share price decreases
below $3 1/16, the number of Berenson Minella Shares would decrease and the
number of Stihl Shares and Severance Shares would increase. Accordingly, the
foregoing numbers are merely estimates and the total dilution could be greater
than or less than that described above.
The trading price of the Harris Common Stock may be adversely affected by
shares of Harris Common Stock that may be issued and become publicly tradable at
or shortly after the Closing Date due to (i) the issuance to Concurrent of the
Purchased Harris Shares, (ii) the shares issuable upon exercise of options held
by optionees of Harris Common Stock and (iii) shares of Harris Common Stock
issued and publicly traded as the result of an underwritten public offering of
Harris Common Stock that may be effected shortly after the consummation of the
Transaction. If such an offering is undertaken, such offering will be registered
pursuant to the Securities Act of 1933, as amended (the "Securities Act"), may
include shares of Harris Common Stock to be issued to Concurrent pursuant to the
Transaction and those held by certain other selling shareholders, and will be
made only by means of a prospectus meeting the requirements of state and federal
securities laws. This is not such a prospectus. Assuming (i) all the outstanding
options to purchase shares of Harris Common Stock (the "Harris Options") are
exercised (all of the Harris Options are in-the-money), (ii) the grant of 91,800
shares of Harris Common Stock to Mr. Siegel (78,000 shares) and Mr. Dunleavy
(13,800 shares) in connection with a non-competition agreement and (iii) the
expiration of all restrictions on the restricted shares granted to Messrs.
Siegel and Dunleavy, an aggregate of approximately 926,230 shares of Harris
Common Stock would become issuable and publicly tradable, representing
approximately 13.3% of the shares of Harris Common Stock expected to be
outstanding immediately following the Transaction, not including the Purchased
Harris Shares.
NO PUBLIC MARKET FOR CONCURRENT PREFERRED STOCK; VALUE OF CONCURRENT PREFERRED
STOCK
There is no public market for the Concurrent Preferred Stock and it is not
anticipated that a trading market will ever develop. Concurrent has agreed to
register the Concurrent Common Stock issuable upon conversion of the Concurrent
Preferred Stock but not the Concurrent Preferred Stock. Absent such
registration, the transferability of the Concurrent Preferred Stock is subject
to restrictions under applicable federal and state securities laws. Therefore,
Harris may be unable to sell the Concurrent Preferred Stock for an indefinite
period of time.
Due to the convertibility of the Concurrent Preferred Stock into Concurrent
Common Stock, the Concurrent Preferred Stock is expected to fluctuate in value
based on factors which are substantially similar to the factors that influence
the price of the Concurrent Common Stock.
CONDITIONS TO THE CONSUMMATION OF THE TRANSACTION; MATERIAL ADVERSE EFFECT
The Purchase and Sale Agreement contemplates a number of conditions which
must be satisfied or waived prior to the Closing (as defined below) of the
Transaction which include, among other things, that (i) certain third party
consents shall have been obtained, (ii) the Non-Competition Agreement and the
other Ancillary Agreements (as defined below) shall have been executed and
delivered by Concurrent and Harris, (iii) Concurrent and Harris shall have
reached mutual agreement with respect to the transfer of stock and assets of the
Transferred Subsidiaries (as defined in the Purchase and Sale Agreement), (iv)
Concurrent shall have approved schedules which will provide for the transfer of
a portion of the Assets and the assumption of a portion of the Assumed
Liabilities, (v) from the date of the Purchase and Sale Agreement through the
Closing Date, there shall not have occurred any change in the financial
condition, business, operations or prospects of Concurrent or Harris that would
have or would be reasonably likely to have a material adverse effect on
Concurrent or Harris, as the case may be, other than any such change that
affects both parties in a substantially similar manner, (vi) the fairness
opinions of Berenson Minella and Bear Stearns shall not have been withdrawn and
(vii) registration statements of Harris covering the Purchased Harris Shares and
of
22
<PAGE> 28
Concurrent covering the Concurrent Common Stock Consideration shall be effective
under the Securities Act and such shares shall have been approved for inclusion
on the Nasdaq/NMS, subject to official notice of issuance. If any of the
conditions set forth in the Purchase and Sale Agreement are not satisfied, the
Transaction would only be consummated if such condition is waived. There can be
no assurance, however, that such a waiver will occur. However, if such a waiver
does occur neither Concurrent nor Harris intends to re-solicit its shareholders
with respect to approval of any of the matters that shareholders are being asked
to approve in this Joint Proxy Statement. For a more complete description of
conditions to consummation of the Transaction, see "TERMS OF THE
TRANSACTION--The Purchase and Sale Agreement." Moreover, to the extent that any
of the special factors mentioned in this Joint Proxy Statement have or would be
reasonably likely to have a material adverse effect on the business, properties,
assets, liabilities, financial performance, results of operations or financial
condition of Concurrent or Harris, it is possible that a number of conditions
under the Purchase and Sale Agreement would remain unsatisfied which, if not
waived, could result in the Transaction not being consummated.
UNCERTAINTIES IN SUCCESSFULLY INTEGRATING THE HARRIS REAL-TIME BUSINESS AND
ACHIEVING COST SAVINGS
In determining that the Transaction is advisable and in the best interest
of its shareholders, each of the Concurrent Board and the Harris Board
considered, among other things, the potential cost savings, operating
efficiencies and other synergies expected to result from the consummation
thereof. Cost savings actions were assumed to begin on the date of the
Transaction with full implementation being reached six months after the
Transaction. These savings will require significant reductions in employees, as
well as consolidation of facilities worldwide and other miscellaneous cost
savings actions. Obtaining these savings through the consolidation of functions,
the integration of departments, systems and procedures and the relocation of
staff present significant management challenges. The consolidation of
development and manufacturing operations are especially challenging. The failure
to effectively consolidate development functions may result in delays in
introduction of the next generation of products. Similarly, the failure to
effectively consolidate manufacturing operations could result in a delay in the
shipment of certain customer orders and could affect the quality of the goods
delivered. Such failures could have a material adverse effect on the future
financial performance, results of operations and financial condition of
Concurrent following the Transaction. There can be no assurance that such
potential cost savings, operating efficiencies and other synergies will be
successfully accomplished or accomplished within the time periods initially
contemplated, particularly since liquidity issues (which are discussed below)
may constrain Concurrent's ability to integrate the real-time business of
Concurrent and Harris. Moreover, although the primary purpose of such actions
will be to realize direct cost savings and other operating efficiencies, there
can be no assurance of the extent to which such cost savings and efficiencies
will be achieved.
IMPACT OF TRANSACTION-RELATED CHARGES AND COSTS ON FINANCIAL PERFORMANCE;
UNCERTAINTY OF
TRANSACTION-RELATED CHARGES AND COSTS
As described below, Concurrent expects to take a pre-tax charge and to
adjust goodwill in the quarter in which the Transaction is consummated to cover
the transaction costs of the Transaction and the costs of integrating the
real-time businesses of Concurrent and Harris, including the cost of facility
closings and employee terminations to eliminate duplicate facilities and excess
capacity and other non-recurring items. As described in "THE PROPOSED
TRANSACTION -- Recommendations of the Board of Directors of Concurrent and
Concurrent's Reasons for the Transaction," the amount of these
transaction-related charges and costs was estimated to be $22.2 million at the
time the Transaction was considered by the Concurrent Board. Concurrent expects
to take a material pre-tax charge and to adjust negative goodwill, as
appropriate, in the quarter in which the Transaction is consummated to cover the
Transaction and business integration costs. At the time this Joint Proxy
Statement was finalized, Concurrent estimated the aggregate charge for these
items to be in the range of $29 to $32 million. Approximately $18 million of
these costs are expected to be paid out in cash over the next two years
(primarily fiscal year 1997), $9 to $11 million of the total charge are expected
to be non-cash fixed asset carrying cost adjustments and approximately $2 to $3
million are expected to be obligations settled using the proceeds from the
issuance of Concurrent Common Stock. Such preliminary estimates indicate that
approximately $8 million of the future cash payments are expected to be
23
<PAGE> 29
incremental to the current cash flow run-rate of the two real-time businesses on
a stand alone basis combined. Such costs include Transaction expenses (such as
investment banker, legal and accounting fees), employee, facility and equipment
relocation costs and employee out-placement costs. The $10 million of remaining
cash payments are expected to be a continuation of current funding requirements
and, after their full satisfaction, are expected to positively impact
Concurrent's liquidity. For example, cash expenditures for employee severance
costs are expected to be paid out over time without increasing payroll costs;
payroll costs are expected to decline as severance payments cease. There can be
no assurances as to the actual amount of these charges or adjustments, and such
charges or adjustments could be higher than current estimates. In addition,
there may be adjustments in future periods relating to the cost of integrating
the real-time businesses of Concurrent and Harris. However, the amount of such
future adjustments cannot currently be determined.
Harris
In connection with the Transaction, Harris expects to report certain
charges in the quarter ending June 30, 1996. Harris estimates that such charges
will consist of, among other things, a loss of approximately $8.5 million on the
Transaction (based on $2.14 per share, the average of the closing prices for
Concurrent Common Stock from May 1 through May 7, 1996), approximately $1.8
million in charges related to certain stock grants and approximately $1.4
million in additional charges. In addition, Harris will report approximately 23%
of any losses reported by Concurrent in the same period.
In addition, there may be further charges by Concurrent or Harris in future
periods relating to the cost of integrating the real-time business of Concurrent
and Harris. However, the amount of such future charges cannot currently be
determined.
DECLINING TREND IN NET SALES
Over the past five years, annual net sales of Concurrent generally have
declined from a high of approximately $255 million to an annualized rate in the
current fiscal year of approximately $100 million. With the exception of the
quarter ended June 30, 1995, where net sales increased $162,000 over the prior
quarter, net sales of Concurrent declined quarter to quarter during the fiscal
year ended June 30, 1995 from $41.5 million in the first quarter to $30.5
million in the fourth quarter for total net sales during the period of $140.1
million. The trend continued in the first two quarters of the fiscal year ending
June 30, 1996. Net sales for the three months ended September 30, 1995 were
$26.5 million, a decrease of $15.0 million from the prior year period and a
decrease of $4 million from the previous quarter. Net sales for the three months
ended December 31, 1995 were $24.5 million, a decrease of $13.3 million from the
prior year quarter and a decrease of $2 million from the previous quarter. Net
sales for the three months ended March 31, 1996 were $26.2 million, a decrease
of $4.2 million from the prior year quarter and an increase of $1.7 million from
the previous quarter. As a result of the distractions and uncertainties
associated with the Transaction, net sales for the quarter ended June 30, 1996
are expected to be the lowest quarterly revenues for the fiscal year ending June
30, 1996. The general decline in net sales is largely the result of the
anticipated decline in sales of proprietary systems, including reduced shipments
under the U.S. Department of Commerce's Next Generation Weather Radar (NEXRAD)
program without a corresponding increase in the sales of open systems. Declining
sales of computer systems consequently results in fewer maintenance contracts.
This, together with a decline in renewal rates on maturing maintenance contracts
as installed systems are decommissioned and competitive discounting from third
party maintenance providers, has led to a declining trend in service revenues.
Harris's net sales have varied and may continue to fluctuate from quarter
to quarter. Net sales for its fiscal year ended September 30, 1995 were $45.1
million compared to $64.1 million for the fiscal year ended June 30, 1994.
(Harris changed its fiscal year end from June 30 to September 30 effective in
the year beginning October 1, 1994.) Net sales for the four quarters of the 1995
fiscal year were $13.3 million, $14.5 million, $8.6 million and $8.7 million,
respectively. Net sales for the quarters ending December 29, 1995 and March 30,
1996 were $12.5 million and $13.1 million, respectively, a decrease of $.8
million and $1.4 million, respectively from the previous year periods. See
"HARRIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS."
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The future growth of Concurrent's business and its future financial
performance will depend on, among other things, its ability to increase net
sales by continuing to develop and market competitive real-time open systems
products, and to expand its revenue base through a combination of internal
growth and strategic alliances. There can be no assurance as to the future
growth of Concurrent's business and financial performance or as to the success
of its products and strategic alliances.
HISTORY OF OPERATING LOSSES; ACCUMULATED DEFICIT
As of March 30, 1996, Harris had an accumulated deficit of $14.6 million.
For the six month period ended March 30, 1996 and the fiscal year ended
September 30, 1995, Harris incurred net losses of $3.3 million and $11.1
million, respectively. On a pro forma basis, Harris's trusted business would
have experienced a loss of approximately $3.2 million for the six months ended
March 30, 1996, assuming the Transaction had been consummated at the beginning
of such period. There can be no assurance that Harris will be able to achieve
profitability, or if achieved, that such profitability can be maintained. See
"HARRIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS" and "PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF
HARRIS."
For the nine months ended March 31, 1996, and for the fiscal years ended
June 30, 1995 and 1994, Concurrent experienced losses (before extraordinary
items and the cumulative effect of changes in accounting principles) of
approximately $5.7 million, $2.0 million and $11.6 million, respectively.
Concurrent recorded net income of $3.9 million for the fiscal year ended June
30, 1993. On a pro forma basis, Concurrent would have experienced losses of
approximately $7.6 million and $7.4 million for the nine months ended March 31,
1996, and the fiscal year ended June 30, 1995, respectively, assuming the
Transaction had been consummated at the beginning of each such period. There can
be no assurance that Concurrent will be able to achieve profitability, or if
achieved, that such profitability can be maintained.
For the nine months ended March 31, 1996, and for the fiscal years ended
June 30, 1994, 1993 and 1992, Concurrent also experienced a decline in assets.
On a pro forma basis, to reflect the Transaction, Concurrent had assets of
approximately $109.5 million at March 31, 1996. The pro forma consolidated
balance sheet at March 31, 1996 does not reflect certain restructuring
adjustments which may result from the integration of the Concurrent and Harris
Real-Time Business, such as the write-down of the carrying value of property,
plant and equipment which may become excess to the needs of the Combined
Real-Time Company. Such write-downs may exceed $10 million. There can be no
assurance that Concurrent's assets will not continue to decline following
consummation of the Transaction. See "PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS OF CONCURRENT."
POTENTIAL SHORTFALL IN LIQUIDITY
Concurrent. Although the purchase of the Harris Real-Time Business and the
integration and consolidation of development and manufacturing operations is
expected to improve Concurrent's liquidity by permitting additional borrowing
availability, there can be no assurance that cash flow from the combined real-
time operations will be sufficient to fund transaction costs related to the
Transaction including relocation of Concurrent's operations to Florida,
anticipated restructuring costs, and ongoing working capital requirements.
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 after consummation of the
Transaction will depend 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 Harris; and (iv) ongoing cost control
actions. Liquidity will also be affected by: (i) the timing of shipments which
predominantly occur during the last month of the quarter; (ii) the increasing
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 facilities; and
(iv) the number of countries
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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 to secure office leases.
Concurrent may sell or pledge some or all of the Purchased Harris Shares to
generate cash. To the extent Harris consummates a public offering of its stock,
Concurrent intends to sell at least one-half of the Purchased Harris Shares
owned by it in connection with such public offering. In addition, under the
terms of the agreements relating to the Transaction, Concurrent may sell a
portion of its stock even if a public offering is not consummated. However,
Concurrent's ability to sell or pledge the Purchased Harris Shares is subject to
a number of limitations and conditions imposed by the Purchase and Sale
Agreement and the Share Holding Agreement. See "TERMS OF THE TRANSACTION -- The
Share Holding Agreement." These limitations and conditions may affect
Concurrent's flexibility in generating cash through sales of Purchased Harris
Shares. In addition, upon the Closing of the Transaction, all of the issued and
outstanding options to purchase shares of Concurrent Common Stock will become
fully vested and exercisable. If all of the "in-the-money" options as of the
date of this Joint Proxy Statement were exercised, approximately $2.9 million in
cash proceeds would be generated for Concurrent.
In addition, if all of the Warrant Shares were issued as a result of the
exercise of the Concurrent Warrants, approximately $1.1 million in additional
cash proceeds would be generated for Concurrent. The Concurrent Warrants
underlying the Warrant Shares expire on July 22, 1996.
Concurrent is in discussions with its primary lender to modify the lending
agreement, specifically to increase the amount available under its revolving
credit facility and to modify various covenants to become effective upon the
closing of the Transaction. Assuming such modifications are obtained, Concurrent
believes that incremental borrowings may be available under its revolving credit
facility based on the higher borrowing base resulting from the combination of
the real-time businesses of the two companies.
Concurrent anticipates that the capital resources available upon completion
of the Transaction will be adequate to satisfy its capital requirements through
June 1997, assuming quarterly net sales of the combined real-time businesses in
the range of $30 million. Concurrent's future capital requirements, however,
will depend on many factors, including its ability to successfully market and
sell its commercial products, the cost and timing of the integration of the
real-time businesses of Concurrent and Harris to realize potential synergies and
cost savings and the cost of developing, marketing and selling competitive
products. To the extent that the funds generated by operations are insufficient
to satisfy Concurrent's capital requirements, Concurrent may seek additional
equity or debt financing or obtain additional credit facilities. Any equity or
debt financing, if available at all, may be on terms which are not favorable to
Concurrent and, in the case of equity or convertible debt offerings, could
result in dilution to Concurrent's then existing shareholders. Concurrent is
also considering various additional financing alternatives, including a possible
sale or sale and partial leaseback of its Oceanport, New Jersey facility to
improve its financial flexibility. If adequate funds are not available,
Concurrent may be required to curtail certain activities, including product
development, marketing and sales activities.
Harris's cash requirements have historically been funded from its working
capital and operating cash flow. As a result of the Transaction it is expected
that cash flows generated from operations will be insufficient to satisfy
Harris's ongoing cash requirements. Harris may obtain a line of credit that is
likely to be secured by all its assets (including all or a substantial part of
the Concurrent Common Stock Consideration and the Concurrent Preferred Stock)
and, if drawn upon, may be subject to, among other things, a number of financial
ratios, levels of cash flow and net worth, and restrictions on indebtedness,
asset dispositions, and investments and corporate transactions, all of which may
affect Harris's operating flexibility and subject Harris's assets to seizure
upon default. Harris expects to effect an underwritten public offering of Harris
Common Stock that may be effected shortly after the consummation of the
Transaction. There can be no assurance that any offering will be undertaken or
that, if undertaken, that such offering will be successful. If such an offering
is undertaken, such offering will be registered pursuant to the Securities Act,
may include shares of Harris Common Stock to be issued to Concurrent pursuant to
the Transaction and those held by certain other selling shareholders, and will
be made only by means of a prospectus meeting the requirements of state and
federal securities laws. This is not such a prospectus.
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While Harris also may sell or pledge part of the Concurrent Common Stock
Consideration or Concurrent Preferred Stock to generate cash, Harris's ability
to sell or pledge these Concurrent securities is subject to a number of
limitations and conditions imposed in connection with the Share Holding
Agreement and any line of credit. See "TERMS OF THE TRANSACTION -- The Share
Holding Agreement." These limitations and conditions may affect Harris's
flexibility in generating cash through sales of the Concurrent Common Stock
Consideration or Concurrent Preferred Stock and may require Harris to seek
alternative sources of cash, including borrowings and equity sales. In addition,
the timing of any such sales and the prices at which the Concurrent Common Stock
Consideration or Concurrent Preferred Stock may be sold may be affected by other
factors beyond Harris's control, such as general market conditions and changes
in the business operations or prospects of Concurrent. See "Fluctuations in
Value of Securities to be Issued in the Transaction; Changes in Market Prices of
Concurrent and Harris Common Stock." In the event that Harris requires financing
from additional outside sources, there can be no assurance that any additional
financing will be available to Harris on acceptable terms, or at all. Any
additional financing may involve dilution of the interests of Harris's then
existing shareholders. If adequate funds are not available, Harris may be
required to curtail certain activities, including product development, marketing
and sales activities.
POTENTIALLY ADVERSE CUSTOMER REACTION
While Concurrent and Harris expect that their customers generally will
favor the Transaction due to the resulting broadening of Concurrent's product
line, the more concentrated focus by Harris on its trusted systems product line
and the other operational benefits of the Transaction, there can be no
assurances as to such customer reaction. Adverse reactions by Harris or
Concurrent customers could have a material adverse effect on the financial
performance, results of operations and financial condition of Harris or
Concurrent, as the case may be.
LAG IN CUSTOMER ORDERS; LONG SALES CYCLE
Whereas both companies pursue significant programs with the potential for
high volume unit sales of its systems, neither company currently has or relies
on fixed term or fixed quantity contracts for future sales. Consequently, both
companies rely on customer orders in a given quarter for net sales for the
quarter and on internal forecasts of customer demand to plan operating
expenditures. The internal forecasts generally have proven to be optimistic. The
ability to match expenditures to anticipated sales is further complicated by the
trend of a majority of customers to delay orders to the last month of a quarter.
Further, the manufacture of systems in anticipation of firm orders introduces
the risk of over-production and investing limited cash resources in potential
excess inventory. As a result, substantial efforts must be undertaken on a
continuous basis to maintain existing levels of business and to manage
expenditures consistent with anticipated sales.
The sales of real-time products generally involve significant education and
commitment of capital by prospective customers, with the attendant delays
frequently associated with large capital expenditures and lengthy procurement
procedures. For these and other reasons, the expected sales cycle associated
with the sale of Concurrent's and Harris's real-time products is typically long
and subject to a number of significant risks over which neither Concurrent nor
Harris has significant control. As a result, both companies may expend
significant resources pursuing potential sales that will not be consummated,
which in turn would result in decreased revenues and cash flow, potentially
resulting in a material adverse effect on the financial performance, results of
operations and financial condition of Concurrent or Harris, as the case may be.
SHIFT IN EMPHASIS AWAY FROM PROPRIETARY SYSTEMS
Many of the target customers of Concurrent and Harris have undergone or are
undergoing a shift away from "proprietary" to "open" systems. For Concurrent,
sales related to its proprietary systems, while declining, continue to represent
more than 50% of its total systems sales. For Harris, sales related to its
proprietary systems, consisting largely of replacement parts, represent
approximately 11% of its total systems sales for the fiscal year ended September
30, 1995. Concurrent had approximately $25 million in open system sales and $47
million in proprietary systems sales in its fiscal year ended June 30, 1995 and
$15 million in open systems sales and $21 million in proprietary systems sales
for the nine months ended March 31, 1996. Comparatively, Harris
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had open systems sales of $27.9 million and proprietary systems sales of $3.3
million in its fiscal year ended September 30, 1995 and open systems sales of
$18.2 million and proprietary systems sales of $.7 million for the six months
ended March 30, 1996. Although Concurrent's installed base of proprietary
systems is currently its largest market, Concurrent's growth and its long-term
financial performance following consummation of the Transaction will depend
largely on its ability to continue to develop and market industry leading open
systems that meet the real-time computing needs of its targeted customers.
Concurrent plans to capitalize on the trend to open systems by focusing on its
target markets as well as entering into strategic alliances with third parties
to bring to market new solutions and software applications for new and existing
customers. The current open system product line uses Concurrent's real-time UNIX
(RTU(TM)) operating system with the processor technology identified below.
Performance currently ranges from 3 to 460 SPECMarks with typical prices ranging
from approximately $22,000 to approximately $170,000. SPECMarks is a standard
suite of benchmark programs developed by Systems Performance Evaluation
Cooperative (SPEC), a nonprofit organization formed in 1988, that characterize
overall system performance by using a single stream, compute intensive set of
tests to provide a consistent measurement of processor performance capabilities.
The MAXION multiprocessor system, the first model of Concurrent's new
next-generation open systems using the MIPS R4400 microprocessor, was introduced
in October 1993. Concurrent does not expect the shift in emphasis to open
systems to result in either significant incremental costs over current cost
levels or incremental capital investment. A shift in emphasis to open systems
may, however, result in lower gross margins on systems sales. Currently, gross
margins on open systems are lower than gross margins on proprietary systems.
Concurrent's operating income would be adversely affected by such a shift unless
total net sales increase, the gross margins on its open systems improve and/or
total operating expenses are reduced.
Servicing Concurrent'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 Concurrent. The shift in emphasis to open
systems may also have an adverse impact on maintenance revenues. Generally, open
systems require less maintenance and can, in many cases, be serviced by the
customers themselves or by third party providers. For Concurrent, the shift in
emphasis, together with declining systems sales, resulted in the decline of
service revenue from $87.6 million for the year ended June 30, 1993 to $68.1
million for the year ended June 30, 1995. For the nine months ended March 31,
1996, Concurrent's service revenue was $41.4 million compared to $51.8 million
in the prior year period. Similarly, Harris's service revenue declined for the
fiscal years ended June 30, 1993, June 30, 1994 and September 30, 1995 from
$16.1 million, to $14.5 million to $13.9 million, respectively. For the six
months ended March 30, 1996, Harris's service revenues were $6.6 million
compared to $6.9 million for the six months ended March 1995. There can be no
assurance that the decline in service revenue will not continue. Should such
decline continue, Concurrent's or Harris's operating income would be adversely
affected by such a decline unless non-service revenues increase and/or total
operating expenses are reduced.
PRODUCT OBSOLESCENCE; SIGNIFICANT RESEARCH AND DEVELOPMENT EXPENDITURES
The information technology industry is characterized by rapid advances in
technology and demand for more cost effective "solutions". The technologies
incorporated by Concurrent and Harris into their respective products and future
products are in a continuous state of development and tend to be surpassed by
new developments within 18-24 months of initial commercial use. Continued rapid
advances in technology will further accelerate the technological obsolescence of
these products as well as those of their competitors, which may affect the
financial performance, results of operations and financial condition of both
companies. Concurrent's and Harris's success will depend, to a significant
extent, upon the ability to enhance existing products, to integrate the best
technologies of Concurrent and Harris and to introduce new products and features
in a timely manner to meet changing customer requirements. It will also be
dependent on the success of strategic technological alliances. In order to
accomplish these objectives, both Concurrent and Harris must maintain certain
levels of investment in research and development and effectively use this
investment. Following the Transaction, Concurrent must obtain and incorporate
new hardware, software, communications and peripheral technologies that are
primarily developed by others. There can be no assurance that the new product
development activities will be successful, that new technologies will be
available to either Concurrent or Harris or, following the consummation of the
Transaction, that either will be able to deliver commercial
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products in a timely manner or that their products will achieve market
acceptance. The business of both Concurrent and Harris following the
consummation of the Transaction will be adversely affected if either company,
its strategic partners, or its suppliers incur delays in developing new products
or enhancements, or if such products or enhancements do not gain market
acceptance because of competing technology. In addition, some new product
introductions are intended to replace existing products. Although reasonable
commercial efforts will be made to monitor and manage new product introductions,
there can be no assurance that a new product introduction will not result in a
material amount of obsolete inventory. Consequently, there may be a material
adverse effect on liquidity of either Concurrent or Harris following the
consummation of the Transaction in the event there is significant inventory that
such company is unable to dispose of in a reasonable time frame at an aggregate
value approximately equal to its aggregate book value. There can be no assurance
that new product introductions will be executed without a material adverse
effect on the financial performance, results of operations or financial
condition of the company making such introductions. It is expected that
following the consummation of the Transaction, Concurrent will develop products
in the real-time computing and multimedia sectors and that Harris will develop
products in the trusted systems and firewall sectors. The costs of developing
future products in each of these markets is expected to be significant. While
the real-time computing sectors are well developed and have an extensive
operational history, Concurrent's multimedia sector and Harris's trusted systems
and firewall sectors are in the relatively early stages of market development
and are likely to require extensive development, sales and marketing expense
before they may be in a position to contribute significant revenue or cash flow
to their respective companies. There can be no assurance as to the cost of
funding future products in either company's product sectors or on the ability of
these product sectors to contribute to the revenues or cash flows of either
company following the consummation of the Transaction.
NEED TO ESTABLISH ADDITIONAL MARKETING RELATIONSHIPS
A significant business strategy of Concurrent and Harris will be to enter
into strategic marketing alliances or other similar collaborative relationships.
There can be no assurance that the existing or contemplated collaborative
relationships will be commercially successful, that Concurrent or Harris will be
able to negotiate additional collaborative relationships, that such additional
collaborations will be available to either company on acceptable terms or that
any such relationships, if established, will be commercially successful. The
potential increased revenues from such relationships may be reduced by
requirements to provide volume price discounts and other allowances, and
potential significant costs incurred in customizing products. In addition, there
can be no assurance that parties with whom either company establishes
collaborative relationships will not pursue alternative technologies or develop
alternative products in addition to or in lieu of Concurrent's or Harris's
products, as the case may be, either on their own or in collaboration with
others, including Concurrent's or Harris's competitors. Such alternative
technologies or products, if developed, may be in direct competition with
Concurrent's and Harris's technologies or products and may significantly erode
the benefits of such strategic marketing alliances or collaborative
relationships.
HARRIS'S LIMITED OPERATING HISTORY IN TRUSTED MARKET; UNPREDICTABILITY OF
OPERATING RESULTS
Although Harris has been developing network security products since 1989,
Harris has operated in the commercial trusted business only since October 1994.
In view of, among other things, Harris's short operating experience in, and the
rapidly changing and intensely competitive nature of, the commercial network
security market, the uncertainty of acceptance of Harris's products, the
reliance of such products on the Internet, the mix of distribution channels
through which Harris's products are sold, and dependence of Harris in the near
future on Concurrent as the sole supplier of computer platforms on which
Harris's products are sold, there is no assurance that Harris will be profitable
in future years. Harris's results of operations may become increasingly
unpredictable from quarter to quarter as a result of these and numerous other
factors, including customer acceptance of Harris's products, fluctuations in the
development and growth of the commercial network security industry in general,
the timing of orders and shipments of products, the introduction of new products
by Harris, or the introduction or the announcement of competitive products. In
addition, a substantial portion of Harris's revenue occurs during the last few
weeks of each quarter; therefore, any delays in orders or shipments are more
likely to result in revenue not being recognized until the following quarter.
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Harris's current and planned expense levels are based in part on its
expectations of future sales and, as a result, net income for a given period
could be disproportionately affected by any reduction in sales. There can be no
assurance that Harris will be able to achieve significant sales from sales of
products in the future or that the level of sales in the future will not
decrease from past levels. There can be no assurance that in future quarters
Harris's sales or operating results will meet the expectations of stock market
securities analysts and investors. In such event, the price of Harris Common
Stock could be materially and adversely affected. See "HARRIS MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
In particular, the market for Harris's network security products is only
beginning to emerge. Although the rapid development of the Internet and
enterprise-wide computing has increased the vulnerability of proprietary
information to access by unauthorized persons and has in recent years increased
demand for computer and network security products, there is no assurance that
demand for network security products will continue at current levels or
increase. Moreover, because the market for network security products is only
beginning to develop, it is difficult to assess the level of demand and the
product features and prices, the optimal distribution strategy and the
competitive environment that will develop. Declines in demand for network
security products, whether as a result of technological change, the public's
perception of the need for security products, developments in the hardware and
software environments in which these products operate, general economic
conditions or other factors, could have a material adverse effect on Harris's
financial condition and results of operations.
Harris's success depends on the timely adoption of Harris's firewall and
other network security products by users. The market acceptance of Harris's
products is difficult to estimate due in large measure to the recent emergence
of the market for network security products and the effect of a number of new
products, applications or product enhancements that have been introduced into
the market. Competitive products are currently available that have comparable or
more favorable price characteristics and which may be perceived to have
comparable performance characteristics. There can be no assurance that Harris's
network security products, particularly its CyberGuard Firewall, will achieve
acceptance among network security customers, and the failure of Harris's
products to achieve such customer acceptance would have a material adverse
effect on Harris's business, operating results and financial condition.
Moreover, Harris anticipates that its existing and new competitors will
introduce additional competitive products, particularly if demand for
enterprise-wide security products increases, which could reduce future customer
acceptance of Harris's products.
As the network security industry continues to evolve, Harris's future
financial performance will depend in part on the successful development,
introduction and market acceptance of additional products, applications and
product enhancements in a timely manner to meet changing customer requirements.
There can be no assurance that Harris will be able to develop new products or
that such products will satisfy evolving customer preferences and achieve market
acceptance or, if market acceptance is achieved, that Harris will be able to
maintain such acceptance for a significant period of time. Any significant delay
in the introduction of Harris's future products could result in loss of sales
volume and would have a material adverse effect on Harris's business, financial
condition and results of operations.
Moreover, Harris's commercial network security products were designed
primarily for computer network environments, that are based upon the
Transmission Control Protocol/Internet Protocol ("TCP/IP") network protocols.
Accordingly, sales of Harris's current network security products will depend in
large part upon a robust industry and infrastructure for providing Internet
access and carrying Internet traffic. Because global commerce and the exchange
of information on the Internet and other similar open wide area networks are new
and evolving, it is difficult to predict with any assurance whether
complementary products or other factors necessary to make the Internet a viable
commercial marketplace will be developed. The failure of the Internet to become
a viable commercial marketplace could have a material adverse effect on Harris's
business, financial condition and results of operations. Additionally, Harris
plans to continue to develop products for use by customers with TCP/IP-based
enterprise-wide internet applications. The failure of the TCP/IP protocol to
gain wide acceptance as an enterprise-wide network protocol could have a
material adverse effect on Harris's business, financial condition and results of
operations.
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LIMITED PROTECTION OF INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS; RISK OF
LITIGATION; RELIANCE ON LICENSED TECHNOLOGY
Both companies rely on trademark, copyright and trade secret laws, employee
and third-party non-disclosure agreements and other methods to protect their
proprietary rights. Concurrent holds patents and may apply for patents which
cover certain aspects of their technology. Although Harris currently does not
hold any patents and has no pending patent applications to cover any aspects of
its technology, Harris may file patent applications in relevant jurisdictions to
protect aspects of its technology. There can be no assurance that any pending or
future patent applications will be granted or that any current or future patents
will not be challenged, invalidated or circumvented or that the rights granted
thereunder will provide competitive advantages to Concurrent or Harris. There
can be no assurance that Concurrent's or Harris's trade secrets or
non-disclosure agreements will provide meaningful protection of its proprietary
information. Furthermore, there can be no assurance that others will not
independently develop similar technologies or duplicate any technology developed
by Concurrent or Harris or that the technology will not infringe upon patents or
other rights owned by others. Further, both companies may be subject to risk as
they enter into transactions in countries where intellectual property laws are
not well developed or are poorly enforced. Legal protections of Concurrent's or
Harris's rights may be ineffective in such countries, and technology developed
in such countries may not be protectable in jurisdictions where protection is
ordinarily available. Concurrent's or Harris's inability to maintain a
competitive advantage based on proprietary rights would have a material adverse
effect on such company's financial performance, results of operations and
financial condition.
As the number of network security products in the industry increases and
the functionality of these products further overlaps, software developers and
publishers may increasingly become subject to infringement claims. There can be
no assurance that third parties will not assert infringement claims against
Harris or Concurrent in the future with respect to current or future products.
There has been substantial litigation regarding patent, copyright, trademark and
other intellectual property rights involving computer companies generally.
Concurrent has been separately notified by IBM and BTG (British Technology
Group), that each believes that certain of Concurrent's technology may infringe
on certain patents held by their respective companies. These and any claims or
litigation, with or without merit, could be costly and could result in a
diversion of management's attention, which could have a material adverse effect
on such company's financial performance, results of operations and financial
condition. Adverse determinations in such claims or litigation could also have a
material adverse effect on such company's financial performance, results of
operations and financial condition.
From time to time, other companies and individuals assert exclusive patent,
copyright, trademark and other intellectual property rights to technologies or
marks that are important to the computer industry or Harris's or Concurrent's
business. Each of Harris and Concurrent evaluates each claim relating to its
products and, if appropriate, seeks a license to use the protected technology.
The licensing agreements generally do not protect Concurrent and Harris from
trade secret, copyright or other violations by either of them or their suppliers
in developing or selling these products. There can be no assurance, however,
that Concurrent and Harris will be able to obtain licenses to intellectual
property of third parties on commercially reasonable terms, if at all. In
addition, each of the companies could be at a disadvantage if its respective
competitors obtain licenses for protected technologies with more favorable terms
than does Concurrent and Harris. If Concurrent or Harris or their respective
suppliers are unable to license protected technology used in their respective
products, Concurrent or Harris could be prohibited from marketing those products
or may have to market products without desirable features. Each of the companies
could also incur substantial costs to redesign its respective products or to
defend any legal action taken against them. If Concurrent's or Harris's products
should be found to infringe protected technology, each could be enjoined from
further infringement and required to pay damages to the infringed party.
RELIANCE ON GOVERNMENT BUSINESS
Both Concurrent and Harris derive a significant portion of their revenues
from the supply of systems under government contracts. For its fiscal year ended
June 30, 1995, approximately $39.2 million of Concurrent's worldwide revenues
were directly or indirectly related to agencies of the U.S. Government. This
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amount represented approximately 28% of Concurrent's worldwide revenues for
fiscal year 1995, compared to 31% and 29% for its 1994 and 1993 fiscal years,
respectively. For the nine months ended March 31, 1996, approximately $14
million (18%) of Concurrent's revenues were directly or indirectly related to
agencies of the U.S. Government. Concurrent's revenues related to sales to the
U.S. Government are derived from various federal agencies, no one of which
accounted for more than 5% of total revenues (e.g., several agencies participate
under the NEXRAD program). Sales to Unisys Corp., as prime contractor, under the
NEXRAD program contributed approximately $17.5 million, $23 million and $35
million in revenues for fiscal years 1995, 1994 and 1993, respectively. The
program is largely completed and no significant revenue is planned for future
periods. For its fiscal year ended September 30, 1995, approximately $23 million
of Harris's worldwide revenues were directly or indirectly related to agencies
of the U.S. Government. This amount represented approximately 51% of Harris's
revenues, compared to 43% and 51% for the comparable period in 1994 and 1993.
For the six months ended March 30, 1996, $9.9 million or 39% of Harris sales
were related to agencies of the U.S. Government. For each of the quarters ended
March 30, 1996 and December 29, 1995, 68% and 83%, respectively, of the revenues
attributable to sales of Harris's CyberGuard firewall product have been to
commercial customers. Approximately $14.2 million (31%) of Harris's total
revenues in fiscal year 1995 were derived from sales directly or indirectly to
the U.S. Department of Defense. No other individual government customer
accounted for more than 5% of the total product sales by Harris. Government
business is, in general, subject to special risks, such as delays in funding,
termination of contracts or subcontracts for convenience of the government or
for default by the contractor, reduction or modification of contracts or
subcontracts, failure to exercise options, changes in governmental policies and
the imposition of budgetary constraints. A loss of government contract revenues
could have a material adverse effect on the financial performance, results of
operations and financial condition of Concurrent or Harris, as the case may be.
HARRIS'S TRANSITION TO THE COMMERCIAL MARKET
Following the Transaction, Harris will continue to focus its trusted
business on the world-wide commercial market as its principal focus for sales of
network security products, which have significantly smaller gross margins than
Harris's secure real-time products that were sold to government-related
customers. Because Harris's transition to the commercial network market has only
recently occurred, there can be no assurance that gross margins can be sustained
at current levels given the different competitive environments (including
pricing, substitute products, short product life cycles and others) of the
commercial market as compared to the government market. Furthermore, Harris,
until recently, has not relied on the commercial market as the primary source of
its sales and there can be no assurance that Harris will be successful competing
in the commercial market against competitors that have more experience in such
market.
DEPENDENCE ON INTERNATIONAL OPERATIONS
The financial results of both companies are increasingly dependent on their
international operations. For Concurrent, approximately 46% of total revenues
for its fiscal year 1995 were derived from international operations. For the
nine months ended March 31, 1996, approximately 51% of total revenues were
derived from international operations. For Harris, approximately 26% of total
revenues for its fiscal year 1995 were derived from international operations.
For the six months ended March 30, 1996, approximately 27% of the total revenues
were derived from international operations. Both Harris and Concurrent expect
international operations to continue to account for a significant percentage of
total revenues. Certain risks are inherent in international operations,
including exposure to currency fluctuations, the imposition of government
controls, export license requirements, restrictions on the export of critical
technology, political and economic instability, trade restrictions, changes in
tariffs, taxes and freight rates, generally longer payment cycles, difficulties
in staffing and managing international operations and general economic
conditions. From time to time in the past, financial results of both companies
have been affected both favorably and unfavorably by fluctuations in currency
exchange rates. Future unfavorable fluctuations in currency exchange rates may
have an adverse impact on the financial performance, results of operations and
financial condition of both companies after the Transaction is consummated.
Although international revenues continue to represent an increasing percentage
of total revenues of Concurrent, accounts receivable from such international
revenues are not included in the borrowing base under Concurrent's revolving
credit facility.
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COMPETITION
Both companies operate in highly competitive environments driven by rapid
technological innovation. Many of their respective competitors have greater
financial and operating resources. In addition, companies with greater resources
that currently do not compete may enter into various of the companies' target
businesses. The success of each company will depend in part upon the ability of
its management to demonstrate to potential customers the performance and
reliability of its products and services. There can be no assurance that
management will be successful in these efforts.
An increase in competition could result in, among other things, price
reductions and loss of sales volume. Such competition and any resulting
reduction in aggregate revenues and/or gross margins could have a material
adverse effect on the future financial performance, results of operations and
financial condition of both companies. There can be no assurance that
Concurrent's and Harris's competitors will not develop real-time or network
security products that may be more effective than Concurrent's and Harris's
current or future products or that Concurrent's and Harris's technologies and
products will not be rendered obsolete by such developments.
Harris's success following the Transaction will depend on, among other
things, the success of its network security products in the commercial network
security industry. The market for commercial network security products and
services is highly competitive, rapidly evolving and characterized by frequent
technological change. Harris expects competition to persist, intensify and
increase in the future. Harris's principal competitors for trusted systems
include CheckPoint Software, Inc., Raptor Systems, Inc., Secure Computing
Corporation, Trusted Information Systems, Inc., and Advanced Network & Services,
Inc. (which is owned by American Online, Inc.). In addition, companies such as
International Business Machines Corporation ("IBM"), Digital Equipment
Corporation, and Sun Microsystems, Inc. sell products with similar features and
functions that could be considered competitors of Harris. Several other
companies offering other network and other computer-related products, including
Microsoft Corporation, are expected to enter the commercial network security
business in the near future. Many of Harris's current and potential competitors
have greater name recognition, larger installed customer bases and significantly
greater financial, technical or marketing resources than Harris. As a result,
they may be able to adapt more quickly to new or emerging technologies or
changes in customer requirements, or to devote greater resources to the
promotion and sale of their products than can Harris. Competition could increase
if new companies enter the business or if existing competitors expand their
product lines. An increase in competition could result in price reductions and
loss of sales volume for Harris. Such competition and any resulting reduction in
pricing and gross margins could have a material adverse effect on Harris's
business, financial condition and results of operations.
There can be no assurance that Harris's competitors will not develop
network security products using approaches substantially similar to or different
from than Harris's that may be more effective than Harris's current or future
products or that Harris's technologies and products would not be rendered
obsolete by such developments. Harris believes a key competitive factor in the
network security market is a computer system's security rating by intelligence
and other government agencies such as the National Computer Security Center
("NCSC"). Harris's secure operating system and networking software have been
rated by the NCSC at a B1 level. Certain of Harris's competitors have also
submitted their commercial network fire wall products for evaluation by the
NCSC, and certain of these products could receive B1 or higher ratings upon
completion of the process. Competitors may also employ litigation or the threat
of litigation relating to patents and other intellectual property to gain a
competitive advantage.
LIMITED SOURCES OF SUPPLY
In limited cases, Concurrent purchases components from a single supplier to
obtain the required technology and the most favorable price and delivery terms.
Concurrent estimates that a lead time of up to 16-24 weeks may be necessary to
switch to an alternative supplier of certain custom application specific
integrated circuits ("ASICS") and printed circuit assemblies. A change in the
supplier of these components without the appropriate lead time could result in a
material delay in shipments by Concurrent of certain
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products and possibly, a material adverse effect on the financial performance,
results of operations and financial condition of Concurrent.
Similarly, Harris purchases components, including customized components
such as certain computer peripheral equipment incorporated into NightHawk(TM)
computers, from a single supplier to obtain the required technology and the most
favorable price and delivery terms. For example, the Harris Real-Time Business
has historically relied exclusively on Motorola as the sole source of supply of
the Motorola 88110 and 88100 microprocessor chips in the manufacture of its
NightHawk 5800, 4800 and 4400 computers. In the manufacture of the current
generation 6000 series of NightHawk computers, the Harris Real-Time Business
depends on the availability of Power PC(TM) chips provided by both IBM and
Motorola. In addition, Harris's manufacturing process requires a high volume of
quality components that are procured from third-party suppliers.
Harris's network security products were developed to function in an open
architecture, real-time environment based upon UNIX operating system technology.
Harris currently uses only Night Hawk real-time computers -- a product that was
manufactured by Harris but will be manufactured by Concurrent following the
Transaction -- on which to install its secure operating system, networking
software and firewall components for resale. Harris also has a relationship with
the Santa Cruz Operation, Inc. ("SCO"), which provides the core UNIX operating
system technology into which its computer security enhancements are integrated.
Following the Transaction, Concurrent will be the only source of supply for
Night Hawks. Pursuant to the terms of the Purchase and Sale Agreement, the
parties will enter into a mutually agreed Non-Competition/ Distribution
Agreement (the "Non-Competition Agreement") at Closing. The terms of such
agreement have not been negotiated, although it is expected that Harris will
obtain Night Hawk computers from Concurrent in accordance with such agreement. A
substantial increase in the price of Night Hawks or a change in the delivery
terms thereof would result in an increase in the price of Harris's products,
which could result in decreased profit margins or loss of sales. Harris is
actively seeking alternative platforms on which to install its products,
however, there is no assurance that Harris will be successful in its attempts to
market its products on platforms other than the Night Hawk or that such products
will be successful in the marketplace. There can further be no assurance that
such alternative platforms will continue to be manufactured or that the price
and delivery terms of such platforms will be favorable to Harris. Should Harris
be successful in marketing its products on platforms other than the Night Hawk,
Harris will remain obliged to continue to support the Night Hawk to satisfy
existing customer expectations for the availability and support of the Night
Hawk platform. This support requirement may place significant burdens on
Harris's resources.
Harris has purchased SCO's UNIX operating system technology as the basis
for the computer security enhancements for Harris's trusted products. Harris
depends upon SCO to develop its UNIX operating system technology and to provide
specific enhancements and features necessary to ensure that the UNIX operating
system remains competitive in the general computer marketplace. In particular,
Harris depends upon SCO to ensure that support is provided for new and emerging
hardware technologies and new and emerging software features. Should SCO
discontinue development efforts related to the UNIX operating system technology,
or should such technology no longer be offered for sale by SCO to Harris, Harris
would be required to initiate internally funded development to support new
hardware and/or software features or choose an alternate UNIX operating system
supplier. Any such internally funded development would likely preclude Harris
from delivering a competitive product offering into the marketplace in a timely
manner and would likely result in substantial development expenses. Likewise,
choosing an alternate UNIX operating system supplier would require Harris to
transfer a significant number of computer security enhancements into the
alternate UNIX operating system which would place a substantial strain on
Harris's product development resources and could have a material adverse effect
on Harris's business, financial condition and results of operations.
Reliance on suppliers, as well as industry supply conditions, generally
involve several risks, including the possibility of defective parts, a shortage
of components, increase in component costs, and reduced control over delivery
schedules, any or all of which could adversely affect Concurrent's or Harris's
respective financial results. Where alternative sources are available,
qualification of the alternative suppliers and establishment of
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reliable supplies of components from such sources may result in delays. Problems
with supplier performance or delays in delivery of components may cause a delay
in shipments of various 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 financial results for that particular period. For a
discussion of supply risks associated with Harris's business, see "HARRIS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS."
POTENTIAL NEED TO EXPAND INFRASTRUCTURE
If Concurrent or Harris at any time in the future experiences rapid growth,
of which there can be no assurance, such company will need to continue to
improve and expand its infrastructure. There can be no assurance that Concurrent
or Harris will be able to manage expansion of its infrastructure to support
future growth effectively, if required.
Concurrent expects to transition its management information systems to more
fully integrate them on an enterprise wide basis, to reduce redundancy and to
incorporate enhanced functionality. There can be no assurance that this
management information system transition can be accomplished on a timely basis
or without disruptions of Concurrent's operations, or management information
functions, which could have a material adverse effect on Concurrent's financial
performance, results of operations and financial condition.
Harris's Trusted Systems Division is currently experiencing a period of
rapid growth that has placed, and following the Transaction could continue to
place, a significant strain on Harris's financial, operational, managerial and
other resources. To manage its growth effectively, Harris will be required to
continue to improve its operational, financial and management information
systems and to attract, train, motivate, manage and retain key employees. In
April 1996, in anticipation of the Transaction, Harris's Trusted Systems
Division engaged a new Chief Executive Officer, appointed a new Chief Financial
Officer from a management position within Harris's Trusted Systems Division
sales force, and appointed other executive officers from positions inside
Harris's Trusted Systems Division. These individuals have not previously worked
together as senior managers and are in the process of integrating as a
management team. With the exception of Bradley C. Lesher, Vice President of
International Sales, and Robert L. Carberry, President, Trusted Systems
Division, none of these senior managers have previously served as an executive
officer of a publicly held corporation. If Harris's executives are unable to
manage growth effectively, Harris's financial performance, results of operations
and financial condition could be adversely affected.
DEPENDENCE ON KEY EMPLOYEES
As high technology companies in highly competitive industries, the success
of Concurrent and Harris following the consummation of the Transaction will
depend in part on each party's ability to attract and retain highly-skilled
technical, managerial, sales and marketing employees. Competition for these key
employees is intense. The uncertainty as to which employees will remain as part
of Concurrent or Harris and the locations of various functions in connection
with the integration of the Harris Real-Time Business as well as potential
differences in culture between the two companies in the manner in, and processes
by, which business is conducted may lead certain employees to choose alternative
employment. Although neither company is dependent on any one employee, the loss
of a number of key employees in significant positions and the inability to
attract and retain qualified replacement employees in a timely manner could
adversely affect the financial performance, results of operations and financial
condition of Concurrent or Harris, as the case may be. For a description of the
expected composition of the executive officers of Concurrent following the
Transaction, see "DIRECTORS AND EXECUTIVE OFFICERS OF CONCURRENT AFTER
CONSUMMATION OF THE TRANSACTION." Of the seven executive officers of Concurrent
following the Transaction, four are expected to be former executive officers of
Harris, one is expected to be a continuing executive officer of Concurrent and
two are expected not to be former officers of either Concurrent or Harris. For a
description of the Harris executive officers after the Transaction, see
"DIRECTORS AND EXECUTIVE OFFICERS OF HARRIS AFTER CONSUMMATION OF THE
TRANSACTION."
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DIVIDEND POLICY
It is currently contemplated that neither Harris nor Concurrent will pay
cash dividends on their respective shares of common stock in the immediately
foreseeable future. Concurrent's and Harris's dividend policy will be reviewed
by their respective boards at such future time as may be appropriate in light of
relevant factors existing at such times.
CERTAIN BARRIERS TO CHANGES OF CONTROL; EFFECTS OF CHANGES OF CONTROL
Rights associated with Concurrent Common Stock and Harris Common Stock may
have the effect of discouraging a third party from making an acquisition
proposal to Concurrent or Harris, as the case may be, and may thereby inhibit a
change in control of such company in circumstances that could give the holders
of Concurrent Common Stock or Harris Common Stock the opportunity to realize a
premium over the then prevailing market prices. Such provisions may also
adversely affect the market price of Concurrent Common Stock and Harris Common
Stock. In addition, loans under certain credit agreements may be accelerated at
the option of the lenders in the event of a "change in control" (as that term is
defined in the credit agreements governing such loans) of Concurrent or Harris.
The charters and by-laws of each of Concurrent and Harris as well as the Florida
Business Corporation Act (the "FBCA") and the Delaware General Corporation Law
(the "DGCL") contain certain provisions that may have the effect of inhibiting a
non-negotiated merger or other business combination.
The Harris and the Concurrent Boards each have the authority to issue
shares of preferred stock and to determine the designations, preferences, and
rights and the qualifications or restrictions of those shares without any
further vote or action by the shareholders. The rights of the holders of Harris
Common Stock and Concurrent Common Stock will be subject to, and may be
materially adversely affected by, the rights of the holders of any preferred
stock that may be issued in the future. The issuance of preferred stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate actions, could have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from acquiring,
Concurrent or Harris, as the case may be. With the exception of the Preferred
Stock Consideration, neither Concurrent nor Harris has any present plan to issue
shares of preferred stock.
INADVERTENT INVESTMENT COMPANY
The Concurrent Common Stock Consideration and the Concurrent Preferred
Stock which Harris will own immediately following the Transaction, would have
comprised approximately 80% of Harris's total assets on a pro forma basis as of
March 30, 1996. As a result, Harris may be deemed to be an "investment company"
within the meaning of the Investment Company Act of 1940, as amended (the "1940
Act"), which defines an investment company as one engaged in the business of
investing or holding securities and owning "investment securities" having a
value exceeding 40% of the value of such company's total assets. Generally, an
investment company is required to register as such with the Commission,
subjecting itself to extensive regulation, compliance with which would have a
material adverse effect on Harris's business, financial condition and results of
operations.
A company is deemed not to be an investment company for one year if it has
a bona fide intent to be engaged in a business other than investing, holding or
trading in securities. Following the Transaction, Harris intends to sell a
portion of the Concurrent Common Stock Consideration. Harris does not intend to
remain a long-term holder of the remaining Concurrent securities or of any
investment securities having a value exceeding 40% of the value of its total
assets when the one-year exemption period expires in June 1997. There is no
assurance that Harris will be successful in its efforts to reduce its holdings
of Concurrent securities, or that, if successful, it can do so at a favorable
price. Harris's ability to sell or pledge the Concurrent Common Stock or the
Concurrent Preferred Stock is subject to the limitations imposed in the Share
Holding Agreement. In addition, Harris's ability to sell such securities may be
affected by factors beyond Harris's control, such as general market conditions
and changes in the business, operations or prospects of Concurrent. See
"Fluctuation in Value of the Consideration to be Issued in the Transaction;
Changes in the Market Price
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of Concurrent or Harris Common Stock." and "TERMS OF THE TRANSACTION -- The
Share Holding Agreement."
LIMITATIONS ON THE USE OF CERTAIN TAX LOSS CARRYFORWARDS
Concurrent has substantial tax loss carryforwards available to offset
future taxable income. Under Section 382 of the Internal Revenue Code of 1986,
as amended (the "Code"), the use of Concurrent's tax loss carryforwards could be
limited in the event of an "ownership change" involving more than 50% of
Concurrent's stock, including ownership changes arising by reason of stock
issuances by Concurrent. Although Concurrent will be issuing a significant
amount of stock in connection with the Transaction, the "ownership shift"
resulting from such issuance, when coupled with other ownership shifts involving
certain five percent shareholders of Concurrent since July 21, 1993, will not be
sufficient to constitute a 50 percent ownership change within the meaning of
Section 382 of the Code. Accordingly, it is expected that the Transaction will
not impair the availability of these tax loss carryforwards to Concurrent. It is
possible, however, that future ownership shifts involving the stock of
Concurrent could limit its ability to use these tax loss carryforwards,
including changes which occur by reason of additional stock issuances by
Concurrent or acquisitions or dispositions of Concurrent Common Stock by persons
who are or become owners of five percent or more of Concurrent Common Stock.
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THE CONCURRENT SPECIAL MEETING
GENERAL
This Joint Proxy Statement is being furnished to holders of Concurrent
Common Stock in connection with the solicitation of proxies by the Concurrent
Board for use at the Concurrent Special Meeting and any adjournments or
postponements thereof. Each copy of this Joint Proxy Statement mailed to holders
of Concurrent Common Stock is accompanied by a form of proxy for use at the
Concurrent Special Meeting.
CONCURRENT SHAREHOLDERS ARE REQUESTED TO COMPLETE, SIGN AND DATE THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY TO CONCURRENT IN THE ENCLOSED,
POSTAGE-PAID ENVELOPE.
PURPOSE OF THE CONCURRENT SPECIAL MEETING
At the Concurrent Special Meeting, the holders of Concurrent Common Stock
will be asked to consider and vote on the following proposals (each, a
"Concurrent Proposal" and collectively, the "Concurrent Proposals") related to
the Purchase and Sale Agreement and the Transaction:
(1) A proposal by Concurrent to issue the Concurrent Common Stock
Consideration and the Additional Common Shares. Because the number of
shares of Concurrent Common Stock to be issued upon consummation of the
Transaction plus the Additional Common Shares will exceed 20% of the number
of shares of Concurrent Common Stock outstanding immediately prior to the
consummation of the Transaction, the by-laws of the National Association of
Securities Dealers ("NASD") require Concurrent to obtain shareholder
approval of the issuance of such shares.
(2) An amendment to the Concurrent Stock Plan Amendment to increase,
at or prior to the Closing Date, the amount of shares of Concurrent Common
Stock authorized for issuance under the Concurrent Stock Plan from
4,014,725 shares to 9,000,000 such shares (representing an increase of
approximately 5,000,000 shares authorized for issuance under the Concurrent
Stock Plan which increase will be reserved for future issuance under the
Concurrent Stock Plan).
(3) 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 from 3,000 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 a non-employee director 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.
(4) The transaction of such other business as may properly come before
the Concurrent Special Meeting.
Proposals (2) and (3) are collectively referred to throughout this Joint
Proxy Statement as the Concurrent Stock Plan Amendment. The (i) issuance of both
the Concurrent Common Stock Consideration and the Additional Common Shares and
(ii) implementation of proposal (2) regarding that portion of the Concurrent
Stock Plan Amendment that provides for an increase in the number of shares of
Concurrent Common Stock authorized for issuance to 9,000,000 shares are
conditioned upon approval of each other. Implementation of proposal (3)
regarding the remaining portions of the Concurrent Stock Plan Amendment is
conditioned upon the approval of both (i) the issuance of the Concurrent Common
Stock Consideration and the Additional Common Shares and (ii) the increase in
the number of shares of Concurrent Common Stock authorized for issuance under
the Concurrent Stock Plan to 9,000,000 such shares (proposal (2)).
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DATE, TIME AND PLACE
The Concurrent Special Meeting is scheduled to be held on June 26, 1996 at
3:30 p.m.., local time, at the Doubletree Guest Suites, 555 N.W. 62nd Street,
Fort Lauderdale, Florida 33309.
RECORD DATE; SHARES OUTSTANDING
The Concurrent Board has fixed the close of business on May 14, 1996 as the
Record Date for the determination of Concurrent shareholders entitled to notice
of and to vote at the Concurrent Special Meeting.
On the Record Date, there were 30,652,681 shares of Concurrent Common Stock
issued and outstanding held by approximately 2,340 shareholders of record. All
directors and executive officers of Concurrent have indicated their intention to
vote all shares over which they exercise voting control (an aggregate of
approximately 100,000 shares of Concurrent Common Stock or less than 1% of the
outstanding shares on the Record Date) FOR the approval of the issuance of
Concurrent Common Stock Consideration and the Concurrent Stock Plan Amendment.
VOTING AT THE CONCURRENT SPECIAL MEETING
The presence, either in person or by proxy, of the holders of a majority of
the issued and outstanding shares of Concurrent Common Stock entitled to vote at
the Concurrent Special Meeting is necessary to constitute a quorum at the
Concurrent Special Meeting. Each share of Concurrent Common Stock is entitled to
one vote with respect to all matters presented at the Concurrent Special
Meeting.
With respect to the Concurrent Proposals to be considered by the holders of
Concurrent Common Stock, the affirmative vote of a majority of the following is
required for approval: (i) the total votes cast by the holders of Concurrent
Common Stock with respect to the issuance of the Concurrent Common Stock
Consideration and the Additional Common Shares and (ii) in a separate vote, the
total votes cast by the holders of Concurrent Common Stock with respect to each
proposal relating to the Concurrent Stock Plan Amendment. In addition, the
Transaction is conditioned upon the affirmative vote of a majority of the
outstanding shares of Harris Common Stock entitled to vote on the approval of
the Transaction and of a majority of the total votes cast by holders of Harris
Common Stock to approve the Harris Stock Plan Amendment.
If a shareholder attends the Concurrent Special Meeting, such shareholder
may vote by ballot. However, many of Concurrent's shareholders may be unable to
attend the Concurrent Special Meeting. Therefore, the Concurrent Board is
soliciting proxies so that each holder of Concurrent Common Stock on the Record
Date has the opportunity to vote on the proposals to be considered at the
Concurrent Special Meeting. When a proxy is returned properly signed and dated,
the shares represented thereby will be voted in accordance with the instructions
on the proxy. If a Concurrent shareholder does not return a signed proxy, such
shareholder's shares will not be voted. Shareholders are urged to mark the boxes
on the proxy to indicate how their shares are to be voted. Each shareholder
shall be entitled to cast one vote on each matter to be voted upon at the
Concurrent Special Meeting. If a holder of Concurrent Common Stock returns a
signed proxy, but does not indicate how such shareholder's shares are to be
voted, the shares represented by the proxy will be voted FOR approval of the
Concurrent Proposals. The proxy also confers discretionary authority on John T.
Stihl, Chairman, President and Chief Executive Officer of Concurrent, and Kevin
J. Dell, Vice President, General Counsel and Secretary of Concurrent, each of
whom has been appointed by the Concurrent Board and named on the proxy, to vote
the shares represented thereby on any other matter that may properly arise at
the Concurrent Special Meeting.
As of the date of this Joint Proxy Statement, the Concurrent Board does not
know of any other matters to be presented for action by Concurrent shareholders
at the Concurrent Special Meeting. If, however, any other matters not now known
are properly brought before the Concurrent Special Meeting, it is anticipated
that the Concurrent proxy holders will vote upon the same according to their
discretion and best judgment.
Any Concurrent shareholder who executes and returns a proxy may revoke such
proxy at any time before it is voted by (i) notifying in writing the corporate
Secretary of Concurrent at Two Crescent Place, Oceanport,
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New Jersey 07757, (ii) granting a subsequent proxy or (iii) appearing in person
and voting at the Concurrent Special Meeting. Attendance at the Concurrent
Special Meeting will not in and of itself constitute revocation of a proxy.
SOLICITATION OF PROXIES
All expenses of Concurrent's solicitation of proxies, including the cost of
preparing and mailing this Joint Proxy Statement to the Concurrent shareholders,
will be borne by Concurrent. In addition to solicitation by use of the mails,
proxies may be solicited by directors, officers and employees of Concurrent in
person or by telephone, telegram or other means of communication. Such
directors, officers and employees soliciting proxies will not be additionally
compensated, but may be reimbursed for reasonable out-of-pocket expenses in
connection with such solicitation. Concurrent has retained Georgeson & Company,
a proxy solicitation firm, for assistance in connection with the Concurrent
Special Meeting at an estimated expense of approximately $5,000 plus reasonable
out-of-pocket expenses. Arrangements will also be made with custodians, nominees
and fiduciaries for forwarding of proxy solicitation materials to beneficial
owners of shares held of record by such custodians, nominees and fiduciaries,
and Concurrent will reimburse such persons for reasonable expenses incurred in
connection therewith.
EFFECT OF ABSTENTIONS AND "BROKER NON-VOTES"
At the Concurrent Special Meeting, abstentions and "broker non-votes" will
be counted for purposes of determining the presence or absence of a quorum. In
determining whether the Concurrent Proposals have each received the requisite
number of affirmative votes, abstentions and broker non-votes have the effect of
an abstention since each of the Concurrent Proposals must be approved by a
majority of the votes cast.
APPRAISAL RIGHTS
Holders of Concurrent Common Stock will not be entitled to any appraisal
rights in connection with the matters to be voted upon at the Concurrent Special
Meeting. See "TERMS OF THE TRANSACTION -- Appraisal Rights".
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THE HARRIS SPECIAL MEETING
GENERAL
This Joint Proxy Statement is being furnished to holders of Harris Common
Stock in connection with the solicitation of proxies by the Harris Board for use
at the Harris Special Meeting and any adjournments or postponements thereof.
Each copy of this Joint Proxy Statement mailed to holders of Harris Common Stock
is accompanied by a form of proxy for use at the Harris Special Meeting.
HARRIS SHAREHOLDERS ARE REQUESTED TO COMPLETE, SIGN AND DATE THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY TO HARRIS IN THE ENCLOSED,
POSTAGE-PAID ENVELOPE.
PURPOSE OF THE HARRIS SPECIAL MEETING
At the Harris Special Meeting, the holders of Harris Common Stock will be
asked to consider and vote upon the following proposals (collectively, the
"Harris Proposals"):
(1) Harris's shareholders will be asked to consider and vote upon a
proposal to approve the Transaction. Because the Transaction contemplates a
sale of "substantially all" of the assets of Harris, Florida corporate law
requires Harris to obtain shareholder approval of the Transaction.
(2) Harris's shareholders will be asked to consider and vote upon a
proposal to approve the Harris Stock Plan Amendment to increase to
2,025,000 the amount of shares of Harris Common Stock available for
issuance thereunder and to amend the director's options portion of the
Harris Stock Plan.
(3) Harris's shareholders will be asked to approve the Name Change,
consisting of an amendment to Harris's Articles of Incorporation to change
Harris's corporate name to CyberGuard Corporation.
(4) Harris's shareholders will be asked to elect the class of
directors whose term expires at the 1998 Annual Meeting of Harris
shareholders (the Harris Special Meeting is in lieu of an annual meeting).
(5) Harris's shareholders will be asked, under certain circumstances,
to approve a proposal to adjourn the Harris Special Meeting.
(6) Harris's shareholders will be asked to approve the appointment of
KPMG as Harris's independent accountants for fiscal year 1996.
(7) The transaction of such other business as may properly come before
the Harris Special Meeting and any adjournment or postponement thereof.
The Transaction is conditioned upon the approval by Concurrent's
shareholders of the issuance of the Concurrent Common Stock Consideration and
the Additional Common Shares and that portion of the Concurrent Stock Plan
Amendment that provides for an increase in the number of shares of Concurrent
Common Stock authorized for issuance to 9,000,000 shares and the approval by
Harris's shareholders of the Transaction (other than the Harris Stock Plan
Amendment) and, in a separate vote, the Harris Stock Plan Amendment. Other than
the foregoing, none of the proposals to be considered at the Harris Special
Meeting is conditioned on the approval of any other proposal.
DATE, TIME AND PLACE
The Harris Special Meeting is scheduled to be held on June 26, 1996 at 2:00
p.m., local time, at the Doubletree Guest Suites, 555 N.W. 62nd Street, Fort
Lauderdale, Florida 33309.
RECORD DATE; SHARES OUTSTANDING
The Harris Board has fixed the close of business on May 14, 1996 as the
Record Date for the determination of holders of Harris Common Stock entitled to
notice of and to vote at the Harris Special Meeting and at any adjournment or
postponement thereof. Under Florida law, all shareholders as of the
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Record Date are entitled to notice of the Harris Special Meeting. Only holders
of Harris Common Stock as of the Record Date will be entitled to vote at the
Harris Special Meeting.
On the Record Date, there were 5,998,415 shares of Harris Common Stock
issued and outstanding held by approximately 6,660 shareholders of record. All
directors and executive officers of Harris have indicated their intention to
vote all shares over which they exercise voting control (an aggregate of 345,291
shares of Harris Common Stock or approximately 5.8% of the outstanding shares on
the Record Date) FOR the approval and adoption of the Transaction, the Harris
Stock Plan Amendment, the nominees for director, adjournment of the Harris
Special Meeting if proposed by the Chairman of the Harris Special Meeting, and
the appointment of KPMG as Harris's independent accountant for fiscal year 1996.
VOTING AT THE HARRIS SPECIAL MEETING
The presence, either in person or by proxy, of the holders of a majority of
the issued and outstanding shares of Harris Common Stock entitled to vote at the
Harris Special Meeting is necessary to constitute a quorum at the Harris Special
Meeting. Each share of Harris Common Stock is entitled to one vote with respect
to all matters presented at the Harris Special Meeting.
The affirmative vote of a majority of the following is required for
approval of the Harris Proposals: (i) the holders of the outstanding shares of
Harris Common Stock with respect to the Transaction (other than the Harris Stock
Plan Amendment) and the Name Change and (ii) the total votes cast at the Harris
Special Meeting with respect to the Harris Stock Plan Amendment, the election of
directors and the appointment of Harris's independent accountant.
If a shareholder attends the Harris Special Meeting, such shareholder may
vote by ballot. However, many of Harris's shareholders may be unable to attend
the Harris Special Meeting. Therefore, the Harris Board is soliciting proxies so
that each holder of Harris Common Stock on the Record Date has the opportunity
to vote on the Harris Proposals on which each is entitled to vote. When a proxy
is returned properly signed and dated, the shares represented thereby will be
voted in accordance with the instructions on the proxy. If a Harris shareholder
does not return a signed proxy, such shareholder's shares will not be voted.
Shareholders are urged to mark a box on the proxy to indicate how their shares
are to be voted. If a holder of Harris Common Stock returns a signed proxy, but
does not indicate how such shareholder's shares are to be voted, the shares
represented by the proxy will be voted FOR approval and adoption of the Harris
Proposals. The proxy also confers discretionary authority on E. Courtney Siegel,
Chairman, President and Chief Executive Officer of Harris, and Daniel S.
Dunleavy, Vice President, Chief Financial Officer and Chief Administrative
Officer of Harris, each of whom has been appointed by the Harris Board and named
on the proxy to vote the shares represented thereby on any other matter that may
properly arise at the Harris Special Meeting.
As of the date of this Joint Proxy Statement, the Harris Board does not
know of any other matters to be presented for action by Harris shareholders at
the Harris Special Meeting. If, however, any other matters not now known are
properly brought before the Harris Special Meeting, it is anticipated that the
Harris proxy holders will vote upon the same according to their discretion and
best judgment.
Any Harris shareholder who executes and returns a proxy may revoke such
proxy at any time before it is voted by (i) notifying in writing the Corporate
Secretary of Harris at 2101 West Cypress Creek Road, Fort Lauderdale, Florida
33309, (ii) granting a subsequent proxy, or (iii) appearing in person and voting
at the Harris Special Meeting. Attendance at the Harris Special Meeting will not
in and of itself constitute revocation of a proxy.
ADJOURNMENT OF THE HARRIS SPECIAL MEETING
The Harris Special Meeting may be adjourned or postponed by Harris for any
reason. If a quorum is not obtained, or if fewer shares are likely to be voted
in favor of approval and adoption of the Transaction than the number required
for approval and adoption, the Harris Special Meeting may be adjourned for the
purpose of obtaining additional proxies or votes. The Harris Special Meeting may
also be adjourned or postponed in order to obtain necessary regulatory
approvals. At any subsequent reconvening of the Harris Special Meeting, all
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proxies will be voted in the same manner as such proxies would have been voted
at the original meeting (except for any proxies which theretofore have been
effectively revoked or withdrawn), notwithstanding that they may have been
effectively voted on the same or any other matter at a prior meeting.
SOLICITATION OF PROXIES
All expenses of Harris's solicitation of proxies, including the cost of
preparing and mailing this Joint Proxy Statement to the Harris shareholders,
will be borne by Harris. In addition to solicitation by use of the mails,
proxies may be solicited by directors, officers and employees of Harris in
person or by telephone, telegram or other means of communication. Such
directors, officers and employees soliciting proxies will not be additionally
compensated, but may be reimbursed for reasonable out-of-pocket expenses in
connection with such solicitation. Harris has retained Georgeson & Company,
Inc., a proxy solicitation firm, for assistance in connection with the Harris
Special Meeting at an estimated expense of approximately $5,000 plus reasonable
out-of-pocket expenses. Arrangements will also be made with custodians, nominees
and fiduciaries for forwarding of proxy solicitation materials to beneficial
owners of shares held of record by such custodians, nominees and fiduciaries,
and Harris will reimburse such persons for reasonable expenses incurred in
connection therewith.
EFFECT OF ABSTENTIONS AND "BROKER NON-VOTES"
At the Harris Special Meeting, abstentions and "broker non-votes" will be
counted for purposes of determining the presence or absence of a quorum. In
determining whether the proposal to approve and adopt the Transaction (other
than the Harris Stock Plan Amendment) and the Name Change received the requisite
number of affirmative votes, abstentions and broker non-votes will have the same
effect as a vote against such proposal since the proposal must be approved by a
majority of the outstanding shares entitled to vote. In determining whether the
proposals to approve (i) the Harris Stock Plan Amendment, (ii) the election of
directors (iii) any adjournment of the Harris Special Meeting and (iv) the
appointment of Harris's independent accountants have received the requisite
number of affirmative votes, abstentions and broker non-votes will have the same
effect as an abstention because each proposal must be approved by a majority of
the votes cast.
DISSENTER'S RIGHTS
Holders of Harris Common Stock do not have dissenter's rights in connection
with the Transaction. See "TERMS OF THE TRANSACTION -- Appraisal Rights."
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THE PROPOSED TRANSACTION
The following is a summary of certain aspects of the Transaction. This
summary does not purport to be complete and is qualified in its entirety by
reference to the Purchase and Sale Agreement, a copy of which is attached hereto
as Annex A, and the other information contained in this Joint Proxy Statement.
GENERAL
The Transaction is to be effected pursuant to the terms and conditions of
the Purchase and Sale Agreement, the Share Holding Agreement, the Certificate of
Designation (the "Certificate of Designation"), the Non-competition Agreement,
the Shared Services Agreement (the "Shared Services Agreement"), and the other
ancillary agreements (collectively, the "Ancillary Agreements") to be entered
into pursuant to the Purchase and Sale Agreement. The Purchase and Sale
Agreement provides that Concurrent will acquire the Purchased Harris Shares and
the Assets of the Harris Real-Time Business, in exchange for which Concurrent
will (i) issue to Harris the Concurrent Common Stock Consideration and the
Preferred Stock Consideration and (ii) assume the Assumed Liabilities. For a
description of the terms of the Concurrent Preferred Stock, see "TERMS OF THE
TRANSACTION -- Concurrent Preferred Stock."
The Transaction is conditioned upon, among other things, approval by
Concurrent's and Harris's shareholders of the Transaction. The Closing is
expected to take place as soon as practicable following the satisfaction or
waiver of all conditions to the Transaction set forth in the Purchase and Sale
Agreement or as otherwise agreed by Harris and Concurrent. See "TERMS OF THE
TRANSACTION -- The Purchase and Sale Agreement."
Pursuant to the Share Holding Agreement, which is to be effective upon
consummation of the Transaction, each of Concurrent and Harris will have certain
rights with respect to representation on the Board of Directors of the other
party. Additionally, both parties will have certain rights and restrictions with
respect to the voting, transfer and sale of securities of such other party held
by it. For a description of the terms of the Share Holding Agreement, see "TERMS
OF THE TRANSACTION -- The Share Holding Agreement."
BACKGROUND OF THE TRANSACTION
For the past several years, the real-time computing industry has been
characterized by increasing competition driven by rapid technological innovation
and decreasing product life cycles. Concurrent's net sales have declined from
$220.5 million in fiscal year 1993 to $140.1 million in fiscal year 1995. This
trend continued in the nine months ended March 31, 1996. Net sales for
Concurrent for the nine months ended March 31, 1996 were $77.1 million, a
decrease of $32.5 million from the prior year period. Net sales for Concurrent
for the three months ended March 31, 1996 were $26.2 million, a decrease of $4.2
million from the prior year quarter but an increase of $1.7 million from the
previous quarter. Throughout the last two years, Concurrent has continuously
reduced its cost structure including headcount reductions of approximately 600
employees.
On October 7, 1994, Harris was spun-off from Harris Corporation in a
tax-free distribution to shareholders of Harris Corporation. Net sales for
Harris decreased to $45.1 million for fiscal year 1995 from $64.6 million for
fiscal year 1994.
Following an exploratory discussion at a trade show in November 1994,
representatives of Concurrent and Harris met in December 1994 to discuss the
parties' interest, if any, in a possible business combination. No follow up
meeting occurred. In late February 1995, Harris delivered to the Concurrent
Board a proposal to acquire Concurrent in a stock-for-stock merger valued at
$29.6 million based upon the then prevailing market prices of the common stock
of each company. This proposal was rejected. In mid-March 1995, the Concurrent
Board rejected another acquisition proposal from Harris at a nominally higher
price.
In June 1995, Concurrent retained Berenson Minella to advise it in
connection with (i) the restructuring and/or refinancing of its bank debt, (ii)
the exploration of various options to improve its capital structure without a
business combination transaction and (iii) after due consideration of items (i)
and (ii), a possible
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sale, merger, acquisition or business combination with respect to all or a
substantial portion of the company or its assets, or other strategic
alternatives. On June 29, 1995, Concurrent entered into a new senior loan
agreement with Foothill Capital Corporation to refinance its prior bank debt.
Following the completion of that refinancing, Concurrent asked Berenson Minella
to initiate discussions with a limited number of potential combination
transaction partners, including Harris. In addition to Harris, Berenson Minella
contacted three other companies similar in size to Concurrent which were deemed
to have complementary operations. The companies contacted expressed limited or
no interest in pursuing a business combination with Concurrent.
On September 7, 1995, representatives of Berenson Minella, in connection
with its review of various strategic alternatives which might be considered by
Concurrent with respect to enhancing shareholder value, met with E. Courtney
Siegel, Chairman, President and Chief Executive Officer of Harris, to ascertain
Harris's interest in a transaction with Concurrent. Following the meeting, the
terms of a possible confidentiality agreement (the "Confidentiality Agreement")
were discussed by representatives of Concurrent and Harris. On September 14,
1995 representatives of Bear Stearns met with members of the Harris Board and
were retained on September 25, 1995 to represent Harris in connection with a
possible transaction with Concurrent. On September 27, 1995, the Concurrent
Board met to consider a preliminary presentation by Berenson Minella regarding a
proposed transaction with Harris and certain types of companies in similar or
related businesses which might be approached to consider alternatives to such
transaction, in the form of an acquisition by or of Concurrent, a merger or
joint venture or an infusion of equity into Concurrent, which types of companies
included general purpose computing companies, real-time and high performance
computing companies, vertical niche computing companies, cable and
telecommunications companies, defense technology companies, government computer
service companies and third party computer maintenance providers. Following such
presentation and board discussion, the Concurrent Board determined that, rather
than conducting a wide spread search for a strategic alliance, pursuing the
proposed transaction with Harris appeared to offer the best immediate
opportunity for a transaction which would meet Concurrent's strategic objectives
and enhance shareholder value.
On September 28, 1995, Concurrent and Harris entered into the
Confidentiality Agreement and agreed to an exchange of confidential information.
On October 11 and 12, 1995, representatives of Concurrent met with
representatives of Harris to conduct a mutual preliminary due diligence
investigation and explore the possibility of a transaction. Following such
meetings and prior to the end of October, representatives of Concurrent and
Harris had discussions on several occasions concerning issues which would be
significant to any potential business combination transaction that might be
proposed.
On October 31, 1995, the Concurrent Board and the Harris Board each held
meetings to discuss a possible business combination transaction involving
Concurrent and Harris. At the meeting of the Harris Board, Bear Stearns
delivered its oral opinion that the Merger (as defined below) was fair, from a
financial point of view, to the holders of Harris Common Stock. At these
meetings, the Board of Directors of each company authorized their respective
managements to pursue further discussions of such a transaction and to negotiate
a definitive merger agreement (the "Merger Agreement").
From November 1 through November 5, 1995 representatives of Concurrent and
Harris negotiated the final terms of the Merger Agreement. The negotiations
culminated in separate meetings of the Boards of Directors of Concurrent and
Harris on November 3, 1995, at which the Merger Agreement and related matters
were approved subject to satisfactory resolution of certain issues. At a meeting
of the Concurrent Board on November 3, 1995, Berenson Minella delivered its oral
opinion that the exchange ratio in the Merger was fair, from a financial point
of view, to the holders of Concurrent Common Stock. Following resolution of such
issues, the Merger Agreement was executed on November 5, 1995. The terms of the
proposed merger were announced in a joint press release issued prior to the
opening of trading on the morning of November 6, 1995. The terms of the Merger
Agreement provided, among other things, (i) that Concurrent's wholly-owned
subsidiary would be merged (the "Merger") with and into Harris with Harris
surviving the Merger as a wholly-owned subsidiary of Concurrent; (ii) each share
of Harris Common Stock outstanding prior to the effective time of the Merger
would be converted into and exchangeable for 9.56 shares of Concurrent Common
Stock and cash in lieu of any fractional share; (iii) that the Merger Agreement
could be terminated by either Harris or Concurrent if the Merger was not
consummated by the earlier of eight weeks following the
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declaration of effectiveness of a registration statement related to the Merger
or April 30, 1996; (iv) events of termination and the payment of a termination
fee upon the occurrence or non-occurrence of certain events, which events of
termination and termination fee were substantially similar to provisions of the
Purchase and Sale Agreement; (v) that the Concurrent Board would consist of nine
directors, three of whom would be designees of Harris and six of whom would be
designees of Concurrent; and (vi) that the mailing of the proxy statement would
be conditioned upon the receipt by Concurrent and Harris of written fairness
opinions from Berenson Minella and Bear Stearns, respectively.
Subsequent to the execution of the Merger Agreement, a number of
market-related events transpired which adversely affected the viability of the
proposed Merger. Chief among these events were (i) the successful initial public
offerings of two competitors of Harris in the trusted systems market, (ii)
communications from one of Harris's largest shareholders that it intended to
oppose the proposed Merger and (iii) the growing disparity in the price per
share of Harris and Concurrent Common Stock.
On November 17, 1995, Secure Computing ("Secure Computing"), a company with
Internet firewall products similar to Harris's CyberGuard product, launched a
public offering of 2,000,000 shares of its common stock at an initial offering
price of $16 per share. The market price of Secure Computing common stock had
risen to $52 per share by December 19, 1995.
On December 20, 1995, Okabena Partnership K ("Okabena"), a Minnesota
general partnership filed a Schedule 13D with the Commission in which Okabena
announced that it had increased its beneficial ownership of Harris Common Stock
from 3.5% to 9.4% of the total issued and outstanding shares. In its Schedule
13D, Okabena stated that it had "undertaken a review of the Internet firewall
products of Harris's trusted systems division, including an analysis of that
segment of [Harris's] business in light of the overall market for products
addressing the security needs of Internet users worldwide and the current market
valuation of Secure Computing. Included in [its] review were McGraw-Hill's
National Software Testing Laboratories' commercial Internet firewall product
evaluations published in the November 21, 1995 issue of Data Communications,
which supported [Okabena's] view that the CyberGuard Internet firewall product
offered by [Harris was] comparable to and competitive with the Side-Winder
Internet firewall product offered by [Secure Computing]." Okabena stated that it
believed that "Secure Computing's market capitalization reflect[ed] investors'
current assessment of the potential for significant worldwide sales of firewall
products to the expanding number of users and providers on the Internet."
In its Schedule 13D, Okabena advised that "the stock merger proposal of
9.56 shares of Concurrent Common Stock for each share of Harris [was]
inadequate, in part, because it imput[ed] an aggregate value of approximately
$20 million for [Harris] based on the closing price on December 19, 1995 for
Concurrent Common Stock as reported on [Nasdaq/NMS.]" Okabena stated that,
"based on its review [as of December 19, 1995] which review is continuing," it
intended to vote its shares against the proposed Merger and to consider "other
possible courses of action with respect to [Harris] including (i) holding
discussions with other [Harris] shareholders concerning the proposed Merger and
other business strategies that [Harris] could pursue, (ii) making a decision to
solicit other [Harris] shareholder support for such opposition, or (iii) seeking
representation on the [Harris Board] and/or otherwise seeking control of
[Harris]." Okabena also decided "to engage in discussions with [Harris
management] with a view toward enhancing shareholder value, including, but not
limited to, a spin-off of its trusted systems division to shareholders prior to
completion of the proposed Merger." After the filing of its Schedule 13D, a
representative of Okabena engaged in conversations with an officer of Harris in
which Okabena's intent to vote against the proposed Merger was confirmed. In
these conversations it also was stated that Okabena generally was in favor of a
transaction in which the Real-time Business of Harris would be sold and the
then-current shareholders of Harris would remain the principal owners of the
Trusted Systems Division. No effort was made on the part of Harris or Okabena to
include representatives of Okabena in any discussions regarding the details of a
possible renegotiation of the proposed transaction with Concurrent.
In light of the foregoing, in early January 1996, Harris began to consider
possible revisions to the proposed Merger, which was communicated to Concurrent
and its financial and legal advisors. Both Harris and Concurrent and their
respective financial and legal advisors spent the next several weeks considering
their
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rights and obligations under the Merger Agreement and reviewing alternative
structures that could be implemented.
On February 2, 1996, a joint meeting of the entire Boards of Concurrent and
Harris was convened, which included their respective financial and legal
advisors, at which Concurrent presented its product development roadmap and
Harris explained its reasons for the need to revise the proposed transaction. At
that meeting, Bear Stearns stated that it had advised Harris that, if asked as
of that date, it would be unable to confirm in writing its oral opinion rendered
to the Harris Board on October 31, 1995, that the Merger was fair, from a
financial point of view, to the holders of Harris Common Stock, and the reasons
therefor. On February 2, 1996 the ratio of the closing bid prices of Harris
Common Stock to Concurrent Common Stock had increased to approximately 18.3 to 1
from the ratio of the closing bid prices on November 3, 1995, the last full
trading day prior to the public announcement of the proposed Merger, of
approximately 8.3 to 1. The boards designated and authorized certain board
members, together with their respective advisors, to negotiate certain
modifications to the proposed transaction. During the next several days, the
authorized board members, with the assistance of their respective legal and
financial advisors, engaged in negotiations over the terms of the revised
transaction. As described above, the parties previously had analyzed various
transaction structures that could be implemented to the extent a revised
transaction were to be agreed. Based on such analyses, which consisted
principally of reviewing the tax effects of various transaction structures and
evaluating the likelihood that a transaction could be consummated using a
particular structure, the parties determined to structure the revised
transaction as an asset purchase by Concurrent combined with a share exchange of
equity securities by the parties.
On February 6, 1996, Raptor Systems, Inc. ("Raptor"), another company with
Internet firewall products similar to Harris's CyberGuard product, launched a
public offering of 2,875,000 shares of its common stock at an initial offering
price of $15 per share. The market price per share of Raptor had risen to
$24 3/4 by the end of the first day of trading. As of May 22, 1996, the most
recent practicable date prior to the printing of this Joint Proxy Statement, the
closing price per share of Secure Computing and Raptor common stock was $27 1/2
and $30 7/8, respectively.
On February 8, 1996, Concurrent and Harris announced the execution of a
memorandum of understanding (the "Memorandum of Understanding") dated February
7, 1996 which provided the basic framework for the Transaction. Pursuant to the
Memorandum of Understanding, Concurrent and Harris agreed to use their best
efforts to negotiate an agreement with respect to the sale to Concurrent of the
Harris Real-Time Business and the Purchased Harris Shares in exchange for the
issuance by Concurrent to Harris of the Concurrent Common Stock Consideration
and the Preferred Stock Consideration and the assumption of the Assumed
Liabilities. The Memorandum of Understanding contemplated that Concurrent and
Harris would enter into a definitive agreement that would supersede the Merger
Agreement. Between February 8th and March 26th, Concurrent and Harris engaged in
detailed negotiations and discussions concerning the assets and liabilities of
the Harris Real-Time Business which would be sold to and assumed by Concurrent
and the other arrangements and agreements between Harris and Concurrent,
including the terms of the Share Holding Agreement, which would be necessary or
appropriate in connection with Concurrent's purchase of the Harris Real-Time
Business and the issuance of the Concurrent Common Stock Consideration and the
Preferred Stock Consideration to Harris and the issuance of the Harris Purchased
Shares to Concurrent. During this same time period, a representative of Okabena
confirmed to a representative of Harris that, subject to a review of the
definitive agreements and receipt of the proxy statement to be provided to
Harris shareholders, Okabena was generally in favor of the Transaction. On March
20, 1996, Bear Stearns delivered an oral opinion to the Special Committee of the
Harris Board that, as of such date, the Transaction was fair, from a financial
point of view, to the shareholders of Harris. On March 21, 1996, the Special
Committee unanimously concluded that the Purchase and Sale Agreement and the
Transaction were fair to and in the best interests of the Harris shareholders
and recommended that the Harris Board also approve them. On March 21, 1996, the
Harris Board unanimously concluded that the Purchase and Sale Agreement and the
Transaction were fair to and in the best interests of the Harris shareholders
and approved them. On March 22, Berenson Minella delivered its oral opinion to
the Concurrent Board that, as of such date, the purchase by Concurrent of the
Assets and the Purchased Harris Shares for the Concurrent Common Stock
Consideration, the Preferred Stock Consideration and the assumption of the
Assumed Liabilities, taken as a whole, were fair to the shareholders of
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Concurrent from a financial point of view, and the Concurrent Board approved the
Transaction. On March 26, 1996, Concurrent and Harris executed the Purchase and
Sale Agreement as amended and restated by Concurrent and Harris on May 23, 1996.
With respect to the Merger and the Transaction, the financial advisors for
each of Concurrent and Harris provided their respective clients with advice on
the financial terms of the transactions and the strategic issues associated
therewith. While each financial advisor was involved at times as one of the
principal negotiators on behalf of its respective client, in no circumstances
did either financial advisor unilaterally establish its client's negotiating
position or agree to a particular provision without its client's agreement.
RECOMMENDATIONS OF THE BOARD OF DIRECTORS OF CONCURRENT AND CONCURRENT'S REASONS
FOR THE TRANSACTION
The Concurrent Board unanimously determined that the Transaction is in the
best interests of Concurrent and the holders of Concurrent Common Stock and
recommends that Concurrent shareholders vote in favor of the issuance of the
Concurrent Common Stock Consideration and the Additional Common Shares and the
Concurrent Stock Plan Amendment. See "AMENDMENT TO THE CONCURRENT STOCK OPTION
PLAN."
The Concurrent Board believes that the Transaction offers the following
significant strategic and financial benefits to Concurrent and its shareholders,
as well as to its employees and customers:
- Enhanced Competitive Position. Concurrent following the Transaction is
expected to be in a better position to meet the challenges of the
increasingly competitive environment in the real-time computing industry
more effectively than either Concurrent or Harris standing alone. In
addition, Concurrent will have access to its own as well as Harris's
technology, allowing it to combine the best of both technologies in the
next generation of products.
- Larger and More Diverse Market Coverage. After the Transaction is
consummated, Concurrent's service territory, installed base and product
offerings will be larger and more diverse than prior to the consummation
of the Transaction. In addition, the combination of the best of the
technologies of the two companies is expected to allow for a reduction in
the time between the introduction of next generation products within the
combined company's product line, resulting in the combined company being
less dependent on the success of any individual next generation product.
- Cost Savings. The Transaction is expected to generate significant cost
savings as early as the first fiscal year after the Transaction. Such
savings will be primarily obtained through headcount reductions, as well
as facilities cost reductions. These savings are expected to be obtained
through a variety of actions including, among others:
-- Integration of Corporate Management and Administrative
Functions. Concurrent would be able to consolidate administrative
functions, thereby eliminating duplicative positions, reducing other
non-labor and administrative expenses and limiting or avoiding
capital expenditures for administrative facilities. Cost savings are
expected to be achieved in the area of personnel reductions through
attrition, strictly controlled hiring, reassignment and retraining
and severance programs.
-- Consolidation of Production and Research and Development
Facilities. The Transaction would allow for the potential
consolidation of the production and research and development
facilities related to the real-time businesses of the two companies.
-- Consolidation of Sales/Service Offices. The Transaction would allow
Concurrent to eliminate duplicative sales and service offices related
to the real-time businesses of the companies in those markets where
each company presently maintains an office.
- Liquidity. The Transaction is expected to provide Concurrent with
potential additional borrowing capacity under its revolving credit
facility based on the higher borrowing base resulting from the
combination of the real-time businesses of the two companies. Concurrent
also may sell or pledge, subject to certain restrictions, part of the
Purchased Harris Shares as a means of achieving increased liquidity. For
a discussion of certain issues relating to the liquidity of each company
and the expected
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liquidity of each company after consummation of the Transaction, see
"SPECIAL FACTORS -- Potential Shortfall in Liquidity."
For the foregoing reasons, the Concurrent Board unanimously believes that
the terms and conditions of the Purchase and Sale Agreement are in the best
interests of Concurrent and its shareholders. In reaching its conclusion, the
Concurrent Board considered, among other things: (i) information relating to the
business, assets, management, competitive position and prospects of Concurrent
if it were to continue as an independent company; (ii) the general strategic and
other benefits of the Transaction, described above; (iii) the judgment, advice
of, and analyses prepared by, Concurrent's management; (iv) the opinions,
analyses and presentations of Concurrent's financial advisor, Berenson Minella
as described under "-- Opinion of Concurrent's Financial Advisor"; (v) the
financial condition and results of operations of Concurrent and Harris, both on
an historical and a prospective basis; (vi) the percentage of equity in
Concurrent to be received by Harris in relation to the relative contributions of
the real-time businesses of Concurrent and Harris based on, among other things,
sales, earnings before interest, taxes, depreciation and amortization, and net
income, and the financial position of Concurrent on a pro forma combined basis
following the Transaction; (vii) the potential value inherent in the Purchased
Harris Shares to be received by Concurrent based on the recent stock trading
values of other companies in the trusted systems market, particularly those
described in "THE PROPOSED TRANSACTION -- Background of the Transaction"; (viii)
the potential efficiencies, cost savings and other synergies that should be
realized as result of the combination of the real-time businesses of Concurrent
and Harris; (ix) historical market prices and trading information with respect
to Concurrent Common Stock and Harris Common Stock; (x) the terms and conditions
of the Purchase and Sale Agreement and the Ancillary Agreements including (a)
the Assets to be acquired by Concurrent, (b) the fact that no long-term
non-contingent liabilities of Harris are to be assumed, the types of current
liabilities and contingent liabilities to be assumed by Concurrent in the
Transaction, and the fact that the liquidation preference of the Concurrent
Preferred Stock to be received by Harris will be reduced on a dollar-for-dollar
basis to the extent that net current assets to be received by Concurrent are
less than $14.4 million, as described in "TERMS OF THE TRANSACTION -- The
Purchase and Sale Agreement -- Preferred Stock Adjustment" and "-- Concurrent
Preferred Stock -- Liquidation Preference," (c) the consideration to be paid by
Concurrent, (d) the obligations imposed on each of the parties, (e) the terms of
the Preferred Stock Consideration to be issued to Harris in the Transaction
(along with the terms of the debentures into which such preferred stock is
exchangeable, pursuant to the terms of such stock) and (f) the terms of the
Share Holding Agreement; (xi) the effect of the tax and accounting treatment of
the Transaction on Concurrent as described under "SPECIAL FACTORS -- Limitations
on Use of Certain Tax Loss Carryforwards", "TERMS OF THE
TRANSACTION -- Accounting Treatment" and "-- Certain Federal Income Tax
Consequences of the Transaction"; (xii) the history of discussions regarding the
Transaction with Harris; (xiii) the expected composition of the Concurrent Board
and the Harris Board following the Transaction; (xiv) the many challenges to
management associated with successfully integrating the businesses of the two
companies and the expected composition of the management team for Concurrent
following the consummation of the Transaction; (xv) the expected costs of
completing the combination of the real-time businesses of Harris and Concurrent
and of developing next generation products in the real-time business; (xvi) the
inherent difficulties in combining the two real-time businesses at a time when
both are experiencing generally declining revenues and liquidity issues; (xvii)
the types of reactions customers might have to the Transaction as customers of
each company analyze the Transaction and its effect on Concurrent's commitment
to existing product lines and the expected next generations of product
improvements; (xviii) the potential significant enhancement of the
technological, strategic and market position of Concurrent beyond that
achievable by Concurrent prior to the consummation of the Transaction and (xix)
the interest of certain members of management of Concurrent in the Transaction
described in detail in "-- Interests of Certain Persons in the Transaction".
In connection with their consideration of the Transaction, the members of
the Concurrent Board were presented with certain projected financial information
for fiscal years 1997 and 1998 prepared by the management of Concurrent and
Harris referred to herein as the Projections (see "PROJECTED FINANCIAL
INFORMATION"). The Projections were prepared by combining separate projections
(which are included in the Projections) of Concurrent and Harris (excluding the
Trusted Systems Division) and making adjustments thereto based on certain
assumptions. These adjustments included (i) $20.0 million and $18.0
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million in negative sales synergies with corresponding volume related material
cost adjustments of $4.4 million and $3.8 million for fiscal years 1997 and
1998, respectively, (ii) manufacturing and service consolidation cost savings of
$12.2 million and $15.1 million for fiscal years 1997 and 1998, respectively,
(iii) selling, general and administrative and research and development cost
savings aggregating $13.2 million and $10.8 million for fiscal years 1997 and
1998, respectively, and (iv) a tax rate for the combined operations of 40%,
resulting in an increase in taxes of $1.4 million and $4.1 million in fiscal
years 1997 and 1998, respectively. In addition, members of the Concurrent Board
were presented with an estimate by management of Concurrent of total net
Transaction-related charges and costs of $22.2 million. (For a discussion of
Transaction-related charges and costs, see "SPECIAL FACTORS -- Impact of
Transaction-Related Charges and Costs on Financial Performance; Uncertainty of
Transaction-Related Charges and Costs.") The foregoing discussion of the
Projections is qualified in its entirety by the disclosure set forth in
"PROJECTED FINANCIAL INFORMATION."
Pursuant to the engagement letter between Concurrent and Berenson Minella,
as amended, Berenson Minella agreed to accept the proceeds from the sale of
shares of Concurrent Common Stock as payment of a portion of its fee, and may,
at its election, accept delivery of any unsold shares in lieu of additional cash
payment. The form of payment was necessitated by the Concurrent Board's desire
to conserve cash and had no impact on the Concurrent Board's reliance on the
opinion of Berenson Minella. See "-- Opinion of Concurrent's Financial Advisor."
The foregoing discussion of the information and factors considered by the
Concurrent Board is not intended to be exhaustive. In view of the variety of
factors considered in connection with its evaluation of the Transaction, except
as noted above the Concurrent Board did not, as a group, find it practicable to
and did not quantify or otherwise assign relative weights to the specific
factors considered in reaching its determination. Individual members of the
Concurrent Board may have quantified and given weights to such factors, but such
individual members may have quantified and weighted such factors differently.
After considering, among other things, the foregoing factors, the
Concurrent Board unanimously adopted and approved the Purchase and Sale
Agreement and the transactions contemplated thereby and recommended that the
shareholders of Concurrent vote to approve the issuance of the Concurrent Common
Stock Consideration and the Concurrent Stock Plan Amendment as required to
consummate the Transaction.
OPINION OF CONCURRENT'S FINANCIAL ADVISOR
In June 1995, Concurrent engaged Berenson Minella as its financial advisor
to assist the senior management of Concurrent in restructuring and/or
refinancing Concurrent's bank debt and to explore various options with respect
to raising capital and combination transactions with other parties. Berenson
Minella was selected by the Concurrent Board after its consideration of several
other financial advisors; such selection was based on, among other things,
Berenson Minella's experience and reputation. Berenson Minella is a nationally
recognized investment banking firm whose principals have substantial experience
in corporate finance, restructurings and transactions such as the Transaction.
On June 29, 1995, Concurrent entered into a new senior loan agreement with
Foothill Capital Corporation to refinance its prior existing bank debt.
Following the completion of that refinancing, Concurrent asked Berenson Minella
to initiate discussions with a limited number of potential combination
transaction partners, including Harris. In October 1995, the Concurrent Board
requested Berenson Minella, as part of its engagement as financial advisor with
respect to a possible combination transaction with Harris, to render an opinion
to the Board as to the fairness of the exchange ratio in such transaction, from
a financial point of view, to Concurrent's shareholders. Thereafter, beginning
in January 1996, Berenson Minella assisted the Concurrent Board in connection
with the revisions to the proposed transaction which resulted in the negotiation
and execution of the Purchase and Sale Agreement.
On March 22, 1996, at the request of Concurrent's Board and prior to its
approval of the Purchase and Sale Agreement, Berenson Minella rendered its oral
opinion (confirmed in a written opinion dated as of the date of this Joint Proxy
Statement) that, as of the date of such opinion, and subject to certain
assumptions, procedures followed and matters and limitations set forth in such
written opinion as described below, the purchase by Concurrent of the Assets and
the Purchased Harris Shares for the Concurrent Common Stock
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Consideration and the Preferred Stock Consideration and the assumption of the
Assumed Liabilities, taken as a whole, are fair to the shareholders of
Concurrent from a financial point of view. Berenson Minella's opinion does not
constitute a recommendation to any shareholder of Concurrent as to how any such
shareholder should vote with respect to the issuance of Concurrent Common Stock
and the Additional Common Shares in connection with the Transaction.
A copy of the written opinion of Berenson Minella is attached hereto as
Annex B. SHAREHOLDERS OF CONCURRENT ARE URGED TO READ SUCH OPINION IN ITS
ENTIRETY FOR A DISCUSSION OF THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND SCOPE
OF THE REVIEW UNDERTAKEN IN RENDERING SUCH OPINION. The summary of the opinion
set forth below is qualified in its entirety by reference to the full text of
such opinion in Annex B.
In arriving at its opinion, Berenson Minella, among other things: (i)
reviewed the Purchase and Sale Agreement, the Form of Certificate of
Designation, Debenture Term Sheet and Form of Share Holding Agreement attached
as exhibits thereto, and the Joint Proxy Statement; (ii) reviewed certain
publicly-available business and financial information relating to Concurrent,
including Concurrent's Annual Reports on Form 10-K for the fiscal years ended
June 30, 1994 and 1995, and its Quarterly Reports on Form 10-Q for the fiscal
quarters ended September 30, 1995, December 31, 1995 and March 31, 1996; (iii)
reviewed certain publicly-available business and financial information relating
to Harris, including Harris's Information Statement dated September 29, 1994,
its Quarterly Reports on Form 10-Q and Form 10-Q/A for the period ended
September 30, 1994, its Annual Report on Form 10-K for the fiscal year ended
September 30, 1995, and its Quarterly Reports on Form 10-Q for the fiscal
quarters ended December 29, 1995 and March 30, 1996; (iv) reviewed forecasted
combined income statements for Concurrent and the Harris Real-Time Business for
the twelve month periods ending June 30, 1997 and 1998, and forecasted combined
balance sheets as of the end of each fiscal quarter from June 30, 1996 through
June 30, 1998, prepared by Concurrent's management as of March 15, 1996,
financial projections for Concurrent and financial projections for the Harris
Real-Time Business for the twelve month periods ending June 30, 1997 and 1998,
prepared by Concurrent's management as of March 15, 1996, and financial
projections for the Harris Real-Time Business for the twelve months ending
December 31, 1996 and 1997, prepared by the management of Harris as of March 15,
1996 (collectively referred to herein as the "Projections"; see "PROJECTED
FINANCIAL INFORMATION"), and had discussions with the management of each company
regarding the Projections; (v) reviewed financial forecasts for Concurrent for
the quarters ending March 31, 1996 and June 30, 1996, prepared by Concurrent's
management as of January 24, 1996; (vi) discussed with the management of each of
Concurrent and Harris their respective businesses and the views of each
management regarding the companies' respective technologies and the
profitability of such technologies, as well as the operating and strategic
benefits and implications of Concurrent's acquisition of the Harris Real-Time
Business, including the effect on sales and the operating synergies and cost
savings projected to be achieved through the combination of the operations of
Concurrent and the Harris Real-Time Business; (vii) considered both the
historical and recent sales and earnings trends of each of Concurrent and the
Harris Real-Time Business, taking into account the financial condition,
including the projected costs associated with Concurrent's acquisition of the
Harris Real-Time Business and debt capacity and liquidity, of each, as well as
that of the pro forma combined company; (viii) reviewed historical stock prices
and trading volumes of Concurrent and Harris; (ix) compared the recent financial
performance of each of Concurrent and the Harris Real-Time Business with that of
other public companies engaged in businesses deemed similar to those of
Concurrent and the Harris Real-Time Business, and compared the recent financial
performance of Harris's "trusted systems" business with that of other public
companies engaged in businesses deemed similar to those of such "trusted
systems" business; (x) reviewed the financial terms of certain other recent
business combinations involving companies engaged in businesses deemed similar
to those of Concurrent and the Harris Real-Time Business, to the extent publicly
available; (xi) compared the relative contribution in terms of sales, operating
income, operating cash flow and net income of each of Concurrent and the Harris
Real-Time Business to a pro forma combined company and compared such
contribution to the pro forma ownership of each of Concurrent's shareholders and
Harris in the combined company; and (xii) reviewed such other information and
took into account such other factors as Berenson Minella deemed relevant.
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For purposes of rendering its opinion, Berenson Minella assumed and relied
upon the accuracy and completeness of the foregoing information and did not
assume any responsibility for independent verification of such information or
for any independent valuation or appraisal of any of the assets or liabilities
of Concurrent or Harris, including without limitation the Assets or the Assumed
Liabilities, nor was Berenson Minella furnished with any such valuations or
appraisals. With respect to the Projections and financial forecasts, Berenson
Minella assumed that they have been reasonably prepared on bases reflecting the
best currently available estimates and good faith judgments of the management of
Concurrent as to the future performance of Concurrent and the Harris Real-Time
Business, of the management of Harris as to the future performance of the Harris
Real-Time Business, and of the managements of Concurrent and Harris with respect
to the future performance of the combined operation of Concurrent and the Harris
Real-Time Business, and relied upon the assurances of the managements of
Concurrent and Harris that they are unaware of any facts that would make the
information, Projections or financial forecasts provided to Berenson Minella
incomplete or misleading. Berenson Minella also assumed that the effect on sales
and the operating synergies and cost savings projected to be achieved through
the combination of the operations of Concurrent and the Harris Real-Time
Business will be realized and relied without further analysis or investigation
on the judgment of the managements of Concurrent and Harris as to the companies'
respective technologies and the profitability of such technologies. Berenson
Minella's opinion is necessarily based on economic, market and other conditions,
and the information made available to it, as of the date of the opinion.
The opinion was provided at the request and for the information of the
Concurrent Board in connection with its consideration of the Transaction, and
shall not be reproduced, summarized, described or referred to, or furnished to
any other person, without Berenson Minella's prior written consent, provided,
however, that the opinion may be reproduced in full in this Joint Proxy
Statement. The opinion does not constitute a recommendation to any shareholder
of Concurrent as to how any such shareholder should vote with respect to the
issuance of Concurrent Common Stock and the Additional Common Shares in
connection with the Transaction.
The following is a brief summary of those financial analyses undertaken by
Berenson Minella and discussed with the Concurrent Board in rendering its oral
fairness opinion to such Board on March 22, 1996.
Review of Historical and Projected Financial Statements. Berenson Minella
reviewed comparable historical financial results for each company for the fiscal
years ending June 30, 1992 through 1995 for Concurrent and analogous periods for
Harris and projected financial results for 1996 (based upon certain of the
Projections for Concurrent's June 30 fiscal year and a September 30 fiscal year
for Harris), and noted the historical trend downward in sales and profitability
for both companies for the latest fiscal year, projected to continue for
Concurrent for 1996, with some improvement for Harris (based on consolidated
numbers for both the Harris Real-Time Business and its "trusted systems"
business) but still significantly below fiscal 1994 numbers.
Stock Trading History. Berenson Minella reviewed the historical trading
prices and volume of Concurrent Common Stock on a daily basis from March 16,
1995 to March 15, 1996 and on a weekly basis from January 3, 1992 to March 15,
1996, and of Harris Common Stock on a daily basis from March 16, 1995 to March
15, 1996 and on a weekly basis from October 7, 1994 (the week of its spin-off
from Harris Corporation) to March 15, 1996, noting the significant decline in
the Concurrent stock price over the past three years and the sharp increase in
the Harris stock price since the end of December 1995.
Contribution Analysis. Berenson Minella analyzed the contribution of each
of Concurrent and the Harris Real-Time Business to the pro forma combined
company for the twelve months ending June 30, 1995, September 30, 1995 and
December 31, 1995 (assuming a quarterly run rate of depreciation and
amortization for the Harris Real-Time Business through December 1995) and June
30, 1996, December 31, 1996 and June 30, 1997 (based upon Concurrent's
Projections dated March 15, 1996 and Harris management's low case for the Harris
Real-Time Business as of March 16, 1996). Such analysis showed that, on both an
historical and projected basis, Concurrent and the Harris Real-Time Business
were each contributing sales in approximately the agreed 75%/25% ownership
ratio, Concurrent's shareholders to Harris, respectively, following the
Transaction (assuming no conversion of the Preferred Stock Consideration or
exercise of
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Concurrent Options to be vested as a result of the Transaction; with such
conversion, the ownership ratio would be 69%/31%, respectively), although
Concurrent's percentage was decreasing from 78.7% for the twelve months ending
June 30, 1995 to 72.4% for the projected twelve months ending June 30, 1997,
while the percentage for the Harris Real-Time Business was increasing from 21.3%
to 27.6%, respectively, over such period. While such analysis showed that, on an
historical and projected basis, Concurrent would have contributed 110% and
120.7% of EBITDA (as defined below) for the twelve months ended June 30, 1995
and December 31, 1995, respectively, and was projected to contribute 81.3% and
78.8% of EBITDA for the twelve months ending June 30, 1996 and December 31,
1996, respectively, and 115.7% and 95.5% of EBIT (as defined below), for the
projected twelve months ending June 30, 1996 and December 31, 1996, respectively
(EBIT being negative for the historical 1995 periods), which was more than the
agreed ownership ratio (assuming no conversion of the Preferred Stock
Consideration or exercise of options, as above), Concurrent was projected to
contribute 70.9% of EBITDA and 74.9% of EBIT for the twelve months ending June
30, 1997, which would be approximately in line with such ratio, assuming no
conversion of the Concurrent Preferred Stock, or slightly above the ratio
following the conversion of the Concurrent Preferred Stock. Berenson Minella
also looked at the accretive benefits of the acquisition to Concurrent's
shareholders and Harris, comparing projected results for the twelve months
ending June 30, 1996 and 1997, derived as described above, to pro forma numbers
for the combined business for the twelve months ending June 30, 1996 and June
30, 1997, based upon the Projections for Concurrent and the Harris Real-Time
Business, adjusted by the projected synergies of the combined business in fiscal
1997 as provided by Concurrent's management, on both a primary ownership basis
and assuming conversion of the Preferred Stock Consideration. Such analysis
showed dilution to Concurrent shareholders in respect of sales of ($19.0)
million, or 17.9%, and ($17.2) million, or 17.2%, vs. dilution to Harris of
($1.0) million and ($0.9) million, or 2.9%, for the projected twelve months
ending June 30, 1996 and June 30, 1997, respectively, assuming conversion of the
Preferred Stock Consideration. Such analysis also showed, however, significant
accretion to Concurrent shareholders in respect of EBITDA of $4.2 million
(25.2%), vs. $5.5 million (144.9%) to Harris, for the projected twelve months
ending June 30, 1996, and of $4.2 million (29.8%), vs. $2.4 million (41.8%) to
Harris, for the projected twelve months ending June 30, 1997, and significant
accretion to Concurrent shareholders in respect of EBIT of $4.8 million (97.7%),
vs. $5.0 million (percentage not meaningful due to projected negative EBIT of
($0.7) million for Harris, for the projected twelve months ending June 30, 1996,
and of $4.4 million (174.1%), vs. $2.3 million (267.3%) for Harris, for the
projected twelve months ending June 30, 1997, assuming in each case conversion
of the Preferred Stock Consideration. Although the percentage accretion in
respect of net income for such periods was not meaningful for Concurrent, given
that it was expecting negative net income, the dollar accretion was expected to
be greater for Concurrent ($5.5 million, vs. $1.6 million for Harris, for 1996
and $3.8 million, vs. $0.3 million for Harris, for 1997, assuming in each case
conversion of the Preferred Stock Consideration). (Percentage accretion was not
meaningful for Harris for 1996, when it was expecting negative net income, and
was 31.8% for Harris for 1997, when it was expecting net income of $0.8
million.) Berenson Minella noted that none of the above analyses assumed any
benefit from the Purchased Harris Shares received by Concurrent in the
Transaction.
Pro Forma Acquisition Analysis. Berenson Minella analyzed certain pro
forma effects of Concurrent's acquisition of the Harris Real-Time Business on
the capitalization and earnings of the combined company, as well as Concurrent's
earnings per share, based upon the number of fully diluted shares of Concurrent
Common Stock provided by Concurrent's management as of March 15, 1996 after
taking into account the issuance of the Concurrent Common Stock Consideration.
These analyses were based upon projections of Concurrent's management for both
Concurrent and the Harris Real-Time Business as of March 15, 1996 for the twelve
months ending June 30, 1997 and 1998, and reflect Concurrent management's view
of expected synergies and anticipated write-offs, non-deductible transaction
expenses and restructuring expenses. Such analysis showed a significant increase
in Concurrent's projected earnings per share from ($.04), on a stand-alone
basis, to $.08, on a pro forma combined basis, for the projected twelve months
ending June 30, 1997 and from $.03, on a stand-alone basis, to $.18, on a pro
forma combined basis, for the projected twelve months ending June 30, 1998, as
well as a combined company with a stronger balance sheet and greater debt
capacity. In its analysis, Berenson Minella assumed that the synergies projected
by Concurrent management to be achieved from the acquisition of the Harris
Real-Time Business would be realized and expressed no view and
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undertook no analysis with respect to whether such synergies would be realized
or the amount or timing of such synergies. Berenson Minella noted that such
analyses did not take into account the value of the Purchased Harris Shares
received by Concurrent in the Transaction.
Comparison with Selected Comparable Publicly Traded Companies. Berenson
Minella reviewed and compared certain financial data, including price/earnings
multiples for the latest twelve months, estimated 1996 and estimated 1997 and
enterprise value to latest twelve months sales, earnings before interest, taxes,
depreciation and amortization ("EBITDA") and earnings before interest and taxes
("EBIT"), based upon financial information publicly available on March 13, 1996,
stock prices as of March 15, 1996, and corresponding financial data, ratios and
multiples for two sets of publicly traded companies: (i) certain large
capitalization, general purpose computer companies (Amdahl, Digital Equipment,
Hewlett-Packard, IBM, Silicon Graphics, Sun Microsystems and Unisys,
collectively, the "Tier I Comparables") and (ii) certain smaller-capitalization,
niche-focused computer companies (Cray Research, Encore Computer, Evans &
Sutherland, Sequent Computer, Stratus, Concurrent and Harris, collectively, the
"Tier II Comparables"). Berenson Minella noted, however, the lack of
comparability of the Tier I Comparables, given their size and breadth of
business, and the limited comparability of the Tier II Comparables. Berenson
Minella concluded from such analysis that no identifiable trends or trading
ranges exist in the Tier II Comparables, but noted that multiples of enterprise
value to latest twelve months sales were in a narrow range, for which the mean
and median were 1.1x and 1.0x, respectively, as of March 15, 1996 (excluding
Encore Computer, which was substantially above the range at 9.9x). Berenson
Minella also reviewed equity value, enterprise value and latest twelve month
sales of certain trusted system companies (Secure Computing, Raptor, Cylink
Corp., Cybercash, Inc. and UUNet Technologies), based upon financial information
publicly available on March 13, 1996 and stock prices as of March 15, 1996, to
provide a perspective for assessing the value of the Purchased Harris Shares
following consummation of the Transaction.
Analysis of Comparable Merger and Acquisition Transactions. Berenson
Minella reviewed certain recent business combinations involving companies
engaged in businesses deemed similar to those of Concurrent and the Harris
Real-Time Business in terms of selected financial data and valuation ratios, to
the extent publicly available, including target enterprise value as a multiple
of sales, EBIT and EBITDA and the ratio of acquisition price to target earnings.
Except in the multiples of target enterprise value to sales, which ranged from
.3x to 1.8x with a mean and median of 1.1x (as compared to multiples, based upon
market values as of March 15, 1996, of 0.5x for Concurrent and 1.8x for Harris),
no identifiable trends existed for such transactions (Silicon Graphic's pending
acquisition of Cray Research, Hewlett Packard's acquisition of Convex Computer,
Siemens Nixdorf 's acquisition of Pyramid Technology, Raytheon's acquisition of
Xyplex, Storage Technology's acquisition of Network Systems, Radius's
acquisition of SuperMac Tech, NCR (AT&T)'s acquisition of Teradata and AT&T's
acquisition of NCR, collectively, the "Transaction Comparables"). Berenson
Minella noted that merger and acquisition activity in the hardware segment of
the computer industry has been relatively modest, and multiples for large
transactions such as NCR/AT&T are not particularly relevant. The lack of
consistent and reasonable valuation bases for many transactions indicated that
many have been done for synergistic and strategic reasons.
Valuation Analysis. Berenson Minella compared the implied purchase price
of the Harris Real-Time Business, based upon the March 15, 1996 closing stock
prices of Concurrent Common Stock ($1.27) and Harris Common Stock ($42.75 prior
to the 3 for 1 stock split on March 29, 1996), of (i) $8 million (assuming
conversion of the Preferred Stock Consideration into 4 million shares of
Concurrent Common Stock) and (ii) $13 million (assuming no conversion of the
Preferred Stock Consideration and a value of the Preferred Stock Consideration
equal to its $10 million liquidation preference), to the enterprise value of
such business based upon sales of the Harris Real-Time Business for the twelve
months ended December 31, 1995 and multiples of enterprise value to latest
twelve month sales, derived as described above, of the Tier I Comparables
(resulting in a minimum enterprise value of $11.4 million, a maximum of $64.6
million and an average of $45.6 million), the Tier II Comparables (resulting in
a minimum enterprise value of $19 million, a maximum of $68.4 million and an
average of $41.8 million) and the Transaction Comparables (resulting in a
minimum enterprise value of $11.4 million, a maximum of $68.4 million and an
average of $41.8 million). Berenson Minella also compared such implied purchase
prices to the enterprise value of the Harris Real-Time
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Business, based upon Concurrent's multiple of enterprise value to latest twelve
month sales of .5x, given that Concurrent is the only publicly traded company
whose sole business is real-time computing, resulting in an enterprise value for
the Harris Real-Time Business of $19 million. In connection with such analysis,
Berenson Minella noted that such implied purchase prices are sensitive to
movements in market prices of both Concurrent Common Stock and Harris Common
Stock and presented a range of implied purchase prices for the Harris Real-Time
Business assuming a 30% increase and decrease in the prices of Harris Common
Stock and Concurrent Common Stock.
The above description is a summary of all financial analyses performed by
Berenson Minella and discussed with the Concurrent Board in rendering its oral
fairness opinion to such Board on March 22, 1996, Berenson Minella did not
attribute any particular weight to any analysis or factor considered by it, but
rather made qualitative judgments as to the significance and relevance of each
analysis and factor. Accordingly, Berenson Minella believes that its analyses
must be considered as a whole and that selecting portions of its analyses and of
the factors considered by it, without considering all such factors and analyses,
could create an incomplete or misleading view of the processes underlying its
analyses and opinion. Arriving at a fairness opinion is a complex process not
necessarily susceptible to partial analyses or summary description. Berenson
Minella's analyses were prepared solely for purposes of providing its opinion to
the Concurrent Board as to the fairness of the purchase of the Assets and the
Purchased Harris Shares for the Concurrent Common Stock Consideration and the
Preferred Stock Consideration and the assumption of the Assumed Liabilities,
taken as a whole, to Concurrent's shareholders from a financial point of view;
they do not purport to be appraisals and do not necessarily reflect the prices
at which businesses or securities may actually be sold. The analyses performed
by Berenson Minella, including those based upon forecasts of future results, are
not necessarily indicative of actual values or actual future results, which may
be significantly more or less favorable than as suggested by such analyses. The
foregoing summary does not purport to be a complete description of Berenson
Minella's analyses.
Since June 1995, Berenson Minella has received fees totaling $280,000 for
its financial advisory services to Concurrent. Concurrent has also agreed to pay
Berenson Minella a transaction fee equal to 1.5% of the average aggregate value
of the outstanding Concurrent Common Stock (as of the close of business) for the
5 business days prior to the date of consummation of the Transaction (the
"Closing Price"), but in no event less than $700,000, against which fee $100,000
of the fees previously paid (together with any additional retainer payments made
pursuant to the terms of the engagement) will be credited. Of such fee, $300,000
is payable in cash at the closing of the Transaction, offset by previously paid
retainer fees as described in the preceding sentence, and the remainder (the
"Remainder Amount") is payable by delivery to Berenson Minella of the proceeds
from the sale by Concurrent at the direction of Berenson Minella of that number
of shares of Concurrent Common Stock equal to the quotient of (i) the Remainder
Amount divided by (ii) the product of (A) the Closing Price times (B) .875;
provided, however, if the aggregate net proceeds from the sale of such shares
are less than the Remainder Amount, Concurrent has agreed to pay Berenson
Minella the amount of such difference in cash on or before the twenty-fifth
business day following the Closing Date of the Transaction (or, if any shares
remain unsold and Berenson Minella so elects, to deliver such shares to Berenson
Minella), and if Berenson Minella reasonably determines, prior to the Closing,
that the shares cannot be sold by Concurrent for any reason within twenty
business days of the Closing, Concurrent will promptly pay the Remainder Amount
in cash. To the extent that the aggregate net proceeds from the sale of such
shares of Concurrent Common Stock exceed the Remainder Amount, Berenson Minella
is entitled to receive such excess and Concurrent will not retain such excess.
Based on an assumed per share price of $3 1/16 (the closing price of Concurrent
Common Stock on May 22, 1996), a transaction fee of approximately $1.4 million
would be payable, with a Remainder Amount of approximately $1.1 million.
Concurrent has also agreed to reimburse Berenson Minella for its reasonable out
of pocket expenses (including the fees and expenses of its counsel) and to
indemnify Berenson Minella and certain related persons against certain
liabilities and expenses in connection with its services as financial advisor
and the sale of any shares of Concurrent Common Stock in connection with its
compensation for such services, including liabilities under federal securities
laws.
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RECOMMENDATIONS OF THE SPECIAL COMMITTEE AND THE BOARD OF DIRECTORS OF HARRIS
AND HARRIS'S REASONS FOR THE TRANSACTION
Special Committee. On March 20, 1996, the Harris Board established the
Special Committee consisting solely of independent directors, Messrs. C. Shelton
James and Michael F. Maguire. Prior to this time, there was a committee
consisting of Messrs. James and Siegel which had been appointed by the Harris
Board to negotiate the terms of the Transaction. However, Mr. Siegel recommended
to the Harris Board that, in light of his proposed employment by Concurrent as
contemplated by the Purchase and Sale Agreement, it would be desirable for the
Harris Board to formally appoint a special committee consisting solely of
outside directors to consider and make a recommendation to the Harris Board
concerning the Transaction.
The Special Committee was authorized to evaluate the Purchase and Sale
Agreement and the Transaction and to consider any other alternative as may be in
the best interests of the Harris shareholders and to make a recommendation to
the Board regarding the Transaction or other alternative. Each member of the
Special Committee will receive $3,000 as compensation for participation on the
Special Committee and the Chairman will receive an additional $7,000. The Harris
Board authorized the Special Committee to retain legal counsel and a financial
advisor.
The Special Committee met on March 20, 1996. It appointed Mr. James as
Chairman of the Committee. The Special Committee considered the selection of
legal counsel and a financial advisor. The Special Committee noted that Holland
& Knight and Bear Stearns were representing Harris with regard to the
Transaction. The Special Committee considered the reputation and work of both
firms and recognized that time would be lost and extra expense would be incurred
if the Special Committee retained legal counsel and financial advisors at this
time who were unfamiliar with the Purchase and Sale Agreement and other
documents. After due consideration, the Special Committee concluded that Holland
& Knight should be retained as special counsel to the Special Committee and that
Bear Stearns be retained as financial advisor to the Special Committee.
At its meeting on March 20, 1996, the Special Committee considered the
Transaction. Among other things, the Special Committee received the oral report
of a representative of Bear Stearns concerning the fairness of the Transaction.
The Special Committee deliberated at length and tentatively concluded that
the Transaction was fair to and in the best interests of the Harris
shareholders. This conclusion was based on its review of various factors,
including (i) the fairness opinion of Bear Stearns; (ii) the fact that the terms
of the Purchase and Sale Agreement were determined through arm's length
negotiation; (iii) the judgment that the Transaction was likely to be
consummated; (iv) the Special Committee's belief that the consideration to be
received by Harris was fair considering the operations and prospects of both
companies and the synergies to be gained by the combined company in which Harris
would have a substantial continuing interest; and (v) the judgment that the
Transaction provided the best value reasonably available to the Harris
shareholders. The Special Committee did not attempt to assign relative weights
to the specific factors it considered and did not evaluate whether such factors
were of equal weight. The Special Committee then decided to defer a vote on the
Transaction until it had an opportunity to review the latest drafts of the
Purchase and Sale Agreement and related documents and receive reports from legal
counsel and others concerning such latest drafts.
In the late afternoon of March 21, 1996, the Special Committee held a
meeting by telephone conference call, joined by legal counsel. The members and
legal counsel had reviewed the latest drafts of the documents and were generally
satisfied with them. Accordingly, the Special Committee unanimously concluded
that the Purchase and Sale Agreement and the Transaction were fair to and in the
best interests of the Harris shareholders, approved the Purchase and Sale
Agreement and the Transaction and recommended that the Harris Board also approve
the Purchase and Sale Agreement and the Transaction.
The Harris Board. On March 21, 1996, the Harris Board unanimously
concluded, in the exercise of its independent business judgment, that the
Purchase and Sale Agreement and the Transaction were fair to and in the best
interests of the Harris shareholders, based upon (i) the conclusion and
recommendation of the Special Committee and (ii) the factors referred to above
as having been taken into account by the Special
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Committee, with which the Harris Board concurred and adopted as its own. Certain
of the factors taken into account by the Special Committee are elaborated upon
in the following paragraphs. Accordingly, the Harris Board has approved the
Purchase and Sale Agreement and recommends that the shareholders of Harris vote
in favor of approval and adoption of the Purchase and Sale Agreement and the
Transaction.
Harris Shareholders Share Expected Future Benefits of Transaction. The
Harris Board reached the conclusion that the Transaction offers significant
strategic and financial benefits to Harris and its shareholders, as well as to
its customers and employees. The Harris Board believes that by combining the
technologies and the engineering capabilities of Concurrent and Harris, the
Transaction is expected to enhance the research and development of improvements
to existing products and the creation of new generations of products. It is
anticipated that the marketing and sales functions should benefit from the
combination of the two companies' customer bases, distribution channels and
marketing and sales staffs.
Moreover, the Harris Board believes that significant cost savings should be
achievable from the Transaction. It is expected that the combined current level
of the two companies' research and development expense presents significant
opportunities for savings. These savings would be created both from the
consolidation of the two companies' research and development facilities and the
lower level of expense associated with creating, improving and supporting a next
generation single series of computer hardware and associated operating system.
The elimination of overlapping sales and service offices world-wide would also
provide an area for significant cost saving. In addition to these potential
savings, the combined enterprise would be able to consolidate manufacturing,
corporate and administrative functions and reduce other non-labor corporate and
administrative expenses. The Harris Board believes that the Transaction
structure provides Harris with the opportunity to benefit from the significant
stake in Concurrent received by Harris in the Transaction.
Trusted Division Benefits from Separate Corporate Identity. The Harris
Board believes that separating the trusted systems operations into a separate
operating company simplifies investors' analysis of Harris by dividing Harris's
disparate product lines into separate operations. Prior to the Transaction,
Harris had been working to expand its trusted systems division sales from
principally government customers to commercial computer users. The Harris Board
believes that a significant market for trusted systems exists and that, as a
separate company, the trusted division can focus on the trusted market, attract
investors, and increase shareholder value without the requirement of competing
with the Harris Real-Time Business for personnel, capital, and administrative
resources. The Harris Board considered that the trusted and real-time businesses
were in many ways unrelated and that the operation by Harris of both businesses
complicated investors' analysis of Harris and raised uncertainty as to the focus
of Harris's business.
In making its determination with respect to the Transaction, the Harris
Board considered the following factors: (i) information relating to the
business, assets, management, competitive position and prospects of Harris as an
independent company; (ii) the financial condition, cash flows, results of
operations and liquidity position of Harris and Concurrent, both on a historical
and a prospective stand-alone and combined basis; (iii) historical market prices
and trading information with respect to Harris Common Stock and Concurrent
Common Stock; (iv) the percentage of equity in Concurrent to be received by
Harris in relation to the relative contributions of Harris and Concurrent based
on, among other things, revenues, earnings before interest and taxes, earnings
before interest, taxes, depreciation and amortization, net income, and book
value; (v) the potential efficiencies, cost savings and other synergies that
should be realized as result of the combination of Concurrent's and Harris's
operations; (vi) the relative advantages and disadvantages to separating the
trusted division into an independent legal entity; (vii) the terms of the
Purchase and Sale Agreement and other Ancillary Agreements; (viii) the existence
of various interests that certain executive officers and directors of Harris
have with respect to the Transaction, in addition to their interests as
shareholders generally (see "-- Interest of Certain Persons in the
Transaction"); (ix) the opinions, analyses and presentations of Bear Stearns as
described under "-- Opinion of Harris's Financial Advisor"; (x) the tax effects
of the Transaction on Harris shareholders; (xi) the tax and accounting effects
of the Transaction on Harris; (xii) the possible effects on the customers of
each of Concurrent and Harris and the marketing and sales efforts that might be
needed to appropriately present the effects of the Transaction to the combined
customer base; (xiii) the demands which will be placed upon management to
successfully combine the business, operations and
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personnel of the two companies; and (xiv) the potential significant enhancement
of the technological, strategic and market position of the combined enterprise
beyond that achievable by Harris alone. In considering Bear Stearns' opinion,
the Harris Board was aware that Bear Stearns' compensation included an incentive
fee payable only if the Transaction is consummated (see "-- Opinion of Harris's
Financial Advisor") but was also aware that Bear Stearns was entitled to a fee
for delivering an opinion on the Transaction.
In connection with their consideration of the Transaction, the members of
the Harris Board focused in particular upon projected financial information
prepared by the management of Harris and Concurrent for the combined real-time
business and the valuation analyses prepared by Harris's financial advisor. The
Harris Board in particular considered: (i) projected net sales and net income
for 1996 and 1997; (ii) Harris's financial advisor's valuation range of $12.0
million to $16.0 million for Harris's real-time systems division on a
stand-alone basis, as described below in "-- Opinion of Harris's Financial
Advisor"; (iii) Harris's financial advisor's valuation of $60.0 million to
$120.0 million for the combined real-time business (see "-- Opinion of Harris's
Financial Advisor"); and (iv) the "Has/Gets Analysis" (as described below in
"-- Opinion of Harris's Financial Advisor") that implied a valuation of the pro
forma equity interest in the combined real-time business to be received by
Harris in the range of $18.5 million to $37.1 million. Given the wide range of
values presented by Harris's financial advisor for the combined real-time
business, Harris's financial advisor provided information in the "Has/Gets
Analysis" over the indicated range of values for Harris's real-time systems
division on a stand-alone basis, for the combined real-time business and for the
remaining trusted systems business. This "Has/Gets Analysis" indicated that,
over the broad range of values, Harris's interest in the remaining trusted
systems business together with the pro-forma equity interest in the combined
real-time business compared favorably with the values for Harris without the
Transaction.
The foregoing discussion of the information and factors considered by the
Harris Board is not intended to be exhaustive. In view of the variety of factors
considered in connection with its evaluation of the Transaction, except as noted
above, the Harris Board did not, as a group, find it practicable to and did not
quantify or otherwise assign relative weights to the specific factors considered
in reaching its determination. Individual members of the Harris Board may have
quantified and given weights to such factors but such individual members may
have quantified and weighted such factors differently.
OPINION OF HARRIS'S FINANCIAL ADVISOR
Harris retained Bear Stearns on September 25, 1995 as its financial advisor
in connection with a possible transaction contemplated between Harris and
Concurrent. Bear Stearns was selected by the Harris Board because of its
qualifications, expertise, and reputation in providing advice to companies in
the technology industry, as well as its reputation as an internationally
recognized investment banking firm.
On March 20, 1996, Bear Stearns delivered an oral opinion to the Special
Committee of the Harris Board ("Special Committee"), which was subsequently
confirmed in a written opinion dated as of the date of this Joint Proxy
Statement (the "Bear Stearns Opinion") that, as of such date, the Transaction
was fair, from a financial point of view, to the shareholders of Harris.
THE FULL TEXT OF THE BEAR STEARNS OPINION IS ATTACHED AS ANNEX C TO THIS
JOINT PROXY STATEMENT. HARRIS'S SHAREHOLDERS ARE URGED TO, AND SHOULD, READ SUCH
OPINION CAREFULLY IN ITS ENTIRETY IN CONJUNCTION WITH THIS JOINT PROXY STATEMENT
FOR ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS OF THE REVIEW BY BEAR
STEARNS.
The Bear Stearns Opinion addresses only the fairness of the Transaction
from a financial point of view to the shareholders of Harris and does not
constitute a recommendation to any shareholders of Harris as to how such
shareholder should vote with respect to approval of the Purchase and Sale
Agreement or the Transaction. The summary of the Bear Stearns Opinion set forth
in this Joint Proxy Statement is qualified in its entirety by reference to the
full text of such opinion.
The consideration to be received by Harris's shareholders as a result of
the Purchase and Sale Agreement was determined by negotiation between Harris and
Concurrent after consultation by each of such parties with their respective
financial advisors. In connection with rendering the Bear Stearns Opinion, Bear
Stearns,
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among other things: (i) reviewed the Purchase and Sale Agreement and the Joint
Proxy Statement in substantially the final form to be sent to the shareholders
of Harris; (ii) reviewed Harris's Information Statement dated September 29,
1994, its Quarterly Reports on Form 10-Q and Form 10-Q/A for the period ended
September 30, 1994, Quarterly Reports on Form 10-Q for the periods ended
December 29, 1995 and March 31, 1996, respectively, and its Annual Report on
Form 10-K for the fiscal year ended September 30, 1995; (iii) reviewed
Concurrent's Annual Reports on Form 10-K for the fiscal years ended June 30,
1994 and 1995, and its Quarterly Reports on Form 10-Q for the periods ended
December 31, 1995 and March 31, 1996, respectively; (iv) reviewed certain
operating and financial information, including projections, provided by the
management of Harris and Concurrent in March 1996 relating to their respective
businesses and prospects (the "Harris Management RSD Base Case Projections" and
"Harris Management TSD Base Case Projections," and the "Concurrent Management
Base Case Projections," respectively); (v) met with certain members of Harris's
senior management to discuss its operations, historical financial statements and
future prospects of both its Real-Time Systems Division ("RSD") and Trusted
Systems Division ("TSD"), their views of the operations, historical financial
statements, and future prospects of Concurrent, and their views of the business,
operational and strategic benefits, potential synergies and other implications
of the Transaction; (vi) met with certain members of Concurrent's senior
management to discuss its operations, historical financial statements, and
future prospects, and their views of the business, operational and strategic
benefits, potential synergies and other implications of the Transaction; (vii)
reviewed the pro forma financial impact of the Transaction on Harris; (viii)
reviewed the pro forma financial impact of the Transaction on the new company
formed as the result of the merger of Harris RSD and Concurrent (the "Combined
Real-Time Company"); (ix) reviewed the historical stock prices and trading
volumes of the Harris Common Stock and the Concurrent Common Stock; (x) reviewed
the publicly available financial information and stock market performance data
of other publicly held companies that Bear Stearns deemed generally comparable
to Harris and Concurrent; (xi) reviewed the terms of selected recent
transactions that Bear Stearns deemed generally comparable to the Transaction;
and (xii) considered such other studies, analyses, inquiries and investigations
as Bear Stearns deemed appropriate.
Subject to this and the following paragraph, Bear Stearns relied upon and
assumed without independent verification: (i) the accuracy and completeness of
all of the financial and other information provided to it for purposes of its
opinion, and (ii) the reasonableness of the assumptions made by the managements
of Harris and Concurrent with respect to their respective projected financial
results and potential synergies (including cost savings from the anticipated
reduction of duplicate facilities, corporate overhead and excess research and
development and manufacturing capacity, and the enhanced ability to operate as a
prime contractor with a broader product line as a result of the Transaction)
which could be achieved upon consummation of the Transaction. In addition, Bear
Stearns did not make or seek to obtain appraisals of Harris's or Concurrent's
assets and liabilities in rendering its opinion. Bear Stearns further relied
upon the assurances of the managements of each of Harris and Concurrent that
such managements were not aware of any facts that would make the information
provided to Bear Stearns incomplete or misleading. The Bear Stearns Opinion is
necessarily based upon the economic, market and other conditions as in effect
on, and the information made available to it as of, the date of its opinion.
Bear Stearns further assumed that the Transaction would be accounted for in
accordance with the purchase method of accounting.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analysis as a whole, could create an incomplete view of the processes
underlying the Bear Stearns' Opinion. In arriving at its opinion, Bear Stearns
considered the results of all such analyses. The analyses were prepared solely
for purposes of providing its opinion and do not purport to be appraisals or
necessarily reflect the prices at which businesses or securities actually may be
sold. Analyses based upon forecasts of future results are not necessarily
indicative of actual future results which may be significantly more or less
favorable than suggested by such analyses. As described above, Bear Stearns'
Opinion and presentation to the Harris Board was one of many factors taken into
consideration by the Harris Board in making its determination to approve the
Purchase and Sale Agreement. The foregoing summary does not purport to be a
complete description of the analysis performed by Bear Stearns.
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Bear Stearns is an internationally recognized investment banking firm and
is continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions and other purposes. In the ordinary
course of its business, Bear Stearns may actively trade the equity securities of
Harris and Concurrent for its own account and for the accounts of its customers
and accordingly, may, at any time, hold a long or short position in such
securities. From time to time since September 25, 1995, Bear Stearns has held
Harris Common Stock as a principal in amounts which have never exceeded 10,000
such shares. At least since September 25, 1995, Bear Stearns has not held
Concurrent Common Stock as a principal. Bear Stearns holds Concurrent Warrants
to purchase 121,877 shares of Concurrent Common Stock. The Concurrent Warrants
were issued on July 21, 1993 and expire on July 22, 1996.
In February and March 1996, the management teams of Harris and Concurrent,
respectively, in conjunction with Bear Stearns, developed a revised case for
each of the Harris Management Base Cases and the Concurrent Management Base Case
(referred to herein as the "Harris RSD March 1996 Case," "Harris TSD March 1996
Case" and the "Concurrent March 1996 Case," respectively; the Harris RSD March
1996 Case and the Concurrent March 1996 Case are included in the "Projections";
see "PROJECTED FINANCIAL INFORMATION"). In developing these three cases, Bear
Stearns in conjunction with Harris management restated each company's fiscal
year projections into calendar year format (including extrapolating Concurrent's
projections for the last six months of calendar year 1998) (which, along with
the Projections, are referred to herein as the "Projected Financial
Information"; see "PROJECTED FINANCIAL INFORMATION") and considered a variety of
factors that could affect the achievability of the Harris Management RSD Base
Case, Harris Management TSD Base Case and the Concurrent Management Base Case.
These revised scenarios for Harris RSD, Harris TSD and Concurrent, respectively,
were presented to the Harris Board. The projections of future business prospects
of Harris used in (i) the Harris Management RSD Base Case and Harris Management
TSD Base Case were developed by the management of Harris, and (ii) the Harris
RSD March 1996 Case and Harris TSD March 1996 Case were developed by Harris
management, in consultation with Bear Stearns. The projections of future
business prospects of Concurrent used in (i) the Concurrent Management Base Case
were developed by the management of Concurrent, and (ii) the Concurrent March
1996 Case were developed by the management of Concurrent, in consultation with
Harris's management team and Bear Stearns. The pro forma financial results for
the Combined Real-Time Company were jointly developed by senior management of
both companies.
The following is a brief summary of certain of the financial analyses used
by Bear Stearns in connection with providing its opinion to the Special
Committee.
Analysis of Stock Price Performance of Harris and Concurrent. Bear Stearns
reviewed the historical stock prices and trading volumes of the Harris Common
Stock and the Concurrent Common Stock for the period from March 16, 1995 through
March 15, 1996 with reference to the (i) 30 trading day average for the period
ended February 7, 1996, (ii) 60 trading day average for the period ended
February 7, 1996, (iii) 90 trading day average for the period ended February 7,
1996 and the stock price increase from February 7, 1996 to March 15, 1996. These
historical stock price trading periods represent the periods before and after
the public announcement on February 8, 1996 of the Memorandum of Understanding
("MOU") dated February 7, 1996. These analyses indicate that the average stock
price for Harris during the above periods was (i) $4.52, (ii) $4.26 and (iii)
$4.40, respectively, and for Concurrent was (i) $0.97, (ii) $1.07 and (iii)
$1.24, respectively. Following the public announcement of the MOU the stock
price for both companies rose significantly. Between February 7 and March 15,
1996, the Harris stock price increased 119.2% from $6.50 to $14.25 per share and
the Concurrent stock price increased 62.1% from $0.78 to $1.27 per share.
Relative Contribution Analysis. Bear Stearns analyzed the pro forma
contributions of each of Harris RSD and Concurrent to the Combined Real-Time
Company, assuming that the Transaction was to be consummated on June 30, 1996,
and reviewed certain historical and estimated future operating and financial
information including, among other things, Revenues, EBITDA and EBIT of Harris
RSD and Concurrent, and the pro forma Revenues, EBITDA and EBIT of the Combined
Real-Time Company resulting from the Transaction for calendar years 1996, 1997
and 1998 for the Harris RSD March 1996 Case and Concurrent March 1996 Case. Bear
Stearns noted that the Harris RSD contribution to the pro forma EBITDA, and EBIT
of the Combined Real-Time Company would be less than the proportion of the pro
forma fully-diluted
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number of shares for the combined company to be owned by former Harris
shareholders after the Transaction (equal to 30.9%), exclusive of any synergies.
In 1996, 1997, and 1998, Harris provides 28.4%, 28.8%, and 31.3% of Combined
Real-Time Company Revenues, respectively, and 8.9%, 5.6%, and 21.8% of Combined
Company EBITDA, respectively. In each of 1996 and 1997, Harris's contribution to
EBIT is negative; in 1998 Harris contributes 30.6% of EBIT. After consideration
of the effects of potential synergies, Harris's contribution to the Combined
Real-Time Company's pro forma EBITDA in 1996, 1997 and 1998 is 13.5%, 26.3%, and
30.2%, respectively. Harris's contribution to the Combined Company's EBIT after
consideration of the effects of potential synergies, in 1996, 1997, and 1998 is
4.5%, 34.4%, and 41.5%, respectively.
Harris RSD "Stand-alone" Valuation. Bear Stearns analyzed the value of RSD
stand-alone primarily based on a liquidation scenario, reflecting either (i) the
sale of assets to a computer company (a "Strategic Buyer"), or (ii) the
harvest/orderly liquidation of RSD. Bear Stearns' analysis was developed in
conjunction with Harris management to determine appropriate asset value discount
factors. Based on this net asset value/ liquidation analysis, Bear Stearns
determined a value range for RSD on a stand-alone basis of approximately $12.0
million-$16.0 million.
Harris RSD "Going Concern" Valuation. Bear Stearns also analyzed the value
of RSD on the basis of the trading multiples of Concurrent and other
"comparable" publicly traded high-end/special purpose computer companies (i.e.,
Amdahl Corporation, Data General Corporation, Digital Equipment Corporation,
Hewlett-Packard Company, Sequent Computer Systems, Silicon Graphics, Inc.,
Stratus Computer, Inc. and Tandem Computers Incorporated). The comparable
company analysis involved an analysis of selected actual and estimated
financial, operating and stock market information from Harris and Concurrent and
the selected computer companies. Although these analyses produced a reference
range of $12.5 - $22.5 million, similar to the net asset value/liquidation
analysis described above, Bear Stearns does not believe that they provide
meaningful indications of RSD's standalone value because: (i) Harris is
significantly smaller than all of the companies used as "comparables"; (ii)
Harris's financial and operating characteristics are significantly different
from all comparables other than Concurrent; and (iii) each company has different
product mixes, different proportions of domestic and international sales,
different profit margins, and different market capitalizations than Harris.
Bear Stearns performed certain other analyses, including an analysis of
selected transactions involving acquisitions of companies in the computer
industry (i.e., Convex Computer/Hewlett-Packard, Pyramid Technology/Siemens,
Custom Manufacturing Services (Micron Computer)/ZEOS International, Bull HN
Information Systems (Compagnie des Machines Bull)/Wang Laboratories, TE
Electronics-Personal Computer Manufacturing Assets (Tandy)/AST Research,
Teradata/NCR (AT&T), Altos Computer Systems/ Acer Group, Apollo
Computer/Hewlett-Packard, Convergent/Unisys, Concurrent
(Perkin-Elmer)/Massachusetts Computer Corporation). Bear Stearns observed that
no company (other than Concurrent) used in the above analysis as a comparison is
identical to Harris or Concurrent. In particular, each company has different
product offerings and market positions than either of Harris or Concurrent. In
reviewing these transactions, Bear Stearns also noted that several such
transactions differed from the Transaction in that they involved a purchase of
stock and not the purchase of assets of a division. Based on these
dissimilarities, substantial weight was not placed on these transactions in
arriving at a view of the fairness of the Transaction.
Harris TSD "Stand-alone" Valuation. To determine the potential public
market valuation of Harris TSD pro forma for the Transaction, Bear Stearns
analyzed the public trading values of the most-direct publicly traded
competitors to Harris TSD, Secure Computing and Raptor. Bear Stearns noted that
Secure Computing and Raptor are not identical to TSD due to differences between
the companies and TSD in product architecture, method of product distribution
and product market segment served. Bear Stearns also analyzed other
Internet-related stocks: America On-line, Inc., NETCOM On-Line Communication
Services, Inc., Netscape Communications Corporation, PSINet Inc., Spyglass, Inc.
and UUNet Technologies, Inc. These six companies are different from TSD in three
key respects, which prevent them from being directly comparable to TSD: (i) none
of the above mentioned companies is focused primarily on the Internet firewall
market segment; (ii) each company has significantly different operating and
financial characteristics than TSD; and (iii) each company operates in a market
of a different size than TSD. Based on Bear Stearns' analysis of these
comparable publicly traded companies, Bear Stearns believes that TSD could
achieve a
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public market valuation in the range of $45.0 million - $85.0 million.
Consequently, Bear Stearns estimates the value of the 6.6% fully-diluted
interest in TSD that will be held by Concurrent shareholders (pro forma to
reflect the 30.9% of Concurrent shares held by Harris shareholders) to be in the
range of $3.0 million to $5.6 million. Bear Stearns acknowledge that the
realization of a potential public market valuation for a "pure play" TSD that is
comparable to Secure Computing, Raptor and other successful recent
Internet-related stock offerings is subject to numerous business and market
risks, including: (i) Harris TSD's historical dependence on DoD/government
contracting; (ii) Harris TSD's product transition from primarily a
hardware-focused to a software-focused design; (iii) separation of the RSD and
TSD business operations and financial/MIS systems, which are now intertwined,
will be complex; (iv) successful recruiting and retention of key senior
management; and (v) a favorable new issue market environment, particularly for
Internet-related companies. The market for Internet-related stocks has been
highly volatile, and any substantial decline in the value of the comparables to
TSD would directly impact Harris TSD's valuation.
Pro Forma Combined Company Valuation. In addition to the review of the
financial analyses described below, Bear Stearns had conversations with Harris's
management concerning the strategic implications of the Transaction. Bear
Stearns assumed, based on such conversations, that the Combined Real-Time
Company might enjoy several strategic advantages over a stand-alone Harris RSD,
including (i) significant cost savings from the elimination of duplicative
activities, and (ii) the creation of a real-time computing entity with a
stronger competitive position in the real-time computer industry.
Pro Forma Combination Analysis. Bear Stearns analyzed the earnings
estimates for calendar years 1996, 1997 and 1998 for both Harris RSD and, on a
pro forma basis, the Combined Real-Time Company after the consummation of the
Transaction. This analysis was performed using the Harris RSD March 1996 Case
and Concurrent March 1996 Case and took into account potential synergies and
cost savings that may be realized after the consummation of the Transaction.
After giving effect to such potential synergies, the analysis showed substantial
accretion in the fully-diluted earnings per share resulting from the Transaction
for the cases examined. Bear Stearns assumed a multiple of equity value range
for projected 1996 pro forma net income and projected 1997 pro forma net income,
which produced an aggregate equity value of $60.0 - $120.0 million.
Has/Gets Analysis. Bear Stearns compared: (i) what Harris shareholders
have, in aggregate, with no transaction (i.e., 100% of the value of standalone
TSD and RSD, respectively), to (ii) what Harris shareholders will hold by virtue
of the Transaction (i.e., 93.4% of the value of TSD, plus 30.9% of the value of
the Combined Real-Time Company) (the "Has/Gets Analysis"). Bear Stearns noted
that, without a successful separation of RSD and TSD in a manner similar to that
contemplated by the Transaction, Harris will face a substantially greater risk
of not realizing the full value of TSD and/or RSD, resulting from (i) the drain
on management's attention away from TSD and (ii) greater difficulty in obtaining
a "full" market valuation for TSD as an embedded component of a larger business,
the majority of whose revenues are generated by a mature business that has
experienced declining revenues, operating profits and net earnings over the
recent past. This Has/Gets Analysis is based on a range of values for RSD on a
stand alone basis from $12.0 million to $16.0 million and an implied aggregate
equity value range for the Combined Real-Time Company of $60.0 million - $120.0
million. The implied value of the pro forma equity interest in the Combined
Real-Time Company to be received by Harris shareholders is therefore $18.5
million - $37.1 million. This compares to an implied pro forma equity market
value of $57.3 million in aggregate, or $17.7 million for the 30.9% interest to
be held by Harris shareholders on a pro forma fully-diluted basis using the
Concurrent closing stock price of $1.266 on March 15, 1996. Using the implied
pro forma equity market value, what Harris shareholders get in the Transaction
compares favorably to what they have with no Transaction. Bear Stearns concluded
that the foregoing analysis supported the conclusion that the Transaction was
fair, from a financial point of view, to the shareholders of Harris.
Gives/Gets Analysis. Bear Stearns compared: (i) what Harris shareholders
sell to Concurrent, (i.e., 6.9% of TSD, plus the value of RSD), to (ii) what
Harris shareholders get as consideration from Concurrent (i.e., 30.9% of the
Combined Real-Time Company) (the "Gives/Gets Analysis"). Bear Stearns noted that
the range of values for RSD used in the Gives/Gets Analysis ($12.5
million - $22.5 million) is higher in the Gives/Gets Analysis than the range of
values for RSD in the Has/Gets Analysis described above
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as Bear Stearns believes that in the context of a combination with Concurrent,
Harris RSD should be valued as a going concern using comparable trading
multiples of Concurrent. Bear Stearns noted that what Harris shareholders get
compares favorably to what they give. Furthermore, given the current pro forma
implied aggregate equity market value for the Combined Real-Time Company of
$57.3 million (using the Concurrent closing stock price of $1.266 on March 15,
1996), Bear Stearns believes that the relevant range of Combined Real-Time
Company values for purposes of both Has/Gets and Gives/Gets is $90.0 million to
$120.0 million.
Terms of Bear Stearns Engagement. Pursuant to a letter agreement dated
February 2, 1996, Harris agreed to pay Bear Stearns: (i) a fee of $250,000 for
rendering its initial Opinion and an update to such Opinion in connection with
the Transaction; (ii) an additional fee of $800,000 upon the consummation of the
Transaction against which the $250,000 will be credited; (iii) an incentive fee
that is payable (at Harris's election) in cash or Harris Common Stock, equal to
5.0% (to a maximum of $500,000) of the amount received by Harris in the
Transaction in excess of $5.00 times the number of shares of Harris Common
Stock, determined on a fully-diluted basis; and (iv) if Harris requires equity
financing within two years of the date of the letter agreement, Bear Stearns
shall have the right to act as Harris's sole or lead managing underwriter in
connection with raising such equity financing. Harris has also agreed to
reimburse Bear Stearns for its reasonable out-of-pocket expenses, including the
reasonable fees and disbursements of counsel, and to indemnify Bear Stearns and
certain related persons against certain liabilities in connection with the
engagement of Bear Stearns, including certain liabilities under the federal
securities laws.
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION
In considering the recommendations of Concurrent and Harris with respect to
the Transaction, shareholders should be aware that certain executive officers
and directors of Concurrent and Harris have certain interests in the Transaction
that are in addition to the interests of shareholders of Concurrent and Harris
generally.
Stock Option Plans. As provided in the Purchase and Sale Agreement, upon
consummation of the Transaction, certain Harris Options outstanding on the
Closing Date under the Harris Stock Plan, whether or not then exercisable, will
be fully vested and exercisable.
Similarly, as provided in the Purchase and Sale Agreement, the Concurrent
Board will take appropriate action so that all options outstanding on the
Closing Date under the Concurrent Stock Plan shall become fully vested and
exercisable.
The following table sets forth the value accruing to the Concurrent and
Harris directors and executive officers under their respective stock option
plans as a result of the Transaction, assuming a Closing Date of June 28, 1996.
<TABLE>
<CAPTION>
OPTIONS
VESTED AS WEIGHTED ADDITIONAL OPTIONS WEIGHTED TOTAL OPTIONS WEIGHTED
OF JUNE 28, AVERAGE VESTING ON THE AVERAGE VESTED AFTER THE AVERAGE
1996 EXERCISE PRICE CLOSING DATE EXERCISE PRICE TRANSACTION EXERCISE PRICE
----------- -------------- ------------------ -------------- ---------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Harris............ 182,001 $ 3.13 286,998 $ 3.23 468,999 $ 3.19
Concurrent........ 600,078 $ 1.18 988,495 $ 1.14 1,588,573 $ 1.16
======= ===== ======= ===== ========= =====
</TABLE>
In addition to the options shown above, Harris granted an aggregate of
52,800 restricted shares to Messrs. Siegel (39,000) and Dunleavy (13,800) in
October 1994. On the Closing Date, restrictions on these shares lapse and the
shares become fully vested. In addition, Messrs. Siegel and Dunleavy have each
agreed to enter into a non-competition agreement. Upon the consummation of the
Transaction, as a result of entering into the non-competition agreement, Messrs.
Siegel and Dunleavy will be issued an additional 78,000 shares and 13,800 shares
of Harris Common Stock, respectively.
In addition, amendments have been proposed to the Concurrent Stock Plan and
the Harris Stock Plan. See "AMENDMENT TO THE CONCURRENT STOCK OPTION PLAN" and
"OTHER MATTERS FOR CONSIDERATION BY HARRIS SHAREHOLDERS -- Amendment to the
Harris Stock Plan."
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Severance Arrangements. The Purchase and Sale Agreement permits Concurrent
to enter into retention and/or severance arrangements with its employees for the
purpose of encouraging employees to remain with Concurrent until the Closing
Date, subject to (i) consultation with Harris prior to implementing any such
arrangement and (ii) a ceiling of $2 million on the aggregate dollar amount
which may be paid or incurred prior to the Closing Date pursuant to all such
retention and/or severance arrangements.
In addition, Concurrent has employment agreements with its executive
officers. If such an agreement, other than the agreement with Mr. Stihl (the
terms of which are described below), is terminated directly by Concurrent
without cause or in certain circumstances constructively by Concurrent, the
terminated employee will receive severance compensation for a one-year period,
in an annualized amount equal to the respective employee's base salary then in
effect plus an amount equal to the then most recent annual bonus paid or, if
determined, payable, to such employee. Any compensation earned by the former
executive officer for subsequent employment during the period for which
severance compensation is payable will offset such severance compensation amount
by one dollar for every two dollars in subsequent employment compensation. The
Purchase and Sale Agreement also provides that Concurrent may pay any severance
obligations to employees or under retention arrangements implemented in
connection with the Transaction in cash or from the proceeds of the issuance of
shares of Concurrent Common Stock. If such severance compensation is paid from
the proceeds of the issuance of shares of Concurrent Common Stock, no offset for
subsequent employment will be taken. For additional information concerning the
Concurrent employment agreements, see "CERTAIN INFORMATION REGARDING
CONCURRENT -- Severance Arrangements."
Messrs. Siegel and Dunleavy are parties to employment agreements with
Harris providing for the payment of certain severance obligations in the event
that their employment is terminated following a "change of control" of Harris.
Messrs. Siegel and Dunleavy have agreed to accept $200,000 and $80,000,
respectively, in lieu of the higher severance obligations payable under
employment agreements between themselves and Harris. For additional information
concerning the Harris employment agreements, see "CERTAIN INFORMATION REGARDING
HARRIS -- Compensation Plans."
Employment Arrangements Following the Transaction. Concurrent has entered
into employment agreements with John T. Stihl, Chairman, President and Chief
Executive Officer of Concurrent, and E. Courtney Siegel, Chairman, President and
Chief Executive Officer of Harris. In addition, Harris has entered into an
employment agreement with Brian Foremny, General Counsel of Harris.
John T. Stihl. Under the Employment Agreement, dated August 25, 1993,
as amended on November 5, 1995, between Concurrent and Mr. Stihl (the
"Stihl Employment Agreement"), Mr. Stihl will continue as Chairman of the
Concurrent Board for six months (the "Continuation Period") after the
Closing Date, which period may be extended by mutual agreement of Mr. Stihl
and Concurrent. Mr. Stihl will be paid a salary at an annualized rate of no
less than $365,000 during the Continuation Period and will be eligible for
a salary increase at the discretion of the Concurrent Board. Mr. Stihl will
be under no obligation to relocate and will continue to receive full
benefits. At any time during the Continuation Period, Mr. Stihl will have
the right to resign as Chairman of the Concurrent Board and as an employee
in the event in his reasonable judgment he determines that the anticipated
benefits to Mr. Stihl and Concurrent are not being fully realized. In such
event, Mr. Stihl will continue to receive all benefits (salary and
otherwise) under the Stihl Employment Agreement through the end of the
Continuation Period. In lieu of any severance compensation which may
otherwise be due and payable under the Stihl Employment Agreement, Mr.
Stihl will have the option to receive (i) full severance compensation for
the 24-month period commencing the day following the Closing Date or (ii)
the proceeds from the sale, at Mr. Stihl's direction, of shares of
Concurrent Common Stock with a fair market value of $730,000. It is
expected that such shares will be sold by the 25th business day following
the Closing Date. If the proceeds from the sale of such shares are less
than $730,000, Mr. Stihl would have the right to receive either the balance
in cash or any unsold shares of Concurrent Common Stock.
E. Courtney Siegel. Concurrent and Mr. Siegel entered into an
employment agreement dated as of March 26, 1996 (the "Siegel Employment
Agreement"), to be effective as of the Closing Date. The Siegel Employment
Agreement provides for the employment of Mr. Siegel as President and Chief
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<PAGE> 70
Executive Officer of Concurrent at an initial annual base salary of
$300,000 subject to annual review by the Concurrent Board (or any committee
delegated by the Concurrent Board to review executive compensation). The
Siegel Employment Agreement provides, as of the Closing Date, for Mr.
Siegel to be granted options to purchase 1,000,000 shares of Concurrent
Common Stock vesting over a three-year period, and long-term incentive
compensation options to purchase up to 250,000 shares of Concurrent Common
Stock vesting based on Concurrent's achievement of certain performance
objectives over a three-year period. The Siegel Employment Agreement
provides for Mr. Siegel to have an initial target bonus for the achievement
of certain performance objectives to be established by the Concurrent
Board, or a committee thereof, of 65% of his annual base salary, and
subsequent target bonuses that may be increased by no more than an
additional 50% of the initial target bonus.
The Concurrent Board may terminate the Siegel Employment Agreement for
"cause." The Siegel Employment Agreement defines "cause" as willful acts
against Concurrent intended to enrich Mr. Siegel at the expense of
Concurrent, the conviction of Mr. Siegel for a felony involving moral
turpitude, willful and gross neglect by Mr. Siegel of his duties or the
intentional failure of Mr. Siegel to observe policies of the Concurrent
Board that have or will have a material adverse effect on Concurrent. If
the Siegel Employment Agreement is terminated by Concurrent other than for
"cause" or the death, disability or normal retirement of Mr. Siegel or by
Mr. Siegel for "good reason," Mr. Siegel will receive severance pay of two
times his annual base salary and two times his target bonus as in effect
immediately prior to termination, and at least one-third of Mr. Siegel's
stock options and stock appreciation rights will be exercisable at
termination. If Mr. Siegel's employment with Concurrent is terminated
within three years following a "change in control" by Concurrent other than
for "cause" or the death, disability or normal retirement of Mr. Siegel or
by Mr. Siegel for "good reason," Mr. Siegel will receive severance pay of
three times his annual base salary and three times his target bonus as in
effect immediately prior to termination, and all of Mr. Siegel's stock
options and stock appreciation rights will become exercisable at
termination. If Mr. Siegel's employment is terminated at any time by
Concurrent for "cause" or by Mr. Siegel other than for "good reason," the
Siegel Employment Agreement prohibits Mr. Siegel from engaging in any
business competitive with the business of Concurrent for a one-year period
following the effective date of termination. If Mr. Siegel's employment is
terminated by Concurrent other than for "cause" or the death, disability or
normal retirement of Mr. Siegel or by Mr. Siegel for "good reason," other
than within three years of a "change in control," the Siegel Employment
Agreement prohibits Mr. Siegel from engaging in any business competitive
with the business of Concurrent for a two-year period following the
effective date of termination.
Brian Foremny. On February 4, 1996, Mr. Foremny entered into an
employment agreement with Harris under which he became general counsel of
Harris and under which he will be paid approximately $120,000 per year,
with a bonus opportunity equal to 16.7% of base salary, and was awarded
options to acquire 72,000 shares of Harris Common Stock at an exercise
price of $5.50 per share (the fair market value of Harris Common Stock on
such date). During March 1996, the Harris Board requested, and Mr. Foremny
agreed, that if the Transaction is not consummated, the Harris Board may
terminate the employment agreement with Mr. Foremny.
In addition, it is expected that Concurrent will enter into employment
agreements with those persons who will become executive officers of Concurrent
following the Transaction. Those persons who are expected to become executive
officers of Concurrent following the Transaction are identified in "DIRECTORS
AND EXECUTIVE OFFICERS OF CONCURRENT AFTER CONSUMMATION OF THE
TRANSACTION -- Executive Officers."
Certain Benefits to Directors. As a result of the Transaction, Messrs. E.
Courtney Siegel, C. Shelton James and Michael F. Maguire, currently members of
the Harris Board, will become members of the Concurrent Board and will be
entitled to benefits as members of the Concurrent Board. See "DIRECTORS AND
EXECUTIVE OFFICERS OF CONCURRENT AFTER CONSUMMATION OF THE TRANSACTION." For a
description of the ongoing benefits to be received by members of the Concurrent
Board, see "CERTAIN INFORMATION REGARDING CONCURRENT." As a result of the
Transaction, Richard P. Rifenburgh, currently a member of the Concurrent Board,
will become a member of the Harris Board
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<PAGE> 71
and will be entitled to benefits as a member of the Harris Board. For a
description of the ongoing benefits to be received by members of the Harris
Board, see "CERTAIN INFORMATION REGARDING HARRIS."
Shareholders should also be aware that payment of certain fees to Bear
Stearns, the financial advisor to Harris, is contingent upon consummation of the
Transaction and the payment of certain fees of Berenson Minella, the financial
advisor to Concurrent, is also contingent upon consummation of the Transaction.
In addition, in partial payment of its financial advisory fees, Berenson Minella
agreed to accept the proceeds from the sale of shares of Concurrent Common
Stock. See "-- Opinion of Harris's Financial Advisor" and" -- Opinion of
Concurrent's Financial Advisor."
OPERATIONS OF HARRIS FOLLOWING THE TRANSACTION
Following the Transaction, Harris will discontinue the manufacturing and
selling of computer systems for the real-time market. Harris will continue to
develop, manufacture and market computer systems for the trusted market. See
"-- Background of the Transaction," "-- Recommendations of the Board of
Directors of Harris and Harris's Reasons for the Transaction," and "CERTAIN
INFORMATION REGARDING HARRIS." Except as concerns the Transaction, Harris has no
present plans or proposals which relate to or would result in any extraordinary
corporate transaction such as a merger, reorganization, liquidation or sale or
transfer of a material amount of assets. It is expected that Harris will
complete a public offering of Harris Common Stock during calendar year 1996.
There is no guarantee that such an offering will be undertaken or, if such
offering is undertaken, that it will be successful. If the offering is
undertaken, Concurrent expects to sell up to one-half of the Purchased Harris
Shares in such offering pursuant to the terms of the Share Holding Agreement.
See "TERMS OF THE TRANSACTION -- The Share Holding Agreement." Sales of stock
pursuant to such an offering will be consummated only pursuant to a prospectus
meeting the requirements of the Securities Act and applicable federal and state
laws. This Joint Proxy Statement is not such a prospectus.
OPERATIONS OF CONCURRENT FOLLOWING THE TRANSACTION
Following the Transaction, Concurrent will continue to manufacture and sell
computer systems for the real-time market. Except with regard to the
Transaction, Concurrent has no present plans or proposals which relate to or
would result in any extraordinary corporate transaction such as a merger,
reorganization, liquidation or sale or transfer of a material amount of assets.
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TERMS OF THE TRANSACTION
THE PURCHASE AND SALE AGREEMENT
The following is a summary of the material terms of the Purchase and Sale
Agreement. This summary does not purport to be complete and is qualified in its
entirety by reference to the Purchase and Sale Agreement, a copy of which is
attached hereto as Annex A. Capitalized terms used herein and not otherwise
defined shall have the meanings ascribed to them in the Purchase and Sale
Agreement. Shareholders are urged to read the Purchase and Sale Agreement in its
entirety.
General Description
On March 26, 1996, Concurrent and Harris executed the Purchase and Sale
Agreement, as amended and restated by Concurrent and Harris on May 23, 1996, for
the Transaction in which Harris agreed to sell the Harris Real-Time Business to
Concurrent. The agreement is a modification of the proposed merger previously
announced November 6, 1995. The Transaction will result in the combination of
the real-time businesses of both companies. Under the Transaction, Harris will
sell the Harris Real-Time Business (retaining its trusted systems computing
business) and 683,178 shares of Harris Common Stock to Concurrent, in exchange
for 10 million shares of Concurrent Common Stock, $10 million liquidation
preference of Concurrent Preferred Stock, subject to adjustments in certain
circumstances, and the assumption of certain liabilities by Concurrent. Upon
completion of the Transaction, Concurrent shareholders and Harris will own
approximately 77% and 23%, respectively, of Concurrent, and Harris shareholders
and Concurrent will own approximately 91% and 9%, respectively, of Harris.
Harris's ownership interest in Concurrent would increase to approximately 29%
upon full conversion of the Concurrent Preferred Stock. The Transaction is
subject to a number of conditions including the approval of the shareholders of
both companies. The Transaction is expected to be completed by June 30, 1996,
although there can be no assurances.
Although the assets to be transferred and liabilities to be assumed with
respect to the Transaction have not been finally identified at this time, the
Purchase and Sale Agreement provides that the Preferred Stock component of the
purchase price paid by Concurrent to Harris is inversely related to changes in
the current liabilities of the Harris Real-Time Business. In addition,
Concurrent is not assuming any long-term non-contingent liabilities of Harris.
Although the amount of the adjustment, if any, to the liquidation preference of
the Preferred Stock Consideration cannot be determined with certainty at this
time, if the Closing were to have occurred on March 31, 1996, the liquidation
preference of the Preferred Stock would have been reduced from $10 million to
$8.3 million.
Purchase of Assets
The Purchase and Sale Agreement provides that Harris shall sell, transfer
and assign to Concurrent, and Concurrent shall purchase, acquire and accept from
Harris, all of Harris's rights, title and interests in all the Property (as
defined below), of Harris which (i) is listed in certain of the schedules (the
"Schedules") to the Purchase and Sale Agreement (the "Identified Real-Time
Assets") and including the Property identified on the Final Net Current Asset
Reconciliation (as defined below) in existence on the Closing Date; (ii)
constitutes the Shared Assets (as defined below) to the extent such Property is
to be transferred and sold to, or utilized by, Concurrent as provided in certain
of the Schedules (the "Shared Real-Time Assets"); (iii) constitutes all other
Property of Harris which is not an Excluded Asset (as defined below) (the "Other
Real Time Assets"); (iv) is tangible Property which is manufacturing Property,
hardware customer support Property and hardware development Property; and (v)
constitutes all other Property of the kind described in clauses (i) and (ii)
above and acquired by Harris between the date of the Purchase and Sale Agreement
and the Closing (the "Subsequently Acquired Real-Time Assets").
The term "Property" means assets, properties and rights, tangible and
intangible, wherever located.
The term "Shared Assets" means the Property of Harris having a significant
use in both the Harris Real-Time Business and the Trusted Systems Business.
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The term "Purchased Assets" means the Identified Real Time Assets, the
Shared Real Time Assets, the Other Real Time Assets and the Subsequently
Acquired Real Time Assets, including the stock or assets, if any, of each of the
Transferred Subsidiaries (as defined below).
Pursuant to the Purchase and Sale Agreement, Harris shall sell, transfer
and assign, directly or indirectly, to Concurrent and Concurrent shall purchase,
acquire and accept from Harris, good and valid legal title to and beneficial
ownership of all of the issued and outstanding shares of capital stock (the
"Harris Subsidiary Shares") of certain foreign subsidiaries. The subsidiaries to
be transferred are collectively referred to as the "Transferred Subsidiaries".
The Purchase and Sale Agreement also provides that, to the extent
Concurrent purchases the stock of the Transferred Subsidiaries, Concurrent shall
not assume, and shall not be deemed to have assumed, Liabilities of the
Transferred Subsidiaries arising from activities of the businesses of the
Transferred Subsidiaries prior to Closing relating to (i) environmental matters
or (ii) claims of employees of the Transferred Subsidiaries at the time of the
applicable violation that the Transferred Subsidiary violated employment
practices laws, rules or regulations or antidiscrimination laws, rules or
regulations insofar as such claims are based on acts or omissions that shall
have occurred prior to Closing (the "Transferred Subsidiaries Excluded
Liabilities"). At Closing, Harris shall assume, and shall be solely and
exclusively liable with respect to the Transferred Subsidiaries Excluded
Liabilities.
Pursuant to the terms of the Purchase and Sale Agreement, Concurrent is not
acquiring from Harris, and Harris shall retain ownership of all right, title and
interest in and to, and exclude from sale, transfer or assignment thereunder,
(i) all Property of Harris used in the Trusted Systems Business (other than
Property which constitutes Shared Assets (the "Trusted Assets")); (ii) other
assets of the Trusted Systems Business identified on certain of the Schedules
(the "Identified Trusted Assets"); and (iii) the Shared Assets, to the extent
they shall be retained or permitted to be utilized by Harris as provided in
certain of the Schedules (the "Shared Trusted Assets").
The term "Excluded Assets" shall mean the Trusted Assets, the Identified
Trusted Assets and the Shared Trusted Assets.
In accordance with the provisions of the Purchase and Sale Agreement,
Harris and Concurrent agreed that Schedules of Assets and Excluded Assets
attached to the Purchase and Sale Agreement upon its execution did not together
contain a complete list of all Property of Harris, but that at the Closing, the
updated Schedules together with the lists of Property attached to the bills of
sale and other documents of transfer delivered to Concurrent would list all the
Assets as of the Closing.
Assumption of Liabilities
The Purchase and Sale Agreement provides that Concurrent shall assume, and
shall be solely and exclusively liable with respect to, (i) Liabilities (as
defined below) of Harris specifically reflected or reserved against on the Final
Net Current Asset Reconciliation and in existence on the Closing Date; (ii)
Liabilities arising from activities of the acquired Harris Real-Time Business
after the Closing; (iii) Liabilities set forth in certain of the Schedules; (iv)
Liabilities specifically related to products sold in the Harris Real-Time
Business, including product warranty liabilities and liabilities for product
returns; (v) Liabilities exclusively associated with the Harris Real-Time
Business; (vi) 50% of the Transfer Taxes (as defined below) resulting from the
transfer of the Purchased Assets (other than the Harris Subsidiary Shares, if
any) and 100% of the Transfer Taxes resulting from the transfer of the Harris
Subsidiary Shares, if any (the "Assumed Concurrent Transfer Tax Liability"); and
(vii) the allocable portion (the "Business Portion") of all Liabilities
associated with both the Harris Real-Time Business and the Trusted Systems
Business (the "Shared Liabilities"), such portion to be based on the Harris
Real-Time Business' contribution to the total net revenues of Harris for the
fiscal year ended September 30, 1995 (items (i) through (vii), collectively, the
"Applicable Assumed Liabilities").
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The Purchase and Sale Agreement also provides that Concurrent shall not
assume, and shall not be deemed to have assumed, any of the following
Liabilities of Harris: (i) Liabilities exclusively associated with the Trusted
Systems Business; (ii) Liabilities arising from activities of the Harris
Real-Time Business prior to the Closing relating to environmental matters,
claims of shareholders of Harris, or claims of employees of Harris that Harris
violated employment practices laws, rules or regulations or anti-discrimination
laws, rules or regulations insofar as such claims are based on acts or omissions
that shall have occurred prior to Closing; (iii) the portion of the Shared
Liabilities after the assumption by Concurrent of the Business Portion of such
Liabilities; (iv) Liabilities in connection with any Taxes (as defined in the
Purchase and Sale Agreement) imposed upon Harris's operations set forth in
certain of the Schedules; and (v) all other Liabilities of Harris which are not
Applicable Assumed Liabilities.
The term "Liabilities" means any liabilities or obligations, fixed or
contingent, known or unknown as of the date of the Purchase and Sale Agreement,
and including such liabilities or obligations under contracts and leases.
The term "Transfer Taxes" means all sales, use, transfer, recording, ad
valorem, bulk sales and other similar taxes and fees, arising out of or in
connection with the transactions contemplated by the Purchase and Sale
Agreement.
In accordance with the Purchase and Sale Agreement, Harris delivered to
Concurrent an audited balance sheet of the Harris Real-Time Business as of March
29, 1996, prepared in accordance with United States generally accepted
accounting principles ("GAAP") and certain additional procedures agreed to by
Harris and Concurrent (such financials, the "Audited Balance Sheet").
Additional Transactions
In addition to the sale and purchase of the Assets and the assumption of
the Applicable Assumed Liabilities as described above, the Purchase and Sale
Agreement also provides that, subject to the terms and upon the conditions set
forth therein, (i) Harris shall issue, sell and deliver to Concurrent, and
Concurrent shall purchase and acquire, good and valid title to 683,178 shares of
Harris Common Stock, subject to adjustment for stock dividends, stock splits and
similar transactions prior to the Closing and (ii) Concurrent shall issue, sell
and deliver to Harris, and Harris shall purchase and acquire, (A) good and valid
title to 10,000,000 shares of Concurrent Common Stock, subject to adjustment for
stock splits, stock dividends and similar transactions prior to the Closing and
(B) $10,000,000 in total liquidation preference of Concurrent Preferred Stock,
as adjusted pursuant to the terms thereof and as set forth below.
Preferred Stock Adjustment
The Purchase and Sale Agreement provides that not later than five business
days prior to the Closing, Harris shall deliver to Concurrent a projected
reconciliation, prepared in accordance with GAAP consistent with the accounting
principles used in preparation of the Audited Balance Sheet and certified by the
chief financial officer of Harris, which shall set forth the portion of the
current assets of the Harris Real-Time Business to be transferred to Concurrent
pursuant to the terms of the Purchase and Sale Agreement as of June 30, 1996
(the "Reference Date") and the current liabilities which are Applicable Assumed
Liabilities as of the Reference Date (the "Projected Net Current Asset
Reconciliation"). Harris shall cause KPMG to prepare promptly after the
Reference Date, but in no event more than 30 days following the Reference Date,
a reconciliation of the portion of the current assets of the Harris Real-Time
Business transferred to Concurrent as of the Reference Date and the current
liabilities which are Assumed Liabilities as of the Reference Date (the "Final
Net Current Asset Reconciliation" and with the Projected Net Current Asset
Reconciliation, the "Net Current Asset Reconciliations").
After delivery of the Projected Net Current Asset Reconciliation and prior
to the Closing, the Preferred Stock Consideration shall be adjusted to the
extent that amount of total current assets minus the total current liabilities
(such difference, the "Net Assets") shown on such Projected Net Current Asset
Reconciliation is less than $14,400,000 by reducing the total $10,000,000
liquidation preference, dollar for dollar. Such reduced amount in the
liquidation preference of the Preferred Stock Consideration, if there shall be
any reduction,
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shall be the actual liquidation preference of such consideration delivered to
Harris at the Closing. After the Closing, additional reductions, if any, in the
liquidation preference of the Preferred Stock Consideration shall be in
accordance with the terms of the Certificate of Designation. In accordance
therewith, if the Net Assets shown on the Final Net Current Asset Reconciliation
are in excess of the Net Assets shown on the Projected Net Current Asset
Reconciliation, then the liquidation preference and stated value of the
Preferred Stock Consideration delivered at Closing shall be increased, dollar
for dollar, to the extent of such excess up to $10,000,000 and any remainder of
such excess shall be paid, dollar for dollar, in cash as soon as practicable
after the determination of such excess. For further description of possible
changes in the liquidation preference of the Concurrent Preferred Stock, see
"TERMS OF THE TRANSACTION -- Concurrent Preferred Stock."
Additional Agreements
The Purchase and Sale Agreement also provides that on the Closing Date
Harris and Concurrent shall enter into (i) (A) certain leases, (B) a Shared
Services Agreement and (C) a Non-Competition/ Distribution Agreement, each
containing terms to be mutually agreed to by Harris and Concurrent prior to the
Closing and (ii) the Share Holding Agreement.
Closing; Closing Date
The closing of the Transaction (the "Closing") shall take place (a) at the
offices of Skadden, Arps, Slate, Meagher & Flom, 919 Third Avenue, New York, New
York 10022, on June 30, 1996 or as soon as practicable following the
satisfaction (or waiver) of the conditions set forth in the Purchase and Sale
Agreement, whether earlier or later than June 30, 1996 or (b) at such other
date, time or place as the parties shall mutually agree.
Representations and Warranties
The Purchase and Sale Agreement contains various customary representations
and warranties of Concurrent and Harris, relating to, among other things:
corporate organization, capitalization, corporate authority, consents and
approvals, the Commission reports, financial statements, information in
disclosure documents, legal proceedings, no material adverse change since
September 30, 1995 (with respect to Harris) and June 30, 1995 (with respect to
Concurrent), opinions of financial advisors, tax matters, shareholder vote
required, employee benefit plans, state takeover laws, certain material
contracts, interests of officers and directors, intellectual property,
questionable payments, insurance, brokers, environmental, investment purpose and
product returns and warranties.
The Purchase and Sale Agreement contains certain additional representations
and warranties of Harris relating to the following: (i) validity of title to and
transferability of the Purchased Assets, (ii) preparation of audited financial
statements in accordance with GAAP, (iii) leased properties, (iv) Transferred
Subsidiaries and (v) liabilities to related parties.
Conduct of Business Pending the Consummation of the Transaction
Except as contemplated by the Purchase and Sale Agreement and the Ancillary
Agreements or with the prior written consent of Harris, during the period from
the date of the Purchase and Sale Agreement to the Closing Date, Concurrent
will, and will cause each of its subsidiaries to conduct its operations only in
the ordinary and usual course of business consistent with past practice and will
use all reasonable efforts, and will cause each of its subsidiaries to use all
reasonable efforts, to preserve intact its present business organization, keep
available the services of its present officers and employees and preserve its
relationships with licensors, licensees, customers, suppliers, employees and any
others having business dealings with it. Without limiting the generality of the
foregoing, and except as otherwise provided in or contemplated by the Purchase
and Sale Agreement or the Ancillary Agreements, Concurrent will not, and will
not permit any of the subsidiaries to, prior to the Closing Date, without the
prior written consent of Harris: (i) adopt any amendment to its charter or
by-laws or comparable organizational documents or to the Concurrent Rights
Agreement; (ii) except for
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(x) issuances of capital stock of Concurrent's subsidiaries to Concurrent or a
wholly owned subsidiary of Concurrent, or (y) issuances of capital stock of
Concurrent to employees of Concurrent who become, at or after the Closing Date,
entitled to severance under Concurrent's existing severance contracts and
policies in lieu of an equivalent cash payment under such contracts and
policies, issue, reissue, sell, deliver or pledge or authorize or propose the
issuance, reissuance, sale, delivery or pledge of additional shares of capital
stock of any class or any securities convertible into capital stock of any
class, or any rights, warrants or options to acquire any convertible securities
or capital stock, other than the issuance of shares of Concurrent Common Stock
upon the exercise of stock options or stock grants pursuant to the Concurrent
Stock Plan outstanding on or prior to the Closing Date in accordance with the
terms of the agreements under which they are issued; (iii) declare, set aside or
pay any dividend or other distribution (whether in cash, securities or property
or any combination thereof) in respect of any class or series of its capital
stock, except that any wholly owned subsidiary of Concurrent may pay dividends
to Concurrent or any of Concurrent's wholly owned subsidiaries; (iv) adjust,
split, combine, subdivide, reclassify or redeem, purchase or otherwise acquire,
or propose to redeem or purchase or otherwise acquire, any shares of its capital
stock, or any of its other securities; (v)(x) incur, assume or pre-pay any
long-term debt or incur or assume any short-term debt, except that Concurrent
and its subsidiaries may incur or pre-pay debt in the ordinary course of
business consistent with past practice under existing lines of credit, (y)
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other person
except in the ordinary course of business consistent with past practice, or (z)
make any loans, advances or capital contributions to, or investments in, any
other person, except subsidiaries of Concurrent and except in the ordinary
course of business consistent with past practice; (vi) except for increases in
salary, wages and benefits of employees of Concurrent or its subsidiaries (other
than executive or corporate officers of Concurrent) in accordance with past
practice and except for increases in salary, wages and benefits granted to
employees of Concurrent or its subsidiaries (other than executive or corporate
officers of Concurrent) in conjunction with promotions or other changes in job
status consistent with past practice or required under existing agreements,
increase the compensation or fringe benefits payable or to become payable to its
directors, officers or employees (whether from Concurrent or any of its
subsidiaries), or pay any benefit not required by any existing plan or
arrangement or grant any severance or termination pay to (except pursuant to
existing agreements or policies as set forth on certain of the Schedules), or
enter into any employment or severance agreement with, any director, officer or
other key employee of Concurrent or any of its subsidiaries or establish, adopt,
enter into, terminate or amend any collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
welfare, deferred compensation, employment, termination, severance or other
employee benefit plan, agreement, trust, fund, policy or arrangement for the
benefit or welfare of any directors, officers or current or former employees,
except to the extent such termination or amendment is required by applicable
law; provided, however, that none of the foregoing shall be deemed to prohibit
the payment of benefits as they become payable; provided, further, however, that
Concurrent shall be permitted to take action so that at the Closing Date, each
stock option issued and outstanding under the Concurrent Stock Plan will become
fully vested and exercisable (it being understood and agreed that the
Transaction will be deemed to be a change in control for purposes of such Plan
and the option agreements entered into thereunder); provided, further, that none
of the foregoing shall prevent Concurrent or any of its subsidiaries from
instituting retention and/or severance arrangements with employees of Concurrent
or any of its subsidiaries, for the purpose of encouraging employees to remain
with Concurrent until the Closing Date subject to (x) Concurrent consulting with
Harris prior to implementing any such retention and/or severance arrangement and
(y) a ceiling of $2,000,000 on the aggregate dollar amount which may be paid or
pursuant to which the obligation may be incurred between November 5, 1995 and
the Closing Date pursuant to all such retention and/or severance arrangements;
(vii) other than as may be required by law to consummate the transactions
contemplated by the Purchase and Sale Agreement, acquire, sell, lease, transfer
or dispose of any assets or securities which are material to Concurrent and its
subsidiaries taken as a whole, or enter into any commitment to do any of the
foregoing; (viii) settle any material tax liability or make any material tax
election; or (ix) agree in writing or otherwise to take any of the foregoing
actions or any action which would make any representation or warranty in the
Purchase and Sale Agreement untrue or incorrect in any material respect or which
would result in any of the foregoing conditions not being satisfied.
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Except as contemplated by the Purchase and Sale Agreement and in the
Ancillary Agreements or with the prior written consent of Concurrent, during the
period from the date of the Purchase and Sale Agreement to the Closing Date,
Harris will, and will cause each of its subsidiaries to, use all reasonable
efforts to conduct the Business (as defined in the Purchase and Sale Agreement)
only in the ordinary course and consistent with prior practice, use Best Efforts
(as defined in the Purchase and Sale Agreement) to maintain, keep and preserve
the Assets and the assets of the Transferred Subsidiaries in operating condition
and repair and maintain or, if necessary, replace insurance thereon in
accordance with present practices, preserve intact the present organization of
the Business, keep available the services of its present officers and employees
and preserve its relationships with licensors, licensees, customers, suppliers,
employees and any others having business dealings with it. Without limiting the
generality of the foregoing, and except as otherwise provided in or contemplated
by the Purchase and Sale Agreement (including Schedule 6.1 thereto) or the
Ancillary Agreements, Harris will not, and will not permit any of its
subsidiaries to, prior to the Closing Date, without the prior consent of
Concurrent: (i) adopt any amendment to its charter or by-laws or comparable
organizational documents or to the Harris Rights Agreement (as defined in the
Purchase and Sale Agreement); (ii) except for issuances of capital stock of any
of the Transferred Subsidiaries to Harris or to another Transferred Subsidiary
of Harris, issue, reissue, sell, deliver or pledge or authorize or propose the
issuance, reissuance, sale, delivery or pledge of additional shares of capital
stock of any class or any securities convertible into capital stock of any
class, or any rights, warrants or options to acquire any convertible securities
or capital stock, other than the issuance of shares of Harris Common Stock upon
the exercise of stock options or stock grants pursuant to the Harris Stock Plan
outstanding on or prior to the Closing Date in accordance with the terms of the
agreements under which they are issued; (iii) declare, set aside or pay any
dividend or other distribution (whether in cash, securities or property or any
combination thereof) in respect of any class or series of its capital stock,
except that any Transferred Subsidiary may pay dividends to Harris or any of the
other Transferred Subsidiaries; (iv) adjust, split, combine, subdivide,
reclassify or redeem, purchase or otherwise acquire, or propose to redeem or
purchase or otherwise acquire, any shares of its capital stock, or any of its
other securities; (v) (x) incur, assume or pre-pay any long-term debt or incur
or assume any short-term debt, except that Harris and its subsidiaries may incur
or pre-pay debt in the ordinary course of business consistent with past practice
under existing lines of credit, (y) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other person except in the ordinary course of business
consistent with past practice, or (z) make any loans, advances or capital
contributions to, or investments in, any other person, except Transferred
Subsidiaries of Harris and except in the ordinary course of business consistent
with past practice; (vi) except for increases in salary, wages and benefits of
employees of Harris or its subsidiaries (other than executive or corporate
officers of Harris) in accordance with past practice and except for increases in
salary, wages and benefits granted to employees of Harris or its subsidiaries
(other than executive or corporate officers of Harris) in conjunction with
promotions or other changes in job status consistent with past practice or
required under existing agreements increase the compensation or fringe benefits
payable or to become payable to its directors, officers or employees (whether
from Harris or any of its subsidiaries), or pay any benefit not required by any
existing plan or arrangement or grant any severance or termination pay to
(except pursuant to existing agreements or policies as set forth on certain of
the Schedules), or enter into any employment or severance agreement with, any
director, officer or other key employee of Harris or any of the Transferred
Subsidiaries or establish, adopt, enter into, terminate or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, welfare, deferred compensation,
employment, termination, severance or other employee benefit plan, agreement,
trust, fund, policy or arrangement for the benefit or welfare of any directors,
officers or current or former employees, except to the extent such termination
or amendment is required by applicable law; provided, however, that none of the
foregoing shall be deemed to prohibit the payment of benefits as they become
payable; provided, further, however, that Harris shall be permitted to take
action so that at the Closing Date, each stock option issued and outstanding
prior to December 31, 1995 under the Harris Stock Plan will be fully vested and
exercisable; (vii) other than as may be required by law to consummate the
transactions contemplated by the Purchase and Sale Agreement, acquire, sell,
lease, transfer or dispose of any assets or securities which are material to
Harris and its subsidiaries taken as a whole, or enter into any commitment to do
any of the foregoing; (viii) settle any material tax liability or make any
material tax election; or (ix) agree in writing or otherwise to take any of the
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foregoing actions or any action which would make any representation or warranty
in the Purchase and Sale Agreement untrue or incorrect in any material respect
or which would result in any of the conditions set forth in the Purchase and
Sale Agreement not being satisfied.
Notwithstanding the terms described in the preceding paragraph, pursuant to
Schedule 6.1, Harris shall be entitled to do the following: (i) to take actions
to arrange for interim financing which would provide Harris with $5,000,000 at
or prior to Closing; provided, however, that Harris shall not be entitled to
take such actions (i) which would result in (A) a material lien, claim or
encumbrance being in place on the Purchased Assets at Closing or (B) the
establishment of an additional Applicable Assumed Liability (as defined in the
Purchase and Sale Agreement) or an increase in an Applicable Assumed Liability;
(ii) to cause the disposition of all or a significant portion of the Trusted
Systems Business; provided, however, that in connection with any such
transaction which could be consummated prior to Closing, Harris shall cause nine
percent of any consideration to be received by Harris shareholders to be
reserved for Concurrent and paid to Concurrent promptly after the Closing;
provided further, however, that Harris shall not take any action which would
result in a change to the Harris Board prior to Closing other than nominating
for election to the Harris Board the person selected to replace E. Courtney
Siegel as Chief Executive Officer of Harris; (iii) to take actions to cause the
Harris Real-Time Business and the Trusted Systems Business to be separated in
accordance with the terms of the Purchase and Sale Agreement and to cause the
Trusted Systems business to have, at and after Closing, executives and other
employees that the Board of Directors of Harris determines, in its sole
discretion, to be necessary to operate the Trusted Systems Business as a
separate business; and (iv) to change the corporate name of Harris in accordance
with Florida law.
Intellectual Property Licenses
The Purchase and Sale Agreement contains certain covenants providing for
the cross-licensing of certain intellectual property of Harris that will either
be transferred to Concurrent at Closing or be retained by Harris following the
Closing. Such covenants provide for Concurrent or Harris, as the case may be, to
grant to the other certain royalty-free and royalty bearing licenses generally
designed to allow (i) Concurrent to conduct the Harris Real-Time Business in
substantially the same manner as conducted by Harris prior to the Closing and
(ii) Harris to conduct its Trusted Systems business in substantially the same
manner after the Closing as conducted prior to the Closing, in each case,
recognizing that some of the licensed intellectual property may have application
in both the Harris Real-Time Business and in Harris's Trusted Systems business.
In addition, each of Concurrent and Harris has agreed to certain customary
covenants, including, among others, covenants relating to access to information,
the taking of actions to comply with legal requirements and to obtaining the
requisite approvals and consents, post-closing cooperation, further assurances
and supplemental disclosure.
Other Acquisition Proposals
The Purchase and Sale Agreement provides that, except as set forth in
Schedule 6.1 described above or otherwise agreed to by Harris and Concurrent,
that neither Harris, Concurrent nor any of their officers, directors,
affiliates, representatives or agents will, directly or indirectly, take any
action to discuss, negotiate, undertake, authorize, recommend, propose or enter
into, facilitate, encourage, solicit or initiate any transaction (other than the
Transaction) involving any disposition or other change of ownership of a
substantial portion of their respective capital stock or assets (each an
"Acquisition Transaction"), nor will they provide any third party with
information in connection with an Acquisition Transaction or otherwise cooperate
in any of the foregoing actions. Each party will cease any current negotiations
of this nature with any third parties and will notify the other parties of any
proposal or bid in respect of an Acquisition Transaction. Notwithstanding the
above, either Harris or Concurrent may engage in negotiations with a third party
who makes a bona fide written proposal for an Acquisition Transaction which
either Board of Directors determines in good faith on the basis of the advice of
outside counsel that failure to take such action creates a substantial risk that
the Board of Directors would fail to comply with its fiduciary duties under
applicable law.
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Expenses
The Purchase and Sale Agreement provides that, whether or not the
Transaction is consummated, all costs and expenses incurred in connection with
the Transaction shall be paid by the party incurring such costs and expenses
except that (i) the filing fees relating to the HSR Act, (ii) the filing fees
and expenses incurred in printing and mailing this Joint Proxy Statement, (iii)
the expenses incurred in connection with the preparation of the Audited Balance
Sheet and the Net Current Asset Reconciliations and (iv) Transfer Taxes with
respect to the Assets, other than the stock of the Transferred Subsidiaries,
shall be shared equally by Harris and Concurrent. Transfer Taxes with respect to
the transfer of the stock of the Transferred Subsidiaries, if such stock is
transferred, shall be borne entirely by Concurrent.
Shareholder Meetings
The Purchase and Sale Agreement provides that Harris and Concurrent each
shall call a meeting of its shareholders for the purpose of voting on the
Purchase and Sale Agreement and the Harris Stock Plan Amendment in the case of
Harris and for the purpose of voting on the issuance of the Concurrent Common
Stock Consideration, the Additional Common Shares and the Concurrent Stock Plan
Amendment in the case of Concurrent. The Purchase and Sale Agreement further
provides, subject to the fiduciary duties of the Concurrent Board and the Harris
Board, that the Concurrent Board and Harris Board recommend that their
respective shareholders approve such matters.
Registration Rights
The Purchase and Sale Agreement provides that each of Harris and Concurrent
shall prepare and file as promptly as practicable after the date thereof, and
shall cause to become effective on the Closing Date, the Concurrent Form S-3 and
the Harris Form S-3. The Purchase and Sale Agreement also provides that each of
Harris and Concurrent shall indemnify the other in connection with the
Concurrent or Harris Form S-3, as the case may be, in accordance with the
provisions set forth in the Share Holding Agreement. The Purchase and Sale
Agreement provides further that each of Harris and Concurrent shall also cause
the shares of common stock issued by it to the other party to be approved for
inclusion on the Nasdaq/NMS on the effective date of the Concurrent or Harris
Form S-3, as the case may be, subject to official notice of issuance.
Employee Matters
The Purchase and Sale Agreement provides that none of Harris's obligations
under any of its employee benefit plans, including the Harris Stock Plan, shall
be assumed by Concurrent. The Purchase and Sale Agreement also provides for
certain contributions and distributions by Harris with respect to the Harris
Stock Plan.
Additionally, the Purchase and Sale Agreement provides that effective the
Employment Effective Time (as defined in the Purchase and Sale Agreement)
Concurrent shall offer employment to each Business Employee (as defined in the
Purchase and Sale Agreement) at the same annual salary or hourly compensation
and on other terms not materially less favorable to the Business Employees than
those in effect as of the date of the Purchase and Sale Agreement.
The Purchase and Sale Agreement also provides that Concurrent shall to use
its Best Efforts to amend the existing Concurrent Stock Plan and to establish
certain new employee benefit plans, programs, policies or arrangements effective
as of Closing.
Best Efforts
The Purchase and Sale Agreement provides that each of Concurrent and Harris
shall use its Best Efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by the Purchase and Sale Agreement.
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Occurrence of Closing Prior to or Following the Reference Date
The Purchase and Sale Agreement also provides that in the event the Closing
occurs prior to the Reference Date, Concurrent shall operate the Harris
Real-Time Business only in the ordinary course consistent with past practice
between the Closing and the Reference Date. In the event the Closing occurs
after the Reference Date, Harris shall provide to Concurrent on a weekly basis
information with respect to the status of the net current assets of the Harris
Real-Time Business, except inventory and current liabilities which will be
provided on a monthly basis.
Management and Corporate Governance Matters
The Purchase and Sale Agreement provides that the Concurrent Board shall
take action to cause the number of directors comprising the full board of
directors of Concurrent to be nine persons, three of whom shall be designated by
Harris prior to the Closing Date ("Original Harris Designees") and six of whom
shall be designees of Concurrent. If any Original Harris Designee shall decline
or be unable to serve, Harris shall designate a person to serve in such person's
stead (the Original Harris Designees together with any such alternate or
alternates are herein referred to as the "Harris Designees"). From and after the
Closing Date until at least September 30, 1997, unless a majority of Harris
Designees then serving as Concurrent directors shall consent to a waiver,
Concurrent shall maintain a board of directors consisting of no more than nine
directors, three of whom shall be Harris Designees.
The Purchase and Sale Agreement provides that the Harris Board shall take
action to cause the number of directors comprising the full board of directors
of Harris to be not more than seven persons, one of whom shall be designated by
Concurrent prior to the Closing Date ("Original Concurrent Designee") and six of
whom shall be designees of Harris. If the Original Concurrent Designee shall
decline or be unable to serve, Concurrent shall designate a person to serve in
such person's stead (the Original Concurrent Designee together with any such
alternate are herein referred to as the "Concurrent Designees"). From and after
the Closing Date until at least September 30, 1997, Harris shall maintain a
board of directors consisting of no more than seven directors, one of whom shall
be a Concurrent Designee.
The Purchase and Sale Agreement provides that Harris shall use its Best
Efforts to cause E. Courtney Siegel to resign as a director, President and Chief
Executive Officer of Harris effective as of the Closing. Harris will keep
Concurrent reasonably informed of the status of the search for a new chief
executive officer of Harris.
The Purchase and Sale Agreement provides that Concurrent shall cause the
election or appointment, effective as of the Closing Date, of E. Courtney Siegel
as the President and Chief Executive Officer of Concurrent and John T. Stihl as
the Chairman of the Concurrent Board. Mr. Siegel shall be an Original Harris
Designee.
The Purchase and Sale Agreement provides that Concurrent shall use its Best
Efforts to cause the number of shares of Concurrent Common Stock authorized for
issuance under the Concurrent Stock Plan to be increased to 9,000,000 such
shares (of which approximately 5,000,000 will be available for grant
thereunder). Such increase is included in the matters submitted for a vote of
shareholders in this Joint Proxy Statement.
The Purchase and Sale Agreement provides that Harris shall use its Best
Efforts to cause the number of shares of Harris Common Stock authorized for
issuance under the Harris Stock Plan to be 2,025,000 such shares (of which
approximately 1,050,000 will be available for grant thereunder). Such increase
is included in the matters submitted for a vote of shareholders in this Joint
Proxy Statement.
The Purchase and Sale Agreement provides that at or prior to the Closing
Date Concurrent shall amend its By-laws to provide that the President of
Concurrent shall be the exclusive chief executive officer of Concurrent,
reporting directly to Concurrent's Board of Directors.
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Employment Agreements
The Purchase and Sale Agreement provides that Concurrent shall cause the
amendment to the employment agreement with John T. Stihl to become effective
upon the Closing. Concurrent has entered into an employment agreement with E.
Courtney Siegel which becomes effective upon the Closing. See "THE PROPOSED
TRANSACTION -- Interests of Certain Persons in the Transaction."
Conditions to the Transaction
The Purchase and Sale Agreement provides that the respective obligations of
the parties to perform the Transaction shall be subject to the satisfaction or
waiver, on or prior to the Closing Date, of the following conditions: (i) the
Transaction shall have been approved and adopted by the affirmative vote of the
holders of a majority of all the votes entitled to be cast with respect to the
holders of Harris Common Stock; the issuance of the Concurrent Common Stock
Consideration shall have been approved by the affirmative vote of a majority of
the total votes cast with respect to the shareholders of Concurrent; that
portion of the Concurrent Stock Plan Amendment that provides for an increase in
the number of shares of Concurrent Common Stock authorized for issuance to
9,000,000 shares shall have been approved by the affirmative vote of a majority
of the total votes cast by the holders of Concurrent Common Stock in a separate
vote; and the Harris Stock Plan Amendment shall have been approved by the
affirmative vote of a majority of the total votes cast by the holders of Harris
Common Stock in a separate vote; (ii) all authorizations, notices, consents,
orders or approvals of, or declarations or filings with, or expirations of
waiting periods imposed by, any Governmental Entity (as defined in the Purchase
and Sale Agreement), the failure to obtain or make which would have a Material
Adverse Effect (as defined in the Purchase and Sale Agreement) on Concurrent and
its subsidiaries or Harris and its subsidiaries, in each case taken as a whole,
shall have been filed, occurred or been obtained; (iii) Concurrent and Harris
each shall have received all state securities or blue sky permits and other
authorizations necessary to issue Concurrent Common Stock pursuant to the
Purchase and Sale Agreement; (iv) no temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the consummation
of the Transaction shall be in effect (each party agreeing to use all reasonable
efforts to have any such order reversed or injunction lifted); (v) no action,
suit or proceeding by any Governmental Entity before any court or governmental
or regulatory authority will be pending against Harris, Concurrent or any of
their subsidiaries challenging the validity or legality of the Transaction,
other than actions, suits or proceedings which, in the reasonable opinion of
counsel to Concurrent and Harris, are unlikely to result in an adverse judgment
having a Material Adverse Effect on Concurrent, Harris or any of their
subsidiaries taken as a whole or the Harris Real-Time Business; (vi) Harris and
Concurrent shall have received an opinion of Holland & Knight, counsel to
Harris, in form and substance reasonably satisfactory to Harris and Concurrent,
dated a date within two days prior to the expected date of this Joint Proxy
Statement, substantially to the effect that none of the actions contemplated by
the Purchase and Sale Agreement shall result in or otherwise give rise to a
breach of any representation or covenant contained in the Tax Disaffiliation
Agreement or made in connection with the opinion rendered by Sullivan & Cromwell
(as described in the Tax Disaffiliation Agreement), in each case relating to the
qualification of the Distribution (as defined in the Purchase and Sale
Agreement) as a distribution pursuant to Section 355 of the Code; in rendering
such opinion, Holland & Knight may rely exclusively without an independent
investigation upon representations contained in certificates of officers of
Harris and others unless Holland & Knight has actual knowledge or reason to
believe that such representations are false or inaccurate; (vi) any applicable
waiting period under the HSR Act shall have expired or been terminated; (vii)
certain consents shall have been obtained; (viii) the Ancillary Agreements shall
have been executed and delivered by the parties thereto; and (ix) Concurrent and
Harris shall have reached mutual agreement with respect to the transfer of stock
and assets of the Transferred Subsidiaries. Concurrent has received the consent
of its primary lender with respect to the Transaction. The condition under the
Purchase and Sale Agreement to Concurrent's and Harris's obligation to
consummate the Transaction that Concurrent obtain additional specified consents
has been waived by Concurrent and Harris.
The Purchase and Sale Agreement provides, as a condition to consummation of
the Transaction, that Harris receive consent under certain agreements, leases
and licenses with third parties. Harris has received
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oral consents as to all but one of such third-party arrangements. As to the
remaining arrangement, the Purchase and Sale Agreement provides a mechanism to
consummate the Transaction in the event a consent is not received. See
"-- Intellectual Property License." The cost of using this mechanism is not
expected to be material to the results of operations of Harris or Concurrent.
The obligation of Harris to perform the Transaction is subject to the
satisfaction of the following additional conditions, on or prior to the Closing
Date, unless waived by Harris: (i) the representations and warranties of
Concurrent set forth in the Purchase and Sale Agreement shall be true and
correct in all material respects as of the date of the Purchase and Sale
Agreement and (except to the extent such representations and warranties speak as
of an earlier date) as of the Closing Date as though made on and as of the
Closing Date and Harris shall have received a certificate signed on behalf of
Concurrent by the Chief Executive Officer and the Chief Financial Officer of
Concurrent to the foregoing effect; (ii) Concurrent shall have performed in all
material respects all obligations required to be performed by it under the
Purchase and Sale Agreement at or prior to the Closing Date, and Harris will
have received a certificate signed on behalf of Concurrent by the Chief
Executive Officer and the Chief Financial Officer of Concurrent to such effect;
(iii) Concurrent shall have made all filings or registrations and obtained all
permits, authorizations, notices, consents and approvals from, Governmental
Entities as may be required in connection with the transactions contemplated by
the Purchase and Sale Agreement under the Exchange Act, the Securities Act, the
HSR Act, the FBCA, any state securities or blue sky laws or other applicable
laws, except for filings, registrations, permits, authorizations, notices,
consents and approvals, the failure to obtain of which would not have a Material
Adverse Effect (as defined in the Purchase and Sale Agreement) on Harris,
Concurrent and their respective subsidiaries taken as a whole (after giving
effect to the Transaction); (iv) from the date of the Purchase and Sale
Agreement through the Closing Date, there will not have occurred any change in
the financial condition, business, operations or prospects of Concurrent and its
subsidiaries, taken as a whole, that would have or would be reasonably likely to
have a Material Adverse Effect on Concurrent and its subsidiaries, taken as a
whole, other than any such change that affects both Concurrent and Harris in a
substantially similar manner; (v) a registration statement of Concurrent shall
be effective under the Securities Act covering the Concurrent Common Stock to be
received by Harris at the Closing and the Concurrent Common Stock issuable upon
conversion of the Concurrent Preferred Stock to be received by Harris at the
Closing or the Debentures, and such Concurrent Common Stock shall have been
approved for inclusion on the Nasdaq/NMS, subject to official notice of
issuance; (vi) the fairness opinion from Bear Stearns to Harris shall not, in
good faith, have been withdrawn by Bear Stearns; and (vii) Harris shall have
received from Concurrent a written determination by the New Jersey Department of
Environmental Protection of the nonapplicability of the New Jersey Industrial
Site Recovery Act ("ISRA") to the Transaction, or a written Negative Declaration
(as defined in ISRA) from such Department to the effect that no soil or
groundwater assessment or remediation is required, or written assurances to
Harris that Concurrent has otherwise complied with ISRA in a manner which does
not require a material financial commitment by Concurrent.
The obligations of Concurrent to effect the Transaction are subject to the
satisfaction, on or prior to the Closing Date, of the following conditions
unless waived by Concurrent: (i) the representations and warranties of Harris in
the Purchase and Sale Agreement shall be true and correct in all material
respects as of the date of the Purchase and Sale Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as of
the Closing Date as though made on and as of the Closing Date and Concurrent
shall have received a certificate signed on behalf of Harris by the Chief
Executive Officer and the Chief Financial Officer of Harris to the foregoing
effect; (ii) Harris shall have performed in all material respects all
obligations required to be performed by it under the Purchase and Sale Agreement
at or prior to the Closing Date, and Concurrent shall have received a
certificate signed on behalf of Harris by the Chief Executive Officer and the
Chief Financial Officer of Harris to that effect; (iii) Harris shall have made
all filings or registrations with, and obtained all permits, authorizations,
notices, consents and approvals from, Governmental Entities as may be required
in connection with the transactions contemplated by the Purchase and Sale
Agreement under the Exchange Act, the Securities Act, the HSR Act, the FBCA, any
state securities or blue sky laws or other applicable laws, except for filings,
registrations, permits, authorizations, notices, consents and approvals, the
failure to obtain of which would not have a Material Adverse Effect on Harris,
Concurrent and their subsidiaries taken as a whole or the Harris Real-Time
Business (after giving effect to the transactions
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contemplated by the Purchase and Sale Agreement); (iv) the parties to certain
contracts and agreements with Harris shall have consented to the assignment of
such contracts and agreements to Concurrent; (v) from the date of the Purchase
and Sale Agreement through the Closing Date, there shall not have occurred any
change in the financial condition, business, operations or prospects of Harris
and the Transferred Subsidiaries, taken as a whole, that would have or would be
reasonably likely to have a Material Adverse Effect on either Harris and its
subsidiaries, taken as a whole, or the Harris Real-Time Business other than any
such change that affects both Concurrent and Harris in a substantially similar
manner; (vi) the fairness opinion from Berenson Minella to Concurrent shall not,
in good faith, have been withdrawn by Berenson Minella; (vii) Concurrent shall
have approved all Schedules with respect to Assets and Liabilities delivered by
Harris, the non-approval of which shall not be based on certain matters
described in the Purchase and Sale Agreement and which approval may not be
unreasonably withheld; and (viii) a registration statement of Harris shall be
effective under the Securities Act covering the Purchased Harris Shares to be
received by Concurrent at the Closing and such Purchased Harris Shares shall
have been approved for inclusion on the Nasdaq/NMS, subject to official notice
of issuance.
Termination
The Purchase and Sale Agreement provides that it may be terminated and the
Transaction abandoned at any time prior to the Closing Date (i) by the mutual
consent of Concurrent and Harris whether before or after shareholder approval;
(ii) by action of the Board of Directors of either Concurrent or Harris if (a)
the Closing contemplated by the Transaction shall not have been consummated by
August 30, 1996 provided, in the case of a termination pursuant to such clause,
that the terminating party shall not have breached in any material respect its
obligations under the Purchase and Sale Agreement in any manner that will have
proximately contributed to such failure to close, or (b) the approval of
Harris's shareholders of the transactions in accordance with the terms of the
Purchase and Sale Agreement shall not have been obtained at the Harris Special
Meeting duly convened therefor or at any adjournment thereof, or (c) the
approval of Concurrent's shareholders of certain of the transactions in
accordance with the terms of the Purchase and Sale Agreement shall not have been
obtained at the Concurrent Special Meeting duly convened therefor or at any
adjournment thereof, or (d) a United States federal or state court of competent
jurisdiction or United States federal or state governmental, regulatory or
administrative agency or commission shall have issued an order, decree or ruling
or taken any other action permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by the Purchase and Sale Agreement and
such order, decree, ruling or other action shall have become final and
non-appealable; provided, that the party seeking to terminate the Purchase and
Sale Agreement pursuant to such clause has used all reasonable efforts to remove
such injunction, order or decree; (iii) by action of the Harris Board, whether
before or after shareholder approval, if (a) in the exercise of its good faith
judgment as to its fiduciary duties to its shareholders imposed by law the
Harris Board determines that such termination is required by reason of an
Acquisition Transaction proposal being made, (b) there has been a breach by
Concurrent of any representation or warranty contained in the Purchase and Sale
Agreement which would have or would be reasonably likely to have a Material
Adverse Effect on Concurrent and its subsidiaries taken as a whole, (c) there
has been a material breach of any of the covenants or agreements set forth in
the Purchase and Sale Agreement on the part of Concurrent, which breach is not
curable or, if curable, is not cured within 30 days after written notice of such
breach is given by Harris to Concurrent or (d) Concurrent withdraws, amends, or
modifies its favorable recommendation of the Purchase and Sale Agreement or
promulgates any recommendation with respect to an Acquisition Transaction other
than a recommendation to reject such Acquisition Transaction; or (iv) by action
of the Concurrent Board, whether before or after shareholder approval, if (a) in
the exercise of its good faith judgment as to its fiduciary duties to its
shareholders imposed by law the Concurrent Board determines that such
termination is required by reason of an Acquisition Transaction proposal being
made, (b) there has been a breach by Harris of any representation or warranty
contained in the Purchase and Sale Agreement which would have or would be
reasonably likely to have a Material Adverse Effect on either Harris and its
Transferred Subsidiaries taken as a whole or the Harris Real-Time Business, (c)
there has been a material breach of any of the covenants or agreements set forth
in the Purchase and Sale Agreement on the part of Harris, which breach is not
curable or, if curable, is not cured within 30 days after written notice of such
breach is given by Concurrent to Harris
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or (d) Harris withdraws, amends, or modifies its favorable recommendation of the
Transaction or promulgates any recommendation with respect to an Acquisition
Transaction other than a recommendation to reject such Acquisition Transaction.
The Purchase and Sale Agreement provides that in the event of termination
of the Purchase and Sale Agreement by either Harris or Concurrent as described
above, the Transaction shall be abandoned and there shall generally be no
liability or obligation on the part of Harris, Concurrent or their respective
subsidiaries, officers or directors except for (i) certain specified obligations
including certain fees, commissions, expenses and access to information, and
(ii) certain damages occasioned by a party which is in material breach of its
representations, warranties, covenants or agreements, but as modified if the
party seeking damages receives a termination fee. A termination fee of $1.75
million is payable by one party (the "First Party") to the other if (i) the
shareholders of the First Party fail to approve the Purchase and Sale Agreement
(or the issuance of the Concurrent Common Stock Consideration or the Additional
Common Shares, the Concurrent Stock Plan Amendment or the Harris Stock Plan
Amendment, as the case may be) and a proposal is presented to the First Party
involving an Acquisition Transaction and the First Party consummates any
Acquisition Transaction within one year of the date on which the Purchase and
Sale Agreement is terminated, or (ii) the First Party's Board of Directors
terminates the Purchase and Sale Agreement in the exercise of its fiduciary
duties as provided in the Purchase and Sale Agreement. If the non-terminating
party receives a termination fee, it may not assert any claim based upon alleged
tortious or other interference with rights under the Purchase and Sale Agreement
against any person submitting a proposal for an Acquisition Transaction, assert
any claim against the terminating party or any of its directors or officers
based upon its or their approval of an Acquisition Transaction or assert any
claim for expenses for which it was otherwise responsible under the Purchase and
Sale Agreement.
Indemnification
Pursuant to the terms of the Purchase and Sale Agreement, Concurrent and
Harris have each agreed to indemnify and hold harmless each other and each
party's respective affiliates, and their respective affiliates' directors,
officers, employees, representatives and agents, and each of the heirs,
executors, successors and assigns of any of the foregoing from and against any
costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages and amount paid in settlement to the extent they are the
result of (i) any breach of any representation or warranty made by such party
under the Purchase and Sale Agreement that is a result of fraud or intentional
or willful misrepresentation by such party, and (ii) liabilities the other party
is not assuming. The indemnification obligations under the Purchase and Sale
Agreement shall survive for a period of two years following the Closing, except
for such obligations with respect to Taxes which shall survive until the
expiration of the applicable statute of limitations.
Amendment and Waiver
The Purchase and Sale Agreement provides that it may only be amended by an
instrument in writing signed on behalf of each of Harris and Concurrent. The
Purchase and Sale Agreement further provides that at any time prior to the
Closing Date Harris and Concurrent may in a signed instrument (i) extend the
time for the performance of any of the obligations or other acts to be performed
by the other parties, (ii) waive any inaccuracies in the representations and
warranties by the other parties contained in the Purchase and Sale Agreement or
in any document delivered pursuant to the Purchase and Sale Agreement, and (iii)
waive compliance with any of the agreements or conditions contained in the
Purchase and Sale Agreement. Neither Concurrent nor Harris intends to resolicit
its shareholders for approval in the event that conditions to performance are
waived.
THE SHARE HOLDING AGREEMENT
The following summary of the Share Holding Agreement is qualified in its
entirety by reference to the copy of the form of Share Holding Agreement
included in this Joint Proxy Statement as Annex F. Capitalized terms used herein
and not otherwise defined shall have the meanings ascribed to them in the Share
Holding Agreement. Shareholders are urged to read the Share Holding Agreement in
its entirety.
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Corporate Governance
The Share Holding Agreement provides that at the Closing the Concurrent
Board shall consist of no more than nine directors, including the initial Harris
Designees who shall be E. Courtney Siegel (who shall also be the initial
Concurrent President and Chief Executive Officer in accordance with the terms of
the Purchase and Sale Agreement), C. Shelton James and Michael F. Maguire. The
Share Holding Agreement also provides that John T. Stihl shall continue to be
the Chairman of the Concurrent Board.
From and after the Closing Date until September 30, 1997, the Concurrent
Board shall include three directors designated by Harris; provided, however,
that if Harris beneficially owns less than 2,400,000 shares of Concurrent Common
Stock (subject to adjustment for stock splits, stock dividends and similar
transactions) on the date of the mailing of the proxy statement for the next
annual meeting of Concurrent shareholders following the Closing Date, Harris
shall not be entitled to any representation on the Concurrent Board.
After September 30, 1997, Concurrent shall exercise all authority under
applicable law to maintain a board of directors of no more than nine directors
and to cause any slate of directors presented to shareholders for election to
the Concurrent Board to include such nominees that, if elected, would result in
the Concurrent Board including that number of Harris Designees determined as
follows: (i) three directors designated by Harris if Harris beneficially owns at
least 10,700,000 (subject to adjustment for stock splits, stock dividends and
similar transactions) shares of Concurrent Common Stock; (ii) two directors
designated by Harris if Harris beneficially owns less than 10,700,000 such
shares but at least 4,700,000 shares of Concurrent Common Stock; (iii) one
director designated by Harris if Harris beneficially owns less than 4,700,000
such shares but at least 2,400,000 shares of Concurrent Common Stock; and (iv)
no director designated by Harris if Harris beneficially owns less than 2,400,000
shares of Concurrent Common Stock.
The Share Holding Agreement provides that at the Closing, the Harris Board
shall consist of no more than seven directors, including the initial Concurrent
Designee who shall be Richard P. Rifenburgh.
The Share Holding Agreement also provides that so long as Concurrent
beneficially owns at least 375,000 (subject to adjustment for stock splits,
stock dividends and similar transactions) shares of Harris Common Stock, Harris
shall exercise all authority under applicable law to maintain a board of
directors of no more than seven directors and to cause any slate of directors
presented to shareholders for election to the Harris Board to include such
nominees that, if elected, would result in the Harris Board including one
Concurrent Designee; provided, however, that if Concurrent beneficially owns
less than 375,000 (subject to adjustment for stock splits, stock dividends and
similar transactions) shares of Harris Common Stock on the date of the mailing
of the proxy statement for the next annual meeting of Harris shareholders
following the date of the Share Holding Agreement, Concurrent shall not be
entitled to any representation on the Harris Board.
Voting of Shares
The Share Holding Agreement provides that until Concurrent beneficially
owns less than 341,589 shares of Harris Common Stock (subject to adjustment for
stock splits, stock dividends and similar transactions), Concurrent shall be
present for all shareholder meetings for purposes of establishing a quorum and
shall vote all securities of Harris owned by it and entitled to vote, in favor
of matters recommended by the Harris Board for approval by shareholders.
The Share Holding Agreement provides that so long as either (i) Harris
beneficially owns 4,700,000 or more shares of Concurrent Common Stock (subject
to adjustment for stock splits, stock dividends and similar transactions) or
(ii) Harris beneficially owns at best 2,400,000 or more shares of Concurrent
Common Stock (subject to adjustment for stock splits or stock dividends) and at
least one member of the existing Concurrent Board (other than the Chief
Executive Officer) is a Harris Designee, Harris shall be present for all
shareholder meetings for purposes of establishing a quorum and shall vote all
securities of Concurrent owned by it and entitled to vote in favor of matters
recommended by the Concurrent Board for approval by shareholders.
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Standstill
Under the terms of the Share Holding Agreement, during the Standstill
Period (defined as the three and one-half year period commencing on the Closing
Date), except as otherwise expressly provided in the Share Holding Agreement or
without the express written consent of the other party, neither Harris,
Concurrent nor any of their controlled affiliates, as the case may be, shall (i)
take any action, to acquire or affect control of the other party or to encourage
or assist any other person or group to do so, (ii) enter, propose to enter into,
solicit or support any merger, business combination, Change of Control (defined
generally as a person or group becoming the beneficial owner of more than 50% of
the stock of Concurrent or Harris, as the case may be, or otherwise obtaining
control), restructuring or similar transaction involving Concurrent or Harris,
as the case may be, or any of their subsidiaries, or purchase, acquire, propose
to purchase or acquire or solicit or support the purchase or acquisition of any
portion of the business, assets or securities of Concurrent or Harris or any of
their subsidiaries, (iii) seek additional representation on the Concurrent or
Harris Board, as the case may be, the removal of any directors from the
Concurrent or Harris Board, as the case may be, or a change in the size or
composition of such board, (iv) initiate or propose any securityholder proposal
without the approval of the Concurrent or Harris Board, as the case may be,
granted in accordance with the Share Holding Agreement or make, engage in, or in
any way participate in, any "solicitation" of "proxies" (as such terms are used
in the proxy rules promulgated by the Commission under the Exchange Act) to
vote, or seek to advise or influence any person with respect to the voting of,
any securities or request or take any action to obtain any list of
securityholders for such purposes with respect to any matter (or, as to such
matters, solicit any person in a manner that would require the filing of a proxy
statement under Regulation 14A promulgated under the Exchange Act), (v) deposit
any securities in a voting trust or enter into any voting agreement or
arrangement with respect thereto (other than the Share Holding Agreement), (vi)
disclose any intent, purpose, plan, arrangement or proposal inconsistent with
the foregoing or take any action that would require public disclosure of any
such intent, purpose, plan, arrangement or proposal, (vii) make any request to
amend or waive any portion of the standstill provisions in the Share Holding
Agreement, which request would require public disclosure under applicable law,
rule or regulation, (viii) take any action challenging the validity or
enforceability of the foregoing or (ix) assist, advise, encourage or negotiate
with any person with respect to, or seek to do, any of the foregoing.
The standstill provisions contained in the Share Holding Agreement,
however, will not (i) prohibit or restrict Concurrent or Harris, as the case may
be, from responding to any inquiries from any shareholders of Harris or
Concurrent, as the case may be, as to its intention with respect to the voting
of any securities of the other party beneficially owned by it so long as such
response is consistent with the terms of the Share Holding Agreement; (ii)
restrict the right of each Harris Designee, and each Concurrent Designee, to
vote on any matter as such individual believes appropriate in light of his or
her duties to the shareholders of Concurrent or Harris, as the case may be; or
(iii) prohibit Harris or Concurrent, as the case may be, from beneficially
owning securities of the other party issued as dividends or distributions in
respect of, or issued upon conversion, exchange or exercise of, securities which
Harris or Concurrent, as the case may be, is permitted to beneficially own under
the Share Holding Agreement.
Third Party Offers
The Share Holding Agreement provides that if Concurrent becomes the subject
of a Third Party Offer (as defined below) that is approved by a majority of the
Concurrent Board at a time when Harris and its controlled affiliates own more
than 10% of the outstanding Voting Securities (as defined below) of Concurrent,
promptly after such approval by the Board of Directors of Concurrent, Concurrent
shall deliver a written notice to Harris, briefly describing the material terms
of such Third Party Offer, and Harris shall, within ten business days after
receipt of such notice, either (i) offer to acquire all or substantially all of
the assets of Concurrent or the Other Concurrent Shares (as defined below), as
the case may be, on terms at least as favorable to the Other Concurrent Holders
(as defined below) as those contemplated by such Third Party Offer or (ii)
confirm in writing that it will support, and at the appropriate time will
support, such Third Party Offer, including by voting and causing each of its
controlled affiliates to vote all its Concurrent Common Stock eligible to vote
thereon in favor of such Third Party Offer or, if applicable, tendering or
selling and causing
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each of its controlled affiliates to tender or sell all the securities of
Concurrent owned by it to the person making such Third Party Offer.
The term "Third Party Offer" means a bona fide offer to enter into a
transaction by a person other than Harris or any of its respective affiliates or
any other person acting on behalf of Harris or any of its respective affiliates
which would result in a change of control of Concurrent or a transfer of all or
substantially all of the assets of Concurrent.
The term "Other Concurrent Holders" means the holders of the Other
Concurrent Shares.
The term "Other Concurrent Shares" means Voting Securities of Concurrent
not beneficially owned by Harris or any of its affiliates.
The term "Voting Securities" means Concurrent Common Stock or Harris Common
Stock, as the case may be, and any other securities of Concurrent or Harris, as
the case may be, entitled to vote generally in the election of directors of
Concurrent or Harris, as the case may be.
Transfer Restrictions
The Share Holding Agreement provides that except in connection with a Third
Party Offer that has been approved by a majority of the Concurrent Directors in
accordance with the Share Holding Agreement, neither Harris, Concurrent, nor any
of their respective subsidiaries shall sell, transfer or otherwise dispose of
any securities of the other party except in accordance with one of the
following: (i) pursuant to a sale to any other person of any such securities in
an amount of less than 5% of the outstanding securities of any class of
Concurrent or Harris, as the case may be (and for these purposes sales in open
market transactions which are not intentionally planned by the seller to assist
any other person in acquiring over 5% of the outstanding securities of any class
of Concurrent or Harris shall be permitted), or if such acquiring person is an
institutional investor eligible to file a statement on Schedule 13G (a "13G
Filer") (or any successor form) with respect to its investment, greater than 5%
but less than 10% of the securities of any class of Concurrent or Harris, as the
case may be, provided, however, that such 13G Filer provides a certification to
Concurrent or Harris, as the case may be, that the securities acquired by it
were acquired in the ordinary course of business and were not acquired for the
purpose of changing or influencing the control of the issuer of such securities
and were not acquired in connection with or as a participant in any transaction
having such purpose or effect, (ii) pursuant to a merger, consolidation or other
business combination of Harris or Concurrent or any Harris or Concurrent Entity
(as defined in the Share Holding Agreement), as the case may be, where such
party is not the surviving entity or a sale of all or substantially all of such
party's assets, provided, however, that the surviving or purchasing entity
agrees to be bound by the terms of the Share Holding Agreement, (iii) pursuant
to a transfer of shares of Concurrent or Harris to affiliates of Harris or
Concurrent, as the case may be, provided that such affiliates agree to be bound
by the terms of the Share Holding Agreement, (iv) pursuant to the pledge
provisions described below and (v) in order to, and only to the extent necessary
to, comply with applicable law. For purposes of the provisions regarding
restrictions on transfer, the Concurrent Preferred Stock shall be deemed to be
the same class of securities as the Concurrent Common Stock.
In addition, the Share Holding Agreement provides that Harris or
Concurrent, as the case may be (each, a "Pledgor"), may pledge the securities of
the other party received by it pursuant to the Purchase and Sale Agreement to a
bank or other lending institution (each, a "Pledgee") to secure borrowings or
other indebtedness as extended from time to time, provided, however, that as a
condition to such pledge (i) the Pledgee shall agree in writing not to sell,
transfer or otherwise dispose of the securities pledged to it other than
pursuant to an effective registration statement on Form S-3 with respect to the
disposition of such securities or an applicable exemption from registration
under the Securities Act, (ii) the Pledgee shall agree in writing that such
Pledgee will be bound by the terms of the Share Holding Agreement relating to
any restrictions on such securities, and (iii) all certificates representing
securities pledged to such Pledgee shall bear an appropriate restrictive legend
substantially as set forth in the Share Holding Agreement.
The Share Holding Agreement also provides that if requested by Harris,
Concurrent shall, to the extent it has not done so prior to the Closing Date
pursuant to the terms of the Purchase and Sale Agreement, use its
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best efforts to facilitate the receipt by Harris, at or shortly following the
Closing Date, of financing in an amount of $5,000,000 from the pledge of
Concurrent Common Stock held by Harris; provided, however, neither Concurrent
nor its counsel shall be required to issue an opinion to any Pledgee regarding
the legal status of such securities.
Registration
The Share Holding Agreement provides that to the extent that the Concurrent
Form S-3 and the Harris Form S-3 have not been filed with the Commission or
declared effective by the Commission on or prior to the Closing Date, Harris and
Concurrent shall use their best efforts to prepare and file such Form S-3s as
promptly as practicable after the Closing Date and to cause such Form S-3s to
become effective as soon as possible after the Closing Date. To the extent the
Concurrent Form S-3 or the Harris Form S-3 has been so declared effective on the
Closing Date, each of Concurrent and Harris, as the case may be, shall also use
its best efforts to cause the shares of Common Stock issued by it to the other
party to be approved for inclusion on the Nasdaq/NMS on the effective date of
the Concurrent Form S-3 or the Harris Form S-3, as the case may be, subject to
official notice of issuance.
The Share Holding Agreement provides that subject to the transfer
restrictions previously described and the lock-up provisions discussed
immediately below, upon the effectiveness of the applicable Form S-3 for the
sale of securities, each of Harris and Concurrent shall be permitted to sell any
shares of securities of the other party held by it at any time in accordance
with applicable law; provided, however, no such sales may occur unless and until
such selling party's Form S-3 has been declared effective.
The Share Holding Agreement provides that so long as Harris is "in
registration" with respect to a public offering of its shares and Concurrent
beneficially owns at least 341,589 shares of Harris Common Stock (subject to
adjustments for stock splits, stock dividends and similar transactions),
Concurrent will not (i) sell more than 45,000 shares of Harris Common Stock
(subject to adjustments for stock splits or stock dividends) in any consecutive
30-day period (which 45,000 share limit shall be reduced by sales of Harris
Common Stock by lenders to Concurrent during such 30-day period, if any) or (ii)
permit more than (x) 35% of the Current Market Value (as defined in the Share
Holding Agreement) (up to $13.35 per share subject to adjustment) of Harris
Common Stock plus (y) 25% of the Current Market Value (in excess of $13.35 per
share subject to adjustment) of Harris Common Stock to serve as collateral for a
margin loan from any lender. The restrictions described in clauses (i) and (ii)
of this paragraph are referred to as the "Concurrent Liquidity Restrictions."
The Share Holding Agreement provides that so long as Concurrent is "in
registration" with respect to a public offering of its shares and Harris
beneficially owns at least 2,000,000 shares of Concurrent Common Stock (subject
to adjustments for stock splits or stock dividends), Harris will not (i) sell
more than 260,000 shares of Concurrent Common Stock (subject to adjustments for
stock splits or stock dividends) in any consecutive 30-day period or (ii) permit
more than (x) 35% of the Current Market Value (up to $1.25 per share subject to
adjustment) of Concurrent Common Stock plus (y) 25% of the Current Market Value
of Concurrent Common Stock (in excess of $1.25 per share, subject to adjustment)
to serve as collateral for a margin loan from any lender; provided, however, the
above restrictions shall not prevent Harris from obtaining a margin or other
loan secured by Concurrent Common Stock with a principal amount equal to the
product of $.50 and the number of shares of Concurrent Common Stock issued to
Harris on the Closing Date (subject to adjustment for stock splits, stock
dividends and similar transactions) and still beneficially owned by Harris at
the time of the execution of the applicable loan agreement. The restrictions
described in clauses (i) and (ii) of this paragraph are referred to as the
"Harris Liquidity Restrictions."
The term "in registration" as used above means any period during which
either Harris or Concurrent (i) has a good faith intention to complete an
underwritten public offering within three calendar months of the date such
intention is communicated in writing to Concurrent or Harris, as the case may
be, and (ii) is actively taking steps to complete such an offering (including
steps which may pre-date the filing of a registration statement for such
offering).
The term "Current Market Value" means the average of the daily closing
prices for the ten consecutive trading days immediately prior to the relevant
measuring date.
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The Share Holding Agreement provides that Concurrent shall have the right
to sell in any public offering up to 341,589 shares of Harris Common Stock
(subject to adjustment for stock splits, stock dividends and similar
transactions) less the total of all shares sold by Concurrent or a lender of
Concurrent pursuant to a margin call prior to the consummation of such public
offering (the "Minimum Number of Owned Harris Shares"). Harris shall have the
right to sell in any public offering up to 2,000,000 shares of Concurrent Common
Stock (subject to adjustment for stock splits, stock dividends and similar
transactions) less the total of all shares sold by Harris or a lender of Harris
pursuant to a margin call prior to the consummation of such public offering (the
"Minimum Number of Owned Concurrent Shares").
The Share Holding Agreement provides that subject to the immediately
following paragraph, (i) Harris shall use its best efforts to include for the
benefit of Concurrent in any public offering of its stock (including in
connection with the exercise by any underwriter of any over-allotment option)
any shares of Harris Common Stock beneficially owned by Concurrent in excess of
the Minimum Number of Owned Harris Shares as requested by Concurrent and (ii)
Concurrent shall use its best efforts to include for the benefit of Harris in
any public offering of its stock (including in connection with the exercise by
any underwriter of any over-allotment option) any shares of Concurrent Common
Stock beneficially owned by Harris in excess of the Minimum Number of Owned
Concurrent Shares as requested by Harris.
The Share Holding Agreement provides that the Minimum Number of Owned
Harris Shares and the Minimum Number of Owned Concurrent Shares sold for the
benefit of Concurrent or Harris, as the case may be, in a public offering may be
reduced if (i) the applicable managing underwriter of such public offering
advises Concurrent or Harris, as the case may be, that the distribution of all
or a portion of such shares will materially and adversely affect the
distribution of the stock being offered in the applicable public offering and
(ii) the public offering in which such number of shares is reduced does not
provide for the sale of any shares of stock for the benefit of any party other
than the issuer; provided, however, any such reduction in the number of shares
shall be the smallest reduction possible in order for the applicable managing
underwriter to conclude that the distribution of such reduced number of shares
will not materially and adversely affect the distribution of the stock in the
applicable public offering.
The Share Holding Agreement provides that if a public offering is
consummated by Harris in which at least the Minimum Number of Owned Harris
Shares is sold for the benefit of Concurrent (or at least such lesser number as
requested by Concurrent to be included in such offering), Concurrent shall be
subject to a "lock-up" (so long as it beneficially owns at least 341,589 shares
of Harris Common Stock (subject to adjustment for stock splits, stock dividends
and similar transactions) at the time of such lock-up) for a period of up to six
months (or up to such lesser lock-up period which is applicable to any selling
shareholder in such public offering who is a director, officer, employee or
affiliate of Harris at the time the public offering is consummated). If a public
offering is consummated by Concurrent in which at least the Minimum Number of
Owned Concurrent Shares is sold for the benefit of Harris (or at least such
lesser number as requested by Harris to be included in such offering), Harris
shall be subject to a lock-up (so long as it beneficially owns at least
2,000,000 shares of Concurrent Common Stock (subject to adjustment for stock
splits, stock dividends and similar transactions) at the time of such lock-up)
for a period of up to six months (or up to such lesser lock-up period which is
applicable to any selling shareholder in such public offering who is a director,
officer, or other affiliate of Concurrent at the time the public offering is
consummated).
The Share Holding Agreement provides that if a public offering is
consummated by Harris in which less than the Minimum Number of Owned Harris
Shares is sold for the benefit of Concurrent (or less than such lesser number as
requested by Concurrent to be included in such public offering), so long as
Concurrent beneficially owns at least 341,589 shares (subject to adjustment for
stock splits, stock dividends and similar transactions) of Harris Common Stock,
the Concurrent Liquidity Restrictions shall remain in effect for a period of up
to six months (or up to such lesser lock-up period which is applicable to any
selling shareholder in such public offering who is a director, officer, employee
or affiliate of Harris at the time the public offering is consummated), but
Concurrent shall not be obligated to enter into any other lock-up provisions in
connection with such offering. If a public offering is consummated by Concurrent
in which less than the Minimum Number of Owned Concurrent Shares is sold for the
benefit of Harris (or less than such lesser number as requested by Harris to be
included in such public offering), so long as Harris beneficially owns at least
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2,000,000 shares (subject to adjustment for stock splits, stock dividends and
similar transactions) of Concurrent Common Stock, the Harris Liquidity
Restrictions shall remain in effect for a period of up to six months (or up to
such lesser lock-up period which is applicable to any selling shareholder in
such public offering who is a director, officer, employee or affiliate of
Concurrent at the time the public offering is consummated), but Harris shall not
be obligated to enter into any other lock-up provisions in connection with such
public offering.
The Share Holding Agreement provides that after either or both of the
Harris Form S-3 or the Concurrent Form S-3 are declared effective by the
Commission, Harris or Concurrent, as the case may be, shall each use best
efforts to maintain the effectiveness of their respective Registration
Statements until the third anniversary of the effective date plus an additional
period beyond the third anniversary equal to the total period of all lock-ups
applied to the other party pursuant to the Share Holding Agreement. So long as
each such registration statement remains effective, the registrant shall file
any material press releases and report any material event as soon as practicable
in a Current Report on Form 8-K.
Indemnification
The Share Holding Agreement provides that in the case of each registration
effected by Concurrent or Harris, as the case may be (each, a "Registrant"),
pursuant to the Share Holding Agreement under the federal securities laws, the
Registrant agrees to indemnify and hold harmless, to the full extent permitted
by law, Harris or Concurrent, as the case may be (each, a "Holder"), and such
Holder's officers, directors, agents and employees against all losses, claims,
damages, liabilities and expenses arising out of or based upon any untrue or
alleged untrue statement of a material fact contained in the registration
statement under which securities of the Registrant owned by such Holder were
registered under the Securities Act, any prospectus or preliminary prospectus or
in any amendment or supplement thereto or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein (in the case of a prospectus, in the light of the
circumstances under which they were made) not misleading, except insofar as the
same arise out of, are based upon or are contained in, any information furnished
in writing to the Registrant by such Holder expressly for use therein or by the
Holder's failure to deliver a copy of the applicable registration statement or
prospectus after the Registrant has furnished such Holder with a sufficient
number of copies of the same.
The Share Holding Agreement provides that, in connection with any
registration statement in which a Holder is participating, such Holder shall
furnish to the Registrant in writing such information and affidavits as the
Registrant reasonably requests for use in connection with any registration
statement or prospectus and agrees to indemnify and hold harmless, to the full
extent permitted by law, the Registrant, its directors, officers, agents, and
employees against any losses, claims, damages, liabilities and expenses arising
out of or based upon any untrue or alleged untrue statement of a material fact
contained in the registration statement under which securities of the Registrant
owned by such Holder were registered under the Securities Act, any prospectus or
preliminary prospectus or in any amendment or supplement thereto or any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein (in the case of a
prospectus, in the light of the circumstances under which they were made) not
misleading, to the extent, but only to the extent, that such untrue or alleged
untrue statement or omission or alleged omission is contained in or should have
been contained in any information or affidavit so furnished in writing by such
Holder to the Registrant specifically for inclusion in such registration
statement or prospectus. In no event shall the liability of any Holder be
greater in amount than the dollar amount of the proceeds received by such Holder
upon the sale of the securities of the Registrant giving rise to such
indemnification obligation. The Registrant and, to the extent customary in
underwriting agreements at the time, its directors, officers, agents, and
employees, shall be entitled to receive indemnities from underwriters, selling
brokers, dealer managers and similar securities industry professionals
participating in the distribution to the same extent as provided above with
respect to information so furnished in writing by such persons specifically for
inclusion in any prospectus or registration statement.
If for any reason the preceding indemnification provisions are unavailable
to an indemnified party or are insufficient to hold it harmless as contemplated
by such provisions, then the indemnifying party, in lieu of
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indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage,
liability or expense in such proportion as is appropriate to reflect not only
the relative benefits received by the indemnified party and the indemnifying
party, but also the relative fault of the indemnified party and the indemnifying
party in connection with the actions which resulted in such loss, claim, damage,
liability or expense, as well as any other relevant equitable considerations.
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to certain limitations, any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. No Holder shall be
required to contribute in an amount greater than the dollar amount of proceeds
received by such Holder with respect to the sale of securities of the Registrant
held by such Holder.
Termination
The Share Holding Agreement and the rights and obligations thereunder shall
automatically terminate upon the last to occur of all of the following: (i) the
Standstill Period has expired, (ii) the percentage of the Concurrent Common
Stock beneficially owned by Harris and any affiliate of Harris, as a group, is
less than 5% of the outstanding Concurrent Common Stock and (iii) the percentage
of Harris Common Stock beneficially owned by Concurrent and any affiliate of
Concurrent, as a group, is less than 5% of the outstanding Harris Common Stock.
The Share Holding Agreement provides that if either party breaches or
violates any material obligation under the Share Holding Agreement and fails to
cure such breach or violation within 60 days after delivery of written notice
from the other party specifying such breach and requesting its cure, such other
party may terminate its obligations under the Share Holding Agreement.
NON-COMPETITION AGREEMENT
The parties are in the process of negotiating the Non-Competition Agreement
and expect to finalize such agreement prior to the Closing.
CONCURRENT PREFERRED STOCK
The following summary of the Concurrent Preferred Stock is qualified in its
entirety by reference to the copy of the form of Certificate of Designation (the
"Certificate of Designation") included in this Joint Proxy Statement as Annex G.
Capitalized terms used herein and not otherwise defined herein should have the
meanings ascribed to them in the form of Certificate of Designation.
Shareholders are urged to read the form of Certificate of Designation in its
entirety.
Designation and Number of Shares
The Certificate of Designation provides that the Concurrent Preferred Stock
shall be 9.00% Class B Convertible Preferred Stock, and the number of shares
constituting such series shall be 1,000,000.
Par Value; Preemptive Rights
The Certificate of Designation provides that the Concurrent Preferred Stock
shall have a par value of $.01 per share. Holders of Concurrent Preferred Stock
shall not be entitled to any preemptive rights to acquire shares of any class or
series of capital stock of Concurrent.
Rank
The Certificate of Designation provides that the Concurrent Preferred Stock
shall rank, with respect to rights to receive dividends and rights to receive
distributions upon the liquidation, winding up or dissolution of Concurrent: (a)
senior to the Concurrent Common Stock, and senior to any class or series of
capital stock,
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including any preferred stock, issued by Concurrent, other than the Class A
Preferred Stock (the "Junior Stock"), and (b) on a parity with the Class A
Preferred Stock (the "Parity Stock").
Dividends and Distributions
The Certificate of Designation provides that the holders of shares of
Concurrent Preferred Stock shall be entitled to receive, when, as and if
declared by the Concurrent Board out of funds legally available for such
purpose, dividends at the rate per annum of 9.00% of the Liquidation Preference
(as defined below) of such shares. Such dividends shall be fully cumulative,
shall accumulate from the date of original issuance of the Concurrent Preferred
Stock, and shall be payable quarterly in arrears in cash at the end of each
calendar quarter, commencing with the last business day of the first calendar
quarter which commences following the Closing Date.
The Certificate of Designation provides that dividends shall not be paid or
declared and set apart for payment on any Parity Stock for any period unless
full cumulative dividends have been, or contemporaneously are, paid or declared
and set apart for payment on the Concurrent Preferred Stock for all dividend
periods terminating on or prior to the date of payment of such full cumulative
dividends. Dividends shall not be paid or declared and set apart for payment on
the Concurrent Preferred Stock for any period unless full cumulative dividends
have been, or contemporaneously are, paid or declared and set apart for payment
on any Parity Stock for all dividend periods terminating on or prior to the date
of payment of such full cumulative dividends. When dividends are not paid in
full upon the Concurrent Preferred Stock and any Parity Stock, Concurrent may
make dividend payments on account of arrears on the Concurrent Preferred Stock
or any such Parity Stock, provided that Concurrent shall make such payments
ratably upon all outstanding shares of Concurrent Preferred Stock and such
Parity Stock in proportion to the respective amounts of dividends in arrears
upon all such outstanding shares of Concurrent Preferred Stock and Parity Stock
to the date of such dividend payment.
The Certificate of Designation provides that so long as any Concurrent
Preferred Stock shall be outstanding, Concurrent shall not declare or pay any
dividends on the Concurrent Common Stock or any other Junior Stock, or make any
payment on account of, or set apart money for, a sinking fund or other similar
fund or agreement for the purchase, redemption or other retirement of any shares
of Junior Stock, or make any distribution in respect thereof, whether in cash or
property or in obligations or stock of Concurrent (other than rights pursuant to
the Rights Agreement, dated as of July 31, 1992, between Concurrent and The
First National Bank of Boston, as Rights Agent (the "Concurrent Rights
Agreement"), or distributions consisting solely of Junior Stock (such dividends,
payments, setting apart and distributions being herein called "Junior Stock
Payments")), unless the following conditions shall be satisfied at the date of
such declaration in the case of any such dividend, or the date of such setting
apart in the case of any such fund, or the date of such payment or distribution
in the case of any other Junior Stock Payment: (i) full cumulative dividends
shall have been paid or declared and set apart for payment on all outstanding
shares of Concurrent Preferred Stock through the last quarterly dividend payment
date that immediately precedes such dividend, setting apart, payment or
distribution; and (ii) Concurrent shall not be in default or in arrears with
respect to any redemption (whether optional or mandatory) of any shares of
Concurrent Preferred Stock. No interest, or sum of money in lieu of interest,
shall be payable in respect of any dividend payment that is in arrears.
Redemption at the Option of Concurrent
The Certificate of Designation provides that whenever the Current Market
Price (defined generally as the average of the daily closing sale prices per
share of Concurrent Common Stock for the 30 consecutive trading days immediately
prior to the date in question as such price is quoted on the principal national
securities exchange or quotation system on which such security is quoted or
listed or admitted to trading) exceeds $3.75, as such price may be adjusted
pursuant to stock splits, stock dividends or other reclassifications, prior to
the date of any notice of redemption, Concurrent may, at its option, redeem all
or a portion of the shares of Concurrent Preferred Stock, at any time or from
time to time, at a price per share equal to the Liquidation Preference.
Concurrent's right to redeem is subject to the payment of all accrued and
accumulated but unpaid dividends, whether or not declared, without interest, to
the date fixed for redemption on the shares to be
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redeemed; and dividends on the shares to be redeemed will cease to accrue on
such date. A holder's right to convert the Concurrent Preferred Stock shall
terminate on the date such stock is redeemed by Concurrent.
The Certificate of Designation provides that notwithstanding the foregoing,
Concurrent shall not redeem less than all the outstanding shares of Concurrent
Preferred Stock, or purchase or acquire any shares of Concurrent Preferred Stock
otherwise than pursuant to a purchase or exchange offer made on the same terms
to all holders of shares of Concurrent Preferred Stock, unless full cumulative
dividends shall have been paid upon all outstanding shares of Concurrent
Preferred Stock for all past dividend periods. If less than all the then
outstanding shares of Concurrent Preferred Stock are to be redeemed, Concurrent
shall effect such redemption pro rata (as nearly as practicable) among all
holders of Concurrent Preferred Stock.
Mandatory Redemption
The Certificate of Designation provides that on the tenth anniversary of
the date of issuance of the Concurrent Preferred Stock (i.e., expected to be
June 28, 2006) (the "Mandatory Redemption Date"), Concurrent shall redeem all of
the Concurrent Preferred Stock then outstanding at the Liquidation Preference.
Accrued and accumulated but unpaid dividends, whether or not declared, without
interest, to the Mandatory Redemption Date will be paid on the Mandatory
Redemption Date and on and after the Mandatory Redemption Date, dividends will
cease to accumulate on the Concurrent Preferred Stock.
Voting
The Certificate of Designation provides that except as otherwise provided
from time to time by the laws of Delaware or Concurrent's Certificate of
Incorporation, the holders of shares of the Concurrent Preferred Stock have no
voting rights with respect to the election of directors or for any other
purpose.
The Certificate of Designation provides that notwithstanding the foregoing,
without the consent or affirmative vote of the holders of a majority of the
outstanding shares of Concurrent Preferred Stock, voting separately as a class,
Concurrent may not amend, alter or repeal (by any means whatsoever, including,
without limitation, by merger or consolidation) any provision of the Certificate
of Incorporation, any amendment or supplement thereto or the Certificate of
Designation (or any similar document relating to any series or class of
preferred stock of Concurrent), if such action would (a) increase or decrease
the aggregate number of authorized shares of Concurrent Preferred Stock, (b)
increase or decrease the par value of such shares or (c) amend, alter, repeal or
change the powers, rights, privileges or preferences of the holders of shares of
Concurrent Preferred Stock so as to affect them adversely, provided, however,
that the creation, issuance or increase in the amount of authorized shares of
any series of Junior Stock will not be deemed to adversely affect such powers,
rights, privileges or preferences of the Concurrent Preferred Stock.
The Certificate of Designation provides that for purposes of the
immediately preceding paragraph, each share of Concurrent Preferred Stock shall
have one vote per share. The foregoing provisions shall not apply if, at or
prior to the time when the act with respect to which such vote would otherwise
be required shall be effected, all outstanding shares of Concurrent Preferred
Stock shall have been redeemed or called for redemption and sufficient funds
shall have been irrevocably deposited in trust to effect such redemption and all
other steps necessary or desirable to effect such redemption shall have been
taken.
Liquidation Preference
The Certificate of Designation provides that in the event of any
liquidation, dissolution or winding up of Concurrent, whether voluntary or
involuntary, the holders of Concurrent Preferred Stock shall be entitled to
receive out of the assets of Concurrent available for distribution to
shareholders, before any distribution of assets shall be made to the holders of
Concurrent Common Stock or of any other shares of Junior Stock, a liquidating
distribution in the total dollar amount of the liquidation preference of the
Concurrent Preferred Stock delivered to Harris at the Closing in accordance with
the terms of the Purchase and Sale Agreement (the "Total Liquidation
Preference") or an amount equal to the per share dollar amount of the Total
Liquidation Preference (the "Liquidation Preference") plus an amount equal to
any accrued and accumulated but unpaid dividends thereon to the date of final
distribution to such holders, whether or not declared, without
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interest; provided, however, that if in accordance with the provisions of the
Purchase and Sale Agreement, the amount of the Net Current Assets shown on the
Final Net Current Asset Reconciliation (such amount shown, the "Actual Net
Current Asset Amount") is less than the lesser of (i) the amount of the net
assets shown on the Projected Net Current Asset Reconciliation and (ii)
$14,400,000 (such amount, the "Applicable Net Current Asset Amount"), then the
Total Liquidation Preference shall be reduced, dollar for dollar, to the extent
of the difference (the "Difference") between the Actual Net Current Asset Amount
and the Applicable Net Current Asset Amount. The Liquidation Preference shall
then be reduced by the amount determined by dividing the Difference by the
number of issued and outstanding shares of Concurrent Preferred Stock as of the
date of the Final Net Current Asset Reconciliation or, if later, the date any
Reconciliation Disagreement (as defined in the Purchase and Sale Agreement) is
resolved. Alternatively, if the amount of the Net Assets shown on the Final Net
Current Asset Reconciliation after resolution of all Reconciliation
Disagreements is in excess of the Net Assets shown on the Projected Net Current
Asset Reconciliation, then the Total Liquidation Preference shall be increased,
dollar for dollar, to the extent of such excess up to $10,000,000 (such excess
up to $10,000,000, the "Excess"). The Liquidation Preference shall then be
increased by the amount determined by dividing the Excess by the number of
issued and outstanding shares of Concurrent Preferred Stock as of the date of
the Final Net Current Asset Reconciliation or, if later, the date any
Reconciliation Disagreement is resolved.
The Certificate of Designation provides that the Total Liquidation
Preference shall also be further reduced to the extent that the parties to the
Purchase and Sale Agreement or a court of competent jurisdiction determines that
any Asset required to be transferred by the Purchase and Sale Agreement was not
in fact transferred, such reduction (the "Net Current Asset Reduction") to be
equal to the book value of such Asset on the Final Net Current Asset
Reconciliation or, with respect to non-current assets, the Audited Balance
Sheet, less any cash paid to Concurrent in respect thereof. The Liquidation
Preference shall then be reduced by the amount determined by dividing the Net
Current Asset Reduction by the number of issued and outstanding shares of
Concurrent Preferred Stock as of the date the amount of the Net Current Asset
Reduction is determined. In addition, in accordance with the terms of the
Purchase and Sale Agreement, the Total Liquidation Preference shall be further
reduced by the amount of any Damages (as defined in the Purchase and Sale
Agreement), less any cash paid to Concurrent in respect thereof (the "Net
Damages"), incurred by Concurrent and its Representatives (as defined in the
Purchase and Sale Agreement) as a result of a willful breach by Harris of a
representation or warranty contained in the Purchase and Sale Agreement. The
Liquidation Preference shall then be reduced by the amount determined by
dividing the Net Damages by the number of issued and outstanding shares of
Concurrent Preferred Stock as of the date the total amount of the Net Damages is
determined.
If, upon any voluntary or involuntary liquidation, dissolution or winding
up of Concurrent, the assets available for distribution are insufficient to pay
in full the amounts payable with respect to the Concurrent Preferred Stock and
any other outstanding shares of Parity Stock, the holders of the Concurrent
Preferred Stock and of such other Parity Stock shall share ratably in any
distribution of assets of Concurrent in proportion to the full respective
preferential amounts to which they are entitled.
The Certificate of Designation provides that neither a consolidation or
merger of Concurrent with or into another person nor a sale or transfer of all
or substantially all of its assets will be deemed a liquidation, dissolution or
winding up.
Conversion and Exchange Rights
The Certificate of Designation provides that each holder of a share of
Concurrent Preferred Stock shall have the right, at the option of such holder,
at any time to convert one or more shares of Concurrent Preferred Stock into
fully paid and nonassessable shares of Concurrent Common Stock. Such conversion
of shares of Concurrent Preferred Stock into shares of Concurrent Common Stock
shall be made at a conversion rate of one share of Concurrent Preferred Stock
for a number of shares of Concurrent Common Stock equal to (x) the Liquidation
Preference divided by (y) the conversion price applicable per share of
Concurrent Common Stock at the time of conversion which shall initially be
$2.50. The conversion price shall be adjusted for stock splits, stock dividends,
or subdivisions or reclassifications of the Concurrent Common Stock.
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Assuming the initial conversion price of $2.50 and a Liquidation Preference of
$10,000,000, four million shares of Concurrent Common Stock would be issuable
upon conversion of the Concurrent Preferred Stock.
The Certificate of Designation provides that an amount in cash equal to the
full cumulative dividends accrued and accumulated but unpaid, whether or not
declared and without interest, on such shares of Concurrent Preferred Stock
shall be paid on the effective date of the conversion through the last quarterly
payment date that immediately precedes the effective date of the conversion.
In the event that Concurrent shall be a party to any transaction pursuant
to which Concurrent Common Stock shall be exchanged for, converted into,
acquired for or constitute solely the right to receive other securities, cash or
other property, then appropriate provisions shall be made as part of the terms
of such transaction whereby each holder of Concurrent Preferred Stock then
outstanding shall thereafter have the right to convert such share only into the
kind of securities, cash or other property receivable by a holder of Concurrent
Common Stock.
The Certificate of Designation provides that Concurrent may, at its option,
cause shares of Concurrent Preferred Stock, as a whole or in part, at any time
and from time to time, to be exchanged for debentures having the terms on the
form of Debenture Term Sheet set forth as Annex H to this Joint Proxy Statement
(the "Debentures"). Such exchange of shares of Concurrent Preferred Stock for
the Debentures shall be made at an exchange rate of Debentures in the principal
amount equal to the Liquidation Preference.
The Certificate of Designation provides that on the effective date of the
exchange, Concurrent shall pay holders of Concurrent Preferred Stock to be
exchanged an amount in cash equal to the full cumulative dividends accrued and
accumulated but unpaid, whether or not declared and without interest, on such
shares of Concurrent Preferred Stock through the last quarterly dividend payment
date that immediately precedes the effective date of the exchange.
Each holder of shares of Concurrent Preferred Stock shall have the right at
any time after September 1, 1998, at the option of such holder, whenever
dividends due for four quarterly periods have not been paid, to exchange such
shares of Concurrent Preferred Stock, as a whole or in part, for Debentures.
Such exchange of shares of Concurrent Preferred Stock for the Debentures shall
be at an exchange rate of Debentures in the principal amount equal to the
Liquidation Preference plus all dividends which are accrued and accumulated but
unpaid, whether or not declared and without interest up to the calendar quarter
immediately preceding the calendar quarter in which the date of exchange occurs.
DEBENTURES
The following summary of the Debentures is qualified in its entirety by
reference to the Debenture Term Sheet set forth as Annex H to this Joint Proxy
Statement. Capitalized terms used herein and not otherwise defined herein shall
have the meanings ascribed to them in the Debenture Term Sheet. SHAREHOLDERS ARE
URGED TO READ THE DEBENTURE TERM SHEET IN ITS ENTIRETY.
Principal Amount
The Debenture Term Sheet provides that the Debentures are issuable upon
exchange of the Concurrent Preferred Stock by Concurrent. If exchanged pursuant
to Concurrent's exchange privilege in accordance with the Certificate of
Designation, the initial principal amount (the "Principal Amount") shall equal
the Total Liquidation Preference of the Concurrent Preferred Stock outstanding
on the date that such Concurrent Preferred Stock is converted (the "Conversion
Date") into the Debentures in accordance with the Certificate of Designation.
The Debenture Term Sheet provides that if the Concurrent Preferred Stock is
exchanged by the holder thereof, pursuant to the Certificate of Designation, the
initial principal amount shall equal the Total Liquidation Preference of the
Concurrent Preferred Stock outstanding on the Conversion Date plus all dividends
which are accrued and accumulated but unpaid, whether or not declared and
without interest, up to the calendar quarter immediately preceding the quarter
in which the Conversion Date occurs.
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Changes in Principal Amount
The Debenture Term Sheet provides that if in accordance with the provisions
of the Purchase and Sale Agreement, the Actual Net Current Asset Amount shown on
the Final Net Current Asset Reconciliation is less than the lesser of (i) the
amount of the net assets shown on the Projected Net Current Asset Reconciliation
and (ii) the Applicable Net Current Asset Amount, then the principal amount of
Debentures shall be adjusted by reducing it, dollar for dollar, to the extent of
the Difference between the Actual Net Current Asset Amount and the Applicable
Net Current Asset Amount. Alternatively, if the Actual Net Current Asset Amount,
after resolution of all Reconciliation Disagreements is in excess of the
Applicable Net Current Asset Amount, the Principal Amount shall be increased,
dollar for dollar, to the extent of such excess up to $10,000,000. The Principal
Amount shall also be further reduced to the extent that the parties to the
Purchase and Sale Agreement or a court of competent jurisdiction determines that
any Asset required to be transferred by the Purchase and Sale Agreement was not
in fact transferred, such reduction (the "Net Current Asset Reduction") to be
equal to the carrying value on the Final Net Current Asset Reconciliation or,
with respect to non-current assets, the Audited Balance Sheet less any cash paid
to Concurrent in respect thereof. In addition, in accordance with the terms of
the Purchase and Sale Agreement, the Principal Amount shall be further reduced
by the amount of Net Damages incurred by Concurrent and its Representatives as a
result of a wilful breach by Harris of a representation or warranty contained in
the Purchase and Sale Agreement.
Payment-in-Kind
The Debenture Term Sheet provides that interest payments on the Debentures
may be paid in cash or in kind.
Interest Rate
The Debenture Term Sheet provides that the Debentures will bear interest at
the rate of 9% per annum, accruing from the first day of the calendar quarter
(the "Accrual Date") during which the Conversion Date occurred, and payable
quarterly at the end of each calendar quarter commencing on the Accrual Date.
Maturity Date
The Debenture Term Sheet provides that the Debentures will mature on the
tenth anniversary of the date of issuance of the Concurrent Preferred Stock.
Optional Redemption
The Debenture Term Sheet provides that subject to certain adjustments for
stock splits, stock dividends and similar transactions, whenever the Current
Market Price (as defined in the Certificate of Designation) of Concurrent Common
Stock exceeds $3.75, Concurrent may, at its option, redeem all or a portion of
the Debentures, at any time or from time to time, at par plus any accrued
interest thereon.
Mandatory Redemption
The Debenture Term Sheet provides that on the tenth anniversary of the date
of issuance of the Concurrent Preferred Stock or at any time the outstanding
principal amount of the Debentures is less than an amount to be determined,
Concurrent shall redeem all of the Debentures then outstanding at par plus any
accrued interest thereon.
Conversion of Debentures
The Debenture Term Sheet provides that each holder of a Debenture shall
have the right, at the option of such holder, at any time or from time to time,
in whole or in part, to convert such Debenture into fully paid and nonassessable
shares of Concurrent Common Stock. Such conversion of Debentures to shares of
Concurrent Common Stock shall be made at a conversion rate equal to (x) the
principal amount of such Debenture (plus any accrued and unpaid interest
thereon) divided by (y) the applicable conversion price per
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share of Concurrent Common Stock at the time of conversion. The conversion price
shall initially be $2.50, subject to certain adjustments. Notwithstanding any
other provision to the contrary, the maximum number of shares into which the
Debentures shall be convertible shall be 4,000,000 (subject to adjustment on a
basis similar to the anti-dilution adjustments contained in the Certificate of
Designation).
Ranking
The Debenture Term Sheet provides that the Debentures will be general
unsecured indebtedness of Concurrent and will rank pari passu in right of
payment to existing indebtedness; provided, however, that the Debentures will
rank junior to claims of certain lenders of Concurrent set forth in the
Debenture Term Sheet with respect to the assets secured under credit facilities
between Concurrent and such lenders.
Modification of Debenture Indenture
The Debenture Term Sheet provides that modifications to provisions of the
indenture or similar agreement (the "Debenture Indenture") for the Debentures
may be effected by majority of outstanding principal amount, with certain
exceptions involving certain fundamental changes which shall require unanimous
approval.
Restricted Payments
The Debenture Term Sheet provides that the Debenture Indenture will provide
that Concurrent will not, and will not permit any of its subsidiaries to
directly or indirectly: (i) declare or pay any dividend or make any distribution
on account of any capital stock of Concurrent or any of its subsidiaries (other
than dividends or distributions payable in such stock or dividends or
distributions payable to Concurrent or any subsidiary); (ii) purchase, redeem or
otherwise acquire or retire for value any of the capital stock of Concurrent,
any subsidiary or other affiliate of Concurrent (other than any such stock owned
by Concurrent or its subsidiaries or in connection with capitalizing a
subsidiary); or (iii) purchase, redeem or otherwise acquire or retire for value,
or make any cash interest payment on, any indebtedness of Concurrent that is
subordinated to the Debentures (all such payments and other actions set forth in
clauses (i) through (iii) above being collectively referred to as "Restricted
Payments"), unless, at the time of such Restricted Payments no Default or Event
of Default (as defined below) will have occurred and be continuing or would
occur as a consequence thereof and interest due on the Debentures for the four
calendar quarters immediately preceding the quarter in which such Restricted
Payments occur has been paid in cash.
Limitation on Merger, Consolidation or Sale of Assets
The Debenture Term Sheet provides that the Debenture Indenture will provide
that Concurrent will not consolidate or merge, or sell, assign, transfer or
lease all or substantially all of its properties and assets as an entirety to
any person, unless: (i) the entity or person formed by or surviving any such
consolidation or merger (if other than Concurrent) or to which such sale,
assignment, transfer or lease shall have been made shall be an entity organized
under the laws of the United States or any State thereof or the District of
Columbia and shall expressly assume, by a supplemental indenture, all the
obligations of Concurrent under the Debenture Indenture; and (ii) no Event of
Default will have occurred and be continuing.
Events of Default
The Debenture Term Sheet provides that the Debenture Indenture will provide
that each of the following constitutes an Event of Default: (i) default in the
payment when due of interest on the Debentures for a number of days to be
determined by Concurrent and Harris; (ii) default in payment when due of the
principal of, or premium, if any, on the Debentures; (iii) failure by Concurrent
to comply with any of its other agreements in the Debenture Indenture or the
Debentures for a number of days to be determined by Concurrent and Harris after
notice; and (iv) certain events of bankruptcy or insolvency with respect to
Concurrent or any of its Subsidiaries.
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ACCOUNTING TREATMENT
The Transaction will be accounted for under the purchase method of
accounting in accordance with generally accepted accounting principles, whereby
the purchase price will be allocated based on the fair value of the assets
acquired and liabilities assumed. Such allocations were based upon estimated
valuations that have not been finalized. The excess of the estimated fair value
of net assets acquired in excess of the purchase price (negative goodwill) will
be allocated by reducing proportionately the values assigned to non-current
assets (except long-term investments in marketable securities). See "PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF CONCURRENT" and "PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF HARRIS."
REGULATORY FILINGS AND APPROVALS
The consummation of the Transaction may be subject to certain regulatory
approvals. With respect to governmental review under the HSR Act, Concurrent and
Harris were informed on May 23, 1996 that the waiting period under the HSR Act
has been terminated.
STATE ANTI-TAKEOVER STATUTES
Section 607.0902 of the FBCA prohibits business combination transactions
involving a Florida corporation (such as Harris) and an "Interested Shareholder"
(defined generally as any person that directly or indirectly beneficially owns
10% or more of the outstanding voting stock of the subject corporation), unless
special requirements are met or certain exceptions apply, including that the
board of directors of the subject corporation approved the acquisition of shares
by such Interested Shareholder. Harris has represented to Concurrent that
because the Harris Board has approved the Purchase and Sale Agreement and the
transactions contemplated thereby, the provisions of Section 607.0902 are not
applicable to the Transaction.
Section 203 of the DGCL prohibits business combination transactions
involving a Delaware corporation (such as Concurrent) and an "Interested
Stockholder" (defined generally as any person that directly or indirectly
beneficially owns 15% or more of the outstanding voting stock of the subject
corporation), unless special requirements are met or certain exceptions apply,
including that board of directors of the subject corporation approved the
acquisition of such shares by such Interested Stockholder. Concurrent has
represented to Harris that because the Concurrent Board has approved the
Purchase and Sale Agreement and the transactions contemplated thereby, the
provisions of Section 203 are not applicable to the Transaction.
Harris and Concurrent, directly or through subsidiaries, conduct business
in a number of states throughout the United States, some of which have also
enacted anti-takeover laws. Other than Florida and Delaware, Harris and
Concurrent do not know whether any of these laws, by their terms, apply to the
Transaction and have not attempted to comply with any such laws. Should any
person seek to apply any such state anti-takeover laws, Harris and Concurrent
will take such action as then appears desirable, which may include challenging
the validity or applicability of any such statute in appropriate court
proceedings. In the event it is asserted that one or more state anti-takeover
statutes is applicable to the Transaction, and an appropriate court does not
determine that it is inapplicable or invalid as applied to the Transaction,
Harris and Concurrent might be required to file certain information with, or
receive approvals from, the relevant state authorities. In addition, if
enjoined, Harris and Concurrent might be delayed in, or prevented from,
consummating the Transaction.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE TRANSACTION
Concurrent will not recognize gain or loss for federal income tax purposes
in connection with the issuance of the Concurrent Common Stock Consideration or
the issuance of the Preferred Stock Consideration.
The sale of the Harris Real-Time Business will be a taxable transaction to
Harris under applicable federal, state, and local tax laws. Harris will
recognize a gain or loss from the sale of the Harris Real-Time Business to the
extent of the difference between Harris's tax basis in the Harris Real-Time
Business transferred to Concurrent and the value of the consideration received
by Harris from Concurrent that is
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allocable to such business. Harris estimates that it will incur a loss of
approximately $8.5 million in connection with the Transaction (based on $2.14
per share, the average of the closing prices for Concurrent Common Stock from
May 1 through May 7, 1996).
Both Harris's and Concurrent's obligation to consummate the Transaction is
conditioned upon Harris and Concurrent receiving an opinion from Holland &
Knight substantially to the effect that none of the actions expressly
contemplated by the Purchase and Sale Agreement shall result in or otherwise
give rise to a breach of any covenant contained in the Tax Disaffiliation
Agreement by and between Harris and Harris Corporation dated September 13, 1994
(the "Tax Disaffiliation Agreement") or made in connection with the opinion
rendered by counsel to Harris Corporation (as described in the Tax
Disaffiliation Agreement), in each case relating to the qualification of the
Distribution (as defined in the Tax Disaffiliation Agreement) in 1994 as a
tax-free distribution in accordance with Section 355 of the Code.
APPRAISAL RIGHTS
Under the FBCA, holders of Harris Common Stock do not have dissenters'
rights in connection with the Transaction. In addition, under the DGCL,
Concurrent shareholders do not have appraisal rights.
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DIRECTORS AND EXECUTIVE OFFICERS OF CONCURRENT
AFTER CONSUMMATION OF THE TRANSACTION
EXECUTIVE OFFICERS
Executive officers of Concurrent are elected by the Concurrent Board to
hold office until their successors have been chosen and qualified or until
earlier resignation or removal. With the exception of John T. Stihl, who will
serve as Chairman of the Concurrent Board, and George E. Chapman, who will serve
as Vice President, International Sales, it is expected, upon Closing of the
Transaction, that the employment arrangements of all of the current executive
officers of Concurrent will terminate.
The executive officers of Concurrent following the Transaction are expected
to be as follows: George E. Chapman, Vice President, International Sales, Robert
F. Chism, Vice President, Development, Daniel S. Dunleavy, Vice President and
Chief Financial Officer, Robert T. Menzel, Vice President, North American Sales,
Michael N. Smith, Vice President, Marketing, Fred R. Lee, Vice President,
Manufacturing and Logistics, and Karen G. Fink, Vice President, General Counsel
and Secretary.
FRED R. LEE. Mr. Lee previously was president of TOM TRACKS, INC., a
privately held management services company since its inception in 1990. Prior
thereto, Mr. Lee held positions with Rockwell International and General Dynamics
Electronics. Mr. Lee will become Vice President, Marketing and Logistics upon
consummation of the Transaction.
KAREN G. FINK. Ms. Fink previously was Counsel and Assistant Secretary of
Harris Corporation. Prior to joining Harris Corporation, Ms. Fink was associated
with the law firm of Seward & Kissel. Ms. Fink will become Vice President,
General Counsel and Secretary upon consummation of the Transaction.
For a biography of George E. Chapman, see "CERTAIN INFORMATION REGARDING
CONCURRENT -- Management." For biographical information relating to the other
executive officers of Concurrent following the Transaction, see "CERTAIN
INFORMATION REGARDING HARRIS -- Management."
DIRECTORS
Information on each person expected to be a director of Concurrent after
the Transaction and their principal occupation and business experience for at
least the last five years and the name of other publicly held companies in which
he serves as a director is set forth below.
MICHAEL A. BRUNNER. Age 62 and a director since November 1994. Mr. Brunner
is the former President, AT&T Federal Systems from 1986-1992, a division of AT&T
focused on federal communications and computer systems programs. He served in
additional management, operating, sales, accounting and personnel positions with
AT&T over a career spanning 37 years. Mr. Brunner serves as a director of
Westell Technologies, Inc., a manufacturer of communications equipment, and as a
director and past Chairman of the Leonard Center for Excellence in Engineering
at Penn State University. He also serves as a director of three privately owned
companies.
C. FORBES DEWEY, JR. Age 61. Mr. Dewey is one of the founders of
Concurrent and has been a director since its organization in 1981. He has been a
Professor of Mechanical Engineering at the Massachusetts Institute of Technology
since 1969. Since 1984, he has been an Associate in Pathology at Brigham and
Women's Hospital in Boston, Massachusetts. He is Co-director of the
International Consortium for Medical Imaging Technology, a non-profit network
consortium of 13 laboratories worldwide.
MORTON E. HANDEL. Age 61 and a director since June 1991. Mr. Handel is
President of S&H Consulting, Ltd., a privately held investment and consulting
company. From 1988 to 1990, he served as Chairman of the Board and Chief
Executive Officer of Coleco Industries, Inc., a publicly held company and
formerly a manufacturer of toys and games. Prior to that time, and from 1983, he
served as Executive Vice President and, from 1974 to 1983, as Chief Financial
Officer of Coleco. He is a director of Remington
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Products, a privately owned consumer products company. He is also a Vice
Chairman, Board of Regents, University of Hartford and serves as a director of
several not-for-profit entities.
C. SHELTON JAMES. Age 56 and a director of Harris since the Distribution.
Since May 1991, Mr. James has served as Chief Executive Officer of Elcotel,
Inc., a public company that manufactures telecommunications equipment. Mr. James
is also President of Fundamental Management Corporation, an investment
management firm specializing in active investment in small capitalization
companies, where he was Executive Vice President from 1990 to April 1993. Prior
to 1990, Mr. James was Executive Vice President of Gould, Inc., a diversified
electronics company, and President of Gould's Computer Systems Division. Mr.
James is Chairman of the Board of Directors of Elcotel, Inc. and serves on the
boards of directors of CSPI, NAI Technologies, Inc., Fundamental Management
Corporation and SK Technologies, Inc.
MICHAEL F. MAGUIRE. Age 69 and a director of Harris since the
Distribution. Since 1984, Mr. Maguire has served as President, director, and
sole shareholder of Maguire Investment Management, Inc., a management consulting
company. For more than 13 years, Mr. Maguire served as an executive at Harris
Corporation, most recently as Senior Vice President from 1979 to 1986. Mr.
Maguire serves on the board of directors of Autosight, Inc., as well as several
non-profit corporations.
RICHARD P. RIFENBURGH. Age 64 and a director since June 1991. Mr.
Rifenburgh is Chairman of the Board of Moval Management Corporation, a privately
held company specializing in restoring companies in financial distress. He is,
or in the past five years has been, a member of the Board of Directors of the
following public companies: Tristar Corporation (formerly known as Ross
Cosmetics Distribution Centers, Inc.) since June 1992 and Chairman since August
1992; Miniscribe Corporation Inc. (manufacturer of disc drives for personal
computers), Chairman and CEO from 1989 to 1991; and Library Bureau Inc.
(manufacturer of library furniture) from 1976 to 1995. His experience also
includes three years as a General Partner of Hambrecht & Quist Venture Partners;
one year as Chairman of the Board and Chief Executive Officer of GCA
Corporation, a publicly held manufacturer of semiconductor manufacturing
equipment; founding Mohawk Data Sciences Corporation, a publicly held
manufacturer of computer equipment, in 1964 and later serving as Chairman of the
Board through 1974; and two years (1975 and 1976) as Chairman of the Board of
the Communications and Computer Industry Association.
E. COURTNEY SIEGEL. Age 45 and a director of Harris since the
Distribution. Mr. Siegel has served as Chairman, President and Chief Executive
Officer of Harris since the Distribution. Prior to that time, and since 1990,
Mr. Siegel served as a Vice President of Harris Corporation and as General
Manager of the Harris Computer Systems Division. Mr. Siegel's 20 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 Operation.
ROBERT R. SPARACINO. Age 68 and a director since November 1994. Mr.
Sparacino is President of Sparacino Associates, Inc. ("SAI") since 1982. SAI
offers management consulting services primarily for high-technology businesses
and companies in financial distress. He is a member of the Board of Directors of
Tristar Corporation since June 1992 and Vice Chairman since August 1992. Mr.
Sparacino's experience includes four years as General Partner of a $125 million
venture capital fund, focused primarily on investments in technology companies;
12 years in executive management positions with Xerox Corporation, including
Corporate Senior Vice President and Senior Vice President -- Information
Products Group; and nine years in engineering and research and development
positions with General Motors Corporation, including Director of Engineering and
Director of Research and Development of its major aerospace division. He has
earned an Sc.D. in Instrumentation from Massachusetts Institute of Technology.
JOHN T. STIHL, CHAIRMAN. Age 63 and a director since June 1991. He was
elected to the positions of Chairman of the Board, President and Chief Executive
Officer in August 1993. He joined Concurrent in May 1991 as Executive Vice
President and in April 1992 he was elected President and Chief Operating
Officer. In 1988, after retiring as a Major General from the United States Air
Force, he was elected President and Chief Executive Officer of G&H Technology,
Inc., a subsidiary of Penn Central Corporation which designs, develops,
manufactures and markets electromechanical components for the defense and
aerospace industries.
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His experience includes over 20 years in high level executive positions with the
United States Air Force managing large scale telecommunications, computer and
air traffic control operations, including from 1986 to 1988, commander (CEO),
Air Force Communications Command, Scott Air Force Base. Prior to his retirement,
he had been an officer in the United States Air Force since 1955.
As noted above, Mr. Rifenburgh served as a director of Library Bureau, Inc.
from 1976 to 1995. Library Bureau filed for reorganization in 1993.
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DIRECTORS AND EXECUTIVE OFFICERS OF HARRIS
AFTER CONSUMMATION OF THE TRANSACTION
EXECUTIVE OFFICERS
With the exception of Bradley C. Lesher, Vice President, International
Operations of Harris, it is expected, upon consummation of the Transaction, that
all of the executive officers of Harris will resign. These executive officers
include E. Courtney Siegel, Chairman, President and Chief Executive Officer;
Daniel S. Dunleavy, Vice President, Chief Financial Officer and Chief
Administrative Officer; Michael N. Smith, Vice President, and General Manager of
Harris's Real-Time Division; Robert T. Menzel, Vice President, General Manager
of Harris's Trusted Systems Division; and Robert E. Chism, Vice President,
Technical and Production Operations. See "CERTAIN INFORMATION REGARDING HARRIS."
The executive officers of Harris following the Transaction are expected to
be as follows:
ROBERT L. CARBERRY. Mr. Carberry was appointed President of Harris's
Trusted Systems Division in April 1996 in anticipation of the Transaction. Upon
consummation of the Transaction, Mr. Carberry will become President and Chief
Executive Officer of Harris. Previously, Mr. Carberry held positions as Vice
President, New Technology at Blockbuster/Viacom Group and Vice President,
Managing Executive for Blockbuster Technology Holding Corporation from 1994,
and, before that, was President of Multimedia Investment Organization, a
division of IBM.
PATRICK O. WHEELER. Prior to his assumption in April 1996 of the
responsibilities of Chief Financial Officer and Vice President Finance of
Harris's Trusted Systems Division in anticipation of the Transaction, Mr.
Wheeler held various positions with Harris including Midwest Regional Sales
Manager, Senior Account Manager, and Director of Accounting. Mr. Wheeler joined
Harris following its spin-off from Harris Corporation, which Mr. Wheeler joined
in 1984 from Price Waterhouse LLP.
KATHERINE K. HUTCHINSON. Ms. Hutchinson was appointed Vice President
Marketing of Harris's Trusted Systems Division in April 1996 in anticipation of
the Transaction. Previously, Ms. Hutchinson served in positions of increasing
responsibility, most recently as Director of Marketing for Harris's Trusted
Systems Division. Ms. Hutchinson joined Harris Corporation in 1993 from a
position as Program Manager and Technical Marketing Manager in the Information
Technology Group of Texas Instruments which she joined in 1982.
RICK A. SIEBENALER. Mr. Siebenaler was appointed Vice President, Software
Development of Harris's Trusted Systems Division in April 1996 in anticipation
of the Transaction. Previously, Mr. Siebenaler served as Director of Software
Development of Harris's Trusted Systems Division since 1994 and, as Chief
Engineer from 1991 to 1994.
BRADLEY C. LESHER. Mr. Lesher joined Harris Corporation in July 1994 from
IBM where he had been General Manager of Latin American/Caribbean Operations
since November 1991 and had previously served as Director of General Business
Systems for that region. He joined IBM in 1957 and held various management
positions with IBM's international operations.
ROBERT PERKS. Mr. Perks was appointed Vice President Sales of Harris's
Trusted Systems Division in April 1996 in anticipation of the Transaction. Mr.
Perks joined the Computer Systems Division of Harris Corporation in 1977. He was
employed by Real Time Products Corporation from 1992 to 1995 as Director,
Customer Support and rejoined Harris in May 1995 as Director of Trusted Sales
for Harris.
BRIAN FOREMNY. Mr. Foremny is an attorney and, since 1995, a partner with
the law firm of Holland & Knight where he maintains a law practice in addition
to his service as Harris's General Counsel. Prior thereto, he was a partner of
the law firm of Kirkpatrick & Lockhart LLP beginning in 1983.
Executive officers of Harris will be elected by the Harris Board to hold
office until their successors have been chosen and qualified or until earlier
resignation or removal.
CHANGES IN THE COMPOSITION OF THE HARRIS BOARD
Upon consummation of the Transaction, as provided in the Purchase and Sale
Agreement, E. Courtney Siegel, who is currently Chairman of the Harris Board,
will resign from the Harris Board. Harris's By-laws
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provide for vacancies on the Harris Board to be filled by the appointment of
replacements by the members of the class of directors in which vacancies occur.
The Share Holding Agreement provides, during the period during which the Share
Holding Agreement is in effect, for the Harris Board to consist of no more than
seven members, one of whom is to be designated by Concurrent. Accordingly, Mr.
Rifenburgh is expected to be appointed as the Concurrent designee to the Harris
Board. For biographical information relating to Mr. Rifenburgh, see "DIRECTORS
AND EXECUTIVE OFFICERS OF CONCURRENT AFTER CONSUMMATION OF THE TRANSACTION."
INCUMBENT DIRECTORS REMAINING ON THE HARRIS BOARD
C. Shelton James and Michael F. Maguire are expected to remain as members
of the Harris Board. For biographical information relating to Messrs. James and
Maguire, see "DIRECTORS AND EXECUTIVE OFFICERS OF CONCURRENT AFTER CONSUMMATION
OF THE TRANSACTION."
DIRECTORS WHOSE TERMS EXPIRE AT THE HARRIS SPECIAL MEETING
The class of directors whose term expired at the 1995 annual meeting of
Harris shareholders will expire at the Harris Special Meeting. Brian Foremny and
Robert L. Carberry are members of such class of directors. The Harris Board has
nominated Mr. Foremny and Mr. Carberry for reelection. See "OTHER MATTERS FOR
CONSIDERATION BY HARRIS SHAREHOLDERS -- Election of Directors."
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AMENDMENT TO THE CONCURRENT STOCK OPTION PLAN
Pursuant to the Purchase and Sale Agreement, among other things, the
Concurrent Board adopted, subject to shareholder approval, an amendment to the
Concurrent Stock Plan to increase the amount of shares of Concurrent Common
Stock authorized for issuance thereunder from 4,014,725 to 9,000,000 such
shares. This represents an increase of 4,985,175 shares authorized for issuance
under the Concurrent Stock Plan. The increase will be reserved for future
issuance under the Concurrent Stock Plan. As more fully described below, the
amendment also amends the number of options to be granted under the Concurrent
Stock Plan to non-employee directors of Concurrent, and extends the period
during which, in certain circumstances, an option granted to a non-employee
director could be exercised after the director is no longer a member of the
board. At the Concurrent Special Meeting, the shareholders are being asked to
approve to the Concurrent Stock Plan Amendment. The Concurrent Stock Plan
Amendment is Item 2 in the Concurrent Notice of Special Meeting.
DESCRIPTION OF THE CONCURRENT STOCK PLAN
Purpose. The purpose of the Concurrent Stock Plan is to advance the
interests of Concurrent by enabling officers, employees, non-employee directors,
and consultants to participate in Concurrent's future and to enable Concurrent
to attract and retain persons by offering them proprietary interests in the
company. The Concurrent Stock Plan Amendment will result in an increase of
4,985,175 shares available for issuance under the Concurrent Stock Plan. The
Concurrent Board believes that the amount available for future issuance will
advance the interests of Concurrent by enabling it to attract and retain
officers, employees, and non-employee directors who are responsible for or
contribute to the management, growth and profitability of the enterprise.
As of May 17, 1996, options to purchase 2,636,787 shares of Concurrent
Common Stock are outstanding and issued pursuant to the Concurrent Stock Plan. A
total of 1,061,529 shares of Concurrent Common Stock remain available for future
grants.
Eligibility. Officers, employees, non-employee directors, and consultants
of Concurrent and its affiliates are eligible to be granted awards under the
Concurrent Stock Plan.
Administration. The Concurrent Stock Plan is administered by the Stock
Award Committee (the "Concurrent Compensation Committee") of the Concurrent
Board, the directors of which may not during such service, be granted or awarded
securities pursuant to the Concurrent Stock Plan. The Concurrent Compensation
Committee consists of directors Michael A. Brunner, Morton E. Handel and Robert
R. Sparacino. Each of the members of the Concurrent Compensation Committee is a
"disinterested" person for purposes of Rule 16b-3. Subject to the terms of the
Concurrent Stock Plan, the Concurrent Compensation Committee has plenary
authority to, among other things, (i) select the employees, directors and
consultants to whom awards are granted, (ii) determine the types of awards and
the number of shares subject thereto, and (iii) determine the terms and
conditions of any award, including vesting and exercise price. The Concurrent
Compensation Committee has the authority to adopt, alter and repeal any rules,
guidelines and practices governing the Concurrent Stock Plan and to interpret
the terms and provisions of the Concurrent Stock Plan and any award issued under
the Concurrent Stock Plan.
Awards under the Concurrent Stock Plan. The Concurrent Stock Plan permits
the granting of the following types of awards: (i) stock options, including
incentive stock options (each an "ISO") and non-qualified stock options (each an
"NQSO"), (ii) stock appreciation rights (each an "SAR") and (iii) restricted
stock. In addition, the Concurrent Stock Plan provides for the automatic grant
of stock options to non-employee directors of Concurrent. Option grants in
excess of 3,000 shares are required to be approved by the Concurrent Board.
Stock Options. Stock options may be granted to participants who are
selected by the Concurrent Compensation Committee. The exercise price of an ISO
must be at least equal to 100% of the fair market value of the Concurrent Common
Stock on the date of grant. The exercise price of an NQSO must not be less than
50% of the fair market value of a share of Concurrent Common Stock on the date
of grant. The term of an ISO or NQSO may not exceed ten years. Each option is
evidenced by a written agreement in a form approved by the Concurrent
Compensation Committee.
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Stock Appreciation Rights. SARs may be granted in conjunction with any
stock option granted under the Concurrent Stock Plan. In the case of an NQSO, a
SAR may be granted at or after the time of grant of the NQSO. In the case of an
ISO, a SAR may granted only at the time of grant of the ISO. Upon the
termination or exercise of the related stock option, the SAR shall terminate and
no longer be exercisable. Upon exercise, payment, at Concurrent's option, may be
in cash or stock or a combination thereof. The recipient will receive value
equal to the excess of the fair market value of one share of Concurrent Common
Stock over the option price per share of the related stock option multiplied by
the number of shares in respect of which the SAR shall have been exercised.
Restricted Stock. Awards of shares of Concurrent Common Stock subject to
certain restrictions (the "Restricted Stock") may be made under the Concurrent
Stock Plan. Subject to the provisions of the Concurrent Stock Plan, the
Concurrent Compensation Committee shall determine, among other things, (i) the
terms and conditions of such award, (ii) the restrictions and restriction period
applicable to such award and (iii) whether the recipient will be entitled to
receive the dividends and other distributions prior to the expiration of the
restrictions.
Directors' Options. The Concurrent Stock Plan currently provides that
options may not be granted to non-employee directors except that each
non-employee director elected to the Concurrent Board automatically receives on
the date of his initial appointment to the Concurrent Board, an option to
purchase 3,000 shares of Concurrent Common Stock at a per share exercise price
equal to the fair market value of Concurrent Common Stock on the initial grant
date. Prior to adoption of the Concurrent Stock Plan Amendment each option
terminates, to the extent not exercised prior thereto, upon the earlier to occur
of (i) the tenth anniversary of grant and (ii) the cessation of the optionee's
service as a member of the Concurrent Board. Pursuant to the amendment, each
non-employee director as of the Closing and each individual who thereafter
becomes a non-employee director of Concurrent for the first time will receive an
option to purchase 20,000 shares of Concurrent Common Stock and on the date of
each annual meeting of Concurrent shareholders each non-employee director will
receive an option to purchase 3,000 shares of Concurrent Common Stock, in each
case at a per share exercise price equal to the fair market value of Concurrent
Common Stock on the date of grant. In addition, pursuant to the Concurrent Stock
Plan Amendment, each option would terminate, to the extent not exercised prior
thereto, upon the earlier to occur of (i) the tenth anniversary of grant and
(ii) the optionee's removal or resignation (other than by reason of death or
disability) as a member of the Concurrent Board.
Nontransferability of Stock Options. The Concurrent Stock Plan provides
that no stock option may be transferred by the optionee other than by will or by
the laws of descent and distribution. All stock options are exercisable, during
the optionee's lifetime, only by the optionee or by the optionee's guardian or
legal representative.
Adjustments. The Concurrent Stock Plan provides that, in the event of any
merger, reorganization, consolidation, recapitalization, stock dividend, stock
split or reverse stock split, extraordinary distribution with respect to the
Concurrent Common Stock or other similar change in corporate structure,
substitutions or adjustments will be made in the aggregate number of shares
reserved for issuance under the Concurrent Stock Plan, in the number and price
of shares subject to outstanding stock options and SARs, and in the number of
shares subject to other outstanding awards granted under the Concurrent Stock
Plan as may be determined to be appropriate by the Concurrent Compensation
Committee, in its sole discretion.
Change of Control. Upon the occurrence of an event of "Change of Control"
and subject to such additional conditions and restrictions as the Concurrent
Compensation Committee may determine, the Concurrent Compensation Committee may
accelerate the time at which all or a portion of the outstanding stock options
shall become exercisable. A "Change of Control" is deemed to occur (i) if any
person or entity acquires 20% or more of outstanding shares of Concurrent, (ii)
the Concurrent shareholders approve a definitive agreement to merge or
consolidate Concurrent with or into another corporation, or to sell all or
substantially all of Concurrent's property and assets or to liquidate the
company or (iii) there is a change of a majority of the directors who were
members of the Concurrent Board on February 1, 1992 or who were subsequently
elected or appointed directors if their nomination for election or appointment
to the Concurrent
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Board was recommended or approved by a majority of those directors who were
members of the Concurrent Board on February 1, 1992.
Amendment. The Concurrent Board may alter, amend, suspend or terminate the
Concurrent Stock Plan, provided that no such action shall deprive an optionee,
without his consent, of any option granted to the optionee pursuant to the
Concurrent Stock Plan or of any of his rights under such option. Provisions
related to automatic grants of options to non-employee directors may not (with
limited exceptions) be amended more frequently than once every six months and no
amendment to such provisions, unless approved by the shareholders of Concurrent,
shall become effective earlier than six months after Concurrent Board approval.
Except as provided in the Concurrent Stock Plan, no amendment by the Concurrent
Board, unless taken with the approval of the shareholders, may (i) materially
increase the benefits accruing to participants under the Concurrent Stock Plan
or (iii) materially modify the requirements as to eligibility for participation
in the Concurrent Stock Plan.
As all of the directors and executive officers of Concurrent are eligible
for grants of options under the Concurrent Stock Plan, each such person has a
personal interest in the approval of the proposed amendment. As awards under the
Concurrent Stock Plan are made in the discretion of the Concurrent Compensation
Committee, except with respect to the awards to non-employee directors described
above and a grant of 20,000 options that is anticipated to be made to Mr. Clowe
subject to shareholder approval of the Concurrent Stock Plan Amendment, it is
not possible to determine either the awards that will be made thereunder during
1996 or the awards that would have been made thereunder during 1995 had the
Concurrent Stock Plan Amendment been in effect.
REASONING BEHIND THE PROPOSAL
The Concurrent Stock Plan Amendment will result in an increase of 4,985,175
shares available for issuance under the Concurrent Stock Plan, increase the
number of options to be granted to non-employee directors of Concurrent, and
extend the period during which, in certain circumstances, an option granted to a
non-employee director could be exercised after the director is no longer a
member of the board. The Concurrent Board believes that the Concurrent Stock
Plan Amendment will advance the interests of Concurrent by enabling it to
attract and retain officers, employees and non-employee directors who are
responsible for or contribute to the management, growth and profitability of the
enterprise.
Issuance of the Concurrent Common Stock Consideration and the Additional
Common Shares and implementation of that portion of the Concurrent Stock Plan
Amendment that provides for an increase in the number of shares of Concurrent
Common Stock authorized for issuance to 9,000,000 shares are each conditioned
upon the approval of the other proposal. Implementation of the remaining
portions of the Concurrent Stock Plan Amendment is conditioned upon the approval
of both (i) the issuance of the Concurrent Common Stock Consideration and the
Additional Common Shares and (ii) the increase in the number of shares of
Concurrent Common Stock authorized for issuance under the Concurrent Stock Plan
to 9,000,000 such shares.
FEDERAL INCOME TAX ASPECTS OF THE CONCURRENT STOCK PLAN
The following is a summary of the federal tax consequences generally
arising with respect to awards to be granted under the Concurrent Stock Plan.
The grant of an ISO has no tax consequences to Concurrent or to the participant.
In addition, the participant recognizes no taxable income at the time of
exercise of an ISO. However, upon exercise, the difference between the fair
market value of the underlying share of Concurrent Common Stock and the exercise
price of the ISO is includable in the participant's income for alternative
minimum tax purposes. If the participant holds the shares acquired upon exercise
of an ISO for at least two years from the date of the grant of the ISO and at
least one year from the date of exercise, he will recognize taxable long-term
capital gain or long-term capital loss upon a subsequent sale of the shares at a
price different from the option exercise price. In either of these events, no
deduction would be allowed to Concurrent for federal income tax purposes.
If the participant disposes of the shares acquired upon exercise of an ISO
within either of the holding periods described above (i) the participant will
recognize taxable ordinary income in the year of such disposition in an amount
equal to the fair market value of the shares on the exercise date minus the
exercise
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price of the ISO; provided that if the disposition is a sale or exchange with an
unrelated party, then the ordinary income will be limited to the excess of the
amount realized upon the sale or exchange of the shares over the exercise price;
(ii) Concurrent will be entitled to a deduction for such year equal to the
amount of taxable ordinary income recognized by the participant; and (iii) the
participant will recognize capital gain or loss, short-term or long-term, as the
case may be, in an amount equal to the difference between (a) the amount
realized by him upon such sale or exchange of the shares and (b) the option
exercise price paid by him increased by the amount of ordinary income, if any,
recognized by him upon such disposition.
The grant of an NQSO has no tax consequences to Concurrent or to the
participant. Upon exercise of an NQSO, however, the participant will recognize
taxable ordinary income in the amount of the excess of the fair market value on
the date of exercise of the shares of Concurrent Common Stock acquired over the
exercise price of the NQSO, and such amount will be deductible for federal
income tax purposes by Concurrent. The holder of such shares will, upon a
subsequent disposition of the shares, recognize short-term or long-term capital
gain or loss, depending on the holding period of the shares.
In general, a grant of restricted stock has no tax consequence to
Concurrent or the participant. Except as discussed below, the then fair market
value of the shares of Concurrent Common Stock issued as restricted stock will
be taxed as ordinary income to the grantee as the restrictions on the stock
lapse. Concurrent will receive a corresponding tax deduction at the same times.
Dividends received by the participant during the restriction period are treated
as compensation income and therefore are taxed as ordinary income to the
participant and are deductible by Concurrent. If the participant holds the stock
for more than one year after the restrictions lapse, any gain realized upon a
taxable sale or exchange of the stock will be long-term capital gain. Concurrent
receives no additional deduction at the time of disposition of the stock by the
participant.
The participant may, under Section 83(b) of the Code, elect to report the
current fair market value of restricted stock as ordinary income in the year the
award is made, even though the stock is subject to restrictions. In such a case,
Concurrent will receive an immediate tax deduction for such fair market value of
the shares in the year of grant, but will receive no deduction for any
subsequent appreciation during or after the restriction period. In addition,
dividends paid during or after the restriction period would be treated as
dividends to the participant and therefore would not be deductible by
Concurrent. If a Section 83(b) election is made, any appreciation in the value
of the stock after the date of grant will not be recognized as capital gain by
the participant until such time as the participant disposes of the stock in a
taxable transaction. Any capital gain then realized will be long-term capital
gain if the participant has held the stock for at least one year from the date
of grant. If the participant forfeits the stock (i.e., because he has not met
the requirements for lapse of restrictions), the participant will receive no
refund or deduction on account of taxes paid in the year of grant as a result of
the Section 83(b) election.
The grant of an SAR has no tax consequences to Concurrent or the
participant. To the extent that an SAR is exercised, the amount paid to the
participant will be taxed to him as ordinary income, and Concurrent will receive
a corresponding deduction at the same time.
With respect to other awards granted under the Concurrent Stock Plan that
are settled either in cash or in stock or other property that is either
transferable or not subject to substantial risk of forfeiture, the participant
must recognize ordinary income equal to the cash or the fair market value of
shares or other property received; Concurrent will be entitled to a deduction
for the same amount. With respect to awards that are settled in stock or other
property that is restricted as to transferability and subject to substantial
risk of forfeiture, the participant must recognize ordinary income equal to the
fair market value of the shares or other property received at the first time the
shares or other property become transferable or not subject to substantial risk
of forfeiture, whichever occurs earlier. Concurrent will be entitled to a
deduction for the same amount. A participant who makes an election under Section
83(b) of the Code will be taxed on the excess of the fair market value at
exercise over the purchase price.
Special tax rules may apply to officers and directors who are not employees
of Concurrent who are subject to Section 16 of the Exchange Act.
THE CONCURRENT BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE CONCURRENT STOCK
PLAN AMENDMENT.
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OTHER MATTERS FOR CONSIDERATION BY HARRIS SHAREHOLDERS
AMENDMENT TO THE HARRIS STOCK PLAN
Harris has adopted, and the shareholders have approved, the Harris Stock
Plan. The Harris Stock Plan provides for the issuance of an aggregate of 975,000
shares of Harris Common Stock, including restricted stock and stock issued upon
the exercise of stock options.
On February 4, 1996, the Harris Board approved the Harris Stock Plan
Amendment to increase to 2,025,000 the maximum number of shares of Harris Common
Stock that may be issued in the form of restricted stock or pursuant to the
exercise of options granted pursuant to the Harris Stock Plan, and amended the
director's options provision of the Harris Stock Plan, as described below. The
Harris shareholders are being requested to consider and approve the Harris Stock
Plan Amendment. Approval of the Harris Stock Plan Amendment requires the
affirmative vote of the holders of a majority of the shares present in person or
represented by proxy at the Harris Special Meeting. It is intended that shares
represented by proxies solicited by the Harris Board will, unless authority to
so vote is withheld, be voted in favor of the Harris Stock Plan Amendment.
THE HARRIS BOARD UNANIMOUSLY RECOMMENDS THAT THE HARRIS SHAREHOLDERS VOTE
FOR THE APPROVAL OF THE HARRIS STOCK PLAN AMENDMENT.
Purpose. The Harris Board believes that awards under the Harris Stock Plan
serve to attract, retain and motivate key employees and enhance the incentive of
employees to perform at the highest level. Awards under the Harris Stock Plan
contribute significantly to Harris's success by tying employees' compensation to
performance and by aligning employees' interests closely to the long-term
interests of Harris and its shareholders. The availability of awards under the
Harris Stock Plan also serves to encourage qualified persons to seek and accept
employment with Harris. The Harris Board believes that the proposed Harris Stock
Plan Amendment, by ensuring that a sufficient number of shares are available to
be granted or issued upon the exercise of options to eligible present and future
participants, furthers these objectives.
Prior to the approval of the Harris Stock Plan by the Harris Board as of
May 16, 1996, options to purchase 777,630 shares of Harris Common Stock, and
52,800 shares of Harris Common Stock subject to restrictions, were outstanding
pursuant to the Harris Stock Plan. In addition, the Compensation Committee of
the Harris Board (the "Harris Compensation Committee") has approved the issuance
of 535,000 additional options to purchase shares of Harris Common Stock subject
to the approval by Harris's shareholders of the Harris Stock Plan. Assuming
approval of the Harris Stock Plan Amendment by the Harris shareholders, a total
of 504,206 shares of Harris Common Stock will remain available for future
grants.
Eligibility. All salaried employees and non-employee directors of Harris
and its affiliates are eligible to participate in the Harris Stock Plan. An
eligible employee may receive an award under the Plan, however, only if selected
by the Harris Compensation Committee.
Administration. The Harris Stock Plan is administered by the Harris
Compensation Committee, none of the members of which may be an employee of
Harris. The Harris Compensation Committee may in turn delegate some or all of
its authority and responsibility under the Harris Stock Plan with respect to
awards to participants who are not subject to Section 16(b) of the Exchange Act
to the Chief Executive Officer of Harris. The Harris Compensation Committee has
the authority to select employees to whom awards are granted, to determine the
types of awards and the number of shares subject thereto, and to set the terms,
conditions and provisions of such awards. Certain specified awards that apply to
non-employee directors of Harris are not subject to the discretion of the Harris
Compensation Committee. The Harris Compensation Committee is authorized to
interpret the Harris Stock Plan, to establish, amend and rescind any rules and
regulations relating to the Harris Stock Plan, to determine the terms and
provisions of any agreements entered into under the Harris Stock Plan, and to
make all other determinations which may be necessary or advisable for the
administration of the Harris Stock Plan.
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Awards under the Harris Stock Plan. The Harris Stock Plan permits the
granting of any or all of the following types of awards: (1) performance shares
conditioned upon meeting performance criteria, (2) restricted stock, (3) stock
options, including incentive stock options ("ISOs"), (4) stock appreciation
rights ("SARs"), in tandem with stock options or freestanding, and (5) other
awards valued in whole or in part by reference to, or otherwise based on, Harris
Common Stock. In connection with any award, payment representing dividends or
interest or their equivalent may be made to Harris Stock Plan participants. In
addition, the Harris Stock Plan provides for the automatic grant of stock
options to directors of Harris who are not employees of Harris or its affiliates
("Outside Directors").
Stock Options. Stock options may be granted, from time to time, to such
salaried employees of Harris and its affiliates as may be selected by the Harris
Compensation Committee. The purchase price per share of Harris Common Stock
purchasable under any stock option granted to an employee is determined by the
Board of Directors, but may not be less than 100% of the fair market value of a
share of Harris Common Stock on the date of grant and, in the case of ISOs, 110%
of the fair market value of a share of Harris Common Stock on the date of the
grant. The term of each such option, and the time or times when it may be
exercised, is fixed by the Harris Compensation Committee (up to 10 years from
the date of the grant). All terms and conditions relating to the options are the
subject of separate stock option agreements between Harris and the grantees. The
grant and the terms of ISOs is restricted to the extent required by the Code.
Options may be exercised by payment of the purchase price, either in cash or, at
the discretion of the Harris Board, in Harris Common Stock having a fair market
value on the date the option is exercised equal to the option price. The Harris
Stock Plan provides for SARs relating to any option to be automatically canceled
to the extent of the number of shares of the exercise. Participants have no
shareholder rights with respect to any options granted until shares have been
issued upon the proper exercise of the option.
Stock Appreciation Rights. The Harris Compensation Committee may grant
SARs, from time to time, to salaried employees. An SAR may be granted in
connection with an option or independent of an option. Upon exercise of an SAR,
the holder thereof is entitled to receive the excess of the fair market value of
the shares for which the right may be exercised over the grant price of the SAR.
The grant price (which may not be less than 100% of the fair market value of the
shares on the date of grant) and other terms of the SAR may be determined by the
Board of Directors. In the event the SAR is granted in connection with an
option, the fixed price from which appreciation shall be computed shall be the
option price. SARs granted in connection with options may be exercised only to
the extent the related options are exercisable; the related options will be
canceled. Payment by Harris upon such exercise will be in cash in the amount of
the fair market value of the SAR over the fixed price, or the option price, as
the case may be. SARs granted under the Harris Stock Plan may not be transferred
except by will or by the laws of descent and distribution and must be exercised
during the lifetime of the grantee. To date, no SARs have been granted pursuant
to the Harris Stock Plan; any future grant of a SAR will be the subject of a
separate Stock Appreciation Rights Agreement between Harris and the grantee
containing the terms of the SAR and such other conditions as the Harris
Compensation Committee may determine.
Performance Awards. From time to time, the Harris Board may select a
period during which performance criteria determined by the Harris Board are
measured for the purpose of determining the extent to which a performance award
has been earned. Any performance awards granted pursuant to the Harris Stock
Plan will be in the form of Harris Common Stock. Recipients of performance
awards, who must be salaried employees of Harris, need not be required to
provide consideration other than the rendering of services. Shares awarded may
be subject to a restriction period during which time the shares may not be
transferred; shares granted are held by Harris during the restricted period.
Recipients of performance awards will have, with respect to the performance
shares (and even during a restricted period), all of the rights of a shareholder
of Harris, including the right to vote the shares and to receive any cash
dividends to the extent permitted by applicable law, unless the Harris Board
determines otherwise.
Restricted Stock. Awards of shares of Harris Common Stock subject to
certain restrictions may be made from time to time to salaried employees of
Harris. The Harris Board may select the recipients of restricted stock.
Restricted stock may not be disposed of by the recipient until the lapse of
certain restrictions established by the Harris Board. Recipients of restricted
stock will not be required to provide consideration
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other than the rendering of services. Recipients will have, with respect to
restricted stock, all of the rights of a shareholder of Harris including the
right to vote the shares and to receive any cash dividends to the extent
permitted by applicable law, unless the Harris Board determines otherwise. Upon
termination of employment during the restriction period, all restricted stock
not then vested will be forfeited, subject to such exceptions, if any,
authorized by the Harris Board.
Other Stock-Based Awards. In order to enable Harris to respond quickly to
significant legislative and regulatory developments and to trends in executive
compensation practices, the Harris Board will also be authorized to grant to
salaried employees, either alone or in addition to other awards granted under
the Harris Stock Plan, awards of stock and other awards that are valued in whole
or in part by reference to, or are otherwise based on, Harris Common Stock
("other stock-based awards"). Other stock-based awards may be paid in Harris
Common Stock or other securities, cash or any other form of property as
determined by the Harris Board.
The Harris Board may determine the employees to whom other stock-based
awards are to be made, the times at which such awards are to be made, the number
of shares to be granted pursuant to such awards and all other conditions of such
awards. The provisions of such awards need not be the same with respect to each
recipient. Securities granted pursuant to other stock-based awards may be issued
for no cash consideration or for such minimum consideration as may be required
by applicable law. If purchase rights are granted pursuant to other stock-based
awards the Harris Board will determine the purchase price of stock, which price
will not be less than the fair market value of such stock on the date of grant.
All awards shall be fully vested and payable immediately upon a change of
control of Harris.
Directors' Options. Under the Harris Stock Plan, as currently in effect,
Outside Directors receive options to purchase shares of Harris Common Stock upon
joining the Harris Board. In addition, on the date of each annual meeting
thereafter, each director who was not an employee of Harris was automatically
granted an option to purchase 1,500 shares of Harris Common Stock. All such
options are non-statutory stock options and priced at 100% of the fair market
value on the date of grant. On February 4, 1996, the Harris Board approved an
amendment to the provisions of the Harris Stock Plan by which Outside Directors
serving on the Harris Board as of such date were each granted an option, subject
to approval by Harris's shareholders of the Harris Stock Plan Amendment, to
purchase 15,000 shares of Harris Common Stock at $5.50 per share, the closing
price of Harris Common Stock on the date of the grant. In the event of a
director's retirement, the options that are exercisable at the date of
retirement will be exercisable for three months thereafter, and, in the event of
a director's death, the options that are exercisable at the date of death will
be exercisable for the next succeeding 12 months. Neither the Harris Board nor
any committee of the Harris Board has any discretion with respect to options
granted to Outside Directors pursuant to the Harris Stock Plan.
Nonassignability of Awards. The Harris Stock Plan provides that no award
granted under the Harris Stock Plan may be sold, assigned, transferred, pledged
or otherwise encumbered by a participant, otherwise than by will or by the laws
of descent and distribution. Each award is exercisable, during the participant's
lifetime, only by the participant, or if permissible under applicable law, by
the participant's agent, guardian or attorney-in-fact.
Adjustments. The Harris Stock Plan provides that, in the event of any
change affecting the shares of Harris Common Stock by reason of any stock
dividend or split, recapitalization, reorganization, merger, consolidation,
spin-off, combination or exchange of shares, spin-out or any distribution to
shareholders other than cash dividends, the Harris Board will make such
substitution or adjustment in the aggregate number or class of shares which may
be distributed under the Harris Stock Plan and in the number, class and option
price or other price of shares subject to the outstanding awards granted under
the Harris Stock Plan as it deems to be appropriate in order to maintain the
purpose of the original grant.
The Harris Board is authorized to make adjustments in performance award
criteria or in the terms and conditions of other awards in recognition of
unusual or non-recurring events affecting Harris or its financial statements or
changes in applicable laws, regulations or accounting principles, provided no
such adjustment shall impair the rights of any participant without his consent.
The Harris Board may correct any defect, supply
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any omission or reconcile any inconsistency in the Harris Stock Plan or any
award in the manner and to the extent it shall deem desirable to carry it into
effect.
Change of Control. In order to maintain all of the participants' rights in
the event of a change of control of Harris, all outstanding awards will become
exercisable immediately prior to the occurrence of the change of control, in
such manner and in such amounts as determined by the Harris Board, as
constituted before such change of control, in its sole discretion. A change in
control is deemed to occur if any person or entity acquires 20% or more of the
outstanding shares of Harris or if as a result of any tender or exchange offer,
merger or other business combination, sale of assets or contested election,
there is a change of a majority of the directors.
Federal Income Tax Aspects of the Harris Stock Plan. The following is a
summary of the federal tax consequences generally arising with respect to awards
to be granted under the Harris Stock Plan. The grant of an ISO has no tax
consequences to Harris or to the participant. In addition, the participant
recognizes no taxable income at the time of exercise of an ISO. However, upon
exercise, the difference between the fair market value of the underlying share
of Harris Common Stock and the exercise price of the ISO is includable in the
participant's income for alternative minimum tax purposes. If the participant
holds the shares acquired upon exercise of an ISO for at least two years from
the date of the grant of the ISO and at least one year from the date of
exercise, he will recognize taxable long-term capital gain or long-term capital
loss upon a subsequent sale of the shares at a price different from the option
exercise price. In either of these events, no deduction would be allowed to
Harris for federal income tax purposes.
If the participant disposes of the shares acquired upon exercise of an ISO
within either of the holding periods described above (i) the participant will
recognize taxable ordinary income in the year of such disposition in an amount
equal to the fair market value of the shares on the exercise date minus the
exercise price of the ISO; provided that if the disposition is a sale or
exchange with an unrelated party, then the ordinary income will be limited to
the excess of the amount realized upon the sale or exchange of the shares over
the exercise price; (ii) Harris will be entitled to a deduction for such year
equal to the amount of taxable ordinary income recognized by the participant;
and (iii) the participant will recognize capital gain or loss, short-term or
long-term, as the case may be, in an amount equal to the difference between (a)
the amount realized by him upon such sale or exchange of the shares and (b) the
option exercise price paid by him increased by the amount of ordinary income, if
any, recognized by him upon such disposition.
The grant of a non-statutory stock option has no tax consequences to Harris
or to the participant. Upon exercise of a non-statutory stock option, however,
the participant will recognize taxable ordinary income in the amount of the
excess of the fair market value on the date of exercise of the shares of Harris
Common Stock acquired over the exercise price of the non-statutory stock option,
and such amount will be deductible for federal income tax purposes by Harris.
The holder of such shares will, upon a subsequent disposition of the shares,
recognize short-term or long-term capital gain or loss, depending on the holding
period of the shares.
In general, a grant of restricted stock has no tax consequence to Harris or
the participant. Except as discussed below, the then fair market value of the
shares of Harris Common Stock issued as restricted stock will be taxed as
ordinary income to the grantee as the restrictions on the stock lapse. Harris
will receive a corresponding tax deduction at the same times. Dividends received
by the participant during the restriction period are treated as compensation
income and therefore are taxed as ordinary income to the participant and are
deductible by Harris. If the participant holds the stock for more than one year
after the restrictions lapse, any gain realized upon a taxable sale or exchange
of the stock will be long-term capital gain. Harris receives no additional
deduction at the time of disposition of the stock by the participant.
The participant may, under Section 83(b) of the Code, elect to report the
current fair market value of restricted stock as ordinary income in the year the
award is made, even though the stock is subject to restrictions. In such a case,
Harris will receive an immediate tax deduction for such fair market value of the
shares in the year of grant, but will receive no deduction for any subsequent
appreciation during or after the restriction period. In addition, dividends paid
during or after the restriction period would be treated as dividends to the
participant and therefore would not be deductible by Harris. If a Section 83(b)
election is made, any appreciation in the value of the stock after the date of
grant will not be recognized as capital gain by the participant until such time
as the participant disposes of the stock in a taxable transaction. Any capital
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gain then realized will be long-term capital gain if the participant has held
the stock for at least one year from the date of grant. If the participant
forfeits the stock (i.e., because he has not met the requirements for lapse of
restrictions), the participant will receive no refund or deduction on account of
taxes paid in the year of grant as a result of the Section 83(b) election.
The grant of an SAR has no tax consequences to Harris or the participant.
To the extent that an SAR is exercised, the amount paid to the participant will
be taxed to him as ordinary income, and Harris will receive a corresponding
deduction at the same time.
With respect to other awards granted under the Harris Stock Plan that are
settled either in cash or in stock or other property that is either transferable
or not subject to substantial risk of forfeiture, the participant must recognize
ordinary income equal to the cash or the fair market value of shares or other
property received; Harris will be entitled to a deduction for the same amount.
With respect to awards that are settled in stock or other property that is
restricted as to transferability and subject to substantial risk of forfeiture,
the participant must recognize ordinary income equal to the fair market value of
the shares or other property received at the first time the shares or other
property become transferable or not subject to substantial risk of forfeiture,
whichever occurs earlier. Harris will be entitled to a deduction for the same
amount. A participant who makes an election under Section 83(b) of the Code will
be taxed on the excess of the fair market value at exercise over the purchase
price. Special tax rules may apply to officers and directors who are not
employees of Harris who are subject to Section 16 of the Exchange Act.
CHANGE OF HARRIS'S CORPORATE NAME
At the Harris Special Meeting, Harris shareholders will be asked to vote on
and approve an amendment to Harris's Articles of Incorporation that would change
Harris's corporate name to CyberGuard Corporation.
Purpose for the Name Change. In connection with the spin-off of Harris
from Harris Corporation, Harris's former corporate parent, Harris and Harris
Corporation entered into a Trademark and Trade Name License Agreement, dated
September 13, 1994, that provided for Harris to use the trade name "Harris
Computer Systems Corporation" only until September 12, 1996. Moreover, as the
result of the Transaction, Harris's operations will no longer include the Harris
Real-Time Business, a business unit with which Harris was primarily identified;
instead, Harris will focus its business on the market for trusted computer
systems. Accordingly, the Harris Board has determined that it is in the best
interest of Harris to amend its Articles of Incorporation to change Harris's
corporate name to CyberGuard Corporation.
The affirmative vote of the holders of a majority of the shares entitled to
be cast at the Harris Special Meeting is required for approval of the Name
Change.
THE HARRIS BOARD RECOMMENDS THAT HARRIS SHAREHOLDERS VOTE FOR THE AMENDMENT
OF HARRIS'S ARTICLES OF INCORPORATION TO CHANGE HARRIS'S CORPORATE NAME TO
CYBERGUARD CORPORATION.
ELECTION OF DIRECTORS
Harris's Articles of Incorporation provide for directors to be divided into
three classes, each as nearly equal in number as reasonably possible as
determined by the Harris Board. The term of one class of Harris Directors,
consisting of two directors, expires at the 1995 annual meeting of Harris
shareholders and, accordingly, will expire at the Harris Special Meeting.
Two directors will be elected at the Harris Special Meeting to fill the
expiring directorships. The term of the directors elected to fill the expiring
directorships will expire at the 1998 annual meeting of Harris shareholders.
Brian Foremny and Robert L. Carberry, who currently hold the expiring
directorships, each have agreed to stand for reelection and have been nominated
by the Harris Board for reelection. Each of Mr. Carberry and Mr. Foremny will be
elected as a director of Harris if he receives a majority of the votes cast by
the holders of Harris Common Stock represented, in person or in proxy, at the
Harris Special Meeting. In the event that
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either of Mr. Carberry or Mr. Foremny becomes unavailable for election as a
director at the time the Harris Special Meeting is held, unless contrary
instructions are given, shares represented by proxies in the accompanying form
may be voted for another person nominated by the present Harris Board. For
biographical information relating to Messrs. Carberry and Foremny, see
"DIRECTORS AND EXECUTIVE OFFICERS OF HARRIS AFTER CONSUMMATION OF THE
TRANSACTION -- Executive Officers."
ADJOURNMENT OF THE HARRIS SPECIAL MEETING
The Chairman of the Harris Special Meeting (the "Harris Chairman") may
propose that the Harris Special Meeting be adjourned or postponed for any
reason. For example, if a quorum is not obtained, or if fewer shares are likely
to be voted in favor of approval and adoption of the Transaction than the number
required for approval and adoption, the Harris Chairman may propose that the
Harris Special Meeting be adjourned for the purpose of obtaining additional
proxies or votes. The Harris Chairman also may propose that the Harris Special
Meeting be adjourned or postponed in order to obtain necessary regulatory
approvals. At any subsequent reconvening of the Harris Special Meeting, all
proxies will be voted in the same manner as such proxies would have been voted
at the original meeting (except for any proxies which theretofore have been
effectively revoked or withdrawn), notwithstanding that they may have been
effectively voted on the same or any other matter at a prior meeting.
THE HARRIS BOARD RECOMMENDS THAT THE HARRIS SHAREHOLDERS VOTE FOR APPROVAL
OF ANY PROPOSAL TO ADJOURN THE HARRIS SPECIAL MEETING.
Those shareholders who plan to vote against the Transaction are advised
that they also should vote against adjournment.
The affirmative vote of a majority of the shares represented, in person or
by proxy, at the Harris Special Meeting is required for approval of any
adjournment thereof.
APPROVAL OF INDEPENDENT ACCOUNTANTS
The Harris Board, upon the recommendation of the Audit Committee of the
Harris Board, has appointed KPMG as Harris's independent accountants to audit
the consolidated financial statements of Harris for the 1996 fiscal year. KPMG
has served as Harris's independent accountants for the fiscal year ended
September 29, 1995.
THE HARRIS BOARD RECOMMENDS THAT THE HARRIS SHAREHOLDERS VOTE FOR APPROVAL
OF KPMG AS HARRIS'S INDEPENDENT ACCOUNTANTS FOR THE SUCCEEDING YEAR.
The affirmative vote of a majority of the shares represented, in person or
by proxy, at the Harris Special Meeting is required for the approval of the
independent accountants. Representatives of KPMG will be present at the Harris
Special Meeting to respond to appropriate questions from the Harris shareholders
and will be given the opportunity to make a statement should they desire to do
so. It is intended that shares represented by proxies solicited by the Harris
Board will, unless authority to so vote is withheld, be voted in favor of the
appointment of KPMG as Harris's independent accountants for fiscal year 1996.
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PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS OF CONCURRENT
The following unaudited pro forma financial statements have been prepared
to give effect to the Transaction which will be accounted for as a purchase. See
"TERMS OF THE TRANSACTION -- Accounting Treatment."
These financial statements do not purport to represent what the Combined
Real-Time Company's results of operations or financial position actually would
have been had the Transaction occurred on the dates when they are reflected to
have occurred in the pro forma financial statements, or to project the Combined
Real-Time Company's results of operations or financial condition for any future
period or date. In particular, the financial condition of Concurrent at the date
of the Transaction will be directly affected by the financial performance of
both Concurrent and Harris up to the date of the Transaction and could be
substantially different from that shown in these pro forma financial statements.
The pro forma condensed consolidated statements of operations for the year
ended June 30, 1995 and for the nine months ended March 31, 1996 have been
prepared assuming the Transaction had occurred as of the beginning of each of
the respective periods. The pro forma condensed consolidated statement of
operations for the year ended June 30, 1995 includes the results of operations
for Concurrent for the year ended June 30, 1995 and for Harris's Real-Time
Business for the year ended September 30, 1995. The pro forma condensed
consolidated statement of operations for the nine months ended March 31, 1996
includes the results of operations for Concurrent and Harris's Real-Time
Business for the nine months ended March 31, 1996. The pro forma consolidated
balance sheet at March 31, 1996 has been prepared assuming the Transaction had
occurred as of that date. "Harris as Reported" and "Harris Trusted" data were
obtained from the Combining Financial Information included in Harris's financial
information -- see "HARRIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" and "HARRIS CONSOLIDATED FINANCIAL
STATEMENTS."
In accordance with generally accepted accounting principles, the purchase
price for the acquisition of the Harris's Real-Time Business will be allocated
to the assets and liabilities received based upon their estimated fair values.
Such fair values are based upon valuations of assets and liabilities and
estimations which are still in process. Accordingly, for purposes of the
following pro forma financial information the pro forma adjustments are stated
on an estimated basis using the most recent information available. No assurance
can be given that the pro forma adjustments will not differ materially from the
amounts ultimately determined. The pro forma financial statements do not reflect
any synergies, operating efficiencies or cost savings anticipated by management
as a result of the Transaction, such as savings expected from consolidation of
manufacturing, research and development, selling, marketing, administrative and
other functions. Such savings will require significant headcount reductions and
present significant management challenges. The resulting pro forma financial
statements are not necessarily indicative of Concurrent's future results of
operations or financial position. For a discussion of anticipated synergies, see
"THE PROPOSED TRANSACTION -- Recommendations of the Board of Directors of
Concurrent and Concurrent's Reasons for the Transaction" and "-- Recommendations
of the Special Committee and the Board of Directors of Harris and Harris's
Reasons for the Transaction."
The pro forma financial statements should be read in conjunction with the
audited consolidated financial statements for the years ended June 30, 1995 and
September 30, 1995 for Concurrent and Harris, respectively, and for Concurrent
the unaudited financial statements for the nine months ended March 31, 1996, and
for Harris the unaudited financial statements for the six months ended March 30,
1996. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE," "TERMS OF THE
TRANSACTION -- Accounting Treatment" and "PROJECTED FINANCIAL INFORMATION."
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PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1995 NINE MONTHS ENDED MARCH 31, 1996
-------------------------------------------------------- --------------------------------------------------------
CONCURRENT HARRIS (LESS) OTHER CONCURRENT HARRIS (LESS) OTHER
AS AS HARRIS PRO FORMA PRO AS AS HARRIS PRO FORMA PRO
REPORTED REPORTED TRUSTED ADJS. FORMA REPORTED REPORTED TRUSTED ADJ. FORMA
---------- -------- ------- --------- -------- ---------- -------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net
sales.... $140,144 $45,111 $(4,817) -- $180,438 $ 77,108 $34,271 $(5,292) $ -- $106,087
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
1,065(a) 1,142(a)
Gross
margin... 60,667 19,347 (1,677 ) 814(b) 80,216 32,682 15,786 (1,710) 610(b) 48,510
(358)(c) (270)(c)
Operating
expenses... 58,585 30,887 (4,834 ) (406)(b) 83,874 33,100 24,844 (6,122) (305)(b) 51,247
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income
(loss)
from
operations... 2,082 (11,540) 3,157 2,643 (3,658) (418) (9,058) 4,412 2,327 (2,737)
Interest
income
(expense)
net...... (2,125) 456 (49) (60)(d) (1,778) (1,658) 250 (49) (45)(d) (1,502)
Other
income
(expense)
net...... (263) (4) -- -- (267) (2,180) 230 22 -- (1,928)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Loss before
provision
for
income
taxes.... (306) (11,088 ) 3,108 2,583 (5,703) (4,256) (8,578) 4,385 2,282 (6,167)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Provision
for
income
taxes.... 1,700 -- -- -- 1,700 1,400 -- -- -- 1,400
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net loss... $ (2,006) $(11,088) $3,108 $ 2,583 $ (7,403) $ (5,656) $(8,578) $4,385 $ 2,282 $ (7,567)
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Net (loss)
for
common
shareholders:
Net
(loss)... $ (2,006) $(11,088) $ (7,403) $ (5,656) $(8,578) $ (7,567)
Adjustment
for
preferred
dividend
requirement... -- -- 747(f) -- -- 560(f)
Accretion
on
redeemable
preferred
stock.... -- -- 105(f) -- -- 79(f)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net (loss)
applicable
to common
shares... (2,006) (11,088) (8,255) (5,656) (8,578) (8,206)
Per common
share:
Net loss
per
share.... $ (0.07) $ (1.88) $ (0.20) $ (0.19) $ (1.45) $ (0.20)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Weighted
average
number of
shares
outstanding 30,095 5,910 (5,910) 10,321(e) 40,416 30,482 5,946 (5,946) 10,321(e) 40,803
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated statements
of operations.
111
<PAGE> 117
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
1. Basis of Presentation
The unaudited pro forma condensed consolidated statements of operations are
presented for illustrative purposes only, giving effect to the Transaction and,
therefore, are not necessarily indicative of the financial results that might
have been achieved had the Transaction occurred as of an earlier date, nor are
they necessarily indicative of the financial results which may occur in the
future. The unaudited pro forma condensed consolidated statement of operations
for the year ended June 30, 1995 include the results of operations for
Concurrent for the year ended June 30, 1995 and for Harris's Real-Time Business
for the year ended September 30, 1995. The pro forma condensed consolidated
statement of operations for the nine months ended March 31, 1996 include the
results of operations for Concurrent and Harris's Real-Time Business for the
nine months ended March 31, 1996.
2. Pro Forma Adjustments
The following unaudited pro forma purchase accounting adjustments were made
to the statements of operations for the year ended June 30, 1995 and the nine
months ended March 31, 1996 to give effect to the Transaction as if such
Transaction had occurred as of the beginning of the respective periods:
(a) To eliminate the amortization expense previously recorded on the
capitalized software during the respective periods. The real-time
technology of both companies is similar and as such, the combination of
duplicate technologies does not provide additional benefit to Concurrent.
As a result, Harris's capitalized software of $5.4 million was eliminated
as part of the Transaction. (See Unaudited Pro Forma Consolidated Balance
Sheet Note 1(f))
(b) To reflect the adjustment to depreciation expense resulting from
the decrease in the book value of Harris's property, plant and equipment
acquired, depreciated on a straight-line basis over an average remaining
useful life of four years. The excess of the estimated fair value of net
assets acquired over the purchase price was allocated to reduce
proportionately the values assigned to non-current assets. Such amount is
subject to change pending completion of the valuation of assets acquired.
(c) To reflect the amortization of negative goodwill, which represents
the remainder of the excess of the estimated fair value of net assets
acquired after reducing the values assigned to non-current assets to zero
over the aggregate purchase price. Negative goodwill is amortized on a
straight-line basis over a ten-year period. Such amount is subject to
change pending the completion of the valuation of Assets acquired.
(d) To reflect the decrease in interest income resulting from the use
of approximately $1.2 million in cash to finance the closing costs related
to the Transaction at an average interest rate of 5%.
112
<PAGE> 118
(e) The number of shares used in computing pro forma net loss per
share for the year ended June 30, 1995 and the nine months ended March 31,
1996 were 40,415,583 and 40,803,089, respectively. Pro forma net loss per
share has been determined based on the historical weighted average of
shares outstanding of Concurrent Common Stock adjusted to give effect to:
1) the issuance of 10,000,000 shares of Concurrent Common Stock; and 2) the
issuance of an estimated 320,802 shares, on a pro forma basis as of March
31, 1996 (based on an estimated average price at such time of $1.43 per
share) to be sold to fund the payment to Berenson Minella of a portion of
its financial advisory fees, assuming such shares had been outstanding for
the entire period. The number of shares is determined as follows:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
JUNE 30, MARCH 31,
1995 1996
---------- -----------
<S> <C> <C>
Historical weighted average number of shares of Concurrent
Common Stock.............................................. 30,094,781 30,482,287
Issuance of shares of Concurrent Common Stock to Harris..... 10,000,000 10,000,000
Issuance of shares of Concurrent Common Stock to investment
banker.................................................... 320,802 320,802
---------- ----------
Total............................................. 40,415,583 40,803,089
========== ==========
</TABLE>
This calculation of total shares excludes all outstanding Concurrent
Options and Concurrent Warrants, as they would have an anti-dilutive effect
on earnings per share.
(f) To reflect earnings per share adjustments for preferred stock
dividends and to accrete Concurrent Preferred Stock to its mandatory
redemption value over the term of the security.
113
<PAGE> 119
PRO FORMA CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AT MARCH 31, 1996
-----------------------------------------------------------------------
CONCURRENT HARRIS (LESS) HARRIS OTHER PRO
AS REPORTED AS REPORTED TRUSTED FORMA ADJS. PRO FORMA
------------- ----------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $ 3,078 $ 1,307 $ (1,230)(a) $ 3,155
Securities available for sale....................... 11,149(b) 11,149
Accounts receivable................................. 24,887 15,335 (2,626) 37,596
Inventories......................................... 12,662 6,381 (87) (700)(c) 18,256
(795)(a)
Prepaid expenses and other current assets........... 4,477 660 (253) (196)(d) 3,893
-------- -------- -------- -------- --------
Total current assets.............................. 45,104 23,683 (2,966) 8,228 74,049
(6,678)(h)
Property, plant and equipment -- net................ 32,048 5,912 (1,034) 1,800(e) 32,048
Capitalized software................................ 291 8,135 (2,726) (5,409)(f) 291
(2,000)(h)
Acquired technology................................. 2,000(f) --
Excess of purchase price over estimated value of net
assets
acquired.......................................... 13,050(h)
(13,050)(g) --
Other long-term assets.............................. 3,063 822 (30) (792)(h) 3,063
-------- -------- -------- -------- --------
Total assets............................... $ 80,506 $ 38,552 $ (6,756) $ (2,851) $109,451
======== ======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable....................................... $ 5,655 $ 5,655
Current portion of long-term debt................... 824 824
Revolving credit facility........................... 3,843 3,843
Accounts payable and accrued expenses............... 22,933 8,784 (1,358) 30,359
Deferred revenue.................................... 4,610 628 (37) 5,201
-------- -------- -------- -------- --------
Total current liabilities......................... 37,865 9,412 (1,395) 45,882
Long-term debt...................................... 7,129 7,129
Excess of acquired net assets over cost............. 3,580(g) 3,580
Other long-term liabilities......................... 5,229 5,229
Class B 9% cumulative convertible redeemable
exchangeable preferred stock subject to a $8,300
mandatory redemption, $0.01 par value per share
1,000,000 shares authorized -- Issued and
outstanding 830,000 at March 31, 1996 -- pro
forma............................................. 7,248(i) 7,248
Shareholders' equity:
Shares of preferred stock, par value $0.01;
authorized 25,000,000.............................
Shares of common stock, par value $0.01; authorized
100,000,000; Concurrent issued 30,569,049, Harris
issued 5,931,912; and pro-forma 40,889,851........ 306 60 (60) 103(j) 409
Capital in excess of par value...................... 73,737 44,144 (44,144) 9,997(j) 83,734
Accumulated deficit after eliminating Concurrent's
accumulated deficit of $81,826 at December 31,
1991, date of quasi-reorganization................ (42,684) (14,363) 38,720 (24,357)(k) (42,684 )
Shares of treasury stock............................ (58) (58 )
Cumulative translation adjustment................... (1,018) (701) 123 578(k) (1,018 )
-------- -------- -------- -------- --------
Total shareholders' equity........................ 30,283 29,140 (5,361) (13,679) 40,383
-------- -------- -------- -------- --------
Total liabilities and shareholders'
equity................................... $ 80,506 $ 38,552 $ (6,756) $ (2,851) $109,451
======== ======== ======== ======== ========
</TABLE>
See accompanying notes to unaudited pro forma consolidated balance sheet.
114
<PAGE> 120
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
1. PRO FORMA ADJUSTMENTS
The following unaudited pro forma purchase accounting adjustments were made
to the balance sheet at March 31, 1996 to give effect to the Transaction as if
such transaction had occurred as of that date:
(a) To reflect estimated cash expenditures for investment banker,
legal, accounting, printing, proxy solicitation, filing, valuation and
other related fees assumed to be paid by Concurrent in connection with the
Transaction.
(b) To reflect the acquisition of 683,178 shares of Harris Common
Stock, at an assumed market price per share of $16.32 (based on the closing
price on March 29, 1996). Such valuation amount is subject to changes in
the market price of Harris Common Stock from March 29, 1996 to the date of
the Closing of the Transaction. Such shares may be sold in accordance with
the Share Holding Agreement which contains restrictions on the volume of
sales of Harris Common Stock by Concurrent in certain circumstances.
(c) The valuation adjustment to Harris's inventory is based upon the
estimated fair value to be realized from the sale of such inventory through
Harris's existing channels of distribution, taking into consideration
estimated disposal costs and other factors. Such amount is subject to
change pending the integration of the two real-time businesses and
development of the combined company's product plan.
(d) To reflect the elimination of certain deferred items of Harris's
Real-Time Business in conformity with Concurrent's accounting policies.
(e) To reflect the adjustment to Harris's Real-Time Business fixed
assets at their estimated fair value, based upon the preliminary findings
of a valuation which is being prepared in conjunction with the Transaction.
Such amount is subject to change pending completion of the valuation of
assets acquired.
(f) To eliminate capitalized software related to Harris's Real-Time
Business and to reflect the estimated fair value of acquired technology,
based upon the preliminary findings of a valuation which is being prepared
in conjunction with the Transaction. The technology of both companies'
real-time business is similar and as such, the combination of duplicate
technologies does not provide additional benefit to Concurrent. As a
result, capitalized software acquired from Harris was adjusted as part of
the Transaction and included in the valuation of acquired technology.
(g) To reflect the estimated negative goodwill relating to the
Transaction, based upon the estimated aggregate purchase price of
approximately $19,373,000 which includes an estimated $2,425,000 of
Transaction expenses ($1,230,000 in cash plus $795,000 which has been
previously expended and included in prepaid expenses and $400,000 in
Concurrent Common Stock payable to Berenson Minella on a pro forma basis as
of March 31, 1996) assumed to be paid by Concurrent in connection with the
Transaction, and the adjusted value of the net assets acquired from Harris:
<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
(UNAUDITED)
------------------------------
(IN THOUSANDS EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Concurrent common shares provided to Harris........ 10,000
</TABLE>
<TABLE>
<S> <C> <C> <C>
Assumed market price per share..................... $ 0.97
------
Estimated fair value of common shares provided..... $ 9,700
Estimated value of Concurrent preferred shares
provided to Harris............................... 7,248
Estimated Transaction expenses..................... 2,425
-------
Estimated aggregate purchase price................. $19,373
Historical cost basis of net assets acquired from
Harris........................................... $23,779
Adjustments to reflect net assets acquired at
estimated fair value -- (see notes (c), (d), (e)
and (f))......................................... (2,505)
Common shares received from Harris................. 683.2
Assumed market price per share..................... $16.32
------
Estimated fair value of common shares received..... $11,149
-------
Estimated fair value of net assets acquired........ $32,423
-------
Estimated fair value of net assets acquired in
excess of purchase price ("negative goodwill")... $13,050
</TABLE>
115
<PAGE> 121
<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
(UNAUDITED)
------
(IN THOUSANDS EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Reduction of negative goodwill via allocation to
reduce proportionately the values assigned to
non-current assets to zero -- (see note(h))...... (9,470)
-------
Unallocated net assets acquired in excess of
purchase price................................... $ 3,580
=======
</TABLE>
The negative goodwill calculation is subject to change pending finalization
of the valuation of assets and liabilities acquired. The calculation is
also subject to any change in the net assets of Harris's Real-Time Business
from March 31, 1996 to the Closing of the Transaction. In addition, costs
(such as employee severance, relocation costs and adjustments for the
disposal of duplicative assets) which result from Concurrent's
consolidation plan (such as, integrating the business of Concurrent and the
Harris Real-Time Business, elimination of duplicate facilities and excess
capacity and other non-recurring items) which are directly related to the
Harris Real-Time Business will result in an increase in goodwill (or a
reduction in negative goodwill). Actions which result from Concurrent's
consolidation plan which are directly related to Concurrent will result in
a pre-tax charge to the results of operations. At the date of this Joint
Proxy Statement, the estimated aggregate charge of total costs resulting
from both of these types of actions is estimated to be in the range of $27
million to $30 million, in addition to the estimated Transaction expenses
of approximately $2.4 million noted above. While the split between the cost
of those actions related to Harris and those related to Concurrent is not
currently determinable, it is anticipated that the majority of such costs
will be related to Concurrent.
(h) To reflect the application of the estimated fair value of net
assets acquired in excess of the estimated aggregate purchase price by
allocating such excess amount to reduce proportionately the values assigned
to non-current assets to zero.
(i) To record the issuance of $8.3 million liquidation preference of
Concurrent Preferred Stock to Harris as part of the Transaction, recorded
at its estimated fair value of $7.2 million (based on a 14% discount rate
and other valuation factors). As of March 31, 1996 the Net Current Assets
of the Harris Real-Time Business were estimated to be approximately
$12,700,000. Pursuant to the Purchase and Sale Agreement, if the
Transaction were consummated at March 31, 1996, Concurrent would have been
entitled to $14,400,000 in Net Current Assets of the Harris Real-Time
Business and therefore the Preferred Stock Consideration provided to Harris
would have been reduced by $1,700,000.
(j) To reflect (i) the issuance of 10,000,000 shares of Concurrent
Common Stock, with a par value $0.01, at an assumed market price per share
of $0.97 (based on the average of the closing prices on the day before and
the day of the announcement of the Memorandum of Understanding ); and (ii)
the issuance of an estimated pro forma 320,802 shares of Concurrent Common
Stock at March 31, 1996 (based on an average price at such time of $1.43
per share) to fund the payment to Berenson Minella of a portion of its
financial advisory fees.
(k) To reflect the elimination of the shareholders' equity of Harris.
116
<PAGE> 122
MANAGEMENT'S DISCUSSION OF THE PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS OF CONCURRENT
The pro forma net sales of $180.4 million indicated on the condensed
consolidated statement of operations for the year ended June 30, 1995, compare
with a net sales projection of $120 million for the fiscal year ending June 30,
1997. The net sales projection reflects (i) a Combined Real-Time Company sales
trend which declined to a pro forma annualized rate of $141.4 million for the
nine months ended March 31, 1996, and (ii) an adjustment for the revenue risks
described in "PROJECTED FINANCIAL INFORMATION."
The pro forma condensed consolidated financial statements of Concurrent do
not reflect any synergies, operating efficiencies or cost savings anticipated by
management as a result of the Transaction, such as savings expected from
consolidation of manufacturing, research and development, selling, marketing,
administrative and other functions. The projected gross margin and net income
for the years ending June 30, 1997 and 1998, described in "PROJECTED FINANCIAL
INFORMATION," anticipate such savings, assuming that the Transaction closes on
June 30, 1996, and after allowing for up to six months thereafter to consolidate
the operations of the Concurrent and Harris real-time businesses. The gross
margin indicated on the pro forma condensed consolidated statement of operations
for the nine months ended March 31, 1996, represented 45.7% of pro forma sales
for that period, and compares with a projected gross margin of 47.2% and 50.1%
of projected sales for the years ending June 30, 1997 and 1998, respectively.
Pro forma operating expenses were 48.3% of pro forma sales for the nine months
ended March 31, 1996 and compare with projected operating expenses of 38.9% and
37.6% of projected sales for the years ending June 30, 1997 and 1998,
respectively. The pro forma net loss per share of $0.20 for the nine months
ended March 31, 1996, is computed after charging $0.6 million for the dividend
and accretion on the Concurrent Preferred Stock and compares with a projected
net income per share of $0.08 for the year ending June 30, 1997, which also
includes the impact of the dividend and the accretion.
Concurrent's pro forma current ratio and working capital at March 31, 1996,
show significant improvement over the as reported numbers (the pro forma current
ratio is 1.61 to 1 versus a reported current ratio of 1.19 to 1; and, pro forma
working capital is $28.2 million versus reported working capital of $7.2
million). This reflects, in part, the acquisition of 683,178 shares of Harris
Common Stock, shown on the pro forma balance sheet as "securities available for
sale" with a market value of approximately $11.1 million, and the acquisition of
Harris Net Current Assets of $12.7 million at March 31, 1996. Concurrent is not
acquiring any short-term or long-term debt from Harris, although Concurrent is
in discussions with a lender to increase the amount available under its
revolving line of credit after the Closing of the Transaction. The Harris as
reported balance sheet does not include any long-term liabilities. The increase
in total assets from $80.5 million to a pro forma $109.5 million reflects the
increase in pro forma current assets. All of the Harris long-term assets have
been adjusted to zero as described in the footnotes to the pro forma
consolidated balance sheet.
The pro forma consolidated balance sheet at March 31, 1996 does not reflect
certain restructuring adjustments which may result from the integration of the
Concurrent and Harris real-time businesses. Although the purchase of the Harris
Real-Time Business and integration and consolidation of the two businesses is
expected to improve Concurrent's liquidity by permitting additional borrowing
availability, there can be no assurance that cash flow from the combined
real-time operations will be sufficient to fund the costs of the Transaction
including the business integration costs. Concurrent anticipates substantial
costs to close the acquisition of Harris's real-time computing business and to
combine the two companies. Concurrent believes that it will be able to fund the
cost of the Transaction, subsequent integration and ongoing operations through
operating results, ongoing cost control actions, the sale of certain facilities,
if required, and the existing revolving credit facility. The Transaction is
expected to provide Concurrent with potential additional borrowing capacity
under its revolving credit facility based on a higher borrowing base resulting
from the combination of the real-time businesses of the two companies.
Concurrent will also hold 683,178 shares of Harris after the closing of the
Transaction. Concurrent may sell or pledge all or part of this interest, subject
to certain restrictions. As of March 31, 1996, this stock interest had a fair
market value of approximately $11.1 million. In addition, upon the closing of
the Transaction all of Concurrent's issued and outstanding stock options to
purchase approximately 2.8 million shares of Concurrent Common Stock will become
fully vested
117
<PAGE> 123
and exercisable. The exercise of all the "in-the-money" options at the time of
this filing would result in approximately $2.9 million in proceeds to
Concurrent. In addition, if all of the Warrant Shares were issued as a result of
the exercise of the Concurrent Warrants, approximately $1.1 million in
additional cash proceeds would be generated for the Company. The Concurrent
Warrants underlying the Warrant Shares expire on July 22, 1996.
Concurrent has announced that the corporate headquarters for the combined
company will be in the southern Florida area. There will be significant costs in
integrating the corporate management and administration functions of the
companies and relocating key personnel. In addition, Concurrent is reviewing its
options regarding the consolidation of the production and research and
development facilities. If the decision is made to consolidate some or all of
these functions in Florida there will be significant costs associated with
personnel reductions, rehirings, and retraining of employees. Concurrent will
also incur costs to eliminate duplicative sales/service offices throughout the
world.
Concurrent expects to take a material pre-tax charge and to adjust negative
goodwill, as appropriate, in the quarter in which the Transaction is consummated
to cover the Transaction and business integration costs. At the time of this
filing, the estimated aggregate charge for these items is in the range of $29 to
$32 million. Approximately $18 million of these costs are expected to be paid
out in cash over the next two years (primarily fiscal year 1997), $9 to $11
million of the total charge is expected to be non-cash fixed asset carrying cost
adjustments and approximately $2 to $3 million will be obligations settled using
the proceeds from the issuance of Concurrent Common Stock. Such preliminary
estimates indicate that approximately $8 million of the future cash payments are
expected to be incremental to the current cash flow run-rate of the two
real-time businesses on a stand alone basis combined. Such costs include
Transaction expenses (such as investment banker, legal and accounting fees),
employee, facility and equipment relocation costs and employee outplacement
costs. The $10 million of remaining cash payments are expected to be a
continuation of current funding requirements and, after their full satisfaction,
will positively impact Concurrent's liquidity. For example, cash expenditures
for employee severance costs are expected to be paid out over time without
increasing payroll costs; payroll costs are expected to decline as severance
payments cease. There can be no assurances as to the actual amount of these
charges or adjustments, and such charges or adjustments could be higher than
current estimates. In addition, there may be adjustments in future periods
relating to the cost of integrating the real-time businesses of Concurrent and
Harris. However, the amount of such future adjustments cannot currently be
determined.
Concurrent anticipates that the capital resources available upon completion
of the Transaction will be adequate to satisfy its capital requirements through
June 1997, assuming quarterly net sales of the combined real-time businesses
amount to approximately $30 million. Concurrent's future capital requirements,
however, will depend on many factors, including its ability to successfully
market and sell its commercial products, the cost and timing of the integration
of the real-time businesses of the two companies to realize potential synergies
and cost savings, and the cost of developing, marketing and selling competitive
products. To the extent that the funds generated by operations are insufficient
to satisfy Concurrent's capital requirements, Concurrent may seek additional
equity or debt financing or obtain additional credit facilities. Any equity or
debt financing, if available at all, may be on terms which are not favorable to
Concurrent and, in the case of equity or convertible debt offerings, could
result in dilution to Concurrent's then existing shareholders. Concurrent is
also considering various additional financing alternatives, including a possible
sale, or sale and partial leaseback, of its Oceanport, New Jersey facility to
improve its financial flexibility. If adequate funds are not available,
Concurrent may be required to curtail certain activities, including product
development, marketing and sales activities.
118
<PAGE> 124
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF HARRIS
The following unaudited pro forma financial statements have been prepared
to give effect to the Transaction. See "TERMS OF THE TRANSACTION -- Accounting
Treatment."
These financial statements do not purport to represent what the results of
operations or financial position actually would have been had the Transaction
occurred on the dates when they are reflected to have occurred in the pro forma
financial statements, or to project the results of operations or financial
condition for any future period or date.
The pro forma condensed consolidated statements of operations for the year
ended September 30, 1995 and for the six months ended March 30, 1996 have been
prepared assuming the Transaction had occurred as of the beginning of each of
the respective periods. The pro forma condensed consolidated statement of
operations for the year ended September 30, 1995 includes Harris's equity
interest in the losses of Concurrent for the year ended June 30, 1995. The pro
forma condensed consolidated statement of operations for the six months ended
March 30, 1996 includes Harris's equity interest in the losses of Concurrent for
the six months ended March 31, 1996. The pro forma condensed consolidated
balance sheet at March 30, 1996 has been prepared assuming the Transaction had
occurred as of that date.
The pro forma condensed financial statements should be read in conjunction
with the condensed consolidated financial statements for the year ended
September 30, 1995, and the condensed consolidated financial statements as of
March 30, 1996 and for the six months then ended. See "HARRIS MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION" and
"HARRIS CONSOLIDATED FINANCIAL STATEMENTS."
119
<PAGE> 125
HARRIS COMPUTER SYSTEMS CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 30, 1996
<TABLE>
<CAPTION>
HARRIS LESS
HISTORICAL REAL-TIME PRO FORMA
CONSOLIDATED BUSINESS(A) ADJUSTMENTS PRO FORMA
------------ --------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Sales
Equipment.................................. $ 18,942 $ (14,765) $ 4,177
Maintenance................................ 6,622 (6,404) 218
------- -------- ------ -------
25,564 (21,169) 4,395
Cost of sales
Equipment.................................. 10,051 (7,228) 2,823
Maintenance................................ 3,279 (3,187) 92
------- -------- ------ -------
13,330 (10,415) 2,915
Gross profit................................. 12,234 (10,754) 1,480
Research and development..................... 3,580 (3,003) 577
Selling, general and administration.......... 11,266 (8,054) 154(b) 3,366
Transaction expense.......................... 820 0 820
------- -------- ------ -------
15,666 (11,057) 154 4,763
Operating loss............................... (3,432) 303 (154) (3,283)
Equity interest in losses of Concurrent...... (141)(c) (141)
Dividends on Concurrent Preferred Stock...... 51(d) 51
Interest income.............................. 155 (129) 26
Other expense................................ 2 (2) 0
------- -------- ------ -------
Net loss..................................... $ (3,275) $ 172 $ (244) $(3,347)
======= ======== ====== =======
</TABLE>
See Accompanying Notes to Pro Forma Condensed Consolidated Statements of
Operations.
120
<PAGE> 126
HARRIS COMPUTER SYSTEMS CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
HARRIS LESS
HISTORICAL REAL-TIME PRO FORMA
CONSOLIDATED BUSINESS(A) ADJUSTMENTS PRO FORMA
------------ ----------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Sales
Equipment................................. $ 31,184 $ (26,650) $ 4,534
Maintenance............................... 13,927 (13,644) 283
-------- -------- ------- -------
45,111 (40,294) 4,817
Cost of sales
Equipment................................. 18,550 (15,549) 3,001
Maintenance............................... 7,214 (7,075) 139
-------- -------- ------- -------
25,764 (22,624) 3,140
Gross profit................................ 19,347 (17,670) 1,677
Research and development.................... 7,903 (7,068) 835
Selling, general and administration......... 22,984 (18,985) 308(b) 4,307
-------- -------- ------- -------
30,887 (26,053) 308 5,142
Operating loss.............................. (11,540) 8,383 (308) (3,465)
Equity interest in losses of Concurrent..... $(1,850)(c) (1,850)
Dividends on Concurrent Preferred Stock..... 203(d) 203
Interest income............................. 456 (407) 49
Other expense............................... (4) 4 0
-------- -------- ------- -------
Net loss.................................... $(11,088) $ 7,980 $(1,955) $(5,063)
======== ======== ======= =======
</TABLE>
See Accompanying Notes to Pro Forma Condensed Consolidated Statements of
Operations.
121
<PAGE> 127
HARRIS COMPUTER SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
1. BASIS OF PRESENTATION
The unaudited pro forma condensed consolidated statements of operations are
presented for illustrative purposes only, giving effect to the Transaction and,
therefore, are not necessarily indicative of the financial results that might
have been achieved had the Transaction occurred as of an earlier date, nor are
they necessarily indicative of the financial results which may occur in the
future.
The unaudited pro forma condensed consolidated statement of operations for
the year ended September 30, 1995 include Harris's equity interest in the net
losses of Concurrent for the year ended June 30, 1995. The unaudited pro forma
condensed consolidated statement of operations for the six months ended March
30, 1996 include Harris's equity interest in the net losses of Concurrent for
the six months ended March 31, 1996.
2. PRO FORMA ADJUSTMENTS
The following unaudited pro forma adjustments were made to Harris's
historical condensed consolidated statements of operations for the year ended
September 30, 1995 and the six months ended March 30, 1996 to give effect to the
Transaction as if such Transaction had occurred as of the beginning of the
respective periods:
(a) to subtract the operating results of Harris's Real-Time Business.
(b) To record the amortization of compensation for the stock granted
to Mr. Siegel and Mr. Dunleavy in exchange for a non-compete agreement.
Amount represents the prorated amortization expense over a 5 year life.
(c) to record Harris's equity interest in the net losses of Concurrent
based on its percentage ownership of Concurrent Common Stock.
(d) to record preferred stock dividends and accretion on Concurrent
Preferred Stock received as part of the Transaction.
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<PAGE> 128
HARRIS COMPUTER SYSTEMS CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 30, 1996
<TABLE>
<CAPTION>
HARRIS
HISTORICAL PRO FORMA
CONSOLIDATED ADJUSTMENTS PRO FORMA
------------ ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents.............................. $ 1,307 $(1,307)(e) $ --
Concurrent Common Stock available for
sale -- current...................................... -- 21,400(c) 21,400(c)
Accounts receivable.................................... 15,335 (12,709)(a) 2,626
Inventories............................................ 6,381 (6,294)(a) 87
1,540(f)
Prepaid expenses....................................... 660 (407)(a) 1,793
------- ------- -------
Total current assets......................... 23,683 2,233 25,906
Property, plant and equipment.......................... 5,912 (4,878)(a) 1,034
Capitalized software................................... 8,135 (5,409)(a) 2,726
Concurrent Preferred Stock -- available for sale....... 5,384(c) 5,384
Other assets........................................... 822 (792)(a) 30
------- ------- -------
Total assets................................. $ 38,552 $(3,472) $35,080
======= ======= =======
Accounts payable....................................... 4,565 (4,100)(a) 465
Deferred revenue....................................... 628 (591)(a) 37
(3,326)(a)
Accrued expenses....................................... 4,219 2,200(b) 3,093
------- ------- -------
Total current liabilities.................... 9,412 (5,817) 3,595
(8,459)(a)
(2,200)(b)
1,540(f)
Equity (deficit)....................................... 29,140 11,464(d) 31,485
------- ------- -------
Total liabilities and equity................. $ 38,552 $(3,472) $35,080
======= ======= =======
</TABLE>
See Accompanying Notes to Pro Forma Condensed Consolidated Balance Sheet.
123
<PAGE> 129
HARRIS COMPUTER SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
1. PRO FORMA ADJUSTMENTS
The following unaudited pro forma adjustments were made to the historical
condensed consolidated balance sheet as of March 30, 1996 to give effect to the
Transaction as if such Transaction occurred as of that date:
(a) to reflect the sale of the assets and liabilities of Harris's
Real-Time Business (as defined in the Purchase and Sale Agreement).
(b) to reflect the accrual of estimated expenses relating to the
Transaction of $2,200.
(c) to reflect the receipt of Concurrent Common and Concurrent
Preferred Stock valued at $21,400 and $5,384, respectively, as part of the
Transaction; the value of Concurrent Preferred Stock is based on the
assumption that no dividends will be paid until the Concurrent Preferred
Stock is to be redeemed in 2006; value at redemption was discounted at a
rate of 14%. The value of the Concurrent Common Stock is the average of the
closing prices for Concurrent Common Stock from May 1 through May 7, 1996.
The Share Holding Agreement contains restrictions on the volume of sales of
Concurrent Common Stock by Harris in certain circumstances.
(d) to reflect the issuance of 683,178 shares of Harris Common Stock
valued at $11,464 to Concurrent as part of the Transaction. The value of
the Harris Common Stock is the average of the closing prices for Harris
Common Stock from May 1 through May 7, 1996.
(e) cash adjustments to Harris from net asset reconciliation
adjustment per the Purchase and Sale Agreement.
(f) To record the charge for the issuance of stock to Mr. Siegel
(78,000 shares) and Mr. Dunleavy (13,800 shares) at $16.78 (the average of
the closing prices from May 1 through May 7, 1996) in exchange for a 5 year
non-compete agreement.
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<PAGE> 130
PROJECTED FINANCIAL INFORMATION
Neither Concurrent nor Harris, as a matter of course, publicly discloses
forecasts or projections as to their future results of operations or financial
condition. However, management of Concurrent and Harris prepared projections
which consisted of forecasted combined income statements for Concurrent and the
Harris Real-Time Business for the twelve month periods ending June 30, 1997 and
1998, and forecasted combined balance sheets as of the end of each fiscal
quarter from June 30, 1996 through June 30, 1998, prepared by Concurrent's
management as of March 15, 1996, financial projections for Concurrent and
financial projections for the Harris Real-Time Business for the twelve month
periods ending June 30, 1997 and 1998, prepared by Concurrent's management as of
March 15, 1996, and financial projections for the Harris Real-Time Business for
the twelve months ending December 31, 1996 and 1997, prepared by the management
of Harris as of March 15, 1996 (collectively, the "Projections"). The
Projections were provided to and considered by Berenson Minella and Bear Stearns
in connection with the delivery of fairness opinions to the Board of Directors
of Concurrent and Harris, respectively. Also, as described in "THE PROPOSED
TRANSACTION -- Opinion of Harris's Financial Advisor", Bear Stearns in
conjunction with Harris management restated each company's fiscal year
projections into calendar year format (including extrapolating Concurrent's
projections for the last six months of calendar year 1998) (such restated
projections, with the Projections, the "Projected Financial Information"). In
addition, summaries of the Projections were included in presentations delivered
by Berenson Minella to the Board of Directors of Concurrent and summaries of the
Projected Financial Information were included in presentations delivered by Bear
Stearns to the Board of Directors of Harris.
THE PROJECTED FINANCIAL INFORMATION WAS NOT PREPARED WITH A VIEW TO PUBLIC
DISCLOSURE AND IS INCLUDED HEREIN ONLY BECAUSE SUCH INFORMATION WAS PROVIDED TO
THE BOARD OF DIRECTORS OF CONCURRENT AND HARRIS AND THEIR FINANCIAL ADVISORS. IN
ADDITION, THE PROJECTED FINANCIAL INFORMATION WAS NOT PREPARED WITH A VIEW
TOWARD COMPLIANCE WITH PUBLISHED GUIDELINES OF THE COMMISSION OR THE AMERICAN
INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING PROJECTIONS AND FORECASTS.
THE PROJECTED FINANCIAL INFORMATION, ALTHOUGH PRESENTED WITH NUMERICAL
SPECIFICITY, IS BASED ON A NUMBER OF ESTIMATES AND ASSUMPTIONS (INCLUDING,
WITHOUT LIMITATION, THOSE SET FORTH BELOW) AND IS SUBJECT TO SIGNIFICANT
ECONOMIC AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES, MOST OF WHICH ARE
BEYOND THE CONTROL OF CONCURRENT AND HARRIS. ACCORDINGLY, ACTUAL RESULTS MAY BE
MATERIALLY HIGHER OR LOWER THAN THOSE PROJECTED, AND THE INCLUSION HEREIN OF
INFORMATION RELATING TO THE PROJECTED FINANCIAL INFORMATION SHOULD NOT BE
REGARDED AS A REPRESENTATION BY CONCURRENT, HARRIS OR THEIR REPRESENTATIVES THAT
THE PROJECTED FINANCIAL INFORMATION OR THE ESTIMATES AND ASSUMPTIONS UPON WHICH
IT IS BASED WILL PROVE TO BE CORRECT. NONE OF THE FOREGOING PERSONS ASSUMES ANY
RESPONSIBILITY FOR THE ACCURACY OF THE PROJECTED FINANCIAL INFORMATION OR SUCH
ESTIMATES AND ASSUMPTIONS. CONCURRENT AND HARRIS MANAGEMENT DO NOT INTEND TO
PUBLICLY ANNOUNCE ANY UPDATE TO THE PROJECTED FINANCIAL INFORMATION TO REFLECT
ANY CHANGES OF CIRCUMSTANCE OR OTHER CHANGES OCCURRING AFTER THEIR RESPECTIVE
DATES OF PREPARATION. IN ADDITION, CONCURRENT AND HARRIS DO NOT INTEND TO
PUBLICLY ANNOUNCE AT ANY TIME IN THE FUTURE ANY CONFIRMATION OR COMPARISON OF
THE PERFORMANCE OF THE COMBINED REAL-TIME BUSINESS WITH THE PROJECTED FINANCIAL
INFORMATION SET FORTH IN THE PROJECTED FINANCIAL INFORMATION. NO INFERENCE CAN
OR SHOULD BE DRAWN FROM THE PROJECTED FINANCIAL INFORMATION AS TO THE LIKELIHOOD
THAT THE ASSUMPTIONS UNDERLYING THE PROJECTED FINANCIAL INFORMATION WILL BE
REALIZED OR THAT ACTUAL PERFORMANCE WILL EQUAL OR EXCEED THE PROJECTED FINANCIAL
INFORMATION. NEITHER COOPERS & LYBRAND L.L.P. NOR KPMG PEAT MARWICK LLP ASSUMES
ANY RESPONSIBILITY FOR THE PROJECTED FINANCIAL INFORMATION AND RELATED
ASSUMPTIONS, NOR HAVE THEY EXAMINED, REVIEWED, COMPILED OR PERFORMED ANY AGREED
UPON PROCEDURES WITH RESPECT TO SUCH PROJECTED FINANCIAL INFORMATION AND
ASSUMPTIONS AND NEITHER COOPERS & LYBRAND L.L.P. NOR KPMG PEAT MARWICK LLP HAS
ISSUED AN OPINION OR OTHER FORM OF ASSURANCE THEREON. OTHER THAN AS SET FORTH
BELOW, CONCURRENT AND HARRIS HAVE ELECTED TO OMIT THE SUMMARIES OF CERTAIN
ASSUMPTIONS AND ACCOUNTING POLICIES REQUIRED UNDER ESTABLISHED GUIDELINES FOR
PRESENTATION OF PROSPECTIVE FINANCIAL STATEMENTS. IF THE OMITTED SUMMARIES WERE
INCLUDED IN THE PROJECTED FINANCIAL INFORMATION, THEY MIGHT INFLUENCE THE USER'S
CONCLUSIONS ABOUT THE PROJECTED FINANCIAL INFORMATION. ACCORDINGLY, THE
PROJECTED FINANCIAL INFORMATION IS NOT DESIGNED FOR THOSE WHO ARE NOT INFORMED
ABOUT SUCH MATTERS.
Although the Projected Financial Information was prepared in good faith and
with a reasonable basis at the time of its preparation and although certain of
the assumptions underlying the Projected Financial
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<PAGE> 131
Information have been disclosed below, the preparation and disclosure of the
Projected Financial Information may not comply with the Commission's policy on
projections (set forth in Item 10(b) of Regulation S-K) since, among other
things: (i) an outside review of the Projected Financial Information has not
been obtained as suggested in the guidelines; (ii) several sets of projections
based on varying assumptions have not been prepared to the extent contemplated
by the guidelines; and (iii) Concurrent and Harris have not analyzed and,
accordingly, have not disclosed, the accuracy or inaccuracy of the Projected
Financial Information as suggested in the guidelines.
The summary of the Projected Financial Information below, which is based in
fiscal year information, should be read in conjunction with the descriptions of
certain assumptions set forth below and with the information contained in the
selected historical financial statements of Concurrent and Harris, the pro forma
financial statements of Concurrent and Harris and the historical financial
statements of Concurrent incorporated by reference herein and of Harris included
herein. See "SELECTED HISTORICAL FINANCIAL DATA OF CONCURRENT," "SELECTED
HISTORICAL FINANCIAL DATA OF HARRIS," "SELECTED UNAUDITED PRO FORMA COMBINED
FINANCIAL DATA OF CONCURRENT," "SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL
DATA OF HARRIS," "PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF
CONCURRENT," "PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF HARRIS,"
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE," and "HARRIS MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
PROJECTED FINANCIAL INFORMATION -- SUMMARY
FISCAL YEAR PROJECTIONS
<TABLE>
<CAPTION>
FOR THE TWELVE MONTHS
ENDED JUNE 30,
-----------------------
1997 1998
-------- --------
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C>
Net sales.................................................... $120,000 $132,000
Gross margin................................................. $ 56,632 $ 66,164
Net income................................................... $ 4,492 $ 8,574
Net income per share......................................... $ 0.08 $ 0.18
</TABLE>
As described above, the Projections and the Projected Financial Information
were prepared by combining separate projections (which are included in the
Projections) of Concurrent and Harris (excluding the Trusted Systems division)
and making adjustments thereto based on certain assumptions. The separate
projections for Concurrent and Harris were prepared based on the assumption that
the real-time business of each company has no revenue growth initially and only
modest revenue growth for the period of the Projections. The adjustments to the
separate projections were of three types: (i) negative adjustments to revenues
based on the risk that the business combination will result in reduced revenues
which risks include the elimination of certain duplicate revenue opportunities
reflected in each of the separate projections for Concurrent and Harris as well
as other risks, including those described in "SPECIAL FACTORS -- Uncertainties
in Successfully Integrating the Harris Real-Time Business and Achieving Cost
Savings, -- Impact of Transaction-Related Charges and Costs on Financial
Performance; Uncertainty of Transaction-Related Charges and Costs, -- Declining
Trend in Net Sales, -- Potentially Adverse Customer Reaction, -- Potential
Shortfall in Liquidity and -- Product Obsolescence; Significant Research and
Development Expenditures," (ii) positive adjustments based on assumptions
relating to cost savings resulting from the Transaction as a result of
reductions in, among other things, manufacturing costs, service costs, research
and development costs, selling and marketing costs, facility costs and employee
costs, and (iii) negative adjustments based on assumptions relating to
additional costs resulting from, among other things, sales training expenses,
and recruiting and relocation expenses. For a description of certain of those
adjustments, see "THE PROPOSED TRANSACTION -- Recommendations of the Board of
Directors of Concurrent and Concurrent's Reasons for the Transaction." Detailed
plans for implementing the actions on which the foregoing assumptions are based
were not prepared prior to preparing the Projected Financial Information. There
can be no assurance that such plans, when developed, will be based on
assumptions which are consistent with the projection assumptions described
herein.
126
<PAGE> 132
CERTAIN INFORMATION REGARDING CONCURRENT
GENERAL
Concurrent is engaged in the business of providing and servicing
high-performance real-time computer systems.
MANAGEMENT
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 Concurrent's executive officers as of the date hereof:
<TABLE>
<CAPTION>
DIRECTOR OR
EXECUTIVE
NAME POSITION AGE OFFICER
- ------------------------ ----------------------------------------------------- --- -----------
<S> <C> <C> <C>
John T. Stihl........... Chairman of the Board, President, Chief Executive 63 1991
Officer
George E. Chapman....... Vice President, Field Operations 62 1994
David S. Cowie.......... Vice President, Development and Engineering 49 1993
Kevin J. Dell........... Vice President, North American Service, General 40 1993
Counsel and Secretary
Robert S. Kovarcik...... Vice President, Manufacturing and Logistics 48 1994
Roger J. Mason.......... Vice President, Finance and Treasurer, Chief 47 1994
Financial Officer
C. Dennis McWatters..... Vice President, Marketing 49 1994
David L. Vienneau....... Vice President, Human Resources 42 1994
</TABLE>
JOHN T. STIHL, CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE
OFFICER. For a career summary of Mr. Stihl see "DIRECTORS AND EXECUTIVE
OFFICERS OF CONCURRENT AFTER THE TRANSACTION -- Directors."
GEORGE E. CHAPMAN, VICE PRESIDENT, FIELD OPERATIONS. Mr. Chapman was
elected to this position in January 1996. He previously served as Vice
President, International Field Operations from November 1994 and as Vice
President, Marketing since January 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 36 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.
DAVID S. COWIE, VICE PRESIDENT, DEVELOPMENT AND ENGINEERING. Mr. Cowie was
elected to this position in August 1993. He joined Concurrent in 1982 as Senior
Manager, Commercial Systems Software Development and advanced to Director,
European Software Development in 1983. In 1991, Mr. Cowie was promoted to the
position of Senior Director, Systems Engineering. Prior to joining Concurrent,
he held systems development, project management, and systems consultancy
positions with ICL Systems, Gemini Computer Systems, and ICL Dataskil.
KEVIN J. DELL, VICE PRESIDENT, NORTH AMERICAN SERVICE, GENERAL COUNSEL AND
SECRETARY. Mr. Dell was elected to the position of Vice President, General
Counsel and Assistant Secretary in August 1993 and advanced to the position of
Secretary in November 1994. He was elected to the position of Vice President,
North American Service in January 1996. As Concurrent's chief legal officer, he
is responsible for Concurrent's legal and contractual requirements worldwide.
Mr. Dell joined Concurrent in 1987 as Senior
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<PAGE> 133
Corporate Attorney and advanced to Assistant General Counsel in 1988. Prior to
joining Concurrent, he was an associate at the law firm of Finley, Kumble,
Wagner, Underberg, Manley, Myerson & Casey in New York.
ROBERT S. KOVARCIK, VICE PRESIDENT, MANUFACTURING AND LOGISTICS. Mr.
Kovarcik was elected to this position in June 1994. He joined Concurrent in 1991
as Director, Program Management. Prior to joining Concurrent, he served for 12
years in management positions with several high technology companies including
Vice President/General Manager of the Cubic Division of Cubic Corporation, a
public manufacturer of electro-optical equipment; Vice President/General Manager
of New Brunswick Scientific, Inc., a public manufacturer of bio-technology
processing equipment; and Program Director of ITT, a public diversified
electronics company.
ROGER J. MASON, VICE PRESIDENT, FINANCE AND TREASURER, CHIEF FINANCIAL
OFFICER. Mr. Mason joined Concurrent in this position in October 1994. Prior to
joining Concurrent, he served as Chief Financial Officer and Treasurer at
Integral Peripherals, Inc., a disk drive manufacturer. From 1981 to 1991, he
held senior executive positions at Maxtor Corporation, a publicly held disk
drive manufacturer, MiniScribe Corporation, a publicly held disk drive
manufacturer whose assets were acquired by Maxtor Corporation, and Ironstone
Group, Inc., a publicly held holding company. His experience also includes
public accounting with Coopers & Lybrand and Honey, Perriam & Company.
C. DENNIS MCWATTERS, VICE PRESIDENT, MARKETING. Mr. McWatters was elected
to this position in January 1996. Prior to that time and since November 1994 he
served as Vice President, North American Field Operations. He joined Concurrent
in November 1993 as Director of OEM and Major Account Sales. Prior to joining
Concurrent he served as Vice President, Data Acquisition of the Harris
Corporation, Computer Systems Division. Mr. McWatters has also held senior
positions at Encore and Gould Computer Systems, Jim Lemick & Associates and
Digital Equipment Corporation. He also served as a pilot in the United States
Marine Corps.
DAVID L. VIENNEAU, VICE PRESIDENT, HUMAN RESOURCES. Mr. Vienneau was
elected to this position in May 1994. He is also President and founder of
Performance Based Solutions, a human resources consulting services company.
Prior to forming Performance Based Solutions, Mr. Vienneau was Director, Human
Resources at Akzo America, Inc., a diversified manufacturer of chemical
products, and Director, Compensation and Benefits at Penn Central Corporation,
which designs, develops, manufactures and markets electromechanical components
for the defense and aerospace industries.
IDENTITY OF DIRECTORS AND OFFICERS
For information on each continuing director's principal occupation and
business experience for at least the last five years and the name of other
publicly held companies in which he serves as a director see "DIRECTORS AND
EXECUTIVE OFFICERS OF CONCURRENT AFTER CONSUMMATION OF THE
TRANSACTION -- Directors."
Director Compensation
Non-employee Directors receive a $15,000 annual retainer payable upon
election as Director of Concurrent at the Annual Meeting of Shareholders (and a
pro rata amount to any non-employee who becomes a Director of Concurrent
thereafter, payable at the time of becoming a Director), and $2,000 per meeting
(including supplemental meetings in person with management where the business to
be conducted cannot be reasonably accomplished during any scheduled meeting
times and is necessary in furtherance of the required duties of a
Director -- representing $2,000 in fees for one supplemental meeting involving
three Directors in fiscal year 1995) not to exceed $2,000 per day for attendance
at the Concurrent Board meeting, Committee and supplemental meetings regardless
of the number of meetings attended on a given day, payable following such
meetings. Non-employee Directors who serve as chairman of Committees of the
Board of Directors receive $4,000 per annum, payable quarterly at the end of a
quarter. No compensation is paid to Mr. Stihl for services as a Director.
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<PAGE> 134
The Concurrent Stock Plan provides for the automatic grant, upon the
election of a non-employee to the Concurrent Board, of an option to purchase
3,000 shares of Concurrent Common Stock at an exercise price equal to the fair
market value of a share of Concurrent Common Stock on the date of grant. On
their date of election, Messrs. Brunner, Clowe, Handel, Rifenburgh and Sparacino
were each granted options to purchase 3,000 shares of Concurrent Common Stock at
an exercise price equal to 100% of the fair market value of Concurrent Common
Stock on the date of grant (i.e., $1.79 for Messrs. Brunner and Sparacino, $5.00
for Messrs. Handel, and Rifenburgh and $5.90 for Mr. Kevin N. Clowe, a current
director of Concurrent). Prior to the adoption of the Concurrent Stock Plan, Mr.
Dewey was granted an option to purchase 10,000 shares of Concurrent Common Stock
at an exercise price equal to par value, $0.01, upon the founding of Concurrent
and his election in 1981. As a result of Concurrent's one-for-ten reverse stock
split in February 1992, this option represents an option to purchase 1,000
shares at an exercise price of $0.10 per share. All options held by directors
with an exercise price greater than $1.35 were repriced to $1.35 pursuant to the
March 1995 stock option repricing program (the "Stock Option Repricing
Program"). See "AMENDMENT TO THE CONCURRENT STOCK OPTION PLAN."
CORPORATE GOVERNANCE
Concurrent is a corporation created and chartered under the laws of
Delaware. It is governed by a Board of Directors and its Committees. As
permitted under Delaware law and the Certificate of Incorporation and By-laws of
Concurrent, the Concurrent Board has established and delegated certain authority
and responsibility to four committees: the Executive Committee; the Audit
Committee; the Finance Committee; and the Compensation Committee. The Concurrent
Board annually reviews the membership of and the authority and responsibility
delegated to each Committee at the organizational meeting of Directors
immediately following the Annual Meeting of Shareholders. From time to time as
required, the Chairman of the Concurrent Board has the authority from the
Concurrent Board to establish a nominating committee to recommend nominees to
fill vacancies on the Concurrent Board, newly created directorships, and expired
terms of directors.
The current members of the Executive Committee are Messrs. Stihl
(Chairman), Handel and Rifenburgh. The Committee has, to the extent legally
permitted, the power and authority of the Concurrent Board in periods between
meetings of the full Concurrent Board. No meetings of the Executive Committee
were held during Concurrent's fiscal year ended June 30, 1995. All matters that
could have been addressed by the Committee during the fiscal year were addressed
by the full Concurrent Board.
The current members of the Audit Committee are Messrs. Rifenburgh
(Chairman), Brunner, Clowe and Dewey. The current principal responsibilities of
the Committee are to review Concurrent's financial statements contained in
filings with the Commission, matters relating to the examination of Concurrent
by its independent auditors, accounting procedures and controls, and the use and
security of Concurrent's liquid assets through the review of the Treasurer's
function, and to recommend the appointment of independent accountants to the
Concurrent Board for its consideration and approval subject to ratification by
the shareholders. The Audit Committee held four meetings during Concurrent's
fiscal year ended June 30, 1995.
The current members of the Finance Committee are Messrs. Handel (Chairman),
Clowe, Rifenburgh and Sparacino. The current principal responsibilities of the
Committee are to review, appraise and recommend actions relating to Concurrent's
capital structure, to review Concurrent's compliance with financial covenants in
its financing documents, and to review capital needs and expenditures,
risk-management programs and financial performance of the retirement savings
plan. The Finance Committee held three meetings during Concurrent's fiscal year
ended June 30, 1995.
The current members of the Compensation Committee are Messrs. Brunner
(Chairman), Handel and Sparacino. The current principal responsibilities of the
Committee are to make recommendations with respect to executive offer and senior
management compensation and incentive compensation programs and, subject to
limitations, to administer Concurrent's stock option plans, stock purchase plan
and stock bonus plans, and to review management development and succession
programs. The Compensation Committee held two meetings during the fiscal year
ended June 30, 1995.
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<PAGE> 135
During the fiscal year ended June 30, 1995, the Concurrent Board held six
meetings. All nominees attended at least 75% of the aggregate number of meetings
of the Board of Directors and the Committees of which they were members held
during their tenure.
EXECUTIVE COMPENSATION
The following table sets forth information with respect to the compensation
of the chief executive officer and each of the other four most highly
compensated executive officers of Concurrent for fiscal year 1995 for services
in all capacities to Concurrent for fiscal years 1993, 1994 and 1995 beginning
with the year in which they became an executive officer.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------- --------------------- ALL OTHER
NAME AND FISCAL SALARY BONUS OTHER SECURITIES UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR ($)(A) ($)(B) ($)(C) OPTIONS(#)(D) ($)(E)
- ---------------------------------- ------ ------- ------ ------ --------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
J.T. Stihl(f)..................... 1995 365,000 -- -- 651,212 25,633
Chairman, President and 1994 324,960 -- 56,875 328,750 17,384
Chief Executive Officer 1993 219,177 93,985 -- 45,200 5,927
C.D. McWatters(g)................. 1995 154,266 -- 14,267 137,300 2,565
Vice President, 1994 -- -- -- -- --
North American Field Operations 1993 -- -- -- -- --
D.S. Cowie(h)..................... 1995 150,000 -- -- 151,869 --
Vice President, 1994 133,670 -- 14,000 62,024 --
Development and Engineering 1993 -- -- -- -- --
G.E. Chapman(i)................... 1995 145,600 -- -- 141,900 3,836
Vice President, 1994 128,100 -- 14,000 67,000 2,893
International Field Operations 1993 -- -- -- -- --
R.S. Kovarcik(j).................. 1995 143,500 -- -- 139,774 4,083
Vice President, 1994 131,333 -- 14,000 57,510 3,859
Manufacturing and Logistics 1993 -- -- -- -- --
</TABLE>
- ---------------
(a) Based on salary accrual during 1995. Also includes commissions earnings: for
Mr. McWatters, $14,266 in 1995 and for Mr. Chapman $10,666 in 1994.
(b) Shows awards of incentive compensation under Concurrent's Executive Bonus
Plan (EBP). No incentive compensation under the EBP for fiscal years 1994
and 1995 was earned or paid.
(c) Shows the dollar value of shares of Concurrent Common Stock granted in
respect of achievement of corporate performance commitments for the quarters
ended March 31 and June 30, 1994 based on the $2.125 closing sale price of a
share on August 19, 1994, the effective date of the grant.
(d) For 1995, includes new stock option grants resulting from the Stock Option
Repricing Program. The repricing resulted in the following number of options
repriced in fiscal year 1995 for each of the named persons: Stihl (451,212),
McWatters (67,300), Cowie (88,353), Chapman (71,900) and Kovarcik (69,774).
The number of options repriced also includes the repricing of the following
number of options previously granted in fiscal year 1995 which number is
excluded from the total number reflected in the table to avoid
double-counting: Stihl (31,100), McWatters (43,300), Cowie (13,000), Chapman
(3,200) and Kovarcik (3,000). For fiscal year 1994, includes stock options
in the following amounts in consideration of an eight-month deferral in
annual merit salary increases: Stihl (8,625), Cowie (3,450), Chapman (1,800)
and Kovarcik (1,610). For 1994, also includes performance based restricted
stock options granted under the Long-Term Incentive Compensation Plan for
executive officers. The named persons received stock options to purchase the
following number of shares: Stihl (100,000), McWatters (35,000), Cowie
(35,000), Chapman (35,000) and Kovarcik (35,000).
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<PAGE> 136
(e) Includes Concurrent's matching contribution to the "401(k)" savings feature
during the year and annual contribution during the year for the prior
fiscal year in shares of Concurrent Common Stock, based on the value of
such shares at the time of contribution, to such person under Concurrent's
Retirement Savings Plan, a defined contribution plan. For Mr. Stihl,
includes $15,550 paid by Concurrent as the premium for $1 million in term
life insurance and $2,086 paid by Concurrent for a long-term disability
policy.
(f) On August 25, 1993, Mr. Stihl was elected to the positions of Chairman of
the Board, President and Chief Executive Officer. Prior to his election,
Mr. Stihl served as President and Chief Operating Officer of Concurrent
since April 1992.
(g) Elected an executive officer in November 1994.
(h) Elected an executive officer in August 1993.
(i) Elected an executive officer in January 1994.
(j) Elected an executive officer in June 1994.
OPTION GRANTS
The following table shows all grants in fiscal year 1995 of stock options
under the Concurrent Stock Plan to the executive officers named in the Summary
Compensation Table. There were no stock options granted to executive officers in
fiscal year 1996 at December 31, 1995. All options shown below with an exercise
price of $1.35 represent a repricing of previously granted stock options,
including the first shown option(s) granted for each person with an exercise
price of $2.125 and $1.7188. No stock appreciation rights were granted during
fiscal year 1995 or fiscal year 1996 through the date hereof.
OPTION GRANTS IN LAST FISCAL YEAR
(No options have been granted to executive officers in fiscal year 1996)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PERCENT OF TOTAL PRICE APPRECIATION
OPTIONS GRANTED TO EXERCISE OR FOR OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED FISCAL YEAR ($/SHARE)(B) DATE 5%($) 10%($)
- ------------------------- ------- ------------------ ------------ ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
J.T. Stihl............... 31,100(a) 2.125 N/A N/A N/A
15,000 1.35 05/03/01 1,366 8,656
26,187 1.35 06/20/01 2,491 5,389
15,000 1.35 04/30/02 2,356 11,298
35,200 1.35 07/31/02 6,186 28,313
10,100 1.35 08/25/03 2,600 10,457
64,969 1.35 08/25/03 16,722 67,262
135,031 1.35 08/25/03 34,754 39,798
10,000 1.35 08/25/03 2,574 10,353
8,625 1.35 01/28/04 2,512 9,785
66,055 1.35 06/23/04 21,375 81,315
33,945 1.35 06/23/04 10,984 41,787
31,100 1.35 08/19/04 10,462 39,488
200,000 0.875 05/03/05 110,057 278,905
------- ------- -------
682,312 21.9%(FY95) 224,439 632,806
0.0%(FY96)
</TABLE>
131
<PAGE> 137
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENT OF TOTAL ANNUAL RATES OF STOCK
OPTIONS GRANTED TO EXERCISE OR PRICE APPRECIATION
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION FOR OPTION TERM
NAME GRANTED FISCAL YEAR ($/SHARE)(b) DATE 5%($) 10%($)
- ------------------------- ------- ------------------ ------------ ----------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
C.D. McWatters........... 2,300(a) 2.125 N/A N/A N/A
6,000(a) 1.7188 N/A N/A N/A
35,000(a) 1.7188 N/A N/A 647
3,000 1.35 11/03/03 817 3,237
21,000 1.35 01/28/04 6,116 23,824
2,300 1.35 08/19/04 774 2,920
6,000 1.35 11/03/04 2,122 7,933
35,000 1.35 11/03/04 12,377 46,278
70,000 0.875 05/03/05 38,520 97,617
------- ------- -------
180,600 5.8%(FY95) 60,726 182,456
0.0%(FY96)
D.S. Cowie............... 3,000(a) 2.125 N/A N/A N/A
10,000(a) 2.125 N/A N/A N/A
1,345 1.35 11/15/00 72 647
2,700 1.35 12/09/01 348 1,827
2,800 1.35 07/31/02 492 2,252
1,125 1.35 08/25/03 290 1,165
20,000 1.35 08/25/03 5,148 20,706
100 1.35 08/25/03 26 104
2,349 1.35 08/25/03 605 2,432
3,450 1.35 01/28/04 1,005 3,914
35,000 1.35 06/23/04 11,326 43,086
3,000 1.35 08/19/04 1,009 3,809
10,000 1.35 08/19/04 3,364 12,697
70,000 0.875 05/03/05 38,520 97,617
------- ------- -------
164,869 5.3%(FY95) 62,205 190,256
0.0%(FY96)
G.E. Chapman............. 3,200(a) 2.125 N/A N/A N/A
1,700 1.35 07/31/02 299 1,367
200 1.35 08/25/03 51 207
30,000 1.35 01/28/04 8,738 34,034
1,800 1.35 01/28/04 524 2,042
35,000 1.35 06/23/04 11,326 43,086
3,200 1.35 08/19/04 1,076 4,063
70,000 0.875 05/03/05 38,520 97,617
------- ------- -------
145,100 4.7%(FY95) 60,534 182,416
0.0%(FY96)
R.S. Kovarcik............ 3,000(a) 2.125 N/A N/A N/A
2,500 1.35 09/16/01 281 1,582
100 1.35 09/16/01 11 63
4,364 1.35 09/16/01 490 2,761
2,300 1.35 07/31/02 404 1,850
900 1.35 08/25/03 232 932
1,610 1.35 01/28/04 469 1,827
35,000 1.35 06/23/04 11,326 43,086
20,000 1.35 06/23/04 6,472 24,620
3,000 1.35 08/19/04 1,009 3,809
70,000 0.875 05/03/05 35,520 97,617
------- ------- -------
142,774 4.6%(FY95) 56,214 178,147
0.0%(FY96)
</TABLE>
- ---------------
(a) Cancelled as a result of the March 1995 Stock Option Repricing Program.
(b) Represents an exercise price not less than the fair market value of a share
of Concurrent Common Stock on the effective date of grant.
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<PAGE> 138
OPTION EXERCISES AND VALUES AS OF MARCH 31, 1996
The following table provides information as to the number and value of
unexercised options to purchase Concurrent Common Stock held by the named
executive officers at March 31, 1996. None of the named executive officers
exercised any options during the fiscal year 1995 or during fiscal year 1996
through March 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
MARCH 31, 1996 MARCH 31, 1996(A)
-------------------------------- -----------------------------
NAME EXERCISABLE(B) UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------- -------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
J.T. Stihl.............................. 297,545 353,667 $71,313 $ 239,796
C.D. McWatters.......................... 37,276 100,023 4,355 78,233
D.S. Cowie.............................. 51,104 100,765 8,915 75,590
G.E. Chapman............................ 41,694 100,205 4,394 75,311
R.S. Kovarcik........................... 42,742 97,032 6,257 74,166
</TABLE>
- ---------------
(a) Based on the fair market value of Concurrent Common Stock on that date
($1.6875).
(b) Includes options exercisable within 60 days of March 31, 1996 (May 30,
1996).
SEVERANCE ARRANGEMENTS
Concurrent has entered into employment agreements with its executive
officers. With the exception of the employment agreement with Mr. Stihl and
except as described below, these agreements contain generally the same terms and
provide for a base salary to be reviewed for increase annually with such
increases as shall be awarded in the discretion of the Concurrent Board. The
agreements also provide for an annual bonus opportunity in a target amount to be
established by the Concurrent Board at the recommendation of the Compensation
Committee, the actual amounts to be paid depending upon the degree of
achievement of various objectives reasonably consistent with Concurrent's
business plan to be established annually by the Concurrent Board.
Employment under the employment agreements with executive officers of
Concurrent may be terminated by either Concurrent or the respective executive
officer at any time. In the event the executive officer voluntarily resigns
(except as described below) or is terminated for cause, compensation under the
employment agreements will end. In the event an agreement, other than the
agreement with Mr. Stihl the terms of which differ, is terminated directly by
Concurrent without cause or in certain circumstances constructively by
Concurrent, the terminated employee will receive severance compensation for a
one-year period, in an annualized amount equal to the respective employee's base
salary then in effect plus an amount equal to the then most recent annual bonus
paid or, if determined, payable, to such employee. Any compensation earned by
the former executive officer for subsequent employment during the period for
which severance compensation is payable will offset such severance compensation
amount by one dollar for every two dollars in subsequent employment
compensation. Pursuant to the Purchase and Sale Agreement, Concurrent has
offered its executive officers the option to accept payment of any severance
obligations incurred under existing employment agreements either in cash, as
provided under such agreements, or alternatively from the proceeds of the sale
of shares of Concurrent Common Stock with a fair market value equal to their
annual base salary in effect as of the Closing Date without any offset.
Concurrent is obligated to use its best efforts to cause the registration
statement pursuant to which the shares will be registered to be effective until
the earlier of the date such shares will be disposed of and 180 days following
the Closing Date. Concurrent has reserved the right to determine the timing and
amount of sales of such shares elected to be sold by an officer during the
initial 60 days following the Closing Date, subject to a minimum of 40% of the
shares issued to an officer in the first 30 days, in consideration of which it
will bear the investment risk (gain or loss) and transaction costs. The officer
shall bear the investment risk and transaction costs for shares such officer
elects to sell after such 60-day period. The Purchase and Sale Agreement also
provides that Concurrent may pay any severance obligations to other employees or
under retention arrangements implemented in connection with the Transaction in
cash or through the issuance of shares of Concurrent Common Stock.
133
<PAGE> 139
Upon his election to the additional positions of Chairman of the Board and
Chief Executive Officer on August 25, 1993, Concurrent entered into an agreement
with Mr. Stihl which provides that he serve as Chairman of the Board, President
and Chief Executive Officer. It also provides for a base annual salary of not
less than $350,000, as may be adjusted based on annual merit increases, plus an
annual bonus opportunity in a target amount not less than 65% of annual base
salary. The actual amount of the bonus opportunity to be paid depends on the
degree of achievement of various objectives established annually by the Board of
Directors reasonably consistent with Concurrent's annual business plan. The
agreement also provides that Concurrent pay the premiums associated with
portable, renewable term life insurance providing a death benefit of $1 million
on the life of Mr. Stihl.
The agreement further provides that either Mr. Stihl or Concurrent may
terminate the employment relationship at any time. In the event that Mr. Stihl
voluntarily resigns (except following certain events constituting constructive
termination), retires or is terminated for cause, compensation under the
agreement would end and no further compensation would be owed or payable. In the
event the agreement is terminated directly by Concurrent without cause, or in
the event Mr. Stihl terminates his employment following certain specified events
constituting constructive termination by Concurrent (including a demotion or
election to positions other than his current positions), he would be entitled to
receive severance compensation for a two-year period commencing upon such
termination in an annualized amount equal to his annual base salary then in
effect without offset. Mr. Stihl will have the option to receive (i) full
severance compensation for the 24-month period commencing the day following the
Closing Date or (ii) the proceeds from the sale, at Mr. Stihl's direction, of
shares of Concurrent Common Stock with a market value of $730,000. It is
expected that such shares will be sold by the 25th business day following the
Closing Date. If the proceeds from the sale of such shares are less than
$730,000, Mr. Stihl would have the right to receive either the balance in cash
or any unsold shares of Concurrent Common Stock. The selection of either option
does not affect Mr. Stihl's rights to various other benefits for the two-year
period following the Closing Date.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, to the knowledge of Concurrent, the
beneficial owners of more than 5% of Concurrent Common Stock as of March 31,
1996:
<TABLE>
<CAPTION>
PERCENTAGE
OF
CONCURRENT
NUMBER OF COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OWNED OUTSTANDING
--------------------------------------------------------- ------------ ------------
<S> <C> <C>
Cowen & Company.......................................... 2,357,050 7.7%
Financial Square
New York, NY 10005
Teachers Insurance and Annuity Association of
America(a)............................................. 1,596,938 5.2%
730 Third Avenue
New York, NY 10017-3206
</TABLE>
- ---------------
(a) Assumes for such beneficial owner the exercise of Concurrent Warrants to
purchase 80,000 shares of Concurrent Common Stock at $3.00 per share granted
in connection with the "lock-up" through January 21, 1994 of the shares of
Concurrent Common Stock held by such beneficial owner. The Concurrent
Warrants expire on July 22, 1996. Does not assume the exercise of warrants
by any other warrant holder. In August 1992, in an arms-length transaction,
Concurrent transferred all its interests in its Westford, Massachusetts
facility to an affiliate of Teachers Insurance and Annuity Association of
America in exchange for consideration including cancellation of $11,000,000
in mortgage indebtedness plus accrued interest. As part of that transaction,
Concurrent leased back a portion of the facility and continued its existing
operations from the facility.
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<PAGE> 140
The following table sets forth for each Concurrent Director, and each of
the persons named in the executive compensation table, his name, and the number
of shares and percentage of Concurrent Common Stock which he reported were
beneficially owned by him as of March 31, 1996, including the number of shares
of Concurrent Common Stock he has the right to purchase during the 60 days
thereafter (through May 30, 1996) upon the exercise of existing stock options.
The beneficial owners have sole voting and investment power with respect to such
shares.
<TABLE>
<CAPTION>
CONCURRENT PERCENTAGE
COMMON STOCK OF
BENEFICIALLY OWNED COMMON STOCK
NAME DIRECTLY OR INDIRECTLY OUTSTANDING
----------------------------------------------------- ---------------------- ------------
<S> <C> <C>
Michael A. Brunner(a)................................ 3,000 *
George E. Chapman(b)................................. 57,256 *
Kevin N. Clowe(a).................................... 3,000 *
David S. Cowie(c).................................... 57,692 *
C. Forbes Dewey, Jr.(d).............................. 14,901 *
Morton E. Handel(a).................................. 3,000 *
Robert S. Kovarcik(e)................................ 46,894 *
C. Dennis McWatters(f)............................... 39,496 *
Richard P. Rifenburgh(g)............................. 13,000 *
Robert R. Sparacino(a)............................... 3,000 *
John T. Stihl(h)..................................... 339,903 *
Directors and executive officers as a group (14
persons)........................................... 697,510 *
</TABLE>
- ---------------
(a) Represents options to purchase 3,000 shares of Concurrent Common Stock
currently exercisable.
(b) Includes options to purchase 41,694 shares of Concurrent Common Stock
currently exercisable or which become exercisable within 60 days of March
31, 1996.
(c) Includes options to purchase 51,103 shares of Concurrent Common Stock
currently exercisable or which become exercisable within 60 days of March
31, 1996.
(d) Excludes 10 shares held by Mr. Dewey's wife and 26 shares held in trust for
Mr. Dewey's son, as to both of which holdings he disclaims beneficial
ownership. Includes options to purchase 5,491 shares of Concurrent Common
Stock which are currently exercisable.
(e) Includes options to purchase 42,741 shares of Concurrent Common Stock
currently exercisable or which become exercisable within 60 days of March
31, 1996.
(f) Includes options to purchase 37,276 shares of Concurrent Common Stock
currently exercisable or which become exercisable within 60 days of March
31, 1996.
(g) Includes options to purchase 3,000 shares of Concurrent Common Stock
currently exercisable.
(h) Includes options to purchase 297,545 shares of Concurrent Common Stock
currently exercisable or which become exercisable within 60 days of March
31, 1996.
* Less than 1% of outstanding Concurrent Common Stock.
Section 16(a) of the Exchange Act requires Concurrent's officers and
directors, and persons who beneficially own more than ten percent of a
registered class of Concurrent's equity securities ("ten percent shareholders"),
to file reports of ownership of Concurrent's securities and changes in such
ownership with the Commission and NASDAQ. Officers, directors and ten percent
shareholders are required by the Commission's regulations to furnish Concurrent
with copies of all Section 16(a) forms they file.
Based solely upon its review of copies of such filings received by it and
written representations from certain reporting persons that no Form 5 was
required for those persons, Concurrent believes that during its fiscal year
ended June 30, 1995 and fiscal year 1996 at March 31, 1996 all filing
requirements applicable to its officers, directors and ten percent shareholders
were satisfied.
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<PAGE> 141
CERTAIN INFORMATION REGARDING HARRIS
GENERAL
Harris, which was incorporated in August 1994, was formed for the purpose
of consolidating in a corporate subsidiary the activities of the former Harris
Computer Systems Division carried on by Harris Corporation and its subsidiary,
Lanier Worldwide, Inc. ("Lanier"). The Harris Computer Systems Division had been
established in 1974. On September 29, 1994, the Board of Directors of Harris
Corporation declared the Distribution. Pursuant to the Distribution, the holders
of record of Harris Corporation common stock received one share of Harris Common
Stock for every 20 shares of Harris Corporation common stock outstanding on
October 7, 1994. As a result of the Distribution, 100% of the outstanding shares
of Harris Common Stock were distributed to Harris Corporation shareholders on a
pro rata basis. The business of Harris did not constitute a material part of the
business of Harris Corporation.
Harris, through its Real-Time division, is a supplier of high performance
real-time computer hardware, software and related peripherals. 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. Harris's Night Hawk products incorporate
either Harris's CX/UX(TM) or Power UX(TM) real-time operating systems modified
with real-time enhancements developed by Harris. Real-time computers are
essential for certain specialized computing tasks such as radar control,
simulation and training, mechanical testing and system controls, process control
and data acquisition.
Harris, through its Trusted Systems division, also is a supplier of trusted
products including operating systems and firewall application products. Trusted
systems store information of different degrees of sensitivity and make them
available to users with correct authorization. The Night Hawk, with its secure
operating system, has security as well as real-time characteristics, and is sold
principally to governments and government agencies. Harris's CyberGuard firewall
is an application that resides on an operating system and restricts the flow of
information from either outside a network or between networks. Although most of
the CyberGuard firewall sales have been to government customers, Harris is
experiencing increased demand for both Night Hawks and CyberGuards in security
applications in the commercial marketplace. For each of the quarters ended March
30, 1996 and December 29, 1995, 68% and 83%, respectively, of the revenues
attributable to sales of Harris's CyberGuard firewall product have been to
commercial customers.
Harris, through its sales offices, distributors and strategic alliances,
sells its computers directly to end users as well as to original equipment
manufacturers, systems integrators, independent software producers and
value-added resellers who combine Harris's product with other equipment or
additional application software for resale to end users. Harris's Real-Time
Business intends to seek to expand its customer base into other government and
commercial markets that require computers with real-time capabilities. Harris
hopes to target as customers of its CyberGuard and other trusted products anyone
who uses the Internet for commerce or communication.
THE TRANSACTION
If consummated, the Transaction will result in the transfer to Concurrent
of the Harris Real-Time Business, which includes all assets of Harris dedicated
to the business of developing, manufacturing and marketing Harris real-time
computers. Harris will retain those assets used for developing, manufacturing
and marketing Harris trusted products.
MARKETS
Generally. Harris offers products to two distinct markets: the real-time
computing market and the trusted computing market. End users rely on Harris's
real-time computer systems for weapons targeting, rocket launch controls,
military and commercial aircraft simulation, power station simulation, weather
forecasting, air traffic control, high technology engine and avionics design and
manufacturing processes that require extremely rapid response to data input.
Harris's Night Hawk product is a leader in the flight simulation and training
market. End users rely on Harris's secure operating system and firewall product
to protect against
136
<PAGE> 142
unauthorized access to sensitive data stored on computer networks having
hundreds of users. The Night Hawk, enhanced with Harris's secure operating
system, protects classified data without the decrease in operating response time
often associated with traditional add-on security packages. The CyberGuard
firewall allows the customer to restrict the flow of data to and from its
computer network and between networks.
Real-time Markets. Harris's real-time products are currently used in the
following niche markets:
Simulation and Training. Although other manufacturers have larger
bases of customers with installed proprietary systems, Harris has a
significant share of the market for new procurement of open architecture
computer systems capable of handling high-end simulation and training
applications. Harris's products are used in military and commercial flight
simulators, vehicle trainers, research laboratories and utility power plant
simulators. Demand for Harris's products in this market is subject to
fluctuations in Department of Defense spending and the business cycle of
commercial airlines. Revenues from open systems used for simulation and
training were $16.8 million, $23.6 million and $15.5 million for fiscal
years ended September 30, 1995, and June 30, 1994 and 1993, respectively.
Customers in this market include The Boeing Company ("Boeing"), Lockheed
Martin Corporation, Thomson S.A. and Flight Safety Corporation.
Data Acquisition. The ability of the Night Hawk to process rapidly
changing data makes the Night Hawk particularly well suited for
applications designed for weather forecasting, launch control and checkout,
equipment design and testing and manufacturing process control. Jet engine,
avionics and automobile manufacturers utilize Night Hawk computers to
design and test new products. Night Hawks are used for the real-time
analysis of data collected in exploration for undersea oil and gas fields
and pharmaceutical research. Demand for Harris's products in this market is
subject to fluctuations in government funding and has been affected by
reductions in government aerospace spending. Harris's revenues from open
systems in the data acquisition market were $7.9 million, $13.8 million and
$13.8 million during fiscal years 1995, 1994 and 1993, respectively.
Customers in this market include Raytheon Co., Ford Motor Company, Boeing,
United Technologies Corporation, Lockheed Martin Corporation, the National
Aeronautics and Space Administration and the French Ministry of Defense.
Trusted Markets. Any of the Night Hawk computers can be enhanced with
either Harris's CX/SX(TM) or Secure/Power UX(TM)real-time operating systems
designed to allow controlled multi-level sharing of data while enforcing a
security policy designed to limit access to data based on its classification and
the user's level of access clearance. Harris also has developed CyberGuard(TM),
a firewall application package that is designed to restrict the flow of
information from either outside the customer's network or between networks.
Harris's products are used by United States and foreign military agencies and
commercial customers as secure gateways, communication bridges and firewalls on
local and wide area networks and mainframe computer systems. Principal customers
include the governments of the United States and the United Kingdom. Customers
include McDonnell Douglas, Computer Sciences Corporation, GTE, Harris
Corporation, Hughes, Lockheed Martin Corporation, Loral, TRW, SAIC, Groupe Bull
S.A. ("Bull"), IBM Federal, Motorola, Nissan Electric Co., Ltd. and Unipalm
PIPEX. Harris intends to utilize its expertise in the government sector in order
to take advantage of opportunities it expects to arise from an increase in
commercial demand for trusted computer systems and firewalls, particularly in
the health care, manufacturing, financial services and professional services
industries.
A key competitive factor in the trusted market is a computer system's
security rating by intelligence and other government agencies such as the
National Computer Security Center ("NCSC") in the United States and Centre
d'Electronique de l'Armement ("CELAR") in France. The Night Hawk, equipped with
Harris's trusted operating system, is rated by both NCSC and CELAR and is
currently being evaluated for ITSEC certification in the United Kingdom.
Harris's secure operating system and secure LAN has the advantage of being rated
B1 by the NCSC. Harris plans to continue to seek security ratings by foreign
military and intelligence services and to emphasize such ratings in its
marketing efforts.
Revenues from trusted systems and firewalls were $4.5 million, $8.5 million
and $6.0 million, during fiscal years 1995, 1994 and 1993, respectively.
137
<PAGE> 143
CUSTOMERS
In the case of both real-time and trusted products, sales to Harris's
customers tend to be based on the existence of a particular project for which
the customer is a prime contractor or a subcontractor or on a relationship with
a corporation for which Harris is the vendor of choice for real-time computers.
In either case, Harris typically negotiates a price for its systems based on the
customer's indication as to an anticipated quantity and configuration to be
purchased. These pricing arrangements do not obligate the customer to purchase
any certain quantity. Rather, Harris delivers its products upon receipt of
purchase orders from its customers. On occasion, Harris participates in a
program providing for the delivery of specified quantities over time. The most
recent such program, which ended in fiscal year 1994, lasted two years and
accounted for less than 10% of Harris's gross revenues for the fiscal years
affected. Although the identity of Harris' ten largest customers differs
somewhat from year to year, for the fiscal years 1995, 1994 and 1993, the ten
largest customers accounted for 60%, 60% and 43% of revenues, respectively.
In many cases, agencies of the United States Government are the ultimate
purchasers of Harris's products. Sales to the United States Government combined
with sales for which Harris acted as subcontractor on government projects have
represented approximately 51%, 43% and 51% of total sales for fiscal years 1995,
1994 and 1993, respectively. Sales made to Boeing as a percentage of total sales
were 4%, 14% and 4%, for fiscal years 1995, 1994 and 1993, respectively. United
States government contracts generally contain provisions for cancellation at the
convenience of the government. Government cancellations generally have not had a
material impact on Harris's business or results of operations.
For additional information regarding Harris's products and the markets in
which they participate, see "HARRIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
PRODUCTS AND SERVICES -- REAL-TIME DIVISION
Harris is the only major supplier of real-time systems that has completed
the transition from proprietary to open systems. A proprietary system requires
that the end user utilize software and peripherals specially designed to operate
with the proprietary system. A computer utilizing an open operating system
allows its user to operate compatible software and peripherals obtained from a
variety of sources. In 1987, the market for real-time computers was dominated by
companies selling proprietary systems. At that time, Harris became the first
manufacturer of real-time computer systems to adopt a strategy of producing only
open systems, and Harris undertook the costs necessary to develop an open system
and to discontinue production and sale of proprietary systems. Demand for open
computer systems has strongly increased over the past nine years. Harris
believes it has developed competitive products to meet customer demand for
real-time open operating systems and is well positioned to take advantage of the
continuing market shift toward open systems.
Night Hawk Computer. The Night Hawk computer uses Harris's UNIX-based open
operating system. Harris currently produces four series of its Night Hawk
computer, each series using either Motorola 88K microprocessor chips or the
IBM/Motorola Power PC(TM). Harris also custom engineers its computer products to
meet identified customer requirements. Because Harris's systems employ an open
architecture, end users have the flexibility to install UNIX-based real-time
software from a variety of sources. Compatible software can function on any
Night Hawk series, and each series is differentiated based on the processing
speed and the maximum number of attachable workstations CPU's. The Night Hawk
also is designed to accommodate hardware and software system upgrades without
incurring the inconvenience and additional cost of a complete system
replacement. Certain information about the Night Hawk is shown in the following
table:
<TABLE>
<CAPTION>
MAX. NO.
SERIES OF CPUS SPECINT* PRICE RANGE TYPICAL TECHNOLOGY
--------------------- -------- -------- ----------------- ------------------
<S> <C> <C> <C> <C>
IBM PowerPC(TM)
6800................. 8 130-1040 $40,000-$500,000 604
5800................. 8 50-400 $35,000-$350,000 Motorola 88110
4800................. 8 20-160 $20,000-$250,000 Motorola 88100
4400................. 4 20-80 $15,000-$100,000 Motorola 88100
</TABLE>
- ---------------
* SPECInt-Independently Developed Industry Standard Benchmark.
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The Night Hawk 4XXX and 58XX computers use Harris's CX/UX real-time
operating system, which is based on SCO's (Novell, Inc.) UNIX Operating System
V.4 as modified by Harris to operate with real-time capabilities. The Night Hawk
6800 uses Harris's new Power UNIX based on SCO's (Novell, Inc.) UNIX Operating
System V.4.2. The Night Hawk combines RISC-based symmetric multiprocessing
technology with a UNIX-based operating system. The current Night Hawk is
designed to utilize up to eight microprocessors to effectively eliminate typical
input/output bottlenecks. The Night Hawk utilizes a unique memory architecture
for multiprocessor systems that allows linear performance increases as
microprocessors are added. The operating system kernels use critical region
design to protect structures that otherwise would be unable to support
simultaneous access. A key to the efficiency and speed of the Night Hawk is the
use of local memory to provide direct memory to memory connections.
PRODUCTS AND SERVICES -- TRUSTED DIVISION
Trusted systems products consist of CX/SX and Secure/Power UX secure
operating systems, which were developed principally for government applications
but that Harris believes have commercial uses; and the CyberGuard firewall, that
was created to target commercial Internet users.
Trusted Operating System. Traditionally, Harris has marketed its Night
Hawk computers enhanced at the option of the customer with either Harris's CX/SX
or Secure/Power UX, real-time operating systems designed to allow controlled
multi-level sharing of data while enforcing a security policy designed to limit
access to data based on its classification and the user's level of access
clearance. Both operating systems allow access to data by hundreds of users
without the delay typically associated with the addition of security features to
general-purpose computer hardware and software while, at the same time,
restricting access to data to those with the requisite authorization. Such a
feature is critical in a computer system called upon to store and update data
received from several sources, such as multiple allied military forces, each
source having one of several security clearances. Security is critical for many
of the real-time functions for which the Night Hawk is presently utilized,
including those involved in missile testing, hardware analysis and testing,
space tracking and range and telemetry data gathering.
The NCSC has established a rating system to classify trusted capabilities
of computer hardware and software. The NCSC ratings are D (systems with minimal
security), C1 (systems with group-based discretionary access controls), C2
(systems with user-based discretionary access controls), B1 (systems with
mandatory access controls), B2 (systems with certain additional implementation
structures), B3 (systems meeting certain additional security criteria) and A1
(systems with assured security). Agencies of the United States government have
incorporated the NCSC ratings into their procurement requirements, although
these agencies may, from time to time, waive such requirements when awarding
particular projects. Harris's trusted computers, utilizing the CX/SX secure
operating systems, are rated by the NCSC at a B1 level, and Harris is the only
supplier of real-time support in a B1-evaluated open system with an integrated
operating system and network. Also, Harris's CyberGuard is the only commercially
available firewall built on an integrated operating system and network with a
rating as high as B1. No supplier of either real-time performance features in an
open system or a secure computer with an integrated operating system and network
has received a higher rating from the NCSC.
Harris's Secure/Power UX operating system is currently under evaluation by
the NCSC at the B2 level. The Secure/Power UX operating system will be released
shortly on the Bull Escala workstation. Although B2 is a United States
government defined security level, Secure/Power UX contains security features
that Harris intends to market to all commercial and foreign customers with needs
for securing different levels of sensitive data. Harris believes that its
Secure/Power UX operating system as utilized on both the Night Hawk 6000 Series
and the Bull Escala is particularly suited to the growing security needs of the
healthcare, manufacturing, financial services and professional services
industries. Harris believes that these needs will increase as users in these
industries shift from centralized (i.e., mainframe) computing to decentralized
(i.e., local area network, wide area network) computing.
CyberGuard Firewall. Harris also has developed CyberGuard, a firewall
application package, that can reside on either of Harris's two secure operating
systems. The CyberGuard is a firewall product designed to
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restrict the flow of information from either outside the network or between the
networks. Harris is unable to predict whether it will derive, or at what point
it will derive, material revenues from commercial Trusted Systems markets.
For each of fiscal years 1995, 1994 and 1993, sales of the Night Hawk for
the real-time market represented approximately 55%, 58% and 53%, respectively,
of Harris's consolidated sales. In each such year, sales of trusted systems
equipped with either the CX/SX or Secure/Power UX trusted operating systems
accounted for approximately 10%, 13% and 11%, respectively, of Harris's
consolidated sales.
MAINTENANCE
Harris derives a portion of its revenues from the maintenance and support
of its installed computer systems. For each of fiscal years 1995, 1994 and 1993,
maintenance activities represented approximately 30%, 22% and 29%, respectively,
of Harris's consolidated sales. It is expected that, after the Transaction is
consummated, Harris will continue to derive revenues from maintenance related to
trusted systems installed prior to the Transaction or from systems sold in the
future. In the case of trusted systems, maintenance revenue is expected to be
substantially lower in proportion to total sales revenue than in the case of
real-time systems. This reduced proportion is attributable to the lack of a
substantial installed base of systems -- including proprietary
systems -- analogous to the installed base that generates revenue for the
real-time division.
PRODUCTS IN DEVELOPMENT
Real-time. The technologies employed by Harris and incorporated into its
products are in a state of continuous development and tend to be surpassed by
new developments in less than two years after beginning their commercial
utilization. Harris is currently developing an enhanced 6000 and its 7000 Series
of Night Hawk computers integrating expected future versions of the IBM PowerPC
microprocessor chip. Harris believes that the PowerPC microprocessor chip
represents the most advanced commercially available microprocessor with the
lowest risk of short-term obsolescence. The products in development will provide
for processing speeds greatly exceeding currently marketed products and in some
models will use up to 16 microprocessors. Harris is continuing to develop its
previously released NightStar(TM), NightTrace(TM), NightView(TM), NightSim(TM)
and NightProbe(TM) products, all of which are real-time software development
tools designed for use on open systems. It is uncertain whether Concurrent will
continue development of any of these products following the Transaction.
Trusted. Bull and Harris are currently developing a joint marketing plan
for delivery in 1996 of Harris's Secure/Power UX operating system and
applications on Bull Escala workstations. There can be no assurance that Bull
will sell any systems using Harris's products. Harris also plans to market
Secure/Power UX to other computer manufacturers.
Harris has been selling its Power SX and Secure/Power UX operating systems
on the Motorola 604-based IBM/Motorola PowerPC single board computer since
August 1995. Harris is actively pursuing additional opportunities to port
Harris's operating system on other platforms.
DISTRIBUTION
Harris sells its products in the continental United States market through
25 offices located in four sales regions. Products are distributed to United
States customers directly from Harris's manufacturing facility in Fort
Lauderdale, Florida.
Harris sells directly to foreign customers through sales offices in Canada,
France, Germany and the United Kingdom. Orders from foreign sales offices are
filled directly from Harris's Fort Lauderdale manufacturing facility. Harris
markets its products in Eastern Europe, including Russia, through its German
subsidiary and through a joint venture with a Russian partner. Harris expects to
open offices in Madrid, Spain and Beijing, China in 1996. Harris's foreign sales
offices are staffed with local nationals. Harris's products are also marketed
through independent distributors in Italy, Sweden, Japan, South Korea and
Singapore. Harris
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does not believe that the loss of any one distributor would have a substantial
impact on Harris's revenues. International net sales for fiscal years 1995, 1994
and 1993 were $11.9 million, $16.8 million and $14.7 million, respectively.
RESEARCH AND DEVELOPMENT
Harris's continued success depends heavily on researching and utilizing the
latest available hardware and software computer technology. Harris spent $10.2
million, $9.5 million and $9.1 million on research and development (including
capitalized software) during fiscal years 1995, 1994 and 1993, respectively. In
addition to Harris-funded research and development, certain of Harris's
customers have funded Harris's research and development to ensure compatibility
between the customer's and Harris's products and to target specific markets
identified as presenting opportunities for integration of the customer's and
Harris's products. During fiscal years 1995, 1994 and 1993, $.7 million, $1.3
million and $1.5 million, respectively, was spent on customer-funded research
and development.
MANUFACTURING OPERATIONS
Harris's manufacturing operation occupies approximately 60,000 square feet
of the Fort Lauderdale, Florida facility leased to Harris by Harris Corporation.
For its open system products, Harris anticipates orders and generally begins
manufacturing of open system products for which no orders have yet been placed.
Anticipation of customer demand, based on information obtained from Harris's
sales representatives, allows Harris to substantially reduce shipping time for
computers ordered, sometimes to only hours after receipt of an actual order.
SOURCES OF SUPPLY
Harris 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 generation of Night Hawk computers (NH 6800), Harris will depend on the
availability of PowerPC microprocessor chips. IBM and Motorola are the sources
of supply for this microprocessor chip. Harris has multiple commercial sources
of supply for all other materials and components used to manufacture its
products. In some cases, components, including customized components such as
certain computer peripheral equipment incorporated into Night Hawk computers,
have been purchased by Harris principally from a single supplier to obtain the
most favorable price and delivery terms. Harris expects that adequate sources of
supply for microprocessor chips, components and peripheral equipment will
continue to be available.
COMPETITION
Harris operates in a highly competitive market driven by rapid
technological innovation. Many of Harris's competitors have greater financial
and operating resources than Harris. In addition, large companies that currently
do not compete with Harris may enter Harris's product markets. Competition in
high performance real-time computing systems comes from (1) independent software
developers and systems integrators that modify or enhance general purpose
platforms to have real-time characteristics; (2) single board computer
companies, such as Force Computers, Inc. and Motorola, that provide board-level
processors that are integrated into a customer's computer system; and (3)
companies, such as Concurrent, that compete directly with Harris in the design
and assembly of high-end real-time computers. Harris also competes with
manufacturers of proprietary real-time systems, particularly when dealing with
customers who already have an installed base of such systems.
Real-time Products. The real-time industry competes based on system
performance and price. Harris produces a high-end product comparable to only a
few of its competitors' products. With respect to the real-time market, Harris
believes, based on a survey of installed flight simulators, that in 1995, 1994
and 1993 Harris supplied a substantial percentage of new procurement of military
flight simulators and a significant
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<PAGE> 147
percentage of new procurement for commercial flight simulators. The cost of
developing and producing a high-end real-time system poses a substantial barrier
to entry of prospective competitors.
Trusted Products. In the trusted market, the principal competitive factors
are security features, system performance and price. In this market, Harris
competes with general purpose computer manufacturers such as Digital Equipment
Corp., whose computers can be equipped with special equipment or software to
provide for security features similar to those of Harris, and with software
developers and system integrators that develop specialized software designed
with security-enhancement features. Harris's major competitor in the market for
open system secure operating systems is Hewlett-Packard Co., which, to Harris's
knowledge, has developed a secure operating system but has not developed
products designed to provide security for local area networks. Harris expects
many competitors to offer products designed to provide security but few with the
high-performance real-time characteristics of the Night Hawk. In the firewall
market place, there are over 40 companies developing various types of firewall
products. Harris believes it has approximately 5% of the current firewall
market.
Harris also competes with companies that are able to provide maintenance
and repair services for Harris's products.
INTELLECTUAL PROPERTY
For both real-time and trusted products, Harris relies on a combination of
contracts and copyright, trademark and trade secret laws to establish and
protect its proprietary rights in its technology. Harris distributes its
products under software license agreements which grant customers perpetual
licenses to Harris's products and which contain various provisions protecting
Harris's ownership in and confidentiality of the licensed technology. Despite
precautions taken by Harris, however, there can be no assurance that Harris'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.
Harris 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.
Harris has purchased from SCO (Novell, Inc.) the perpetual right to use and
license the UNIX Operating System V.4 in Harris's computer systems. Harris pays
a royalty to SCO (Novell, Inc.) for each computer system shipped using the UNIX
operating system.
EMPLOYEES
As of March 30, 1996, Harris had approximately 419 employees worldwide, of
whom 35 were employed outside the United States. Harris's employees are not
members of a collective bargaining unit.
BACKLOG
Because Harris anticipates customer orders, it is able to ship its product
promptly upon request. Backlog was $6.9 million as of March 30, 1996 and $7.4
million as of March 30, 1995, approximately 83% and 76% of which, respectively,
relate to annual maintenance contracts. Harris does not generally experience
substantial amounts of non-maintenance backlog; however, Harris may experience
backlog in the event of a large purchase order occurring near the end of its
fiscal year. It should be noted that Concurrent calculates its backlog on a
different basis than Harris. Concurrent calculates its backlog solely on systems
orders and not on maintenance contracts.
PROPERTIES
Harris's manufacturing operations and its corporate headquarters are
located in Fort Lauderdale, Florida. Although Harris previously occupied 230,000
square feet of the facility, which is owned by Harris Corporation, a
substantially smaller portion is sufficient to accommodate its offices and
production operations. Accordingly, Harris leases 100,000 square feet of the
facility, including the former manufacturing portion,
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from Harris Corporation pursuant to a three-year lease which can be cancelled by
either party at any time upon six months' prior notice. Harris believes there is
sufficient, suitable commercial space available on acceptable terms to meet its
potential needs for alternative space; however, there is no guarantee that
Harris will be successful in locating such facilities on terms favorable to
Harris. In addition, any sustained interruption in manufacturing connected with
the transfer of Harris's facilities to a new location would likely result in
loss of revenue for Harris.
Of Harris's 32 sales offices in the United States and abroad, five are
located in Harris Corporation facilities. Harris negotiated terms of the lease
arrangements with Harris Corporation for each of these offices.
ENVIRONMENTAL MATTERS
Harris purchases, uses and arranges for disposal of chemicals used in the
manufacturing process. As a result, Harris is subject to federal and state
environmental protection and community right-to-know laws applicable to such
purchase, use and disposal. Violations of such laws can result in certain
circumstances in the imposition of substantial remediation costs and penalties.
Harris believes it currently is in compliance with all material environmental
laws and regulations.
LEGAL PROCEEDINGS
Harris is not a party to any material legal proceedings.
REGULATORY COMPLIANCE
Exports of Harris's high technology products are governed by federal laws
administered by the United States Department of Commerce. At present, Department
of Commerce regulations do not restrict export of Harris's products, and Harris
believes that it is in compliance with all other material laws and regulations
applicable to export sales. Compliance with export regulations does not impose
significant costs on Harris's operations.
MANAGEMENT
Certain of Harris's executive officers and certain directors of Harris are
expected to serve as officers or directors of Concurrent after the Transaction.
Following is certain information about current directors and executive officers
of Harris.
<TABLE>
<CAPTION>
NAME POSITION AGE
- ---------------------------- ------------------------------------------------------- ---
<S> <C> <C>
E. Courtney Siegel(5) Chairman, President and Chief Executive Officer 45
C. Shelton James(1)(2)(5) Director 56
Michael F. Maguire(1)(2)(4) Director 69
Brian Foremny(1)(3) Director 47
Robert L. Carberry(3) Director, President, Trusted Systems Division 53
Daniel S. Dunleavy Vice President, Chief Financial Officer and Chief
Administrative Officer 42
Michael N. Smith Vice President, General Manager, Real-Time Division 42
Bradley C. Lesher Vice President, International Sales 60
Robert T. Menzel Vice President, General Manager, Trusted Systems
Division 43
Robert E. Chism Vice President, Technical and Production Operations of
Harris 43
</TABLE>
- ---------------
(1) Member of the Audit Committee.
(2) Member of the Compensation and Stock Option Committee.
(3) Member of the Class of Directors whose term expires at the Harris Special
Meeting.
(4) Member of the Class of Directors whose term expires at the 1996 annual
meeting.
(5) Member of the Class of Directors whose term expires at the 1997 annual
meeting.
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<PAGE> 149
Information on the business experience of each executive officer (other
than those expected to serve following the Transaction) for at least the last
five years is set forth below. For biographical information relative to each
executive officer expected to serve following the Transaction, see "DIRECTORS
AND EXECUTIVE OFFICERS OF HARRIS AFTER THE TRANSACTION -- Executive Officers."
For biographical information relative to the Harris Directors whose terms are
not expiring at the Harris Special Meeting, see "DIRECTORS AND EXECUTIVE
OFFICERS OF CONCURRENT AFTER CONSUMMATION OF THE TRANSACTION -- Directors." For
biographical information related to Robert Carberry and Brian Foremny, who have
been nominated for election at the Harris Special Meeting, see "OTHER MATTERS
FOR CONSIDERATION BY HARRIS SHAREHOLDERS."
DANIEL S. DUNLEAVY, VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND CHIEF
ADMINISTRATIVE OFFICER OF HARRIS SINCE THE DISTRIBUTION. Mr. Dunleavy served as
Vice President, Strategic Alliances and International Operations of the Harris
Computer Systems Division from February 1991 through the Distribution. After
joining Harris Corporation in 1978, Mr. Dunleavy served in various positions of
increasing responsibility, including as Controller of the Harris Computer
Systems Division from 1988 until 1991.
MICHAEL N. SMITH, VICE PRESIDENT, AND GENERAL MANAGER OF THE REAL-TIME
DIVISION SINCE APRIL 1995. Mr. Smith was appointed Vice President, Marketing of
the Harris Computer Systems Division in January 1993 where he remained until
April 1995. Mr. Smith joined Harris Corporation, Computer System Division in
March 1992 as Director, Secure Systems Business. Prior to joining Harris, he
served in positions of increasing responsibility for 15 years with General
Electric Company's Aerospace division, serving as Program Manager Armor Training
when he left there to join the Harris Computer Systems Division.
ROBERT T. MENZEL, VICE PRESIDENT, GENERAL MANAGER OF THE TRUSTED SYSTEMS
DIVISION OF HARRIS SINCE APRIL 1995. Mr. Menzel served as Vice President,
National Sales of the Harris Computer Systems Division from April 1993 until
April 1995. He joined Harris Corporation, Computer Systems Division in 1992 as
Manager, Secure Systems Marketing and later assumed responsibility for the
entire Secure Business Area. Before joining Harris Corporation, he was employed
at the GE Aerospace division of General Electric Company for 12 years where he
held positions of increasing responsibility within the Business Development and
Marketing group, serving as Manager, Army Business Development, when he left
there to join Harris Computer Systems Division.
ROBERT E. CHISM, VICE PRESIDENT, TECHNICAL AND PRODUCTION OPERATIONS OF
HARRIS. Mr. Chism served as Director of the Simulation Business Area for the
Computer Systems Division of Harris Computer Systems Division beginning in June
of 1993 and assumed his present responsibilities in the fall of 1994. 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.
There is no family relationship between any Harris executive officer or
director.
GENERAL INFORMATION RELATING TO THE BOARD OF DIRECTORS
The business and affairs of Harris are managed under the direction of the
Harris Board. To assist it in carrying out its duties, the Harris Board has
delegated certain authority to two committees. The Harris Board held five
meetings during the fiscal year ended September 30, 1995. During fiscal year
1995, each member of the Harris Board attended all the meetings of the Harris
Board and all committees of the Harris Board of which he was a member.
Committees of the Board
The Harris Compensation Committee consists of two members of the Harris
Board who are not executive officers of Harris. The Harris Compensation
Committee is responsible for setting and approving the salaries, bonuses and
other compensation for Harris's executive officers, establishing compensation
programs, and determining the amounts and conditions of all grants of awards
under the Harris Stock Plan. The members of
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the Harris Compensation Committee are C. Shelton James and Michael F. Maguire,
neither of whom are executive officers of Harris. The Harris Compensation
Committee held two meetings during fiscal year 1995.
The Audit Committee of the Harris Board ("Harris Audit Committee")
recommends to the Harris Board the independent accountant to be nominated,
reviews the scope of their engagement, including the remuneration to be paid,
and reviews the independence of the accountants on a continuing basis. The
Harris Audit Committee, with the assistance of Harris's Chief Financial Officer
and other appropriate Harris personnel, reviews Harris's annual financial
statements and the independent auditor's report, including significant reporting
or operational issues; Harris corporate policies and procedures as they relate
to accounting and financial reporting and financial controls; litigation in
which Harris is a party; and use by Harris executive officers of expense
accounts and other non-monetary perquisites, if any. The Harris Audit Committee
may direct Harris's legal counsel, independent auditors and internal audit staff
to inquire into and report to it on any matter having to do with Harris's
accounting or financial procedures or reporting. The members of the Harris Audit
Committee are C. Shelton James and Michael F. Maguire, neither of whom are
executive officers of Harris. The Harris Audit Committee held no meetings during
fiscal year 1995, and one meeting shortly after the completion of the 1995
fiscal year-end audit to receive the audit report and review with Harris's
independent accountants the results of the audit and certain other related
matters.
As of the end of fiscal year 1995, Harris did not have a standing
nominating committee of the Harris Board nor a committee performing similar
functions.
SUMMARY COMPENSATION TABLE
The following table sets forth certain information with respect to the
annual and long-term compensation of Harris's Chief Executive Officer and
Harris's other four most highly compensated executive officers for fiscal years
ended September 30, 1995 and June 30, 1994 and 1993. During the periods
presented, the individuals were compensated in accordance with Harris
Corporation's plans and policies prior to the Distribution. All references in
the following tables to stock and stock options relate to awards of stock and
stock options of Harris. Pursuant to the Stock Option Agreements in place with
each of the executive officers listed below, certain outstanding Harris options
will become immediately exercisable at the Closing Date. See "THE PROPOSED
TRANSACTION -- Interests of Certain Persons in the Transaction."
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------------
ANNUAL COMPENSATION AWARDS
--------------------------------- -------------------- PAYOUTS
OTHER RESTRICTED ------- ALL OTHER
ANNUAL STOCK LTIP COMPEN-
NAME AND PRINCIPAL FISCAL COMPEN- AWARD(S) OPTIONS PAYOUTS SATION(4)
POSITION(1) YEAR(2) SALARY($) BONUS($)(3) SATION($) ($) (#) ($) ($)
- ---------------------------- ------- --------- ----------- ------- ---------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
E. Courtney Siegel.......... 1995 200,013 20,000 0 100,750 120,000 0 11,389
Chairman, President and 1994 140,206 37,200 6,720 0 0 0 9,104
Chief Executive Officer 1993 135,013 74,997 6,240 0 0 0 12,289
0 0
Daniel S. Dunleavy.......... 1995 120,016 10,000 0 35,650 75,000 0 7,132
Vice President, 1994 93,463 34,275 1,344 0 0 0 7,242
Chief Financial Officer
and 1993 90,012 33,706 1,352 0 0 0 7,215
Chief Administrative
Officer 0 0 0
Michael N. Smith............ 1995 110,011 10,000 0 0 60,000 0 6,554
Vice President, 1994 93,463 26,618 896 0 0 0 7,078
General Manager, 1993 84,122 10,771 416 0 0 0 19,568
Real-Time Division 0 0 0
Robert T. Menzel............ 1995 110,001 6,520 0 0 60,000 0 6,542
Vice President 1994 87,511 16,791 448 0 0 0 6,341
and General Manager, 1993 70,785 0 0 0 0 0 23,621
Trusted Systems Division 0 0 0
Bradley C. Lesher........... 1995 110,001 12,500 0 0 60,000 0 1,015
Vice President, 1994 0 0 0 0 0 0 0
International Sales 1993 0 0 0 0 0 0 0
</TABLE>
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- ---------------
(1) See "-- Management" for information concerning positions held by such
individuals with Harris.
(2) For fiscal years ending September 30, 1995, and June 30, 1994 and 1993.
(3) 1994 amounts represent bonuses achieved and accrued under Harris Corporation
but paid after September 28, 1994.
(4) Amounts reported for fiscal 1995 represent contributions to the Harris
Retirement Plan.
Option Grants in Fiscal Year 1995 and After
The following table shows all grants in fiscal year 1995 and thereafter of
stock options under the Harris Stock Plan to the executive officers named in the
Summary Compensation Table.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------- VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF
NUMBER OF TOTAL OPTIONS STOCK PRICE
SECURITIES GRANTED EXERCISE APPRECIATION FOR
UNDERLYING TO EMPLOYEES OR BASE OPTION TERM(a)
OPTION IN FISCAL PRICE EXPIRATION --------------------
NAME GRANTED(#) YEAR ($/SH) DATE 5%($) 10%($)
- ------------------------- ---------- ------------- -------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
E. Courtney Siegel....... 120,000(b) 28.6% 2.583 10/07/99 85,600 195,200
57,000 38.4% 4.708 10/31/01 74,195 163,970
Daniel S. Dunleavy....... 75,000(b) 17.9% 2.583 10/07/99 53,500 122,000
18,000 12.1% 4.708 10/31/01 23,430 51,780
Michael N. Smith......... 60,000(b) 14.3% 2.583 10/07/99 42,800 97,600
15,000 10.1% 4.708 10/31/01 19,525 43,150
Robert T. Menzel......... 60,000(b) 14.3% 2.583 10/07/99 42,800 97,600
15,000 10.1% 4.708 10/31/01 19,525 43,150
Bradley C. Lesher........ 60,000(b) 14.3% 2.583 10/07/99 42,800 97,600
9,000(c) 6.1% 4.708 10/31/01 11,715 25,890
</TABLE>
- ---------------
(a) The potential realizable values set forth under these columns result from
calculations assuming 5% and 10% annualized stock price growth rates from
grant dates to expiration dates as set by the Commission and are not
intended to forecast future price appreciation of Harris Common Stock based
upon growth at these prescribed rates. An alternative formula for a grant
date valuation, an approach which would state gains at present, and
therefore lower, value was not utilized. Harris is not aware of any formula
which will determine with reasonable accuracy a present value based on
future unknown factors. Actual gains, if any, on stock option exercises are
dependent on the future performances of Harris Common Stock. There can be no
assurance that the amounts reflected in this table will be achieved.
(b) Granted on October 8, 1994, one-third of these options became exercisable on
October 8, 1995, another one-third will become exercisable on October 8,
1996, and the remaining one-third will become exercisable on October 8,
1997. However, all of these options will become fully exercisable upon
consummation of the Transaction. See "THE PROPOSED TRANSACTION -- Interests
of Certain Persons in the Transaction".
(c) Granted on October 31, 1995, one-third of these options will become
exercisable on each of November 1, 1996, 1997 and 1998. However, all of
these options will become fully exercisable upon consummation of the
Transaction. See "THE PROPOSED TRANSACTION -- Interests of Certain Persons
in the Transaction".
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Option Exercises and Fiscal Year-End Values
The following table provides information as to the number and value of
unexercised options to purchase Harris Common Stock held by the named executive
officers at September 30, 1995, based on a closing sale price on September 29,
1995. None of the named executive officers exercised any options during fiscal
year 1995.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES VALUE OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
ACQUIRED ON REALIZED YEAR-END(#) AT FISCAL YEAR-END($)
NAME EXERCISE(#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- --------------------------- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
E. Courtney Siegel......... -- -- 39,999/80,001 121,664/243,336
Daniel S. Dunleavy......... -- -- 24,999/50,001 76,039/152,086
Michael N. Smith........... -- -- 20,001/39,999 60,836/121,664
Robert T. Menzel........... -- -- 20,001/39,999 60,836/121,664
Bradley C. Lesher.......... -- -- 20,001/39,999 60,836/121,664
</TABLE>
COMPENSATION PLANS
Employment Agreements. Harris has entered into employment agreements with
its executive officers which terminate on September 30, 1996, unless extended as
provided therein. With the exception of the employment agreements with Mr.
Siegel and Mr. Dunleavy, as described below, these agreements contain generally
the same terms and provide for a base salary to be reviewed for increase
annually with such increases as shall be awarded by the Board of Directors of
Harris or any committee delegated by the Board of Directors to review such
salary.
Employment under the employment agreements with executive officers of
Harris may be terminated by either Harris or the respective executive officer at
any time. In the event the executive officer resigns without "good reason" or is
terminated for "cause," compensation under the employment agreements will end.
In the event any such employment agreement (other than the agreements with
Messrs. Siegel and Dunleavy) is terminated by Harris without "cause" or the
executive officer resigns for "good reason," the terminated executive officer
will receive, among other things, severance compensation equal to one-half of
such employee's annual base salary and one-half of the target bonus under
Harris's bonus program. In such event, Messrs. Dunleavy and Siegel are entitled
to receive one times and two times their base salary and bonus, respectively. In
the case of Messrs. Siegel and Dunleavy, "good reason" includes any change in
their respective executive officer title or responsibilities. In addition, all
non-statutory options and stock appreciation rights of all such executive
officers shall be immediately exercisable upon termination of employment and
certain other awards previously made under any of Harris's compensation plans or
programs and previously not paid shall immediately vest on the date of such
termination.
Severance provisions shall also apply if the employee's employment is
terminated prior to or more than three years after the occurrence of a change of
control. The Transaction will constitute a change in control under the terms of
the employment agreements. In the event that any such employee is terminated
within three years following the occurrence of a change in control, such
employee shall be entitled to receive on the date of such termination an amount
equal to, among other things, such employee's base salary, target bonus under
the Harris's bonus program, any performance award payable under the Harris Stock
Plan, or similar plan, as well as any other benefits to which any such employee
would be entitled provided termination was by Harris without "cause" or with
"good reason" by the employee. In the case of Messrs. Siegel and Dunleavy, such
employees will be entitled to receive three times and two times their base
salary, target bonus and performance awards, respectively.
Following the Transaction, with the exception of Bradley C. Lesher, Vice
President, International Operations of Harris, it is expected, upon consummation
of the Transaction, that all of the executive officers of Harris will resign and
assume new positions with Concurrent. These executive officers include Harris's
President and Chief Executive Officer, its Chief Financial and Chief
Administrative Officer, the Vice President and General Manager of its Real-Time
division, and the Vice President, Technical and Production
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<PAGE> 153
Operations. The President and Chief Executive Officer and the Vice President,
Chief Financial Officer and Chief Administrative Officer have agreed to accept
$200,000 and $80,000 respectively in lieu of higher severance obligations due
under employment contracts between them and Harris. See "THE
TRANSACTION -- Interests of Certain Persons in the Transaction."
Directors' Fees. Non-employee directors of Harris receive a $15,000 annual
retainer payable upon election as a director of Harris at an annual meeting of
shareholders (and a pro rata amount to any non-employee who becomes a director
of Harris thereafter, payable at the time of becoming a director) and $1,000 per
Harris Board meeting attended. In addition, directors receive $750 ($1,000 for
the Chairman) for attendance at any meeting of a committee of the Harris Board,
payable at any such meeting, except for committee meetings held on the same day
as Harris Board meetings, in which case no such fee will be payable. Directors
are also reimbursed for travel and lodging expenses in connection with Harris
Board and committee meetings. No compensation shall be payable by Harris for
attendance at telephone board or committee meetings unless the Chairman of the
Board or the committee determines that unusual circumstances exist warranting
compensation for such telephone meeting.
The Harris Stock Plan, effective October 8, 1994, provides that
non-employee directors of Harris will receive options to purchase shares of
Harris Common Stock. Upon joining the Harris Board, all non-employee directors
receive 6,000 such options. In addition, on the date of the Harris Special
Meeting and each Annual Meeting thereafter, each director who is not an employee
of Harris will automatically be granted an option to purchase 1,500 shares of
Harris Common Stock. All such options will be non-statutory stock options and
priced at 100% of the fair market value on the date of grant. In the event of a
director's retirement, the options which are exercisable at the date of
retirement will be exercisable for three months thereafter, and, in the event of
a director's death, the options which are exercisable at the date of death will
be exercisable for the next succeeding 12 months. Neither the Harris Board nor
any committee of the Harris Board will have any discretion with respect to
options granted to non-employee directors pursuant to the Harris Stock Plan. The
director's option provisions of the plan are proposed to be amended by the
Harris Stock Plan Amendment. See "OTHER MATTERS FOR CONSIDERATION BY HARRIS
SHAREHOLDERS."
COMPENSATION AND STOCK OPTION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
During fiscal year 1995, the Harris Compensation Committee consisted of
three members of the Harris Board who were not executive officers of Harris. The
Harris Compensation Committee is responsible for setting and approving the
salaries, bonuses and other compensation for Harris's executive officers,
establishing compensation programs, and determining the amounts and conditions
of all grants of awards under the Harris Stock Plan.
Harris Compensation Committee Objectives
The Harris Compensation Committee believes that the objectives of executive
compensation are to attract, motivate and retain the highest quality executives
and to align the interests of these executives with those of the Harris
shareholders to motivate Harris executives to increase shareholder value by
improving corporate performance and profitability. To meet these objectives, the
Harris Compensation Committee seeks to provide competitive salary levels and
compensation incentives that attract and retain qualified executives, to
recognize individual performances and achievements as well as performance of
Harris relative to its peers, and to encourage ownership of Harris stock.
Executive Salaries
Base salaries for management employees are determined initially by
evaluating the responsibilities of the position, the experience of the
individual, internal comparability considerations, as appropriate, the
competition in the marketplace for management talent, and the compensation
practices among industry competitors and for public companies of the size of
Harris. Salary adjustments are determined and normally made at 12-month
intervals.
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<PAGE> 154
Annual Bonuses
Harris offers a bonus program for executives designed to provide year-end
incentive bonuses to executives who contributed materially to Harris's success
during the most recently completed fiscal year. The bonus program is intended to
enable Harris executives to participate in Harris's success as well as to
provide incentives for future performance. In determining amounts to be awarded
as bonuses, the Harris Compensation Committee takes into account a number of
factors, including Harris's gross revenue, net income, cash flow, and individual
performance and achievement. For the fiscal year ended September 29, 1995, with
one exception, no bonuses were granted to executive officers of Harris because
Harris' financial results did not meet those set forth in Harris's business
plan. A $10,000 bonus was awarded to Robert E. Chism, Vice President, Technical
and Production Operations of Harris, based upon Mr. Chism's accomplishing
certain goals that were established for him during October 1994, and upon the
Compensation Committee's review of information relating to executives having
similar management responsibilities at comparably sized competitors and other
public companies.
Long Term Incentives
Under the Harris Stock Plan, the Harris Compensation Committee may grant to
certain employees of Harris a variety of long-term incentives, including
non-qualified stock options, incentive stock options, stock appreciation rights,
exercise payment rights, grants of stock or performance awards.
During the fiscal year ended September 30, 1995, the Harris Compensation
Committee approved grants of stock options that had an exercise price of not
less than the fair market value of the underlying stock on the date of the
grant. The stock options, which would otherwise become exercisable with respect
to one-third of such options on each of October 8, 1995, 1996, and 1997, will
all become exercisable upon consummation of the Transaction, and all options
expire on October 8, 2004.
SUBMITTED BY THE HARRIS COMPENSATION
AND STOCK OPTION COMMITTEE:
C. SHELTON JAMES, CHAIRMAN
MICHAEL F. MAGUIRE
BRIAN FOREMNY
Compensation Committee Interlocks and Insider Participation
During fiscal year 1995, E. Courtney Siegel, Harris's Chairman, President
and Chief Executive Officer and Chairman of the Board, participated in
deliberations of the Harris Compensation Committee, as requested by such
Committee, concerning executive officer compensation. Brian Foremny, who is a
director and who serves as Harris's General Counsel, is a partner at the law
firm of Holland & Knight, which serves as Harris's outside general counsel.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth as of May 15, 1996 information related to
the beneficial ownership of (i) each person or entity known to Harris to own 5%
or more of Harris Common Stock; (ii) each Harris director and each Harris
executive officer named in the executive compensation table above and (iii) all
directors and executive officers as a group, including the name, and the number
of shares and percentage of Harris Common Stock which such person or entity
reported were beneficially owned by it including the number of shares of Harris
Common Stock that may be purchased, unless otherwise noted, during the 60 days
thereafter upon the exercise of existing stock options. Unless otherwise
indicated, the beneficial owners have sole voting and investment power with
respect to such shares and have the same address as Harris. For a discussion of
the effect of the Transaction on the beneficial ownership of Harris Common Stock
by directors and executive officers, see "THE PROPOSED TRANSACTION -- Interests
of Certain Persons in the Transaction."
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<PAGE> 155
<TABLE>
<CAPTION>
HARRIS COMMON STOCK
BENEFICIALLY OWNED PERCENTAGE OF
DIRECTLY OR HARRIS COMMON STOCK
NAME INDIRECTLY OUTSTANDING
---------------------------------------------- ------------------- -------------------
<S> <C> <C>
Okabena Partnership K......................... 522,300 8.71%
5140 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Austin W. Marxe............................... 366,915 6.12%
153 East 53rd Street
New York New York 10022(a)
David L. Babson & Co.......................... 491,700 8.20%
One Memorial Drive
Cambridge, Massachusetts 02142
Paul Tudor Jones, II.......................... 451,500 7.53%
c/o Tudor Investment Corporation
One Liberty Plaza, 51st Floor
New York, New York, 10006(b)
E. Courtney Siegel(c)(m)...................... 164,673 2.69%
C. Shelton James(e)(f)........................ 261,000 4.33%
Brian Foremny(d).............................. 30,000 *
Michael F. Maguire(e)......................... 6,000 *
Daniel S. Dunleavy(g)(m)...................... 122,559 2.00%
Michael N. Smith(h)........................... 75,802 1.25%
Bradley C. Lesher(i)(k)....................... 70,596 1.16%
Robert T. Menzel(k)........................... 90,815 1.49%
Directors and executive officers as group (9
persons).................................... 1,034,091 15.72%
</TABLE>
- ---------------
(a) Includes 97,705 shares of Harris Common Stock owned by Special Situations
Fund III, L.P. (the "Fund") and 24,600 shares of Harris Common Stock owned
by Special Situations Cayman Fund, L.P. (the "Cayman Fund"). MGP Advisors
Limited Partnership ("MGP"), the Fund's general partner, shares voting and
investment power as to the shares of Harris Common Stock owned by the Fund.
AWM Investment Company, Inc. ("AWM"), the general partner of MGP and the
Cayman Fund, and Austin W. Marxe, the principal shareholder and executive
officer of AWM, share voting and investment power as to the shares of
Harris Common Stock beneficially owned by MGP, the Fund, and the Cayman
Fund.
(b) Includes 146,600 shares of Harris Common Stock owned by The Raptor Global
Fund Ltd. ("Raptor Ltd."), 77,400 shares of Harris Common Stock owned by
The Raptor Global Fund L.P. ("Raptor L.P."), 30,100 shares of Harris Common
Stock owned by Tudor Arbitrage Partners L.P. ("TAP"), and 197,400 shares of
Harris Common Stock owned by Tudor BVI Futures, Ltd. ("Tudor BVI"). Tudor
Global Trading LLC ("TGT") is the sole general partner of TAP and shares
voting and investment power as to the shares of Harris Common Stock owned
by TAP. Tudor Investment Corporation ("TIC") provides investment advice to
Raptor Ltd., Raptor L.P., TAP, TGT, and Tudor BVI and shares voting and
investment power as to the shares of Harris Common Stock beneficially owned
by such entities. Paul Tudor Jones, II is the Chairman and Chief Executive
Officer of TIC, of which he owns a majority of the capital stock and voting
securities. As such, he shares voting and investment power as to the shares
of Harris Common Stock beneficially owned by TIC.
(c) Includes options to purchase 39,999 shares of Harris Common Stock that are
currently exercisable and 4,074 shares held pursuant to the Harris's
Employee Savings Plan. Does not include options on an additional 137,001
shares of Harris Common Stock that would have become exercisable upon
completion of the Transaction, but as to which Mr. Siegel and Harris agreed
to a later vesting in connection with a non-competition agreement between
Mr. Siegel and Harris. See "THE PROPOSED TRANSACTION -- Interests of
Certain Persons in the Transaction."
(d) Consists of options to purchase shares of Harris Common Stock that are
currently exercisable.
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<PAGE> 156
(e) Includes options to purchase 6,000 shares of Harris Common Stock that are
currently exercisable and an additional 15,000 shares that will become
exercisable upon approval of the Harris Stock Plan Amendment.
(f) Includes 255,000 shares that are deemed beneficially owned by Mr. James as a
result of his serving as an executive officer and director of various
investment limited partnerships.
(g) Includes options to purchase 24,999 shares of Harris Common Stock that are
currently exercisable; options with respect to an additional 68,001 shares
of Harris Common Stock that will become exercisable upon completion of the
Transaction; and 1,863 shares held pursuant to Harris's Employee Savings
Plan.
(h) Includes options to purchase 20,001 shares of Harris Common Stock that are
currently exercisable; options with respect to an additional 54,999 shares
of Harris Common Stock that will become exercisable upon completion of the
Transaction; and 802 shares held pursuant to Harris's Employee Savings
Plan.
(i) Includes options to purchase 20,001 shares of Harris Common Stock that are
currently exercisable and options with respect to an additional 48,999
shares of Harris Common Stock that will become exercisable upon completion
of the Transaction.
(j) Includes 1,200 shares owned by Mr. Lesher's wife and as to which Mr. Lesher
shares investment power and 396 shares held pursuant to Harris's Employee
Savings Plan.
(k) Includes options to purchase 20,001 shares of Harris Common Stock that are
currently exercisable; options with respect to 69,999 shares of Harris
Common Stock that will become exercisable upon completion of the
Transaction; and 815 shares held pursuant to Harris's Employee Savings
Plan.
(l) Includes options to purchase 158,001 shares of Harris Common Stock that are
currently exercisable and options with respect to an additional 423,999
shares of Harris Common Stock that will become exercisable upon completion
of the Transaction.
(m) Includes 39,000 shares (in the case of Mr. Siegel) or 13,800 shares (in the
case of Mr. Dunleavey) of Harris Common Stock that will be received by them
as a performance award subject to restrictions, which restrictions will
lapse upon consummation of the Transaction. Includes 78,000 shares (in the
case of Mr. Siegel) and 13,800 shares (in the case of Mr. Dunleavy) of
Harris Common Stock that will be received by them in connection with their
non-competition agreements upon consummation of the Transaction. See "THE
PROPOSED TRANSACTION -- Interests of Certain Persons in the Transaction"
and "CERTAIN INFORMATION REGARDING HARRIS -- Compensation Plans."
* Less than 1% of the outstanding Harris Common Stock.
Section 16(a) of the Exchange Act requires Harris's officers and directors
and persons who beneficially own more than ten percent of a registered class of
Harris's equity securities ("ten percent shareholders"), to file reports of
ownership of Harris's securities and changes in such ownership with the
Commission and the National Association of Securities Dealers, Inc. Officers,
directors and ten percent shareholders are required by the Commission's
regulations to furnish Harris with copies of all Section 16(a) forms they file.
Based solely upon its review of copies of such filings received by it and
written representations from certain reporting persons that no Form 5 was
required for those persons, Harris believes that during its fiscal year ended
September 30, 1995 all filing requirements applicable to its officers, directors
and ten percent shareholders were satisfied.
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<PAGE> 157
PERFORMANCE GRAPH
The following graph shows Harris's cumulative total return to shareholders
compared to Standard & Poor's 500 Index, and the Self-determined Peer Group
(defined below) over the period from October 10, 1994, the first day that Harris
was traded publicly, and the end of fiscal year 1995, based upon an initial
investment of $100. Total shareholder return assumes dividend reinvestment. The
stock performance shown on the following graph is not indicative of future price
performance. The Self-determined Peer Group includes Concurrent Computer
Corporation, Data General Corp., Digital Equipment Corp., Encore Computer Corp.,
Sequent Computer Systems Inc., Silicon Graphics Inc., and Tandem Computers
Incorporated.
COMPARISON OF ONE-YEAR CUMULATIVE TOTAL RETURN
AMONG HARRIS, S&P 500, AND PEER GROUP
<TABLE>
<CAPTION>
Oct-94(1) June-95(2) Sept-95
--------- ---------- -------
<S> <C> <C> <C>
Harris $100 $157.14 $192.86
S&P 500 $100 $141.83 $150.29
Peer Group $100 $141.14 $139.81
</TABLE>
(1) Assumes an initial investment of $100 on October 10, 1995. Total return
assumes reinvestment of dividends.
(2) During fiscal year 1995, Harris changed its year-end to September 30.
152
<PAGE> 158
HARRIS MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Six Month Period Ended March 30, 1996 Compared to the Six Month Period
Ended March 31, 1995
Net Sales. Net sales were lower in the six month period ended March 30,
1996 compared to the same period ended March 31, 1995. Overall, net sales were
$25.6 million for the six months ended March 30, 1996 compared to $27.8 million
for the period ended March 31, 1995. The net sales for the 1995 quarter were
favorably impacted by a $2.5 million sale to Lukon, a Russian company ("Lukon"),
and Harris's joint venture partner. Harris is currently working on a payment
plan with Lukon.
Product sales were $1.9 million lower in the six months ended March 30,
1996 as compared to the same period in 1995. Comparatively lower product sales
resulted from the Russian shipment described above, impacting the 1995 sales
offset by an increase in Trusted shipments of $1.0 million. Night Hawk sales
decreased to $18.2 million from $19.4 million for the quarter ended March 31,
1995. Proprietary sales decreased to $.7 million from $1.4 million for the six
months ended March 31, 1995. Maintenance sales decreased by $0.3 million in the
six months ended March 30, 1996 as compared to the same period in 1995. These
decreases in maintenance revenue and proprietary sales reflect the continuing
downward trend experienced by Harris over the last few years in these revenue
categories.
International sales were $6.8 million for the six month period ending March
30, 1996, a decrease of $1.6 million from the same period in 1995. This decrease
is the result of a $2.5 million sale to Lukon in 1995 and a slow down of sales
by the French subsidiary as the French government's slow down of spending
impacted the operation, offset by increased international Trusted sales.
Domestic sales decreased $.5 million to $18.8 million as a result of decreasing
maintenance sales.
Real-time product sales were $14.7 million for the six months ended March
30, 1996 compared to $17.5 million for the same period in 1995. The $2.5 million
decrease was due to the non-repeatability of the Lukon order discussed above.
Trusted product sales were $4.2 million for the six month period ended
March 30, 1995 compared to $3.4 million for the same period in 1996. The 1996
sales were to 63 customers whereas the 1995 sales included an order of $1.9
million to one customer. The 1996 sales were 74% commercial (non-US government)
compared to 35% for the same period in 1995.
Gross Income. Gross income as a percent of sales decreased to 47.9% from
52.1% for the same period in 1995. Gross income decreased by $2.2 million for
the current period. This was the result of decreased sales and an increase in
CyberGuard shipments as described above because CyberGuard products have lower
gross margins.
Net Income. Expenses increased by $1.1 million to $15.6 million for the
current period compared to the six month period ended March 31, 1995. The
increase is the result of the $.8 million charge for costs associated with the
Transaction and an increase in sales and marketing expense to market the
CyberGuard product. The decrease in Harris's sales as described above and the
increase in expenses resulted in a decrease in income to a loss of $3.3 million
compared to a profit of $0.2 million for the six month period ended March 31,
1995.
Fiscal Year Ended September 30, 1995 Compared to Fiscal Year Ended June 30,
1994
Net Sales. Net sales decreased to $45.1 million for fiscal year 1995 from
$64.6 million for fiscal year 1994. During fiscal year 1995, net product sales
were $31.2 million as compared to $50.1 million for fiscal year 1994. Fiscal
year 1995 net sales attributable to real-time open systems were $26.4 million as
compared to $37.0 million for fiscal year 1994. Management believes that
approximately $5.7 million of the decrease in revenue from real-time open
systems was the result of the completion and delivery of 5800 Series computers
ordered by customers in fiscal year 1993 but shipped in fiscal year 1994. During
this time period, Harris
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<PAGE> 159
experienced delays in receiving acceptable Motorola 88110 microprocessor chips,
which are essential to the 5800 Series computers. As a result of these delays,
during fiscal year 1993 Harris shipped 4800 Series computers to customers that
desired ultimately to acquire 5800 Series computers. Pending the delivery of the
5800 Series, these customers accepted delivery of, paid for and used the 4800
Series computers. Harris did not recognize income from the sale of these
computers, however, until the shipment of the 5800 Series microprocessor boards
during fiscal year 1994. During fiscal year 1995, Harris also experienced a slow
down in real-time product sales due to the inability of IBM to complete a
secondary cache chip. As discussed above, Harris has developed its own secondary
cache using chips available from multiple sources. Other than as discussed
herein, Harris has not experienced delays in commercializing announced products.
In addition, Harris was not successful in moving its real-time products to a
more commercial focus and as such experienced the delays inherent in the
government markets. Fiscal year 1995 net sales attributable to real-time
proprietary systems, reflecting sales for replacement or add-on parts for
Harris's installed base of proprietary systems, were $3.3 million as compared to
$4.3 million for fiscal year 1994. This continues the trend of more customers
moving from "proprietary systems" to "open systems."
Harris does expect the introduction of the PowerPC technology to result in
increased net sales for fiscal year 1996. Customers demand the latest technology
and the ability to easily upgrade existing systems as more advanced components
are developed; therefore, the PowerPC technology is expected to replace, to a
large extent, Harris's existing systems. Part of the shortfall in revenue for
fiscal year 1995 was due to the inability to complete the Night Hawk 6800
product. Harris's ability to maintain or to increase present levels of sales
will depend in part on market acceptance of the PowerPC technology. See "CERTAIN
INFORMATION REGARDING HARRIS". Accordingly, to the extent that such technology
is not accepted by the marketplace, Harris's net sales would be materially
adversely affected. See "SPECIAL FACTORS -- Competition" and "-- Limited Sources
of Supply."
Net sales of trusted systems decreased to $4.8 million for fiscal year 1995
from $8.9 million for fiscal year 1994. This decrease relates in part to a
significant order of $4.9 million by one customer. Shipments under this contract
were completed during fiscal year 1994. Harris did not sell its trusted systems
to non-government customers during fiscal year 1994 or prior, but intends to
utilize its expertise in the government sector in order to take advantage of
opportunities it expects to arise from the projected increase in commercial
demand for trusted computer systems, particularly in the health care,
manufacturing, financial services and professional services industries. See
"CERTAIN INFORMATION REGARDING HARRIS -- Markets." Harris believes that demand
for its trusted systems should increase in the future, especially as commercial
users shift from centralized (i.e., mainframe) computing to decentralized (i.e.,
local area network, wide area network) computing. This shift in trusted systems
to a more commercial focus was begun in fiscal year 1995 and sales in the
firewall area grew from almost none in fiscal year 1994 to $2.0 million in
fiscal year 1995. Although Harris believes that its trusted systems division is
reasonably well positioned to take advantage of this growing market, given the
emerging nature of the this market, no assurances can be given that Harris will
be able to market and service its trusted systems products effectively or that
the products will be competitive as to price and security features. See "SPECIAL
FACTORS -- Harris's Limited Operating History in Trusted Market;
Unpredictability of Operating Results."
Maintenance revenue decreased to $13.6 million for fiscal year 1995 from
$14.5 million for fiscal year 1994. This decrease was principally a result of
the shift in market demand to open systems. Harris's open systems require less
maintenance as compared to proprietary systems, and open systems can, in many
cases, be serviced by the customers themselves. Maintenance revenues are also
declining as Harris's installed base of proprietary systems reaches the end of
its useful life. Management expects maintenance revenue to stabilize in fiscal
year 1996.
During fiscal year 1995, Harris's net product sales to agencies of the
United States government and their prime contractors were $14.6 million and
maintenance revenue was $8.4 million. During fiscal year 1994, the comparable
net product sales were $25.7 million and the comparable maintenance revenue was
$7.4 million. During fiscal year 1995, Harris's net product sales to the United
States Department of Defense or to other contractors for integration into
systems for the Department of Defense were $13.2 million and maintenance revenue
was $1.0 million. During fiscal year 1994, the comparable Department of Defense
net product sales
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<PAGE> 160
were $13.9 million and maintenance revenue was $2.5 million. During fiscal year
1995, net product sales to the United States government agencies and their
contractors that were not defense related were $1.4 million and maintenance
revenue was $7.4 million. During fiscal year 1994, the comparable non-defense
related net product sales were $11.9 million and maintenance revenue was $4.9
million. Management believes these decreases in United States government-related
net product sales are in part attributable to the revenue from the 5800 product
Series computers ordered in fiscal year 1993 but shipped in fiscal year 1994, as
presented above. These decreases also reflect the completion of one government
contract during fiscal year 1994 and the reduction of sales under two other
contracts during fiscal year 1995 as they move toward completion.
International net sales decreased to $11.9 million for fiscal year 1995
from $16.8 million for fiscal year 1994. This decrease is attributable
principally to the completion during fiscal year 1994 of a trusted systems
contract with a government contractor in the U.K., which had resulted in $4.9
million of revenue during fiscal year 1994.
Domestic net product sales decreased to $21.3 million for fiscal year 1995
from $35.1 million for fiscal year 1994 and domestic maintenance revenue
decreased to $11.9 million for fiscal year 1995 from $12.8 million for fiscal
year 1994. Management believes this decrease in net product sales in part
reflects the delay, until 1994, in shipments of 5800 Series computers due to the
delay in receiving acceptable Motorola 88110 microprocessor chips, as described
above. In addition, revenue was lower in fiscal year 1995 due to the production
delays with respect to the Night Hawk 6800 product as described above and the
slow rate of expansion of revenues in the commercial market. Maintenance
revenues declined principally due to the shift in Harris's product mix to open
systems as discussed above.
Gross Margin. Gross margin for sales and rentals decreased to 40.5% in
fiscal year 1995 from 54.4% in fiscal year 1994 as a result of decreased sales
of Night Hawk Series computers and $2.4 million of inventory reserve taken.
Gross margins for sales of trusted systems was 34.8% in fiscal year 1995. Gross
margins for Night Hawks with trusted systems are the same as Night Hawks without
the trusted features. However, gross margins for trusted systems declined with
the introduction during fiscal year 1995 of Harris's CyberGuard product. The
gross margin for CyberGuard products is smaller than for Night Hawks, primarily
because CyberGuard customers do not require CyberGuard's real-time capabilities.
Accordingly, although Harris's CyberGuard products have real-time capabilities,
Harris prices the CyberGuard to be more in line with its competitors' prices for
firewalls without real-time capabilities. Service and maintenance gross margins
increased to 48.2% from 42.1% as a result of decrease in expenses as the product
mix of service moves more to the open system Night Hawk computer. Open systems
are generally more reliable and therefore require less service. International
maintenance revenue increased, which also resulted in improved gross margins.
Indirect Expenses. Research, development, marketing, administrative and
general expenses for fiscal year 1995 increased by $4.4 million as Harris
invested to introduce its trusted product in the commercial market. Harris also
booked a reserve of $1.3 million for a shipment made to Lukon, a Russian
corporation, and Harris's joint venture partner. Harris is currently working on
a payment plan with Lukon.
Net Income (Loss). Net loss for fiscal year 1995 was $11.1 million
compared to a profit of $4.4 million for fiscal year 1994. The decrease was
principally the result of the decrease in revenue experienced during fiscal year
1995. Additions to the reserves for inventory and doubtful accounts accounted
for $4.0 million of the loss. See "-- Fiscal Year Ended June 30, 1995 Compared
to Fiscal Year Ended June 30, 1994 -- Net Sales."
Harris received interest income of $0.5 million on its cash and marketable
securities compared to a slight charge for fiscal year 1994.
Harris paid no income taxes during fiscal year 1995 and is currently
operating with a tax loss carryforward in all of its operations.
Change in Fiscal Year. Harris changed its fiscal year end from June 30 to
September 30 effective the year beginning October 1, 1994. Revenue for the three
months ending September 30, 1994 was $7.7 million. Sales were lower than
expected due in part to the protracted nature of the spin-off from Harris
Corporation and its effects on product sales focus by management.
155
<PAGE> 161
The loss after tax for the period was $7.6 million compared to a profit of
$375,000 for the quarter ended September 30, 1993. The loss for the period was
impacted by a $1.3 million charge for restructuring, $2.5 million pre-tax and
$2.4 million of after-tax charges for expenses relating to the spin-off from
Harris Corporation and a $1.7 million charge in connection with the repatriation
of cash from Harris's German subsidiary.
Fiscal Year Ended June 30, 1994 Compared to Fiscal Year Ended June 30, 1993
Net Sales. Net sales increased to $64.6 million for fiscal year 1994 from
$55.5 million for fiscal year 1993. During fiscal year 1994, net product sales
were $50.1 million as compared to $39.4 million for fiscal year 1993. Fiscal
year 1994 net sales attributable to real-time open systems were $37.0 million as
compared to $29.0 million for fiscal year 1993. The increase in revenue from
real-time open systems was the result of the delayed completion and delivery of
5800 Series computers ordered by customers in fiscal year 1993 but shipped in
fiscal year 1994 as described above. Fiscal year 1994 net sales attributable to
real-time proprietary systems, reflecting sales for replacement or add-on parts
for Harris's installed base of proprietary systems, were $4.3 million as
compared to $4.2 million for fiscal year 1993.
Net sales of trusted systems increased to $8.9 million for fiscal year 1994
from $6.2 million for fiscal year 1993. This increase relates in part to a
significant order of $4.9 million by one customer. Shipments under this contract
were completed during fiscal year 1994. Harris did not sell its trusted systems
to non-government customers during 1994 or prior. See "CERTAIN INFORMATION
REGARDING HARRIS -- Markets."
Maintenance revenue decreased to $14.5 million for fiscal year 1994 from
$16.1 million for fiscal year 1993. This decrease was principally a result of
the continuing shift in market demand to open systems, which require less
maintenance and support as compared to proprietary systems. Maintenance revenues
are also declining as Harris's installed base of proprietary systems reaches the
end of its useful life. See "CERTAIN INFORMATION REGARDING
HARRIS -- Maintenance."
During fiscal year 1994, Harris's net product sales to agencies of the
United States government and their prime contractors were $25.7 million and
maintenance revenue was $7.4 million. During fiscal year 1993, the comparable
net product sales were $15.4 million and the comparable maintenance revenue was
$8.6 million. During fiscal year 1994, Harris's net product sales to the United
States Department of Defense or to other contractors for integration into
systems for the Department of Defense were $13.9 million and maintenance revenue
was $2.5 million. During fiscal year 1993, the comparable Department of Defense
net product sales were $1.0 million and maintenance revenue was $3.2 million.
The increase in net product sales to the Department of Defense and related
contractors is attributed to two factors. First, Harris increased its sales of
trusted products as a result of the NCSC B1-level certification of these
products. Second, the increase stems from the completion and delivery of the
5800 Series computers ordered in fiscal year 1993 but shipped in fiscal year
1994. During fiscal year 1994, net product sales to the United States government
agencies and their contractors that were not defense related were $11.9 million
and maintenance revenue was $4.9 million. During fiscal year 1993, the
comparable non-defense related net product sales were $14.4 million and
maintenance revenue was $5.4 million. This decrease reflects the completion of
one government contract and the cancellation of another.
International net sales increased to $16.8 million for fiscal year 1994
from $14.7 million for fiscal year 1993. This increase was attributable
principally to increased sales in France and Asia.
Domestic net product sales increased to $35.1 million for fiscal year 1994
from $26.2 million for fiscal year 1993 and domestic maintenance revenue
decreased to $12.8 million for fiscal year 1994 from $14.6 million for fiscal
year 1993. The increase in net product sales was due to the completion and
delivery of the 5800 Series computers ordered in fiscal year 1993 but shipped in
fiscal year 1994. The decrease in maintenance revenue was attributable to the
factors described above.
Gross Margin. Gross margin for sales and rentals increased to 54.4% in
fiscal year 1994 from 48.7% in fiscal year 1993 as a result of increased sales
of Night Hawk 5800 Series computers having higher gross margins. Harris believes
this increase in gross margin is an aberration that arose from the delays until
1994 of
156
<PAGE> 162
recognizing revenues from sales of 5800 Series computers ordered in fiscal year
1993 but shipped in fiscal year 1994. Historically, Harris's gross margins have
been relatively stable, primarily because Harris and its competitors price their
products based on product characteristics and service and not through
discounting or other pricing policies. Service and maintenance gross margins
increased to 42.1% from 40.1% as a result of decreased start up expenses for the
Night Hawk 5800 Series computers.
Indirect Expenses. Research, development, marketing, administrative and
general expenses for fiscal year 1994 remained relatively constant, both in
absolute dollars and as a percentage of net sales as compared to fiscal year
1993. Other indirect expense (referred to in Harris's Consolidated Financial
Statements as "Harris Corporate Expense Allocation") represented the historic
charges by Harris Corporation to Harris for Harris's proportionate share of
legal, financial and other administrative expenses.
Net Income (Loss). Net income for fiscal year 1994 increased to $4.4
million from a loss of $0.5 million for fiscal year 1993. Fiscal year 1994
operating profit attributable to domestic operations increased to $3.8 million
from a loss of $2.3 million in fiscal year 1993. As described above, the
increase was principally the result of recognizing revenue during fiscal year
1994 from upgrades of the 4800 Series computers to 5800 Series computers that
were ordered in fiscal year 1993. Management believes that operating profit
attributable to domestic operations would have increased to break even in fiscal
year 1993 but for such recognition of revenue. The increase in net income is
also due to an increase in operating profit attributable to European operations
of $1.0 million for fiscal year 1994 from $0.3 million for fiscal year 1993.
That increase is the result of increasing product revenues and decreasing costs
relating to European operations. The increase in profitability also offset a
decrease in tax benefit of $2.6 million from fiscal year 1993 to fiscal year
1994.
The fiscal year 1994 results include an after-tax adjustment of
approximately, $.1 million reflecting Harris Corporation's adoption of Statement
of Financial Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions".
Harris has not incurred any substantial expense for interest during any of
the periods under consideration. Interest expense results from direct borrowings
of the business. See "-- Liquidity and Capital Resources".
Impact of Foreign Exchange. Harris's international sales are accomplished
in the currency of the customer, typically French francs, British pounds and
German marks, which exposes Harris to fluctuations in foreign currency exchange
rates and to other material risks associated with international operations.
Harris has not in the past suffered a material adverse impact from currency
fluctuations for any of the periods under consideration. Harris's risk from such
activities has been reduced because Harris has been able to pay the expenses of
its international operations in local currency, which has lessened the need for
conversion into United States dollars. In addition, Harris utilizes exchange
rate agreements with customers and foreign currency hedging instruments to
minimize the currency risks of international transactions. Gains and losses
resulting from currency rate fluctuations did not have a material effect on
Harris's results of operations in fiscal years 1995, 1994 or 1993, but Harris's
risk in this regard may increase as Harris's international sales increase in
volume and geographical distribution. The impact of translating the assets and
liabilities of these operations to United States dollars is included as a
component of business equity. At September 30, 1995, the cumulative translation
adjustment reduced business equity by approximately $0.5 million, compared to a
decrease of approximately $1.9 million at June 30, 1994 and an increase of
$266,000 at June 30, 1993.
LIQUIDITY AND CAPITAL RESOURCES
Harris had cash and cash equivalents on hand of $1.3 million as of March
30, 1996, representing a decrease of $7.0 million from $8.3 million as of
September 30, 1995. Accounts receivable increased by $5.3 million as a result of
increased sales and slow collections internationally, especially in France.
Inventory decreased by $2.7 million as inventory reduction programs take effect.
Machinery and equipment remained flat as cash conservation programs offset the
purchases required for demo equipment required for the new products. Capitalized
software increased by $1.4 million as Harris increased development spending in
conjunction with the February release of its enhanced trusted product offering
for the CyberGuard.
157
<PAGE> 163
To date, Harris's cash requirements have been funded from its working
capital and operating cash flow. Harris has no outstanding bank borrowings or
long-term debt. Its principal sources of liquidity at March 30, 1996 consisted
of cash, accounts and notes receivable and vendor trade credit. As a result of
the Transaction, it is expected that cash flows from operations will be
insufficient to satisfy Harris's ongoing cash requirements.
The future liquidity of Harris will be affected by numerous factors,
including sales volumes, gross margins, the levels of selling, general and
administrative expenses required to fully implement Trusted systems product
sales to commercial customers, levels of required capital expenditures, and
access to external sources of financing. On April 1, 1996, Harris entered into a
line of credit of up to $5.0 million with Foothill Capital Corporation. The line
of credit allows for the borrowing of up to 80% of eligible domestic accounts
receivables. The line is backed by all the domestic assets of Harris. The line
of credit will terminate upon the consummation of the Transaction. Management
expects to undertake an underwritten public offering of Harris Common Stock that
may be effected shortly after the consummation of the Transaction. There can be
no assurance that any public offering will be undertaken or that, if undertaken,
that such offering will be successful. If such an offering is undertaken, such
offering will be registered pursuant to the Securities Act, may include shares
of Harris Common Stock to be issued to Concurrent pursuant to the Transaction
and certain other selling shareholders, and will be made only by means of a
prospectus meeting the requirements of state and federal securities laws. This
is not such a prospectus.
Harris expects to realize certain charges in the quarter ending June 30,
1996. Expenses associated with the Transaction for the six months ended March
30, 1996 were $.8 million. In the quarter ending June 30, 1996, Harris estimates
that it will incur approximately an additional $1.4 million in expenses related
to the Transaction; approximately $0.4 million in charges related to stock
grants; approximately $2.8 million in charges to write-off capitalized software;
and a loss of approximately $8.5 million on the Transaction (based on an assumed
market price of Concurrent Common Stock of $2.50 per share). In addition, Harris
will report approximately 23% of any losses reported by Concurrent in the same
period.
After consummation of the Transaction, a principal source of liquidity will
be the Concurrent Common Stock Consideration and the Concurrent Preferred Stock.
Harris may obtain a line of credit that is likely to be secured by all of its
assets (including such Concurrent securities). Additionally, immediately
following the Transaction, Harris intends to sell a portion of the Concurrent
Common Stock. Harris does not intend to be a long-term holder of the remaining
Concurrent securities. Harris's ability to sell or pledge these Concurrent
securities will be subject to limitations imposed in the Share Holding Agreement
and in any line of credit obtained. See "TERMS OF THE TRANSACTION -- The Share
Holding Agreement." These limitations and conditions may affect Harris's
flexibility in generating cash through sales of the Concurrent Common Stock
Consideration and the Concurrent Preferred Stock and may require Harris to seek
alternative sources of cash, including borrowings and equity sales. In addition,
the timing of such sales may be affected by other factors beyond Harris's
control, such as general market conditions and changes in the business,
operations or prospects of Concurrent. If adequate funds are not available,
Harris may be required to curtail certain activities, including product
development, marketing and sales activities. Although there can be no assurance
that additional financing will be available to Harris on acceptable terms,
Harris believes that the proceeds from sales or pledges of the Concurrent
securities and any additional financing will be sufficient to satisfy Harris's
operations and capital requirements for the foreseeable future.
INFLATION
Inflation has not significantly impacted Harris's operations.
158
<PAGE> 164
CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Harris has engaged KPMG Peat Marwick LLP as its independent accountants.
Ernst & Young LLP ("Ernst & Young") had been engaged by Harris Corporation,
Harris's former corporate parent, to audit the financial statements of Harris in
connection with the Distribution. The report of Ernst & Young, which contains no
adverse opinion or a disclaimer of opinion, or qualification as to uncertainty,
audit scope, or accounting principles, appears in Harris's Registration
Statement on Form 10 effective September 19, 1994. As an independent
corporation, Harris declined to engage Ernst & Young as its independent
auditors. The Harris Board approved the engagement of KPMG on November 11, 1994.
In connection with the audits of the financial statements of Harris for
each of the two years ended June 30, 1994, and in the subsequent interim period,
no disagreements existed between Harris and Ernst & Young on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure that, if not resolved to the satisfaction of Ernst & Young,
would have caused it to make reference to the subject matter of the disagreement
in connection with its report.
Harris has requested Ernst & Young to furnish it a letter addressed to the
Commission stating whether it agrees with the above statements. A copy of Ernst
& Young's letter dated November 14, 1994 was filed as an exhibit to Harris's
Current Report on Form 8-K dated November 13, 1994.
OTHER MATTERS
As of the date of this Joint Proxy Statement, the Harris and Concurrent
Boards do not know of any other matters to be presented for action by the
shareholders at the Special Meetings. If, however, any other matters not now
known are properly brought before the Harris and Concurrent Special Meetings,
the proxy holders will vote upon the same according to their discretion and best
judgment.
DATE FOR SUBMISSION OF PROPOSALS OF HARRIS SHAREHOLDERS
Proposals of Harris shareholders must be received on or before January 21,
1997 to be considered for inclusion in the proxy statement and for presentation
at the annual meeting of Harris shareholders to be held in 1997.
159
<PAGE> 165
HARRIS COMPUTER SYSTEMS, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors Report........................................................... F-2
Report of Independent Certified Public Accountants.................................... F-3
Consolidated Balance Sheets -- as of September 30, 1995, 1994 and March 30, 1996
(unaudited)......................................................................... F-4
Consolidated Statements of Operations -- Year Ended September 30, 1995; and the three
months ended September 30, 1994, and the six months ending March 30, 1996 and March
31, 1995 (unaudited)................................................................ F-5
Consolidated Statements of Cash Flow -- Year Ended September 30, 1995; and the three
months ended September 30, 1994, and the six months ending March 30, 1996 and March
31, 1995 (unaudited)................................................................ F-6
Consolidated Statements of Shareholders' Equity....................................... F-7
Notes to Consolidated Financial Statements............................................ F-8
Consolidated Balance Sheet Information -- as of September 30, 1995.................... F-17
Consolidated Statement of Operations Information -- Year Ended September 30, 1995..... F-18
Notes to Consolidated Financial Information........................................... F-19
Combined Statements of Operations -- Year Ended June 30, 1994 and June 30, 1993....... F-20
Consolidated Statements of Cash Flows -- Year Ended June 30, 1994 and June 30, 1993... F-21
Notes to Financial Statements of Harris Computer Systems Business..................... F-22
</TABLE>
F-1
<PAGE> 166
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Harris Computer Systems Corporation
and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Harris
Computer Systems Corporation and subsidiaries as of September 30, 1995 and 1994,
and the related consolidated statements of operations, shareholders' equity, and
cash flows for the year ended September 30, 1995 and the three months ended
September 30, 1994. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Harris
Computer Systems Corporation and subsidiaries as of September 30, 1995 and 1994,
and the results of their operations and their cash flows for the year ended
September 30, 1995 and the three months ended September 30, 1994 in conformity
with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The combining information is
presented for purposes of additional analysis and is not a required part of the
basic consolidated financial statements. Such information has been subjected to
the auditing procedures applied in the audits of the basic consolidated
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic consolidated financial statements taken as a
whole.
KPMG PEAT MARWICK LLP
November 3, 1995, except as to the
stock split noted in note 2, which is as
of March 18, 1996 and to note 15,
which is as of March 26, 1996
Miami, Florida
F-2
<PAGE> 167
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Harris Corporation:
We have audited the accompanying combined statements of operations and cash
flows of the Harris Computer Systems Business for each of the two years in the
period June 30, 1994. These financial statements are the responsibility of the
Business' management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined results of operations and cash flows of
Harris Computer Systems Business for the years ended June 30, 1994 and 1993 in
conformity with generally accepted accounting principles.
As discussed in Note E to the financial statements, effective July 1, 1993 the
Business changed its method of accounting for postretirement benefits other than
pensions.
Ernst & Young LLP
Orlando, Florida
July 13, 1994
F-3
<PAGE> 168
HARRIS COMPUTER SYSTEMS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------- MARCH 30,
1995 1994 1996
-------- ------- -----------
<S> <C> <C> <C>
(UNAUDITED)
Cash and cash equivalents.................................. $8,265 $7,649 $1,307
Accounts and notes receivable, less allowance for
uncollectible accounts of $1,513 and $213 at September
30, 1995 and 1994, respectively (Note 11)................ 9,994 11,387 15,335
Due from Harris Corporation (Note 6)....................... -0- 6,369 --
Inventories (Note 8)....................................... 9,080 14,078 6,381
Prepaid expenses........................................... 530 1,529 660
-------- ------- --------
Total current assets.................................. 27,869 41,012 23,683
Machinery and equipment, net (Note 10)..................... 5,947 7,493 5,912
Capitalized computer software development costs, less
accumulated amortization of $6,870 and $5,565 at
September 30, 1995 and 1994, respectively (Note 4)....... 6,734 5,715 8,135
Other assets............................................... 881 709 822
-------- ------- --------
Total assets............................................... $41,431 $54,929 $38,552
======== ======= ========
Accounts payable........................................... 3,493 4,694 4,565
Deferred revenue........................................... 401 784 628
Accrued expenses (Note 9).................................. 5,441 6,492 4,219
-------- ------- --------
Total current liabilities............................. 9,335 11,970 9,412
Deferred income taxes (Note 7)............................. -- 166 --
-------- ------- --------
Total liabilities..................................... 9,335 12,136 9,412
Shareholders' equity (Note 12)
Common stock par value $0.01 authorized 20,000,000 shares;
issued and outstanding 5,911,437 shares at September 30,
1995 and 1994, and 5,996,143 shares at March 30, 1996.... 59 59 60
Additional paid in capital............................... 43,662 43,662 44,144
Accumulated deficit...................................... (11,088) -- (14,363)
Cumulative translation adjustment.......................... (537) (928) (701)
-------- ------- --------
Total shareholders' equity................................. 32,096 42,793 29,140
-------- ------- --------
Total liabilities and shareholders' equity................. $ 41,431 $54,929 $ 38,552
======== ======= ========
</TABLE>
See notes to the accompanying consolidated financial statements
F-4
<PAGE> 169
HARRIS COMPUTER SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS ENDED
YEAR ENDED ENDED ---------------------------
SEPTEMBER 30, SEPTEMBER 30, MARCH 30, MARCH 30,
1995 1994 1996 1995
------------- ------------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Sales
Equipment.............................. $31,184 $4,242 $18,942 $20,848
Maintenance............................ 13,927 3,506 6,622 6,938
--------- --------- --------- ---------
45,111 7,748 25,564 27,786
Cost of sales
Equipment.............................. 18,550 3,443 10,051 9,711
Maintenance............................ 7,214 2,023 3,279 3,612
--------- --------- --------- ---------
25,764 5,466 13,330 13,323
Gross profit............................. 19,347 2,282 12,234 14,463
Operating expenses
Research and development............... 7,903 1,517 3,580 3,890
Selling, general and administrative.... 22,984 4,836 11,266 10,582
Restructuring (Note 6)................. -- 1,256 -- --
Transaction costs relating to spin off
(Note 6)............................ -- 2,500 820 --
--------- --------- --------- ---------
Total other operating expenses...... 30,887 10,109 15,666 14,472
--------- --------- --------- ---------
Operating loss........................... (11,540) (7,827) (3,432) (9)
Interest income (expense), net........... 456 (69) 155 207
Other income (expense), net.............. (4) (72) 2 25
--------- --------- --------- ---------
452 (141) 157 232
Net income (loss) before income tax
provision (benefit).................... (11,088) (7,968) (3,275) 223
Income tax provision (benefit)........... -- (378) -- 8
--------- --------- --------- ---------
Net income (loss)........................ (11,088) (7,590) (3,275) 215
Earnings (loss) per common share......... $(1.88) $(1.28) $(0.55) $0.04
========= ========= ========= =========
Weighted average number of shares
outstanding............................ 5,911,437 5,911,437 5,924,287 5,911,437
========= ========= ========= =========
</TABLE>
See notes to the accompanying consolidated financial statements
F-5
<PAGE> 170
HARRIS COMPUTER SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS ENDED
YEAR ENDED ENDED ---------------------------
SEPTEMBER 30, SEPTEMBER 30, MARCH 30, MARCH 30,
1995 1994 1996 1995
------------- ------------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net income (loss)...................... $ (11,088) $(7,590) $(3,275) $215
Adjustment to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation........................... 3,446 1,134 1,389 2,005
Amortization........................... 1,305 326 1,066 653
Compensation expense................... -- -- 321 --
Deferred income taxes.................. (166) (1,075) -- 1,414
Changes in assets and liabilities
Receivables......................... 1,393 12,333 (5,341) (6,351)
Due from Harris Corporation......... 6,369 (6,369) -- 6,386
Inventories......................... 4,998 (863) 2,699 1,893
Accounts payable.................... (1,201) 2,142 1,073 (822)
Accrued expenses.................... (1,051) 1,502 (1,222) (2,422)
Deferred revenue.................... (383) (344) 227 336
Prepaid expenses and other assets... 827 (510) -- --
Other............................... 391 257 (235) 596
-------- ------- ------- -------
Net cash provided (used) by operating
activities............................. 4,840 943 (3,298) 3,903
-------- ------- ------- -------
Cash flows from investing activities
Additions to machinery and equipment... (1,900) (1,151) (1,354) (1,281)
Software development costs.......... (2,324) (569) (2,467) (854)
-------- ------- ------- -------
Net cash used by investing activities.... (4,224) (1,720) (3,821) (2,135)
-------- ------- ------- -------
Cash flows from financing activities
Issuance of common stock............... -- -- 161 0
-------- ------- ------- -------
Net cash provided by financing
activities............................. -- -- 161 0
======== ======= ======= =======
Net increase (decrease) in cash and cash
equivalents............................ 616 (777) (6,958) 1,768
Cash and cash equivalents at beginning of
the period............................. 7,649 8,426 8,265 7,649
-------- ------- ------- -------
Cash and cash equivalents at end of the
period................................. $8,265 $7,649 $1,307 $9,417
======== ======= ======= =======
</TABLE>
See notes to the accompanying consolidated financial statements
F-6
<PAGE> 171
HARRIS COMPUTER SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
$.01 PAR VALUE ADDITIONAL CUMULATIVE NET
------------------ PAID IN ACCUMULATED TRANSLATION INVESTMENT
SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT BY HARRIS TOTAL
--------- ------ ---------- ----------- ----------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance June 30, 1994............ -- -- -- -- (1,185) 51,311 50,126
Net loss to distribution
date (Note 1).................. -- -- -- -- -- (7,590) (7,590)
Issuance of common stock to
Harris Corporation's
shareholders................... 5,911,437 $ 59 43,662 -- -- (43,721) --
Translation adjustments.......... -- -- -- -- 257 -- 257
--------- --- ------- -------- ------- ------- --------
Balance September 30, 1994....... 5,911,437 $ 59 43,662 -- (928) -- 42,793
Net loss......................... -- -- -- (11,088) -- -- (11,088)
Translation adjustments.......... -- -- -- -- 391 -- 391
--------- --- ------- -------- ------- ------- --------
Balance September 30, 1995....... 5,911,437 $ 59 43,662 (11,088) (537) -- 32,096
Issuance of common stock
(unaudited).................... 84,706 1 482 -- -- -- 483
Net loss (unaudited)............. -- -- -- (3,275) -- -- (3,275)
Translation adjustments
(unaudited).................... -- -- -- -- (164) -- (164)
--------- --- ------- -------- ------- ------- --------
Balance March 30, 1996
(unaudited).................... 5,996,143 $ 60 44,144 (14,363) (701) -- 29,140
========= === ======= ======== ======= ======= ========
</TABLE>
See notes to the accompanying consolidated financial statements
F-7
<PAGE> 172
HARRIS COMPUTER SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 30, 1996
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
1. ORGANIZATION OF THE COMPANY
Harris Computer Systems Corporation and Subsidiaries (the "Company") became
an independent company effective September 29, 1994 (the "Distribution Date")
when Harris Corporation ("Harris") spun off its Harris Computer Systems
Division. The Company develops real-time and multi-level secure computer
systems, solutions and software for commercial and government markets. One share
of the Company's common stock, together with the associated preferred stock
purchase rights (Note 12), was issued for every twenty shares of Harris common
stock, outstanding to shareholders of record on October 7, 1994. The terms of
the spin-off resulted in net assets of $43,721 being transferred from Harris to
the Company.
The Company sells products to Harris and its subsidiaries. Sales to these
operations were $439 for the year ended September 30, 1995; $644 for the three
months ended September 30, 1994.
2. SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION -- The consolidated financial statements include those of
Harris Computer Systems Corporation and its wholly-owned subsidiaries. All
intercompany transactions between entities have been eliminated.
INVENTORIES -- Inventories are carried at the lower of cost, determined by
the First-In-First-Out (FIFO) method, or market.
MACHINERY AND EQUIPMENT -- Machinery and equipment is carried on the basis
of cost. Depreciation is computed by the straight-line method using the
estimated useful lives of the assets.
SOFTWARE DEVELOPMENT COSTS -- The Company capitalizes costs related to the
development of certain software products. Capitalization begins when
technological feasibility has been established and ends when the product is
available for general release to customers. Software development costs incurred
prior to technological feasibility are considered research and development costs
and are expensed as incurred. Capitalized costs are amortized as the greater of
the amount computed using the ratio that current gross revenues for a product
bear to the total current and anticipated future gross revenues for that product
or the straight-line method. Capitalized software costs are stated net of
accumulated amortization of $6,870 and $5,565 at September 30, 1995 and 1994,
respectively.
REVENUE RECOGNITION -- Revenue is recognized from sales when a product is
shipped, from rentals as they accrue, and from services and maintenance when
performed. Unearned income on service contracts is amortized by the
straight-line method over the term of the contracts. Revenue from long-term
software 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.
FOREIGN CURRENCY TRANSLATION -- The assets and liabilities of the foreign
operations are translated using the local currency as the functional currency.
INCOME TAXES -- Prior to the Distribution Date, the Company followed the
liability method of accounting for income taxes and was included with its
parent, Harris Corporation, in a consolidated federal income tax return. Harris
required each of its companies to provide taxes on financial statement pre-tax
income or loss at applicable statutory tax rates. Amounts receivable or payable
for current and prior years' income taxes were treated as intercompany
transactions in accordance with Harris policy and, accordingly, flowed through
the net investment by Harris. Deferred income taxes resulting from temporary
differences
F-8
<PAGE> 173
HARRIS COMPUTER SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 30, 1996
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
between the financial statements and the tax basis of assets and liabilities
were separately classified on the balance sheets.
For the periods after the Distribution Date, the Company files 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").
FAS No. 109 requires 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.
Harris and the Company have entered into a tax disaffiliation agreement
based on the principle that Harris will be responsible for all current tax
liabilities generated through the Distribution Date with the Company being
responsible for all tax liabilities generated after the Distribution Date.
CASH EQUIVALENTS -- The Company considers all investments purchased with an
original maturity of three months or less to be cash equivalents.
LOSS PER COMMON SHARE -- Loss per common share is calculated by dividing
the net loss by the weighted-average number of common shares outstanding during
the year. Common stock equivalents are excluded due to their anti-dilutive
effect.
STOCK SPLIT -- On March 5, 1996, the Board of Directors declared a
three-for-one common stock split distributable on March 29 to shareholders of
record at the close of business on March 18, 1996. All applicable share and per
share data have been restated for the stock split.
UNAUDITED INTERIM FINANCIAL STATEMENTS -- The consolidated financial
statements for the six months ended March 30, 1996 and March 30, 1995 and as of
March 30, 1996, are unaudited and reflect all adjustments, consisting of normal
recurring adjustments, which are, in the opinion of management, necessary for
the fair presentation of the results for the interim periods. These consolidated
financial statements should be read in conjunction with the audited consolidated
financial statements and notes therefore for the periods ended September 30,
1994 and 1995. The results of operations for the six months ended March 30, 1996
are not necessarily indicative of the results for the entire fiscal year ending
September 30, 1996.
F-9
<PAGE> 174
HARRIS COMPUTER SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 30, 1996
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
3. CHANGE IN FISCAL YEAR
The Company changed its fiscal year end from June 30, to September 30,
effective in the year beginning October 1, 1994. The three-month transition
period ended September 30, 1994, is presented within the body of the Company's
basic financial statements. Comparative condensed income statement data is shown
as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1994 1993
------------------ ------------------
(UNAUDITED)
<S> <C> <C>
Sales............................................. $7,748 $14,160
-------- -------
Gross margin...................................... 2,282 7,131
-------- -------
Income (loss) before income taxes................. (7,968) 378
Income tax provision (benefit).................... (378) 3
-------- -------
Net earnings (loss)............................... $(7,590) $375
======== =======
</TABLE>
4. SOFTWARE DEVELOPMENT COSTS
Software development costs capitalized were $2,324 in 1995 and $569 for the
three months ended September 30, 1994. Software amortization expenses were
$1,305 in 1995 and $326 for the three months ended September 30, 1994.
5. LEASE COMMITMENTS
Rent expense was $1,814 for the year ended September 30, 1995 and $478 for
the three months ended September 30, 1994, including $828 and $238,
respectively, to Harris.
Total future minimum rental commitments under non-cancelable operating
leases, primarily for land, buildings and equipment, for the years following
September 30, 1995 are: 1996 - $756; 1997 - $351; 1998 - $103; 1999 - $64;
2000 - $64; and 2001 and thereafter - $64.
6. RESTRUCTURING CHARGES AND SPIN-OFF COSTS
Restructuring charges of $1,256 were accrued for during the period ended
September 30, 1994, due to significant workforce reduction actions which were
taken to streamline and centralize the Company's operations. The number of
employees terminated under this plan was 44. All amounts accrued have been paid
as of September 30, 1995.
Costs associated with the spin-off totaled $2.5 million. These costs relate
to investment banking, legal and public accounting fees, and employee retention
and incentive costs incurred directly related to the spin-off. The net
settlement amount for the spin-off of $6,369, which is due from Harris
Corporation at September 30, 1994 has been included on the Company's balance
sheet.
Costs associated with the sale of the real-time business to Concurrent
Computer Corporation were $820 for the six months ended March 30, 1996. Total
costs for the transaction are estimated to be $2.2 million (unaudited).
F-10
<PAGE> 175
HARRIS COMPUTER SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 30, 1996
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
7. INCOME TAXES
The provision (benefit) for income taxes is as follows:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1994
------------- ------------------
<S> <C> <C>
Current:
United States...................................... -- (1,833)
International...................................... -- --
State and local.................................... -- (157)
Tax on dividend from German subsidiary............. -- 1,739
--- -------
Current Total........................................ -- (251)
Deferred:
United States...................................... -- (127)
International...................................... -- --
State and local.................................... --
--- -------
Total................................................ -- (378)
=== =======
</TABLE>
The components of deferred income tax assets (liabilities) are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------
1995 1994
------ -------
<S> <C> <C>
Inventory valuations.............................................. 1,705 1,209
Depreciation...................................................... (247) (501)
Capitalized software.............................................. (2,357) (2,000)
Restructuring costs............................................... 24 391
Accrued vacation.................................................. 259 302
Net operating losses.............................................. 4,288 1,477
All other -- net.................................................. 198 433
Valuation allowance............................................... (3,870) (1,477)
------ ------
Net deferred income tax liability................................. -- (166)
====== ======
</TABLE>
A reconciliation of the effective income tax rate and the statutory United
States income tax rate follows:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30,
1995 1994
------------- ------------------
<S> <C> <C>
Statutory U.S. income tax rate....................... (34.0%) (34.0%)
State taxes.......................................... -- (1.9%)
Capitalized restructuring costs...................... -- 9.3%
Operating loss carryforwards......................... 32.2% --
Payment of tax to Parent on German dividend.......... -- 21.8%
Other items.......................................... 1.8% .1%
----- -----
Effective income tax rate............................ -0- (4.7%)
===== =====
</TABLE>
F-11
<PAGE> 176
HARRIS COMPUTER SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 30, 1996
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
Prior to the Distribution Date, United States income taxes had not been
provided on the undistributed earnings of international subsidiaries because
Harris had intended to reinvest these earnings. If the Company distributes
international earnings, a U.S. tax would be provided in future periods. As of
September 30, 1995, the Company does not intend to distribute international
earnings; therefore, no U.S. tax has been projected. The determination of the
amount of these undistributed earnings and any related unrecognized deferred
U.S. tax liability is not practicable.
As of September 30, 1995, the Company has U.S. net operating loss
carryforwards of approximately $8 million. The Company's net operating loss
carryforwards begin to expire in 2010.
At September 30, 1995, the Company had net European income tax loss
carryforwards of approximately $4 million. Loss carryforwards are available for
specified periods of time and have been offset by valuation allowances.
Pretax income (loss) from European operations was $(3,136) for the year
ended September 30, 1995 and ($664) for the three months ended September 30,
1994.
8. INVENTORIES
Inventories consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1995 1994
------- -------
<S> <C> <C>
Finished goods................................................... 356 333
Work in process.................................................. 7,416 11,409
Raw materials.................................................... 5,702 5,483
------ ------
13,474 17,225
Reserves for obsolete and slow-moving inventory.................. (4,394) (3,147)
------ ------
Net inventory.................................................... 9,080 14,078
====== ======
</TABLE>
9. ACCRUED EXPENSES
Accrued expenses consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------
1995 1994
------ ------
<S> <C> <C>
Retirement plan accruals........................................... 1,396 1,313
Salaries, wages and other compensation............................. 2,613 3,479
Accrued interest and sundry taxes.................................. 706 1,093
Other.............................................................. 726 607
----- -----
5,441 6,492
===== =====
</TABLE>
F-12
<PAGE> 177
HARRIS COMPUTER SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 30, 1996
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
10. MACHINERY AND EQUIPMENT, NET
Machinery and equipment, net is summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------- ESTIMATED USEFUL
1995 1994 LIFE (IN YEARS)
-------- -------- ----------------
<S> <C> <C> <C>
Buildings and leasehold improvements........... 96 86 3 - 5
Machinery and equipment........................ 25,504 28,292 5 - 10
Loan equipment and service parts............... 4,976 5,905 1 - 5
------- -------
Gross machinery and equipment.................. 30,576 34,283
Less: Accumulated depreciation................. (24,629) (26,790)
------- -------
Net machinery and equipment.................... 5,947 7,493
======= =======
</TABLE>
11. ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS
Changes in the allowance for uncollectible accounts follows:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1994
------------- ------------------
<S> <C> <C>
Balance at beginning of year......................... 213 213
Additions charged to expense......................... 1,660 --
Less net write offs of uncollectible accounts........ (360) --
----- ---
Balance at end of year............................... 1,513 213
===== ===
</TABLE>
Bad debt expense is included in "Selling, general, and administrative
expenses" on the Income Statement.
12. SHAREHOLDERS' EQUITY
Each share of the Company's common stock has attached to it one right. Each
right entitles its registered holder to purchase from the Company after the
"Separation Time," as hereinafter defined, one-hundredth of a share of
Participating Preferred Stock, par value $.01 per share, for an amount
calculated in accordance with the Agreement. The rights will not trade
separately from the common stock unless and until the Separation Time. The
Separation Time is defined as the earlier of the tenth business day after the
date on which any person commences a tender or exchange offer which, if
consummated, would result in an acquisition, and the first date of public
announcement by the Company of such offering. In the event of any voluntary, or
involuntary liquidation of the Company, the holders of the Preferred Stock shall
be paid an amount as calculated in accordance with the Preferred Stock
Agreement.
Effective October 8, 1994, the Company adopted a Stock Incentive Plan which
permits the issuance of stock options, stock appreciation rights, performance
awards, restricted stock and/or other stock based awards to directors and
salaried employees. The plan reserves 975,000 shares of common stock for grant.
The option price shall be determined by the Board Committee effective on the
Grant Date. The option price shall not be less than one hundred percent of the
Fair Market Value of a share of common stock on the Grant Date. If the Incentive
Stock Options are granted to a participant who on the Grant Date is a ten
percent holder, such price shall be not less than one hundred and ten percent of
the Fair Market Value of a share of common stock on the Grant Date. All options
become immediately exercisable upon the occurrence of a Change in Control of the
Company. See SUBSEQUENT EVENTS in Note 15. No stock appreciation rights or
performance
F-13
<PAGE> 178
HARRIS COMPUTER SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 30, 1996
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
awards were made during 1995 under this plan. On October 28, 1994, the Company
granted restricted stock awards for 52,800 shares of common stock at an option
price of $2.58 per share, pursuant to the Stock Incentive Plan to two employees.
None of the restricted shares may be sold, transferred, assigned, pledged or
otherwise encumbered or disposed of for the "Restricted Period." The Restricted
Period is from October 28, 1994 (date of the agreement) until the earlier of 21
months from the date of the agreement or upon the occurrence of a change in
control. During 1995, 715,200 stock option shares were granted at option prices
ranging from $2.58 to $3.83. At September 30, 1995 options to purchase 207,000
shares were available for grant.
13. EMPLOYEE BENEFIT PLANS
Prior to the Distribution Date, Harris provided retirement benefits to
substantially all United States-based employees, primarily through a retirement
plan having profit-sharing and savings elements. Contributions to the retirement
plan were based on Harris profits and employees' savings with no other funding
requirements. Related retirement plan expense was $431 for the three months
ended September 30, 1994.
Subsequent to the Distribution Date, the Company began a 401(k) Savings
Plan (the "Plan") which covers the eligible employees of Harris Computer Systems
Corporation, and any related company. An employee is eligible to participate in
the Plan on the date he completes one year of service. The amount of
profit-sharing contributions made by the Company into the Plan is discretionary
and shall be determined based on a percentage of the Company's adjusted net
income before taxes. Each participant may contribute up to 12% of his
compensation into the Plan. The Company makes a matching contribution on behalf
of each participant for the first 6% of their individual contribution.
Participant's profit-sharing and matching contribution vests over a seven year
period. The Company contributions to the Plan were $966 in 1995.
14. POSTRETIREMENT HEALTH CARE BENEFITS
Prior to the Distribution Date, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions". Health care benefits were provided on a limited
cost-sharing basis to domestic-based retirees who had 10 or more years of
service. This adoption resulted in a one-time charge of $135, net of income tax
credits of $83. The on-going expense of this plan was not material and the
liability for these benefits had not been funded. Subsequent to the Distribution
Date, the Company canceled this post retirement health care plan.
15. SUBSEQUENT EVENTS
(a) Sale of real-time Computing business
On November 5, 1995, the Company entered into an Agreement and Plan of
Merger and Reorganization with Concurrent Computer Corporation ("Concurrent").
The transaction contemplated between the Company and Concurrent was revised. On
March 26, 1996, the Company and Concurrent signed a Purchase and Sale Agreement.
Under the revised transaction structure, the Company will sell its real-time
computing business and approximately 683,178 shares of its common stock to
Concurrent in exchange for (i) 10 million newly issued shares of Concurrent
common stock, par value $0.01 per share, (ii) convertible exchangeable preferred
stock of Concurrent paying a 9% cumulative annual dividend quarterly in arrears
with a liquidation preference of $10,000,000 subject to adjustment to reflect,
among other things, the amount of net current assets of the Harris Real-Time
Business transferred in the Transaction and (iii) the assumption of certain
liabilities (hereafter defined as the "Transaction"). The Transaction is subject
to a number of conditions including approval of the shareholders of each
company.
F-14
<PAGE> 179
HARRIS COMPUTER SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 30, 1996
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
Immediately following the transaction, Concurrent's shareholders are
expected to own approximately 77% of Concurrent's outstanding common stock, with
the balance to be owned by the Company. The Company's shareholders will own
approximately 91% of its common stock, with Concurrent owning approximately 9%.
The Company could increase its position in Concurrent from approximately 23% to
approximately 29% upon full conversion of the preferred stock.
Harris will retain its Trusted Systems product line after the transaction.
Such product line includes computer and network security products.
Summarized financial data relating to the Company's Trusted Systems
Division which will be retained is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------- MARCH 30,
1995 1994 1996
------ ----- -----------
<S> <C> <C> <C>
Current assets......................................... 996 6,170 2,762
------ ----- ------
Noncurrent assets...................................... 2,261 1,622 3,760
------ ----- ------
Current liabilities.................................... -- -- --
------ ----- ------
Noncurrent liabilities................................. 6,365 7,792 12,053
------ ----- ------
Cumulative division losses............................. (3,108) 0 (5,531)
------ ----- ------
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS SIX MONTHS YEARS ENDED
ENDED ENDED ENDED JUNE 30,
SEPTEMBER 30, SEPTEMBER 30, MARCH 30, MARCH 31, -------------
1995 1994 1996 1995 1994 1993
------------- ------------- ---------- ----------- ----- -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net sales........... 4,817 983 4,395 3,489 8,464 5,974
----- --- ----- ----- ----- -----
Gross income........ 1,677 491 1,480 1,386 4,622 2,982
----- --- ----- ----- ----- -----
Net income (loss)... (3,108) (962) (2,423) (727) 91 (40)
----- --- ----- ----- ----- -----
</TABLE>
(b) Unaudited Loan and Security Agreement
On April 1, 1996, Harris entered into a Loan and Security Agreement with
Foothill Capital Corporation ("Foothill") pursuant to which Foothill agreed to
make revolving advances to Harris in an amount of up to $5,000,000 subject to
certain borrowing base requirements and at an interest rate equal to the prime
or reference rate announced by Norwest Bank Minnesota, National Association,
plus two percent. As collateral for the loan, Harris granted Foothill a security
interest in all of its domestic assets. Accrued interest on the loan is due and
payable monthly. The loan matures on the earlier of three years from April 1,
1996 or the Closing Date.
16. CONTINGENCIES
Certain claims have been filed or are pending against the Company. It is
management's opinion that all matters are without merit or are of such kind, or
involve such amounts, as would not have a material effect on the consolidated
financial position of the Company if disposed of unfavorably.
17. CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to a
concentration of credit risk principally consist of cash, cash equivalents and
trade receivables. The Company holds any excess cash in short-term
F-15
<PAGE> 180
HARRIS COMPUTER SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 30, 1996
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
investments consisting of commercial paper. Concentrations of credit risk with
respect to receivables are limited due to the Company's large number of
customers.
18. GEOGRAPHIC INFORMATION
The Company operates exclusively in the computer systems industry.
Substantially all revenues result from the sale of computer systems and related
software and services. Major customers during 1995 and 1994 include the United
States Government and Boeing Company. In many cases, agencies of the United
States Government are the ultimate purchasers of the Company's products. Sales
to the United States Government combined with sales for which the Company acted
as subcontractor on government projects have represented approximately 51% and
43% of total sales, respectively. Sales made to Boeing Company as a percentage
of total sales were 4% and 14%, for the periods ended September 30, 1995 and
1994, respectively. All intercompany revenues and expenses are eliminated in
computing revenues and operating income.
A summary of the Company's operations by geographic area is summarized
below:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1995
---------------------------------------------------
U.S. U.K. FRANCE GERMANY TOTAL
------ ----- ------ ------- -------
<S> <C> <C> <C> <C> <C>
Net Sales............................. 36,138 1,770 3,310 3,893 45,111
Operating Profit (loss)............... (9,989) (346) (471 ) (734) (11,540)
Identifiable assets................... 33,245 1,957 2,026 4,204 41,432
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 1994
---------------------------------------------------
U.S. U.K. FRANCE GERMANY TOTAL
------ ----- ------ ------- -------
<S> <C> <C> <C> <C> <C>
Net Sales............................. 6,647 179 718 204 7,748
Operating Profit (loss)............... (7,437) (181) 71 (280) (7,827)
Identifiable assets................... 44,596 4,526 3,674 2,133 54,929
</TABLE>
U.S. export sales were $2,945 for the year ended September 30, 1995; and
$605 for the three months ended September 30, 1994.
F-16
<PAGE> 181
HARRIS COMPUTER SYSTEMS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET INFORMATION
SEPTEMBER 30, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
REAL-TIME TRUSTED SYSTEMS
BUSINESS PRODUCT LINE COMBINED
--------- --------------- --------
<S> <C> <C> <C>
Cash and cash equivalents............................... $8,265 $0 $8,265
Accounts receivable..................................... 9,180 814 9,994
Inventories............................................. 8,959 121 9,080
Prepaid expenses........................................ 469 61 530
------- ------- -------
Total current assets............................... 26,873 996 27,869
Property, plant and equipment........................... 5,231 716 5,947
Capitalized software.................................... 5,189 1,545 6,734
Other assets............................................ 881 0 881
------- ------- -------
Total assets.................................. $38,174 $3,257 $41,431
======= ======= =======
Accounts payable........................................ 3,493 0 3,493
Deferred revenue........................................ 401 0 401
Accrued expenses........................................ 5,441 0 5,441
------- ------- -------
Total current liabilities.......................... 9,335 0 9,335
Liability to "Real-time" receivable from "Trusted
Systems" Product Line)................................ (6,365) 6,365 0
Equity (deficit)........................................ 35,204 (3,108) 32,096
------- ------- -------
Total liabilities and equity.................. $38,174 $3,257 $41,431
======= ======= =======
</TABLE>
See Notes to Combining Financial Information
F-17
<PAGE> 182
HARRIS COMPUTER SYSTEMS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS INFORMATION
YEAR ENDED SEPTEMBER 30, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
REAL-TIME TRUSTED SYSTEMS
BUSINESS PRODUCT LINE COMBINED
--------- --------------- --------
<S> <C> <C> <C>
Sales
Equipment............................................. $26,650 $4,534 $31,184
Maintenance........................................... 13,644 283 13,927
------- ------- -------
40,294 4,817 45,111
Cost of sales
Equipment............................................. 15,549 3,001 18,550
Maintenance........................................... 7,075 139 7,214
------- ------- -------
22,624 3,140 25,764
Gross profit............................................ 17,670 1,677 19,347
Research and development................................ 7,068 835 7,903
Selling, general and admin.............................. 18,985 3,999 22,984
------- ------- -------
26,053 4,834 30,887
Operating loss.......................................... (8,383) (3,157) (11,540)
Interest income......................................... 407 49 456
Other expense........................................... (4) 0 (4)
Net Loss................................................ ($7,980) ($3,108) ($11,088)
======= ======= =======
</TABLE>
See Notes to Combining Financial Information
F-18
<PAGE> 183
HARRIS COMPUTER SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
BASIS OF PRESENTATION
The combining financial information is presented to reflect the financial
position and results of operations of the "Real Time Business" ("Business") and
Trusted Systems Product Line ("Product Line") of Harris Computer Systems
Corporation and subsidiaries as of and for the year ended September 30, 1995.
Such information should be read in conjunction with the accompanying
consolidated financial statements and notes thereto. The following is a summary
of the methods used to arrive at amounts reflected in the Combining Financial
Information.
BALANCE SHEET INFORMATION
Accounts receivable, inventory, property, plant and equipment and
substantially all capitalized software reflect items specifically identified as
pertaining to the Business or Product Line.
The liability/receivable between the Business and Product Line represents
the net amount assumed to have been paid for or accrued for by the Business on
behalf of the Product Line since July 1, 1990. This assumption is considered
appropriate in light of the fact that the Business and Product Line share the
same operating infrastructure, substantially all operating costs are commingled,
and the predominance of the Business to the combined entity.
STATEMENT OF OPERATIONS INFORMATION
Sales and cost of sales amounts are derived principally by specific
identification. Research and development and selling, general, and
administrative expenses are allocated based on a percentage of sales except for
certain direct research and development, marketing and sales expenses amounting
to $10,182 and $2,510 for the Business and Product Line, respectively.
F-19
<PAGE> 184
HARRIS COMPUTER SYSTEMS BUSINESS
COMBINED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED JUNE
30,
-------------------
1994 1993
------- -------
<S> <C> <C>
Sales
Equipment.............................................................. $50,146 $39,398
Maintenance............................................................ 14,494 16,142
------- -------
64,640 55,540
Cost of Sales
Equipment.............................................................. 22,842 20,194
Maintenance............................................................ 8,394 9,669
------- -------
31,236 29,863
Gross Income............................................................. 33,404 25,677
Operating expenses
Research and development............................................... 6,725 6,850
Selling, general and administrative.................................... 19,791 19,770
Harris Corporation expense allocation.................................. 1,324 1,119
------- -------
Total other operating expenses................................. 27,840 27,739
------- -------
Operating income (loss).................................................. 5,564 (2,062)
Interest income (expense), net........................................... (4) 0
Other income (expense) -- net............................................ 53 45
------- -------
49 45
Net income (loss) before income tax provision (benefit) and cumulative
effect of change in accounting principle............................... 5,613 (2,017)
Income tax provision (benefit)........................................... 1,086 (1,560)
------- -------
Net income (loss) before cumulative effect of change in accounting
principle.............................................................. 4,527 (457)
Cumulative effect of change in accounting principle (Note 14)............ (135) 0
------- -------
Net Income (loss)........................................................ $4,392 ($457)
======= =======
</TABLE>
See notes to the accompanying consolidated financial statements.
F-20
<PAGE> 185
HARRIS COMPUTER SYSTEMS BUSINESS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED JUNE
30,
-------------------
1994 1993
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss)...................................................... $4,392 $(457)
Adjustment to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation........................................................ 3,223 3,860
Amortization........................................................ 1,396 1,258
Changes in Assets and Liabilities
Receivables....................................................... (4,122) 941
Inventories....................................................... (1,370) (3,895)
Accounts Payable.................................................. (1,654) 236
Accrued Expenses.................................................. 334 69
Deferred Revenue.................................................. (4,044) 4,680
Deferred Income Taxes............................................. 28 657
Other............................................................. (1,819) (119)
Compensation and Benefits......................................... (309) (546)
------- -------
Net Cash Provided (Used) by Operating Activities......................... (3,945) 6,684
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Machinery and Equipment................................... (3,336) (2,568)
Software Development Costs............................................. (2,780) (2,217)
------- -------
Net Cash Used by Investing Activities.................................... (6,116) (4,785)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of Short-Term Borrowings....................................... -- (3,465)
Equity Contributions................................................... 18,484 1,566
------- -------
Net Cash Provided by (Used by) Financing Activities...................... 18,484 (1,899)
------- -------
Net Increase in Cash and Cash Equivalents................................ 8,423 --
Cash and Cash Equivalents at beginning of the Period..................... 3 3
------- -------
Cash and Cash Equivalents at end of the Period........................... $8,426 $3
======= =======
</TABLE>
See notes to the accompanying consolidated financial statements.
F-21
<PAGE> 186
HARRIS COMPUTER SYSTEMS BUSINESS
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1994 AND 1993
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION -- The combined financial statements include the
accounts of the Computer Systems Business (the "Business") of Harris Corporation
("Harris"). The Business develops, manufactures and markets high performance
real-time computer systems. The accompanying combined financial statements
include operations of Computer Systems in Fort Lauderdale, Florida, and Harris
Systemes Electroniques S.A., France, as well as the Computer Systems Business
portion of Harris Systems, Ltd., United Kingdom and Harris GmbH, Germany. In
1994, Harris contributed the remaining assets and liabilities of Harris GmbH to
the Business, making Harris GmbH a wholly owned subsidiary of the Business.
Corporate expense allocations charged by Harris are based on a percentage
of the Business's net sales. Interest expense is provided on direct borrowings
of the Business. Interest expense of Harris has not been allocated to the
Business. It is not practicable to estimate what business equity would have been
if the Business had operated as an unaffiliated entity. In the opinion of
management, the allocation methods used are reasonable.
The effects of all significant transactions between components of the
Business have been eliminated.
The Business sells products to other affiliated operations of Harris. Sales
to these operations were $4,013 in 1994 and $5,023 in 1993.
INVENTORIES -- Inventories are carried at the lower of cost, determined by
the First-In-First-Out (FIFO) method, or market.
DEPRECIATION -- Depreciation of rental equipment is computed by the
straight-line method using estimated useful lives of up to three years. Service
parts are depreciated over five years. Depreciation on machinery and equipment
is carried on the basis of cost and is computed by the straight-line method
using the estimated useful lives of the assets.
SOFTWARE DEVELOPMENT COSTS -- The Business capitalizes costs related to the
development of certain software products. Capitalization begins when
technological feasibility has been established and ends when the product is
available for general release to customers. Software development costs incurred
prior to technological feasibility are considered research and development costs
and are expensed as incurred. Capitalized costs are amortized as the greater of
the amount computed using the ratio that current gross revenues for a product
bear to the total current and anticipated future gross revenues for that product
or the straight-line method over three years in 1993 and prior years an over
five years in 1994. The effect of net income of changing the estimated useful
lives in 1994 was approximately $350.
REVENUE RECOGNITION -- Revenue is recognized from sales when a product is
shipped, from rentals as they accrue, and from services and maintenance when
performed. Unearned income on service contracts is amortized by the
straight-line method over the term of the contracts. Revenue from long-term
software 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.
INCOME TAXES -- The Business follows the liability method of accounting for
income taxes and was included with its parent, Harris, in a consolidated federal
income tax return. Harris requires each of its businesses to provide taxes on
financial statement pre-tax income or loss at applicable statutory tax rates.
Amounts receivable or payable for current and prior year' income taxes are
treated as intercompany transactions in accordance with Harris policy and,
accordingly, flowed through the Business Equity account.
F-22
<PAGE> 187
HARRIS COMPUTER SYSTEMS BUSINESS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
FOREIGN CURRENCY TRANSLATION -- Foreign operations are translated using the
local currency at the functional currency.
NOTE B -- SOFTWARE DEVELOPMENT COSTS
Software amortization expenses were $1,396 in 1994 and $1,258 in 1993.
Amortization expenses are included in Cost of Sales and Rentals in the Combined
Statements of Income.
NOTE C -- INVENTORY PURCHASE COMMITMENT
At June 30, 1994, the Business was committed to purchase $1,600 of
inventory from a supplier. Management believes the cost of this inventory
approximates current market value.
NOTE D -- LEASE COMMITMENTS
Rent expense was $1,897 in 1994 and $1,806 in 1993 including $1,085 and
$1,096 respectively, paid to Harris.
Total future minimum rental commitments under operating leases, primarily
for land and buildings, for the years following June 30, 1994 are: 1995 - $763,
1996 - $267; 1997 - $157; 1998 - $8.
NOTE E -- POSTRETIREMENT HEALTH CARE BENEFITS
In fiscal 1994, the Business adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions". Health care benefits are provided on a limited cost-sharing basis to
domestic-based retirees who had 10 or more years of service. This adoption
resulted in a one-time charge of $135, net of income tax credits of $83. The
on-going expense of this plan is not expected to be material and the liability
for these benefits has not been funded.
NOTE F -- RETIREMENT BENEFIT PLANS
Harris provides retirement benefits to substantially all United
States-based employees, primarily through a retirement plan having
profit-sharing and savings elements. Contributions to the retirement plan are
based on Harris profits and employees' savings with no other funding
requirements. Related retirement plan expense was $2,201 in 1994 and $1,487 in
1993.
In addition, a noncontributory defined benefit pension plan is maintained
in the United Kingdom for substantially all employees of Harris Systems, Ltd.
This plan is fully funded and there have been no charges to
income for the two year period ended June 30, 1994. Separate actuarial
information applicable to the Business' portion of this plan is not available.
F-23
<PAGE> 188
HARRIS COMPUTER SYSTEMS BUSINESS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE G -- INCOME TAXES
The provision (benefit) for income taxes is as follows:
<TABLE>
<CAPTION>
1994 1993
------ -------
<S> <C> <C>
Current:
United States................................................... $ 367 $(1,594)
International................................................... 721 --
State and local................................................. 74 (322)
------ -------
1,162 1,916
Deferred:
United States................................................... (78) 298
International................................................... -- --
State and local................................................. 2 58
------ -------
(76) 356
------ -------
$1,086 $(1,560)
====== =======
</TABLE>
A reconciliation of the effective income tax rate and the statutory United
States income tax rate follows:
<TABLE>
<CAPTION>
1994 1993
---- -----
<S> <C> <C>
Statutory U.S. income tax rate...................................... 35.0% (34.0)%
State taxes......................................................... 0.9 (8.6)
Operating loss carryforwards........................................ (8.8) (27.4)
Contributions....................................................... (7.5) (2.2)
Other items......................................................... (0.3) (5.1)
---- -----
Effective income tax rate........................................... 19.3% (77.3)%
==== =====
</TABLE>
United States income taxes had not been provided on the undistributed
earnings of international subsidiaries because Harris had intended to reinvest
these earnings. If Harris Computer Systems Corporation distributes international
earnings, a U.S. tax would be provided in future periods. The determination of
the amount of these undistributed earnings and any related unrecognized deferred
U.S. tax liability is not practicable.
At June 30, 1994, the Business had net international income tax loss
carryforwards of approximately $1,564. Loss carryforwards are available for
indefinite periods of time and have been offset by valuation allowances in both
1993 and 1994.
Pretax income from international operations was $1,860 in 1994 and $299 in
1993.
NOTE H -- GEOGRAPHIC INFORMATION
The Business operates exclusively in the computer systems industry.
Substantially all revenues result from the sale of computer systems and related
software and services. Major customers include the United States Government and
Boeing Company. Sales made to the United States Government as a percentage of
total sales were 43 percent and 51 percent for the year 1994 and 1993,
respectively. Sales made to Boeing Company as a percentage of total sales were
14 percent and 4 percent for the years 1994 and 1993, respectively. All
intercompany revenues and expenses are eliminated in computing revenues and
operating income.
F-24
<PAGE> 189
HARRIS COMPUTER SYSTEMS BUSINESS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the Business operations by geographic area is summarized
below:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1994
--------------------------------------------------
U.S. U.K. FRANCE GERMANY TOTAL
------- ------ ------ ------- ------
<S> <C> <C> <C> <C> <C>
Net Sales.............................. 51,008 7,539 4,691 1,402 64,640
Operating Profit (loss)................ 2,294 2,577 963 (221) 5,613
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1993
--------------------------------------------------
U.S. U.K. FRANCE GERMANY TOTAL
------- ------ ------ ------- ------
<S> <C> <C> <C> <C> <C>
Net Sales.............................. 42,902 6,773 4,914 951 55,540
Operating Profit (loss)................ (3,640) 1,292 653 (322) (2,017)
</TABLE>
Export Sales were $3,316 in 1994 and $2,145 in 1993. Export sales and net
sales of international operations were principally to Europe, Canada and Asia.
NOTE I -- SHAREHOLDERS EQUITY
Changes in Business equity are summarized as follows:
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Balance at July 1................................................ $28,701 $27,501
Net income (loss)................................................ 4,392 (457)
Foreign currency translation adjustments......................... (1,451) 91
------- -------
Net cash transfers and billings from Harris Corporation.......... 18,484 1,566
------- -------
$50,126 $28,701
======= =======
</TABLE>
NOTE J -- ALLOWANCE FOR COLLECTION LOSSES
Changes in the allowance for collection losses during the two years ended
June 30, 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Balance at beginning of year.......................................... $631 $693
Additions charged to expense.......................................... 100 5
Effects of foreign currency translation............................... 17 (27)
---- ----
748 671
Less net write-offs of uncollectible accounts......................... 535 40
---- ----
Balance at end of year................................................ $213 $631
==== ====
</TABLE>
NOTE K -- CONTINGENCIES
Certain claims have been filed or are pending against the Business. It is
management's opinion, that all matters are without merit or are of a kind, or
involve such amounts, as would not have a material effect on the consolidated
financial position of the Business if disposed of unfavorably.
F-25
<PAGE> 190
ANNEX A
- --------------------------------------------------------------------------------
PURCHASE AND SALE AGREEMENT
BETWEEN
CONCURRENT COMPUTER CORPORATION,
AND
HARRIS COMPUTER SYSTEMS CORPORATION,
DATED AS OF MARCH 26, 1996
AND AMENDED AND RESTATED
AS OF MAY 23, 1996
- --------------------------------------------------------------------------------
<PAGE> 191
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C> <C>
ARTICLE I
SALE AND PURCHASE OF ASSETS............................................................ A-1
Section 1.1 Transfer of Assets.................................................... A-1
Section 1.2 Excluded Assets; Omitted Property..................................... A-2
Section 1.3 Assumed Liabilities; Excluded Liabilities............................. A-3
Section 1.4 Exact Effective Time.................................................. A-3
ARTICLE II
TRANSFER OF STOCK; ADDITIONAL AGREEMENTS............................................... A-3
Section 2.1 Sale of Harris Common Stock........................................... A-3
Section 2.2 Sale of Concurrent Stock.............................................. A-3
Section 2.3 Preparation of Audited Financial Statements; Net Current Assets
Adjustment............................................................ A-4
Section 2.4 Ancillary Agreements; Certificate of Designation...................... A-5
Section 2.5 Allocation of Purchase Price.......................................... A-6
ARTICLE III
CLOSING................................................................................ A-6
Section 3.1 Closing............................................................... A-6
Section 3.2 Deliveries by Harris.................................................. A-6
Section 3.3 Deliveries by Concurrent.............................................. A-7
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF HARRIS............................................... A-7
Section 4.1 Organization Etc...................................................... A-7
Section 4.2 Capitalization........................................................ A-8
Section 4.3 Authority............................................................. A-8
Section 4.4 Consents and Approvals; No Violations................................. A-9
Section 4.5 SEC Reports and Financial Statements.................................. A-9
Section 4.6 Information in Disclosure Documents................................... A-10
Section 4.7 Litigation............................................................ A-10
Section 4.8 Absence of Certain Changes............................................ A-10
Section 4.9 Opinion of Financial Advisor.......................................... A-10
Section 4.10 Tax Matters........................................................... A-11
Section 4.11 Vote Required......................................................... A-12
Section 4.12 Employee Benefit Plans; ERISA......................................... A-12
Section 4.13 Applicability of Certain Laws......................................... A-13
Section 4.14 Major Contracts....................................................... A-13
Section 4.15 Interests of Officers and Directors................................... A-14
Section 4.16 Intellectual Property................................................. A-14
Section 4.17 Questionable Payments................................................. A-16
Section 4.18 Insurance............................................................. A-16
Section 4.19 No Brokers............................................................ A-16
Section 4.20 Environmental......................................................... A-16
Section 4.21 Assets................................................................ A-17
</TABLE>
A-i
<PAGE> 192
<TABLE>
<CAPTION>
PAGE
------
<S> <C> <C>
Sheet...A-18Section Leased Properties..................................................... A-18
4.23
Section 4.24 Subsidiaries.......................................................... A-18
Section 4.25 Outstanding Liabilities to Related Parties............................ A-19
Section 4.26 Product Returns; Warranties........................................... A-19
Section 4.27 Transferred Subsidiaries.............................................. A-19
Section 4.28 Transferred Subsidiaries Financial Statement.......................... A-19
Section 4.29 Investment Purpose.................................................... A-19
Section 4.30 Rights Agreement...................................................... A-19
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF CONCURRENT........................................... A-20
Section 5.1 Organization.......................................................... A-20
Section 5.2 Capitalization........................................................ A-20
Section 5.3 Authority............................................................. A-21
Section 5.4 Consents and Approvals; No Violations................................. A-21
Section 5.5 SEC Reports and Financial Statements.................................. A-22
Section 5.6 Information in Disclosure Documents................................... A-22
Section 5.7 Litigation............................................................ A-22
Section 5.8 Absence of Certain Changes............................................ A-23
Section 5.9 Opinion of Financial Advisor.......................................... A-23
Section 5.10 Rights Agreement...................................................... A-23
Section 5.11 Tax Matters........................................................... A-23
Section 5.12 Vote Required......................................................... A-24
Section 5.13 Employee Benefit Plans; ERISA......................................... A-24
Section 5.14 Major Contracts....................................................... A-25
Section 5.15 Interests of Officers and Directors................................... A-25
Section 5.16 Intellectual Property................................................. A-25
Section 5.17 Questionable Payments................................................. A-27
Section 5.18 Insurance............................................................. A-27
Section 5.19 No Brokers............................................................ A-27
Section 5.20 Environmental......................................................... A-28
Section 5.21 Investment Purpose.................................................... A-28
Section 5.22 Applicability of Certain Laws......................................... A-28
Section 5.23 Product Returns; Warranties........................................... A-28
ARTICLE VI
COVENANTS.............................................................................. A-29
Section 6.1 Conduct of Business of Harris......................................... A-29
Section 6.2 Conduct of Business of Concurrent..................................... A-30
Section 6.3 Best Efforts.......................................................... A-31
Section 6.4 Registration Rights................................................... A-32
Section 6.5 Occurrence of Closing Prior to or Following the Reference Date........ A-32
Section 6.6 Access to Information................................................. A-32
Section 6.7 Stockholders Meetings................................................. A-32
</TABLE>
A-ii
<PAGE> 193
<TABLE>
<CAPTION>
PAGE
------
<S> <C> <C>
Section 6.8 No Solicitation....................................................... A-33
Section 6.9 Brokers or Finders.................................................... A-34
Section 6.10 Rights Plan........................................................... A-34
Section 6.11 Publicity............................................................. A-34
Section 6.12 Notification of Certain Matters....................................... A-34
Section 6.13 Management and Corporate Governance Matters........................... A-34
Section 6.14 Employment Agreements................................................. A-35
Section 6.15 Expenses.............................................................. A-35
Section 6.16 IRS Determination Letter.............................................. A-35
Section 6.17 Insurance............................................................. A-35
Section 6.18 Supplemental Disclosure............................................... A-35
Section 6.19 Further Assurances; Subsequent Transfers.............................. A-36
Section 6.20 Risk of Loss.......................................................... A-37
Section 6.21 Compliance with Applicable Bulk Sales Laws............................ A-38
Section 6.22 Audited Financial Statements; Statutory Financial Statements.......... A-38
Section 6.23 Tax Matters........................................................... A-38
Section 6.24 HSR Approval.......................................................... A-38
ARTICLE VII
EMPLOYMENT AND EMPLOYEE BENEFIT PLANS.................................................. A-38
Section 7.1 Existing Employee Benefit Plans of Harris............................. A-38
Section 7.2 Employment of Employees Employed in Business.......................... A-40
Section 7.3 Employee Benefit Plans of Concurrent.................................. A-40
ARTICLE VIII
CONDITIONS............................................................................. A-41
Section 8.1 Conditions to Each Party's Obligation To Perform this Agreement....... A-41
Section 8.2 Conditions of Obligation of Concurrent................................ A-42
Section 8.3 Conditions of Obligation of Harris.................................... A-43
ARTICLE IX
TERMINATION AND AMENDMENT.............................................................. A-43
Section 9.1 Termination by Mutual Consent......................................... A-43
Section 9.2 Termination by Either Concurrent or Harris............................ A-43
Section 9.3 Termination by Harris................................................. A-44
Section 9.4 Termination by Concurrent............................................. A-44
Section 9.5 Effect of Termination................................................. A-44
Section 9.6 Termination Fee....................................................... A-45
ARTICLE X
OBLIGATIONS OF PARTIES AFTER CLOSING DATE.............................................. A-45
Section 10.1 Survival Periods...................................................... A-45
Section 10.2 Indemnification....................................................... A-45
Section 10.3 Claims................................................................ A-46
</TABLE>
A-iii
<PAGE> 194
<TABLE>
<CAPTION>
PAGE
------
<S> <C> <C>
ARTICLE XI
MISCELLANEOUS.......................................................................... A-47
Section 11.1 Amendment............................................................. A-47
Section 11.2 Extension; Waiver..................................................... A-47
Section 11.3 Notices............................................................... A-47
Section 11.4 Interpretation........................................................ A-48
Section 11.5 Counterparts.......................................................... A-48
Section 11.6 Entire Agreement; No Third Party Beneficiaries........................ A-48
Section 11.7 Governing Law......................................................... A-48
Section 11.8 Specific Performance.................................................. A-48
Section 11.9 Assignment............................................................ A-49
Section 11.10 Incorporation of Exhibits............................................. A-49
Section 11.11 Severability.......................................................... A-49
</TABLE>
A-iv
<PAGE> 195
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
TERM SECTION
- ----------------------------------------------------------------------- ----------------------
<S> <C>
Acquiring Person....................................................... 4.3 and 5.10
Acquisition Transaction................................................ 6.8(a)(i)
affiliate.............................................................. 4.15 and 5.15
Allocation............................................................. 2.5
Ancillary Agreements................................................... 2.4(a)
Appraisal Rights....................................................... 5.22
Article................................................................ 11.4
Assets................................................................. 1.1(d)
associate.............................................................. 4.15 and 5.15
Assumed Concurrent Transfer Tax Liability.............................. 1.3(a)
Assumed Liabilities.................................................... 1.3(a)
at the closing; exact effective time................................... 1.4
Audited Balance Sheet.................................................. 2.3(a)(i)
Audited Balance Sheet Disagreement..................................... 2.3(a)(iii)
Audited Base Financial Statements...................................... 4.22
Best Efforts........................................................... 6.3
Business............................................................... Introduction
Business Combinations with Interested Stockholders..................... 5.22
Business Employees..................................................... 7.1(a)(i)
Business Intellectual Property Rights.................................. 4.16(a)
Business Portion....................................................... 1.3(a)
Closing................................................................ 3.1
Closing Date........................................................... 3.1
Code................................................................... 2.5
Common Stock Consideration............................................. 2.2
Concurrent............................................................. Introduction
Concurrent 401(k) Plan................................................. 7.3(a)
Concurrent Additional Cost............................................. 6.20(a)(ii)
Concurrent Casualty Deficiency......................................... 6.20(a)(ii)
Concurrent Common Stock................................................ Introduction
Concurrent Designees................................................... 6.13(b)
Concurrent ERISA Affiliate............................................. 5.13(a)
Concurrent ERISA Plans................................................. 5.13(a)
Concurrent Intellectual Property Rights................................ 5.16(a)
Concurrent Matching Contribution....................................... 7.3(a)(iii)
Concurrent Options..................................................... 5.2
Concurrent Plans....................................................... 5.13(a)
Concurrent Preferred Stock............................................. Introduction
Concurrent Rights Agreement............................................ 5.2
Concurrent SEC Documents............................................... 5.5
Concurrent Stock Plan.................................................. 5.2
Concurrent Stock Plan Amendment........................................ 5.12
Concurrent Stockholder Meeting......................................... 4.6
Confidentiality Agreement.............................................. 6.6
Control-Share Acquisitions............................................. 4.13
Corporate Target Goals................................................. 7.3(d)
</TABLE>
[/R]
A-v
<PAGE> 196
<TABLE>
<CAPTION>
TERM SECTION
- ----------------------------------------------------------------------- ----------------------
<S> <C>
Damages................................................................ 10.2(a)
the date hereof........................................................ 11.4
the date of this Agreement............................................. 11.4
Debentures............................................................. 2.2
DGCL................................................................... 5.22
Disclosure Schedule.................................................... 4.16(d)
Distribution........................................................... 4.10(e)
Distribution Date...................................................... 5.10
employee benefit plan.................................................. 4.12(a) and 5.13(a)
employee pension plan.................................................. 4.12(g) and 5.13(h)
Employment Effective Time.............................................. 7.1(a)(i)
Encumbrances........................................................... 4.21(d)
Environmental Claim.................................................... 4.20(d)
Environmental Laws..................................................... 4.20(d)
ERISA.................................................................. 4.12(a)
Exchange Act........................................................... 4.4(a)
Excluded Assets........................................................ 1.2(b)
Fair Market Value...................................................... 6.20(b)
Final Net Current Asset Reconciliation................................. 2.3(b)(i)
First Appraiser........................................................ 6.20(b)
Flip-in Date........................................................... 4.30
Flip-over Transaction.................................................. 4.30
GAAP................................................................... 2.3(a)(i)
Governmental Entity.................................................... 4.4(a)
Harris................................................................. Introduction
Harris 401(k) Plan..................................................... 7.1(a)
Harris Common Stock.................................................... Introduction
Harris Designees....................................................... 6.13(a)
Harris ERISA Affiliate................................................. 4.12(a)
Harris ERISA Plans..................................................... 4.12(a)
Harris Plans........................................................... 4.12(a)
Harris Rights.......................................................... 4.2
Harris Rights Agreement................................................ 4.2
Harris SEC Documents................................................... 4.5
Harris Stock Plan...................................................... 4.2
Harris Stock Plan Amendment............................................ 4.11
Harris Stockholder Meeting............................................. 4.6
Harris Subsidiary Shares............................................... 1.1(c)
herein................................................................. 11.4
hereof................................................................. 11.4
hereunder.............................................................. 11.4
Hired Business Employee................................................ 7.1(a)(iv)(B)
HSR Act................................................................ 4.4(a)
Identified Real Time Assets............................................ 1.1(a)
Identified Trusted Assets.............................................. 1.2(a)
include(s)............................................................. 11.4
including.............................................................. 11.4
Indemnified Parties.................................................... 10.2(b)
</TABLE>
A-vi
<PAGE> 197
<TABLE>
<CAPTION>
TERM SECTION
- ----------------------------------------------------------------------- ----------------------
<S> <C>
Indemnifying Party..................................................... 10.3(a)
Individual Target Goals................................................ 7.3(d)
Intellectual Property Rights........................................... 4.16(a)
IRS.................................................................... 4.10(b)(ii)
ISRA................................................................... 8.3(g)
KPMG................................................................... 2.3(a)(i)
Leases................................................................. 4.23(a)
Liabilities............................................................ 1.3(c)
Material Adverse Effect................................................ 4.1(a)
Materials of Environmental Concern..................................... 4.20(d)
multiemployer pension plan............................................. 4.12(d) and 5.13(d)
Net Assets............................................................. 2.3(c)(i)
Net Current Asset Reconciliations...................................... 2.3(b)(i)
Omitted Property....................................................... 1.2(c)
Original Concurrent Designee........................................... 6.13(b)
Original Harris Designees.............................................. 6.13(a)
Other Real Time Assets................................................. 1.1(a)
Person................................................................. 6.8(a)(iii)
Preferred Stock Consideration.......................................... 2.2
Projected Net Current Asset Reconciliation............................. 2.3(b)(i)
Property............................................................... 1.1(a) and 6.20(a)(i)
Proxy Statement........................................................ 4.6
Purchased Harris Shares................................................ 2.1
qualified.............................................................. 4.12(f) and 5.13(f)
qualified beneficiaries................................................ 7.1(b)(iii)
qualifying event....................................................... 7.1(b)(iii)
Reconciliation Disagreement............................................ 2.3(b)(iii)
Reference Date......................................................... 2.3(b)(i)
Representatives........................................................ 10.2(a)
Right of Stockholders to Dissent....................................... 4.13
S-3 Registration Statement(s).......................................... 6.4
Schedule............................................................... 11.4
SEC.................................................................... 4.5
Second Appraiser....................................................... 6.20(b)
Section................................................................ 11.4
Securities Act......................................................... 4.4(a)
Separation Time........................................................ 4.30
SERP................................................................... 7.3(e)
Shared Assets.......................................................... 1.1(b)
Shared IP Right........................................................ 1.1(b)
Shared Liabilities..................................................... 1.3(a)
Shared Real Time Assets................................................ 1.1(a)
Shared Trusted Assets.................................................. 1.2(a)
single employer........................................................ 4.12(a) and 5.13(a)
Stock Acquisition Date................................................. 4.30 and 5.10
Stockholder Meetings................................................... 4.6
Subsequently Acquired Real Time Assets................................. 1.1(a)
Subsidiary............................................................. 4.1(a)
</TABLE>
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<TABLE>
<CAPTION>
TERM SECTION
- ----------------------------------------------------------------------- ----------------------
<S> <C>
Disclosure....................6.18(a)Target Bonuses.................... 7.3(d)
Tax Return............................................................. 4.10(d)
Tax Sharing Agreement.................................................. 4.10(e)
Taxes.................................................................. 4.10(d)
Termination Fee........................................................ 9.6(c)
Third Appraiser........................................................ 6.20(b)
Transfer Taxes......................................................... 6.23(b)
Transferred Subsidiaries............................................... 1.1(c)
Transferred Subsidiaries Benefit Plans................................. 4.12(j)
Transferred Subsidiaries Financial Statements.......................... 4.28(a)
Triggering Event....................................................... 5.10
Trusted Assets......................................................... 1.2
Trusted Systems Business............................................... Introduction
Welfare and Fringe Benefit Plans....................................... 7.1(b)
without limitation..................................................... 11.4
</TABLE>
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EXHIBITS
<TABLE>
<S> <C>
Exhibit A Form of Certificate of Designation
Exhibit B Debenture Term Sheet
Exhibit C Form of Share Holding Agreement
Exhibit D Employment Agreement
SCHEDULES
Schedule 1.1(a)(i) Identified Real Time Assets
Schedule 1.1(b) Shared Assets
Schedule 1.2(a)(ii) Identified Trusted Assets
Schedule 1.3(a) Assumed Liabilities
Schedule 1.3(b)(iv) Excluded Tax Liabilities
Schedule 2.3(a) Audited Balance Sheet Procedures
Schedule 2.3(b) Net Current Asset Reconciliation Procedures
Schedule 2.5 Allocation of Purchase Price
Schedule 4.2 Capitalization
Schedule 4.4(a) Consents and Approvals
Schedule 4.4(b) No Violation
Schedule 4.5 Material Undisclosed Liabilities
Schedule 4.7 Litigation
Schedule 4.8 Absence of Certain Changes
Schedule 4.10(b)(i) List of Localities in which Registered to do Business and Tax Liens
Schedule 4.10(b)(ii) Tax Years Examined; Tax Deficiencies and Assessments
Schedule 4.10(c) Agreements or Waivers
Schedule 4.12(a) Employee Benefit Plans
Schedule 4.12(i) Unvested Harris Options
Schedule 4.12(k) Transferred Subsidiaries Benefit Plans
Schedule 4.14 Major Contracts
Schedule 4.15 Interests of Officers and Directors
Schedule 4.16(b) Business Intellectual Property Rights
Schedule 4.16(c) Products Sold by Harris
Schedule 4.16(e) Payments to Third Parties for Intellectual Property Rights
Schedule 4.16(m) Agreements Granting Rights to any Third Party in any of the Business
Intellectual Property Rights
Schedule 4.18 Insurance
Schedule 4.20(a) Compliance with Environmental Laws
Schedule 4.20(b) Pending Environmental Claims
Schedule 4.20(c) Harris Actions Leading to Possible Environmental Claims
Schedule 4.23(b) Leased Properties
Schedule 4.24(a) Subsidiaries of Harris
Schedule 4.24(b) Ownership of the Stock of the Transferred Subsidiaries
Schedule 4.24(c) Officers and Directors of the Transferred Subsidiaries
Schedule 5.2 Capitalization
Schedule 5.4(a) Consents and Approvals
Schedule 5.4(b) No Violation
Schedule 5.5 Material Undisclosed Liabilities
Schedule 5.7 Litigation
Schedule 5.8 Absence of Certain Changes
</TABLE>
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<TABLE>
<S> <C>
Schedule 5.11(b)(i) List of Localities in which Registered to do Business and Tax Liens
Schedule 5.11(b)(ii) Tax Years Examined; Tax Deficiencies and Assessments
Schedule 5.11(c) Agreements or Waivers
Schedule 5.13(a) Employee Benefit Plans
Schedule 5.14 Major Contracts
Schedule 5.15 Interests of Officers and Directors
Schedule 5.16(b) Business Intellectual Property Rights
Schedule 5.16(e) Payments to Third Parties for Intellectual Property Rights
Schedule 5.16(m) Agreements Granting Rights to any Third Party in any of the Concurrent
Intellectual Property Rights
Schedule 5.18 Insurance
Schedule 5.20(a) Compliance with Environmental Laws
Schedule 5.20(b) Pending Environmental Claims
Schedule 5.20(c) Concurrent Actions Leading to Possible Environmental Claims
Schedule 6.1 Conduct of Business of Harris
Schedule 6.14 Terms of the Stihl Employment Agreement Amendment
Schedule 7.1 Business Employees
Schedule 8.1(g) Consents
Schedule 8.2(d) Contracts and Agreements
</TABLE>
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THIS AGREEMENT is made as of the 26th day of March 1996, and amended and
restated as of the 23th day of May 1996, between HARRIS COMPUTER SYSTEMS
CORPORATION, a Florida corporation ("Harris") and CONCURRENT COMPUTER
CORPORATION, a Delaware corporation ("Concurrent").
W I T N E S S E T H:
WHEREAS, Harris and its subsidiaries are engaged in the businesses of
providing and servicing high-performance real-time computer systems on a
worldwide basis (the "Business") and supplying "trusted products," including
operating systems and firewall application products (the "Trusted Systems
Business");
WHEREAS, Concurrent has agreed to purchase from Harris, and Harris has
agreed to sell to Concurrent, the Business and shares of common stock, par value
$0.01 per share, of Harris (the "Harris Common Stock") on the terms and subject
to the conditions set forth herein; and
WHEREAS, in exchange for the Business and such shares of Harris Common
Stock, Concurrent has agreed to sell to Harris, and Harris has agreed to
purchase from Concurrent, shares of common stock, par value $0.01 per share, of
Concurrent (the "Concurrent Common Stock") and shares of a new class of
convertible exchangeable preferred stock of Concurrent (the "Concurrent
Preferred Stock") on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
SALE AND PURCHASE OF ASSETS
Section 1.1 Transfer of Assets.
(a) Except as provided in Section 1.2, at the Closing, Harris shall sell,
transfer and assign to Concurrent, and Concurrent shall purchase, acquire and/or
accept from Harris, all of Harris' rights, title and interests in all the
Property (as defined below), of Harris which (i) is listed in Schedule 1.1(a)(i)
(the "Identified Real Time Assets") and including the Property identified on the
Final Net Current Asset Reconciliation in existence on the Closing Date; (ii)
constitutes the Shared Assets (as defined in Section 1.1(b)) to the extent such
Property is to be transferred and sold to, or utilized by, Concurrent as
provided in Schedule 1.1(b) (the "Shared Real Time Assets"); (iii) constitutes
all other Property of Harris which is not an Excluded Asset (as defined in
Section 1.2) (the "Other Real Time Assets"); (iv) is tangible Property which is
manufacturing Property, hardware customer support Property and hardware
development Property; and (v) constitutes all other Property of the kind
described in clauses (i) and (ii) above and acquired by Harris between the date
hereof and the Closing (the "Subsequently Acquired Real Time Assets"). The term
"Property" shall mean assets, properties and rights, tangible and intangible,
wherever located.
(b) The term "Shared Assets" shall mean the Property of Harris having a
significant use in both the Business and the Trusted Systems Business. To the
extent they have been identified as of the date hereof, the Shared Assets are
set forth in Schedule 1.1(b), which Schedule indicates which of the therein
identified Shared Assets shall be transferred to Concurrent or retained by
Harris.
To the extent that any Shared Assets are not identified in Schedule 1.1(b),
they shall be transferred to Concurrent at Closing or retained by Harris as
follows: (i) if the Shared Asset not identified in Schedule 1.1(b) is a
"Business Intellectual Property Right" (as defined in Section 4.16(a)) (each
Shared Asset that is also a Business Intellectual Property Right, a "Shared IP
Right"), then each such asset shall be transferred as described in the second
sentence of this paragraph; and (ii) if the Shared Asset not identified in
Schedule 1.1(b) is not a Shared IP Right, then, unless Concurrent acknowledges
that such asset is not needed for the conduct of the Business after the Closing,
it shall be transferred to Concurrent. Shared IP Rights that have not been
identified in Schedule 1.1(b) shall be made available by license or otherwise to
Concurrent and Harris as follows: (i) if the use of the Shared IP Rights does
not require royalties or other payments to be
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made to third parties, then the Shared IP Right shall be made available, without
cost, by license or otherwise so that each of Concurrent and Harris may freely
utilize such Shared IP Rights after Closing, subject to the terms of the
Non-Competition Agreement required to be delivered in accordance with Section
2.4, and (ii) to the extent the use of the Shared IP Rights requires royalties
or payments to be made to third parties, Schedule 1.1(b) sets forth the method
by which such royalties or other payments will be borne by Concurrent and Harris
after the Closing.
(c) At the Closing, Harris shall sell, transfer and assign, directly or
indirectly, to Concurrent and Concurrent shall purchase, acquire and accept from
Harris, good and valid legal title to and beneficial ownership of all of the
issued and outstanding shares of capital stock (the "Harris Subsidiary Shares"),
free and clear of all Encumbrances (as defined in Section 4.21) or assets, as
the case may be, of certain subsidiaries to be mutually agreed upon by the
parties prior to Closing.
The subsidiaries, if any, to be transferred as agreed to by the parties
hereto shall be collectively referred to as the "Transferred Subsidiaries". The
shares shall constitute all of the issued and outstanding shares of each such
Transferred Subsidiary.
To the extent Concurrent purchases the stock of the Transferred
Subsidiaries, Concurrent shall not assume, and shall not be deemed to have
assumed, Liabilities of the Transferred Subsidiaries arising from activities of
the businesses of the Transferred Subsidiaries prior to Closing relating to (i)
environmental matters or (ii) claims of employees of the Transferred
Subsidiaries at the time of the applicable violation that the Transferred
Subsidiary violated employment practices laws, rules or regulations or
antidiscrimination laws, rules or regulations insofar as such claims are based
on acts or omissions that shall have occurred prior to Closing (the "Transferred
Subsidiaries Excluded Liabilities"). At Closing, Harris shall assume, and shall
be solely and exclusively liable with respect to the Transferred Subsidiaries
Excluded Liabilities.
(d) The term "Assets" shall mean the Identified Real Time Assets, the
Shared Real Time Assets, the Other Real Time Assets and the Subsequently
Acquired Real Time Assets, including the stock or assets, if any, of each of the
Transferred Subsidiaries, which will be being transferred by Harris to
Concurrent in accordance with Sections 1.1(a) and (b).
Section 1.2 Excluded Assets; Omitted Property. (a) Concurrent is not
acquiring from Harris, and Harris shall retain ownership of all right, title and
interest in and to, and exclude from sale, transfer or assignment hereunder (i)
all Property of Harris used in the Trusted Systems Business (other than Property
which constitutes Shared Assets in accordance with Section 1.1(b)) as conducted
on the date hereof (the "Trusted Assets"); (ii) the Trusted Assets listed in
Schedule 1.2(a)(i) (the "Identified Trusted Assets"), (iii) the Shared Assets,
to the extent they shall be retained or permitted to be utilized by Harris as
provided in Schedule 1.1(b) (the "Shared Trusted Assets").
(b) The term "Excluded Assets" shall mean the Trusted Assets, the
Identified Trusted Assets and the Shared Trusted Assets.
(c) The Parties hereto acknowledge that the Schedules of Assets and
Excluded Assets will not together contain a complete list of all Property of
Harris, but that at the Closing, the updated Schedules together with the lists
of Property attached to the bills of sale and other documents of transfer
delivered to Concurrent will list all the Assets as of the Closing. To the
extent that there is any Property of Harris as of the Closing which failed to be
identified on a Schedule of any Assets or Excluded Assets or on a list of
Property attached to the bill of sale or other document of transfer delivered at
Closing (the "Omitted Property"), it will be transferred, assigned, or sold to
Concurrent or retained or utilized by Harris in accordance with the Assets or
Excluded Assets to which such Omitted Property is most similar. Any adjustments
to the Final Net Asset Reconciliation which may be appropriate in connection
with such Omitted Property shall be made so long as, pursuant to the terms
hereof, the time period during which the parties hereto may dispute the Final
Net Asset Reconciliation (as defined in Section 2.3(b)) has not elapsed.
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Section 1.3 Assumed Liabilities; Excluded Liabilities.
(a) At the Closing, subject to Section 1.3(b) below, Concurrent shall
assume, and shall be solely and exclusively liable with respect to, (i)
Liabilities of Harris specifically reflected or reserved against on the Final
Net Current Asset Reconciliation (as defined below) and in existence on the
Closing Date; (ii) Liabilities arising from activities of the Business after the
Closing; (iii) Liabilities set forth on Schedule 1.3(a); (iv) Liabilities
specifically related to products sold in the Business, including product
warranty liabilities and liabilities for product returns; (v) Liabilities
exclusively associated with the Business; (vi) 50% of the Transfer Taxes (as
defined in Section 6.24) hereof resulting from the transfer of the Assets (other
than the Harris Subsidiary Shares, if any) and 100% of the Transfer Taxes
resulting from the transfer of the Harris Subsidiary Shares, if any (the
"Assumed Concurrent Transfer Tax Liability") and (vii) the allocable portion
(the "Business Portion") of all Liabilities associated with both the Business
and the Trusted Systems Business (the "Shared Liabilities"), such portion to be
based on the Business' contribution to the total net revenues of Harris for the
fiscal year ended September 30, 1995 (items (i) through (vii), collectively, the
"Assumed Liabilities");
(b) Concurrent is not assuming, and shall not be deemed to have assumed,
any of the following Liabilities of Harris: (i) Liabilities exclusively
associated with the Trusted Systems Business; (ii) Liabilities arising from
activities of the Business prior to the Closing relating to environmental
matters, claims of shareholders of Harris, claims of employees of Harris at the
time of the applicable violation that Harris violated employment practices laws,
rules or regulations or antidiscrimination laws, rules or regulations insofar as
such claims are based on acts or omissions that shall have occurred prior to
Closing; (iii) the portion of the Shared Liabilities after the assumption by
Concurrent of the Business Portion of such Liabilities; (iv) Liabilities in
connection with any Taxes imposed upon Harris's operations set forth in Schedule
1.3(b)(iv); and (v) all other Liabilities of Harris which are not Assumed
Liabilities.
(c) The term "Liabilities" shall mean any liabilities or obligations, fixed
or contingent, known or unknown as of the date hereof, and including such
liabilities or obligations under contracts and leases.
Section 1.4 Exact Effective Time. Unless otherwise expressly provided, the
exact effective time of the sale, transfer and assignment of the Assets and the
Harris Subsidiary Shares, and of the assumption of Assumed Liabilities, which is
stated herein to be "at the Closing," shall be 12:01 a.m. of the morning of the
Closing Date.
ARTICLE II
TRANSFER OF STOCK; ADDITIONAL AGREEMENTS
Section 2.1 Sale of Harris Common Stock. In addition to the sale of the
Assets described in Article I hereof, subject to the terms and upon the
conditions set forth in this Agreement and in reliance upon the representations,
warranties and agreements of Concurrent contained herein, Harris shall issue,
sell and deliver to Concurrent, and Concurrent shall purchase and acquire, good
and valid title to 227,726 shares of Harris Common Stock, subject to adjustment
for stock dividends, stock splits and similar transactions prior to the Closing
(such shares, the "Purchased Harris Shares").
Section 2.2 Sale of Concurrent Stock. As consideration for the sale of the
Assets and the Purchased Harris Shares to Concurrent described in Article I and
Section 2.1 hereof, subject to the terms and upon the conditions set forth in
this Agreement and in reliance upon the representations, warranties and
agreements of Harris contained herein, Concurrent shall issue, sell and deliver
to Harris, and Harris shall purchase and acquire, (i) good and valid title to
ten million (10,000,000) shares of Concurrent Common Stock, subject to
adjustment for stock splits, stock dividends and similar transactions prior to
the Closing (the "Common Stock Consideration") and (ii) ten million dollars
($10,000,000) in total liquidation preference of Concurrent Preferred Stock, as
adjusted pursuant to the terms thereof and Section 2.3(c) hereof (the "Preferred
Stock Consideration"). The terms of the Preferred Stock Consideration are set
forth in the Certificate of Designation (as defined below) attached hereto as
Exhibit A. In accordance with the terms of the Certificate of Designation such
Preferred Stock Consideration may be converted into debentures of Concurrent
having the terms substantially set forth in the term sheet attached hereto as
Exhibit B (the "Debentures").
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Section 2.3 Preparation of Audited Financial Statements; Net Current Assets
Adjustment. In connection with the transactions contemplated hereby, Harris and
Concurrent also agree to the following:
(a) Audited Financial Statements.
(i) Within 45 days after March 29, 1996, Harris shall deliver to
Concurrent an audited balance sheet of the Business as of March 29, 1996,
prepared in accordance with United States generally accepted accounting
principles ("GAAP") and such additional procedures set forth in Schedule
2.3(a) hereto (such financials, the "Audited Balance Sheet"). The audit for
the Audited Balance Sheet shall be performed by KPMG Peat Marwick LLP
("KPMG").
(ii) Following completion and delivery of the Audited Balance Sheet,
Harris shall promptly make available to Concurrent all available work
papers of KPMG created in connection with the preparation of the Audited
Balance Sheet. Harris shall cause the representatives of KPMG to be
available promptly to assist Concurrent and its auditors in its review of
such work papers. In addition, in accordance with Section 6.6, Concurrent
and its auditors shall be entitled to review the books and records of
Harris relating to the Business.
(iii) Concurrent may dispute the Audited Balance Sheet by giving
written notice to Harris within 20 days after delivery of the Audited
Balance Sheet to Concurrent, setting forth in reasonable detail the basis
for such dispute (hereinafter called an "Audited Balance Sheet
Disagreement"). The parties shall promptly commence good faith negotiations
with a view to resolving such Audited Balance Sheet Disagreement, which
resolution shall be not later than 30 days after the date the Audited
Balance Sheet is received by Concurrent.
(iv) If Concurrent or Harris delivers a written notice to the other
party that an Audited Balance Sheet Disagreement is unable to be resolved,
such Audited Balance Sheet Disagreement shall be referred to a nationally
recognized accounting firm other than KPMG, Coopers & Lybrand or Ernst &
Young for determination of the disputed amounts in accordance with this
Agreement. If Concurrent and Harris do not promptly agree on the selection
of a nationally recognized accounting firm, their respective independent
public accountants shall select such accounting firm which shall be a firm
other than KPMG, Coopers & Lybrand or Ernst & Young. The determination of
such firm shall be final and binding upon the parties. Such firm shall
render its determination as soon as practicable after referral of the
Audited Balance Sheet Disagreement. The fees and expenses of such firm with
respect to the Audited Balance Sheet Disagreement shall be paid by
Concurrent and Harris as follows: 30% of such fees shall be paid by the
party whose position in the Audited Balance Sheet Disagreement submitted to
the arbiter is closest to the final determination of the accounting firm
selected, and the remaining 70% of such fees shall be paid by the other
party.
(b) Net Current Asset Reconciliations.
(i) Not later than 5 business days prior to the Closing, Harris shall
deliver to Concurrent a projected reconciliation, certified by the chief
financial officer of Harris, which shall set forth the portion of the
current assets of the Business to be assigned, transferred and sold to
Concurrent pursuant to the terms hereof as of June 30, 1996 (the "Reference
Date") and the current liabilities of the Business which are not to be
retained by Harris as of the Reference Date (the "Projected Net Current
Asset Reconciliation"). The Projected Net Current Asset Reconciliation
shall, except as set forth in this subsection (i), be prepared in
accordance with GAAP consistent with the accounting principles used in
preparation of the Audited Balance Sheet and prepared in accordance with
the additional procedures set forth in Schedule 2.3(b) hereto. Harris shall
cause KPMG to prepare promptly after the Reference Date, but in no event
more than 30 days following the Reference Date, consistent with (i) the
provisions of Schedule 2.3(b) and (ii) the Projected Net Current Asset
Reconciliation (to the extent it does not conflict with Schedule 2.3(b)), a
reconciliation of the portion of the current assets of the Business
assigned, transferred and sold to Concurrent as of the Reference Date and
the current liabilities of the Business which were not retained by Harris
as of the Reference Date (the "Final Net Current Asset
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Reconciliation" and with the Projected Net Current Asset Reconciliation,
the "Net Current Asset Reconciliations").
(ii) Following delivery of the Final Net Current Asset Reconciliation,
Harris shall promptly make available to Concurrent all available work
papers (including those relating to inventories and accounts receivable) of
KPMG created in connection with the preparation of the Final Net Current
Asset Reconciliation. Harris shall cause the representatives of KPMG to be
available to promptly assist Concurrent and its auditors in its review of
such work papers. In addition, in accordance with Section 6.6, Concurrent
and its auditors shall be entitled to review the books and records of
Harris relating to the Business.
(iii) Concurrent may dispute the Final Net Current Asset
Reconciliation by giving written notice to Harris within 30 days after
delivery of the Final Net Current Asset Reconciliation to Concurrent,
setting forth in reasonable detail the basis for such dispute (hereinafter
called a "Reconciliation Disagreement"). The parties shall promptly
commence good faith negotiations with a view to resolving such
Reconciliation Disagreement, which resolution shall be not later than 70
days after the Closing Date.
(iv) If Concurrent or Harris delivers a written notice to the other
party that a Reconciliation Disagreement is unable to be resolved, such
Reconciliation Disagreement shall be referred to a nationally recognized
accounting firm other than KPMG, Coopers & Lybrand or Ernst & Young for
determination of the disputed amounts in accordance with this Agreement. If
Concurrent and Harris do not promptly agree on the selection of a
nationally recognized accounting firm, their respective independent public
accountants shall select such accounting firm which shall be a firm other
than KPMG, Coopers & Lybrand or Ernst & Young. The determination of such
firm shall be final and binding upon the parties. Such firm shall render
its determination as soon as practicable after referral of the
Reconciliation Disagreement. The fees and expenses of such firm with
respect to a Reconciliation Disagreement shall be paid by Concurrent and by
Harris as follows: 30% of such fees shall be paid by the party whose
position in the Reconciliation Disagreement submitted to the arbiter is
closest to the final determination of the accounting firm selected, and the
remaining 70% of such fees shall be paid by the other party.
(c) Adjustment to Preferred Stock Consideration.
(i) After delivery of the Projected Net Current Asset Reconciliation
and prior to the Closing, the Preferred Stock Consideration shall be
adjusted by reducing the total $10,000,000 liquidation preference and
stated value thereof, dollar for dollar, to the extent that total current
assets minus the total current liabilities (such difference, the "Net
Assets") shown on such Projected Net Current Asset Reconciliation is less
than $14,400,000. Such reduced amount of Preferred Stock Consideration, if
there shall be any reduction, shall be the actual amount of such
consideration delivered to Harris at the Closing.
(ii) After the Closing, additional reductions, if any, in the
liquidation preference of the Preferred Stock Consideration shall be in
accordance with the terms of the Certificate of Designation. In accordance
with the terms of the Certificate of Designation, if the Net Assets shown
on the Final Net Asset Reconciliation (after resolution of all
Reconciliation Disagreements) is in excess of the Net Assets shown on the
Projected Net Asset Reconciliation, then the liquidation preference and
stated value of the Preferred Stock Consideration delivered at Closing
shall be increased, dollar for dollar, to the extent of such excess up to
$10,000,000 and any remainder of such excess shall be paid, dollar for
dollar, in cash as soon as practicable after the determination of such
excess.
Section 2.4 Ancillary Agreements; Certificate of Designation. (a) On the
Closing Date, the parties hereto shall enter into (1) leases to be mutually
agreed to by the parties hereto prior to Closing, (2) a Shared Services
Agreement to be mutually agreed to by the parties hereto prior to Closing, (3) a
Non-Competition/ Distribution Agreement, to be mutually agreed to by the parties
hereto prior to Closing, and (4) a Share Holding Agreement, substantially in the
form of Exhibit C hereto. The foregoing agreements and any other agreements the
parties hereto determine to be necessary to effectuate this Agreement and the
transactions contemplated hereby and mutually agree shall be considered
"Ancillary Agreements" referred to herein as the "Ancillary Agreements".
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(b) Prior to the Closing, the Board of Directors of Concurrent shall have
also adopted the Certificate of Designation.
Section 2.5 Allocation of Purchase Price. Concurrent shall prepare and
deliver, and Concurrent and Harris shall mutually agree to, the allocation of
the Purchase Price and the Assumed Liabilities among the Assets to be purchased
hereunder which allocation shall be reflected on Schedule 2.5 and which shall be
finalized as of the Closing Date but shall be adjusted to take account of any
post-closing purchase price adjustments (the "Allocation"). The Allocation shall
be made in accordance with Section 1060 of the Internal Revenue Code (the
"Code") and applicable Treasury regulations. Each of Harris and Concurrent shall
(i) be bound by the Allocation for purposes of determining any Taxes (as defined
in Section 4.10), (ii) prepare and file, and cause its affiliates to prepare and
file, its Tax Returns (as defined in Section 4.10) on a basis consistent with
the Allocation and (iii) take no position, and cause its affiliates to take no
position, inconsistent with the Allocation of any applicable Tax Return, in any
proceeding before any taxing authority or otherwise. In the event that the
Allocation is disputed by any taxing authority, the party receiving notice of
the dispute shall promptly notify the other party hereto of the receipt of such
notice.
ARTICLE III
CLOSING
Section 3.1 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place (a) at the offices of Skadden, Arps,
Slate, Meagher & Flom, 919 Third Avenue, New York, New York 10022, on June 30,
1996 or as soon as practicable following the satisfaction (or waiver) of the
conditions set forth in Article VIII, whether earlier or later than June 30,
1996 or (b) at such other date, time or place as the parties shall mutually
agree (the "Closing Date").
Section 3.2 Deliveries by Harris. At or prior to the Closing, Harris shall
deliver or shall cause to be delivered the following documents to Concurrent:
(a) Cash by wire transfer in immediately available funds to an account
designated by Concurrent in the amount of the cash set forth on the Projected
Net Current Asset Reconciliation.
(b) Certificates representing the Purchased Harris Shares.
(c) A duly executed bill of sale and assignment with respect to the Assets
in the form mutually agreed to by the parties hereto.
(d) (i) A duly executed instrument of assignment, in recordable form,
sufficient to transfer title in the Business Intellectual Property Rights to
Concurrent in the form mutually agreed to by the parties hereto and (ii) such
other duly executed individual instruments of assignments in recordable form
appropriate to transfer title in the Business Intellectual Property Rights to
Concurrent in the jurisdiction in which the Business Intellectual Property
Rights are registered or in which an application for registration is pending in
the form mutually agreed to by the parties hereto.
(e) Such other duly executed instruments of conveyance and transfer as may
be reasonably requested by Concurrent prior to the Closing Date.
(f) Opinions of counsel to Harris mutually agreed to by the parties hereto.
(g) The certificates required by Sections 8.2(a) and 8.2(b) hereof relating
to truthfulness of representations and warranties and the performance of all
covenants of Harris hereunder.
(h) The records and files of the Business in the manner requested by
Concurrent, including the corporate documents of the Transferred Subsidiaries,
which records, files and documents shall remain at the premises of such
Transferred Subsidiaries and be deemed to be delivered to Concurrent.
(i) Certificates representing the Harris Subsidiary Shares, if any,
accompanied by stock powers duly executed in blank or duly executed stock
transfer forms or instruments of transfer, with any requisite documentary or
stock transfer taxes affixed thereto.
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(j) The consents set forth on Schedule 8.2(d).
(k) Duly executed counterparts of the Ancillary Agreements.
(l) The resignation of E. Courtney Siegel as a director and an executive
officer of Harris.
(m) The Audited Balance Sheet.
(n) Separate statutory financial statements for each of the Transferred
Subsidiaries as of and for the periods ended September 30, 1994 and September
30, 1995, respectively.
(o) Such other documents reasonably requested by Concurrent prior to the
Closing Date.
Section 3.3 Deliveries by Concurrent. At or prior to the Closing,
Concurrent shall deliver or shall cause to be delivered the following to Harris:
(a) Certificates representing the Common Stock Consideration.
(b) Certificates representing the Preferred Stock Consideration, as
adjusted, if at all, prior to the Closing pursuant to the terms hereof.
(c) Duly executed instruments of assumption, in the form mutually agreed to
by the parties hereto.
(d) Such other duly executed instruments of assumption as may be reasonably
requested by Harris prior to the Closing Date.
(e) Duly executed counterparts of the Ancillary Agreements.
(f) Opinions of counsel to Concurrent mutually agreed to by the parties
hereto.
(g) The certificates required by Sections 8.3(a) and 8.3(b) hereof relating
to the truthfulness of representations and warranties, and the performance of
all covenants of Concurrent.
(h) The determinations and declarations required by Section 8.3(f) hereof.
(i) A certified copy of the Certificate of Designation.
(j) Such other documents reasonably requested by Harris prior to the
Closing Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF HARRIS
Harris represents and warrants to Concurrent as follows:
Section 4.1 Organization Etc.
(a) Harris and each of its Subsidiaries (as defined below) is a corporation
or other legal entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization and has
all requisite corporate power and authority to own, lease and operate the assets
owned and leased by it and to carry on its business as now being conducted,
except where the failure to be so organized, existing or in good standing or to
have such power and authority would not, individually or in the aggregate, have
a Material Adverse Effect (as defined herein) on either Harris and its
Subsidiaries taken as a whole or the Business. As used in this Agreement, the
term "Material Adverse Effect" with respect to an entity (or group of entities
taken as a whole) means such event, change or effect which is materially adverse
to the business, properties, assets, liabilities, results of operations or
financial condition of such entity (or group of entities taken as a whole).
Harris and each of its Subsidiaries is duly qualified or licensed to do business
and in good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so duly
qualified or licensed and in good standing would not, individually or in the
aggregate, have a Material Adverse Effect on either Harris and its Subsidiaries
taken as a whole or the Business. For purposes of this Agreement, the term
"Subsidiary" when used with respect to any party, means any entity of which such
party (either alone
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or through or together with any other Subsidiary) owns, directly or indirectly,
50% or more of the stock or other equity interests the holders of which are
generally entitled to vote for the election of the board of directors or other
governing body of such entity.
(b) Harris has heretofore made available to Concurrent a complete and
correct copy of the charter and by-laws or comparable organizational documents,
each as amended to date, of Harris and each of its Subsidiaries. Such charters,
by-laws and comparable organizational documents are in full force and effect.
Neither Harris nor any of its Subsidiaries is in violation of any provision of
its charter, by-laws or comparable organizational documents, except for such
violations that would not, individually or in the aggregate, have a Material
Adverse Effect on Harris or its Subsidiaries taken as a whole.
Section 4.2 Capitalization. As of the date of this Agreement, the
authorized capital stock of Harris consists of: (a) 20,000,000 shares of Harris
Common Stock of which, as of March 17, 1996, 1,995,389 shares were issued and
outstanding, no shares were held in treasury and (b) 5,000,000 shares of
Preferred Stock, par value $0.01 per share, of which, as of the date hereof, no
shares were issued and outstanding and 20,000 shares were reserved for issuance
in accordance with the Stockholder Protection Rights Agreement dated as of
September 15, 1994, by and between Harris and Society National Bank, as Rights
Agent (the "Harris Rights Agreement"), pursuant to which Harris has issued
rights (the "Harris Rights") to purchase shares of Harris Preferred Stock. As of
December 31, 1995, not more than 325,000 shares of Harris Common Stock and as of
March 17, 1996 not more than 675,000 shares of Harris Common Stock were reserved
for issuance (i) upon exercise of outstanding options or for grants of
restricted stock pursuant to the Harris Stock Incentive Plan (the "Harris Stock
Plan") and (ii) upon exercise of outstanding options awarded to directors and
employees outside the Harris Stock Plan. Except as permitted by Section 6.1 and
Schedule 6.1, since the date hereof, Harris has not issued any shares of Harris
Common Stock, except upon the exercise of options granted under the Harris Stock
Plan which were outstanding on the date hereof. All the outstanding shares of
Harris's capital stock are, and all shares which may be issued pursuant to the
Harris Stock Plan will be, when issued and paid for in accordance with the
respective terms thereof, duly authorized, validly issued, fully paid and
nonassessable and not subject to any preemptive rights of third parties in
respect thereto. The Purchased Harris Shares when issued and paid for in
accordance with the terms hereof will be duly authorized, validly issued, fully
paid and nonassessable and not subject to any preemptive rights of third parties
in respect thereto. Except as set forth above or on Schedule 4.2 hereto, as of
the date of this Agreement, there are no existing options, warrants, calls,
subscriptions or other rights or other agreements or commitments of any
character relating to the issued or unissued capital stock of Harris or any of
its Subsidiaries obligating Harris or any of its Subsidiaries to issue, transfer
or sell or cause to be issued, transferred or sold any shares of capital stock
of, or other equity interests in, Harris or any of its Subsidiaries or
securities convertible into or exchangeable for such shares or equity interests
or obligating Harris or any of its Subsidiaries to grant, extend or enter into
any such option, warrant, call, subscription or other right, agreement or
commitment. As of the date of this Agreement, except as set forth on Schedule
4.2 hereto, there are no outstanding contractual obligations of Harris or any of
its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of Harris or any of its Subsidiaries. Each of the outstanding
shares of capital stock of each of Harris's Subsidiaries is duly authorized,
validly issued, fully paid and nonassessable, and such shares are owned by
Harris free and clear of any lien, claim, option, charge, security interest,
limitation on voting rights and encumbrance of any kind, except as would not
have a Material Adverse Effect on either Harris and its Subsidiaries taken as a
whole or the Business.
Section 4.3 Authority. Harris has the requisite corporate power and
authority to execute and deliver this Agreement and the Ancillary Agreements to
which it is a party and to consummate the transactions contemplated hereby and
thereby (other than the approval and adoption of this Agreement and the
transactions contemplated hereby by the affirmative vote of the holders of a
majority of the outstanding shares of Harris Common Stock). The execution,
delivery and performance of this Agreement and the Ancillary Agreements by
Harris and the consummation by Harris of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action on the
part of Harris and no other corporate proceedings on the part of Harris are
necessary to authorize this Agreement or the Ancillary Agreements or to
consummate the transactions contemplated hereby or thereby (other than the
approval and adoption of this
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Agreement and the transactions contemplated hereby by the affirmative vote of a
majority of the outstanding shares of Harris Common Stock). This Agreement has
been, and when executed the Ancillary Agreements will be, duly executed and
delivered by Harris and, assuming this Agreement, and the Ancillary Agreements
when executed, constitute valid and binding obligations of Concurrent,
constitute, or will constitute, valid and binding obligations of Harris,
enforceable against Harris in accordance with their terms.
Section 4.4 Consents and Approvals; No Violations.
(a) Except as set forth on Schedule 4.4(a) hereto and except for filings,
permits, authorizations, notices, consents and approvals as may be required
under, and other applicable requirements of, the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the Securities Act of 1933, as amended
(the "Securities Act"), the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), the FBCA, certain state takeover statutes or
state securities or blue sky laws, neither the execution, delivery or
performance of this Agreement and the Ancillary Agreements by Harris nor the
consummation by Harris of the transactions contemplated hereby and thereby and
compliance by Harris with any of the provisions hereof and thereof will (i)
conflict with or result in any breach of any provisions of the certificate of
incorporation or by-laws or comparable organizational documents of Harris or any
of its Subsidiaries, (ii) require any filing with, or permit, authorization,
consent or approval of, any court, arbitral tribunal, administrative agency or
commission or other governmental or other regulatory authority or agency (a
"Governmental Entity") (except where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings would not prevent
or delay consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements in any material respect and would not, individually or in
the aggregate, have a Material Adverse Effect on either Harris and its
Subsidiaries taken as a whole or the Business), (iii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, amendment, cancellation or
acceleration) under, or result in the creation of any lien or other encumbrance
on any property or asset of Harris or any of its Subsidiaries pursuant to, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to which
Harris or any of its Subsidiaries is a party or by which any of them or any of
their properties or assets may be bound or (iv) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Harris or any of
its Subsidiaries or by which any property or asset of Harris or any of its
Subsidiaries is bound or affected, except, in the case of clauses (iii) and
(iv), for violations, breaches, defaults or other occurrences which would not
prevent or delay consummation of this Agreement or the Ancillary Agreements or
the transactions contemplated hereby or thereby in any material respect and
would not, individually or in the aggregate, have a Material Adverse Effect on
either Harris and its Subsidiaries taken as a whole or the Business.
(b) Except as disclosed in the Harris SEC Documents (as defined in Section
4.5) or on Schedule 4.4(b) hereto, neither Harris nor any of its Subsidiaries is
in conflict with, or in default or violation of, (i) any order, writ,
injunction, decree, statute, rule or regulation of any Governmental Entity
applicable to Harris or any of its Subsidiaries or by which any of them or any
of their properties or assets may be bound or (ii) any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which Harris or any of its Subsidiaries is a party or by which any of them or
any of their properties or assets may be bound or affected, except for any such
conflicts, defaults or violations which have not had and are not likely to have
a Material Adverse Effect on either Harris and its Subsidiaries taken as a whole
or the Business.
Section 4.5 SEC Reports and Financial Statements. Harris has filed with
the Securities and Exchange Commission (the "SEC"), and has heretofore made
available to Concurrent true and complete copies of all forms, reports and
documents required to be filed by it since June 30, 1994, under the Exchange Act
or the Securities Act (as such documents have been amended since the time of
their filing, collectively, the "Harris SEC Documents"). The Harris SEC
Documents, including without limitation any financial statements or schedules
included therein, at the time filed, (a) did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading and (b) complied in all
material respects with the applicable requirements of the Exchange Act or the
Securities Act, as the case may be. The financial statements of Harris included
in the Harris SEC Documents complied as to form in all material
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respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted on Harris's Form 10-Q as filed with the SEC
under the Exchange Act) and fairly present (subject, in the case of the
unaudited statements, to normal, recurring audit adjustments which will not be
material in amount or effect) the consolidated financial position of Harris and
its consolidated Subsidiaries as at the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended. Except as
reflected, reserved against or otherwise disclosed in the financial statements
of Harris included in the Harris SEC Documents or as disclosed on Schedule 4.5
hereto, neither Harris nor any of its Subsidiaries has any liabilities or
obligations (absolute, accrued, fixed, contingent or otherwise) material to
Harris and its Subsidiaries taken as a whole that would be required to be
reflected on, or reserved against in, a balance sheet of Harris or the notes
thereto, prepared in accordance with generally accepted accounting principles
consistently applied.
Section 4.6 Information in Disclosure Documents. None of the information
supplied or to be supplied by Harris in writing specifically for inclusion or
incorporation by reference in the joint proxy statement relating to the meeting
of the stockholders of Harris and Concurrent (respectively, the "Harris
Stockholder Meeting" and the "Concurrent Stockholder Meeting" and collectively,
the "Stockholder Meetings") to be held in connection with the transactions
contemplated by this Agreement (the "Proxy Statement") will, at the time the
Proxy Statement is filed with the SEC, at the time such Proxy Statement is
mailed to stockholders of Harris and Concurrent, at the times of the Stockholder
Meetings to be held in connection with the transactions contemplated by this
Agreement and at the Closing Date, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. The Proxy Statement will, when filed
with the SEC, comply as to form in all material respects with the provisions of
the Exchange Act and the rules and regulations thereunder, except that no
representation is made by Harris with respect to statements made therein based
on information supplied by Concurrent in writing specifically for inclusion in
the Proxy Statement.
Section 4.7 Litigation. Except as disclosed in the Harris SEC Documents or
on Schedule 4.7 hereto, there is no suit, claim, action, proceeding or
investigation pending or, to the best knowledge of Harris, threatened, against
Harris or any of its Subsidiaries before any Governmental Entity which,
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on either Harris or any of its Subsidiaries taken as a whole or
the Business or a Material Adverse Effect on the ability of Harris to consummate
the transactions contemplated by this Agreement. Except as disclosed in the
Harris SEC Documents or on Schedule 4.7 hereto, neither Harris nor any of its
Subsidiaries is subject to any outstanding order, writ, injunction or decree
which, insofar as can be reasonably foreseen, individually or in the aggregate,
would in the future have a Material Adverse Effect on either Harris or any of
its Subsidiaries taken as a whole or the Business or a Material Adverse Effect
on the ability of Harris to consummate the transactions contemplated by this
Agreement. Harris has, in accordance with GAAP, made adequate provision in its
financial statements for the payment of losses arising out of suits, claims,
actions, proceedings or investigations disclosed in the Harris SEC Document or
on Schedule 4.7 and such provision has continued to be adequate.
Section 4.8 Absence of Certain Changes. Except as disclosed in the Harris
SEC Documents or on Schedule 4.8 hereto, since September 30, 1995, Harris has
conducted its business only in the ordinary course of such business and there
has not been (a) any material adverse change in either Harris and its
Subsidiaries taken as a whole or the Business, (b) any declaration, setting
aside or payment of any dividend or other distribution with respect to its
capital stock or (c) any material change in its accounting principles, practices
or methods.
Section 4.9 Opinion of Financial Advisor. Harris has received the opinion
of Bear, Stearns & Co. Inc., its financial advisor, to the effect that, as of
the date of this Agreement, the transactions contemplated hereby are fair, from
a financial point of view, to the stockholders of Harris.
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Section 4.10 Tax Matters.
(a) Harris and each of its Subsidiaries has duly filed all, or as of the
Closing Date will have filed, all Tax Returns (as defined in Section 4.10(e))
required to be filed by it or its Subsidiaries on or before the Closing Date,
and such Tax Returns are or will be true, correct and complete in all material
respects. Harris and its Subsidiaries have duly paid, caused to be paid, or made
adequate provision in the Harris SEC Documents in accordance with GAAP for the
payment of all Taxes (as defined in Section 4.10(d)) required to be paid in
respect of all periods covered by such Tax Returns. Harris has made adequate
provision in accordance with GAAP for the payment of all Taxes anticipated to be
payable in respect of all taxable periods or portions thereof ending on or
before the Closing Date since the periods covered by such Tax Returns.
(b) (i) The reserves for Taxes (except for deferred Taxes) reflected
in the Harris SEC Documents are sufficient for the payment of all unpaid
Taxes (whether or not currently disputed) accrued through the date thereof.
Since September 30, 1995, neither Harris nor its Subsidiaries have incurred
any material liability for Taxes other than in the ordinary course of
business consistent with past practice. Harris and its Subsidiaries are
qualified or registered to do business in the states and localities set
forth on Schedule 4.10(b)(i) hereto. Except as set forth on Schedule
4.10(b)(i) hereto, there are no liens for Taxes upon the assets of Harris
or its Subsidiaries except for statutory liens for current Taxes not yet
due.
(ii) The Tax Returns filed by Harris have been examined by the
Internal Revenue Service (the "IRS") or other appropriate taxing authority,
for all taxable years as set forth on Schedule 4.10(b)(ii) hereto. Except
as set forth on Schedule 4.10(b)(ii) hereto, all deficiencies and
assessments asserted as a result of such examinations or other audits by
federal, state, local or foreign taxing authorities have been paid, fully
settled or adequately provided for in the Harris SEC Documents in
accordance with GAAP, and no issue or claim has been asserted for Taxes by
any taxing authority for any prior period, the adverse determination of
which would result in a deficiency which would have a Material Adverse
Effect on either Harris and its Subsidiaries taken as a whole or the
Business, other than those heretofore paid or provided for. Except as
disclosed on Schedule 4.10(b)(ii) hereto, no issue has been raised during
the past five years by any federal, state, local or foreign taxing
authority which, if raised with regard to any other period not so examined,
could reasonably be expected to result in a proposed deficiency for any
other period not so examined.
(c) (i) Except as set forth on Schedule 4.10(c) hereto, there are no
outstanding agreements or waivers extending the statutory period of
limitation applicable to any Tax Return of Harris or its Subsidiaries.
Except as set forth on Schedule 4.10(c) hereto, neither Harris nor any of
its Subsidiaries (x) has been a member of a group filing consolidated
returns for federal income tax purposes, or (y) is a party to a tax sharing
or tax indemnity agreement or any other agreement of a similar nature that
remains in effect. Except as set forth on Schedule 4.10(c) hereto, no power
of attorney has been executed by, or on behalf of Harris or its
Subsidiaries with respect to any matter relating to Taxes which is
currently in force.
(ii) Neither Harris nor any of its Subsidiaries has filed a consent
pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2)
of the Code apply to any disposition of a subsection (f) asset (as such
term is defined in Section 341(f)(2) of the Code) owned by Harris or any of
its Subsidiaries.
(iii) The respective net operating losses, net operating loss
carryforwards and tax credit carryforwards, if any, of each of the
Transferred Subsidiaries for all federal, state, local and foreign tax
purposes as of December 29, 1995, are as set forth on Schedule 4.10(c)(iii)
hereto.
(d) As used in this Agreement, "Taxes" shall mean all taxes, charges, fees,
levies or other assessments, including, without limitation, income, gross
receipts, excise, property, sales, transfer, use (or any similar taxes),
license, payroll, withholding, social security, capital stock and franchise
taxes, imposed by any federal, state, local or foreign taxing authority,
including any interest, penalties or additions thereto. As used in this
Agreement, the term "Tax Return" shall mean any report, return or other
information or document required to be supplied to a taxing authority in
connection with Taxes.
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(e) Neither Harris nor any of its Subsidiaries has committed any breach of
any representation or covenant contained in the Tax Sharing Agreement (as
defined herein) or made in connection with the opinion rendered by Sullivan &
Cromwell (as described in Section 1.12(a) of the Tax Sharing Agreement), in each
case relating to the qualification of the Distribution (as defined herein) as a
distribution pursuant to Section 355 of the Code, and none of the actions
contemplated by this Agreement shall result in or otherwise give rise to a
breach of any such representation or covenant. As used in this Agreement, the
term "Distribution" shall refer to the distribution of Harris Common Stock
pursuant to the Distribution Agreement by and between Harris and Harris
Corporation dated September 16, 1994 and "Tax Sharing Agreement" shall refer to
the Tax Disaffiliation Agreement by and between Harris and Harris Corporation
dated September 13, 1994.
Section 4.11 Vote Required. The only votes of the holders of any class or
series of Harris's capital stock necessary to approve the transactions
contemplated hereby are the affirmative vote of a majority of (a) all votes
entitled to be cast by the holders of Harris Common Stock with respect to this
Agreement and the transactions contemplated hereby and (b) the total votes cast
by the holders of Harris Common Stock, in a separate vote, with respect to an
amendment to the Harris Stock Plan (the "Harris Stock Plan Amendment") to
increase the number of shares of Harris Common Stock reserved and available for
issuance under the Harris Stock Plan to 2,025,000 shares of Harris Common Stock.
Section 4.12 Employee Benefit Plans; ERISA.
(a) Schedule 4.12(a) contains a true and complete list of each bonus,
deferred compensation, incentive compensation, stock purchase, stock option,
severance or termination pay, hospitalization or other medical, life or other
insurance, supplemental unemployment benefits, profit-sharing, pension, or
retirement plan, program, agreement or arrangement, and each other employee
benefit plan, program, agreement or arrangement, sponsored, maintained or
contributed to or required to be contributed to by Harris or by any trade or
business, whether or not incorporated (a "Harris ERISA Affiliate"), that
together with Harris would be deemed a "single employer" within the meaning of
section 4001 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), for the benefit of any employee or terminated employee of Harris or
any Harris ERISA Affiliate (the "Harris Plans"). Schedule 4.12(a) identifies
each of the Harris Plans that is an "employee benefit plan," as that term is
defined in section 3(3) of ERISA (the "Harris ERISA Plans").
(b) With respect to each Harris Plan, Harris has heretofore delivered to
Concurrent true and complete copies of each of the following documents:
(i) a copy thereof;
(ii) a copy of the most recent annual report and actuarial report, if
required under ERISA and the most recent report prepared with respect
thereto in accordance with Statement of Financial Accounting Standards No.
87, Employer's Accounting for Pensions;
(iii) a copy of the most recent Summary Plan Description required
under ERISA with respect thereto;
(iv) if the Harris Plan is funded through a trust or any third party
funding vehicle, a copy of the trust or other funding agreement and the
latest financial statements thereof; and
(v) the most recent determination letter received from the IRS with
respect to each Harris Plan intended to qualify under section 401 of the
Code.
(c) Neither Harris nor any Harris ERISA Affiliate maintains or has ever
maintained an ERISA Plan subject to Title IV of ERISA.
(d) No Harris ERISA Plan is a "multiemployer pension plan," as defined in
section 3(37) of ERISA, nor is any Harris ERISA Plan a plan described in section
4063(a) of ERISA.
(e) Each Harris Plan has been operated and administered in all material
respects in accordance with its terms and applicable law, including but not
limited to ERISA and the Code.
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(f) To the best knowledge of Harris, each Harris ERISA Plan intended to be
"qualified" within the meaning of section 401(a) of the Code is so qualified and
the trusts maintained thereunder are exempt from taxation under section 501(a)
of the Code.
(g) No Harris Plan provides benefits, including death or medical benefits
(whether or not insured), with respect to current or former employees of Harris
or any Harris ERISA Affiliate beyond their retirement or other termination of
service (other than (i) coverage mandated by applicable law or (ii) death
benefits or retirement benefits under any "employee pension plan," as that term
is defined in section 3(2) of ERISA).
(h) There are no pending, threatened or anticipated claims by or on behalf
of any Harris Plan, by any employee or beneficiary covered under any such Harris
Plan, or otherwise involving any such Harris Plan (other than routine claims for
benefits).
(i) Except with respect to the Harris Options which are set forth on
Schedule 4.12(i) hereto and shall continue to have the vesting schedule in
effect on the date hereof, at the Closing Date, all Harris Options then
outstanding under the Harris Stock Plan shall become exercisable and vested to
the extent provided for pursuant to the stock option agreements under which such
Harris Options were granted.
(j) As of the Closing Date, full payment will have been made or accrued in
accordance with GAAP, and to the extent applicable, section 412 of the Code of
all amounts required to be paid under the terms of each of the Harris Plans and
any other similar fringe or employee benefit plans, programs or arrangements
applicable to employees of the Transferred Subsidiaries (the "Transferred
Subsidiaries Benefit Plans") as contributions to such plans.
(k) Listed on Schedule 4.12(k) is a description of each of the Transferred
Subsidiaries Benefit Plans that provides post-retirement medical, health or
other post-retirement benefits to employees.
(l) Where applicable, the Transferred Subsidiaries Benefit Plans required
to be registered with applicable regulatory authorities have been registered and
have been maintained in good standing with such applicable regulatory
authorities.
Section 4.13 Applicability of Certain Laws. The provisions of Section
607.0901-.0903 ("Control-Share Acquisitions") and Section 607.1302(1)-(3)
("Right of Stockholders to Dissent"), respectively, of the FBCA will not apply
to this Agreement or any of the transactions contemplated hereby.
Section 4.14 Major Contracts. Except as disclosed in the Harris SEC
Documents or as set forth on Schedule 4.14 hereto, neither Harris nor any of its
Subsidiaries is a party to or subject to:
(a) Any joint venture contract or arrangement or any other agreement which
has involved or is expected to involve a sharing of profits with other persons;
(b) Any existing OEM agreement, distribution agreement, volume purchase
agreement, or other similar agreement in which the annual amount involved in
1995 exceeded or is expected to exceed in fiscal 1996 $500,000 in aggregate
amount or pursuant to which Harris has granted or received exclusive marketing
rights related to any product, group of products or territory;
(c) Any material license agreement, either as licensor or licensee
(excluding nonexclusive software licenses granted to customers or end-users in
the ordinary course of business) involving the payment of at least $250,000;
(d) Any contract containing covenants purporting to limit Harris's freedom
or that of any of its Subsidiaries to compete in any line of business in any
geographic area;
(e) Any mortgage, loan agreement, note, or guarantee of obligations of
others for borrowing of money in excess of $50,000;
(f) Any agreement or arrangement for the purchase or sale of any Assets, or
for the grant of any preferential right to purchase any of the Assets, other
than in the ordinary course of business or would exceed $50,000;
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(g) Any lease for Equipment or other personal property involving an
aggregate commitment of $50,000 ;
(h) Any agreement, contract or commitment for maintenance, consulting,
engineering or other services involving an aggregate commitment of $50,000 or
more on an annual basis;
(i) Any agreement, contract or commitment for purchase of materials or
supplies (other than capital equipment), or any group of such agreements,
contracts or commitments with a single vendor, involving an aggregate commitment
of $100,000 or more on an annual basis;
(j) Any agreement, contract or commitment for purchase of capital equipment
under which the remaining commitment is $50,000 or more;
(k) Any distribution, dealer, manufacturer's representative, sales agency
or franchise contract not terminable without penalty within 90 days and in
excess of $50,000; and
(l) Any shareholders' agreements relating to any of Harris's Subsidiaries.
Each of the contracts set forth in Schedule 4.14 is in full force and
effect. Harris is not in default, and there are no existing acts, events or
conditions (other than the transactions contemplated hereby) which, with notice
or lapse of time, or both, will result in a material default by Harris under any
of the contracts.
Section 4.15 Interests of Officers and Directors. Except as disclosed on
Schedule 4.15 hereto or in the Harris SEC Documents, no officer or director of
Harris or any of its Subsidiaries or any "affiliate" or "associate" (as those
terms are defined in Rule 405 promulgated under the Securities Act) of any such
person has had, either directly or indirectly, a material interest in: (a) any
person or entity which purchases from or sells, licenses or furnishes to Harris
or any Subsidiary any goods, property, technology or intellectual or other
property rights or services; (b) any contract or agreement to which Harris or
any of its Subsidiaries is a party or by which it may be bound or affected; or
(c) any property, real or personal, tangible or intangible, used in or
pertaining to the Business, including any interest in the Harris Intellectual
Property Rights (as defined herein), except for rights as a stockholder, and
except for rights under any Harris Plan.
Section 4.16 Intellectual Property.
(a) Harris and any of the Transferred Subsidiaries own, or are licensed or
otherwise entitled to exercise all rights in and to, all domestic and foreign
patents, trademarks, trade names, service marks, copyrights, mask works, trade
secrets and other intellectual property rights, and any applications,
registrations, certificates and/or Letters Patent therefor, and all net lists,
schematics, sketches, drawings, notebooks, reports, memoranda, prints, drafts,
worksheets, and any other writings, methods and practices, business information,
procedures, technology, source code, know-how, computer software programs and
all other tangible and intangible information or material, and all goodwill
associated with any of the foregoing, including goodwill in respect of
trademarks, that are used in the operation of the Assets as currently operated
(collectively, the "Business Intellectual Property Rights"). Harris or any of
its Subsidiaries own or are licensed or otherwise are entitled to exercise all
rights in and to all of the foregoing types of intellectual property used in the
operation of the Trusted Systems Business (such other intellectual property,
together with the Business Intellectual Property Rights, the "Intellectual
Property Rights"). There are no restrictions applicable to the Business
Intellectual Property Rights that interfere in any material respect with the
current use of such Business Intellectual Property Rights.
(b) Schedule 4.16(b) hereto is a complete and accurate list of the Business
Intellectual Property Rights. For each item listed thereon, Schedule 4.16(b)
hereto identifies the owner thereof and, if the owner is not Harris or any of
the Transferred Subsidiaries, the means by which Harris or any of the
Transferred Subsidiaries obtains rights thereto, and which party obtains such
rights. Schedule 4.16(b) hereto identifies all oral or written licenses,
agreements and other arrangements for any Business Intellectual Property Rights
between any two or more of Harris and its Subsidiaries, the parties thereto and
the subject matter thereof.
(c) Schedule 4.16(c) hereto lists all of the currently marketed products of
the Business and an indication as to which, if any, of such products are the
subject of certificates of copyright issued by the United States Copyright
Office, and any similar office or agency of any foreign country or jurisdiction,
and/or are the
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subject of applications for patent or original Letters Patent in the United
States or any foreign country or jurisdiction.
(d) Neither Harris nor any of its Subsidiaries is, or as a result of the
execution and delivery of this Agreement or the other transactions contemplated
hereby or the performance of Harris's obligations hereunder will be, in
violation of, or lose any rights pursuant to any license, sublicense or
agreement that is materially related to a Business Intellectual Property Right
and is described in the disclosure schedule attached to this Agreement (the
"Disclosure Schedule") with respect to Harris.
(e) Harris and one of the Transferred Subsidiaries is the owner or licensee
of the Business Intellectual Property Rights, and Harris and one of the
Subsidiaries is the owner of all other Intellectual Property Rights, with all
necessary right, title and interest in and to the same free and clear of any
liens, encumbrances or security interests. Except as set forth on Schedule
4.16(e) hereto, neither Harris nor any of its Subsidiaries is contractually
obligated to pay any compensation to any third party in an amount in excess of
$250,000 in respect to the use of any of the Intellectual Property Rights or the
material covered thereby in connection with the services or products being
manufactured and/or used and/or sold by Harris or any of its Subsidiaries.
(f) No claims with respect to the Intellectual Property Rights have been
asserted or, to the best knowledge of Harris, after reasonable investigation,
are threatened by any person. Harris knows of no claims: (i) to the effect that
the manufacture, offer for sale, sale or use of any product as now used or
offered by Harris or any of its Subsidiaries, or the use thereof by any customer
or licensee of Harris or any of its Subsidiaries infringes any copyright,
patent, trademark or service mark, or violates any trade secret rights, or other
intellectual property rights of any third party, (ii) challenging the ownership
or validity of any of the Intellectual Property Rights.
(g) To the best knowledge of Harris, all patents and registered trademarks,
service marks, copyrights and patents held by Harris or any of its Subsidiaries
are valid and subsisting.
(h) To the best knowledge of Harris, there has not been and there is not
now any material unauthorized use, infringement or misappropriation of any of
the Intellectual Property Rights by any third party, including, without
limitation, any employee or former employee of Harris or any of its
Subsidiaries; neither Harris nor any of its Subsidiaries has been sued or
charged in writing as a defendant in any claim, suit, action or proceeding which
involves a claim of infringement of any patents, trademarks, service marks,
copyrights or other intellectual property rights and which has not been finally
terminated prior to the date hereof; there are no such charges or claims
outstanding; and to the best knowledge of Harris neither Harris nor any of its
Subsidiaries has any infringement liability with respect to any patent,
trademark, service mark, copyright or other intellectual property right of
another.
(i) No Intellectual Property Right is subject to any outstanding order,
judgment, decree, stipulation or agreement restricting in any manner the
licensing or other disposition thereof by Harris or any of its Subsidiaries.
Except with respect to products and software described in the Night Hawk Product
Catalog a true and complete copy of which has been delivered to Concurrent,
neither Harris nor any of its Subsidiaries has entered into any agreement to
indemnify any other person against any charge of infringement of any
Intellectual Property Right. Neither Harris nor any of its Subsidiaries has
entered into any agreement granting any third party the right to bring
infringement actions with respect to, or otherwise to enforce rights with
respect to, any Intellectual Property Right.
(j) Harris and its Subsidiaries have the exclusive right to file, prosecute
and maintain all applications, certificates, registrations and Letters Patent
with respect to the Intellectual Property Rights owned by Harris or its
Subsidiaries. Harris or any of its Subsidiaries is listed in the records of the
appropriate agency as the sole owner of record for each registration, grant,
Letters Patent and application listed on Schedule 4.16(b) hereto as owned by
Harris or any of the Subsidiaries. All registration and maintenance fees that
have become due and payable with respect of such Intellectual Property Rights
have been paid.
(k) To the best knowledge of Harris, no act has been done, or omitted to be
done, by Harris or any of its Subsidiaries to impair or dedicate to the public
or to entitle any governmental authority to cancel, forfeit, modify or hold
abandoned any of the Intellectual Property Rights.
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(l) Harris and its Subsidiaries, with respect to all Intellectual Property
Rights owned and/or developed thereby, have taken or caused to be taken all
reasonable steps to obtain and retain valid and enforceable intellectual
property rights therein, including, without limitation, the use of
non-disclosure agreements adequate to protect the proprietary nature of any
confidential information disclosed by Harris or any of its Subsidiaries to third
parties.
(m) Schedule 4.16(m) hereto sets forth a complete and accurate list of all
licenses, assignments and other agreements pursuant to which Harris, or any of
its Subsidiaries, grants rights to any third party in and to any of the Business
Intellectual Property Rights.
(n) To the best knowledge of Harris, the components of all software,
hardware and firmware that are material to the Assets and are used or currently
proposed to be used in the operation of the Assets and the Excluded Assets as
currently operated are (i) owned by Harris and any of the Subsidiaries, or (ii)
currently in the public domain or otherwise available to Harris and any of its
Subsidiaries without the approval or consent of any third party, or (iii) used
by Harris or any of its Subsidiaries, or included in any of their products,
pursuant to rights granted to Harris or any of its Subsidiaries pursuant to a
written license or lease from a third party.
Section 4.17 Questionable Payments. Neither Harris nor any of its
Subsidiaries nor to its best knowledge any director, officer or other employee
of Harris or any of its Subsidiaries has: (a) corruptly made any payments or
provided services in the United States or in any foreign country in order to
obtain preferential treatment or consideration by any Governmental Entity in
order to obtain or retain business for Harris or any of its Subsidiaries in
violation of Section 30A of the Exchange Act; or (b) made any political
contributions unlawful under the laws of the United States and the foreign
country in which such payments were made. Neither Harris nor any of its
Subsidiaries nor to its best knowledge any director, officer or other employee
of Harris or any of its Subsidiaries has been the subject of any inquiry or
investigation by any Governmental Entity relating to the conduct described above
in this Section 4.17.
Section 4.18 Insurance. Except as set forth on Schedule 4.18 hereto,
Harris and each of its Subsidiaries is, and has been continuously since at least
October 7, 1994, insured with financially responsible insurers in such amounts
and against such risks and losses as are customary in all material respects for
companies conducting the Business as conducted by Harris and its Subsidiaries
during such time period. Except as set forth on Schedule 4.18 hereto, neither
Harris nor any of its Subsidiaries has received any notice of cancellation or
termination with respect to any material insurance policy of Harris or any of
its Subsidiaries. The insurance policies of Harris and its Subsidiaries are
valid and enforceable policies in all material respects.
Section 4.19 No Brokers. Harris has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of Harris or Concurrent to pay any finder's fees, brokerage or
agent's commissions or other like payments in connection with the negotiations
leading to this Agreement or the consummation of the transactions contemplated
hereby, except that Harris has retained Bear, Stearns & Co. Inc. as its
financial advisor, the arrangements with which have been disclosed in writing to
Concurrent prior to the date hereof. Other than the foregoing arrangement or as
disclosed in Section 5.19, Harris is not aware of any claim for payment of any
finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby.
Section 4.20 Environmental.
(a) Except as set forth on Schedule 4.20(a) hereto, Harris and its
Subsidiaries are in compliance in all material respects with all applicable
Environmental Laws (as defined herein). Except as set forth on Schedule 4.20(a)
hereto, Harris has not received any communication (written or oral), whether
from a governmental authority, citizen group, employee or otherwise, that
alleges that Harris is not in such compliance, and, to Harris's best knowledge
after due inquiry, there are no circumstances that may prevent or interfere with
such compliance in the future. Except as set forth on Schedule 4.20(a) hereto,
Harris has not received in the past five years any written request for
information from a governmental authority concerning or relating to the
treatment, transportation or disposal of any Materials of Environmental Concern
(as defined herein). Except
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as set forth on Schedule 4.20(a) hereto: Harris has acquired all necessary
permits, licenses, approvals and other governmental authorizations necessary to
operate in compliance with all applicable Environmental Laws; such permits,
licenses, approvals and authorizations are currently valid; and Harris is in
compliance in all material respects with such permits, licenses, approvals and
authorizations. To Harris's best knowledge, after due inquiry, there are no
circumstances that may prevent or interfere with the renewal of the permits,
licenses, approvals and other governmental authorizations held by Harris
pursuant to Environmental Laws.
(b) Except as set forth on Schedule 4.20(b) hereto, there has been in the
last five years and there is no Environmental Claim (as defined herein) pending
or threatened against Harris or, to Harris's best knowledge after due inquiry,
against any person or entity whose liability for any Environmental Claim Harris
has or may have retained or assumed either contractually or by operation of law.
(c) Except as set forth on Schedule 4.20(c) hereto, there are no past or
present actions, activities, circumstances, conditions, events or incidents,
including the release, emission, discharge or disposal of any Material of
Environmental Concern (as defined herein), that could form the basis of any
Environmental Claim against Harris or, to Harris' best knowledge after due
inquiry, against any person or entity whose liability for any Environmental
Claim Harris has or may have retained or assumed either contractually or by
operation of law.
(d) As used in this Agreement, the term "Environmental Laws" means all
federal, state, local and foreign laws and regulations relating to pollution or
protection of human health or the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata),
including, without limitation, laws and regulations relating to emissions,
discharges, releases or threatened releases of Materials of Environmental
Concern, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Materials of
Environmental Concern. As used in this Agreement, the term "Environmental Claim"
means any notice (written or oral) by any person or entity alleging potential
liability (including, without limitation, potential liability for investigatory
costs, clean-up costs, governmental response costs, natural resources damages,
property damages, personal injuries, or penalties) arising out of, based on or
resulting from (i) the presence, or release into the environment, of any
Material of Environmental Concern at any location, whether or not owned by
Harris, Concurrent or any of their Subsidiaries or (ii) circumstances forming
the basis of any violation, or alleged violation, of any Environmental Law. As
used in this Agreement, the term "Materials of Environmental Concern" means
chemicals, pollutants, hazardous substances, contaminants, toxic substances,
hazardous waste, petroleum and petroleum products as those terms are defined by
Environmental Laws.
Section 4.21 Assets.
(a) The lists of assets to be attached to the Bill of Sale to be delivered
by Harris to Concurrent at the Closing will be a true and complete listing of
Assets as of the Closing.
(b) Schedule 1.1(b) is a true and complete listing of the Property used in
both the Business and the Trusted Systems Business as of the date of this
Agreement.
(c) Schedule 1.2(a)(i) is a true and complete listing of all of the
Property used in the Trusted Systems Business.
(d) The Assets and the assets of the Transferred Subsidiaries, together
with the other arrangements contemplated by this Agreement (including the
Ancillary Agreements), constitute all the Property used in the operation of the
Business as they are presently being operated by Harris and the Transferred
Subsidiaries, and, except as otherwise contemplated by the terms hereof and the
terms of the Ancillary Agreements, will enable Concurrent and the Transferred
Subsidiaries to operate the Business immediately after the Closing as Harris and
the Transferred Subsidiaries operated the Business immediately prior to the
Closing. As of the Closing Date, all of the machines, equipment and other assets
that constitute tangible personal property that are being operated in connection
with the Business are in usable condition for the purpose for which they are
intended subject to ordinary wear and tear and routine maintenance. Harris has,
and, except as otherwise contemplated by the terms hereof (including Schedule
1.1(b) which describes the extent to which Shared Assets are transferred to
Concurrent) or the terms of the Ancillary Agreements, at Closing Harris will
deliver to
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Concurrent good and valid title to all of the tangible personal property
included in the Assets subject to (i) any security interests, mortgages, liens,
pledges, conditional sale or other title retention agreements, rights of first
refusal, options, leases, adverse claims, or any other encumbrances (the
"Encumbrances") relating to purchase money security interests entered into in
the ordinary course of business consistent with past practice and reflected in
the Audited Balance Sheet or the Final Net Current Asset Reconciliation; and
(ii) Encumbrances relating to lessors' interests in leased tangible personal
property. Harris has valid and subsisting leasehold interests in the Leased
Properties. To the best knowledge of Harris after reasonable inquiry, the
Transferred Subsidiaries have valid and subsisting leasehold interests in the
leased property of the Transferred Subsidiaries. Upon the Closing, Concurrent
shall acquire, directly or indirectly, the same right, title and interest in and
to all of the assets, real or personal, of the Transferred Subsidiaries as held
by Harris immediately prior to Closing.
Section 4.22 Audited Balance Sheet. The Audited Balance Sheet and all
financial statements or financial data with respect to the Business included in
the Proxy Statement (the "Audited Base Financial Statements") will be prepared
in accordance with GAAP and will present fairly, in all material respects, the
financial position of the Business or portion thereof, as the case may be, as of
the date or for the periods indicated therein.
Section 4.23 Leased Properties.
(a) Schedules 1.1(a)(i) and 1.1(b) contain an accurate and complete list of
all Leases, including the name and address of the lessor of each such Leased
Property, and the date of each of the Leases. Harris has delivered to Concurrent
true and complete copies of all Leases. For purposes of Section 4.23, the term
"Leases" shall include all leases, amendments thereto, assignments thereof,
subleases, subordination and/or nondisturbance agreements and all other
agreements creating, amending or modifying the leasehold estates in the Leased
Properties.
(b) With respect to the Leased Properties: (i) to the best knowledge of
Harris, there are no material defects in the buildings, improvements and
structures located thereon which would be reasonably expected to substantially
impair the operation of the Business immediately preceding the Closing as
compared with the operation of the Business by Harris on the date hereof; (ii)
to the best knowledge of Harris, all Leases are in full force and effect, and
constitute legal, valid and binding obligations of Harris, in accordance with
their respective terms; (iii) no written waiver, indulgence or postponement of
landlord's obligations thereunder has been granted by Harris and Harris has not
received any such written waiver, indulgence or postponement of its obligations
thereunder except as set forth on Schedule 4.23(b); and (iv) to the best
knowledge of Harris, there exists no event of default, event, occurrence,
condition or act (other than the transaction contemplated hereunder) which, with
the giving of notice, the lapse of time or the happening of any further event or
condition, would become a material default thereunder.
Section 4.24 Subsidiaries.
(a) Schedule 4.24(a) contains a true and complete list of all Subsidiaries
beneficially owned, directly or indirectly, by Harris and a description of those
Subsidiaries that are involved in the conduct of the Business.
(b) Schedule 4.24(b) contains a true and complete list of the authorized
and issued capital stock of each of the Transferred Subsidiaries, and the record
owners thereof.
(c) Schedule 4.24(c) contains a complete list of the officers and directors
of each of the Transferred Subsidiaries.
(d) Upon delivery of certificates representing the Harris Subsidiary Shares
to Concurrent or appropriate entries in the stock register, as the case may be,
Concurrent shall acquire legal and beneficial ownership of, and shall have good
and valid title to, the Harris Subsidiary Shares, free and clear of any
Encumbrance, as analogous concepts are understood under applicable local laws.
Upon delivery, all of the issued and outstanding shares of each Transferred
Subsidiary will be duly authorized, validly issued, fully paid and non-
assessable and not subject to any preemptive rights of third parties in respect
thereto.
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Section 4.25 Outstanding Liabilities to Related Parties. There are no
outstanding liabilities, contingent or otherwise, relating to the Business or
that will arise out of the transactions contemplated by this Agreement (except
as set forth in this Agreement) for amounts due to shareholders, directors,
officers, employees or other parties affiliated with or related to Harris or, to
the best knowledge of Harris after reasonable inquiry, the Transferred
Subsidiaries other than amounts due to directors, officers and employees in the
ordinary course of business consistent with past practice.
Section 4.26 Product Returns; Warranties.
(a) There are no liabilities for product returns, warranty obligations and
product services other than those arising in the ordinary course of business,
consistent with Harris's historical practice relating to the Business and in
accordance with normal industry standards. Harris has no knowledge of any
threatened claims for any extraordinary (i) product returns, (ii) warranty
obligations or (iii) product services, relating to the Business, reserved or
otherwise. Harris has made adequate provision for product returns and warranty
obligations in the Audited Balance Sheet in accordance with GAAP.
(b) Any liabilities for product returns and warranty obligations are fully
accrued and fully reserved against on each of the Audited Base Financial
Statements provided by Harris to Concurrent. Such reserves are adequate to pay
any amounts which may be owed by Harris of any of its Subsidiaries to any party
as a result of the incurrence of such liabilities.
(c) True and correct copies of the standard warranty provided by Harris on
sales orders and other related documents which are delivered in connection with
the Business have been made available to Concurrent. Such warranty delivered is
the only warranty applicable to the products of the Business except for
warranties provided by applicable law.
Section 4.27 Transferred Subsidiaries. There exists no debt, liability or
other obligation of the Transferred Subsidiaries, contingent or otherwise,
except those that will be reflected on the Final Net Current Asset
Reconciliation.
Section 4.28 Transferred Subsidiaries Financial Statement. (a) Harris has
previously delivered to Concurrent true and complete copies of the statutory
balance sheets as of September 30, 1995 and 1994 and the statements of
operations for the fiscal periods ended September 30, 1995 and 1994 of each
Transferred Subsidiary, together with the notes to such financial statements
(where available) (the "Transferred Subsidiaries Financial Statements").
(b) Each Transferred Subsidiary Financial Statement presents fairly in all
material respects, the financial condition of such Transferred Subsidiary as at
its respective date or during the respective period; and each of such
Transferred Subsidiary Financial Statements has been prepared in accordance with
GAAP consistently applied during the periods involved, except as otherwise
stated therein.
Section 4.29 Investment Purpose. Harris will acquire the shares of
Concurrent Common Stock to be issued pursuant to this Agreement and the
transactions contemplated hereby for its own account for the purpose of
investment and not with a view to or for sale in connection with any
distribution thereof, except pursuant to an effective registration statement
under the Securities Act and all applicable state securities laws or pursuant to
an exemption from the Securities Act and all applicable state securities laws
confirmed by an opinion of counsel satisfactory to Concurrent, the expense for
which shall be borne by Harris.
Section 4.30 Rights Agreement. Harris shall take all necessary and
appropriate actions such that (i) Concurrent will not become an "Acquiring
Person", (ii) no "Stock Acquisition Date", "Separation Time", "Flip-over
Transaction" or "Flip-in Date" (as such terms are defined in the Harris Rights
Agreement) will occur and (iii) the stockholders of Harris will not be entitled
to receive any right or benefit under the Harris Rights Agreement as a result of
the approval, execution or delivery of this Agreement by Harris or the
consummation of the transactions contemplated hereby.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF CONCURRENT
Concurrent represents and warrants to Harris as follows:
Section 5.1 Organization.
(a) Concurrent and each of its Subsidiaries is a corporation or other legal
entity duly organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation or organization and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted, except where the failure to be so
organized, existing or in good standing or to have such power and authority
would not, individually or in the aggregate, have a Material Adverse Effect on
Concurrent and its Subsidiaries taken as a whole. Concurrent and each of its
Subsidiaries is duly qualified or licensed to do business and in good standing
in each jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and in
good standing would not, individually or in the aggregate, have a Material
Adverse Effect on Concurrent and its Subsidiaries taken as a whole.
(b) Concurrent has heretofore made available to Harris a complete and
correct copy of the charter and by-laws or comparable organizational documents,
each as amended to date, of Concurrent and each of its Subsidiaries. Such
charters, by-laws and comparable organizational documents are in full force and
effect. Neither Concurrent nor any of its Subsidiaries is in violation of any
provision of its charter, by-laws or comparable organizational documents, except
for such violations that would not, individually or in the aggregate, have a
Material Adverse Effect on Concurrent and its Subsidiaries taken as a whole.
Section 5.2 Capitalization. As of the date of this Agreement, the
authorized capital stock of Concurrent consists of: (a) 100,000,000 shares of
Concurrent Common Stock of which, as of March 20, 1996 30,569,159 shares were
issued and outstanding and 840 shares were held in treasury; and (b) 25,000,000
shares of Series Preferred Stock, par value $.01 per share, of which, as of the
date of this Agreement, no shares are issued and outstanding and 300,000 shares
are designated as Series A Participating Cumulative Preferred Stock, and are
reserved for issuance in accordance with the Rights Agreement as of July 31,
1992, between Concurrent and First National Bank of Boston, as Rights Agent (the
"Concurrent Rights Agreement"). As of December 31, 1995, 3,042,495 shares of
Concurrent Common Stock and as of the date hereof not more than 3,042,495 shares
of Concurrent Common Stock were reserved for issuance upon exercise of
outstanding options (the "Concurrent Options") pursuant to Concurrent's Stock
Option Plan (the "Concurrent Stock Plan"). Since the date hereof, Concurrent has
not issued any shares of Concurrent Common Stock, except upon the exercise of
options granted under Concurrent Stock Plan which were outstanding on the date
hereof. All the outstanding shares of Concurrent's capital stock are, and all
shares of Concurrent Common Stock and Concurrent Preferred Stock which are to be
issued to Harris pursuant to the transactions contemplated by this Agreement
will be, when issued and paid for in accordance with the respective terms
thereof, duly authorized, validly issued, fully paid and nonassessable and not
subject to any preemptive rights of third parties in respect thereto. The
Debentures issuable in exchange for the Preferred Stock Consideration have been
duly authorized. Except as set forth above or on Schedule 5.2 hereto, as of the
date of this Agreement, there are no existing options, warrants, calls,
subscriptions or other rights or other agreements or commitments of any
character relating to the issued or unissued capital stock of Concurrent or any
of its Subsidiaries obligating Concurrent or any of its Subsidiaries to issue,
transfer or sell or cause to be issued, transferred or sold any shares of
capital stock of, or other equity interests in, Concurrent or of any of its
Subsidiaries or securities convertible into or exchangeable for such shares or
equity interests or obligating Concurrent or any of its Subsidiaries to grant,
extend or enter into any such option, warrant, call, subscription or other
right, agreement or commitment. As of the date of this Agreement, except as set
forth on Schedule 5.2 hereto, there are no outstanding contractual obligations
of Concurrent or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any shares of capital stock of Concurrent or any of its Subsidiaries.
Each of the outstanding shares of capital stock of each of Concurrent's
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable,
and such shares are owned by Concurrent or by a Subsidiary of Concurrent free
and clear of
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any lien, claim, option, charge, security interest, limitation on voting rights
and encumbrance of any kind, except as would not have a Material Adverse Effect
on Concurrent and its Subsidiaries taken as whole.
Section 5.3 Authority. Concurrent has the requisite corporate power and
authority to execute and deliver this Agreement and the Ancillary Agreements and
to consummate the transactions contemplated hereby and thereby (other than (a)
with respect to the issuance of shares of Concurrent Common Stock pursuant to
the transactions contemplated by this Agreement and the Ancillary Agreements,
the approval of the holders of Concurrent Common Stock required for such
issuance by the affirmative vote of a majority of the total votes cast and (b)
with respect to the Concurrent Stock Plan Amendment (as defined in Section 5.12)
the affirmative vote of a majority of the voting shares of Concurrent Common
Stock in a separate vote). The execution, delivery and performance of this
Agreement and the Ancillary Agreements by Concurrent and the consummation by
Concurrent of the other transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action on the part of Concurrent and
no other corporate proceedings on the part of Concurrent are necessary to
authorize this Agreement and the Ancillary Agreements or to consummate the
transactions contemplated hereby and thereby (other than, with respect to the
issuance of shares of Concurrent Common Stock and Preferred Consideration
pursuant to the transactions contemplated by this Agreement (including Common
Stock issuable upon the conversion of the Preferred Stock Consideration or any
debentures for which such consideration is exchangeable pursuant to its terms)
and the Ancillary Agreements, the approval of the holders of Concurrent Common
Stock required for such issuance by the affirmative vote of a majority of the
total votes cast). This Agreement and the Ancillary Agreements have been duly
executed and delivered by Concurrent and, assuming this Agreement and the
Ancillary Agreements constitute valid and binding obligations of Harris,
constitute valid and binding obligations of Concurrent, enforceable against
Concurrent in accordance with their respective terms.
Section 5.4 Consents and Approvals; No Violations.
(a) Except as set forth on Schedule 5.4(a) hereto, and except for filings,
permits, authorizations, notices, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act, the Securities
Act, the HSR Act, the FBCA, certain state takeover statutes or state securities
or blue sky laws, neither the execution, delivery or performance of this
Agreement and the Ancillary Agreements by Concurrent nor the consummation by
Concurrent of the transactions contemplated hereby and thereby and compliance by
Concurrent with any of the provisions hereof and thereof will (i) conflict with
or result in any breach of any provision of the respective certificates of
incorporation or by-laws or comparable organizational documents of Concurrent or
any Subsidiary of Concurrent, (ii) require any filing with, or permit,
authorization, consent or approval of, any Governmental Entity (except where the
failure to obtain such permits, authorizations, consents or approvals or to make
such filings would not prevent or delay consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements in any material
respect and would not, individually or in the aggregate, have a Material Adverse
Effect on Concurrent and its Subsidiaries taken as a whole), (iii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, or result in the creation of any lien or
other encumbrance on any property or asset of Concurrent or any of its
Subsidiaries pursuant to any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, lease, contract, agreement or other
instrument or obligation to which Concurrent or any of its Subsidiaries is a
party or by which any of them or any of their properties or assets may be bound
or (iv) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Concurrent or any of its Subsidiaries or by which any property or
asset of Concurrent or any of its Subsidiaries is bound or affected, except, in
the case of clauses (iii) and (iv), for violations, breaches, defaults or other
occurrences which would not prevent or delay consummation of this Agreement and
the Ancillary Agreements or the transactions contemplated hereby or thereby in
any material respect and would not, individually or in the aggregate, have a
Material Adverse Effect on Concurrent and its Subsidiaries taken as a whole.
(b) Except as disclosed in the Concurrent SEC Documents (as defined in
Section 5.5) or on Schedule 5.4(b) hereto, neither Concurrent nor any of its
Subsidiaries is in conflict with, or in default or violation of, (i) any order,
writ, injunction, decree, statute, rule or regulation of any Governmental Entity
applicable to Concurrent or any of its Subsidiaries or by which any of them or
any of their properties or assets may be bound
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or (ii) any note, bond, mortgage, indenture, lease, license, contract, agreement
or other instrument or obligation to which Concurrent or any of its Subsidiaries
is a party or by which any of them or any of their properties or assets may be
bound or affected, except for any such conflicts, defaults or violations which
have not had and are not likely to have a Material Adverse Effect on Concurrent
and its Subsidiaries taken as a whole.
Section 5.5 SEC Reports and Financial Statements. Concurrent has filed
with the SEC, and has heretofore made available to Harris true and complete
copies of all forms, reports and other documents required to be filed by it
since June 30, 1995 under the Exchange Act or the Securities Act (as such
documents have been amended since the time of their filing, collectively, the
"Concurrent SEC Documents"). The Concurrent SEC Documents, including without
limitation any financial statements or schedules included therein, at the time
filed, (a) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading and (b) complied in all material respects with the
applicable requirements of the Exchange Act or the Securities Act, as the case
may be. The financial statements of Concurrent included in the Concurrent SEC
Documents complied as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto or, in the case of the unaudited statements, as permitted on
Concurrent's Form 10-Q as filed with the SEC under the Exchange Act) and fairly
present (subject, in the case of the unaudited statements, to normal, recurring
audit adjustments which will not be material in amount or effect) the
consolidated financial position of Concurrent and its consolidated Subsidiaries
as at the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended. Except as reflected, reserved against or
otherwise disclosed in the financial statements of Concurrent included in the
Concurrent SEC Documents or as disclosed on Schedule 5.5 hereto, neither
Concurrent nor any of its Subsidiaries has any liabilities or obligations
(absolute, accrued, fixed, contingent or otherwise) material to Concurrent and
its Subsidiaries taken as a whole that would be required to be reflected on, or
reserved against in, a balance sheet of Concurrent or the notes thereto,
prepared in accordance with generally accepted accounting principles
consistently applied.
Section 5.6 Information in Disclosure Documents. None of the information
supplied or to be supplied by Concurrent in writing specifically for inclusion
or incorporation by reference in the Proxy Statement will, at the time the Proxy
Statement is filed with the SEC, at the time such Proxy Statement is mailed to
stockholders of Concurrent and Harris, at the times of the meetings of
stockholders of Concurrent and Harris to be held in connection with the
transactions contemplated by this Agreement and at the Closing Date, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The Proxy
Statement will, when filed with the SEC, comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder, except that no representation is made by Concurrent with respect to
statements made therein based on information supplied by Harris in writing
specifically for inclusion in the Proxy Statement.
Section 5.7 Litigation. Except as disclosed in the Concurrent SEC
Documents or on Schedule 5.7 hereto, there is no suit, claim, action, proceeding
or investigation pending or, to the best knowledge of Concurrent, threatened,
against Concurrent or any of its Subsidiaries before any Governmental Entity
which, individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on Concurrent and its Subsidiaries taken as a whole or a Material
Adverse Effect on the ability of Concurrent to consummate the transactions
contemplated by this Agreement. Except as disclosed in the Concurrent SEC
Documents or on Schedule 5.7 hereto, neither Concurrent nor any of its
Subsidiaries is subject to any outstanding order, writ, injunction or decree
which, insofar as can be reasonably foreseen, individually or in the aggregate,
would in the future have a Material Adverse Effect on Concurrent and its
Subsidiaries taken as a whole or a Material Adverse Effect on the ability of
Concurrent to consummate the transactions contemplated by this Agreement.
Concurrent has, in accordance with GAAP, made adequate provision in its
financial statements for the
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payment of losses arising out of suits, claims, actions, proceedings or
investigations disclosed in the Concurrent SEC Documents or on Schedule 5.7 and
such provision has continued to be adequate.
Section 5.8 Absence of Certain Changes. Except as disclosed in the
Concurrent SEC Documents or on Schedule 5.8 hereto, since June 30, 1995,
Concurrent has conducted its business in the ordinary course of such business
and there has not been any (a) material adverse change in Concurrent and its
Subsidiaries taken as a whole, (b) any declaration, setting aside or payment of
any dividend or other distribution with respect to its capital stock or (c) any
material change in its accounting principles, practices or methods.
Section 5.9 Opinion of Financial Advisor. Concurrent has received the
opinion of Berenson Minella & Company, its financial advisor, to the effect
that, as of the date of this Agreement, the purchase of the Assets and the
Purchased Harris Shares for the Common Stock Consideration and the Preferred
Stock Consideration and the Assumed Liabilities, taken as a whole, are fair to
the stockholders of Concurrent from a financial point of view.
Section 5.10 Rights Agreement. Concurrent shall take all necessary and
appropriate actions such that (a) Harris will not become an "Acquiring Person",
(b) no "Stock Acquisition Date", "Distribution Date" or "Triggering Event" (as
such terms are defined in Concurrent Rights Agreement) will occur and (c)
Concurrent Stockholders will not become entitled to receive any right or benefit
under the Concurrent Rights Agreement as a result of the approval, execution or
delivery of this Agreement by Concurrent, or the consummation of the
transactions contemplated hereby.
Section 5.11 Tax Matters.
(a) Concurrent and each of its Subsidiaries has duly filed, or as of the
Closing Date will have filed, all Tax Returns required to be filed by it or its
Subsidiaries on or before the Closing Date, and such Tax Returns are or will be
true, correct and complete in all material respects. Concurrent and its
Subsidiaries have duly paid, caused to be paid or made adequate provision in the
Concurrent SEC Documents in accordance with GAAP for the payment of all Taxes
required to be paid in respect of all periods covered by such Tax Returns.
Concurrent has made adequate provision in accordance with GAAP for payment of
all Taxes anticipated to be payable in respect of all taxable periods or
portions thereof ending on or before the Closing Date since the periods covered
by such Tax Returns.
(b) (i) The reserves for Taxes (except for deferred Taxes) reflected
in the Concurrent SEC Documents are sufficient for the payment of all
unpaid Taxes (whether or not currently disputed) accrued through the date
thereof. Since June 30, 1995, neither Concurrent nor its Subsidiaries
incurred any material liability for Taxes other than in the ordinary course
of business consistent with past practice. Concurrent and its Subsidiaries
are registered to do business in the states and localities set forth on
Schedule 5.11(b)(i) hereto, and Concurrent or its Subsidiaries file all
required Tax Returns in such states and localities. Except as set forth on
Schedule 5.11(b)(i) hereto, there are no liens for Taxes upon the assets of
Concurrent or its Subsidiaries except for statutory liens for current Taxes
not yet due.
(ii) The Tax Returns required to be filed by Concurrent have been
examined by the IRS or other appropriate taxing authority for all taxable
years as set forth on Schedule 5.11(b)(ii) hereto. Except as set forth on
Schedule 5.11(b)(ii) hereto, all deficiencies and assessments asserted as a
result of such examinations or other audits by federal, state, local or
foreign taxing authorities have been paid, fully settled or adequately
provided for in the Concurrent SEC Documents in accordance with GAAP, and
no issue or claim has been asserted for Taxes by any taxing authority for
any prior period, the adverse determination of which would result in a
deficiency which would have a Material Adverse Effect on Concurrent and its
Subsidiaries taken as a whole, other than those heretofore paid or provided
for. Except as disclosed on Schedule 5.11(b)(ii) hereto, no issue has been
raised during the past five years by any federal, state, local or foreign
taxing authority which, if raised with regard to any other period not so
examined, could reasonably be expected to result in a proposed deficiency
for any other period not so examined.
(c) (i) Except as set forth on Schedule 5.11(c) hereto, there are no
outstanding agreements or waivers extending the statutory period of
limitation applicable to any Tax Return of Concurrent or its
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Subsidiaries. Except as set forth on Schedule 5.11(c) hereto, neither
Concurrent nor any of its Subsidiaries (x) has been a member of a group
filing consolidated returns for federal income tax purposes, or (y) is a
party to a tax sharing or tax indemnity agreement or any other agreement of
a similar nature that remains in effect. Except as set forth on Schedule
5.11(c) hereto, no power of attorney has been executed by, or on behalf of
Concurrent or its Subsidiaries with respect to any matter relating to Taxes
which is currently in force.
(ii) Neither Concurrent nor any of its Subsidiaries have filed a
consent pursuant to Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as such term is defined in Section 341(f)(2) of the Code) owned by
Concurrent or any of its Subsidiaries.
Section 5.12 Vote Required. The only votes of the holders of any class or
series of Concurrent's capital stock necessary to approve the transactions
contemplated hereby are the affirmative vote of a majority of (i) the total
votes cast by the holders of Concurrent Common Stock with respect to the
issuance of Concurrent Common Stock pursuant to the transactions contemplated by
this Agreement and (ii) the total votes cast by the holders of Concurrent Common
Stock, in a separate vote, with respect to an amendment to the Concurrent Stock
Plan (the "Concurrent Stock Plan Amendment") in the form set forth on Exhibit E
hereto.
Section 5.13 Employee Benefit Plans; ERISA.
(a) Schedule 5.13(a) contains a true and complete list of each bonus,
deferred compensation, incentive compensation, stock purchase, stock option,
severance or termination pay, hospitalization or other medical, life or other
insurance, supplemental unemployment benefits, profit-sharing, pension, or
retirement plan, program, agreement or arrangement, and each other employee
benefit plan, program, agreement or arrangement, sponsored, maintained or
contributed to or required to be contributed to by Concurrent or by any trade or
business, whether or not incorporated (a "Concurrent ERISA Affiliate"), that
together with Concurrent would be deemed a "single employer" within the meaning
of section 4001 of ERISA, for the benefit of any employee or terminated employee
of Concurrent or any Concurrent ERISA Affiliate (the "Concurrent Plans").
Schedule 5.13(a) identifies each of the Concurrent Plans that is an "employee
benefit plan," as that term is defined in section 3(3) of ERISA (the "Concurrent
ERISA Plans").
(b) With respect to each Concurrent Plan, Concurrent has heretofore
delivered to Harris true and complete copies of each of the following documents:
(i) a copy thereof;
(ii) a copy of the most recent annual report and actuarial report, if
required under ERISA and the most recent report prepared with respect
thereto in accordance with Statement of Financial Accounting Standards No.
87, Employer's Accounting for Pensions;
(iii) a copy of the most recent Summary Concurrent Plan Description
required under ERISA with respect thereto; and
(iv) if Concurrent Plan is funded through a trust or any third party
funding vehicle, a copy of the trust or other funding agreement and the
latest financial statements thereof.
(c) Neither Concurrent nor any Concurrent ERISA Affiliate maintains or has
ever maintained an ERISA Plan subject to Title IV of ERISA.
(d) No Concurrent ERISA Plan is a "multiemployer pension plan," as defined
in section 3(37) of ERISA, nor is any Concurrent ERISA Plan a plan described in
section 4063(a) of ERISA.
(e) Each Concurrent Plan has been operated and administered in all material
respects in accordance with its terms and applicable law, including but not
limited to ERISA and the Code.
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(f) To the best knowledge of Concurrent, each Concurrent ERISA Plan
intended to be "qualified" within the meaning of section 401(a) of the Code is
so qualified and the trusts maintained thereunder are exempt from taxation under
section 501(a) of the Code.
(g) No amounts payable under the Concurrent Plans will fail to be
deductible for federal income tax purposes by virtue of section 280G of the
Code.
(h) No Concurrent Plan provides benefits, including death or medical
benefits (whether or not insured), with respect to current or former employees
of Concurrent or any Concurrent ERISA Affiliate beyond their retirement or other
termination of service (other than (i) coverage mandated by applicable law or
(ii) death benefits or retirement benefits under any "employee pension plan," as
that term is defined in section 3(2) of ERISA).
(i) There are no pending, threatened or anticipated claims by or on behalf
of any Concurrent Plan, by any employee or beneficiary covered under any such
Concurrent Plan, or otherwise involving any such Concurrent Plan (other than
routine claims for benefits).
(j) At the Closing Date, Concurrent shall take all actions to cause all
Concurrent Options then outstanding under the Concurrent Stock Plan to become
fully vested and exercisable.
(k) As of the Closing Date, full payment will have been made or accrued in
accordance with GAAP, and to the extent applicable, section 412 of the Code of
all amounts required to be paid under the terms of each of the Concurrent Plans.
Section 5.14 Major Contracts. Except as disclosed in Concurrent SEC
Documents or as set forth on Schedule 5.14 hereto, neither Concurrent nor any of
its Subsidiaries is a party to or subject to:
(a) Any joint venture contract or arrangement or any other agreement which
has involved or is expected to involve a sharing of profits with other persons;
(b) Any existing OEM agreement, distribution agreement, volume purchase
agreement, or other similar agreement in which the annual amount involved in
1995 exceeded or is expected to exceed in fiscal 1996 $500,000 in aggregate
amount or pursuant to which Concurrent has granted or received exclusive
marketing rights related to any product, group of products or territory;
(c) Any material license agreement, either as licensor or licensee
(excluding nonexclusive software licenses granted to customers or end-users in
the ordinary course of business) involving the payment of at least $250,000; or
(d) Any contract containing covenants purporting to limit Concurrent's
freedom or that of any of its Subsidiaries in any line of business in any
geographic area.
Section 5.15 Interests of Officers and Directors. Except as disclosed on
Schedule 5.15 hereto, no officer or director of Concurrent or any "affiliate" or
"associate" (as those terms are defined in Rule 405 promulgated under the
Securities Act) of any such person has had, either directly or indirectly, a
material interest in: (a) any person or entity which purchases from or sells,
licenses or furnishes to Concurrent or any of its Subsidiaries any goods,
property, technology or intellectual or other property rights or services; (b)
any contract or agreement to which Concurrent or any of its Subsidiaries is a
party or by which it may be bound or affected; or (c) any property, real or
personal, tangible or intangible, used in its business or that of its
Subsidiaries, including any interest in the Concurrent Intellectual Property
Rights (as defined in Section 5.16(a)) except for rights as a stockholder, and
except for rights under any Concurrent Plan.
Section 5.16 Intellectual Property.
(a) Concurrent owns, or is licensed or otherwise entitled to exercise,
without restriction, all rights in and to all domestic and foreign patents,
trademarks, trade names, service marks, copyrights, mask works, trade secrets
and other intellectual property rights, and any applications, registrations,
certificates and/or Letters Patent therefor, and all net lists, schematics,
sketches, drawings, notebooks, reports, memoranda, prints, drafts, worksheets,
and any other writings, methods and practices, business information, procedures,
technol-
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ogy, source code, know-how, computer software programs and all other tangible
and intangible information or material and all goodwill associated with any of
the foregoing including goodwill in respect of trademarks, that are used in or
necessary for the conduct of the business of Concurrent and its Subsidiaries as
currently conducted or as currently proposed to be conducted (collectively, the
"Concurrent Intellectual Property Rights").
(b) Schedule 5.16(b) hereto is a complete and accurate list of all domestic
and foreign patents, registered copyrights, unregistered copyrightable subject
matter; trade names, registered and unregistered trademarks and service marks,
and other company, product or service identifiers; mask work rights; and any
applications, registrations or grants thereof or therefor, included in the
Concurrent Intellectual Property Rights. For each item listed thereon, Schedule
5.16(b) hereto identifies the owner thereof and, if the owner is not Concurrent
or any of its Subsidiaries, the means by which Concurrent or any of its
Subsidiaries obtains rights thereto.
(c) Concurrent has provided to Harris a copy of Concurrent's proprietary
Product Information Book, dated November 1994, which identifies all of
Concurrent's currently marketed products. No such products are the subject of
certificates of copyright issued by the United States Copyright Office, and any
similar office or agency of any foreign country or jurisdiction, and/or are the
subject of applications for patent or original Letters Patent in the United
States or any foreign country or jurisdiction.
(d) Neither Concurrent nor any of its Subsidiaries is, or as a result of
the execution and delivery of this Agreement or the performance of Concurrent's
obligations hereunder will be, in violation of, or lose any rights pursuant to
any license, sublicense or agreement described in the Concurrent Disclosure
Schedule.
(e) Concurrent or one of its Subsidiaries is the owner or licensee of the
Concurrent Intellectual Property Rights, with all necessary right, title and
interest in and to the same free and clear of any liens, encumbrances or
security interests. Except as set forth on Schedule 5.16(e) hereto, Concurrent
is not contractually obligated to pay any compensation to any third party, in an
amount in excess of $250,000 in respect to the use of any of the Concurrent
Intellectual Property Rights or the material covered thereby in connection with
the services or products being manufactured and/or used and/or sold by
Concurrent.
(f) No claims with respect to Concurrent Intellectual Property Rights have
been asserted or, to the best knowledge of Concurrent, after reasonable
investigation, are threatened by any person. Concurrent knows of no claims (i)
to the effect that the manufacture, offer for sale, sale or use of any product
as now used or offered by Concurrent or any Subsidiary of Concurrent, or the use
thereof by any customer or licensee of Concurrent infringes any copyright,
patent, trademark or service mark, or violates any trade secret rights, or other
intellectual property rights of any third party, or (ii) challenging the
ownership or validity of any of the Concurrent Intellectual Property Rights.
(g) To the best knowledge of Concurrent, all patents and registered
trademarks, service marks, copyrights and patents held by Concurrent are valid
and subsisting.
(h) To the best knowledge of Concurrent, there has not been and there is
not now any material unauthorized use, infringement or misappropriation of any
of the Concurrent Intellectual Property Rights by any third party, including,
without limitation, any employee or former employee of Concurrent or any of its
Subsidiaries; neither Concurrent nor any of its Subsidiaries has been sued or
charged in writing as a defendant in any claim, suit, action or proceeding which
involves a claim of infringement of any patents, trademarks, service marks,
copyrights or other intellectual property rights and which has not been finally
terminated prior to the date hereof; there are no such charges or claims
outstanding; and to the best knowledge of Concurrent neither Concurrent nor any
of its Subsidiaries has any infringement liability with respect to any patent,
trademark, service mark, copyright or other intellectual property right of
another.
(i) No Concurrent Intellectual Property Right is subject to any outstanding
order, judgment, decree, stipulation or agreement restricting in any manner the
licensing or other disposition thereof by Concurrent or any of its Subsidiaries.
Neither Concurrent nor any of its Subsidiaries has entered into any agreement to
indemnify any other person against any charge of infringement of any Concurrent
Intellectual Property Right. Neither Concurrent nor any of its Subsidiaries has
entered into any agreement granting any third party the
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right to bring infringement actions with respect to, or otherwise to enforce
rights with respect to, any Concurrent Intellectual Property Right.
(j) Concurrent and its Subsidiaries have the exclusive right to file,
prosecute and maintain all applications, certificates, registrations and Letters
Patent with respect to the Concurrent Intellectual Property Rights owned by
Concurrent or its Subsidiaries. Concurrent or any of its Subsidiaries is listed
in the records of the appropriate agency as the sole owner of record for each
registration, grant Letters Patent and application listed on Schedule 5.16(b)
hereto as owned by Concurrent or any of its Subsidiaries. All registration and
maintenance fees that have become due and payable with respect of such
Concurrent Intellectual Property Rights have been paid.
(k) To the best knowledge of Concurrent, no act has been done, or omitted
to be done, by Concurrent or any of its Subsidiaries to impair or dedicate to
the public or to entitle any governmental authority to cancel, forfeit, modify
or hold abandoned any of the Concurrent Intellectual Property Rights.
(l) Concurrent and its Subsidiaries, with respect to all Concurrent
Intellectual Property Rights owned and/or developed thereby, have taken or
caused to be taken all reasonable steps to obtain and retain valid and
enforceable intellectual property rights therein, including, without limitation,
the use of non-disclosure agreements adequate to protect the proprietary nature
of any confidential information disclosed by Concurrent or any of its
Subsidiaries to third parties.
(m) Schedule 5.16(m) hereto sets forth a complete and accurate list of all
licenses, assignments and other agreements pursuant to which Concurrent, or any
of its Subsidiaries, grants rights to any third party in and to any of the
Concurrent Intellectual Property Rights.
(n) To the best knowledge of Concurrent, the components of all software,
hardware and firmware that are material to the business of Concurrent and are
used or currently proposed to be used in or necessary for the conduct of the
business of Concurrent and its Subsidiaries as currently conducted or as
currently proposed to be conducted are (i) owned by Concurrent or any of its
Subsidiaries, or (ii) currently in the public domain or otherwise available to
Concurrent or any of its Subsidiaries without the approval or consent of any
third party, or (iii) used by Concurrent or any of its Subsidiaries, or included
in any of their products, pursuant to rights granted to Concurrent or any of its
Subsidiaries pursuant to a written license or lease from a third party.
Section 5.17 Questionable Payments. Neither Concurrent nor any of its
Subsidiaries nor to its best knowledge any director, officer or other employee
of Concurrent or any of its Subsidiaries has: (a) corruptly made any payments or
provided services in the United States or in any foreign country in order to
obtain preferential treatment or consideration by any Governmental Entity in
order to obtain or retain business for Concurrent or any of its Subsidiaries in
violation of Section 30A of the Exchange Act; or (b) made any political
contributions unlawful under the laws of the United States and the foreign
country in which such payments were made. Neither Concurrent nor any of its
Subsidiaries nor to its best knowledge any director, officer or other employee
of Concurrent or any of its Subsidiaries has been the subject of any inquiry or
investigation by any Governmental Entity relating to the conduct described above
in this Section 5.17.
Section 5.18 Insurance. Except as set forth on Schedule 5.18 hereto,
Concurrent and each of its Subsidiaries is, and has been continuously since at
least July 1, 1995, insured with financially responsible insurers in such
amounts and against such risks and losses as are customary in all material
respects for companies conducting the business as conducted by Concurrent and
its Subsidiaries during such time period. Except as set forth on Schedule 5.18
hereto, neither Concurrent nor any of its Subsidiaries has received any notice
of cancellation or termination with respect to any material insurance policy of
Concurrent or any of its Subsidiaries. The insurance policies of Concurrent and
each of its Subsidiaries are valid and enforceable policies in all material
respects.
Section 5.19 No Brokers. Concurrent has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of Concurrent or Harris to pay any finder's fees, brokerage or
agent's commissions or other like payments in connection with the negotiations
leading to this Agreement or the consummation of the transactions contemplated
hereby, except that Concurrent has retained Berenson Minella & Company as its
financial advisor, the arrangements with which have been
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disclosed in writing to Harris prior to the date hereof. Other than the
foregoing arrangements or as disclosed in Section 4.19, Concurrent is not aware
of any claim for payment of any finder's fees, brokerage or agent's commissions
or other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby.
Section 5.20 Environmental.
(a) Except as set forth on Schedule 5.20(a) hereto, Concurrent and its
Subsidiaries are in compliance in all material respects with all applicable
Environmental Laws. Except as set forth on Schedule 5.20(a) hereto, Concurrent
has not received any communication (written or oral), whether from a
governmental authority, citizen group, employee or otherwise, that alleges that
Concurrent is not in such compliance, and, to Concurrent's best knowledge after
due inquiry, there are no circumstances that may prevent or interfere with such
compliance in the future. Except as set forth on Schedule 5.20(a) hereto,
Concurrent has not received in the past five years any written request for
information from a governmental authority concerning or relating to the
treatment, transportation or disposal of any Materials of Environmental Concern.
Except as set forth on Schedule 5.20(a) hereto: Concurrent has acquired all
necessary permits, licenses, approvals and other governmental authorizations
necessary to operate in compliance with all applicable Environmental Laws; such
permits, licenses, approvals and authorizations are currently valid; and
Concurrent is in compliance in all material respects with such permits,
licenses, approvals and authorizations. To Concurrent's best knowledge, after
due inquiry, there are no circumstances that may prevent or interfere with the
renewal of the permits, licenses, approvals and other governmental
authorizations held by Concurrent pursuant to Environmental Laws.
(b) Except as set forth on Schedule 5.20(b) hereto, there has been in the
last five years and there is no Environmental Claim pending or threatened
against Concurrent or, to Concurrent's best knowledge after due inquiry, against
any person or entity whose liability for any Environmental Claim Concurrent has
or may have retained or assumed either contractually or by operation of law.
(c) Except as set forth on Schedule 5.20(c) hereto, there are no past or
present actions, activities, circumstances, conditions, events or incidents,
including the release, emission, discharge or disposal of any Material of
Environmental Concern, that could form the basis of any Environmental Claim
against Concurrent or, to Concurrent's best knowledge after due inquiry, against
any person or entity whose liability for any Environmental Claim Concurrent has
or may have retained or assumed either contractually or by operation of law.
Section 5.21 Investment Purpose. Concurrent will acquire the shares of
Harris Common Stock to be issued pursuant to this Agreement and the transactions
contemplated hereby for its own account for the purpose of investment and not
with a view to or for sale in connection with any distribution thereof, except
pursuant to an effective registration statement under the Securities Act and all
applicable state securities laws or pursuant to an exemption from the Securities
Act and all applicable state securities laws confirmed by an opinion of counsel
satisfactory to Harris the expense for which shall be borne by Concurrent.
Section 5.22 Applicability of Certain Laws. The provisions of Section 203
("Business Combinations with Interested Stockholders") and Section 262
("Appraisal Rights"), respectively, of the Delaware General Corporation Law (the
"DGCL") will not apply to this Agreement or any of the transactions contemplated
hereby.
Section 5.23 Product Returns; Warranties. There are no liabilities for
product returns, warranty obligations and product services other than those
arising in the ordinary course of business, consistent with Concurrent's
historical practice and in accordance with normal industry standards. Concurrent
has no knowledge of any threatened claims for any extraordinary (i) product
returns, (ii) warranty obligations or (iii) product services, reserved or
otherwise. Concurrent has made adequate provision in the latest Concurrent SEC
Document for product returns and warranty obligations in accordance with GAAP.
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ARTICLE VI
COVENANTS
Section 6.1 Conduct of Business of Harris. Except as contemplated by this
Agreement (including Schedule 6.1 hereto) and the Ancillary Agreements or with
the prior written consent of Concurrent, during the period from the date of this
Agreement to the Closing Date, Harris will, and will cause each of its
Subsidiaries to, use all reasonable efforts to conduct the Business only in the
ordinary course and consistent with prior practice, to use Best Efforts to
maintain, keep and preserve the Assets and the assets of the Transferred
Subsidiaries in operating condition and repair and maintain or, if necessary,
replace insurance thereon in accordance with present practices, to preserve
intact the present organization of the Business, keep available the services of
its present officers and employees and preserve its relationships with
licensors, licensees, customers, suppliers, employees and any others having
business dealings with it. Without limiting the generality of the foregoing, and
except as otherwise provided in or contemplated by this Agreement (including
Schedule 6.1 hereto) or the Ancillary Agreements, Harris will not, and will not
permit any of its Subsidiaries to, prior to the Closing Date, without the prior
written consent of Concurrent:
(a) adopt any amendment to its charter or by-laws or comparable
organizational documents or to the Harris Rights Agreement;
(b) except for issuances of capital stock of any of the Transferred
Subsidiaries to Harris or to another Transferred Subsidiary of Harris, issue,
reissue, sell, deliver or pledge or authorize or propose the issuance,
reissuance, sale, delivery or pledge of additional shares of capital stock of
any class or any securities convertible into capital stock of any class, or any
rights, warrants or options to acquire any convertible securities or capital
stock, other than the issuance of shares of Harris Common Stock upon the
exercise of stock options or stock grants pursuant to the Harris Stock Plan
outstanding on or prior to the Closing Date in accordance with the terms of the
agreements under which they are issued;
(c) declare, set aside or pay any dividend or other distribution (whether
in cash, securities or property or any combination thereof) in respect of any
class or series of its capital stock, except that any Transferred Subsidiary may
pay dividends to Harris or any of the other Transferred Subsidiaries;
(d) adjust, split, combine, subdivide, reclassify or redeem, purchase or
otherwise acquire, or propose to redeem or purchase or otherwise acquire, any
shares of its capital stock, or any of its other securities;
(e) (i) incur, assume or pre-pay any long-term debt or incur or assume any
short-term debt, except that Harris and its Subsidiaries may incur or pre-pay
debt in the ordinary course of business consistent with past practice under
existing lines of credit, (ii) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
obligations of any other person except in the ordinary course of business
consistent with past practice, or (iii) make any loans, advances or capital
contributions to, or investments in, any other person, except Transferred
Subsidiaries of Harris and except in the ordinary course of business consistent
with past practice;
(f) except for increases in salary, wages and benefits of employees of
Harris or its Subsidiaries (other than executive or corporate officers of
Harris) in accordance with past practice and except for increases in salary,
wages and benefits granted to employees of Harris or its Subsidiaries (other
than executive or corporate officers of Harris) in conjunction with promotions
or other changes in job status consistent with past practice or required under
existing agreements increase the compensation or fringe benefits payable or to
become payable to its directors, officers or employees (whether from Harris or
any of its Subsidiaries), or pay any benefit not required by any existing plan
or arrangement or grant any severance or termination pay to (except pursuant to
existing agreements or policies as set forth on Schedule 4.12(a) hereto), or
enter into any employment or severance agreement with, any director, officer or
other key employee of Harris or any of the Transferred Subsidiaries or
establish, adopt, enter into, terminate or amend any collective bargaining,
bonus, profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, welfare, deferred compensation, employment, termination,
severance or other employee benefit plan, agreement, trust, fund, policy or
arrangement for the benefit or welfare of any directors, officers or current or
former employees, except to the extent such termination or amendment is required
by applicable law; provided, however, that
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nothing herein shall be deemed to prohibit the payment of benefits as they
become payable; provided, further, however that Harris shall be permitted to
take action so that at the Closing Date, each stock option issued and
outstanding prior to December 31, 1995 under the Harris Stock Plan will be fully
vested and exercisable;
(g) other than as may be required by law to consummate the transactions
contemplated hereby, acquire, sell, lease, transfer or dispose of any assets or
securities which are material to Harris and its Subsidiaries taken as a whole,
or enter into any commitment to do any of the foregoing;
(h) settle any material tax liability or make any material tax election; or
(i) agree in writing or otherwise to take any of the foregoing actions or
any action which would make any representation or warranty in this Agreement
untrue or incorrect in any material respect or which would result in any of the
conditions set forth in Article VIII not being satisfied.
Section 6.2 Conduct of Business of Concurrent. Except as contemplated by
this Agreement and the Ancillary Agreements or with the prior written consent of
Harris, during the period from the date of this Agreement to the Closing Date,
Concurrent will, and will cause each of its Subsidiaries to, conduct its
operations only in the ordinary and usual course of business consistent with
past practice and will use all reasonable efforts, and will cause each of its
Subsidiaries to use all reasonable efforts, to preserve intact its present
business organization, keep available the services of its present officers and
employees and preserve its relationships with licensors, licensees, customers,
suppliers, employees and any others having business dealings with it. Without
limiting the generality of the foregoing, and except as otherwise provided in or
contemplated by this Agreement or the Ancillary Agreements, Concurrent will not,
and will not permit any of the Subsidiaries to, prior to the Closing Date,
without the prior written consent of Harris:
(a) adopt any amendment to its charter or by-laws or comparable
organizational documents or to the Concurrent Rights Agreement;
(b) except for (i) issuances of capital stock of Concurrent's Subsidiaries
to Concurrent or a wholly owned Subsidiary of Concurrent, or (ii) issuances of
capital stock of Concurrent to employees of Concurrent who become, at or after
the Closing Date, entitled to severance under Concurrent's existing severance
contracts and policies in lieu of an equivalent cash payment under such
contracts and policies, issue, reissue, sell, deliver or pledge or authorize or
propose the issuance, reissuance, sale, delivery or pledge of additional shares
of capital stock of any class or any securities convertible into capital stock
of any class, or any rights, warrants or options to acquire any convertible
securities or capital stock, other than the issuance of shares of Concurrent
Common Stock upon the exercise of stock options or stock grants pursuant to the
Concurrent Stock Plan outstanding on or prior to the Closing Date in accordance
with the terms of the Agreements under which they are issued;
(c) declare, set aside or pay any dividend or other distribution (whether
in cash, securities or property or any combination thereof) in respect of any
class or series of its capital stock, except that any wholly owned Subsidiary of
Concurrent may pay dividends to Concurrent or any of Concurrent's wholly owned
Subsidiaries;
(d) adjust, split, combine, subdivide, reclassify or redeem, purchase or
otherwise acquire, or propose to redeem or purchase or otherwise acquire, any
shares of its capital stock, or any of its other securities;
(e) (i) incur, assume or pre-pay any long-term debt or incur or assume any
short-term debt, except that Concurrent and its Subsidiaries may incur or
pre-pay debt in the ordinary course of business consistent with past practice
under existing lines of credit, (ii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other person except in the ordinary course of business
consistent with past practice, or (iii) make any loans, advances or capital
contributions to, or investments in, any other person, except Subsidiaries of
Concurrent and except in the ordinary course of business consistent with past
practice;
(f) except for increases in salary, wages and benefits of employees of
Concurrent or its Subsidiaries (other than executive or corporate officers of
Concurrent) in accordance with past practice and except for increases in salary,
wages and benefits granted to employees of Concurrent or its Subsidiaries (other
than executive or corporate officers of Concurrent) in conjunction with
promotions or other changes in job status
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consistent with past practice or required under existing agreements, increase
the compensation or fringe benefits payable or to become payable to its
directors, officers or employees (whether from Concurrent or any of its
Subsidiaries), or pay any benefit not required by any existing plan or
arrangement or grant any severance or termination pay to (except pursuant to
existing agreements or policies as set forth on Schedule 5.13(a) hereto), or
enter into any employment or severance agreement with, any director, officer or
other key employee of Concurrent or any of its Subsidiaries or establish, adopt,
enter into, terminate or amend any collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
welfare, deferred compensation, employment, termination, severance or other
employee benefit plan, agreement, trust, fund, policy or arrangement for the
benefit or welfare of any directors, officers or current or former employees,
except to the extent such termination or amendment is required by applicable
law; provided, however, that nothing herein shall be deemed to prohibit the
payment of benefits as they become payable; provided, further, however, that
Concurrent shall be permitted to take action so that at the Closing Date, each
stock option issued and outstanding at such time under the Concurrent Stock Plan
will become fully vested and exercisable (it being understood and agreed that
the transactions contemplated hereby will be deemed to be a change in control
for purposes of such plan and the option agreements entered into thereunder);
provided, further, that nothing herein shall prevent Concurrent or any of its
Subsidiaries from instituting retention and/or severance arrangements with
employees of Concurrent or any of its Subsidiaries, for the purpose of
encouraging employees to remain with Concurrent until the Closing Date subject
to (i) Concurrent consulting with Harris prior to implementing any such
retention and/or severance arrangement and (ii) a ceiling of $2,000,000 on the
aggregate dollar amount which may be paid or pursuant to which the obligation
may be incurred between November 5, 1995 and the Closing Date pursuant to all
such retention and/or severance arrangements.
(g) other than as may be required by law to consummate the transactions
contemplated hereby, acquire, sell, lease, transfer or dispose of any assets or
securities which are material to Concurrent and its Subsidiaries taken as a
whole, or enter into any commitment to do any of the foregoing;
(h) settle any material tax liability or make any material tax election; or
(i) agree in writing or otherwise to take any of the foregoing actions or
any action which would make any representation or warranty in this Agreement
untrue or incorrect in any material respect or which would result in any of the
conditions set forth in Article VIII not being satisfied.
Section 6.3 Best Efforts. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use its Best Efforts (as defined
herein) to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement including (a) the prompt preparation and filing with the SEC of
the Proxy Statement, (b) such actions as may be required to have the Proxy
Statement cleared by the SEC, in each case as promptly as practicable, including
by consulting with each other as to, and responding promptly to, any SEC
comments with respect thereto, and (c) such actions as may be required to be
taken under applicable state securities or blue sky laws in connection with the
issuance of the Purchased Harris Shares and shares of Concurrent Common Stock
and Concurrent Preferred Stock contemplated hereby or the Ancillary Agreements.
As used in this Agreement, the term "Best Efforts" means all such efforts as may
be taken in a commercially reasonable manner. It shall be a condition to the
mailing of the Proxy Statement to the stockholders of Concurrent and Harris that
(a) Concurrent shall have received an opinion from Berenson Minella & Company,
dated the date of the Proxy Statement, to the effect that, as of the date
thereof, the purchase of the Assets and the Purchased Harris Shares for the
Common Stock Consideration and the Preferred Stock Consideration and the Assumed
Liabilities, taken as a whole, are fair to the stockholders of Concurrent from a
financial point of view and (b) Harris shall have received an opinion from Bear,
Stearns & Co. Inc., dated the date of the Proxy Statement, to the effect that,
as of the date thereof, the transactions contemplated hereby are fair, from a
financial point of view, to the stockholders of Harris. Each party shall
promptly consult with the other with respect to, provide any necessary
information with respect to and provide the other (or its counsel) copies of,
all filings made by such party with any Governmental Entity in connection with
this Agreement and the transactions contemplated hereby. In addition, if at any
time prior to the Closing Date any event or circumstance relating to either
Harris or any of
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the Transferred Subsidiaries of Concurrent or any of its Subsidiaries, or any of
their respective officers or directors, should be discovered by Harris or
Concurrent, as the case may be, and which should be set forth in an amendment or
supplement to the Proxy Statement, the discovering party shall promptly inform
the other party of such event or circumstance.
Section 6.4 Registration Rights. Each of Harris and Concurrent shall
prepare and file as promptly as practicable after the date hereof, and shall
cause to become effective on the Closing Date, a registration statement on Form
S-3 (or if either Concurrent or Harris is not eligible to use Form S-3 on such
other form as Concurrent or Harris may use) (each, an "S-3 Registration
Statement" and collectively, the "S-3 Registration Statements"), in compliance
with the Securities Act relating to the sale by the other party hereto and its
permitted pledgees of the registrant's shares of common stock (and, in the case
of Concurrent, the common stock issuable upon conversion of the Preferred Stock
Consideration or the Debentures) issued in accordance with the terms of this
Agreement and the Share Holding Agreement. Each of Harris and Concurrent shall
indemnify the other in connection with the S-3 Registration Statements in
accordance with the provisions set forth in the Share Holding Agreement. Each of
Harris and Concurrent shall also cause the shares of common stock issued by it
to the other party to be approved for inclusion on the NASDAQ/NMS on the
effective date of the applicable Registration Statement, subject to official
notice of issuance.
Section 6.5 Occurrence of Closing Prior to or Following the Reference
Date. In the event the Closing occurs prior to the Reference Date, Concurrent
shall operate the Business only in the ordinary course consistent with past
practice between the Closing and the Reference Date. In the event the Closing
occurs after the Reference Date, without limiting the provisions of Section 6.6
below, Harris shall provide to Concurrent on a weekly basis information with
respect to the status of the net current assets, except inventory and current
liabilities which will be provided on a monthly basis.
Section 6.6 Access to Information. Upon reasonable notice, Harris and
Concurrent shall each (and shall cause each of their respective Subsidiaries to)
afford to the officers, employees, accountants, counsel and other
representatives of the other, access, during normal business hours during the
period prior to the Closing Date, to all its properties, facilities, books,
contracts, commitments and records and other information and, during such
period, each of Harris and Concurrent shall (and shall cause each of their
respective Subsidiaries to) (a) furnish promptly to the other a copy of each
report, schedule, registration statement and other document filed or received by
it during such period pursuant to the requirements of federal securities laws,
(b) furnish promptly to the other all other information concerning the Business,
properties and personnel as such other party may reasonably request, (c) make
available to the other all its environmental sampling, assessment, remediation
reports, studies and any other document and all its permits, licenses, approvals
and other governmental authorizations referenced in Schedules to Section 4.20 or
Section 5.20 of this Agreement, and (d) afford access to the other to all its
employees and outside environmental consultants who have conducted or assisted
in preparing environmental sampling, assessment or remediation studies. Neither
party nor any of their respective Subsidiaries shall be required to provide
access to or to disclose information where such access or disclosure would
violate or prejudice the rights of customers, jeopardize the attorney-client
privilege of the institution in possession or control of such information or
contravene any law, rule, regulation, order, judgment, decree, fiduciary duty or
binding agreement entered into prior to the date of this Agreement. Unless
otherwise required by law, the parties will hold any such information which is
nonpublic in confidence in accordance with the terms of Section 1 of that
certain letter agreement, dated September 28, 1995, between Concurrent and
Harris (the "Confidentiality Agreement"), and in the event of termination of
this Agreement for any reason each party shall promptly return all nonpublic
documents obtained from any other party, and any copies made of such documents,
to such other party in the manner contemplated by the Confidentiality Agreement.
Section 6.7 Stockholders Meetings. Harris and Concurrent each shall call a
meeting of its stockholders for the purpose of voting, in the case of Harris,
upon (a) the sale of the Business (including the Assets and the Transferred
Subsidiaries) and (b) an amendment to the Harris Stock Plan to increase the
number of shares of Harris Common Stock reserved and available for distribution
under the Harris Stock Plan in accordance with Section 4.11, and, in the case of
Concurrent, upon (x) the issuance of shares of Concurrent Common Stock pursuant
to this Agreement and (y) an amendment to the Concurrent Stock Plan to increase
the number of
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shares of Concurrent Common Stock reserved and available for distribution under
the Concurrent Stock Plan in accordance with Section 5.12. Harris and Concurrent
will, through their respective Boards of Directors, recommend to their
respective stockholders approval of such matters and will coordinate and
cooperate with respect to the timing of such Stockholders Meetings and shall use
their Best Efforts to hold such Stockholders Meetings on the same day and as
soon as practicable after the date hereof; provided, however, that nothing
contained in this Section 6.7 shall require the Board of Directors of Harris or
Concurrent to take any action or refrain from taking any action in violation of
its fiduciary duties. In addition, Concurrent may seek approval from its
shareholders at the Concurrent Stockholders Meeting, if required by applicable
law or the rules and regulations of NASDAQ; for a reverse stock split at or
following the Closing Date; provided, however, that the transactions
contemplated by this Agreement shall not be conditioned on approval of any such
reverse stock split proposal.
Section 6.8 No Solicitation.
(a) Except as provided in Section 6.8(b), Schedule 6.1 or otherwise agreed
to by the parties hereto, until the termination of this Agreement pursuant to
Article IX, Harris and Concurrent will not, nor will either of them permit its
officers, directors, affiliates, representatives or agents, directly or
indirectly, to do any of the following:
(i) discuss, negotiate, undertake, authorize, recommend, propose or
enter into, either as the proposed surviving, merged, acquiring or acquired
corporation, any transaction (other than the transactions contemplated by
this Agreement and the Ancillary Agreements) involving any disposition or
other change of ownership of a substantial portion of (x) Harris's or
Concurrent's or their respective Subsidiaries' capital stock or assets or
(y) the Business (an "Acquisition Transaction");
(ii) facilitate, encourage, solicit or initiate or in any way engage
in any discussion, negotiation or submission of a proposal or offer in
respect of an Acquisition Transaction;
(iii) furnish or cause to be furnished to any corporation,
partnership, individual or other entity or group (other than the other
party and its representatives) (a "Person") any information concerning the
business, operations, properties or assets of Harris or Concurrent in
connection with an Acquisition Transaction; or
(iv) otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage, any effort or attempt by any other Person to do or
seek any of the foregoing.
Harris and Concurrent will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any Person conducted
heretofore with regard to an Acquisition Transaction and will take the necessary
steps to inform such Persons of the obligations undertaken in this Section 6.8.
Each party will inform the other party by telephone within 24 hours of its
receipt of any proposal or bid (including the terms thereof and the Person
making such proposal or bid) in respect of any Acquisition Transaction.
(b) Notwithstanding anything else contained in this Section 6.8, either
party may engage in discussions or negotiations with, and may furnish
information to, a third party who, or representatives of a third party who,
makes a written, bona fide proposal with respect to an Acquisition Transaction
that is reasonably capable of being consummated and, as determined in good faith
by its Board of Directors after consultation with its financial advisors, is
more favorable to such party's stockholders than the transactions contemplated
hereby, provided that the Board of Directors of such party shall have determined
in good faith on the basis of the advice of outside counsel that failure to take
such action creates a substantial risk that the Board of Directors would fail to
comply with its fiduciary duties under applicable law. Nothing in this Section
6.8 shall (i) permit any party to terminate this Agreement (except as
specifically provided in Article IX hereof), (ii) permit any party to enter into
any agreement with respect to an Acquisition Transaction during the term of this
Agreement (it being agreed that during the term of this Agreement, no party
shall enter into any agreement with any person that provides for, or in any way
facilitates, an Acquisition Transaction (other than a confidentiality agreement
in customary form)), or (iii) affect any other obligation of any party under
this Agreement.
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Section 6.9 Brokers or Finders. Each of Concurrent and Harris agree to
indemnify and hold the other harmless from and against any claims with respect
to any fees, commissions or expenses asserted by any person on the basis of any
act or statement alleged to have been made by such party or its Subsidiary or
affiliate.
Section 6.10 Rights Plan. Harris shall not redeem the Harris Rights, or
amend or terminate the Harris Rights Agreement prior to the Closing Date unless
required to do so by order of a court of competent jurisdiction. Concurrent
shall not redeem Concurrent Rights or amend (other than in accordance with
Section 5.10) or terminate Concurrent Rights Agreements unless required to do so
by order of a court of competent jurisdiction.
Section 6.11 Publicity. The initial press release relating to this
Agreement shall be a joint press release and thereafter Harris and Concurrent
shall, subject to their respective legal obligations (including requirements of
stock exchanges and other similar regulatory bodies), consult with each other,
and use reasonable efforts to agree upon the text of any press release, before
issuing any such press release or otherwise making public statements with
respect to the transactions contemplated hereby and in making any filings with
any federal or state governmental or regulatory agency or with any national
securities exchange with respect thereto. With respect to all other press
releases during the term of this Agreement, the parties hereto shall use
reasonable efforts to consult with each other prior to issuing such press
releases.
Section 6.12 Notification of Certain Matters. Harris shall give prompt
notice to Concurrent, and Concurrent shall give prompt notice to Harris, of (a)
the occurrence, or non-occurrence, of any event the occurrence, or
non-occurrence, of which would be likely to cause (i) any representation or
warranty contained in this Agreement to be untrue or inaccurate or (ii) any
covenant, condition or agreement contained in this Agreement not to be complied
with or satisfied and (b) any failure of Harris or Concurrent, as the case may
be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the delivery
of any notice pursuant to this Section 6.12 shall not limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
Section 6.13 Management and Corporate Governance Matters.
(a) Composition of Concurrent's Board of Directors. The Board of Directors
of Concurrent shall take action to cause the number of directors comprising the
full board of directors of Concurrent to be nine persons, three of whom shall be
designated by Harris prior to the Closing Date ("Original Harris Designees") and
six of whom shall be designees of Concurrent. If any Original Harris Designee
shall decline or be unable to serve, Harris shall designate a person to serve in
such person's stead (the Original Harris Designees together with any alternate
or alternates selected in accordance with this sentence are herein referred to
as the "Harris Designees"). From and after the Closing Date until at least
September 30, 1997, unless a majority of Harris Designees then serving as
Concurrent directors shall consent to a waiver of this Section 6.13(a),
Concurrent shall maintain a Board of Directors consisting of no more than nine
directors, three of whom shall be Harris Designees.
(b) Composition of Harris' Board of Directors. The Board of Directors of
Harris shall take action to cause the number of directors comprising the full
board of directors of Harris to be not more than seven persons, one of whom
shall be designated by Concurrent prior to the Closing Date ("Original
Concurrent Designee") and six of whom shall be designees of Harris. If the
Original Concurrent Designee shall decline or be unable to serve, Concurrent
shall designate a person to serve in such person's stead (the Original
Concurrent Designee together with any alternate selected in accordance with this
sentence are herein referred to as the "Concurrent Designees"). From and after
the Closing Date until at least September 30, 1997, Harris shall maintain a
Board of Directors consisting of no more than seven directors, one of whom shall
be a Concurrent Designee.
(c) Chief Executive Officers of Harris. Harris shall use its Best Efforts
to cause E. Courtney Siegel to resign as a director, President and Chief
Executive Officer of Harris effective as of the Closing. Harris will keep
Concurrent reasonably informed of the status of the search for a new chief
executive officer of Harris and
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will use Best Efforts to find and disclose, if found prior to the mailing of the
Proxy Statement or if required by applicable law, the identity of such chief
executive officer in the Proxy Statement.
(d) Designation of Concurrent Officers. Concurrent shall cause the
election or appointment, effective as of the Closing Date, of E. Courtney Siegel
as the President and Chief Executive Officer of Concurrent and John T. Stihl as
the Chairman of the Board of Directors of Concurrent. Mr. Siegel shall be an
Original Harris Designee.
(e) Increase in Shares Available under Concurrent Stock Plan. Concurrent
shall use its Best Efforts to cause the number of shares of Concurrent Common
Stock authorized for issuance under the Concurrent Stock Plan to be increased to
9,000,000 such shares (of which approximately 5,000,000 will be available for
grant thereunder), including the inclusion of such increase in the matters
submitted for a vote of shareholders in the Proxy Statement.
(f) Increase in Shares Available under Harris Stock Plan. Harris shall use
its Best Efforts to cause the number of shares of Harris Common Stock authorized
for issuance under the Harris Stock Plan to be 2,025,000 such shares, including
the inclusion of such increase in the matters submitted for a vote of
shareholders in the Proxy Statement.
(g) Amendment of Concurrent By-laws. At or prior to the Closing Date
Concurrent shall amend its Bylaws to provide that the President of Concurrent
shall be the exclusive chief executive officer of Concurrent, reporting directly
to Concurrent's Board of Directors.
Section 6.14 Employment Agreements. Concurrent shall cause the amendment
to the employment agreement with John T. Stihl, the material terms of which are
set forth on Schedule 6.14 hereto, to become effective upon Closing. Prior to or
simultaneously with the execution hereof, Concurrent entered into an employment
agreement with E. Courtney Siegel, a copy of which is attached hereto as Exhibit
D.
Section 6.15 Expenses. Whether or not the transactions contemplated by
this Agreement are consummated but subject to the provisions of Article IX
hereto, all costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby, shall be paid by the party incurring such
costs and expenses except as expressly provided herein. Notwithstanding the
above, (i) the filing fee in connection with the HSR Act filing, the filing fee
in connection with the filing of the Proxy Statement with the SEC, the fees and
expenses incurred in connection with the preparation of the Audited Balance
Sheet and the Net Current Asset Reconciliation, Transfer Taxes (as defined in
Section 6.24(b)) with respect to Assets other than the stock of Transferred
Subsidiaries, and the expenses incurred in connection with printing and mailing
the Proxy Statement, shall be shared equally by Harris and Concurrent and (ii)
Transfer Taxes with respect to the transfer of the stock of Transferred
Subsidiaries shall be borne entirely by Concurrent.
Section 6.16 IRS Determination Letter. Prior to the Closing Date,
Concurrent shall deliver to Harris a copy of the most recent determination
letter received from the Internal Revenue Service with respect to each
Concurrent Plan intended to qualify under Section 401 of the Code.
Section 6.17 Insurance. Harris shall and shall cause its Subsidiaries to
use their Best Efforts to maintain the insurance policies referred to in Section
4.18 in full force and effect through the Closing Date. Concurrent shall use its
Best Efforts to maintain the insurance policies referred to in Section 5.18 in
full force and effect through the Closing Date.
Section 6.18 Supplemental Disclosure.
(a) Prior to the Closing, Harris shall have a continuing obligation to
notify Concurrent, and Concurrent shall have a continuing obligation to notify
Harris, of events, circumstances or discoveries which would be likely to result
in any of the representations and warranties in Article IV or Article V hereof,
respectively, being inaccurate or incomplete in any respect and supplement or
amend the Schedules with respect to any matter hereafter arising or discovered
which, if existing or known at the date of this Agreement, would have been
required to be set forth or described in the Disclosure Schedules. Any
amendments or supplements to the Disclosure Schedules after the date hereof and
prior to the Closing Date shall be referred to herein as "Supplemental
Disclosure."
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(b) In the event of a Supplemental Disclosure occurring within five (5)
business days prior to a date on which a scheduled Closing would otherwise
occur, the party to which such Supplemental Disclosure is delivered shall have
the right to delay the Closing for up to five (5) business days from the date
such party receives such Supplemental Disclosure.
(c) The Supplemental Disclosure will not be deemed to have cured any breach
of any representation or warranty made in this Agreement as of the date hereof
for purposes of determining whether or not the conditions set forth in Article
VIII have been satisfied or for purposes of the indemnification obligations set
forth in Article X hereof.
Section 6.19 Further Assurances; Subsequent Transfers.
(a) The parties hereto shall execute and deliver such further instruments
of conveyance, transfer, assignment and other similar documents and shall take
such other actions as each of them may reasonably request of the other in order
to effectuate the purposes of this Agreement and to carry out the terms hereof.
Without limiting the generality of the foregoing, at any time and from time to
time after the Closing Date, (i) at the request of Concurrent, Harris shall
execute and deliver to Concurrent such other instruments of transfer,
conveyance, assignment and confirmation and take such action as Concurrent may
reasonably deem necessary or desirable in order to more effectively transfer,
convey and assign to Concurrent and to confirm Concurrent's title to all of the
Assets, to put Concurrent in actual possession and operating control thereof and
to permit Concurrent to exercise all rights with respect thereto (including,
without limitation, rights under contracts and other arrangements as to which
the consent of any third party to the transfer thereof shall not have previously
been obtained), (ii) at the request of Harris, Concurrent shall execute and
deliver to Harris all instruments, undertakings or other documents and take such
other action as Harris may reasonably deem necessary or desirable in order to
have Concurrent fully assume and be liable for the Assumed Liabilities and shall
deliver to Harris any of the Excluded Assets inadvertently left in the control
or possession of Concurrent, and (iii) at the request of Concurrent, Harris
shall execute and deliver to the appropriate Transferred Subsidiaries all
instruments, undertakings or other documents and take such other action as
Concurrent may reasonably deem necessary or desirable in order to have Harris
fully assume the Excluded Liabilities as they relate to the Transferred
Subsidiaries. Notwithstanding the foregoing, the parties shall not be obligated,
in connection with the foregoing, to expend monies other than reasonable
out-of-pocket expenses and attorneys' fees.
(b) Harris shall use its Best Efforts to obtain any consent, approval or
amendment required to novate and/or assign all agreements, Leases, licenses and
other rights of any nature whatsoever relating to the transfer of the Assets to
Concurrent. In the event and to the extent that Harris is unable to obtain any
such required consent, approval, amendment or modification (except with respect
to any Lease, agreement or license set forth in Schedule 8.2(d) hereof) (i)
Harris shall continue to be bound by such agreements, leases, licenses or other
matters, (ii) unless not permitted by law, Concurrent shall pay, perform and
discharge fully all the obligations of Harris thereunder and indemnify Harris
for all liabilities arising out of such performance by Concurrent (but only to
the extent that (x) such liabilities are Assumed Liabilities and (y) in the case
of a Lease, upon such payment or performance, Concurrent shall be entitled to
use and occupancy of the premises covered by such lease) and (z) so long as
Concurrent has paid, performed and discharged the obligations of Harris, Harris
shall, without further consideration therefor, pay and remit to Concurrent
promptly all monies, rights and other considerations received in respect of such
performance. Harris shall exercise or exploit its rights and options under all
such agreements, leases, licenses and other rights and commitments (other than
in connection with the Leases referred to in Schedule 8.2(d) hereof) referred to
in this Section 6.19(b) only as reasonably directed by Concurrent. If and when
any such consent shall be obtained or such agreement, lease, license or other
right (other than in connection with the Leases referred to in Schedule 8.2(d)
hereof) shall otherwise become assignable or able to be novated, Harris shall
promptly assign and novate all its rights and obligations thereunder to
Concurrent without payment of further consideration and Concurrent shall,
without the payment of any further consideration therefor, assume such rights
and obligations.
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Section 6.20 Risk of Loss.
(a) Leasehold Properties:
(i) In the event that during the period between the date hereof and
the Closing, all or any portion of the Leased Property included in
the Assets (a "Property") is damaged by fire or other casualty,
Harris shall promptly give notice thereof to Concurrent. If such
damage materially affects the ability of Concurrent at Closing to
conduct the Business as contemplated herein, Concurrent shall have
the right to terminate this Agreement. In the event of such
termination, all parties shall be released from all liability
hereunder.
(ii) If as a result of such casualty, the Property is partially
damaged or rendered partially unusable for the purposes for which
such Property is used by Harris on the date hereof, but such
damage does not materially affect Concurrent's ability to conduct
the Business at Closing as conducted on the date hereof, then
Harris shall convey such Property to Concurrent at Closing in its
damaged condition upon and subject to all of the other terms and
conditions of this Agreement, and Harris shall assign to
Concurrent all of Harris's right, title and interest in and to
any claims Harris may have under its insurance policies, and/or
any causes of action with respect to such damage or destruction,
and shall assign to Concurrent all insurance proceeds awarded to
Harris under such policies with respect to the damage to the
Property. Notwithstanding the foregoing, in the event that the
damaged Property was not covered by insurance or the insurance
proceeds received by Concurrent pursuant to the preceding
sentence are insufficient to restore the Property to its
condition prior to such casualty ("Concurrent Casualty
Deficiency"), then (x) if a Concurrent Casualty Deficiency is
discovered prior to the determination of the Preferred Stock
Consideration pursuant to Section 2.3, the liquidation value and
stated value of the Preferred Stock Consideration shall be
reduced by an amount equal to the additional cost (the
"Concurrent Additional Cost"), as estimated by an engineer or
architect, selected by Harris and reasonably acceptable to
Concurrent, required to repair such damage and restore the
Property to its condition immediately prior to the casualty or
(y) if a Concurrent Casualty Deficiency is discovered subsequent
to the determination of the Preferred Stock Consideration
pursuant to Section 2.3, Harris shall, within five days of the
determination of the Concurrent Additional Cost, pay such cost to
Concurrent in cash or other immediately available funds.
(iii) In the event such Property is totally destroyed or rendered
wholly unusable for the purposes for which it was used by Harris
prior to the casualty but such damage does not materially affect
Concurrent's ability to conduct the Business at Closing as
conducted on the date hereof, then such Property shall be
excluded from Assets, and the parties shall proceed to the
Closing with respect to the remaining Assets upon and subject to
all of the other terms and conditions of this Agreement, except
that the liquidation preference Preferred Stock Consideration
hereunder shall be reduced in an amount equal to the Fair Market
Value (as defined in Section 6.20(b)) of such Property prior to
such casualty.
(b) Fair Market Value:
Fair Market Value of the Leased Properties shall mean the fair market value
of the interest on such Property contemplated to be transferred by this
Agreement, as if such Property were available in the then leasing market, for
comparable property, as determined by an independent real estate appraiser
selected by Harris (in the case of the Leased Properties) (the "First
Appraiser"), which appraisal shall be made within thirty (30) days after the
occurrence of the casualty. If Concurrent (in the event of a total destruction
of the Leased Properties), disputes the determination of the First Appraiser,
which dispute must be raised within twenty (20) days after receipt by Concurrent
of the First Appraiser's determination, Concurrent shall appoint its own
independent real estate appraiser (the "Second Appraiser"). If within thirty
(30) days after Concurrent disputes the determination of the First Appraiser,
the First Appraiser and Second Appraiser shall mutually agree upon the
determination of the Fair Market Value of the property in question, their
determination shall be final and binding upon the parties. If the First
Appraiser and Second Appraiser are unable to reach a mutual determination within
said thirty (30) day period, both such Appraisers shall jointly
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select a third real estate appraiser (the "Third Appraiser"), whose fee shall be
borne equally by Harris and Concurrent, and who shall, within thirty (30) days
of his selection, choose either the First or Second Appraiser's determination;
such choice by the Third Appraiser shall be conclusive and binding upon the
parties hereto.
Section 6.21 Compliance with Applicable Bulk Sales Laws. Without admitting
the applicability of the bulk transfer laws of any jurisdiction, Harris and
Concurrent have agreed to waive the compliance with the requirements of any
applicable laws relating to bulk sales. Harris shall defend, indemnify and hold
Concurrent harmless from and against any Losses incurred as a result of Harris's
noncompliance with any applicable bulk transfer laws.
Section 6.22 Audited Financial Statements; Statutory Financial
Statements. Prior to the Closing, Harris shall have delivered to Concurrent the
Audited Balance Sheet and the statutory financial statements of the Transferred
Subsidiaries for the periods ended September 30, 1995 and September 30, 1994.
Section 6.23 Tax Matters. For purposes of Section 1.3, Taxes of Harris
accruing prior to Closing shall mean any Taxes of the Business attributable to
any Tax period (or portion thereof) of Harris, or any of its Subsidiaries ending
on or before the close of business on the Closing Date, and, in the case of any
Taxes that are imposed on a periodic basis or are payable for a taxable period
that includes (but does not end on) the Closing Date, the portion of such Taxes
related to the portion of such taxable period ending on the Closing Date shall
(i) in the case of any Taxes other than Taxes based upon or related to income,
be deemed to be determined on a per diem basis, and (ii) in the case of any
Taxes based upon or related to income, be deemed equal to the amount which would
be payable if the relevant taxable period ended on the Closing Date. Any credits
relating to a taxable period that begins before and ends after the Closing Date
shall be taken into account as though the relevant taxable period ended on the
Closing Date. All determinations necessary to give effect to the foregoing
allocations shall be made in a manner consistent with the prior practice of
Harris, the Transferred Subsidiaries and their subsidiaries.
(a) Without the prior written consent of Concurrent, if a Material Adverse
Effect on the liability for Taxes of the Transferred Subsidiaries will result
therefrom, none of the Transferred Subsidiaries nor their subsidiaries shall
make or change any election, change an annual accounting period, adopt or change
any accounting method, file any amended Tax return or report, enter into any
closing agreement, settle any Tax claim or assessment relating to any of the
Transferred Subsidiaries or their subsidiaries, surrender any right to claim a
refund of Taxes, or consent to any extension or waiver of the limitations period
applicable to any Tax claim or assessment relating to any of the Transferred
Subsidiaries or their subsidiaries.
(b) "Transfer Taxes" shall be borne by Harris and Concurrent as provided in
Section 6.15. Transfer Taxes include all sales, use, transfer, recording, ad
valorem, bulk sales and other similar taxes and fees, arising out of or in
connection with the transactions contemplated by this Agreement. The party which
has primary responsibility for the payment of any particular Transfer Tax shall
prepare and file the relevant Tax Return, pay the Transfer Taxes shown on such
Return, and notify the other party in writing of the Transfer Taxes shown on
such Tax Return and how such Transfer Taxes were calculated; the other party
shall, within 5 days of the receipt of such notice, pay to the first party its
share of such Transfer Taxes.
Section 6.24 HSR Approval. If the lowest closing bid price of Concurrent
Common Stock is greater than $1.50 per share on the date that the Proxy
Statement is mailed to shareholders of Concurrent and Harris, each of the
parties hereto agrees to use its Best Efforts to take, or cause to be taken, and
to do, or cause to be done, all things necessary to promptly prepare and file
the pre-merger notification report form and to seek early termination or
expiration of the waiting period under the HSR Act.
ARTICLE VII
EMPLOYMENT AND EMPLOYEE BENEFIT PLANS
Section 7.1 Existing Employee Benefit Plans of Harris. Notwithstanding any
other provisions contained herein, none of Harris's obligations under any of its
employee benefit plans, including the Harris Stock Plan,
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shall be assumed by Concurrent. Contributions shall be made to and benefits
shall be provided under the Harris Plans as follows:
(a) With respect to the Harris Computer Systems Corporation Savings Plan
(the "Harris 401(k) Plan"),
(i) Harris shall, in accordance with Section 3.9(a) of the Harris
401(k) Plan, remit to the Trustee of the Harris 401(k) Plan all pretax
contributions and after-tax contributions authorized by the employees
listed in Schedule 7.1 (Harris employees who will be employed by Concurrent
following Closing) ("Business Employees") and collected by Harris prior to
12:01 a.m. of the morning of the Closing Date (hereinafter in this Article
VII, the "Employment Effective Time");
(ii) Harris shall, in accordance with Section 3.9(a) of the Harris
401(k) Plan, remit to the Trustee of the Harris 401(k) Plan the Matching
Employer Contribution to which the Business Employees are entitled for the
1995 Plan Year;
(iii) In applying Section 12.4 of the Harris 401(k) Plan, Harris shall
deem a partial termination to have occurred with respect to the Business
Employees as of the Employment Effective Time. As a result of said partial
termination, each Business Employee shall be fully vested and have a
nonforfeitable interest in that portion of such Business Employee's account
attributable to Matching Employer Contributions as of the Employment
Effective Time without regard to the number of years of service such
Business Employee has completed for Harris.
(iv) Harris shall distribute the Harris 401(k) Plan account balances
of the Business Employees according to either (A) or (B) below, whichever
is applicable:
(A) If the sale of the Assets described in Article I constitutes a
sale of substantially all the assets of a trade or business, within the
meaning of Section 401(k)(10)(A)(ii) of the Code, Harris shall notify
each Business Employee of his rights with respect to the distribution of
his Harris 401(k) Plan account balance and shall make distribution of
such account balances in accordance with the terms of the Harris 401(k)
Plan, ERISA and the Code.
(B) If the sale of the Assets described in Article I does not
constitute a sale of substantially all the assets of a trade or
business, within the meaning of Section 401(k)(10)(A)(ii) of the Code,
Harris shall not distribute the Harris 401(k) Plan account balance of
any Business Employee who becomes an employee of Concurrent ("Hired
Business Employee") to such Hired Business Employee until the
termination of his employment with Concurrent. Concurrent shall notify
Harris of the termination of the employment of any Hired Business
Employee no later than five days following the date on which such Hired
Business Employee's employment with Concurrent terminates.
(b) With respect to the Harris Computer Systems Corporation Medical/Dental
Plan, the Harris Computer Systems Corporation Long Term Disability Plan, the
Harris Computer Systems Corporation Life, AD&D, and Business Travel Accident
Plan, the Harris Computer Systems Corporation Short Term Disability Plan, the
Harris Computer Systems Corporation Cafeteria Plan, the Harris Computer Systems
Corporation Medical Reimbursement Plan, and the Harris Computer Systems
Corporation Dependent Care Plan (collectively, the "Welfare and Fringe Benefit
Plans"),
(i) Harris shall make, as soon as administratively practicable
following the Closing, all contributions and shall pay all insurance
premiums necessary to provide the benefits to which the Business Employees
are entitled, under the terms of the Welfare and Fringe Benefit Plans;
(ii) Harris shall be responsible for the payment of all expenses and
claims incurred prior to 12:01 a.m. of the morning of the Closing Date
under the Welfare and Fringe Benefits Plans, and shall use Best Efforts to
make arrangements with Welfare and Fringe Benefits providers for a runoff
period in which claims incurred prior to but submitted after 12:01 a.m. of
the morning of the Closing Date will be honored for payment by Harris; and
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(iii) Harris shall be responsible for compliance with the requirements
of Section 4980B of the Code and Part 6 of Title I of ERISA for its
employees employed in the Business and their "qualified beneficiaries"
whose "qualifying event" (as such terms are defined in Section 4980B of the
Code) occurs prior to the Employment Effective Time.
Section 7.2 Employment of Employees Employed in Business. (a) Effective
the Employment Effective Time, Concurrent shall offer employment to each
Business Employee at the same annual salary or hourly compensation and on other
terms not materially less favorable to the Business Employees than those in
effect as of the date of this Agreement.
(b) Harris shall transfer to Concurrent any records (including, but not
limited to, Forms W-4 and Employee Withholding Allowance Certificates) relating
to withholding and payment of income and employment taxes (federal, state and
local) and FICA taxes with respect to wages paid by Harris during the 1996
calendar year to any employees retained by Concurrent. Concurrent shall, to the
extent permitted by applicable law, provide such employees with Forms W-2, Wage
and Tax Statements for the 1996 calendar year setting forth the wages and taxes
withheld with respect to such employees for the 1996 calendar year by Harris and
Concurrent as predecessor and successor employers, respectively. Harris and
Concurrent shall also comply with the filing requirements set forth in Revenue
Procedure 84-77, 1984-2 C.B. 753, to implement this Section 7.2(b).
Section 7.3 Employee Benefit Plans of Concurrent. Concurrent agrees to use
Best Efforts to amend the existing Concurrent Plans and to establish new
employee benefit plans, programs, policies or arrangements to accomplish the
following effective at Closing:
(a) Amend its Code section 401(k) retirement plan ("Concurrent 401(k)
Plan") to provide
(i) coverage for each Hired Business Employee on the same basis as
provided for each current participant in the Concurrent 401(k) Plan as of
the date of this Agreement;
(ii) credit for each Hired Business Employee's prior years of service
with Harris for purposes of eligibility and vesting;
(iii) a contribution by Concurrent for each plan year equal to 100% of
each Hired Business Employee's elective deferral contributions up to 6% of
such Hired Business Employee's compensation for the plan year ("Concurrent
Matching Contribution"), with 2% of the Concurrent Matching Contribution
made in the form of cash and 4% of the Concurrent Matching Contribution
made in the form of Concurrent stock;
(iv) acceptance of direct rollovers and elective transfers of the cash
and non-cash assets of the Harris 401(k) Plan accounts of Hired Business
Employees, including promissory notes related to outstanding participant
loans received by Hired Business Employees from the Harris 401(k) Plan; and
(v) the repayment of outstanding participant loans received from the
Harris 401(k) Plan by the Hired Business Employees who elect a direct
rollover to the Concurrent 401(k) Plan promissory notes related to such
outstanding participant loans.
(b) in accordance with Section 6.13(e) hereof, Concurrent shall use its
Best Efforts to cause the number of shares of Concurrent Common Stock authorized
for issuance under the Concurrent Stock Plan to be increased to 9,000,000 (of
which approximately 5,000,000 shall be available for grant).
(c) implement a long term incentive program for executive officers
comprised of the vesting of stock option grants contingent upon identified
Company performance objectives for the three (3) fiscal years following the
purchase of the Assets and the Purchased Harris Shares pursuant to the terms
hereof.
(d) implement a management bonus program for executive officers of the
Company pursuant to which they will have the opportunity to receive cash bonuses
("Target Bonuses") upon achievement of both individual goals established for
such persons ("Individual Target Goals") and corporate financial goals
established based upon the business plan ("Corporate Target Goals"), and up to
150% of such Target bonuses upon achievement of goals in excess of such persons
Target Individuals Goals and Target Corporate Goals.
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The Individual Target Goals, Corporate Target Goals, the levels of performance
required to result in payments thereunder and all other matters relating to the
bonus program shall be determined by the Board of Directors of Concurrent (or a
committee thereof).
(e) review the appropriateness of providing a nonqualified deferred
compensation arrangement or Supplemental Employer Retirement Plan ("SERP") for
the benefit of allowing the employee directed deferral and Company match on
contributions under the Concurrent 401(k) Plan otherwise limited by the Code,
including sections 401(a)(4), 401(a)(17), 401(k) and 402(g).
ARTICLE VIII
CONDITIONS
Section 8.1 Conditions to Each Party's Obligation To Perform this
Agreement. The respective obligations of the parties to perform this Agreement
and the transactions contemplated hereby shall be subject to the satisfaction or
waiver, on or prior to the Closing Date, of the following conditions:
(a) Stockholder Approval. This Agreement and the transactions contemplated
hereby shall have been approved and adopted by the affirmative vote of a
majority of all the votes entitled to be cast with respect to the holders of
Harris Common Stock and the issuance of shares of Concurrent Common Stock
pursuant to this Agreement shall have been approved by the affirmative vote of a
majority of the total votes cast with respect to the stockholders of Concurrent.
An increase in the number of shares of Concurrent Common Stock authorized for
issuance under the Concurrent Stock Plan to 9,000,000 such shares shall have
been approved by the affirmative vote of a majority of the total votes cast by
the holders of Concurrent Common Stock in a separate vote. The Harris Stock Plan
Amendment shall have been approved by the affirmative vote of a majority of the
total votes cast by the holders of the Harris Common Stock in a separate vote.
(b) Other Approvals. All authorizations, notices, consents, orders or
approvals of, or declarations or filings with, or expirations of waiting periods
imposed by, any Governmental Entity, the failure to obtain or make which would
have a Material Adverse Effect on (i) Concurrent and its Subsidiaries, (ii)
Harris and its Subsidiaries, in each case taken as a whole, or (iii) the
Business shall have been filed, occurred or been obtained. Concurrent and Harris
each shall have received all state securities or blue sky permits and other
authorizations necessary to issue Concurrent Common Stock pursuant to this
Agreement.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of this Agreement and the transactions contemplated hereby shall be
in effect (each party agreeing to use all reasonable efforts to have any such
order reversed or injunction lifted).
(d) No Action. No action, suit or proceeding by any Governmental Entity
before any court or governmental or regulatory authority shall be pending
against Harris, Concurrent or any of their Subsidiaries challenging the validity
or legality of the transactions contemplated by this Agreement, other than
actions, suits or proceedings which, in the reasonable opinion of counsel to the
parties hereto, are unlikely to result in an adverse judgment having a Material
Adverse Effect on either Concurrent, Harris or any of their respective
Subsidiaries taken as a whole or the Business.
(e) Tax Opinion. Harris and Concurrent shall have received an opinion of
Holland & Knight, counsel to Harris, in form and substance reasonably
satisfactory to Harris and Concurrent, dated a date within two days prior to the
expected date of the Proxy Statement, substantially to the effect that none of
the actions expressly contemplated by this Agreement shall result in or
otherwise give rise to a breach of any covenant contained in the Tax Sharing
Agreement or made in connection with the opinion rendered by Sullivan & Cromwell
(as described in Section 1.12(a) of the Tax Sharing Agreement), in each case
relating to the qualification of the Distribution as a distribution pursuant to
Section 355 of the Code. In rendering such opinion, Holland & Knight may rely
exclusively without an independent investigation upon representations contained
in certificates of officers of Harris and others unless Holland & Knight has
actual knowledge or reason to believe that such representations are false or
inaccurate.
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(f) HSR Approval. Any applicable waiting period under the HSR Act shall
have expired or been terminated.
(g) Consents. The consents set forth in Schedule 8.1(g) shall have been
obtained.
(h) The Ancillary Agreements (each of which shall provide that it shall
become effective simultaneously with the effectiveness of this Agreement) shall
have been executed and delivered by the parties thereto.
(i) Concurrent and Harris shall have reached mutual agreement with respect
to the transfer of stock and assets of the Transferred Subsidiaries.
Section 8.2 Conditions of Obligation of Concurrent. The obligation of
Concurrent to perform this Agreement and the transactions contemplated hereby
are subject to the satisfaction, on or prior to the Closing Date, of the
following conditions unless waived by Concurrent:
(a) Representations and Warranties. The representations and warranties of
Harris set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date. Concurrent shall have
received a certificate signed on behalf of Harris by the Chief Executive Officer
and the Chief Financial Officer of Harris to the foregoing effect.
(b) Performance of Obligations of Harris. Harris shall have performed in
all material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and Concurrent shall have received a
certificate signed on behalf of Harris by the Chief Executive Officer and the
Chief Financial Officer of Harris to such effect.
(c) Filings and Consents with Governmental Entities. Harris shall have
made all filings or registrations with, and obtained all permits,
authorizations, notices, consents and approvals from, Governmental Entities as
may be required in connection with the transactions contemplated by this
Agreement under the Exchange Act, the Securities Act, the HSR Act, the FBCA, any
state securities or blue sky laws or other applicable laws, except for filings,
registrations, permits, authorizations, notices, consents and approvals, the
failure to obtain of which would not have a Material Adverse Effect on Harris,
Concurrent and their Subsidiaries taken as a whole or the Business (after giving
effect to the transactions contemplated hereby).
(d) Consents Under Agreements. The parties to the contracts and agreements
identified on Schedule 8.2(d) hereto shall consent to the assignment of such
contracts and agreements to Concurrent.
(e) Material Adverse Effect. From the date of this Agreement through the
Closing Date, there shall not have occurred any change in the financial
condition, business, operations or prospects of Harris and the Transferred
Subsidiaries, taken as a whole, that would have or would be reasonably likely to
have a Material Adverse Effect on either Harris and its Subsidiaries, taken as a
whole, or the Business other than any such change that affects both Concurrent
and Harris in a substantially similar manner.
(f) Fairness Opinion. The fairness opinion letter from Berenson Minella &
Company referred to in Section 5.9 shall not, in good faith, have been withdrawn
by Berenson Minella & Company.
(g) Approval of Schedules. Concurrent shall have approved all Schedules
delivered by Harris pursuant to Article I hereof, the non-approval of which
shall not be based on matters regarding amortization or reclassification for
purposes of changes in depreciation or for other financial statement purposes
and which approval may not be unreasonably withheld.
(h) Effectiveness of Registration Statement/Inclusion of NASDAQ/NMS. A
Registration Statement of Harris shall be effective under the Securities Act
covering the Purchased Harris Shares to be received by Concurrent at the Closing
and such Purchased Harris Shares shall have been approved for inclusion on the
NASDAQ/NMS, subject to official notice of issuance.
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Section 8.3 Conditions of Obligation of Harris. The obligation of Harris
to perform this Agreement and the transactions contemplated hereby is subject to
the satisfaction of the following conditions, on or prior to the Closing Date,
unless waived by Harris:
(a) Representations and Warranties. The representations and warranties of
Concurrent set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date. Harris shall have received a
certificate signed on behalf of Concurrent by the Chief Executive Officer and
the Chief Financial Officer of Concurrent to the foregoing effect.
(b) Performance of Obligations of Concurrent. Concurrent shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and Harris shall have
received a certificate signed on behalf of Concurrent by the Chief Executive
Officer and the Chief Financial Officer of Concurrent to such effect.
(c) Filings and Consents with Governmental Entities. Concurrent shall have
made all filings or registrations and obtained all permits, authorizations,
notices, consents and approvals from, Governmental Entities as may be required
in connection with the transactions contemplated by this Agreement under the
Exchange Act, the Securities Act, the HSR Act, the FBCA, any state securities or
blue sky laws or other applicable laws, except for filings, registrations,
permits, authorizations, notices, consents and approvals, the failure to obtain
of which would not have a Material Adverse Effect on Harris, Concurrent and
their Subsidiaries taken as a whole (after giving effect to the transactions
contemplated hereby).
(d) Material Adverse Effect. From the date of this Agreement through the
Closing Date, there shall not have occurred any change in the financial
condition, business, operations or prospects of Concurrent and its Subsidiaries,
taken as a whole, that would have or would be reasonably likely to have a
Material Adverse Effect on Concurrent and its Subsidiaries, taken as a whole,
other than any such change that affects both Concurrent and Harris in a
substantially similar manner.
(e) Effectiveness of Registration Statement/Inclusion on NASDAQ/NMS. A
Registration Statement of Concurrent shall be effective under the Securities Act
covering the Concurrent Common Stock to be received by Harris at the Closing and
the Concurrent Common Stock issuable upon conversion of the Concurrent Preferred
Stock to be received by Harris at the Closing or the Debentures, and such
Concurrent Common Stock shall have been approved for inclusion on the
NASDAQ/NMS, subject to official notice of issuance.
(f) Fairness Opinion. The fairness opinion letter from Bear, Stearns & Co.
Inc. to Harris referred to in Section 4.9 shall not, in good faith, have been
withdrawn by Bear, Stearns & Co. Inc.
(g) New Jersey Advice. Harris shall have received from Concurrent (i) a
written determination by the New Jersey Department of Environmental Protection
of the nonapplicability of the New Jersey Industrial Site Recovery Act, as
amended ("ISRA") to the transactions contemplated by this Agreement, or (ii) a
written Negative Declaration (as defined in ISRA) from the New Jersey Department
of Environmental Protection to the effect that no soil or groundwater assessment
or remediation is required or (iii) written assurances to Harris that Concurrent
has otherwise complied with ISRA in a manner which does not require a material
financial commitment on behalf of Concurrent.
ARTICLE IX
TERMINATION AND AMENDMENT
Section 9.1 Termination by Mutual Consent. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned at any time
prior to the Closing Date, before or after the approval of this Agreement by the
stockholders of Harris or Concurrent, by the mutual consent of Concurrent and
Harris.
Section 9.2 Termination by Either Concurrent or Harris. This Agreement may
be terminated and the transactions contemplated hereby may be abandoned by
action of the Board of Directors of either Harris or
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Concurrent if (a) the Closing contemplated by this Agreement shall not have been
consummated by August 30, 1996 provided, in the case of a termination pursuant
to this clause (a), that the terminating party shall not have breached in any
material respect its obligations under this Agreement in any manner that shall
have proximately contributed to the occurrence of the failure referred to in
said clause, or (b) the approval of Harris's stockholders referred to in Section
4.11 shall not have been obtained at a Harris Stockholder Meeting duly convened
therefor or at any adjournment thereof, or (c) the approval of Concurrent's
stockholders referred to in Section 5.12 shall not have been obtained at a
Concurrent Stockholder Meeting duly convened therefor or at any adjournment
thereof, or (d) a United States federal or state court of competent jurisdiction
or United States federal or state governmental, regulatory or administrative
agency or commission shall have issued an order, decree or ruling or taken any
other action permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and non-appealable; provided, that the
party seeking to terminate this Agreement pursuant to this clause (d) shall have
used all reasonable efforts to remove such injunction, order or decree.
Section 9.3 Termination by Harris. This Agreement may be terminated at any
time prior to the Closing Date, before or after the adoption and approval by the
stockholders of Harris referred to in Section 4.11, by action of the Board of
Directors of Harris, if (a) in the exercise of its good faith judgment as to its
fiduciary duties to its stockholders imposed by law the Board of Directors of
Harris determines that such termination is required by reason of an Acquisition
Transaction proposal being made, (b) there has been a breach by Concurrent of
any representation or warranty contained in this Agreement which would have or
would be reasonably likely to have a Material Adverse Effect on Concurrent and
its Subsidiaries taken as a whole, (c) there has been a material breach of any
of the covenants or agreements set forth in this Agreement on the part of
Concurrent, which breach is not curable or, if curable, is not cured within 30
days after written notice of such breach is given by Harris to Concurrent or (d)
Concurrent withdraws, amends, or modifies its favorable recommendation of this
Agreement and the transactions contemplated hereby or promulgates any
recommendation with respect to an Acquisition Transaction other than a
recommendation to reject such Acquisition Transaction.
Section 9.4 Termination by Concurrent. This Agreement may be terminated at
any time prior to the Closing Date, before or after the approval by the
stockholders of Concurrent referred to in Section 5.12, by action of the Board
of Directors of Concurrent, if (a) in the exercise of its good faith judgment as
to its fiduciary duties to its stockholders imposed by law the Board of
Directors of Concurrent determines that such termination is required by reason
of an Acquisition Transaction proposal being made, (b) there has been a breach
by Harris of any representation or warranty contained in this Agreement which
would have or would be reasonably likely to have a Material Adverse Effect on
either Harris and the Transferred Subsidiaries, taken as a whole or the
Business, (c) there has been a material breach of any of the covenants or
agreements set forth in this Agreement on the part of Harris, which breach is
not curable or, if curable, is not cured within 30 days after written notice of
such breach is given by Concurrent to Harris or (d) Harris withdraws, amends, or
modifies its favorable recommendation of the transactions contemplated by this
Agreement and the transactions contemplated hereby or promulgates any
recommendation with respect to an Acquisition Transaction other than a
recommendation to reject such Acquisition Transaction.
Section 9.5 Effect of Termination. In the event of termination of this
Agreement pursuant to this Article IX, all obligations of the parties hereto
shall terminate, except the obligations of the parties pursuant to this Section
9.5 and Sections 6.6 and 6.9. Moreover, in the event of termination of this
Agreement pursuant to Section 9.3 or 9.4, nothing herein shall prejudice the
ability of the non-terminating party from seeking damages from any other party
for any breach of this Agreement, attorneys' fees and the right to pursue any
remedy at law or in equity; provided, however, that in the event nonterminating
party has received the Termination Fee (as defined in Section 9.6(c)) from the
terminating party, the non-terminating party shall not (a) assert or pursue in
any manner, directly or indirectly, any claim or cause of action based in whole
or in part upon alleged tortious or other interference with rights under this
Agreement against any entity or person submitting a proposal for an Acquisition
Transaction (b) assert or pursue in any manner, directly or indirectly, any
claim or cause of action against the terminating party or any of its officers or
directors based in whole or in part upon its or their receipt, consideration,
recommendation, or approval of an Acquisition Transaction or the
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terminating party's exercise of its right of termination under Section 9.3(a) or
9.4(a), as appropriate, or assert any claim for any of the expenses referred to
in Section 6.15 herein. Notwithstanding the foregoing, in the event the
non-terminating party is required to file suit to seek such Termination Fee, and
it ultimately succeeds on the merits, it shall be entitled to all expenses,
including reasonable attorneys' fees, which it has incurred in enforcing its
rights hereunder.
Section 9.6 Termination Fee. (a) If (i) (x) this Agreement is terminated
by either Concurrent or Harris in accordance with Section 9.2(b), (y) prior to
the Harris Stockholder Meeting a proposal for a competing Acquisition
Transaction involving Harris is publicly announced, and (z) any Acquisition
Transaction involving Harris is consummated within 1 year of the date of
termination of this Agreement or (ii) this Agreement is terminated by Harris in
accordance with Section 9.3(a), Harris shall pay to Concurrent the Termination
Fee.
(b) If (i) (x) this Agreement is terminated by either Concurrent or Harris
in accordance with Section 9.2(c), (y) prior to the Concurrent Stockholder
Meeting a proposal for a competing Acquisition Transaction involving Concurrent
is publicly announced, and (z) any Acquisition Transaction involving Concurrent
is consummated within 1 year of the date of termination of this Agreement or
(ii) this Agreement is terminated by Concurrent in accordance with Section
9.4(a), Concurrent shall pay to Harris the Termination Fee.
(c) The Termination Fee shall be $1.75 million payable by wire transfer of
immediately available funds within five business days of the date of the first
to occur of clauses (i) or (ii) of either Section 9.6 (a) or (b), as
appropriate, to such account as the receiving party shall specify to the paying
party.
ARTICLE X
OBLIGATIONS OF PARTIES AFTER CLOSING DATE
Section 10.1 Survival Periods. Except as otherwise provided herein, the
representations and warranties of the parties contained in this Agreement or any
certificate delivered in connection herewith shall not survive the Closing. The
covenants and agreements of the parties hereto shall survive the Closing if and
to the extent so provided in such covenant or agreement.
Section 10.2 Indemnification.
Subject to the other provisions of this Article X, from and after the
Closing:
(a) Harris shall indemnify and hold harmless Concurrent and its affiliates,
and each of their affiliates' and their respective affiliates' directors,
officers, employees, representatives and agents, and each of the heirs,
executors, successors and assigns of any of the foregoing (collectively, the
"Representatives") from and against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages and amounts paid in
settlement (collectively, "Damages") to the extent they are the result of (i)
any breach of any representation or warranty made by or on behalf of Harris
under this Agreement that is a result of fraud or intentional or wilful
misrepresentation by Harris or (ii) the Excluded Liabilities. As to claims for
Damages by Concurrent and its Representatives in respect of misrepresentations
pursuant to clause (i) of this Section 10.2(a), such claims, to the extent
practicable, shall be satisfied by reductions in the Liquidation Preference for
the Outstanding Preferred Stock Consideration pursuant to the terms of the
Certificate of Designation.
(b) Concurrent shall indemnify and hold harmless Harris and its
Representatives from and against any Damages to the extent they arise out of and
are the result of (i) any breach of any representation or warranty made by or on
behalf of Concurrent under this Agreement that is a result of fraud or
intentional or wilful misconduct by Concurrent or (ii) the Assumed Liabilities.
Concurrent and its Representatives, on the one hand, and Harris and its
Representatives, on the other hand, as the case may be, are referred to herein
as the "Indemnified Parties."
(c) Neither Harris nor Concurrent, as the case may be, shall be obligated
to indemnify a party pursuant to this Article X for any Damages pursuant to
Sections 10.2(a)(i) and 10.2(b)(i) unless Harris or Concurrent, as the case may
be, shall have received written notice of such Damages (i) in the case of a
breach
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of a representation and warranty (other than the representations and warranties
set forth in Sections 4.10 and 5.11, as the case may be), within 2 years from
the Closing Date and (ii) in the case of the representations and warranties set
forth in Sections 4.10 and 5.11, as the case may be, prior to the expiration of
the applicable statute of limitations; provided, however, in the event that an
Indemnified Party (x) receives notice of any matter which provides a reasonable
basis for a claim to indemnification hereunder and within the applicable period
provided in this Section 10.2(c) and (y) provides notice to the Indemnifying
Party (as defined hereinafter) of the receipt of such notice, then such
Indemnified Party shall be entitled to indemnification with respect to such
claim until its final resolution, and provided, further, that there shall be no
period of time within which notice of or a claim for indemnity must be provided
by an Indemnified Party to an Indemnifying Party (as defined in Section 10.3(a))
with respect to those items set forth in Section 10.2(a)(ii) and 10.2(b)(ii)
hereof.
Section 10.3 Claims.
(a) If an Indemnified Party intends to seek indemnification pursuant to
this Article X, such Indemnified Party shall promptly notify Harris or
Concurrent, as the case may be (the "Indemnifying Party"), in writing of such
claim describing such claim in reasonable detail; provided, however, that the
failure to provide such notice shall not affect the obligations of the
Indemnifying Party unless it is actually prejudiced thereby, subject, however,
to the time periods specified in Section 10.1 hereof. In the event that such
claim involves a claim by a third party against the Indemnified Party, the
Indemnifying Party shall have 30 days after receipt of such notice to decide
whether it will undertake, conduct and control, through counsel of its own
choosing and at its own expense, the settlement or defense thereof, and if it so
decides, the Indemnified Party shall cooperate with it in connection therewith;
provided, however, that the Indemnified Party may participate in such settlement
or defense through counsel chosen by it; and provided, further, however, that
the fees and expenses of such counsel shall be borne by the Indemnified Party.
The decision by an Indemnifying Party to undertake the defense or settlement of
such claim shall be conclusive evidence of its concurrence that any Indemnified
Party involved in such claim is entitled to indemnification hereunder with
respect to such claim. Notwithstanding anything in this Section 10.3(a) to the
contrary, the Indemnifying Party may, without the consent of the Indemnified
Party, settle or compromise any action or consent to the entry of any judgment
which includes as an unconditional term thereof the delivery by the claimant or
plaintiff to the Indemnified Party of a duly executed written release of the
Indemnified Party from all liability in respect of such action, which release
shall be reasonably satisfactory in form and substance to counsel for the
Indemnified Party; provided, however, that the Indemnifying Party shall not,
without the written consent of the Indemnified Party, settle or compromise any
action in any manner that, in the reasonable judgment of the Indemnified Party
or its counsel, would materially and adversely affect the Indemnified Party,
other than as a result of money damages or other money payments. If the
Indemnifying Party does not notify the Indemnified Party within 30 days after
the receipt of the Indemnified Party's notice of a claim of indemnity hereunder
that it elects to undertake the defense thereof, the Indemnified Party shall
have the right to contest, settle or compromise the claim but shall not thereby
waive any right to indemnity therefor pursuant to this Agreement. So long as the
Indemnifying Party is contesting any such claim in good faith, the Indemnified
Party shall not pay or settle any such claim. Notwithstanding the foregoing, the
Indemnified Party shall have the right to pay or settle any such claim;
provided, however, that so long as the Indemnifying Party is contesting such
claim in good faith, any such settlement shall include as an unconditional term
thereof the delivery by the claimant or plaintiff to the Indemnifying Party of a
duly executed written release of the Indemnifying Party from all liability in
respect of such action; and provided, further, however, that in such event it
shall waive any right to indemnity therefor by the Indemnifying Party; and
provided, further, however, that the Indemnified Party shall provide the
Indemnifying Party reasonable advance notice of any proposed settlement or
payment and shall not pay or settle any claim if the Indemnifying Party shall
reasonably object.
(b) The Indemnified Party shall cooperate fully in all aspects of any
investigation, defense, pretrial activities, trial, compromise, settlement or
discharge of any claim in respect of which indemnity is sought pursuant to
Article X, including, but not limited to, by providing the other party with
reasonable access to employees and officers (including as witnesses) and other
information.
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ARTICLE XI
MISCELLANEOUS
Section 11.1 Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of this Agreement and the transactions
contemplated hereby by the stockholders of Harris or of Concurrent, but, after
any such approval, no amendment shall be made which by law requires further
approval by such stockholders without such further approval. This Agreement may
not be amended except by an instrument in writing signed on behalf of each of
the parties hereto.
Section 11.2 Extension; Waiver. At any time during the term of this
Agreement or during the time any provision survives termination hereof or
Closing as provided herein, the parties hereto, by action taken or authorized by
the respective Boards of Directors, may to the extent legally allowed, (a)
extend the time for the performance of any of the obligations or other acts of
the other parties hereto, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any of the agreements or conditions contained here. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf of such party.
Section 11.3 Notices. All consents, notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses or
telephone numbers (or at such other address for a party as shall be specified by
like notice):
(a) if to Concurrent, to
Concurrent Computer Corporation
2 Crescent Place
Oceanport, NJ 07757
Attention: Kevin Dell
Telecopy: (908) 870-4779
with a copy, which copy shall not
constitute notice, to
Skadden, Arps, Slate, Meagher& Flom
919 Third Avenue
New York, N.Y. 10022
Telecopy: (212) 735-3764
Attention: Eric L. Cochran
and
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(b) if to Harris, to
Harris Computer Systems Corporation
2101 W. Cypress Creek Road
Ft. Lauderdale, FL 33309
Attention: Daniel Dunleavy
Telecopy: (305) 973-5253
with a copy, which copy shall not
constitute notice, to
Holland & Knight
One East Broward Blvd.
P.O. Box 14070
Fort Lauderdale, FL 33302
Telecopy: (305) 463-2030
Attention: Brian Foremny
Section 11.4 Interpretation. Any reference in this Agreement to an
"Article", a "Section" or a "Schedule" without reference to a document is a
reference to an Article or a Section hereof or a Schedule hereto.
Notwithstanding any specific reference to a Schedule in this Agreement, all of
the representations, warranties and covenants of the parties contained in this
Agreement are qualified by the entire Disclosure Schedule. With respect to any
discrepancy between this Agreement and the Ancillary Agreements, and other
agreements and instruments delivered herewith, the provisions set forth in this
Agreement shall control. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "hereof", "herein", and
"hereunder" are used in this Agreement they shall refer to this Agreement as a
whole unless the context otherwise requires. Whenever the words "include",
"includes" or "including" are used in this Agreement they shall be deemed to be
followed by the words "without limitation." The phrases "the date of this
Agreement," "the date hereof" and terms of similar import, unless the context
otherwise requires, shall be deemed to refer to the date first written above.
The use of any gender herein shall be deemed to include the other gender.
Section 11.5 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
Section 11.6 Entire Agreement; No Third Party Beneficiaries. (a) This
Agreement, including all Schedules hereto, together with the Ancillary
Agreements referred to in Section 2.4 and the Confidentiality Agreement (a)
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and thereof, and (b) except as expressly provided herein
are not intended to confer upon any person other than the parties hereto and
thereto any rights or remedies hereunder or thereunder.
(b) Effective as of the date hereof, the Agreement and Plan of Merger and
Reorganization, dated November 5, 1995, among Harris, Concurrent and Concurrent
Acquisition Corporation, is hereby terminated by the mutual consent of Harris
and Concurrent.
Section 11.7 Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware applicable to contracts
made, executed, delivered and performed wholly within the State of Delaware,
without regard to any applicable conflicts of law.
Section 11.8 Specific Performance. The parties hereto agree that if any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to determine,
and that the parties shall be entitled to specific performance of the terms
hereof, in addition to any other remedy at law or equity.
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Section 11.9 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. This Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
Section 11.10 Incorporation of Exhibits. The Disclosure Schedule,
Concurrent Disclosure Schedule and all Exhibits attached hereto and referred to
herein are hereby incorporated herein and made a part hereof for all purposes as
if fully set forth herein.
Section 11.11 Severability. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
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IN WITNESS WHEREOF, Concurrent and Harris have caused this Agreement to be
signed by their respective officers thereunto duly authorized as originally
executed as of the 26th day of March, 1996 and as amended and restated as of the
13th day of May, 1996.
CONCURRENT COMPUTER CORPORATION
By: /s/ John T. Stihl
------------------------------------
John T. Stihl
Chairman, President and
Chief Executive Officer
HARRIS COMPUTER SYSTEMS
CORPORATION
By: /s/ E. Courtney Siegel
------------------------------------
E. Courtney Siegel
Chairman, President and
Chief Executive Officer
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ANNEX B
BerensonMinella Logo
May 23, 1996
Board of Directors
Concurrent Computer Corporation
2 Crescent Place
Oceanport, New Jersey 07757
Gentlemen:
We understand that Concurrent Computer Corporation ("Concurrent") has
entered into a Purchase and Sale Agreement, dated as of March 26, 1996 and
amended and restated as of May 23, 1996 (the "Purchase and Sale Agreement"),
with Harris Computer Systems Corporation ("Harris"), providing for the sale by
Harris to Concurrent of assets used in the business (the "Harris Real-Time
Business") of providing and servicing high-performance real-time computer
systems on a worldwide basis (as defined in the Purchase and Sale Agreement, the
"Assets"), the assumption by Concurrent of certain related liabilities of the
Harris Real-Time Business (as defined in the Purchase and Sale Agreement, the
"Assumed Liabilities") and the sale by Harris to Concurrent of 683,178 shares of
Common Stock, par value $0.01 per share, of Harris (such shares, the "Purchased
Harris Shares"), for consideration consisting of 10,000,000 shares of Common
Stock, par value $.01 per share (the "Concurrent Common Stock") of Concurrent,
subject to adjustment for stock splits, stock dividends and similar transactions
prior to the closing (the "Concurrent Common Stock Consideration"), and
$10,000,000 in total liquidation preference of 9% Class B Convertible Preferred
Stock of Concurrent (the "Concurrent Preferred Stock") having the rights,
designations and preferences set forth in the Certificate of Designation (as
defined in the Purchase and Sale Agreement, a form of which is attached as
Exhibit A thereto), as adjusted pursuant to the terms thereof and the Purchase
and Sale Agreement (such shares, the "Preferred Stock Consideration"). Pursuant
to the terms of the Concurrent Preferred Stock and the terms of the debentures
(the "Debentures") into which the Concurrent Preferred Stock is exchangeable, a
maximum of 4,000,000 shares, subject to anti-dilution adjustment, of Concurrent
Common Stock (the "Additional Common Shares") may be issuable upon the
conversion of the Concurrent Preferred Stock and the Debentures. The purchase by
Concurrent of the Assets and the Purchased Harris Shares for the Concurrent
Common Stock Consideration and the Preferred Stock Consideration and the
assumption of the Assumed Liabilities and all other transactions contemplated
thereby are sometimes referred to herein as the "Transaction". You have asked us
to render our opinion as to whether the purchase by Concurrent of the Assets and
the Purchased Harris Shares for the Concurrent Common Stock Consideration and
the Preferred Stock Consideration and the assumption of the Assumed Liabilities,
taken as a whole, are fair to the shareholders of Concurrent from a financial
point of view.
In arriving at our opinion, we have, among other things:
(i) reviewed the Purchase and Sale Agreement, the Form of Certificate
of Designation, Debenture Term Sheet and Form of Share Holding Agreement
attached as exhibits thereto, and the joint proxy statement of Concurrent
and Harris (the "Proxy Statement") relating to the respective meetings of
shareholders of Concurrent and Harris to be held in connection with the
Transaction;
(ii) reviewed certain publicly-available business and financial
information relating to Concurrent, including Concurrent's Annual Reports
on Form 10-K for the fiscal years ended June 30, 1994 and 1995, and its
Quarterly Reports on Form 10-Q for the fiscal quarters ended September 30,
1995, December 31, 1995 and March 31, 1996;
BerensonMinella Address Line
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(iii) reviewed certain publicly-available business and financial
information relating to Harris, including Harris' Information Statement
dated September 29, 1994, its Quarterly Reports on Form 10-Q and Form
10-Q/A for the period ended September 30, 1994, its Annual Report on Form
10-K for the fiscal year ended September 30, 1995, and its Quarterly
Reports on Form 10-Q for the fiscal quarters ended December 29, 1995 and
March 30, 1996;
(iv) reviewed forecasted combined income statements for Concurrent and
the Harris Real-Time Business for the twelve month periods ending June 30,
1997 and 1998, and forecasted combined balance sheets as of the end of each
fiscal quarter from June 30, 1996 through June 30, 1998, prepared by
Concurrent's management as of March 15, 1996, financial projections for
Concurrent and financial projections for the Harris Real-Time Business for
the twelve month periods ending June 30, 1997 and 1998, prepared by
Concurrent's management as of March 15, 1996, and financial projections for
the Harris Real-Time Business for the twelve months ending December 31,
1996 and 1997, prepared by the management of Harris as of March 15, 1996
(collectively, the "Projections"), and had discussions with the management
of each company regarding the Projections;
(v) reviewed financial forecasts for Concurrent for the quarters
ending March 31, 1996 and June 30, 1996, prepared by Concurrent's
management as of January 24, 1996;
(vi) discussed with the managements of Concurrent and Harris their
respective businesses and the views of each management regarding the
companies' respective technologies and the profitability of such
technologies, as well as the operating and strategic benefits and
implications of Concurrent's acquisition of the Harris Real-Time Business,
including the effect on sales and the operating synergies and cost savings
projected to be achieved through the combination of the operations of
Concurrent and the Harris Real-Time Business;
(vii) considered both the historical and recent sales and earnings
trends of each of Concurrent and the Harris Real-Time Business, taking into
account the financial condition, including the projected costs associated
with Concurrent's acquisition of the Harris Real-Time Business and debt
capacity and liquidity, of each, as well as that of the pro forma combined
company;
(viii) reviewed historical stock prices and trading volumes of
Concurrent and Harris;
(ix) compared the recent financial performance of each of Concurrent
and the Harris Real-Time Business with that of other public companies
engaged in businesses deemed similar to those of Concurrent and the Harris
Real-Time Business, and compared the recent financial performance of
Harris's "trusted systems" business with that of other public companies
engaged in businesses deemed similar to those of such "trusted systems"
business;
(x) reviewed the financial terms of certain other recent business
combinations involving companies engaged in businesses deemed similar to
those of Concurrent and the Harris Real-Time Business, to the extent
publicly available;
(xi) compared the relative contribution in terms of sales, operating
income, operating cash flow and net income of each of Concurrent and the
Harris Real-Time Business to a pro forma combined company and compared such
contribution to the pro forma ownership of each of Concurrent's
shareholders and Harris in the combined company; and
(xii) reviewed such other information and taken into account such
other factors as we deemed relevant.
For purposes of rendering our opinion, we have assumed and relied upon the
accuracy and completeness of the foregoing information and have not assumed any
responsibility for independent verification of such information or for any
independent valuation or appraisal of any of the assets or liabilities of
Concurrent or Harris, including without limitation the Assets or the Assumed
Liabilities, nor were we furnished with any such valuations or appraisals. With
respect to the Projections and financial forecasts, we have assumed that they
have been reasonably prepared on bases reflecting the best currently available
estimates and good faith judgments of the management of Concurrent as to the
future performance of Concurrent and the Harris Real-
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Time Business, of the management of Harris as to the future performance of the
Harris Real-Time Business, and of the managements of Concurrent and Harris with
respect to the future performance of the combined operation of Concurrent and
the Harris Real-Time Business, and have relied upon the assurances of the
managements of Concurrent and Harris that they are unaware of any facts that
would make the information, Projections or financial forecasts provided to us
incomplete or misleading. We have also assumed that the effect on sales and the
operating synergies and cost savings projected to be achieved through the
combination of the operations of Concurrent and the Harris Real-Time Business
will be realized and have relied without further analysis or investigation on
the judgment of the managements of Concurrent and Harris as to the companies'
respective technologies and the profitability of such technologies. Our opinion
is necessarily based on economic, market and other conditions, and the
information made available to us, as of the date hereof.
Our opinion is being provided at the request and for the information of the
Board of Directors of Concurrent in connection with its consideration of the
Transaction, and shall not be reproduced, summarized, described or referred to,
or furnished to any other person, without our prior written consent, provided,
however, that this letter may be reproduced in full in the Proxy Statement. Our
opinion does not constitute a recommendation to any shareholder of Concurrent as
to how any such shareholder should vote with respect to the issuance of the
Concurrent Common Stock Consideration and the Additional Common Shares in
connection with the Transaction.
We have in the past provided financial advisory services to Concurrent and
have received fees for rendering such services. We have acted as financial
advisor to Concurrent in connection with the Transaction and will receive a fee
for such services, including the rendering of this opinion, contingent upon the
consummation of the Transaction.
Based upon and subject to the foregoing, and subject to the various
assumptions and limitations set forth herein, it is our opinion that, as of the
date hereof, the purchase by Concurrent of the Assets and the Purchased Harris
Shares for the Concurrent Common Stock Consideration and the Preferred Stock
Consideration and the assumption of the Assumed Liabilities, taken as a whole,
are fair to the shareholders of Concurrent from a financial point of view.
Very truly yours,
BERENSON MINELLA & COMPANY
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ANNEX C
[BEAR STEARNS LETTERHEAD]
May 23, 1996
The Special Committee of the Board of Directors
Harris Computer Systems Corporation
2101 West Cypress Creek Road
Fort Lauderdale, FL 33309
Dear Sirs:
We understand that Harris Computer Systems Corporation ("Harris") and
Concurrent Computer Corporation ("Concurrent") have entered into a Purchase and
Sale Agreement dated March 26, 1996, as amended and restated on May 23, 1996
(the "Transaction Agreement"), pursuant to which (i) Harris will sell to
Concurrent (a) the assets and liabilities of its real-time computer systems
business, (known as the Real-Time Systems Division), plus (b) 683,178 newly
issued shares of Harris common stock, representing approximately 9.4% of
Harris' fully-diluted shares outstanding on a pro forma basis, and (ii)
Concurrent shall issue to Harris (a) 10,000,000 shares of Concurrent common
stock, representing approximately 21.7% of Concurrent's fully-diluted shares
outstanding on a pro forma basis, plus (b) $10.0 million liquidation preference
(subject to certain adjustments) of Concurrent convertible exchangeable
preferred stock representing another 4,000,000 shares of Concurrent common
stock (8.6% of Concurrent's fully-diluted shares outstanding on a pro forma
basis) (the "Transaction"). You have provided us with the joint preliminary
proxy statement/prospectus, which includes the Transaction Agreement, in
substantially final form to be sent to the shareholders of Harris (the "Joint
Proxy Statement").
You have asked us to render our opinion as to whether the Transaction is fair,
from a financial point of view, to the shareholders of Harris.
In the course of our analyses for rendering this opinion, we have:
1. reviewed the Joint Proxy Statement;
2. reviewed Harris' Information Statement dated September 29, 1994, and
its Annual Report on Form 10-K for the year ended September 30, 1995,
its Quarterly Report on Form 10-QA for the period ended September 30,
1994, and its Quarterly Reports on Form 10-Q for the periods ended
December 29, 1995, and March 30, 1996;
<PAGE> 255
3. reviewed Concurrent's Annual Reports on Form 10-K for the fiscal
years ended June 30, 1994 and 1995, and Quarterly Reports on Form
10-Q for the periods ended September 30 and December 31, 1995, and
March 31, 1996;
4. reviewed certain operating and financial information, including
projections, provided to us by Harris' and Concurrent's managements
relating to their respective businesses and prospects;
5. met with certain members of Harris' senior management to discuss its
operations, historical financial statements and future prospects, as
well as their views with respect to the operations, historical
financial statements and future prospects of Concurrent, and their
views of the business, operational and strategic benefits, potential
synergies and other implications of the Transaction;
6. met with certain members of Concurrent's senior management to
discuss its operations, historical financial statements and future
prospects, as well as their views of the business, operational and
strategic benefits, potential synergies and other implications of
the Transaction;
7. reviewed the pro forma financial impact of the Transaction on
Concurrent;
8. reviewed the historical prices and trading volumes of the common
shares of Harris and Concurrent;
9. reviewed publicly available financial data and stock market
performance data of companies which we deemed generally comparable
to Harris and Concurrent;
10. reviewed the terms of recent acquisitions of companies which we
deemed generally comparable to the Transaction; and
11. conducted such other studies, analyses, inquiries and investigations
as we deemed appropriate.
In the course of our review, we have relied upon and assumed the accuracy and
completeness of the financial and other information provided to us by Harris
and Concurrent. With respect to Harris' and Concurrent's projected financial
results we have assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
managements of Harris and Concurrent as to the expected future performance of
Harris and Concurrent, respectively. We have not assumed any responsibility
for the information or projections
<PAGE> 256
provided to us and we have further relied upon the assurances of the
managements of Harris and Concurrent, respectively, that they are unaware of
any facts that would make the information or projections provided to us
incomplete or misleading. In arriving at our opinion, we have not performed or
obtained any independent appraisal of the assets of Harris and Concurrent. Our
opinion is necessarily based on economic, market and other conditions, and the
information made available to us, as of the date hereof.
Based on the foregoing, it is our opinion that the Transaction is fair, from a
financial point of view, to the shareholders of Harris.
We have acted as financial advisor to Harris in connection with the Transaction
and will receive a fee for such services, payment of a substantial portion of
which is contingent upon the consummation of the Transaction.
Very truly yours,
BEAR, STEARNS & CO. INC.
By: /s/ Davies B. Beller
-------------------
Managing Director
<PAGE> 257
ANNEX D
AMENDMENT TO THE
CONCURRENT 1991 RESTATED STOCK OPTION PLAN
Amendment (the "Concurrent Stock Plan Amendment"), dated as of May 13,
1996, to the Concurrent Computer Corporation 1991 Restated Stock Option Plan
(the "Concurrent Stock Plan").
WITNESSETH
WHEREAS, Concurrent Computer Corporation ("Concurrent") and Harris Computer
Systems Corporation ("Harris") have entered into a Purchase and Sale Agreement
(the "Purchase and Sale Agreement") pursuant to which Concurrent will acquire
the assets of the real-time business of Harris; and
WHEREAS, subject to its approval by the shareholders of Concurrent, the
Board of Directors of Concurrent has approved and adopted this Concurrent Stock
Plan Amendment and directed that the proper officers take all appropriate steps
to execute and put into effect the Concurrent Stock Plan Amendment.
NOW, THEREFORE:
1. The first sentence of Section 5 of the Concurrent Stock Plan is hereby
amended, effective upon its approval by the stockholders of Concurrent, to read
in its entirety as follows:
The total number of shares of Stock reserved and available for
distribution pursuant to Awards under the Plan shall be 9,000,000 shares
of Stock.
2. Section 8 of the Concurrent Stock Plan is hereby amended, effective upon
its approval by the stockholders of Concurrent, to read in its entirety as
follows:
"SECTION 8. Options Granted to Non-Employee Directors.
The provisions of this Section 8 govern the granting and terms of
Options for any director of the Company who is not an employee of the
Company or any of its Affiliates ("Eligible Director"). No options may be
granted to Eligible Directors other than pursuant to this Section 8.
Upon an individual becoming an Eligible Director for the first time,
without further action by the Board or the stockholders of the Company,
such Eligible Director shall be automatically granted Options to purchase
20,000 shares of stock (subject to adjustment in accordance with the
provisions of Section 5 of the Plan). On the date of each annual meeting of
stockholders of the Company, each Eligible Director who has previously been
awarded an Option under the preceding sentence shall be granted
automatically, without further action by the Board or the stockholders of
the Company, Options to purchase 3,000 shares of stock (subject to
adjustment in accordance with the provisions of Section 5 of the Plan).
The purchase price per share deliverable upon the exercise of Options
granted under this Section 8 shall be 100% of the Fair Market Value of such
shares as of the date of grant of such Option. Each Option granted under
this Section 8 shall become immediately exercisable and no Option shall be
exercisable after the expiration of ten (10) years from the date of grant.
If not previously exercised, each Option granted pursuant to this Section 8
shall expire upon the tenth (10th) anniversary of the date of grant or upon
the earlier removal or resignation as a director of the Company (other than
any such removal or resignation as a result of the death or disability of
the optionee).
3. This Concurrent Stock Plan Amendment shall be effective immediately
following the closing of the transactions contemplated by the Purchase and Sale
Agreement and the Concurrent Stock Plan shall continue in full force and effect
as amended hereby.
4. Capitalized terms used in this Concurrent Stock Plan Amendment and not
defined herein shall have the meanings assigned thereto in the Concurrent Stock
Plan.
D-1
<PAGE> 258
IN WITNESS WHEREOF, Concurrent has caused this Amendment to be duly
executed and its corporate seal to be hereunto affixed and attested, all as of
the day and year first above written.
CONCURRENT COMPUTER CORPORATION
By:
--------------------------------------
Name:
Title:
D-2
<PAGE> 259
ANNEX E
AMENDMENT 1996-1 TO
HARRIS COMPUTER SYSTEMS CORPORATION
STOCK INCENTIVE PLAN
Pursuant to Section 11 of the Harris Computer Systems Corporation Stock
Incentive Plan (the "Plan"), and subject to the approval of the shareholders of
Harris Computer Systems Corporation (the "Corporation"), the Compensation and
Stock Option Committee of the Board of Directors of the Corporation (the
"Committee") has approved the following amendment (the "Amendment") to the terms
of the Plan pursuant to a meeting of the Committee on February, 4, 1996:
1. The following definition of "Amendment Effective Date" shall be
added to Section 2:
" Amendment Effective Date" means February 4, 1996
2. The definition of "Grant Date" in Section 2 shall be deleted in its
entirety and the following definition of "Grant Date" in Section 2 shall be
simultaneously substituted in lieu thereof.
"Grant Date" means the date of the grant by the Board Committee of an
Option under Section 5.1 hereof or a SAR under Section 6.1 hereof.
3. The first sentence of Section 3.1 shall be deleted in its entirety
and the following first sentence of Section 3.1 shall be simultaneously
substituted in lieu thereof:
3.1 Shares Reserved Under the Plan. Subject to adjustment as
provided in Section 3.2, no more than 675,000 share of Common Stock
shall be cumulatively available for the grant of Incentive Stock Options
under the Plan.
4. The following Section 10.5 shall be added to the Plan:
10.5 Effective February 4, 1996, each person who is an Outside
Director of the Corporation shall be granted an Option to purchase five
thousand (5,000) shares of Common Stock at an Option Price of $16.50 per
share, which was the Fair Market Value of the Common Stock on such date.
5. The Amendment shall be effective as of February 4, 1996, provided
that the Amendment shall be duly approved by the shareholders of the
Corporation. Any grants made under the Plan as amended prior to such
approval shall be effective when made (unless otherwise specified by the
Board Committee at the time of the grant), but shall be conditioned on, and
subject to, the approval of the Amendment by the shareholders.
(The Amendment set forth above does not take into account the Corporation's
three-for-one stock split which was effected during March 1996)
E-1
<PAGE> 260
ANNEX F
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARE HOLDING AGREEMENT
DATED AS OF
[ ], 1996
BETWEEN
CONCURRENT COMPUTER CORPORATION
AND
HARRIS COMPUTER SYSTEMS CORPORATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 261
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I
Definitions........................................................................... F-1
SECTION 1.1. Definitions........................................................... F-1
ARTICLE II
Corporate Governance.................................................................. F-3
SECTION 2.1. The Concurrent Board of Directors..................................... F-3
SECTION 2.2. The Harris Board of Directors......................................... F-4
SECTION 2.3. Initial Designees..................................................... F-4
SECTION 2.4. Resignations and Replacements......................................... F-4
SECTION 2.5. Solicitation and Voting of Shares..................................... F-5
ARTICLE III
Standstill............................................................................ F-5
SECTION 3.1. Standstill............................................................ F-5
SECTION 3.2. Third Party Offers.................................................... F-6
ARTICLE IV
Transfer Restrictions................................................................. F-6
SECTION 4.1. Restrictions.......................................................... F-6
SECTION 4.2. Pledge of Stock....................................................... F-7
SECTION 4.3. Effect................................................................ F-8
ARTICLE V
Termination........................................................................... F-8
SECTION 5.1. Termination........................................................... F-8
ARTICLE VI
Registration.......................................................................... F-8
SECTION 6.1. Registration.......................................................... F-8
SECTION 6.2. Indemnification; Contribution......................................... F-10
ARTICLE VII
Miscellaneous......................................................................... F-11
SECTION 7.1. Effectiveness......................................................... F-11
SECTION 7.2. Notices............................................................... F-12
SECTION 7.3. Interpretation........................................................ F-12
SECTION 7.4. Severability.......................................................... F-13
SECTION 7.5. Counterparts.......................................................... F-13
SECTION 7.6. Entire Agreement; No Third Party Beneficiaries........................ F-13
SECTION 7.7. Further Assurances.................................................... F-13
SECTION 7.8. Governing Law; Equitable Remedies..................................... F-13
SECTION 7.9. Consent to Jurisdiction............................................... F-13
SECTION 7.10. Amendments; Waivers................................................... F-13
SECTION 7.11. Assignment............................................................ F-14
</TABLE>
F-i
<PAGE> 262
SHARE HOLDING AGREEMENT dated as of [ ], 1996, between CONCURRENT
COMPUTER CORPORATION, a Delaware corporation ("Concurrent"), and HARRIS COMPUTER
SYSTEMS CORPORATION, a Florida corporation ("Harris").
WHEREAS Harris and Concurrent are parties to a Purchase and Sale Agreement
dated as of March 26, 1996 and amended and restated as of May 23, 1996 (the
"Purchase and Sale Agreement") and upon consummation of the transactions
contemplated therein (the "Transactions"), Harris will Beneficially Own
10,000,000 shares of Concurrent Common Stock and Concurrent will Beneficially
Own 683,178 shares of Harris Common Stock (as such terms are defined below); and
WHEREAS the parties hereto wish to set forth their agreement concerning
certain governance matters of Concurrent and Harris following consummation of
the Transactions as well as certain matters relating to Concurrent's and
Harris's ownership of Voting Securities (as such term is defined below).
NOW, THEREFORE, in consideration of the mutual covenants and undertakings
contained herein and for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. As used in this Agreement, the following terms
shall have the following meanings:
An "affiliate" of any Person means any other Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first Person. For purposes of the definition
of affiliate, "control" has the meaning specified in Rule 12b-2 under the
Exchange Act as in effect on the date of this Agreement.
An "associate" has the meaning set forth in Rule 12b-2 under the Exchange
Act as in effect on the date of this Agreement.
A Person shall be deemed to "Beneficially Own", to have "Beneficial
Ownership" of, or to be "Beneficially Owning" any securities (which securities
shall also be deemed "Beneficially Owned" by such Person) that such Person is
deemed to "beneficially own" within the meaning of Rule 13d-3 under the Exchange
Act as in effect on the date of this Agreement.
"Best Efforts" with respect to any action subject to such a Best Efforts
obligation shall mean all efforts to take such action as may be taken in a
commercially reasonable manner.
"Change of Control" with respect to Concurrent or Harris, as the case may
be, shall be deemed to have occurred at such time as a "person" or "group"
(within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) (i)
becomes the Beneficial Owner, directly or indirectly, of more than 50% of the
Voting Securities of Concurrent or Harris, as the case may be or (ii) otherwise
obtains control of Concurrent or Harris, as the case may be.
"Closing Date" means the date of the closing of the Purchase and Sale
Agreement.
"Concurrent", together with any subsidiary of Concurrent that holds shares
of Harris Common Stock, has the meaning set forth in the recitals to this
Agreement.
"Concurrent Board" means the board of directors of Concurrent.
"Concurrent Common Stock" means the common stock of Concurrent, par value
$0.01 per share.
"Concurrent Designee" means such person as is so designated by Concurrent
in accordance with Section 2.2(b) to serve as a member of the Harris Board
pursuant to Section 2.3 hereof.
F-1
<PAGE> 263
"Concurrent Liquidity Restrictions" means restrictions, which shall become
effective only in accordance with the provisions of Article VI hereof and only
so long as Concurrent Beneficially Owns at least the Triggering Number of Harris
Shares, pursuant to which Concurrent may not sell more than 45,000 shares of
Harris Common Stock (subject to adjustment for stock splits, stock dividends and
similar transactions) in any consecutive thirty day period (which 45,000 share
limit shall be reduced by sales of Harris Common Stock by Lenders during such 30
day period, if any) and will not permit more than 35% of the Current Market
Value (up to $13.35 per share, subject to adjustment) of Harris Common Stock
plus (ii) 25% of the Current Market Value (in excess of $13.35 per share) of
Harris Common Stock (in each case measured as of the date such stock is pledged)
to serve as collateral for a margin loan from any Lender.
"Concurrent President" means the President and Chief Executive Officer of
Concurrent.
"Current Market Value" means the average of the daily closing prices for
the ten consecutive trading days immediately prior to the relevant measuring
date.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Governmental Entity" means any court of competent jurisdiction,
administrative agency, regulatory body, commission or other governmental
authority, board, bureau or instrumentality, domestic or foreign and any
subdivision thereof.
A "group" has the meaning set forth in Section 13(d) of the Exchange Act as
in effect on the date of this Agreement.
"Harris", together with any subsidiary of Harris that holds shares of
Concurrent Common Stock, has the meaning set forth in the recitals to this
Agreement.
"Harris Board" means the board of directors of Harris.
"Harris Common Stock" means the common stock of Harris, par value $0.01 per
share.
"Harris Designees" means such Persons as are so designated by Harris in
accordance with Section 2.1(b), as such designations may change from time to
time in accordance with this Agreement, to serve as members of the Concurrent
Board pursuant to Section 2.3 hereof.
"Harris Liquidity Restrictions" means restrictions, which shall become
effective only in accordance with the provisions of Article VI hereto and only
so long as Harris Beneficially Owns at least the Triggering Number of Concurrent
Shares, pursuant to which Harris may not sell more than 260,000 shares of
Concurrent Common Stock (subject to adjustment for stock splits, stock dividends
and similar transactions) in any consecutive thirty day period (which 260,000
share limit shall be reduced by sales of Concurrent Common Stock by Lenders
during such 30 day period, if any) and will not permit more than (A) 35% of the
Current Market Value (up to $1.25 per share, subject to adjustment) of
Concurrent Common Stock plus (B) 25% of the Current Market Value (in excess of
$1.25 per share, subject to adjustment) of Concurrent Common Stock (in each case
measured as of the date such stock is pledged) to serve as collateral for a
margin loan from any Lender; provided, however, the above restrictions shall not
prevent Harris from obtaining a margin or other loan secured by Concurrent
Common Stock with a principal amount equal to the product of $.50 and the number
of shares of Concurrent Common Stock issued to Harris on the Closing Date
(subject to adjustment for stock splits, stock dividends and similar
transactions) Beneficially Owned by Harris at the time of the execution of the
applicable loan agreement.
"Lender" shall mean any bank, broker-dealer or other lender who grants
either party hereto a margin loan or other similar loans secured by the
securities of either party hereto.
"Minimum Number of Owned Concurrent Shares"means 2,000,000 shares of
Concurrent Common Stock Beneficially Owned by Harris (subject to adjustment for
stock splits, stock dividends and similar transactions) less the total of all
shares of Concurrent Common Stock sold by Harris or a Lender of Harris between
the date hereof and the applicable date.
F-2
<PAGE> 264
"Minimum Number of Owned Harris Shares" means 341,589 shares of Harris
Common Stock Beneficially Owned by Concurrent (subject to adjustment for stock
splits, stock dividends and similar transactions) less the total of all shares
of Harris Common Stock sold by Concurrent or a Lender of Concurrent between the
date hereof and the applicable date.
"in registration" means, with respect to any party hereto, any period
during which such party (i) has a good faith intention to complete a Public
Offering (as defined below) within three calendar months of the date such
intention is communicated in writing to the other party hereto and (ii) is
actively taking steps to complete such an offering (including steps which may
predate the filing of a registration statement for a Public Offering).
"Other Concurrent Holders" means the holders of the Other Concurrent
Shares.
"Other Concurrent Shares" means Voting Securities of Concurrent not
Beneficially Owned by Harris or any of its affiliates.
"Person" means any individual, group, corporation, firm, partnership, joint
venture, trust, business association, organization, Governmental Entity or other
entity.
"Public Offering" means any underwritten offering of stock registered under
the Securities Act.
"Purchase and Sale Agreement" has the meaning set forth in the recitals to
this Agreement.
"SEC" means the Securities and Exchange Commission or any successor
Governmental Entity.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Standstill Period" means the period commencing on the date hereof and
expiring [the date which is 42 months following the Closing Date].
"Subsidiary" means, with respect to any Person, as of any date of
determination, any other Person as to which such Person owns, directly or
indirectly, or otherwise controls, more than 50% of the voting shares or other
similar interests.
"Third Party Offer" means a bona fide offer to enter into a transaction by
a Person other than Harris or any of its respective affiliates or any other
Person acting on behalf of Harris or any of its respective affiliates which
would result in a Change of Control of Concurrent or a transfer of all or
substantially all of the assets of Concurrent.
"Transactions" has the meaning set forth in the recitals to this Agreement.
"Triggering Number of Concurrent Shares" means 2,000,000 shares of
Concurrent Common Stock, subject to adjustment for stock splits, stock dividends
and similar transactions.
"Triggering Number of Harris Shares" means 341,589 shares of Harris Common
Stock, subject to adjustment for stock splits, stock dividends and similar
transactions.
"Voting Securities" means Concurrent Common Stock or Harris Common Stock,
as the case may be, and any other securities of Concurrent or Harris, as the
case may be, entitled to vote generally in the election of directors of
Concurrent or Harris, as the case may be.
ARTICLE II
CORPORATE GOVERNANCE
SECTION 2.1. The Concurrent Board of Directors.
(a) At Closing, the Concurrent Board shall consist of no more than nine
directors, including the individuals identified in Section 2.3(a) hereto as the
initial Harris Designees.
F-3
<PAGE> 265
(b) After September 30, 1997, so long as Harris Beneficially Owns at least
the number of shares of Concurrent Common Stock (including the Concurrent
Preferred Stock assuming full conversion of all such shares) set forth below, as
such numbers may be appropriately adjusted for stock dividends, stock splits or
similar transactions, Concurrent shall exercise all authority under applicable
law to maintain a board of directors of no more than nine directors and to cause
any slate of directors presented to stockholders for election to the Concurrent
Board to include such nominees that, if elected, would result in the Concurrent
Board including that number of directors which appears directly opposite the
minimum share ownership set forth below:
<TABLE>
<CAPTION>
MINIMUM NUMBER OF SHARES
OF CONCURRENT COMMON
STOCK BENEFICIALLY OWNED NUMBER OF HARRIS DESIGNEES
BY HARRIS ON CONCURRENT SLATE
---------------------------------------------------- --------------------------
<S> <C>
10,700,000.......................................... 3
4,700,000........................................... 2
2,400,000........................................... 1
less than 2,400,000................................. 0
</TABLE>
Prior to September 30, 1997, Harris shall be entitled to three Harris
Designees unless Harris Beneficially Owns less than 2,400,000 shares of
Concurrent Common Stock, as such number of shares may be appropriately adjusted
for stock dividends, stock splits or similar transactions, on the date of the
mailing of the proxy statement for the next annual meeting of Concurrent
shareholders following the date hereof, in which case the provisions of this
Section 2.1(b) will not apply and Harris shall not be entitled to any
representation on the Concurrent Board in accordance with this Section 2.1(b)
and Section 2.3(a) hereof.
(c) The initial Chairman of the Concurrent Board shall be John T. Stihl.
SECTION 2.2. The Harris Board of Directors.
(a) The Harris Board shall consist of no more than seven directors,
including the individual identified in Section 2.4(b) hereto as the initial
Concurrent Designee.
(b) So long as Concurrent Beneficially Owns at least 375,000 (subject to
adjustment for stock splits, stock dividends and similar transactions) shares of
Harris Common Stock, as such number of shares may be appropriately adjusted for
stock dividends, stock splits or similar transactions, the parties hereto shall
exercise all authority under applicable law to maintain a board of directors of
no more than seven directors and to cause any slate of directors presented to
stockholders for election to the Harris Board to include such nominees that, if
elected, would result in the Harris Board including one Concurrent Designee;
provided, however, that if Concurrent Beneficially Owns less than 375,000
(subject to adjustment for stock splits, stock dividends and similar
transactions) shares of Harris Common Stock, as such number of shares may be
appropriately adjusted for stock dividends, stock splits or similar
transactions, on the date of the mailing of the proxy statement for the next
annual meeting of Harris shareholders following the date hereof, then this
Section 2.2(b) will not apply and Concurrent shall not be entitled to any
representation on the Harris Board in accordance with this Section 2.2(b) and
Section 2.3(b) hereof.
SECTION 2.3. Initial Designees.
(a) The initial Harris Designees shall be E. Courtney Siegel (who shall
also be the initial Concurrent President in accordance with Section 6.13 of the
Purchase and Sale Agreement), C. Shelton James and Michael F. Maguire.
(b) The initial Concurrent Designee shall be Richard P. Rifenburgh.
SECTION 2.4. Resignations and Replacements.
(a) If at any time a member of the Concurrent Board resigns or is removed,
a new member shall be designated to replace such member until the next election
of directors. If such director who resigned or was removed was a Harris
Designee, Harris shall designate the replacement of such director. If such
director who
F-4
<PAGE> 266
resigned or was removed was not a Harris Designee, Concurrent shall designate
the replacement director in accordance with the terms of its by-laws.
(b) If at any time a member of the Harris Board resigns or is removed, a
new member shall be designated to replace such member until the next election of
directors. If such director who resigned or was removed was a Concurrent
Designee, Concurrent shall designate the replacement of such director. If such
director who resigned or was removed was not a Concurrent Designee, Harris shall
designate the replacement director in accordance with the provisions of its
by-laws.
SECTION 2.5. Solicitation and Voting of Shares.
(a) Concurrent or Harris, as the case may be, shall use reasonable efforts
to solicit from its stockholders eligible to vote for the election of directors
proxies in favor of the board designees selected in accordance with Sections
2.1, 2.2 and 2.3.
(b) Until Concurrent Beneficially Owns less than the Triggering Number of
Harris Shares, Concurrent shall and shall cause any of its Subsidiaries to be
present for all stockholders meetings for purposes of establishing a quorum and
shall vote and shall cause any of its Subsidiaries to vote all securities of
Harris owned by it and entitled to vote, in favor of matters recommended by the
Harris Board for approval by stockholders.
(c) So long as either (i) Harris Beneficially Owns 4,700,000 (subject to
adjustment for stock splits, stock dividends) or more shares of Concurrent
Common Stock or (ii) Harris Beneficially Owns 2,400,000 (subject to adjustment
for stock splits, stock dividends) or more shares of Concurrent Common Stock and
at least one member of the existing Concurrent Board (other than the Chief
Executive Officer) was a Harris Designee, Harris shall and shall cause any of
its Subsidiaries to be present for all stockholder meetings for purposes of
establishing a quorum and shall vote and cause any Subsidiary of Harris to vote
all securities of Concurrent owned by it and entitled to vote, in favor of
matters recommended by the Concurrent Board for approval by stockholders.
ARTICLE III
STANDSTILL
SECTION 3.1. Standstill.
(a) During the Standstill Period, except as otherwise expressly provided in
this Agreement (including this Section 3.1 and Section 3.2), without the express
written consent of the other party, neither Harris, Concurrent nor any of their
controlled affiliates, as the case may be, shall, directly or indirectly, (i)
take any action, to acquire or affect control of the other party or to encourage
or assist any other Person or group to do so, (ii) enter, propose to enter into,
solicit or support any merger, business combination, Change of Control,
restructuring or similar transaction involving Concurrent or Harris, as the case
may be, or any of their Subsidiaries, or purchase, acquire, propose to purchase
or acquire or solicit or support the purchase or acquisition of any portion of
the business, assets or securities of Concurrent or Harris or any of their
Subsidiaries, (iii) seek additional representation on the Concurrent or Harris
Board, as the case may be, the removal of any directors from the Concurrent or
Harris Board, as the case may be, or a change in the size or composition of such
board, (iv) initiate or propose any securityholder proposal without the approval
of the Concurrent or Harris Board, as the case may be, granted in accordance
with this Agreement or make, engage in, or in any way participate in, any
"solicitation" of "proxies" (as such terms are used in the proxy rules
promulgated by the SEC under the Exchange Act) to vote, or seek to advise or
influence any Person with respect to the voting of, any securities or request or
take any action to obtain any list of securityholders for such purposes with
respect to any matter (or, as to such matters, solicit any Person in a manner
that would require the filing of a proxy statement under Regulation 14A of the
Exchange Act), (v) deposit any securities in a voting trust or enter into any
voting agreement or arrangement with respect thereto (other than this
Agreement), (vi) disclose any intent, purpose, plan, arrangement or proposal
inconsistent with the foregoing (including any such intent, purpose, plan,
arrangement or proposal that is conditioned on or would require the
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<PAGE> 267
waiver, amendment, nullification or invalidation of any of the foregoing) or
take any action that would require public disclosure of any such intent,
purpose, plan, arrangement or proposal, (vii) make any request to amend or waive
any provision of this Section 3.1, which request would require public disclosure
under applicable law, rule or regulation, (viii) take any action challenging the
validity or enforceability of the foregoing or (ix) assist, advise, encourage or
negotiate with any Person with respect to, or seek to do, any of the foregoing.
(b) Nothing in this Section 3.1 shall (i) prohibit or restrict Concurrent
or Harris, as the case may be, from responding to any inquiries from any
stockholders of Harris or Concurrent, as the case may be, as to its intention
with respect to the voting of any securities of the other party Beneficially
Owned by it so long as such response is consistent with the terms of this
Agreement; (ii) restrict the right of each Harris Director on the Concurrent
Board or any committee thereof, and each Concurrent Director on the Harris Board
or any committee thereof, to vote on any matter as such individual believes
appropriate in light of his or her duties to the stockholders of Concurrent or
Harris, as the case may be; or (iii) prohibit Harris or Concurrent, as the case
may be, from Beneficially Owning securities of the other party issued as
dividends or distributions in respect of, or issued upon conversion, exchange or
exercise of, securities which Harris or Concurrent, as the case may be, is
permitted to Beneficially Own under this Agreement.
SECTION 3.2. Third Party Offers. If Concurrent becomes the subject of a
Third Party Offer that is approved by a majority of the Board of Directors of
Concurrent at a time when Harris and its controlled affiliates own more than 10%
of the outstanding Voting Securities of Concurrent, promptly after such approval
by the Board of Directors of Concurrent, Concurrent shall deliver a written
notice to Harris, briefly describing the material terms of such Third Party
Offer, and Harris shall, within ten business days after receipt of such notice,
either (i) offer to acquire all or substantially all of the assets of Concurrent
or the Other Concurrent Shares, as the case may be, on terms at least as
favorable to the Other Concurrent Holders as those contemplated by such Third
Party Offer or (ii) confirm in writing that it will support, and at the
appropriate time will support, such Third Party Offer, including by voting and
causing each of its controlled affiliates to vote all its Concurrent Common
Stock eligible to vote thereon in favor of such Third Party Offer or, if
applicable, tendering or selling and causing each of its controlled affiliates
to tender or sell all its securities of Concurrent owned by it to the Person
making such Third Party Offer.
ARTICLE IV
TRANSFER RESTRICTIONS
SECTION 4.1. Restrictions. Except in connection with a Third Party Offer
as provided in Section 3.2, neither Harris, Concurrent, nor any of their
Subsidiaries, as the case may be, shall, directly or indirectly, sell, transfer
or otherwise dispose of any securities of the other party except in accordance
with one of the following: (i) (a) pursuant to a sale to any other Person of any
such securities in an amount of less than 5% of the outstanding securities of
any class of Concurrent or Harris, as the case may be, (and for these purposes,
sales in open market transactions which are not intentionally planned by the
Seller to assist any other person in acquiring over 5% of the outstanding
securities of any class of Concurrent or Harris shall be permitted) or if such
acquiring Person is an institutional investor eligible to file a Statement on
Schedule 13G (a "13G Filer") (or any successor form) with respect to its
investment, greater than 5% but less than 10% of the outstanding securities of
any class of Concurrent or Harris, as the case may be, provided, however, that
such 13G Filer provides a certification to Concurrent or Harris, as the case may
be, that the securities acquired by it were acquired in the ordinary course of
business and were not acquired for the purpose of changing or influencing the
control of the issuer of such securities and were not acquired in connection
with or as a participant in any transaction having such purpose or effect, (ii)
pursuant to a merger, consolidation or other business combination of Harris or
Concurrent or any Harris or Concurrent Entity, as the case may be, where such
party is not the surviving entity or a sale of all or substantially all of such
party's assets; provided, however, that the surviving or purchasing entity
agrees to be bound by the terms of this Agreement, (iii) pursuant to a transfer
of shares of Concurrent or Harris to affiliates of Harris or Concurrent, as the
case may be, provided that such affiliates agree to be bound by the terms of
this Agreement, (iv) pursuant to Section 4.2 hereof or (v) in order to, and only
to the extent necessary to, comply with applicable law. For purposes of Section
4.1(i), the
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convertible exchangeable preferred stock of Concurrent to be delivered in
connection with the Purchase and Sale Agreement shall be deemed to be the same
class of securities as the Concurrent Common Stock.
SECTION 4.2. Pledge of Stock.
(a) Harris or Concurrent, as the case may be, (each, a "Pledgor") may
pledge the securities of the other party received by it pursuant to the Purchase
and Sale Agreement to a Lender to secure borrowings or other indebtedness as
extended from time to time, provided, however, that as a condition to such
pledge, (i) the Lender shall agree in writing not to sell, transfer or otherwise
dispose of the securities pledged to it other than pursuant to an effective
registration statement on Form S-3 (the "S-3 Registration Statement") with
respect to the disposition of such securities or an applicable exemption from
registration under the Securities Act, (ii) the Lender shall agree in writing
that such Lender will be bound by the terms of this Agreement relating to any
restrictions on such securities, including with respect to the transfer, pledge
or other disposition of securities, applicable to the Pledgor under Article IV
hereof and (iii) all certificates representing securities pledged to such Lender
shall (x) if pledged after the date on which the S-3 Registration Statement is
declared effective, bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF
A SHARE HOLDING AGREEMENT (THE "SHARE HOLDING AGREEMENT"), DATED
, 1996 BY AND BETWEEN CONCURRENT COMPUTER CORPORATION
("CONCURRENT") AND HARRIS COMPUTER SYSTEMS CORPORATION ("HARRIS")
PURSUANT TO WHICH, AMONG OTHER THINGS, [CONCURRENT] [HARRIS] (THE
"ISSUER") HAS FILED, AND THE SEC HAS DECLARED EFFECTIVE, A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT (THE "REGISTRATION
STATEMENT"). THE ISSUER HAS A BEST EFFORTS OBLIGATION TO MAINTAIN THE
EFFECTIVENESS OF THE REGISTRATION STATEMENT UNTIL . THE
PLEDGEE HEREOF SHALL NOT TRANSFER, SELL OR OTHERWISE DISPOSE OF THE
SHARES REPRESENTED BY THIS CERTIFICATE UNLESS SUCH TRANSFER, SALE OR
OTHER DISPOSITION IS UNDERTAKEN PURSUANT TO THE REGISTRATION STATEMENT
(IF THEN EFFECTIVE) OR AN APPLICABLE EXEMPTION FROM REGISTRATION
(CONFIRMED BY AN OPINION OF COUNSEL SATISFACTORY TO [CONCURRENT]
[HARRIS], THE EXPENSE FOR WHICH SHALL BE BORNE BY [CONCURRENT]
[HARRIS]), AND IN ACCORDANCE WITH THE TRANSFER RESTRICTIONS SET FORTH
IN THE SHARE HOLDING AGREEMENT WHICH INCLUDE, AMONG OTHER THINGS,
LIMITS ON THE PERCENTAGE OF SECURITIES WHICH MAY BE SOLD TO ANY PERSON
OR ENTITY. ANY TRANSFERS IN VIOLATION OF THE SHARE HOLDING AGREEMENT
ARE NULL AND VOID.
or (y) if pledged prior to the date on which the S-3 Registration Statement is
declared effective by the SEC, bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF
A SHARE HOLDING AGREEMENT (THE "SHARE HOLDING AGREEMENT"), DATED
, 1996 BY AND BETWEEN CONCURRENT COMPUTER CORPORATION
("CONCURRENT") AND HARRIS COMPUTER SYSTEMS CORPORATION ("HARRIS")
PURSUANT TO WHICH, AMONG OTHER THINGS, [CONCURRENT] [HARRIS] (THE
"ISSUER") HAS A BEST EFFORTS OBLIGATION TO FILE, AND HAVE THE SEC
DECLARE EFFECTIVE, A REGISTRATION STATEMENT UNDER THE SECURITIES ACT
(THE "REGISTRATION STATEMENT"). THE ISSUER ALSO HAS A BEST EFFORTS
OBLIGATION TO MAINTAIN THE EFFECTIVENESS OF THE REGISTRATION STATEMENT
UNTIL . THE PLEDGEE HEREOF SHALL NOT TRANSFER, SELL OR
OTHERWISE DISPOSE OF THE SHARES REPRESENTED BY THIS CERTIFICATE UNLESS
SUCH TRANSFER, SALE OR OTHER DISPOSITION IS UNDERTAKEN PURSUANT TO THE
REGISTRATION STATEMENT (IF THEN
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EFFECTIVE) OR AN APPLICABLE EXEMPTION FROM REGISTRATION (CONFIRMED BY
AN OPINION OF COUNSEL SATISFACTORY TO [CONCURRENT] [HARRIS], THE
EXPENSE FOR WHICH SHALL BE BORNE BY [CONCURRENT] [HARRIS], AND IN
ACCORDANCE WITH THE TRANSFER RESTRICTIONS SET FORTH IN THE SHARE
HOLDING AGREEMENT WHICH INCLUDE, AMONG OTHER THINGS, LIMITS ON THE
PERCENTAGE OF SECURITIES WHICH MAY BE SOLD TO ANY PERSON OR ENTITY.
ANY TRANSFERS IN VIOLATION OF THE SHARE HOLDING AGREEMENT ARE NULL AND
VOID.
(b) If requested by Harris, Concurrent shall, to the extent it has not done
so prior to the Closing, use its Best Efforts to facilitate the receipt by
Harris, at or shortly following the Closing Date net proceeds of $5,000,000 from
the pledge of Concurrent Common Stock; provided, however, neither Concurrent nor
its counsel shall be required to issue an opinion to any Pledgee regarding the
legal status of such securities or the Pledgee.
SECTION 4.3. Effect. Any purported transfer of securities that is
inconsistent with the provisions of this Article IV shall be null and void and
of no force or effect.
ARTICLE V
TERMINATION
SECTION 5.1. Termination.
(a) This Agreement shall automatically terminate upon the last to occur of
all of the following: (i) the Standstill Period has expired, (ii) the percentage
of the Concurrent Common Stock Beneficially Owned by Harris and any affiliate of
Harris, as a group, is less than 5% of the outstanding Concurrent Common Stock
and (iii) the percentage of Harris Common Stock Beneficially Owned by Concurrent
and any affiliate of Concurrent, as a group, is less than 5% of the outstanding
Harris Common Stock.
(b) If either party to this Agreement is in breach of or violates any
material obligation under this Agreement and fails to cure such breach or
violation within 60 days after delivery of written notice from the other party
specifying such breach and requesting its cure, such other party may terminate
its obligations under this Agreement.
ARTICLE VI
REGISTRATION
SECTION 6.1. Registration.
(a) To the extent that an S-3 Registration Statement with respect to the
sale of shares of Harris Common Stock held by Concurrent has not been filed with
the SEC or declared effective by the SEC on or prior to the Closing Date, Harris
shall use its Best Efforts to prepare and file as promptly as practicable after
the Closing Date and shall use its Best Efforts to cause to become effective as
soon as possible after the Closing Date, such S-3 Registration Statement,
including a final prospectus (the "Harris S-3"), in compliance with the
Securities Act, relating to the sale by Concurrent and its permitted pledgees of
shares of Harris Common Stock issued to Concurrent pursuant to the terms of the
Purchase and Sale Agreement. To the extent that an S-3 Registration Statement
with respect to the sale of shares of Concurrent Common Stock held by Harris has
not been filed with the SEC or declared effective by the SEC on or prior to the
Closing Date, Concurrent shall use its Best Efforts to prepare and file as
promptly as practicable after the Closing Date and shall use its Best Efforts to
cause to become effective as soon as possible after the Closing Date, such S-3
Registration Statement, including a final prospectus (the "Concurrent S-3" and
together with a Harris S-3, the "S-3 Registration Statements"), in compliance
with the Securities Act, relating to the sale by Harris and its permitted
pledgees of the shares of Concurrent Common Stock issued to Harris pursuant to
the terms of the Purchase and Sale Agreement and shares issuable upon conversion
of the preferred stock or debentures
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issued to Harris in connection with the Transactions (references in this Article
VI to "shares of Concurrent Common Stock held by Harris" shall include the
Harris Common Stock issuable upon conversion of such preferred stock or
debentures). To the extent the shares of Concurrent Common Stock held by Harris
at the Closing have not been so approved on the Closing Date, Concurrent shall
also use its Best Efforts to cause the shares of Concurrent Common Stock issued
by it to Harris to be approved for inclusion on the NASDAQ/NMS on the effective
date of the Concurrent S-3, subject to official notice of issuance. To the
extent the shares of Harris Common Stock held by Concurrent at the Closing have
not been so approved on the Closing Date, Harris shall also use its Best Efforts
to cause the shares of Harris Common Stock issued by it to Concurrent to be
approved for inclusion on the NASDAQ/NMS on the effective date of the Harris
S-3, subject to official notice of issuance.
(b) Subject to Article IV and the other provisions of this Article VI, upon
the effectiveness of the applicable S-3 Registration Statement for the sale of
securities, each of Harris and Concurrent shall be permitted to sell shares of
such securities of the other party held by it at any time in accordance with
applicable law; provided, however, no such sales may occur unless and until both
of the S-3 Registration Statements have been declared effective.
(c) So long as Harris is in registration, Concurrent shall be subject to
the Concurrent Liquidity Restrictions. So long as Concurrent is in registration,
Harris shall be subject to the Harris Liquidity Restrictions.
(d) Concurrent shall have the right to sell in any Public Offering by
Harris of shares of Harris Common Stock up to the Minimum Number of Harris Owned
Shares. Harris shall have the right to sell in any Public Offering by Concurrent
of shares of Concurrent Common Stock up to the Minimum Number of Concurrent
Owned Shares.
(e) Subject to Section 6.1(f) below, (i) Harris shall use its Best Efforts
to include for the benefit of Concurrent in any Public Offering of its stock
(including in connection with the exercise by any underwriter of any
over-allotment option) any shares of Harris Common Stock Beneficially Owned by
Concurrent in excess of the Minimum Number of Owned Harris Shares as requested
by Concurrent and (ii) Concurrent shall use its Best Efforts to include for the
benefit of Harris in any Public Offering of its stock (including in connection
with the exercise by any underwriter of any over-allotment option) any shares of
Concurrent Common Stock Beneficially Owned by Harris in excess of the Minimum
Number of Owned Concurrent Shares as requested by Harris.
(f) The Minimum Number of Owned Harris Shares and the Minimum Number of
Owned Concurrent Shares sold for the benefit of Concurrent or Harris, as the
case may be, in a Public Offering may be reduced if (i) the applicable managing
underwriter of such Public Offering advises Concurrent or Harris, as the case
may be, that the distribution of all or a portion of such shares will materially
and adversely affect the distribution of the stock being offering in the
applicable Public Offering and (ii) the Public Offering in which such number of
shares is reduced does not provide for the sale of any shares of stock for the
benefit of any party other than the issuer; provided, however, any such
reduction in the number of shares shall be the smallest reduction possible in
order for the applicable managing underwriter to conclude that the distribution
of such reduced number of shares will not materially and adversely affect the
distribution of the stock in the applicable Public Offering.
(g) If a Public Offering is consummated by Harris in which at least the
Minimum Number of Owned Harris Shares is sold for the benefit of Concurrent (or
at least such lesser number as requested by Concurrent to be included in such
Public Offering), Concurrent shall be subject to a "lock-up" (so long as it
Beneficially Owns at least the Triggering Number of Harris Shares at the time of
such lock-up) for a period of up to 6 months (or up to such lesser lock-up
period which is applicable to any selling shareholder in such Public Offering
who is a director, officer, employee or affiliate of Harris at the time the
Public Offering is consummated). If a Public Offering is consummated by
Concurrent in which at least the Minimum Number of Owned Concurrent Shares is
sold for the benefit of Harris (or at least such lesser number as requested by
Harris to be included in such Public Offering), Concurrent shall be subject to a
lock-up (so long as it Beneficially Owns at least the Triggering Number of
Concurrent Shares at the time of such lock-up) for a period of up to 6 months
(or up to such lesser lock-up period which is applicable to any selling
shareholder in
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such Public Offering who is a director, officer, or other affiliate of
Concurrent at the time the Public Offering is consummated).
(h) If a Public Offering is consummated by Harris in which less than the
Minimum Number of Owned Harris Shares is sold for the benefit of Concurrent (or
less than such lesser number as requested by Concurrent to be included in such
Public Offering), the Concurrent Liquidity Restrictions shall remain in effect
for a period of up to 6 months (or up to such lesser lock-up period which is
applicable to any selling shareholder in such Public Offering who is a director,
officer, employee or affiliate of Harris at the time the Public Offering is
consummated) but Concurrent shall not be obligated to enter into any other
lock-up provisions in connection with such Public Offering. If a Public Offering
is consummated by Concurrent in which less than the Minimum Number of Owned
Concurrent Shares is sold for the benefit of Harris (or less than such lesser
number as requested by Harris to be included in such Public Offering), the
Harris Liquidity Restrictions shall remain in effect for a period of up to 6
months (or up to such lesser lock-up period which is applicable to any selling
shareholder in such Public Offering who is a director, officer, employee or
affiliate of Concurrent at the time the Public Offering is consummated) but
Harris shall not be obligated to enter into any other lock-up provisions in
connection with such Public Offering.
(i) After such registration statement is declared effective by the SEC,
Harris shall use its Best Efforts to maintain the effectiveness of the Harris
S-3 until the third anniversary of the effective date plus an additional period
beyond the third anniversary equal to the total period of all lock-ups applied
to Concurrent pursuant to Section 6.1(g) above. So long as the Harris S-3
remains effective, Harris shall file any material press releases and report any
material event as soon as practicable in a Current Report of Form 8-K.
(j) After such registration statement is declared effective by the SEC,
Concurrent shall use its Best Efforts to maintain the effectiveness of the
Concurrent S-3 until the third anniversary of the effective date plus an
additional period beyond the third anniversary equal to the total period of all
lock-ups applied to Harris pursuant to Section 6.1(g) above. So long as the
Concurrent S-3 remains effective, Concurrent shall file any material press
releases and report any material event as soon as practicable in a Current
Report of Form 8-K.
SECTION 6.2. Indemnification; Contribution.
(a) In the case of each registration effected by Concurrent or Harris, as
the case may be, (each, a "Registrant") pursuant to this Agreement under the
federal securities laws, the Registrant agrees to indemnify and hold harmless,
to the full extent permitted by law, Harris or Concurrent, as the case may be
(each, a "Holder"), and such Holder's officers, directors, agents and employees
against all losses, claims, damages, liabilities and expenses arising out of or
based upon any untrue or alleged untrue statement of a material fact contained
in the registration statement under which securities of the Registrant owned by
such Holder were registered under the Securities Act, any prospectus or
preliminary prospectus or in any amendment or supplement thereto or any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein (in the case of a
prospectus, in the light of the circumstances under which they were made) not
misleading, except insofar as the same arise out of, are based upon or are
contained in any information furnished in writing to the Registrant by such
Holder expressly for use therein or by the Holder's failure to deliver a copy of
the applicable registration statement or final prospectus after the Registrant
has furnished such Holder with a sufficient number of copies of the same.
(b) In connection with any registration statement in which a Holder is
participating, such Holder shall furnish to the Registrant in writing such
information and affidavits as the Registrant reasonably requests for use in
connection with any registration statement or prospectus and agrees to indemnify
and hold harmless, to the full extent permitted by law, the Registrant, its
directors, officers, agents, employees against any losses, claims, damages,
liabilities and expenses arising out of or based upon any untrue or alleged
untrue statement of a material fact contained in the registration statement
under which securities of the Registrant owned by such Holder were registered
under the Securities Act, any prospectus or preliminary prospectus or in any
amendment or supplement thereto or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein (in the case of a prospectus, in the light of the
circumstances under which they were made) not misleading, to the extent, but
only to the extent, that such untrue or alleged untrue statement or omission or
alleged omission is contained in or should have been
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contained in any information or affidavit so furnished in writing by such Holder
to the Registrant specifically for inclusion in such registration statement or
prospectus. In no event shall the liability of any Holder, hereunder be greater
in amount than the dollar amount of the proceeds received by such Holder upon
the sale of the securities of the Registrant giving rise to such indemnification
obligation. The Registrant and, to the extent customary in underwriting
agreements at the time, its directors, officers, agents, employees, shall be
entitled to receive indemnities from underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution to the same extent as provided above with respect to information so
furnished in writing by such Persons specifically for inclusion in any
prospectus or registration statement.
(c) Any Person entitled to indemnification hereunder shall (i) give prompt
written notice to the indemnifying party of any claim with respect to which it
shall seek indemnification and (ii) unless in the reasonable judgment of counsel
to such indemnified party a conflict of interest is likely to exist between such
indemnified party and the indemnifying party with respect to such claim, permit
the indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If the indemnifying party
assumes the defense of such claim, it shall not be obligated to pay the fees and
expenses of more than one counsel with respect to such claim, unless, in the
reasonable judgment of counsel to such indemnified party, a conflict of interest
is likely to exist between such indemnified party and any other indemnified
party with respect to such claim, in which event the indemnifying party shall be
obligated to pay the fees and expenses of one additional counsel with respect to
such claim. Subject to the foregoing, the indemnifying party shall in no event
be liable to an indemnified party for legal and other expenses incurred by such
indemnified party in connection with the defense of a claim subsequent to the
assumption of such defense by such indemnifying party. The indemnifying party
shall not be subject to any liability for any settlement made without its
consent.
(d) If for any reason the indemnification provided for in the preceding
paragraphs of this Section 6.2 is unavailable to an indemnified party or is
insufficient to hold it harmless as contemplated by the preceding paragraphs (a)
and (b), then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such loss, claim, damage, liability or expense in such proportion
as is appropriate to reflect not only the relative benefits received by the
indemnified party and the indemnifying party, but also the relative fault of the
indemnified party and the indemnifying party in connection with the actions
which resulted in such loss, claim, damage, liability or expense, as well as any
other relevant equitable considerations. The relative fault of such indemnifying
party and indemnified party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact, has been made by, or relates to information supplied by, such indemnifying
party or indemnified party, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such action. The amount
paid or payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include, subject
to the limitations set forth in Section 6.2(c) hereof, any legal or other fees
or expenses reasonably incurred by such party in connection with any
investigation or proceeding. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 6.2(d) were determined by
pro rata allocation or by any other method of allocation which does not take
into account the equitable considerations referred to in the immediately
preceding paragraph. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. No Holder shall be required to contribute in an amount
greater than the dollar amount of proceeds received by such Holder with respect
to the sale of securities of the Registrant held by such Holder.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. Effectiveness. This Agreement shall be executed
contemporaneously with the Purchase and Sale Agreement and shall be effective at
the Closing Date.
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SECTION 7.2. Notices. All notices, requests and other communications
hereunder shall be in writing (including fax) and shall be sent, delivered or
mailed, addressed, or faxed:
(a) if to Concurrent, to:
Concurrent Corporation
2 Crescent Place
Oceanport, NJ 07757
(908) 870-4500
(F) (908) 870-4779
Attention of Kevin J. Dell
Vice President, Secretary
and General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
(T) (212) 735-3000
(F) (212) 735-2000
Attention: Eric L. Cochran, Esq.
(b) if to Harris, to:
Harris Computer Systems Corporation
2101 West Cypress Creek Road
Fort Lauderdale, FL 33309
(T) (305) 974-1700
(F) (305) 973-5253
Attention of President
with a copy to:
Holland & Knight
One East Broward Boulevard
P.O. Box 14070
Fort Lauderdale, FL 33302
(T) (305) 525-1000
(F) (305) 463-2030
Attention: Brian Foremny, Esq.
Each such notice, request or other communication shall be given (i) by hand
delivery, (ii) by nationally recognized courier service or (iii) by fax, receipt
confirmed. Each such notice, request or communication shall be effective (A) if
delivered by hand or by nationally recognized courier service, when delivered at
the address specified in this Section 5.1 (or in accordance with the latest
unrevoked written direction from such party) and (B) if given by fax, when such
fax is transmitted to the fax number specified in this Section 5.1 (or in
accordance with the latest unrevoked written direction from such party), and the
appropriate confirmation is received.
SECTION 7.3. Interpretation. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "included," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
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SECTION 7.4. Severability.
(a) To the extent that any provision of this Agreement, with respect to
either party hereto, is determined to be invalid, unenforceable or excessive in
scope by any court or other body of competent jurisdiction, unless the analogous
provision with respect to the other party hereto is also determined to be
invalid, unenforceable or excessive in scope by such court or other body of
competent jurisdiction, or unless the other party waives the effect of such
provision in writing then this Agreement shall be terminated in its entirety and
of no further force or effect.
(b) If such analogous provision is determined to be invalid, unenforceable
or excessive in scope by such court or other body of competent jurisdiction,
each such provision shall be ineffective only to the most limited extent so as
not to render the Agreement unenforceable, and the remaining provisions shall
remain in full force and effect as if this Agreement had been executed with the
invalid, unenforceable or excessive provision so limited.
SECTION 7.5. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which shall,
taken together, be considered one and the same agreement, it being understood
that both parties need not sign the same counterpart.
SECTION 7.6. Entire Agreement; No Third Party Beneficiaries. This
Agreement together with the Purchase and Sale Agreement (a) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof
and (b) is not intended to confer upon any Person, other than the parties
hereto, any rights or remedies hereunder.
SECTION 7.7. Further Assurances. Each party shall execute, deliver,
acknowledge and file such other documents and take such further actions as may
be reasonably requested from time to time by the other party hereto to give
effect to and carry out the transactions contemplated herein.
SECTION 7.8. Governing Law; Equitable Remedies. This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of law. The parties hereto agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties hereto shall be entitled to equitable
relief, including in the form of injunctions, in order to enforce specifically
the provisions of this Agreement, in addition to any other remedy to which they
are entitled at law or in equity.
SECTION 7.9. Consent to Jurisdiction. Each party hereto irrevocably
submits to the exclusive jurisdiction of the United States District Court for
the Southern District of Florida or if such court does not have jurisdiction,
the Circuit Court for the Seventeenth Judicial Circuit in and for Broward
County, Florida, for the purposes of any suit, action or other proceeding
arising out of this Agreement or any transaction contemplated hereby. Each party
hereto further agrees that service of any process, summons, notice or document
by U.S. registered mail to such party's respective address set forth in Section
5.1 shall be effective service of process for any action, suit or proceeding in
Florida with respect to any matters to which it has submitted to jurisdiction as
set forth above in the immediately preceding sentence. Each party hereto
irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in (a) the United States District Court for the Southern
District of Florida or (b) the Circuit Court for the Seventeenth Judicial
Circuit in and for Broward County, Florida, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.
SECTION 7.10. Amendments; Waivers.
(a) No provision of this Agreement may be amended or waived unless such
amendment or waiver is in writing and signed, in the case of an amendment, by
the parties hereto, or in the case of a waiver, by the party against whom the
waiver is to be effective; provided that no such amendment or waiver by
Concurrent shall be effective without the approval of a majority of the
directors of Concurrent. Notwithstanding any provision
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herein to the contrary, if a majority of the directors of Concurrent determine
in good faith to do so, such directors may seek to enforce, in the name and on
behalf of Concurrent, the terms of this Agreement against Harris.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 7.11. Assignment. Neither this Agreement nor any of the rights or
obligations hereunder shall be assigned by either of the parties hereto without
the prior written consent of the other party, except that either party may
assign all its rights and obligations to the assignee of all or substantially
all of the assets of such party, provided that such party shall in no event be
released from its obligations hereunder without the prior written consent of the
other party. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered, all as of the date first set forth above.
CONCURRENT COMPUTER CORPORATION
By
--------------------------------------------
Name:
Title:
HARRIS COMPUTER SYSTEMS CORPORATION
By
--------------------------------------------
Name:
Title:
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ANNEX G
DESIGNATION, PREFERENCES AND RIGHTS OF CLASS B
CONVERTIBLE PREFERRED STOCK
1. DESIGNATION AND NUMBER OF SHARES. The designation of such series shall
be 9.00% Class B Convertible Preferred Stock (the "Convertible Preferred
Stock"), and the number of shares constituting such series initially shall be
[1,000,000].
2. PAR VALUE; PREEMPTIVE RIGHTS. As provided in Article Fourth of the
Corporation's Restated Certificate of Incorporation, the Convertible Preferred
Stock shall have a par value of $.01 per share. Holders of Convertible Preferred
Stock shall not be entitled to any preemptive rights to acquire shares of any
class or series of capital stock of the Corporation.
3. RANK. The Convertible Preferred Stock shall rank, with respect to
rights to receive dividends and rights to receive distributions upon the
liquidation, winding up or dissolution of the Corporation (whether voluntary or
involuntary): (a) senior to the Corporation's Common Stock, par value $.01 per
share (the "Common Stock"), and senior to any class or series of capital stock,
including any preferred stock, issued by the Corporation, other than the Class A
Preferred Stock (the "Junior Stock"), and (b) on a parity with the Class A
Preferred Stock (the "Parity Stock").
4. DIVIDENDS AND DISTRIBUTIONS; METHOD OF PAYMENT. (a) The holders of
shares of Convertible Preferred Stock shall be entitled to receive, when, as and
if declared by the Board of Directors out of funds legally available for such
purpose, dividends at the rate per annum of 9.00% of the Liquidation Preference
(as defined in Section 8 hereof) of such shares. Such dividends shall be fully
cumulative, shall accumulate from the date of original issuance of the
Convertible Preferred Stock, and shall be payable quarterly in arrears in cash
on each [ ], [ ], [ ] and [ ] , commencing
, 1996(1) (provided, that if any such date is not a Business Day, then
such dividend shall be payable without interest on the next succeeding Business
Day), to holders of record as they appear on the stock books of the Corporation
on such record dates as shall be fixed by the Board of Directors. Such record
dates shall be not more than 60 nor less than 10 days preceding the respective
dividend payment dates. The amount of dividends payable per share of Convertible
Preferred Stock for each full quarterly dividend period shall be computed by
dividing the annual dividend amount by four. The amount of dividends payable for
the initial dividend period and for any other period shorter than a full
quarterly dividend period shall be computed on the basis of a 360-day year of
twelve 30-day months.
Dividends on account of arrears for any past dividend periods may be
declared and paid at any time, without reference to any regular dividend payment
date, to holders of record of Convertible Preferred Stock on such date, not
exceeding 45 days preceding the payment date thereof, as may be fixed in advance
by the Board of Directors.
Dividends shall not be paid or declared and set apart for payment on any
Parity Stock for any period unless full cumulative dividends have been, or
contemporaneously are, paid or declared and set apart for payment on the
Convertible Preferred Stock for all dividend periods terminating on or prior to
the date of payment of such full cumulative dividends. Dividends shall not be
paid or declared and set apart for payment on the Convertible Preferred Stock
for any period unless full cumulative dividends have been, or contemporaneously
are, paid or declared and set apart for payment on any Parity Stock for all
dividend periods terminating on or prior to the date of payment of such full
cumulative dividends. When dividends are not paid in full upon the Convertible
Preferred Stock and any Parity Stock, the Corporation may make dividend payments
on account of arrears on the Convertible Preferred Stock or any such Parity
Stock, provided that the Corporation shall make such payments ratably upon all
outstanding shares of Convertible Preferred Stock and
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(1) Insert as the first payment date the first day of the first fiscal quarter
following the Closing.
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such Parity Stock in proportion to the respective amounts of dividends in
arrears upon all such outstanding shares of Convertible Preferred Stock and
Parity Stock to the date of such dividend payment.
So long as any Convertible Preferred Stock shall be outstanding, the
Corporation shall not declare or pay any dividends on the Common Stock or any
other Junior Stock, or make any payment on account of, or set apart money for, a
sinking fund or other similar fund or agreement for the purchase, redemption or
other retirement of any shares of Junior Stock, or make any distribution in
respect thereof, whether in cash or property or in obligations or stock of the
Corporation, other than (A) the Rights (as defined in Section 13 hereof) and (B)
a distribution consisting solely of Junior Stock (such dividends, payments,
setting apart and distributions being herein called "Junior Stock Payments"),
unless the following conditions shall be satisfied at the date of such
declaration in the case of any such dividend, or the date of such setting apart
in the case of any such fund, or the date of such payment or distribution in the
case of any other Junior Stock Payment:
(i) full cumulative dividends shall have been paid or declared and set
apart for payment on all outstanding shares of Convertible Preferred Stock
through the last quarterly dividend payment date established pursuant to
this Section 4(a) that immediately precedes such dividend, setting apart,
payment or distribution; and
(ii) the Corporation shall not be in default or in arrears with
respect to any redemption (whether optional or mandatory) of any shares of
Convertible Preferred Stock.
Holders of shares of Convertible Preferred Stock shall not be entitled to
any dividend in excess of full cumulative dividends on such shares. No interest,
or sum of money in lieu of interest, shall be payable in respect of any dividend
payment that is in arrears.
(b) The Corporation may pay dividends pursuant to this Section 4 and any
redemption payments pursuant to Sections 5 and 6 hereof to holders of record of
Convertible Preferred Stock by checks payable to such holders in money of the
United States.
5. REDEMPTION AT OPTION OF THE CORPORATION. Whenever the Current Market
Price (as defined in Section 13) exceeds $3.75 (the "Triggering Price"), as such
price may be adjusted pursuant to Section 9(e) hereof, prior to the date of any
notice of redemption, the Corporation may, at its option, redeem all or a
portion of the shares of Convertible Preferred Stock, at any time or from time
to time, at a price per share equal to the Liquidation Preference. The
Corporation's right to redeem pursuant to this provision is subject to the
payment of all accrued and accumulated but unpaid dividends, whether or not
declared, without interest, to the Redemption Date (as defined below) on the
shares to be redeemed; and dividends on the shares to be redeemed will cease to
accrue on the Redemption Date.
Notice of any redemption pursuant to this Section 5 shall be given by the
Corporation by first class mail, postage prepaid, not more than 30 days after
the end of the period during which the applicable Current Market Price is
determined and not less than 30 or more than 90 days prior to the date fixed for
redemption (the "Redemption Date"), to each holder of record of the shares to be
redeemed, at such holder's address as shown on the stock register of the
Corporation. Each such notice shall state: (a) the Redemption Date; (b) the
number of shares of Convertible Preferred Stock to be redeemed and, if less than
all such shares held by such holder are to be redeemed, the number of such
shares to be redeemed from such holder; (c) the Redemption Price; (d) the place
or places where certificates for such shares are to be surrendered for payment
of the Redemption Price; (e) the then effective Conversion Price (as defined in
Section 9(a) hereof); (f) that the right of holders of Convertible Preferred
Stock called for redemption to exercise their conversion rights pursuant to
Section 9 hereof shall cease and terminate as to such shares at the close of
business on the Redemption Date (provided that there is no default in payment of
the Redemption Price); (g) that payment of the Redemption Price will be made
upon presentation and surrender of certificates representing the shares of
Convertible Preferred Stock called for redemption; (h) that, in accordance with
the second sentence of the first paragraph of this Section 5, accumulated but
unpaid dividends to the Redemption Date on the shares to be redeemed will be
paid on the Redemption Date; and (i) that dividends on the shares to be redeemed
will cease to accrue on the Redemption Date. If a notice is mailed to a holder
in the manner provided above within the time prescribed, it is duly given with
respect to such holder. Notice having been mailed as aforesaid, from
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and after the Redemption Date (unless default shall be made by the Corporation
in providing money for the payment of the Redemption Price) dividends on the
shares of Convertible Preferred Stock so called for redemption shall cease to
accrue, and such shares shall no longer be deemed to be outstanding, and all
rights of the holders thereof as shareholders of the Corporation by virtue of
the ownership of such shares (except the right to receive from the Corporation
the Redemption Price without interest) shall cease. Upon surrender in accordance
with such notice of the certificates for any shares so redeemed (properly
endorsed or assigned for transfer, if the Board of Directors shall so require
and the notice shall so state), the Corporation shall redeem such shares at the
Redemption Price.
If less than all the then outstanding shares of Convertible Preferred Stock
are to be redeemed, the Corporation shall effect such redemption pro rata (as
nearly as practicable) among all holders of Convertible Preferred Stock. If
fewer than all the shares represented by a surrendered certificate or
certificates are redeemed, the Corporation shall issue a new certificate
representing the unredeemed shares. Notwithstanding the foregoing, the
Corporation shall not redeem less than all the outstanding shares of Convertible
Preferred Stock pursuant to this Section 5, or purchase or acquire any shares of
Convertible Preferred Stock otherwise than pursuant to a purchase or exchange
offer made on the same terms to all holders of shares of Convertible Preferred
Stock, unless full cumulative dividends shall have been paid upon all
outstanding shares of Convertible Preferred Stock for all past dividend periods.
6. MANDATORY REDEMPTION. On (2), 2006 (the "Mandatory Redemption
Date"), the Corporation shall redeem all of the Convertible Preferred Stock then
outstanding at the Liquidation Preference. Accrued and accumulated but unpaid
dividends, whether or not declared, without interest, to the Mandatory
Redemption Date will be paid on the Mandatory Redemption Date and on and after
the Mandatory Redemption Date, dividends will cease to accumulate on the
Convertible Preferred Stock.
Notice of such redemption shall be given by the Corporation by first class
mail, postage prepaid, not less than 30 or more than 90 days prior to the
Mandatory Redemption Date, to each holder of record of the shares to be
redeemed, at such holder's address as shown on the stock register of the
Corporation. Each such notice shall state: (a) the Mandatory Redemption Date;
(b) the Redemption Price; (c) the place or places where certificates for such
shares are to be surrendered for payment of the Redemption Price; (d) the then
effective Conversion Price; (e) that the right of holders of Convertible
Preferred Stock to exercise their conversion rights pursuant to Section 9 hereof
shall cease and terminate at the close of business on the Mandatory Redemption
Date (provided that there is no default in payment of the Redemption Price); (f)
that payment of the Redemption Price will be made upon presentation and
surrender of certificates representing the shares of Convertible Preferred
Stock; (g) that, in accordance with the second sentence of the first paragraph
of this Section 6, accumulated but unpaid dividends to the Mandatory Redemption
Date will be paid on the Mandatory Redemption Date; and (h) that on and after
the Mandatory Redemption Date, dividends will cease to accumulate on the
Convertible Preferred Stock. If a notice is mailed to a holder in the manner
provided above within the time prescribed, it is duly given with respect to such
holder.
On or after the Mandatory Redemption Date, each holder of the shares of
outstanding Convertible Preferred Stock (other than shares which have been duly
surrendered for conversion at or before the close of business on the Mandatory
Redemption Date) shall surrender the certificate or certificates evidencing such
shares to the Corporation at the place designated in the redemption notice and
shall thereupon be entitled to receive payment of the Redemption Price. If, on
the Mandatory Redemption Date, funds necessary for the redemption shall be
available therefor and shall have been irrevocably deposited or set aside, then,
notwithstanding that the certificates evidencing any shares to be redeemed shall
not have been surrendered, the dividends with respect to such shares shall cease
to accumulate on and after the Mandatory Redemption Date, such shares shall no
longer be deemed to be outstanding, the holders thereof shall cease to be
shareholders of the Corporation by virtue of the ownership of such shares, and
all rights whatsoever with respect to such shares (except the right of the
holders thereof to receive the Redemption Price without interest upon surrender
of their certificates) shall terminate.
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(2) Insert the first day of the month of the date of original issuance of the
Convertible Preferred Stock.
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7. VOTING.
(a) No General Voting Rights. Except as otherwise provided from time to
time by the laws of Delaware or this Corporation's Restated Certificate of
Incorporation, the entire voting power for the election of directors of the
Corporation and for all other purposes shall be vested in the holders of Common
Stock which shall vote as a single class, with the holder of each share of
Common Stock being entitled to one vote in respect of such shares.
(b) Other Voting Rights. Without the consent or affirmative vote of the
holders of a majority of the outstanding shares of Convertible Preferred Stock,
voting separately as a class to the exclusion of holders of any other shares of
capital stock of the Corporation (either in writing without a meeting, if
permitted by the Certificate of Incorporation and applicable law, or by vote at
any meeting called for that purpose), the Corporation may not amend, alter or
repeal (by any means whatsoever, including, without limitation, by merger or
consolidation any provision of the Certificate of Incorporation, any amendment
or supplement thereto or this Certificate of Designations (or any similar
document relating to any series or class of preferred stock of the
Corporation)), if such action would (a) increase or decrease the aggregate
number of authorized shares of Convertible Preferred Stock, (b) increase or
decrease the par value of such shares or (c) amend, alter, repeal or change the
powers, rights, privileges or preferences of the holders of shares of
Convertible Preferred Stock so as to affect them adversely, provided, however,
that the creation, issuance or increase in the amount of authorized shares of
any series of Junior Stock will not be deemed to adversely affect such powers,
rights, privileges or preferences of the Convertible Preferred Stock.
For purposes of the foregoing provisions of this Section 7, each share of
Convertible Preferred Stock shall have one vote per share. The foregoing
provisions of this Section 7 shall not apply if, at or prior to the time when
the act with respect to which such vote would otherwise be required shall be
effected, all outstanding shares of Convertible Preferred Stock shall have been
redeemed or called for redemption and sufficient funds shall have been
irrevocably deposited in trust to effect such redemption and all other steps
necessary or desirable to effect such redemption shall have been taken.
8. LIQUIDATION PREFERENCE. (i) In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the holders of Convertible Preferred Stock shall be entitled to receive out of
the assets of the Corporation available for distribution to shareholders, before
any distribution of assets shall be made to the holders of the Common Stock or
of any other shares of Junior Stock, a liquidating distribution in the total
amount of [$10,000,000](3) (the "Total Liquidation Preference") or an amount
equal to $[10] per share (the "Liquidation Preference") plus an amount equal to
any accrued and accumulated but unpaid dividends thereon to the date of final
distribution to such holders, whether or not declared, without interest;
provided, however, if in accordance with the provisions of the Purchase and Sale
Agreement, dated as of March 26, 1996 and amended and restated as of May 23,
1996, between the Corporation and Harris Computer Systems Corporation (the
"Purchase and Sale Agreement") the amount of the net current assets (the "Net
Assets")shown on the Final Net Current Asset Reconciliation (as defined in the
Purchase and Sale Agreement)(such amount shown, the "Actual Net Asset Amount")
is less than the lesser of (i) the amount of the Net Assets shown on the
Projected Net Current Asset Reconciliation (as defined in the Purchase and Sale
Agreement) and (ii) $14,400,000 (such lesser amount, the "Applicable Amount"),
then the Total Liquidation Preference shall be adjusted by reducing it, dollar
for dollar, to the extent of the difference (the "Difference") between the
Actual Net Asset Amount and the Applicable Amount. The Liquidation Preference
shall then be reduced by the amount [(rounded to the nearest $[ ])]
determined by dividing the Difference by the number of issued and outstanding
shares of Convertible Preferred Stock as of the date of the Final Net Current
Asset Reconciliation or, if later, the date any Reconciliation Disagreement (as
defined in the Purchase and Sale Agreement) is resolved. Alternatively, if the
amount of the Net Assets shown on the Final Net Current Asset Reconciliation
after resolution of all reconciliation Disagreements (as defined in the Purchase
and Sale Agreement) is in excess of the Net Assets shown on the Projected Net
Current Asset Reconciliation (as defined in the Purchase and Sale Agreement),
then the Total Liquidation Preference shall
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(3) May be adjusted pursuant to the terms of the Purchase and Sale Agreement.
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be increased, dollar for dollar, to the extent of such excess up to
$10,000,000 (such excess up to $10,000,000, the "Excess"). The Liquidation
Preference shall then be increased by the amount [(rounded to the nearest
$[ ])] determined by dividing the Excess by the number of issued and
outstanding shares of Convertible Preferred Stock as of the date of the Final
Net Current Asset Reconciliation or, if later, the date any Reconciliation
Disagreement is resolved.
(ii) The Total Liquidation Preference shall also be further reduced to the
extent that the parties to the Purchase and Sale Agreement or a court of
competent jurisdiction determines (which determination by such court shall be
final and nonappealable) that any Asset (as defined in the Purchase and Sale
Agreement) required to be transferred by the Purchase and Sale Agreement was not
in fact transferred, such reduction (the "Net Asset Reduction") to be equal to
the book value of such Asset on the Final Net Current Asset Reconciliation or
with respect to non-current assets the Audited Balance Sheet (as defined in the
Purchase and Sale Agreement) less any cash paid to the Corporation in respect
thereof. The Liquidation Preference shall then be reduced by the amount
[(rounded to the nearest $[ ])] determined by dividing the Net Asset
Reduction by the number of issued and outstanding shares of Convertible
Preferred Stock as of the date the amount of the Net Asset Reduction is
determined. In addition, in accordance with the terms of the Purchase and Sale
Agreement, the Total Liquidation Preference shall be further reduced by the
amount of any Damages (as defined in the Purchase and Sale Agreement), less any
cash paid to the Corporation in respect thereof (the "Net Damages"), incurred by
the Corporation and its Representatives (as defined in the Purchase and Sale
Agreement) as a result of a wilful breach by Harris of a representation or
warranty contained in the Purchase and Sale Agreement. The Liquidation
Preference shall then be reduced by the amount [(rounded to the nearest
$[ ])] determined by dividing the Net Damages by the number of issued and
outstanding shares of Convertible Preferred Stock as of the date the total
amount of the Net Damages is determined.
If, upon any voluntary or involuntary liquidation, dissolution or winding
up of the Corporation, the assets available for distribution are insufficient to
pay in full the amounts payable with respect to the Convertible Preferred Stock
and any other outstanding shares of Parity Stock, the holders of the Convertible
Preferred Stock and of such other Parity Stock shall share ratably in any
distribution of assets of the Corporation in proportion to the full respective
preferential amounts to which they are entitled.
After payment to the holders of the Convertible Preferred Stock of the full
preferential amounts provided for in this Section 8, the holders of the
Convertible Preferred Stock shall not be entitled to any further participation
in any distribution of assets by the Corporation.
For purposes of this Section 8, neither a consolidation or merger of the
Corporation with or into another person nor a sale or transfer of all or
substantially all of the assets of the Corporation will be deemed a liquidation,
dissolution or winding up of the Corporation.
9. CONVERSION AND EXCHANGE RIGHTS.
(a) General Rights to Convert. Each holder of a share of Convertible
Preferred Stock shall have the right, at the option of such holder, at any time
to convert, upon the terms and provisions of this Section 9, one or more shares
of Convertible Preferred Stock into fully paid and nonassessable shares of
Common Stock of the Corporation (and such other securities and property as such
holder may be entitled to as hereinafter provided). Such conversion of shares of
Convertible Preferred Stock to shares of Common Stock shall be made at a
conversion rate of one share of Convertible Preferred Stock for a number of
shares of Common Stock equal to (x) the Liquidation Preference divided by (y)
the conversion price applicable per share of Common Stock at the time of
conversion (the "Conversion Price"). The Conversion Price shall initially be
$2.50. The Conversion Price shall be adjusted in certain instances as provided
below.
An amount in cash equal to the full cumulative dividends accrued and
accumulated but unpaid, whether or not declared and without interest, on such
shares of Convertible Preferred Stock shall be paid on the effective date of the
conversion through the last quarterly payment date that immediately precedes the
effective date of the conversion.
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(b) Mechanics of Conversion. In order to convert shares of Convertible
Preferred Stock into Common Stock, the holder or holders thereof shall surrender
the certificate or certificates evidencing such shares of Convertible Preferred
Stock at the office of the transfer agent for the Convertible Preferred Stock
(or if there is no such transfer agent, to the secretary of the Corporation),
which certificate or certificates shall be duly endorsed to the Corporation or
in blank, or accompanied by proper instruments of transfer, accompanied by (i) a
written notice to the Corporation that the holder elects so to convert all or a
specified number of such shares of Convertible Preferred Stock and specifying
the name or names (with address or addresses) in which a certificate or
certificates evidencing shares of Common Stock are to be issued and (ii) if
required pursuant to Section 9(j) hereof, an amount sufficient to pay any
transfer or similar tax (or evidence reasonably satisfactory to the Corporation
demonstrating that such taxes have been paid). If more than one share of
Convertible Preferred Stock shall be surrendered for conversion at one time by
the same holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate number of
shares of Convertible Preferred Stock so surrendered.
Shares of Convertible Preferred Stock shall be deemed to have been
converted immediately prior to the close of business on the day of the surrender
of such shares for conversion in accordance with the foregoing provisions, and
the person or persons entitled to receive the Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such Common Stock at such time. As promptly as practicable on or after the
surrender of a certificate or certificates for conversion and the receipt of the
notice relating thereto (and in any event within five Business Days thereafter),
the Corporation shall deliver or cause to be delivered to the person or persons
entitled to receive the same: (i) a certificate or certificates for the number
of full shares of Common Stock issuable upon such conversion; (ii) any cash owed
in lieu of any fraction of a share, determined in accordance with Section 9(i)
hereof; (iii) if less than the full number of shares of Convertible Preferred
Stock evidenced by the surrendered certificate or certificates is being
converted, a new certificate or certificates, of like tenor, for the number of
shares evidenced by such surrendered certificate or certificates less the number
of shares being converted; and (iv) subject to the provisions of the second
paragraph of Section 9(a), an amount in cash equal to the full cumulative
dividends accrued but unpaid on such shares of Convertible Preferred Stock
through the last quarterly dividend payment date established pursuant to Section
4 hereof that immediately precedes the effective date of conversion. If for any
reason the Corporation is unable to pay any accrued dividends on the Convertible
Preferred Stock being converted, the Corporation will pay such dividends to the
converting holder as soon thereafter as funds of the Corporation are legally
available for such payment and may be paid under applicable credit agreements
with interest thereon, accruing at a rate of 9.00% per annum. At the request of
any such converting holder, the Corporation shall deliver to such holder a due
bill or other appropriate instrument evidencing the Corporation's obligation to
such holder. A payment or adjustment shall not be made by the Corporation upon
any conversion on account of any dividends on the Common Stock issued upon
conversion.
(c) Rights to Exchange. (i) Corporation may, at its option, cause shares
of Convertible Preferred Stock, as a whole or in part, at any time and from time
to time, to be exchanged for debentures of the Corporation having the terms set
forth in Exhibit A to the Purchase and Sale Agreement (the "Debentures"). Such
exchange of shares of Convertible Preferred Stock for the Debentures pursuant to
this Section 9(c)(i) shall be made at an exchange rate of Debentures in the
principal amount equal to the Liquidation Preference.
On the effective date of the exchange pursuant to this Section 9(c)(i), the
Corporation shall pay holders of Convertible Preferred Stock to be exchanged an
amount in cash equal to the full cumulative dividends accrued and accumulated
but unpaid, whether or not declared and without interest, on such shares of
Convertible Preferred Stock through the last quarterly dividend payment date
that immediately precedes the effective date of the exchange.
(ii) Each holder of shares of Convertible Preferred Stock shall have the
right at any time after September 1, 1998 upon the terms and conditions set
forth in this Section 9(c)(ii), at the option of such holder, whenever dividends
due for four quarterly periods have not been paid, to exchange such shares of
Convertible Preferred Stock, as a whole or in part, for Debentures. Such
exchange of shares of Convertible Stock for the Debentures shall be of an
Exchange Rate of Debentures in the principal amount equal to the
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Liquidation Preference plus all dividends which are accrued and accumulated but
unpaid, whether or not declared and without interest up to the calendar quarter
immediately preceding the calendar quarter in which the date of conversion
occurs.
(d) Mechanics of the Exchange. In connection with the exchange shares of
Convertible Preferred Stock for the Debentures, the holder or holders thereof
shall surrender the certificate or certificates evidencing such shares of
Convertible Preferred Stock at the office of the transfer agent (or the
secretary of the Corporation if there is no such transfer agent) for the
Convertible Preferred Stock, which certificate or certificates shall be duly
endorsed to the Corporation or in blank, or accompanied by proper instruments of
transfer, accompanied by (i) a written notice to the Corporation that the holder
shall thereby exchange all or the number specified by the Corporation and
specifying the name or names (with address or addresses) in which a certificate
or certificates evidencing the Debentures are to be issued and (ii) if required
pursuant to Section 9(i) hereof, an amount sufficient to pay any transfer or
similar tax (or evidence reasonably satisfactory to the Corporation
demonstrating that such taxes have been paid). When more than one share of
Convertible Preferred Stock is to be surrendered for exchange at one time by the
same holder, the principal amount of the Debentures issuable upon exchange
thereof shall be computed on the basis of the aggregate number of shares of
Convertible Preferred Stock so surrendered.
Shares of Convertible Preferred Stock shall be deemed to have been
exchanged immediately prior to the close of business on the day of the surrender
of such shares for exchange in accordance with the foregoing provisions, and the
person or persons entitled to receive the Debentures issuable upon such exchange
shall be treated for all purposes as the record holder or holders of such
Debentures at such time. As promptly as practicable on or after the surrender of
a certificate or certificates for exchange and the receipt of the notice
relating thereto (and in any event within five Business Days thereafter), the
Corporation shall deliver or cause to be delivered to the person or persons
entitled to receive the same: (i) a certificate or certificates for the
principal amount of the Debentures issuable upon such conversion; (ii) any cash
owed in lieu of any fraction of a Debenture in accordance with Section 9(j)
hereof; (iii) if less than the full number of shares of Convertible Preferred
Stock evidenced by the surrendered certificate or certificates is being
exchanged, a new certificate or certificates, of like tenor, for the number of
shares evidenced by such surrendered certificate or certificates less the number
of shares being exchanged; and (iv) if exchanged pursuant to Section 9(c)(i),
subject to the provisions of the second paragraph of Section 9(c)(i), an amount
in cash equal to the full cumulative dividends accrued but unpaid on such shares
of Convertible Preferred Stock through the last quarterly dividend payment date
established pursuant to Section 4 hereof that immediately precedes the effective
date of exchange. If for any reason the Corporation is unable to pay any accrued
dividends on the Convertible Preferred Stock being exchanged pursuant to Section
9(c)(i), the Corporation will pay such dividends to the converting holder as
soon thereafter as funds of the Corporation are legally available for such
payment and may be paid under applicable credit agreements with interest
thereon, accruing at a rate of 9.00% per annum. At the request of any such
holder converting pursuant to Section 9(c)(i), the Corporation shall deliver to
such holder a due bill or other appropriate instrument evidencing the
Corporation's obligation to such holder.
(e) Adjustments to Conversion Price and the Triggering Price. The
Conversion Price and Triggering Price shall be adjusted from time to time as
follows:
(i) In case the Corporation shall pay or make a dividend or other
distribution on any class of capital stock of the Corporation in Common
Stock, the Conversion Price and Triggering Price in effect at the close of
business on the date fixed for the determination of shareholders entitled
to receive such dividend or other distribution shall be reduced to a price
determined by multiplying such Conversion Price and Triggering Price each
by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for
such determination and of which the denominator shall be the sum of such
number of shares and the total number of shares constituting such dividend
or other distribution, such reduction to become effective at the opening of
business on the day following the date fixed for such determination. In the
event that such dividend or distribution is not so paid or made, the
Conversion Price and Triggering Price shall be readjusted to be the
Conversion Price
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and Triggering Price which would then be in effect if such date fixed for
the determination of shareholders entitled to receive such dividend or
other distribution had not been fixed.
(ii) In case the Corporation shall issue rights or warrants to all
holders of its outstanding shares of Common Stock entitling them to
subscribe for or purchase shares of Common Stock (or securities convertible
into (which for purposes of this paragraph (ii) shall also mean
exchangeable for) Common Stock) at a price per share less than the Current
Market Price (as defined in Section 13 hereof) of Common Stock on the date
fixed for the determination of shareholders entitled to receive such rights
or warrants, the Conversion Price and Triggering Price in effect at the
close of business on the date fixed for such determination shall be reduced
to a price determined by multiplying such Conversion Price and Triggering
Price each by a fraction of which the numerator shall be the total number
of shares of Common Stock outstanding at the close of business on the date
fixed for such determination plus the number of shares of Common Stock
which the aggregate of the offering price of the total number of shares of
Common Stock so offered for subscription or purchase (or the aggregate
conversion price of the convertible securities so offered) would purchase
at such Current Market Price and of which the denominator shall be the
number of shares of Common Stock outstanding at the close of business on
the date fixed for such determination plus the total number of additional
shares of Common Stock so offered for subscription or purchase (or into
which the convertible securities so offered are convertible), such
reduction to become effective at the opening of business on the day
following the date fixed for such determination. To the extent that shares
of Common Stock are not delivered after the expiration of such rights or
warrants, the Conversion Price and Triggering Price shall be readjusted to
the Conversion Price and Triggering Price which would then be in effect had
the adjustments made upon the issuance of such rights or warrants been made
on the basis of delivery of only the number of shares of Common Stock
actually delivered. In the event that such rights or warrants are not so
issued, the Conversion Price and Triggering Price shall be readjusted to be
the Conversion Price and Triggering Price which would then be in effect if
the date fixed for the determination of shareholders entitled to receive
such rights or warrants had not been fixed.
(iii) In case outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Conversion Price and
Triggering Price in effect at the close of business on the date upon which
such subdivision becomes effective shall be proportionately reduced, and,
conversely, in case outstanding shares of Common Stock shall each be
combined into a smaller number of shares of Common Stock, the Conversion
Price and Triggering Price in effect at the close of business on the date
upon which such combination becomes effective shall be proportionately
increased, such reduction or increase, as the case may be, to become
effective at the opening of business on the day following the date upon
which such subdivision or combination becomes effective.
(iv) Notwithstanding any other provision of this Section 9, no
adjustment in the Conversion Price or Triggering Price shall be required
unless such adjustment would require an increase or decrease of at least 1%
in the Conversion Price or Triggering Price, as the case may be; provided,
however, that any adjustments which by reason of this paragraph (iv) are
not required to be made shall be carried forward and taken into account in
determining whether any subsequent adjustment shall be required. Once the
cumulative effect of any such adjustments that are carried forward would
result in an increase or decrease of at least 1% in the Conversion Price or
Triggering Price, then the Conversion Price or Triggering Price shall be
changed to reflect all adjustments called for by this Section 9 and not
previously made.
(v) Notwithstanding any other provision of this Section 9, no
adjustment to the Conversion Price or Triggering Price shall reduce the
Conversion Price or Triggering Price below the then par value per share of
the Common Stock, and any such purported adjustment shall instead reduce
the Conversion Price or Triggering Price to such par value.
(vi) Whenever the Conversion Price or Triggering Price is adjusted as
provided herein, the Corporation shall compute the adjusted Conversion
Price or Triggering Price in accordance with this Section 9 and shall
prepare a certificate signed by the Treasurer of the Corporation setting
forth the adjusted Conversion Price or Triggering Price and showing in
reasonable detail the facts upon which such
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adjustment is based, and the corporation shall mail a copy of such
certificate as soon as practicable to the holders of record of the shares
of Convertible Preferred Stock.
(vii) In any case in which this Section 9 shall require that an
adjustment shall become effective on the day following a record date for an
event, the Corporation may defer until the occurrence of such event (i)
issuing to the holder of any share of Convertible Preferred Stock, if such
share is converted after such record date and before the occurrence of such
event, the additional Common Stock issuable upon such conversion by reason
of the adjustment required by such event over and above Common Stock
issuable upon such conversion before giving effect to such adjustment and
(ii) paying to such holders any amount in cash in lieu of a fractional
share of Common Stock pursuant to paragraph (i) of this Section 9;
provided, that, upon request of any such holder, the Corporation shall
deliver to such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional Common Stock and
such cash, upon the occurrence of the event requiring such adjustment; and
provided, further, that the failure of such event to occur shall relieve
the Corporation of the obligation to make an additional distribution upon
conversion by reason of the adjustment required by the occurrence of such
event.
(viii) The Corporation may make such reductions in the Conversion
Price, in addition to those required by this Section 9, as the Board of
Directors considers to be advisable in order that any event treated for
Federal income tax purposes as a dividend or distribution of stock (or
rights to acquire stock) shall not be taxable to the recipients. The
Corporation at any time or from time to time, as permitted by applicable
law and to the extent the Board of Directors determines that such reduction
would be in the best interests of the Corporation, may reduce the
Conversion Price by any amount for any period of time, if the period is at
least twenty (20) days and if the reduction is irrevocable during the
period.
(ix) Whenever the Conversion Price is reduced by the Corporation
pursuant to paragraph (viii) of this Section 9(e), the Corporation shall
mail to holders of the Convertible Preferred Stock a notice of the
reduction. The Corporation shall mail such notice by first class mail,
postage prepaid, at least fifteen (15) days before the date the reduced
Conversion Price takes effect, to each holder of record of shares of
Convertible Preferred Stock at such holder's address as shown on the stock
register of the Corporation. The notice shall state the reduced Conversion
Price and the period it will be in effect. If a notice is mailed to a
holder in the manner provided above within the time prescribed, it is duly
given with respect to such holder.
(f) Reclassification, Consolidation, Merger or Sale of Assets. In the
event that the Corporation shall be a party to any transaction (including
without limitation any (i) recapitalization or reclassification of the Common
Stock (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or combination
of the Common Stock), (ii) any consolidation or merger of the Corporation with
or into any other person or any merger of another person into the Corporation
(other than a merger which does not result in a reclassification, conversion,
exchange or cancellation of outstanding shares of Common Stock of the
Corporation), (iii) any sale or transfer of all or substantially all of the
assets of the Corporation, or (iv) any compulsory share exchange) pursuant to
which the Common Stock shall be exchanged for, converted into, acquired for or
constitute solely the right to receive other securities, cash or other property,
then appropriate provision shall be made as part of the terms of such
transaction whereby the holder of each share of Convertible Preferred Stock then
outstanding shall thereafter have the right to convert such share only into the
kind and amount of securities, cash and other property receivable upon such
recapitalization, reclassification, consolidation, merger, sale, transfer or
share exchange by a holder of the number of shares of Common Stock into which
such share of Convertible Preferred Stock might have been converted immediately
prior to such transaction. The Corporation or the person formed by such
consolidation or resulting from such merger or which acquired such assets or
which acquired the Corporation's shares, as the case may be, shall make
provisions in its certificate or articles of incorporation or other constituent
document to establish such right. Such certificate or articles of incorporation
or other constituent document shall provide for adjustments which, for events
subsequent to the effective date of such certificate or articles of
incorporation or other constituent document, shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 9. The above
provisions shall similarly apply to successive transactions of the type
described in this paragraph.
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(g) Prior Notice of Certain Events. In case at any time:
(i) the Corporation shall (1) declare any dividend or any other
distribution on its Common Stock, other than (A) a dividend payable solely
in shares of Common Stock or (B) the Rights or (2) declare or authorize a
redemption or repurchase of any of the then outstanding shares of Common
Stock or any other Junior Stock; or
(ii) the Corporation shall authorize the granting to all holders of
Common Stock of rights or warrants to subscribe for or purchase any shares
of stock of any class or of any other rights or warrants; or
(iii) of any reclassification of Common Stock (other than a
subdivision or combination of the outstanding Common Stock), or of any
consolidation or merger to which the Corporation is a party and for which
approval of any shareholders of the Corporation shall be required, or of
the sale or transfer of all or substantially all of the assets of the
Corporation or of any compulsory share exchange whereby the Common Stock is
converted into other securities, cash or other property; or
(iv) of the voluntary or involuntary liquidation, dissolution or
winding up of the Corporation;
then, in any such case, the Corporation shall cause to be mailed to the
holders of record of the Convertible Preferred Stock, at their last addresses as
they shall appear upon the stock transfer books of the Corporation, at least
twenty (20) days prior to the applicable record date or effective date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, redemption, repurchase or
granting of rights or warrants or, if a record is not to be taken, the date as
of which the holders of Common Stock of record to be entitled to such dividend,
distribution, redemption, rights or warrants are to be determined or (y) the
date on which such reclassification, consolidation, merger, sale, transfer,
share exchange, liquidation, dissolution or winding up is expected to become
effective, and the date as of which it is expected that holders of Common Stock
of record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, liquidation, dissolution
or winding up. No failure to mail such notice or any defect therein or in the
mailing thereof shall affect the validity of the corporate action required to be
specified in such notice.
(h) Reservation of Shares, etc. The Corporation shall at all times reserve
and keep available, free from preemptive rights, out of its authorized but
unissued Common Stock, solely for the purpose of effecting the conversion of
shares of Convertible Preferred Stock, the full number of shares of Common Stock
then deliverable upon the conversion of all shares of Convertible Preferred
Stock then outstanding. If the Corporation shall issue any securities or make
any change in its capital structure which would change the number of shares of
Common Stock into which each share of the Convertible Preferred Stock shall be
convertible as herein provided, the Corporation shall at the same time also make
proper provision so that thereafter there shall be a sufficient number of shares
of Common Stock authorized and reserved, free from preemptive rights, for
conversion of the outstanding Convertible Preferred Stock on the new basis.
If any Debentures or shares of Common Stock required to be reserved for
purposes of exchange or conversion of the Convertible Preferred Stock hereunder
require registration with or approval of any governmental authority under any
Federal or State law before such debentures or shares may be issued upon
exchange or conversion, the Corporation will in good faith and as expeditiously
as possible endeavor to cause such debentures or shares to be duly registered or
approved, as the case may be. The Corporation will, in good faith and as
expeditiously as possible, endeavor, if permitted by the rules of the applicable
exchange or quotation system, list and keep listed or quote and keep quoted on
the principal exchange or quotation system of its Common Stock, as the case may
be, upon official notice of issuance or quotation, all Debentures or shares of
Common Stock issuable upon exchange or conversion of the Convertible Preferred
Stock.
(i) No Fractional Shares or Debentures. No fractional shares or scrip
representing fractional shares of Common Stock shall be issued upon conversion
of Convertible Preferred Stock. Instead of any fraction of a share which would
otherwise be issuable upon conversion of any shares of Convertible Preferred
Stock, the Corporation shall pay a cash adjustment in respect of such fraction
in an amount equal to the same fraction of the Closing Price (as defined in
Section 13 hereof) of a share of Common Stock (or, if there is no such
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Closing Price, the fair market value of a share of Common Stock, as determined
in good faith by the Board of Directors or in any manner prescribed by the Board
of Directors) at the close of business on the Trading Day immediately preceding
the date of conversion.
The Debentures will be issued in denominations of $[ ] and integral
multiples thereof. No fractional interests in the Debentures shall be issued
upon exchange of conversion of Convertible Preferred Stock. Instead of any
fraction of a Debenture which would otherwise be issuable upon exchange of any
shares of Convertible Preferred Stock, the Corporation shall pay a cash
adjustment in respect of such fraction in an amount equal to the same fraction
of the Closing Price (as defined in Section 13 hereof) of a Debenture in the
principal amount of $[ ] (or, if there is no such Closing Price, the fair market
value of a Debenture in such principal amount, as determined in good faith by
the Board of Directors or in any manner prescribed by the Board of Directors) at
the close of business on the Trading Day immediately preceding the date of
exchange.
(j) Transfer Taxes, etc. The Corporation will pay any and all taxes that
may be payable in respect of the issue or delivery of shares of Common Stock or
Debentures on conversion or exchange of shares of Convertible Preferred Stock
pursuant hereto. The Corporation shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in the issue and
delivery of shares of Common Stock or Debentures in a name other than that in
which the shares of Convertible Preferred Stock so exchanged or converted were
registered, and no such issue or delivery shall be made unless and until the
person requesting such issue has paid to the Corporation the amount of any such
tax, or has established to the satisfaction of the Corporation that such tax has
been paid.
10. EXCHANGES. Certificates representing shares of Convertible Preferred
Stock shall be exchangeable, at the option of the holder, for a new certificate
or certificates of the same or different denominations representing in the
aggregate the same number of shares of Convertible Preferred Stock.
11. OUTSTANDING SHARES. For purposes of this Certificate of Designations,
all shares of Convertible Preferred Stock shall be deemed outstanding except for
(a) shares of Convertible Preferred Stock held of record or beneficially by the
Corporation or any subsidiary of the Corporation; (b) from the date of surrender
of certificates representing Convertible Preferred Stock for conversion pursuant
to Section 9 hereof, all shares of Convertible Preferred Stock which have been
converted into Common Stock or other securities or property pursuant to Section
9 hereof; and (c) from the date fixed for redemption pursuant to Section 5 or 6
hereof, all shares of Convertible Preferred Stock which have been called for
redemption, provided that funds necessary for such redemption are available
therefor and have been irrevocably deposited or set aside for such purpose and
all other steps necessary to effect such redemption shall have been taken.
12. STATUS OF CONVERTIBLE PREFERRED STOCK UPON RETIREMENT. Shares of
Convertible Preferred Stock which are acquired or redeemed by the Corporation or
converted pursuant to Section 9 shall return to the status of authorized and
unissued shares of Preferred Stock of the Corporation, without designation as to
series. Upon the acquisition or redemption by the Corporation or conversion
pursuant to Section 9 of all outstanding shares of Convertible Preferred Stock,
all provisions of this Certificate of Designations shall cease to be of further
effect.
13. DEFINITIONS. For purposes of this Certificate of Designation, the
following terms shall have the meanings indicated:
(a) "Board of Directors" shall mean the board of directors of the
Corporation or any committee authorized by such board of directors to perform
any of its responsibilities with respect to the Convertible Preferred Stock.
(b) "Business Day" shall mean any day other than a Saturday, Sunday, or a
day on which commercial banks in the State of New York are authorized or
required by law or executive order to close or a day which is or is declared a
national or New York state holiday;
(c) "Closing Price" with respect to any securities on any day shall mean
the closing sale price regular way on such day or, in case no such sale takes
place on such day, the average of the reported closing bid and asked prices,
regular way, in each case on the principal national securities exchange or
quotation system on
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which such security is quoted or listed or admitted to trading, or, if not
quoted or listed or admitted to trading on any national securities exchange or
quotation system, the average of the closing bid and asked prices of such
security on the over-the-counter market on the day in question as reported by
the National Quotation Bureau Incorporated, or a similarly generally accepted
reporting service, or if not so available, in such manner as furnished by any
New York Stock Exchange member firm selected from time to time by the Board of
Directors of the Corporation for that purpose or a price determined in good
faith by the Board.
(d) "Current Market Price" shall mean the average of the daily Closing
Prices per share of Common Stock for the thirty consecutive Trading Days
immediately prior to the date in question.
(e) "fair market value" shall mean the amount which a willing buyer would
pay a willing seller in an arm's length transaction.
(f) "full cumulative dividends" shall mean, with respect to the Convertible
Preferred Stock, or any other capital stock of the Corporation, as of any date
the amount of accumulated, accrued and unpaid dividends payable on such shares
of Convertible Preferred Stock, or other capital stock, as the case may be,
whether or not earned or declared and whether or not there shall be funds
legally available for the payment thereof.
(g) "record date" shall mean, with respect to any dividend, distribution or
other transaction or event in which the holders of Common Stock have the right
to receive any cash, securities or other property or in which the Common Stock
(or other applicable security) is exchanged or converted into any combination of
cash, securities or other property, the date fixed for determination of
shareholders entitled to receive such cash, securities or other property
(whether such date is fixed by the Board of Directors or by statute, contract or
otherwise), and with respect to any subdivision or combination of the Common
Stock, the effective date of such subdivision or combination.
(h) "Rights" shall mean the rights of the Corporation that are issuable
under the Corporation's Rights Agreement, dated July 31, 1992 and as amended
from time to time, or rights to purchase any capital stock of the Corporation
under any successor stockholder rights plan or plans adopted in replacement of
the Corporations Rights Agreement.
(i) "Trading Day" shall mean (x) if the applicable security is quoted on
the Nasdaq National Market of The Nasdaq Stock Market, a day on which trades may
be made on such Nasdaq National Market or (y) if the applicable security is
listed or admitted for trading on the New York Stock Exchange or another
national securities exchange, a day on which the New York Stock Exchange or
another national securities exchange is open for business or (z) if the
applicable security is not so listed, admitted for trading or quoted, any day
other than a Saturday or Sunday or a day on which banking institutions in the
State of New York are authorized or obligated by law or executive order to
close.
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ANNEX H
CONCURRENT COMPUTER CORPORATION
DESCRIPTION OF NEW DEBENTURES
The principal terms of the New Debentures are set forth below.
ISSUER
Concurrent Computer Corporation.
ISSUE
Series A Debentures (the "New Debentures").
PRINCIPAL AMOUNT
If converted pursuant to Concurrent's right to convert, the initial
principal amount shall equal the Total Liquidation Preference of the 9.00% Class
B Convertible Preferred Stock (the "Class B Preferred Stock") outstanding on the
date that the Class B Preferred Stock is converted (the "Conversion Date") into
the New Debentures in accordance with Section 9(c)(i) of the Certificate of
Designation (the "Certificate of Designation") of the Class B Preferred Stock.
If converted pursuant to a holder's right to convert pursuant to Section
9(c)(ii) of the Certificate of Designation, the initial principal amount shall
equal the Total Liquidation Preference of the Class B Preferred Stock
outstanding on the Conversion Date plus all dividends which are accrued and
accumulated but unpaid, whether or not declared and without interest, up to the
calendar quarter immediately preceding the quarter in which the Conversion Date
occurs.
CHANGES IN PRINCIPAL AMOUNT
If in accordance with the provisions of the Purchase and Sale Agreement,
dated as of March 26, 1996, amended and restated as of May 23, 1996 between the
Concurrent and Harris Computer Systems Corporation (the "Purchase and Sale
Agreement") the amount of the net current assets (the "Net Assets") shown on the
Final Net Current Asset Reconciliation (as defined in the Purchase and Sale
Agreement)(such amount shown, the "Actual Net Asset Amount") is less than
$14,400,000, then the Principal Amount shall be adjusted by reducing it, dollar
for dollar, to the extent of the difference (the "Difference") between the
Actual Net Asset Amount and $14,400,000. Alternatively, if the amount of the Net
Assets shown on the Final Net Current Asset Reconciliation, after resolution of
all Reconciliation Disagreements (as defined in the Purchase and Sale Agreement)
is in excess of the Net Current Assets shown on the Projected Net Current Asset
Reconciliation (as defined in the Purchase and Sale Agreement), the Principal
Amount shall be increased, dollar for dollar, to the extent of such excess up to
$10,000,000. The Principal Amount shall also be further reduced to the extent
that the parties to the Purchase and Sale Agreement or a court of competent
jurisdiction determines (which determination by such court shall be final and
nonappealable) that any Asset (as defined in the Purchase and Sale Agreement)
required to be transferred by the Purchase and Sale Agreement was not in fact
transferred, such reduction (the "Net Asset Reduction") to be equal to the book
value on the Final Net Current Asset Reconciliation or with respect to
non-current assets, the "Audited Balance Sheet" (as defined in the Purchase and
Sale Agreement) less any cash paid to Concurrent in respect thereof. In
addition, in accordance with the terms of the Purchase and Sale Agreement, the
Principal Amount shall be further reduced by the amount of any Damages (as
defined in the Purchase and Sale Agreement), less any cash paid to Concurrent in
respect thereof (the "Net Damages"), incurred by Concurrent and its
Representatives (as defined in the Purchase and Sale Agreement) as a result of a
wilful breach by Harris of a representation or warranty contained in the
Purchase and Sale Agreement.
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These provisions will be drafted so that there will be no double counting
of reductions or increases in the Liquidation Preference of the Preferred Stock
which occurred prior to the exchange of such stock for the New Debentures.
PAYMENT-IN-KIND
Interest payments on the New Debentures may be paid in cash or in kind.
INTEREST RATE
The New Debentures will bear interest at the rate of 9% per annum, accruing
from the first day of the calendar quarter (the "Accrual Date") during which the
Conversion Date occurred, and payable quarterly on , ,
and commencing on the Accrual Date.(1)
MATURITY DATE
June , 2006.
OPTIONAL REDEMPTION
Subject to certain adjustments for stock splits, stock dividends and
similar transactions, whenever the Current Market Price (as defined in the
Certificate of Designation) of the Common Stock exceeds $3.75, Concurrent may,
at its option, redeem all or a portion of the Debentures, at any time or from
time to time, at par plus any accrued interest thereon.
MANDATORY REDEMPTION
On June , 2006, Concurrent shall redeem all of the Debentures then
outstanding at par plus any accrued interest thereon or at any time the
outstanding principal amount of the Debentures is less than $[ ].
CONVERSION OF DEBENTURES
Each holder of a New Debenture shall have the right, at the option of such
holder, at any time or from time to time to convert such New Debenture into
fully paid and nonassessable shares of Common Stock of Concurrent. Such
conversion of New Debentures to shares of Common Stock shall be made at a
conversion rate equal to (x) the principal amount of such New Debenture (plus
any accrued and unpaid interest thereon) divided by (y) the applicable
conversion price per share of Common Stock at the time of conversion (the
"Conversion Price"). The Conversion Price shall initially be $2.50, subject to
certain adjustments as provided in the Certificate of Designation.
Notwithstanding any other provision to the contrary, the maximum number of
shares in which the New Debentures shall be convertible shall be 4,000,000
(subject to adjustment for stock splits, stock dividends and similar
transactions).
RANKING
The New Debentures will be general unsecured indebtedness of Concurrent and
will rank pari passu in right of payment to existing indebtedness; provided
however, that the New Debentures shall rank junior to the claims of Foothill
Capital Corporation, Fleet Bank of Massachusetts, N.A. and CIBC Inc. with
respect to the assets secured under the credit facilities between Concurrent and
such entities.
MODIFICATION OF DEBENTURE INDENTURE
By majority of outstanding principal amount, with certain exceptions
involving certain fundamental changes which shall require unanimous approval.
- ---------------
(1) Calendar quarters will be used.
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RESTRICTED PAYMENTS
The New Debenture Indenture will provide that Concurrent will not, and will
not permit any of its Subsidiaries to directly or indirectly: (i) declare or pay
any dividend or make any distribution on account of the Equity Interests of
Concurrent or any of its Subsidiaries (other than dividends or distributions
payable in Equity Interests of Concurrent or dividends or distributions payable
to Concurrent or any Subsidiary); (ii) purchase, redeem or otherwise acquire or
retire for value any Equity Interests of Concurrent, any Subsidiary or other
Affiliate of Concurrent (other than any such Equity Interests owned by
Concurrent or its Subsidiaries or in connection with capitalizing a Subsidiary);
(iii) purchase, redeem or otherwise acquire or retire for value, or make any
cash interest payment on, any Indebtedness of Concurrent that is subordinated to
the New Debentures (all such payments and other actions set forth in clauses (i)
through (iii) above being collectively referred to as "Restricted Payments"),
unless, at the time of such Restricted Payment no Default or Event of Default
will have occurred and be continuing or would occur as a consequence thereof and
interest due on the New Debentures for the four calendar quarters immediately
preceding the quarter in which such Restricted Payment occurs has been paid in
cash.
LIMITATION ON MERGER, CONSOLIDATION OR SALE OF ASSETS
Concurrent will not consolidate or merge (whether or not Concurrent shall
be the surviving corporation), or sell, assign, transfer or lease all or
substantially all of its properties and assets as an entirety to any person,
unless: (i) the entity or person formed by or surviving any such consolidation
or merger (if other than Concurrent) or to which such sale, assignment, transfer
or lease shall have been made shall be an entity organized under the laws of the
United States or any State thereof or the District of Columbia and shall
expressly assume, by a supplemental indenture, all the obligations of Concurrent
under the New Debenture Indenture; (ii) immediately before and immediately after
giving effect to such transaction, no Event of Default and no Default will have
occurred and be continuing.
EVENTS OF DEFAULT
The New Debenture Indenture will provide that each of the following
constitutes an Event of Default: (i) default for days in the payment when due of
Interest on the New Debentures; (ii) default in payment when due of the
principal of, or premium, if any, on the New Debentures; (iii) failure by
Concurrent for days after notice to comply with any of its other agreements in
the New Debenture Indenture or the New Debentures; (iv) certain events of
bankruptcy or insolvency with respect to Concurrent or any of its Subsidiaries.
OTHER
Such additional provisions as appropriate, which provisions, however, shall
be no less favorable to the Holder of the Debentures than the provisions set
forth herein.
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CONCURRENT COMPUTER CORPORATION
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
The undersigned hereby appoints John T. Stihl, Chairman, President and
Chief Executive Officer of Concurrent, and Kevin J. Dell, Vice President,
General Counsel and Secretary of Concurrent, or either of them with full power
of substitution, proxies to vote at the Special Meeting of Stockholders of
Concurrent Computer Corporation (the "Company") to be held on June 26, 1996 at
3:30 p.m., local time, at the Doubletree Guest Suites, 555 N.W. 62nd Street,
Fort Lauderdale, Florida 33309 (the "Special Meeting"), hereby revoking any
proxies heretofore given, to vote all shares of common stock, par value $.01
per share, of the Company held or owned by the undersigned as directed on the
reverse side of this proxy card, and in their discretion upon such other
matters incidental to the conduct of the meeting that may properly arise.
(TO BE SIGNED ON REVERSE SIDE)
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/X/ Please mark This proxy when properly executed will
votes as in this be voted in the manner directed herein.
example If no direction is made, this proxy will
be voted "For" proposals 1, 2 and 3.
The Board of Directors recommends a vote FOR Proposals 1, 2 and 3.
1. Approval of the issuance of (a) 10,000,000 shares FOR AGAINST ABSTAIN
of Concurrent Common Stock and (b) the issuance of / / / / / /
4,000,000 shares, subject to adjustment, of
Concurrent Common Stock which may be issuable
upon the conversion of the Concurrent Preferred
Stock, each in accordance with the terms of the
Purchase and Sale Agreement.
2. Approval of the amendment to the Concurrent 1991 FOR AGAINST ABSTAIN
Restated Stock Option Plan to increase the / / / / / /
number of shares of Concurrent Common Stock
reserved and available for issuance to nine
million shares.
3. Approval of the amendment to the Concurrent 1991 FOR AGAINST ABSTAIN
Restated Stock Option Plan to (a) increase the / / / / / /
number of shares of Concurrent Common Stock
underlying the options initially granted to each
non-employee director to 20,000 shares following
the adoption of such amendment, (b) provide for
the automatic grant to continuing non-employee
directors of options to purchase 3,000 shares of
Concurrent Common Stock on the close of each
annual meeting of shareholders, and (c) provide
that each option granted to non-employee
directors shall expire on the earlier of the
tenth anniversary of the date of grant or the
resignation or removal of such non-employee
director.
Adoption of proposals 1 and 2 are each conditioned upon the approval of the
other. Adoption of proposal 3 is conditioned upon the approval of both proposals
1 and 2.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
SIGNATURE _______________________________________________ DATE_________________
SIGNATURE _______________________________________________ DATE_________________
Signature if held jointly
NOTE: When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian please give full
title as such. If a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
