SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d) of
--- the Securities Exchange Act of 1934
For the Quarter Ended December 31, 1999
or
Transition Report Pursuant to Section 13 or 15(d) of
--- the Securities Exchange Act of 1934
For the Transition Period from ____ to ____
Commission File No. 0-13150
_____________
CONCURRENT COMPUTER CORPORATION
Delaware 04-2735766
(State of Incorporation) (I.R.S. Employer Identification No.)
4375 River Green Parkway, Duluth, GA 30096
Telephone: (678) 258-4000
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Number of shares of the Registrant's Common Stock, par value $0.01 per share,
outstanding as of February 10, 2000 was 53,450,954.
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CONCURRENT COMPUTER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------------- -------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales:
Computer systems. . . . . . . . . . . . . . . . . $ 9,458 $ 9,068 $ 17,062 $15,796
Service and other . . . . . . . . . . . . . . . . 7,464 10,113 15,544 20,259
--------- -------- --------- --------
Total . . . . . . . . . . . . . . . . . . . . . 16,922 19,181 32,606 36,055
Cost of sales:
Computer systems. . . . . . . . . . . . . . . . . 5,043 4,244 8,833 7,258
Service and other . . . . . . . . . . . . . . . . 4,126 5,103 8,380 10,214
--------- -------- --------- --------
Total . . . . . . . . . . . . . . . . . . . . . 9,169 9,347 17,213 17,472
--------- -------- --------- --------
Gross margin. . . . . . . . . . . . . . . . . . . . 7,753 9,834 15,393 18,583
Operating expenses:
Selling, general and administrative . . . . . . . 7,850 6,750 14,006 12,583
Research and development. . . . . . . . . . . . . 2,409 2,545 4,631 5,249
In-process computer software technology . . . . . 14,000 - 14,000 -
Relocation and restructuring. . . . . . . . . . . - - 2,367 -
--------- -------- --------- --------
Total operating expenses. . . . . . . . . . . . . . 24,259 9,295 35,004 17,832
--------- -------- --------- --------
Operating income (loss) . . . . . . . . . . . . . . (16,506) 539 (19,611) 751
Interest income (expense) - net . . . . . . . . . . 73 (30) 83 (56)
Other non-recurring income (expense). . . . . . . . - 341 761 (88)
Other income (expense) - net. . . . . . . . . . . . (38) 151 (105) (32)
--------- -------- --------- --------
Income (loss) before provision for income taxes . . (16,471) 1,001 (18,872) 575
Provision for income taxes. . . . . . . . . . . . . 150 86 300 86
--------- -------- --------- --------
Net income (loss) available to common shareholders. $(16,621) $ 915 $(19,172) $ 489
========= ======== ========= ========
Basic and diluted net income (loss) per share . . . $ (0.32) $ 0.02 $ (0.38) $ 0.01
========= ======== ========= ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
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<PAGE>
<TABLE>
<CAPTION>
CONCURRENT COMPUTER CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
DEC. 31, JUNE 30,
1999 1999
--------- ---------
ASSETS (UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . $ 7,952 $ 6,872
Accounts receivable - net. . . . . . . . . . . . . . . . . . 14,769 14,879
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . 4,383 4,641
Prepaid expenses and other current assets. . . . . . . . . . 706 1,053
--------- ---------
Total current assets . . . . . . . . . . . . . . . . . . . 27,810 27,445
Property, plant and equipment - net. . . . . . . . . . . . . . 11,474 10,936
Facilities held for sale . . . . . . . . . . . . . . . . . . . - 1,223
Purchased developed computer software. . . . . . . . . . . . . 1,868 -
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,101 -
Other long-term assets . . . . . . . . . . . . . . . . . . . . 1,898 965
--------- ---------
Total assets . . . . . . . . . . . . . . . . . . . . . . . $ 46,151 $ 40,569
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses. . . . . . . . . . . . $ 9,327 $ 8,973
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . 2,536 3,778
--------- ---------
Total current liabilities. . . . . . . . . . . . . . . . . 11,863 12,751
Other long-term liabilities. . . . . . . . . . . . . . . . . . 1,827 1,807
--------- ---------
Total liabilities. . . . . . . . . . . . . . . . . . . . . 13,690 14,558
--------- ---------
Stockholders' equity:
Common stock . . . . . . . . . . . . . . . . . . . . . . . . 532 485
Capital in excess of par value . . . . . . . . . . . . . . . 124,384 98,916
Accumulated deficit after eliminating accumulated deficit of
$81,826 at December 31, 1991, date of quasi-reorganization (92,028) (72,856)
Treasury stock . . . . . . . . . . . . . . . . . . . . . . . (58) (58)
Cumulative translation adjustment. . . . . . . . . . . . . . (369) (476)
--------- ---------
Total stockholders' equity . . . . . . . . . . . . . . . . 32,461 26,011
--------- ---------
Total liabilities and stockholders' equity . . . . . . . . . . $ 46,151 $ 40,569
========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
-2-
<PAGE>
<TABLE>
<CAPTION>
CONCURRENT COMPUTER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
SIX MONTHS ENDED
DECEMBER 31,
1999 1998
--------- ---------
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) . . . . . . . . . . . . . . . . . . . . $(19,172) $ 489
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Write-off of in-process software technology . . . . . . 14,000 -
Loss on dissolution of subsidiary . . . . . . . . . . . - 429
Depreciation, amortization and other. . . . . . . . . . 2,747 2,551
Other non-cash expenses . . . . . . . . . . . . . . . . 647 12
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . 186 1,592
Inventories . . . . . . . . . . . . . . . . . . . . . 8 75
Prepaid expenses and other current assets . . . . . . (179) (433)
Other long-term assets. . . . . . . . . . . . . . . . (569) 98
Accounts payable and accrued expenses . . . . . . . . 220 (769)
Deferred revenue. . . . . . . . . . . . . . . . . . . (1,242) (2,455)
Other long-term liabilities . . . . . . . . . . . . . 20 197
--------- ---------
Total adjustments to net income (loss). . . . . . . . . . 15,838 1,297
--------- ---------
Net cash provided by (used in) operating activities . . . . (3,334) 1,786
--------- ---------
INVESTING ACTIVITIES:
Net additions to property, plant and equipment. . . . . . (2,168) (2,238)
Proceeds from sale of facility. . . . . . . . . . . . . . 1,223 -
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 76 -
--------- ---------
Net cash used in investing activities . . . . . . . . . . . (869) (2,238)
--------- ---------
FINANCING ACTIVITIES:
Payments of notes payable . . . . . . . . . . . . . . . . - (5)
Proceeds from borrowings under revolving credit facility. - 28,054
Repayments of borrowings under revolving credit facility. - (28,255)
Proceeds from sale and issuance of common stock . . . . . 5,352 390
--------- ---------
Net cash provided by financing activities . . . . . . . . . 5,352 184
--------- ---------
Effect of exchange rates on cash and cash equivalents . . . (69) 312
--------- ---------
Increase in cash and cash equivalents . . . . . . . . . . . 1,080 44
Cash and cash equivalents at beginning of period. . . . . . 6,872 5,733
--------- ---------
Cash and cash equivalents at end of period. . . . . . . . . $ 7,952 $ 5,777
========= =========
Cash paid during the period for:
Interest. . . . . . . . . . . . . . . . . . . . . . . . $ 113 $ 148
========= =========
Income taxes (net of refunds) . . . . . . . . . . . . . $ 70 $ 318
========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
-3-
<PAGE>
CONCURRENT COMPUTER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements of Concurrent
Computer Corporation ("Concurrent" or the "Company") have been prepared in
accordance with the instructions to Form 10-Q and therefore do not include all
information and footnotes necessary for a fair presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles. The foregoing financial information reflects
all adjustments which are, in the opinion of management, necessary for a fair
presentation of the results for the periods presented. All such adjustments are
of a normal recurring nature.
While the Company believes that the disclosures presented are adequate to
make the information not misleading, it is suggested that these condensed
consolidated financial statements be read in conjunction with the audited
consolidated financial statements and the notes included in the Annual Report on
Form 10-K as filed with the Securities and Exchange Commission.
The results of interim periods are not necessarily indicative of the
results to be expected for the full fiscal year.
2. BASIC AND DILUTED LOSS PER SHARE
Basic income (loss) per share is computed by dividing income (loss) by the
weighted average number of common shares outstanding during each year. Diluted
income (loss) per share is computed by dividing income (loss) by the weighted
average number of shares including common share equivalents. Under the treasury
stock method, incremental shares representing the number of additional common
shares that would have been outstanding if the dilutive potential common shares
had been issued are included in the computation.
The number of shares used in computing basic and diluted loss per share for
the three months ended December 31, 1999 and the six months ended December 31,
1999 was 51,560,000 and 50,262,000, respectively. Because of the losses for
these periods, the common share equivalents are anti-dilutive and are not
considered in the diluted EPS calculations. The number of shares used in
computing basic and diluted EPS for the three months ended December 31, 1998 was
47,852,000 and 49,214,000, respectively. The number of shares used in computing
basic and diluted EPS for the six months ended December 31,1998 was 47,763,000
and 49,220,000, respectively.
-4-
<PAGE>
3. INVENTORIES
Inventories are valued at the lower of cost or market, with cost being
determined by using the first-in, first-out ("FIFO") method. The components of
inventories are as follows:
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DEC. 31, JUNE 30,
1999 1999
--------- ---------
<S> <C> <C>
Raw materials . $ 3,185 $ 3,103
Work-in-process 891 1,175
Finished goods. 307 363
--------- ---------
$ 4,383 $ 4,641
========= =========
</TABLE>
4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
The components of accounts payable and accrued expenses are as follows:
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DEC. 31, JUNE 30,
1999 1999
--------- ---------
<S> <C> <C>
Accounts payable, trade . . . $ 3,020 $ 2,941
Accrued payroll, vacation and
other employee expenses . . 3,599 4,314
Restructuring reserve . . . . 667 90
Other accrued expenses. . . . 2,041 1,628
--------- ---------
$ 9,327 $ 8,973
========= =========
</TABLE>
5. COMPREHENSIVE INCOME
Effective July 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("FAS No. 130").
FAS No. 130 requires the reporting of comprehensive income in addition to net
income from operations. Comprehensive income is a more inclusive financial
reporting methodology that includes disclosure of certain financial information
that historically has not been recognized in the calculation of net income. The
Company's total comprehensive income is as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
--------- ------ --------- ------
<S> <C> <C> <C> <C>
Net income (loss) . . . . . . . . . . . . . . $(16,621) $ 915 $(19,172) $ 489
Other comprehensive income (loss):
Foreign currency translation gains (losses) (305) 247 107 1,067
--------- ------ --------- ------
Total comprehensive income (loss) . . . . . . $(16,926) $1,162 $(19,065) $1,556
========= ====== ========= ======
</TABLE>
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<PAGE>
6. SEGMENT INFORMATION
The Company operates its business in two reportable segments: real-time and
video-on-demand ("VOD"). Its real-time segment is a leading provider of
high-performance, real-time computer systems, solutions and software for
commercial and government markets focusing on strategic market areas that
include hardware-in-the-loop and man-in-the-loop simulation, data acquisition,
industrial systems, and software and embedded applications. Its VOD segment is
a leading supplier of digital video server systems to a wide range of industries
serving a variety of markets, including the broadband/cable, hospitality,
intranet/distance learning, and other related markets.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies in the consolidated financial
statements and related footnotes for the fiscal year ended June 30, 1999
included in the Company's Annual Report on Form 10-K. Shared expenses are
primarily allocated based 50 percent on revenues and 50 percent on headcount.
There were no material intersegment sales or transfers. The following
summarizes the operating income (expense) by segment for the quarter ended
December 31, 1999:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, 1999 DECEMBER 31, 1999
---------- --------- --------- ---------- --------- ---------
REAL-TIME VOD TOTAL REAL-TIME VOD TOTAL
---------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenue. . . . . . . . . . . . . . . $ 14,802 $ 2,120 $ 16,922 $ 29,397 $ 3,209 $ 32,606
Cost of sales. . . . . . . . . . . . 7,476 1,693 9,169 14,775 2,438 17,213
---------- --------- --------- ---------- --------- ---------
Gross margin . . . . . . . . . . . . 7,326 427 7,753 14,622 771 15,393
Selling, general and administrative. 4,670 3,180 7,850 8,640 5,366 14,006
Research and development . . . . . . 962 1,447 2,409 2,175 2,456 4,631
In-process computer
software technology . . . . . . - 14,000 14,000 - 14,000 14,000
Relocation and restructuring . . . . - - - 1,208 1,159 2,367
---------- --------- --------- ---------- --------- ---------
Total operating expenses . . . . . . 5,632 18,627 24,259 12,023 22,981 35,004
---------- --------- --------- ---------- --------- ---------
Operating income (expense) . . . . . $ 1,694 $(18,200) $(16,506) $ 2,599 $(22,210) $(19,611)
========== ========= ========= ========== ========= =========
</TABLE>
It is impracticable to attain comparable information for the quarter and six
months ended December 31, 1998.
7. RESTRUCTURING AND RELOCATION
In August 1999, the Company relocated its Corporate Headquarters and its
VOD Division to Duluth, Georgia. In connection with this move, the Company
incurred employee relocation costs of $769,000, which is recorded as an
operating expense in the condensed consolidated statement of operations for the
quarter ended September 30, 1999.
In addition to the relocation discussed above, management decided in the
first quarter to "right-size" the Real-Time Division to bring its expenses in
line with its anticipated revenues. In connection with these events, the
Company recorded a $1.6 million restructuring provision as on operating expense
in quarter ended September 30, 1999. This expense represents workforce
reductions of approximately 38 employees in all areas of the Company. Cash
expenditures of $0.4 million and $0.5 million were made against this provision
in the first and second quarters, respectively, leaving a $0.7 million
restructuring accrual at December 31, 1999.
-6-
<PAGE>
8. DISSOLUTION OF SUBSIDIARY
During the quarter ended September 30, 1998, the Company dissolved its
subsidiary Concurrent Computer Corporation France (the "French Branch"). In
connection with the dissolution, all assets and liabilities of the French Branch
were assumed by the Company. A loss of $429,000, representing the write off of
the French Branch's cumulative translation adjustment, was recorded as other
non-recurring charges in the condensed consolidated statement of operations. The
Company continues to operate a French Subsidiary, Concurrent Computer
Corporation S.A.
9. SALE OF SUBSIDIARY
On September 8, 1999, the Company entered into an agreement to sell the
stock of Concurrent Vibrations, a wholly owned subsidiary of Concurrent Computer
Corporation S.A., to Data Physics, Inc. The transaction, which had an effective
date of August 31, 1999, resulted in a gain of $761,000. This gain is recorded
in other non-recurring items in the condensed consolidated statement of
operations in the quarter ended September 30, 1999.
10. ACQUISITION OF VIVID TECHNOLOGY
On October 28, 1999, the Company acquired Vivid Technology ("Vivid") for
total consideration of $19.8 million, consisting of 2,233,689 shares of common
stock valued at $16.8 million, $0.2 million of acquisition costs, and 378,983
shares reserved for future issuance upon exercise of stock options with a value
of $2.8 million. The acquisition was treated as a purchase for accounting
purposes, and, accordingly, the assets and liabilities were recorded based on
their fair values at the date of the acquisition. The purchase price allocation
and the respective useful lives of the intangible assets are as follows:
<TABLE>
<CAPTION>
Allocation Life
<S> <C> <C>
Working Capital. . . . . . . . . . . . . . . . . $ 72
Fixed Assets . . . . . . . . . . . . . . . . . . 257
Other Long-Term Assets . . . . . . . . . . . . . 13
Developed Completed Computer Software Technology 1,900 10 yrs
Employee Workforce . . . . . . . . . . . . . . . 400 3 yrs
Goodwill . . . . . . . . . . . . . . . . . . . . 3,153 10 yrs
In-Process Computer Software Technology. . . . . 14,000
</TABLE>
Amortization of intangible assets is on a straight line basis over the assets'
estimated useful life. Vivid's operations are included in the condensed
consolidated statements of operations from the date of acquisition.
At the acquisition date, Vivid had one product under development that had not
demonstrated technological or commercial feasibility. This product was the Vivid
interactive video-on-demand integrated system. The in-process technology has no
alternative use in the event that the proposed product does not prove to be
feasible. This development effort falls within the definition of In-Process
Research and Development ("IPR&D") contained in Statement of Financial
Accounting Standards ("SFAS") No. 2 and was expensed in the second quarter as a
one-time charge.
Vivid's interactive video-on-demand system is specifically being designed to
integrate with the most popular digital set-top boxes used by General
Instruments Corporation. The system is also expected to be compatible with the
digital set-top boxes used by other leading cable operators such as Philips,
Panasonic, Sony, etc. Vivid's VOD server is based on a cluster of Microsoft
Windows NT computers with proprietary hardware and software added to provide
high video streaming capacity and fault tolerance. The Vivid VOD system is being
designed to eventually provide VOD service including pause, rewind, and fast
forward VCR-like functions. The system will also provide necessary back office
support software for video content management, video selection graphical user
interface, subscriber management, purchase management, billing interfaces,
content provider account settlement and consumer marketing feedback. In
addition, the Vivid VOD system is being designed to support other interactive
applications such as on-line banking, home shopping, merchandising and
on-demand/addressable advertising.
-7-
<PAGE>
The in-process computer software technology was estimated to be 80% complete at
the date of acquisition and was estimated to cost an additional $650,000 to
complete the VOD system technology project in December of 2000. A variety of
tasks are yet to be completed which are required in order for the technology to
become commercially acceptable in the VOD marketplace including the following:
- The Content Manager, which is used to load movies from studios, does not
have the functionality necessary to create a royalty payment affidavit
which is required for the cable operators to pay the required royalties to
the movie studios. Also, the Content Manager, which has been implemented
using a SQL data base, will need to be ported to other relational data
bases such as Oracle to support high end data base applications.
- The Resource Manager has been alpha tested; however, an advanced beta test
has not been completed which would validate its ability to scale up to the
required number of subscribers or connections in an actual commercial
deployment.
- The Subscriber Manager, which has been implemented using a SQL data base,
will need to be ported to other relational data bases such as Oracle to
support high end data base applications.
- The Set top VOD application will need to be tested under advanced beta
test conditions to ensure that the back channel key stroke system
performance can fulfill operational requirements.
- The Hub Server, or video pump, will need to be tested under full load in
an operational environment to ensure stability over an extended period of
time. The random conditions resulting from the in home use of tens of
thousands of subscribers can only be simulated in an advanced beta test
which has yet to be performed.
The method used to allocate the purchase consideration to in-process research
and development ("IPR&D") was the modified income approach. Under the income
approach, fair value reflects the present value of the projected free cash flows
that will be generated by the IPR&D project and that is attributable to the
acquired technology, if successfully completed. The modified income approach
takes the income approach, modified to include the following factors:
- Analysis of the stage of completion of each project
- Exclusion of value related to research and development yet-to-be completed
as part of the on-going IPR&D projects; and
- The contribution of existing products/technologies.
The projected revenues used in the income approach are based upon the
incremental revenues likely to be generated upon completion of the project and
the beginning of commercial sales, as estimated by Company management. The
projections assume that the product will be successful and the products'
development and commercialization are as set forth by management. The discount
rate used in this analysis is an after-tax rate of 28%.
Consistent with the Company's policy for internally developed software, the
Company determined the amounts to be allocated to IPR&D based on whether
technological feasibility had been achieved and whether there was any
alternative future use for the technology. As of the date of the acquisition,
the Company concluded that the IPR&D had no alternative future use after taking
into consideration the potential for usage of the software in different
products, resale of the software and internal usage.
-8-
<PAGE>
The following unaudited proforma information presents the results of operations
of the Company as if the acquisition had taken place on July 1, 1998 and
includes the one-time charge related to the write-off of the purchased IPR&D of
$14 million:
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
Dec. 31, 1999 Dec. 31, 1998
--------------- ---------------
<S> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . $ 32,960 $ 36,455
Net income (loss). . . . . . . . . . . . . . . (19,868) (14,220)
Basic and Diluted Net Income (loss) Per Share. $ (0.37) $ (0.28)
=============== ===============
</TABLE>
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<PAGE>
SELECTED OPERATING DATA AS A PERCENTAGE OF NET SALES
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------- ------ ------- ------
<S> <C> <C> <C> <C>
Net sales:
Computer systems . . . . . . . . . . . . . . . 55.9% 47.3% 52.3% 43.8%
Service and other. . . . . . . . . . . . . . . 44.1 52.7 47.7 56.2
------- ------ ------- ------
Total. . . . . . . . . . . . . . . . . . . . 100.0 100.0 100.0 100.0
Cost of sales (% of respective sales category):
Computer systems . . . . . . . . . . . . . . . 53.3 46.8 51.8 45.9
Service and other. . . . . . . . . . . . . . . 55.3 50.5 53.9 50.4
------- ------ ------- ------
Total. . . . . . . . . . . . . . . . . . . . 54.2 48.7 52.8 48.5
------- ------ ------- ------
Gross margin . . . . . . . . . . . . . . . . . . 45.8 51.3 47.2 51.5
Operating expenses:
Selling, general and administrative. . . . . . 46.4 35.2 43.0 34.9
Research and development . . . . . . . . . . . 14.2 13.3 14.2 14.6
In process computer software technology. . . . 82.7 - 42.9 -
Relocation and restructuring . . . . . . . . . - - 7.3 -
------- ------ ------- ------
Total operating expenses . . . . . . . . . . . . 143.4 48.5 107.4 49.5
------- ------ ------- ------
Operating income (loss)
(97.5) 2.8 (60.1) 2.1
Interest income (expense) - net. . . . . . . . . 0.4 (0.2) 0.3 (0.2)
Other non-recurring income (expense) . . . . . . - 1.8 2.3 (0.2)
Other income (expense) - net . . . . . . . . . . (0.2) 0.8 (0.3) (0.1)
Income (loss) before provision for income taxes. (97.3) 5.2 (57.9) 1.6
Provision for income taxes . . . . . . . . . . . 0.9 0.4 0.9 0.2
------- ------ ------- ------
Net income (loss). . . . . . . . . . . . . . . . (98.2)% 4.8% (58.8)% 1.4%
======= ====== ======= ======
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THE QUARTER ENDED DECEMBER 31, 1999 COMPARED WITH THE QUARTER ENDED DECEMBER 31,
1998.
Net product sales were $9.5 million for the quarter ended December 31, 1999
as compared with $9.1 million for the quarter ended December 31, 1998. This
increase relates to sales of VOD product, which increased from $0.2 million in
the quarter ended December 31, 1998 to $2.1 million in the current quarter. The
increase in product sales reverses a trend of declining Real-Time product sales
the Company has experienced for a number of years. The expansion of the VOD
business, coupled with a renewed focus on real-time products in existing and new
markets account for the improved results, despite declining sales of proprietary
systems and the lower selling price of open systems as compared with proprietary
products.
Service revenues decreased from $10.1 million in the quarter ended December
31, 1998 to $7.5 million in the quarter ended December 31, 1999, continuing the
decline experienced over the past years as customers move from proprietary
systems to open systems which require less maintenance.
Gross Margin decreased by $2.1 million to $7.8 million for the three months
ended December 31, 1999 as compared to $9.8 million for the quarter ended
December 31, 1998. The gross margin as a percentage of sales decreased from
51.3% in the quarter ended December 31, 1998 to 45.8% in the current quarter
which is primarily due to the first large scale commercial deployment of a VOD
system in the cable television industry during the current quarter.
Operating Income (Loss) decreased $17.0 million to a loss of $16.5 million
in the current quarter as compared with a profit of $0.5 million in the quarter
ended December 31, 1998. This decrease is primarily due a $14.0 million
write-off of in-process computer software technology in connection with the
acquisition of Vivid Technology (see Note 10 to the financial statements) and
the inclusion of Vivid Technology's operating expenses in the current quarter
with only a nominal increase in revenue.
Net Income (Loss) decreased $17.5 million from an income of $0.9 million in
the quarter ended December 31, 1998 to a loss of $16.6 million in the current
quarter. The decrease is primarily due to the decrease in operating income
discussed above.
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<PAGE>
THE SIX MONTHS ENDED DECEMBER 31, 1999 COMPARED WITH THE SIX MONTHS ENDED
DECEMBER 31, 1998.
Net product sales were $17.1 million for the six months ended December 31,
1999 as compared with $15.8 million for the six months ended December 31, 1998.
This increase relates to sales of VOD product, which increased from $0.2 million
in the six months ended December 31, 1998 to $3.2 million in the current
six-month period. The increase in VOD product sales was partially offset by a
decline in sales of real-time products of $1.7 million resulting from declining
sales of proprietary systems and the lower selling price of open systems as
compared with proprietary products.
Service revenues decreased from $20.3 million in the six months ended
December 31, 1998 to $15.5 million in the six months ended December 31, 1999,
continuing the decline experienced over the past years as customers move from
proprietary systems to open systems which require less maintenance.
Gross Margin decreased by $3.2 million to $15.4 million for the six months
ended December 31, 1999 as compared to $18.6 million for the six months ended
December 31, 1998. The gross margin as a percentage of sales decreased from
51.5% in the six months ended December 31, 1998 to 47.2% in the current
six-month period which is primarily due to the lower margin realized in the very
early stages of the VOD business.
Operating Income (Loss) decreased $20.4 million to a loss of $19.6 million
in the current six-month period as compared with a profit of $0.8 million in the
six months ended December 31, 1998. This decrease is primarily due to a $14.0
million write-off of in-process computer software technology in connection with
the acquisition of Vivid Technology (see Note 10 to the financial statements),
the inclusion of Vivid Technology's operating expenses in the current quarter,
and $2.4 million of restructuring and relocation provision recognized in the
quarter ended September 30, 1999 (see Note 8 to the financial statements).
Net Income (Loss) decreased $19.7 million from an income of $0.5 million in
the six months ended December 31, 1998 to a loss of $19.2 million in the current
six-month period. The decrease is primarily due to the decrease in operating
income discussed above.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company'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 the Company depends to a significant extent on
(i) the actual versus anticipated decline in sales of proprietary systems and
service maintenance revenue; (ii) revenue growth from video-on-demand systems;
and (iii) ongoing cost control actions. Liquidity will also be affected by: (i)
timing of shipments which predominately occur during the last month of the
quarter; (ii) the percentage of sales derived from outside the United States
where there are generally longer accounts receivable collection cycles and which
receivables are not included in the Company'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 the Company's
revolving credit facility; and (iv) the number of countries in which the Company
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.
The Company used cash of $3.3 million in operating activities in the first
six months of fiscal year 2000 compared to generating cash of $1.8 million in
the first six months of the previous year primarily due to the loss generated by
the VOD business. The Company has an agreement providing for an $8 million
revolving credit facility through August 1, 2000. At December 31, 1999, no
amounts were outstanding under the revolving credit facility. Borrowings under
the revolving credit facility bear interest at the prime rate plus .75% and are
secured by substantially all of the Company's domestic assets.
The Company invested $2.2 million in property, plant and equipment during
each of the six-month periods ended December 31, 1999 and 1998, respectively.
Current year capital expenditures primarily relate to computer, development and
loaner equipment for the VOD Division and leasehold improvements for the
Real-Time Division's new administrative offices.
The Company received $5.4 million in proceeds from the issuance of new
shares of common stock to employees and directors who exercised stock options
during the six-month period ended December 31, 1999 compared to $0.4 million
during the six-month period ended December 31, 1998.
At December 31, 1999, the Company did not have any material commitments for
capital expenditures. The Company believes that its existing cash balances,
available credit facilities and funds generated by operations will be sufficient
to meets its anticipated working capital and capital expenditure requirements
for the foreseeable future.
YEAR 2000
The Company has aggressively addressed Year 2000 issues related to the
processing of date-sensitive data. A cross-functional team was assembled, and a
determination was made as to which systems were Year 2000 non-compliant. The
Company believes that all of the critical financial, manufacturing, R&D and
other systems are fully compliant. All costs associated with making these
systems Year 2000 compliant have been expensed as incurred and have been
insignificant.
Concurrent has reviewed customer and supplier relationships, and has a Year
2000 software product available which many of our customers have implemented.
While the Company has taken all reasonable efforts, including direct mailings
and internet web site, to make information on the Year 2000 readiness of its
products available to its customers, this information may not have reached all
customers, particularly third-party customers. Although the Company believes it
has addressed Year 2000 readiness issues related to its products and through
February 11, 2000 has not experienced any significant Year 2000 issues, there
may be disruptions and/or product failures that are unforeseen.
The Company has requested, and in many cases obtained, assurances from its
major suppliers that they have addressed these issues and that products procured
by the Company will function properly in the Year 2000.
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<PAGE>
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS:
Certain matters discussed in this Form 10-Q may be "forward-looking statements"
as defined in the Private Securities Litigation Reform Act of 1995. Concurrent
Computer Corporation cautions investors that any forward-looking statements made
herein are not guarantees of future performance and that a variety of factors
could cause its actual results and experience to differ materially from the
anticipated results or other expectations expressed in such forward-looking
statements. The risks and uncertainties which could affect Concurrent Computer
Corporation's performance or results include, without limitation, changes in
product demand; economic conditions; various inventory risks due to changes in
market conditions; uncertainties relating to the development and ownership of
intellectual property; uncertainties relating to the ability of Concurrent
Computer Corporation and other companies to enforce their intellectual property
rights; the pricing and availability of equipment, materials and inventories;
technological developments; delays in testing of new products; rapid technology
changes; the highly competitive environment in which Concurrent Computer
Corporation operates; the entry of new well-capitalized competitors into
Concurrent Computer Corporation's markets, and other risks and uncertainties.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK
As of December 31, 1999, the Company had cash and cash equivalents of $8.0
million invested in liquid money market funds or bank accounts with average
maturities of less than 90 days. The cash and cash equivalents are subject to
interest rate risk and we may receive higher or lower interest income if market
interest rates increase or decrease. A hypothetical increase or decrease in
market interest rates by 10 percent from levels at March 31, 1999 would not have
a material impact on our cash or cash equivalents.
We currently conduct business in a number of foreign countries and we plan to
conduct business in additional regions outside of the United States. A decrease
in the value of foreign currencies relative to the U.S. dollar could result in
losses from foreign currency translations. The Company does not currently hedge
its foreign currency risk.
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<PAGE>
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
(10.1) Amended and Restated Employment Agreement of Daniel S. Dunleavy
(10.2) Amended and Restated Employment Agreement of Steve G. Nussrallah
(10.3) Employment Agreement of Steven R. Norton
(11) Statement on computation of per share earnings
(27) Financial Data Schedule
(b) Reports on Form 8-K.
On January 4, 2000, the Company filed a Current Report on Form 8-K
announcing the promotion of Steve Nussrallah to President and Chief Executive
Officer of the Company effective January 1, 2000. In addition, on January 11,
2000, the Company filed a Current Report on Form 8-K/A which amended the Form
8-K filed on November 12, 1999 announcing the acquisition of Vivid Technology,
Inc.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this quarterly report for the quarter ended December
31, 1999 to be signed on its behalf by the undersigned thereunto duly
authorized.
Date: February 14, 2000 CONCURRENT COMPUTER CORPORATION
By: /s/ Steven R. Norton
----------------------
Steven R. Norton
Chief Financial Officer
(Principal Financial and Accounting Officer)
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<PAGE>
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
--------------------
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement") is made
and entered into as of the 6th day of December, 1999 by and between CONCURRENT
COMPUTER CORPORATION, a Delaware corporation ("Concurrent" or the "Company"),
and DANIEL S. DUNLEAVY (the "Employee").
WHEREAS, the Company and the Employee have entered into that certain
Employment Agreement dated as of June 27, 1996 (the "Original Agreement");
WHEREAS, the Company and the Employee desire to amend and restate the
Original Agreement to more accurately reflect the current duties and
responsibilities performed by Employee and payments to be made to Employee upon
termination of employment;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
1. EMPLOYMENT. The Company hereby employs the Employee and the
----------
Employee hereby accepts employment with the Company for the term set forth in
Paragraph 2 below, in the position and with the duties and responsibilities set
forth Paragraph 3 below, and upon other terms and conditions hereinafter stated.
2. TERM. The term of employment hereunder shall commence on the
----
date hereof and shall continue until otherwise terminated by either party at any
time in accordance with the terms hereof.
3. POSITION; DUTIES; RESPONSIBILITIES.
------------------------------------
a. It is intended that at all times during the term of employment
hereunder, the Employee shall serve in such senior executive position as
President, Real-Time Division as shall be assigned to the Employee by the Chief
Executive Officer of the Company (the "Chief Executive Officer") or by the
Company's Board of Directors (the "Board of Directors") from time to time. The
Employee agrees to perform such senior executive and managerial services
customary to such position as are necessary to the operations of the Company and
as may be assigned to him from time to time by the Chief Executive Officer or
the Board of Directors.
<PAGE>
b. Throughout the term of employment hereunder, the Employee shall
devote his full time and undivided attention during normal business hours to the
business and affairs of the Company, as appropriate to his responsibilities and
duties hereunder, except for reasonable vacations and illness or other
disability, but nothing in the Agreement shall preclude the Employee from
devoting reasonable periods required for serving as a director or member of any
advisory committee of not more than two (at any time) organizations involving no
conflict of interest with the interests of the Company (subject to approval by
the Board of Directors, which approval shall not be unreasonably withheld), from
engaging in charitable and community activities, and from managing his personal
investments, provided such activities do not materially interfere with the
performance of his duties and responsibilities under the Agreement.
4. COMPENSATION
------------
a. Salary: For services rendered by the Employee during the term
of employment hereunder, the Employee shall be paid a salary, payable in equal
biweekly installments (or, if different, payable in accordance with the then
existing applicable payroll policy of the Company, but in no event less
frequently than equal monthly installments) at an annualized rate of no less
than $220,000, such salary to be reviewed for increase annually with such
increases as shall be awarded in the discretion of the Board of Directors taking
into account such factors as corporate and individual performance and general
business conditions, including changes in the Miami-Fort Lauderdale metropolitan
area cost of living index.
b. Annual Bonus: During the term of employment hereunder, the
Employee will be provided an annual bonus opportunity in a target amount not
less than 40% of the then current salary, (hereafter, the "Executive Bonus
Plan") the actual amount to be paid depending upon the degree of achievement
of various objectives. The objectives for each year and other terms and
conditions of the bonus opportunity shall be established by the Board of
Directors or a committee thereof and shall be reasonably consistent with the
business plan of the Company for such year established in advance.
c. Employee Benefit Plans: During the term of employment
hereunder, the Employee will be eligible to participate in all employee benefit
programs of the Company now or hereafter made available to senior executives, in
accordance with the provisions thereof as in effect from time to time; for
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example, to the extent made available to senior executives of the Company from
time to time, any incentive compensation plan, profit sharing and savings or
other retirement plans, stock option and purchase plans, group life insurance,
hospitalization, medical and dental coverage, disability plans, annual physical
examination, car phone, holidays and accrued vacations. In any event, the
Employee shall be entitled to vacation days at the rate of four weeks per year
or such greater amount as may be provided by Company policies in effect from
time to time.
d. Stock and Stock Options: On June 27, 1996 the Board of
Directors granted to the Employee a stock option to purchase an aggregate of
320,000 shares with an exercise price equal to $2.10, pursuant to resolutions
duly adopted. The employee was also granted an additional stock option to
purchase an aggregate of 80,000 shares with an exercise price equal to $2.10
pursuant to resolutions duly adopted and the terms of the Long-Term Incentive
Compensation Plan for the 3-year cycle ending June 30, 1999.
e. Business Expense Reimbursements: During the term of employment
hereunder, the Employee will be entitled to receive reimbursement by the Company
for all reasonable out-of-pocket expenses incurred by him (in accordance with
the policies and procedures established by the Company for its senior level
executives), in connection with his performing services hereunder.
5. GROUNDS FOR TERMINATION. The Board of Directors of the Company may
------------------------
terminate this Agreement for Cause. As used herein, "Cause" shall mean any of
the following: (a) the Employee has committed a willful serious act against the
Company intended to enrich himself at the expense of the Company, such as
embezzlement, or has been convicted of a felony involving moral turpitude; or
(b) Employee has (i) willfully and grossly neglected his duties hereunder, or
(ii) intentionally failed to observe specific directives or policies of the
Board of Directors, which directives or policies were consistent with his
positions, duties and responsibilities hereunder, and which failure had, or
continuing failure will have, a material adverse effect on the Company. Prior
to any such termination, Employee shall be given written notice by the Board of
Directors that the Company intends to terminate his employment for Cause under
this Paragraph 5, which written notice shall specify the particular acts or
omissions on the basis of which the Company intends to so terminate Employee's
employment, and Employee (with his counsel, if he so chooses) shall be given the
opportunity, within 15 days of his receipt of such notice, to have a meeting
with the Board of Directors to discuss such acts or omissions and be given
reasonable time to remedy the situation. In the event of such termination, the
Employee shall be promptly furnished written specification of the basis therefor
in reasonable detail.
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6. TERMINATION BY EMPLOYEE. Employee may terminate this Agreement at
-------------------------
any time with Good Reason. "Good Reason" shall exist if:
a. the Company demotes or otherwise elects or appoints the
Employee to lesser offices than set forth in Paragraph 3, or fails to elect or
appoint him to such positions;
b. the Company causes a material change in the nature or scope of
the authorities, powers, functions, duties or responsibilities attached to the
Employee's positions as described in Paragraph 3;
c. the Company decreases the Employee's compensation below the
levels provided for by the terms of Paragraph 4 (taking into account increases
made from time to time in accordance with Paragraph 4);
d. the Company materially reduces the Employee's benefits under
any employee benefit plan, program or arrangement of the Company (other than a
change that affects all employees similarly situated) from the level in effect
upon the Employee's commencement or participation;
e. the Company commits any other material breach of the provisions
of this Agreement (except those set forth in Paragraph 4.a.) and Employee
provides at least 15 days' prior written notice to at least two members of the
Company's Board of Directors of the existence of such breach and his intention
to terminate this Agreement (no such termination shall be effective if such
breach is cured during such period); or
f. the Company fails to comply with the provisions of Paragraph
4.a. for an uninterrupted 10 day period.
The Employee has the absolute right to resign and receive all benefits
detailed in Paragraph 8 of this Agreement provided he has continued in the
position as President of the Real-Time Division, or a more senior position,
until July 1, 2002.
7. PAYMENT AND OTHER PROVISIONS UPON TERMINATION FOR CAUSE OR EMPLOYEE
--------------------------------------------------------------------
CONVENIENCE. In the event Employee's employment with the Company (including its
- - -----------
subsidiaries) is terminated by the Company for Cause as provided in Paragraph 5
prior to a Change of Control or more than three years after the occurrence of a
Change of Control (as defined in Paragraph 9.d. hereof), then the following
provisions shall apply. These same provisions shall apply if the Employee
terminates his employment other than in accordance with the provisions of
Paragraph 6 hereof.
a. Compensation: On or before Employee's last day of employment
with the Company, the Company shall pay in a lump sum to Employee such amount of
compensation due Employee for services rendered to the Company, as well as
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compensation for unused vacation time, as has accrued but remains unpaid. Any
and all other rights to compensation of any kind granted to Employee under this
Agreement shall terminate as of the date of termination, except as may be
otherwise required by statute.
b. Noncompetition Period: The provisions of Paragraph 13 shall
continue to apply with respect to Employee for a period of one year following
the date of termination.
8. PAYMENTS AND OTHER PROVISIONS UPON TERMINATION OTHER THAN FOR CAUSE
--------------------------------------------------------------------
OR FOR GOOD REASON. In the event Employee's employment with the Company
- - ---------------------
(including its subsidiaries) is terminated by the Company for any reason other
than for Cause as provided in Paragraph 5 and other than as a consequence of
Employee's death, disability, or normal retirement under the Company's
retirement plans and practices prior to a Change of Control or more than three
years after the occurrence of a Change of Control (as defined in Paragraph 9.d.
hereof), then the following provisions shall apply. These same provisions shall
apply if Employee terminates his employment in accordance with the provisions of
Paragraph 6 hereof, prior to a Change of Control or more than three years after
the occurrence of a Change of Control (as defined in Paragraph 9.d. hereof).
a. Salary and Bonus Payments: On or before Employee's last day of
employment with the Company, the Company shall promptly pay in a lump sum to
Employee as compensation for services rendered to the Company a cash amount
equal to the amount of twice the Employee's base salary and target bonus under
the Executive Bonus Plan as in effect immediately prior to his date of
termination. At the election of the Company, the cash amount referred to in
this subparagraph 8.a. may be paid to Employee in periodic installments in
accordance with the normal salary payment procedures of the Company.
b. Benefit Plan Coverage: The Company shall maintain in full
force and effect for Employee and his dependents for two years after the date of
termination, all life, health, accident, and disability benefit plans and other
similar employee benefit plans, programs and arrangements in which Employee or
his dependents were entitled to participate immediately prior to the date of
termination, in such amounts as were in effect immediately prior to the date of
termination, provided that such continued participation is possible under the
general terms and provisions of such benefit plans, programs and arrangements.
In the event that participation in any benefit plan, program or arrangement
described above is barred, or any such benefit plan, program or arrangement is
discontinued or the benefits thereunder materially reduced, the Company shall
arrange to provide Employee and his dependents for two years after the date of
termination with benefits substantially similar to those that they were entitled
to receive under such benefit plans, programs and arrangements immediately prior
to the date of termination. If immediately prior to the date of termination the
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Company provided Employee with any club memberships, Employee will be entitled
to continue such memberships at his sole expense. Notwithstanding any time
period for continued benefits stated in this subparagraph 8.b., all benefits in
this subparagraph 8.b. will terminate on the date that Employee becomes an
employee of another employer and eligible to participate in the employee benefit
plans of such other employer. To the extent that Employee was required to
contribute amounts for the benefits described in this subparagraph 8.b. prior to
his termination, he shall continue to contribute such amounts for such time as
these benefits continue in effect after termination.
c. Savings and Other Plans: Except as otherwise more specifically
provided herein or under the terms of the respective plans relating to
termination of employment, Employee's active participation in any applicable
savings, retirement, profit sharing or supplemental employee retirement plans or
any deferred compensation or similar plan of the Company or any of its
subsidiaries shall continue only through the last day of his employment. All
other provisions, including any distribution and/or vested rights under such
plans, shall be governed by the terms of those respective plans.
d. Noncompetition Period: The provisions of Paragraph 13 shall
continue, beyond the time periods set forth in such paragraphs, to apply with
respect to employee for the shorter of (x) twenty-four (24) months following the
date of termination or (y) until such time as the Company has failed to comply
with the provisions of subparagraph 8.a. for an uninterrupted 10-day period and
such failure is not cured within 15 days after written notice of such failure is
delivered to at least two non-employee directors of the Company.
9. PAYMENT AND OTHER PROVISIONS AFTER CHANGE OF CONTROL. In the event
-----------------------------------------------------
Employee's employment with the Company is terminated within three years
following the occurrence of a Change of Control (other than as a consequence of
his death or disability, or of his normal retirement under the Company's
retirement plans and practices) either (i) by the Company for any reason other
than for Cause in accordance with Paragraph 5, or (ii) by Employee in accordance
with the provisions of Paragraph 6 hereof, then the following provisions shall
apply:
a. Salary and Bonus Payments: On or before Employee's last day of
employment with the Company, the Company shall promptly pay in a lump sum a cash
amount equal to the amount of twice the Employee's annual base salary as in
effect at the date of termination and the amount of the Employee's target bonus
under the Executive Bonus Plan for the fiscal year in which the date of
termination occurs, multiplied by two.
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<PAGE>
b. Noncompetition Period: In the event of a termination under the
circumstances described in Paragraph 9, the provisions of Paragraph 13 shall be
without force and effect and shall not apply to Employee.
c. For purposes of this Agreement, the term "Change of Control"
shall mean:
i. The acquisition, other than from the Company, by any
individual, entity or group (within the meaning of Rule 13d-3 promulgated under
the Exchange Act or any successor provision)(any of the foregoing described in
this Paragraph 9.c.i hereafter a "Person") of 33% or more of either (a) the then
outstanding shares of Capital Stock of the Company (the "Outstanding Capital
Stock") or (b) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Voting Securities"), provided, however, that any acquisition by
--------- -------
(x) the Company or any of its subsidiaries, or any employee benefit plan (or
related trust) sponsored or maintained by the Company or any of its subsidiaries
or (y) any Person that is eligible, pursuant to Rule 13d-1(b) under the Exchange
Act, to file a statement on Schedule 13G with respect to its beneficial
ownership of Voting Securities, whether or not such Person shall have filed a
statement on Schedule 13G, unless such Person shall have filed a statement on
Schedule 13D with respect to beneficial ownership of 33% or more of the Voting
Securities or (z) any corporation with respect to which, following such
acquisition, more than 60% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Capital Stock and Voting Securities
immediately prior to such acquisition in substantially the same proportion as
their ownership, immediately prior to such acquisition, of the Outstanding
Capital Stock and Voting Securities, as the case may be, shall not constitute a
Change of Control; or
ii. Individuals who, as of the Effective Date, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board, provided that any individual becoming a director
subsequent to the Effective Date whose election or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
Directors of the Company (as such terms are used in Rule 14a-11 of Regulation
14A, or any successor Paragraph, promulgated under the Exchange Act); or
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<PAGE>
iii. Approval by the shareholders of the Company of a
reorganization, merger or consolidation (a "Business Combination"), in each
case, with respect to which all or substantially all holders of the Outstanding
Capital Stock and Voting Securities immediately prior to such Business
Combination do not, following such Business Combination, beneficially own,
directly or indirectly, more than 60% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from the Business Combination; or
iv. (a) a complete liquidation or dissolution of the Company
or (b) a sale or other disposition of all or substantially all of the assets of
the Company other than to a corporation with respect to which, following such
sale or disposition, more than 60% of, respectively, the then outstanding shares
of common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors is then owned
beneficially, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Capital Stock and Voting Securities immediately prior to such sale
or disposition in substantially the same proportion as their ownership of the
Outstanding Capital Stock and Voting Securities, as the case may be, immediately
prior to such sale or disposition.
10. TERMINATION BY REASON OF DEATH. If Employee shall die while
----------------------------------
employed by the Company both prior to termination of employment and during the
effective term of this Agreement, all Employee's rights under this Agreement
shall terminate with the payment of such amounts of annual base salary as have
accrued but remain unpaid and a prorated amount of targeted bonus under the
Executive Bonus Plan through the month in which his death occurs, plus six
additional months of the fixed salary and targeted bonus. All benefits under
Paragraphs 8.c. shall be extended to Employee's estate as described in such
paragraphs. In addition, Employee's eligible dependents shall receive continued
benefit plan coverage under Paragraph 8.b. for six months from the date of
Employee's death.
11. TERMINATION BY DISABILITY. Employee's employment hereunder may be
-------------------------
terminated by the Company for disability. In such event, all Employee's rights
under this Agreement shall terminate with the payment of such amounts of annual
base salary as have accrued but remain unpaid as of the thirtieth (30th) day
after such notice is given except that all benefits under Paragraphs 8.b. and
------
8.c. shall be extended to Employee as described in such paragraphs, provided,
---------
however, that, with respect to Paragraph 8.b., the period for continued benefit
- - -------
plan coverage shall be limited to six months from the date of termination. In
addition, the noncompetition provision of Paragraph 13 shall continue to apply
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<PAGE>
for a period of six months from the date of termination for disability. For
purposes of this Agreement, "disability" is defined to mean that, as a result of
Employee's incapacity due to physical or mental illness:
a. Employee shall have been absent from his duties as an officer
of the Company on a substantially full-time basis for six (6) consecutive
months: and
b. Within thirty (30) days after the Company notifies Employee in
writing that it intends to replace him, Employee shall not have returned to the
performance of his duties as an officer for the Company on a full-time basis.
Such notice may be given by the Company at any time after Employee has been
absent for a total of four consecutive months.
12. RETIREMENT. Employee shall be entitled to participate in the
-----------
Company's Retirement Savings Plan and any other retirement plan hereafter made
available to senior executive officers of the Company in accordance with the
provisions thereof as in effect from time to time.
13. NON-COMPETE AND CONFIDENTIAL INFORMATION. The Company and the
-------------------------------------------
Employee will enter into a non-compete and confidentiality agreement
substantially in the form attached as Exhibit A hereto.
----------
14. SUCCESSORS AND ASSIGNS
------------------------
a. Assignment by the Company: This Agreement shall be binding
upon and inure to the benefit of the Company or any corporation or other entity
to which the Company may transfer all or substantially all its assets and
business and to which the Company may assign this Agreement, in which case
"Company" as used herein shall mean such corporation or other entity.
b. Assignment by the Employee: The Employee may not assign this
Agreement or any part thereof without the prior written consent of the Company,
which consent may be withheld by the Company for any reason it deems
appropriate; provided, however, nothing herein shall preclude the Employee from
designating one or more beneficiaries to receive any amount that may be payable
following the occurrence of his legal incompetency or his death and shall not
preclude the legal representative of his estate from assigning any right
hereunder to the person or persons entitled thereto under his will or, in the
case of intestacy, to the person or persons entitled thereto under the laws of
intestacy applicable to his estate. The term "beneficiaries", as used in this
Agreement, shall mean a beneficiary or beneficiaries so designated to receive
any such amount or if no beneficiary has been so designated the legal
representative of the Employee (in the event of his incompetency) or the
Employee's estate.
-9-
<PAGE>
15. ARBITRATION. Any dispute or controversy under or in connection
-----------
with this Agreement shall be settled exclusively by arbitration in Florida by
one arbitrator in accordance with the labor arbitration rules of the American
Arbitration Association then in effect. The arbitrator's award may include the
manner in which fees of counsel and other expenses in connection with the
dispute or controversy are to be borne. The arbitrator's authority and
jurisdiction is limited to interpreting and applying the express provisions of
this agreement and the arbitrator shall not have the authority to alter or add
to the provisions of this agreement. Judgment may be entered upon the
arbitrator's award in any court having jurisdiction.
16. GOVERNING LAW. This Agreement shall be deemed a contract made
--------------
under, and for all purposes shall be construed in accordance with, the laws of
the State of Florida without reference to the principles of conflicts of law.
17. ENTIRE AGREEMENT. This Agreement contains all the understandings
-----------------
and representations between the parties hereto pertaining to the subject matter
hereof and supersedes all undertakings and agreements, whether oral or in
writing, if any there be, previously entered into by them with respect thereto.
18. AMENDMENT OR MODIFICATION; WAIVER. No provision in this Agreement
----------------------------------
may be amended or waived unless such amendment or waiver is agreed to in
writing, signed by the Employee and an officer of the Company thereunto duly
authorized. Except as otherwise specifically provided in the Agreement, no
waiver by any party hereto of any breach by another party hereto of any
condition or provision of the Agreement to be performed by such other party
shall be deemed a waiver of a similar or dissimilar provision or condition at
the same or any prior or subsequent time.
19. NOTICES. Any notice to be given hereunder shall be in writing and
-------
delivered personally or sent by certified mail, postage prepaid, return receipt
requested, addressed to the party concerned at the address indicated below or to
such other address as such party may subsequently give notice of hereunder in
writing:
TO THE COMPANY: CONCURRENT COMPUTER CORPORATION
2101 WEST CYPRESS CREEK ROAD
FORT LAUDERDALE, FL 33309
ATTN: CHIEF EXECUTIVE OFFICER
-10-
<PAGE>
TO THE EMPLOYEE: DANIEL S. DUNLEAVY
10328 N.W. 50TH COURT
CORAL SPRINGS, FL 33076
20. SEVERABILITY. In the event that any provision or portion of the
------------
Agreement shall be determined to be invalid or unenforceable for any reason, the
remaining provisions or portions of the Agreement shall be unaffected thereby
and shall remain in full force and effect to the fullest extent permitted by
law.
21. WITHHOLDING. Anything to the contrary notwithstanding, all
-----------
payments required to be made by the Company hereunder to the Employee or his
estate or beneficiaries, shall be subject to withholding of such amounts
relating to taxes as the Company may reasonably determine it should withhold
pursuant to any applicable law or regulation. In lieu of withholding such
amounts, in whole or in part, the Company may, in its sole discretion, accept
other provision for payment of taxes as required by law, provided it is
satisfied that all requirements of law affecting its responsibilities to
withhold such taxes have been satisfied.
22. SURVIVORSHIP. The respective rights and obligations of the parties
------------
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
23. REFERENCES. In the event of the Employee's death or judicial
----------
determination of his incompetence, reference in the Agreement to the Employee
shall be deemed, where appropriate, to refer to his legal representatives, or,
where appropriate, to his beneficiary or beneficiaries.
24. TITLES. Titles to the Paragraphs in this Agreement are intended
------
solely for convenience and no provision of the Agreement is to be construed by
reference to the title of any Paragraph.
25. COUNTERPARTS. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
-11-
<PAGE>
26. CERTAIN LIMITATIONS ON REMEDIES. Paragraph 8.a. provides that
----------------------------------
certain payments and other benefits shall be received by Employee upon the
termination of Employee by the Company other than for Cause and states that
these same provisions shall apply if Employee terminates his employment in
accordance with the provisions of Paragraph 6 hereof. It is the intention of
this Agreement that if the Company terminates Employee other than for Cause (and
other than as a consequence of Employee's death, disability or normal
retirement) or if Employee terminates his employment in accordance with the
provisions of Paragraph 6 hereof, then the payments and other benefits set forth
in Paragraph 8.a. shall constitute the sole and exclusive remedies of Employee.
This Paragraph 26 shall have no effect upon the provisions of Paragraph 9 of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
CONCURRENT COMPUTER CORPORATION EMPLOYEE
/s/ E. Courtney Siegel /s/ Daniel S. Dunleavy
- - ------------------------------- ------------------------
E. Courtney Siegel Daniel S. Dunleavy
Chairman, President and Chief Executive Officer
-12-
<PAGE>
Exhibit A
---------
NON-COMPETE AND CONFIDENTIALITY AGREEMENT
-----------------------------------------
I, the undersigned, in consideration of and as a condition to my employment
by Concurrent Computer Corporation (the "Company), do hereby agree with the
Company as follows:
1. Competition. During the period of my employment by the Company, I
------------
will devote my full time and best efforts to the business of the Company and I
will not, directly or indirectly, alone or as a partner, officer, director,
employee or holder of more than 5% of the common stock of any other
organization, engage in any business activity which competes directly or
indirectly with the products or services being developed, manufactured or sold
by the Company. I also agree that, following any termination of such
employment, I will not, for any periods in respect of which I receive
compensation continuation payments from the Company and, if longer, but only
with respect to (b) below, for a period of one year after such termination, (a)
solicit or seek to obtain orders for any products or services similar to those
being developed, manufactured or sold by the Company from any person or
organization that is or was a customer of the Company or (b) recruit or
otherwise seek to induce employees of the Company to terminate their employment
or violate any agreement with the Company.
2. Confidential Information. Except as may be required in the
--------------------------
performance of my duties with the Company, or as may be necessary to comply with
any order or decree issues by a court having competent jurisdiction, I will not
at any time, whether during or after termination of my employment with the
Company, reveal to any person or organization any of the trade secrets or
confidential information of the Company, and I will not use or attempt to use
any such information in any manner that may directly or indirectly injure or
cause loss to the Company. All information concerning the business of the
Company, including technical, financial and business information, shall be
considered confidential unless it is or becomes publicly available through no
fault of mine or unless it is disclosed by the Company to third parties without
similar restrictions.
Further, I agree that any and all documents, notes, or memoranda prepared
by me or others and containing trade secrets or confidential information shall
be and remain the sole and exclusive property of the Company, and that upon
termination of my employment I will immediately deliver all of such documents,
notes or memoranda, including all copies, to the Company at its main office.
-13-
<PAGE>
3. Inventions and Copyrights. If at any time or times during my
----------------------------
employment (or within six months thereafter if based on confidential information
within the meaning of Paragraph 2 above), I make or discover, either alone or
with others, any invention, modification, development, improvement, process or
secret, whether or not patented or patentable (collectively, "inventions") in
the field of computer science or instrumentation, I will disclose in reasonable
detail the nature of such invention to the Company in writing, and if it relates
to the business of the Company or any of the products or services being
developed, manufactured or sold by the Company, such invention and the benefits
thereof shall immediately become the sole and absolute property of the Company
provided the Company notifies me in reasonable detail within 90 days after
receipt of my disclosure of such invention that it believes such invention
relates to the business of the Company or any of the products or services being
developed, manufactured or sold by the Company. I also agree to transfer such
inventions and benefits and rights resulting from such inventions to the Company
without compensation and will communicate without cost, delay or prior
publications all available information relating to the inventions to the
Company. At the Company's expense I will also, whether before or after
termination of my employment, sign all documents (including patent applications)
and do all acts and things that the Company may deem necessary or desirable to
effect the full assignment to the Company of my right and title to the
inventions or necessary to defend any opposition thereto. I also agree to
assign to the Company all copyrights and reproduction rights to any materials
prepared by me in connection with my employment.
4. Conflicting Agreements. I represent that I have attached to this
------------------------
Agreement a copy of any agreement which presently affects my ability to comply
with the terms of this Agreement, and that to the best of my knowledge my
employment with the Company will not conflict with any agreement to which I am
subject. I have returned all documents and materials belonging to any of my
former employers. I will not disclose to the Company or induce any of the
Company's employees to use confidential information of any of my former
employers.
5. Miscellaneous.
--------------
(a) I hereby give the Company permission to use photographs of me,
during my employment, with or without using my name, for any purposes the
Company deems necessary or desirable.
(b) The Company shall have, in addition to any and all remedies of
law, the right to an injunction, specific performance and other equitable relief
as may be appropriate to prevent the violation of my obligations hereunder.
(c) I understand that this Agreement does not create an obligation
on the Company or any other person to continue my employment.
-14-
<PAGE>
(d) This Agreement shall be construed in accordance with the laws
of the State of Florida. I agree that each provision of this Agreement shall be
treated as a separate and independent clause, and the unenforceability of any
clause shall in no way impair the enforceability of any of the other clauses.
Moreover, if one or more of the provisions contained in this Agreement shall for
any reason be held to be extensively broad as to scope, activity, geographical
area or subject so as to be unenforceable at law, such provision or provisions
shall be construed by the appropriate judicial body by limiting and reducing it
or them so as to be enforceable to the extent compatible with applicable law as
it shall then appear.
(e) My obligations under this Agreement shall survive the
termination of my employment regardless of the manner of such termination for
the time periods set forth in paragraphs 1 and 3, above, with respect to the
matters covered therein and shall be binding upon my heirs, executors and
administrators.
(f) The term "Company" as used in this Agreement includes
Concurrent Computer Corporation and any of its subdivisions or affiliates. The
Company shall have the right to assign this Agreement to its successors and
assigns.
(g) The foregoing is the entire agreement between the Company and
me with regard to its subject matter, and may not be amended or supplemented
except by a written instrument signed by both the Company and me. The Paragraph
headings are inserted for convenience only, and are not intended to affect the
meaning of this Agreement.
/s/ Daniel S. Dunleavy
- - -----------------------
Daniel S. Dunleavy
Date: December 6, 1999
----------------
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<PAGE>
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement") is made
and entered into as of the ________ day of November, 1999 by and between
CONCURRENT COMPUTER CORPORATION, a Delaware corporation with its corporate
headquarters in Georgia ("Company"), and STEVE G. NUSSRALLAH ("Employee").
WHEREAS, the Company and Employee have entered into an Employment Agreement
dated as of November 17, 1998 (the "Original Agreement"); and
WHEREAS, the Company and Employee desire to amend and restate the Original
Agreement and thereby to replace and supercede it with this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. EMPLOYMENT. The Company hereby employs Employee, and Employee
----------
hereby accepts employment, upon the terms of and subject to this Agreement.
2. TERM. The term ("Term") of this Agreement shall commence and this
----
Agreement shall become effective as of the date hereof, and shall continue until
otherwise terminated by either party at any time in accordance with the terms
hereof.
3. DUTIES. During his employment hereunder from the date hereof
------
through December 31, 1999, Employee shall serve as the President and Chief
Operating Officer of the Company. In such capacity, Employee shall have
responsibility for the day-to-day operations of the Company, subject to the
authority and control of the Chief Executive Officer of the Company. The
Company shall take such actions as necessary to appoint Employee as a member of
the Board of Directors of the Company effective on the date hereof or as soon
thereafter as practicable. Commencing January 1, 2000, Employee shall serve as
the President and Chief Executive Officer of the Company. In such capacity,
Employee shall have general and active charge of the business and affairs of the
Company, and responsibility for the day-to-day operations of the Company,
subject to the authority and control of the Board of Directors of the Company.
Throughout the term of employment hereunder, the Employee shall devote his full
time and undivided attention during normal business hours to the business and
affairs of the Company, as appropriate to his duties and responsibilities
hereunder, except for reasonable vacations and illness or other disability, but
nothing in this Agreement shall preclude the Employee from devoting reasonable
periods required for serving as a director or member of any advisory committee
of not more than two (at any time) "for profit" organizations involving no
conflict of interest with the interests of the Company (subject to approval by
the Board of Directors, which approval shall not be unreasonably withheld), or
from engaging in charitable and community activities, or from managing his
personal investments, provided such activities do not materially interfere with
the performance of his duties and responsibilities under this Agreement.
-1-
<PAGE>
4. COMPENSATION.
------------
a. Salary: Employee shall be paid an initial salary of $280,000
per year, payable in equal installments not less than monthly. Commencing
January 1, 2000, Employee shall be paid a salary of $318,000 per year payable in
equal installments not less than monthly. The Employee's salary shall be
reviewed at least annually.
b. Stock Option/Bonus: In addition to salary, Employee shall be
entitled to participate in the Company's Stock Option Plan (the "Stock Option
Plan") and Employee was granted an option (herein "Option # 1") to purchase
1,000,000 shares of common stock of the Company (such number to be subject to
adjustment as provided in section 5, paragraph 3, of the Stock Option Plan),
such grant occurring on November 17, 1998. The per share exercise price of the
option was the fair market value of the Company's common stock as of the date of
grant ($2.75), and the option vests in three equal annual installments over the
three-year period that commenced November 17, 1998. The Employee was also
granted a long-term option (herein "Option # 2") to purchase up to 250,000
shares of common stock of the Company, such grant occurring on November 17,
1998, at an exercise price equal to the fair market value of a share of common
stock as of the date of grant ($2.75), and the option shall vest in its entirety
on November 17, 2001, and the Employee has also been granted an option (herein
"Option # 3") to purchase up to 50,000 shares of common stock of the Company,
such grant occurring on August 17, 1999, at an exercise price equal to the fair
market value of a share of common stock as of the date of grant ($8.00), and the
option shall vest in three equal annual installments over the three year period
that commenced on August 17, 1999. Further, Employee has been and will be
provided with an annual bonus opportunity with an initial target bonus for
Employee of $150,000, representing 60% of Employee's prior annual salary under
the Original Agreement (hereafter the "Executive Bonus Plan"), the actual amount
to be paid depending upon the degree of achievement of various objectives.
Commencing January 1, 2000, Employee shall be provided with an annual bonus
opportunity of 65% of Employee's annual salary as set forth in Paragraph 4.a
above, the actual amount to be paid depending upon the degree of achievement of
various objectives. The objectives for each year and other terms and conditions
of the bonus opportunity shall be established by the Board of Directors or a
committee thereof and shall be reasonably consistent with the business plan of
the Company for such year, or portion thereof, established in advance. The
target bonus opportunity may be increased to no more than an additional 100% for
superior performance as defined and determined under the Executive Bonus Plan.
c. Insurance: During his employment hereunder, Employee shall be
entitled to participate in such health, life, disability and other insurance
programs, if any, that the Company may offer to other key executive employees of
the Company from time to time.
d. Other Benefits: During his employment hereunder, Employee
shall be entitled to such other benefits, if any, that the Company may offer to
other key executive employees of the Company from time to time. Certain other
benefits are described on Schedule A hereto. In addition, the Company and
Employee have entered into an Indemnification Agreement in the form the Company
may enter into with other key executive employees of the Company from time to
time.
-2-
<PAGE>
e. Vacation: Employee shall be entitled to four weeks vacation
leave (in addition to holidays) in each calendar year during the Term, or such
additional amount as may be set forth in the vacation policy that the Company
shall establish from time to time.
f. Expense Reimbursement: Employee shall, upon submission of
appropriate supporting documentation, be entitled to reimbursement of reasonable
out-of-pocket expenses incurred in the performance of his duties hereunder in
accordance with policies established by the Company. Such expenses shall
include, without limitation, reasonable entertainment expenses, gasoline and
toll expenses and cellular phone use charges, if such charges are directly
related to the business of the Company.
5. GROUNDS FOR TERMINATION. The Company may terminate this Agreement
-------------------------
for Cause. As used herein, "Cause" shall mean any of the following: (a) the
Employee (1) has been convicted of a felony, or (2) has been held liable to the
Company by a court of competent jurisdiction for a breach of fiduciary duty,
tort or other violation of law, which results in a material adverse affect on
the Company; or (b) the Employee (i) has willfully and grossly neglected his
duties as set forth under this Agreement, or (ii) has intentionally failed to
observe specific written directives or policies of the President and Chief
Executive Officer or the Board of Directors, which directives or policies were
consistent with his positions, duties and responsibilities hereunder and did not
violate applicable law, and which neglect or failure had, or will have, a
material adverse effect on the Company. Prior to any termination for Cause, the
Employee shall be given written notice (the "Cause Notification") by the Board
of Directors which notice shall set forth (1) the specific action(s) or
inaction(s) which constitute "Cause" under this Agreement, (2) that the Company
intends to terminate the Employee's employment for Cause under this Section 5
unless the Employee takes remedial action (as set forth below), and (3) the
remedial action(s) which the Company would accept. Within 15 days of his
receipt of such Cause Notification, the Employee shall have the right to have a
meeting with the Board of Directors to discuss such specific actions or
omissions. Within 30 days after receipt of such Cause Notification (or such
later date as the Board may determine in good faith and communicate to
Employee), but in no event less than a reasonable period after the receipt of
the Cause Notification by the Employee (the "Remedy Period"), the Employee shall
have the opportunity to remedy the situation. In the event that the Employee is
terminated following the Remedy Period, the Employee shall be furnished as of
his date of termination an additional written notice specifying (1) his date of
termination, (2) each and every reason for the Employee's termination for Cause
by the Company, and (3) each and every reason that the Company does not accept
the remedial action taken by the Employee. To the extent that the Employee
incurs legal expenses by seeking the advice and representation of legal counsel
to respond to a Cause Notification for an event listed in clause (b) above (but
not clause (a) above) or to respond to a subsequent termination of the Employee
for such Cause under this Agreement (including, but not limited to, any legal
action against the Company challenging such termination), the Employee shall be
entitled to reimbursement by the Company of all such legal expenses incurred by
the Employee up to a maximum aggregate amount of $100,000. In the event that
the Company terminates the employment of the Employee for Cause in accordance
with the provisions of this Paragraph 5, then the provisions of Paragraph 7 of
this Agreement shall apply.
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<PAGE>
6. TERMINATION BY EMPLOYEE FOR GOOD REASON. Employee may terminate
-------------------------------------------
this Agreement and his employment with the Company (including its subsidiaries)
at any time with Good Reason. "Good Reason" shall exist if:
a. the Company demotes or otherwise elects or appoints the
Employee to lesser offices than set forth in Section 3, or fails to elect or
appoint him to such; provided, however, that it shall not constitute Good Reason
for Employee to terminate this Agreement or his employment if Employee is not
elected or re-elected to, or is removed from, the Board of Directors of the
Company by its shareholders pursuant to the Company's Articles of Incorporation
or Bylaws or otherwise as permitted by law.
b. the Company causes a material change in the nature or scope of
the authorities, powers, functions, duties or responsibilities attached to the
Employee's positions as described in Section 3;
c. the Company causes Employee to relocate more than 50 miles from
Atlanta, Georgia;
d. the Company decreases the Employee's compensation below the
levels provided for by the terms of Section 4 (taking into account increases
made from time to time in accordance with Section 4);
e. the Company materially reduces the Employee's benefits under
any employee benefit plan, program or arrangement of the Company (other than a
change that affects all employees similarly situated) from the level in effect
upon the Employee's commencement or participation;
f. the Company commits any other material breach of the provisions
of this Agreement (except those set forth in Paragraph 4.a) and employee
provides at least 15 days' prior written notice to at least two members of the
Company's Board of Directors of the existence of such breach and his intention
to terminate this Agreement (no such termination shall be effective if such
breach is cured during such period);
g. the Company fails to comply with the provisions of Paragraph
4.a. for an uninterrupted 10 day period; or
h. in the event the Company fails to dispose of its real-time
division by January 1, 2000 and the Company fails to complete a public offering
by June 15, 2000, raising at least $40,000,000, with respect to the
Video-on-Demand division, whereby, 1) the Video-on-Demand division is spun off
from the Company and becomes a publicly traded company, and 2) the Employee
shall become the CEO of the new video-on-demand public company.
In the event that the Employee terminates his employment in accordance with the
provisions of this Paragraph 6, then the provisions of Paragraph 8 of this
Agreement shall apply.
7. PAYMENT AND OTHER PROVISIONS FOR TERMINATION FOR CAUSE OR BY
--------------------------------------------------------------------
EMPLOYEE WITHOUT GOOD REASON. In the event Employee's employment with the
- - -------------------------------
Company (including its subsidiaries) is terminated by the Company for Cause as
provided in Paragraph 5 then, on or before Employee's last day of employment
with the Company, the provisions of this Paragraph 7 shall apply. These same
provisions shall apply if the Employee terminates his employment other than for
Good Reason in accordance with the provisions of Paragraph 6 hereof.
a. Compensation: The Company shall pay in a lump sum to employee
such amount of compensation due Employee for services rendered to the Company,
-4-
<PAGE>
as well as compensation for unused vacation time, as has accrued but remains
unpaid. Any and all other rights to compensation of any kind granted to
Employee under this Agreement shall terminate as of the date of termination,
except as may be otherwise required by statute.
b. Noncompetition/Nonsolicitation Period: The provisions of
Paragraphs 14 and 15 shall continue to apply with respect to Employee for a
period of one year following the date of termination.
8. PAYMENT AND OTHER PROVISIONS FOR TERMINATION FOR GOOD REASON OR BY
--------------------------------------------------------------------
THE COMPANY OTHER THAN FOR CAUSE. In the event Employee's employment with the
- - ----------------------------------
Company (including its subsidiaries) is terminated by the Company for any reason
other than for Cause as provided in Paragraph 5 and other than as a consequence
of Employee's death or disability, then the following provisions apply. These
same provisions shall apply if Employee terminates his employment for Good
Reason in accordance with the provisions of Paragraph 6 hereof, however, if the
Employee exercises his right to terminate under section 6h above, the Employee
agrees to give the Company at least 90 days notice of his intent to terminate
his employment under such section 6h. The Employee may give such notice
beginning March 15, 2000.
a. Salary and Bonus Payments: On or before Employee's last day of
employment with the Company, the Company shall promptly pay in a lump sum to
Employee as compensation for services rendered to the Company a cash amount
equal to twice (three times such sum in the case of a termination occurring
during the period (a "Change of Control Period") beginning on the occurrence of
a Change in Control (as defined in Paragraph 8.f. below) and ending on the third
anniversary of such Change in Control) the sum of the amount of Employee's
annual base salary and the target bonus under the Executive Bonus Plan as in
effect immediately prior to his date of termination. At the election of the
Company, the cash amount referred to in this Paragraph 8.a. may be paid to
Employee in periodic installments in accordance with the normal salary payment
procedures of the Company, except that for a termination occurring during a
Change of Control Period, the cash amount referred to in this Paragraph 8.a.
shall be paid in a single lump sum on the date of termination.
b. Vesting of Options and Rights: Notwithstanding the vesting
period provided for in the Stock Option Plan and related stock option agreements
between the Company and Employee for stock options ("options") and stock
appreciation rights ("rights") granted Employee by the Company, one-third of
the options and stock appreciation rights provided to Employee under section 4b
of this Agreement, excluding Option #3 and the portion of Option #1 and Option
#2 which have already vested prior to termination, shall be exercisable upon
termination of employment. In addition, Employee shall have the right to
exercise such options and rights for the shorter of (i) one year (three years in
the case of a termination occurring during a Change of Control Period) following
his termination of employment or (ii) with respect to each option, the remainder
of the period of exercisability under the terms of the appropriate documents
that grant such options. However, notwithstanding the foregoing and the vesting
period provided for in the Stock Option Plan and any related stock option
agreements between the Company and Employee, all options and rights shall be
fully vested and exercisable upon termination of employment occurring during a
Change in Control Period, and the period of exercise shall be as described in
the preceding sentence.
c. Benefit Plan Coverage: The Company shall maintain in full
force and effect for Employee and his dependents for two years after the date of
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<PAGE>
termination, all life, health, accident, and disability benefit plans and other
similar employee benefit plans, programs and arrangements in which Employee or
his dependents were entitled to participate immediately prior to the date of
termination, in such amounts as were in effect immediately prior to the date of
termination, provided that such continued participation is possible under the
general terms and provisions of such benefit plans, programs and arrangements.
In the event that participation in any benefit plan, program or arrangement
described above is barred, or any such benefit plan, program or arrangement is
discontinued or the benefits thereunder materially reduced, the Company shall
arrange to provide Employee and his dependents for two years after the date of
termination with benefits substantially similar to those that they were entitled
to receive under such benefit plans, programs and arrangements immediately prior
to the date of termination. If immediately prior to the date of termination the
Company provided Employee with any club memberships, Employee shall be entitled
to continue such memberships at his sole expense. Notwithstanding any time
period for continued benefits stated in this Paragraph 8.c., all benefits in
this Paragraph 8.c. will terminate on the date that Employee becomes an employee
of another employer and eligible to participate in the employee benefit plans of
such other employer. To the extent that Employee was required to contribute
amounts for the benefits described in this Paragraph 8.c. prior to his
termination, he shall continue to contribute such amounts for such time as these
benefits continue in effect after termination.
d. Savings and Other Plans: Except as otherwise more specifically
provided herein or under the terms of the respective plans relating to
termination of employment, Employee's active participation in any applicable
savings, retirement, profit sharing or supplemental employment retirement plans
or any deferred compensation or similar plan of the Company or any of its
subsidiaries shall continue only through the last day of his employment. All
other provisions, including any distribution and/or vested rights under such
plans, shall be governed by the terms of those respective plans.
e. Noncompetition/Nonsolicitation Period: The provisions of
Paragraph 14 and 15 shall continue, beyond the time periods set forth in such
paragraphs, to apply with respect to employee for the shorter of (x) twenty-four
(24) months following the date of termination or (y) until such time as the
Company has failed to comply with the provisions of subparagraph 8.a. for an
uninterrupted 10-day period and such failure is not cured within 15 days after
written notice of such failure is delivered to at least two non-employee
directors of the Company, provided, that in such circumstances, Employee shall
remain entitled to exercise his rights under this Agreement. However, in the
case of a termination occurring during a Change of Control Period, the
provisions of Paragraphs 14 and 15 shall be without force and effect and shall
not apply to Employee.
f. For purposes of this Agreement, the term "Change of Control"
shall mean:
i. The acquisition, other than from the Company, by any
individual, entity or group (within the meaning of Rule 13d-3 promulgated under
the Exchange Act or any successor provision)(any of the foregoing described in
this Paragraph 8.c.i. hereafter a "Person") of 33% or more of either (a) the
then outstanding shares of Capital Stock of the Company (the "Outstanding
Capital Stock") or (b) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Voting Securities"), provided, however, that any acquisition by
(x) the Company or any of it subsidiaries, or any employee benefit plan (or
-6-
<PAGE>
related trust) sponsored or maintained by the Company or any of its subsidiaries
or (y) any Person that is eligible, pursuant to Rule 13d-1(b) under the Exchange
Act, to file a statement on Schedule 13D with respect to its beneficial
ownership of Voting Securities, whether or not such Person shall have filed a
statement on Schedule 13G, unless such Person shall have filed a statement on
Schedule 13D with respect to beneficial ownership of 33% or more of the Voting
Securities or (z) any corporation with respect to which, following such
acquisition, more than 60% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Capital Stock and Voting Securities
immediately prior to such acquisition in substantially the same proportion as
their ownership, immediately prior to such acquisition, of the Outstanding
Capital Stock and Voting Securities, as the case may be, shall not constitute a
Change of Control; or
ii. Individuals who, as of November 17, 1998, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board, provided that any individual becoming a director
subsequent to November 17, 1998 whose election or nomination for election by the
Company's shareholders was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
Directors of the Company (as such terms are used in Rule 14a-11 of Regulation
14A, or any successor section, promulgated under the Exchange Act); or
iii. Approval by the shareholders of the Company of a
reorganization, merger or consolidation (a "Business Combination"), in each
case, with respect to which all or substantially all holders of the Outstanding
Capital Stock and Voting Securities immediately prior to such Business
Combination do not, following such Business Combination, beneficially own,
directly or indirectly, more than 60% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from the Business Combination; or
iv. (a) a complete liquidation or dissolution of the Company
or (b) a sale or other disposition of all or substantially all of the assets of
the Company other than to a corporation with respect to which, following such
sale or disposition, more than 60% of, respectively, the then outstanding shares
of common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors is then owned
beneficially, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Capital Stock and Voting Securities immediately prior to such sale
or disposition in substantially the same proportion as their ownership of the
Outstanding Capital Stock and Voting Securities, as the case may be, immediately
prior to such sale or disposition.
9. TERMINATION BY REASON OF DEATH. If Employee shall die while
-----------------------------------
employed by the Company and during the effective term of this Agreement, all
Employee's rights under this Agreement shall terminate with the payment of such
amounts of annual base salary as have accrued but remain unpaid and prorated
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<PAGE>
amount of targeted bonus under the Executive Bonus Plan through the month in
which his death occurs, plus six additional months of the fixed salary and
targeted bonus. All benefits under Paragraphs 8.b. and 8.d. shall be extended
to Employee's estate as described in such paragraphs. In addition, Employee's
eligible dependents shall receive continued benefit plan coverage under
Paragraph 8.c. for six months from the date of Employee's death.
10. TERMINATION BY DISABILITY. Employee's employment hereunder may be
-------------------------
terminated by the Company for disability. In such event, all Employee's rights
under this Agreement shall terminate with the payment of such amounts of annual
base salary as have accrued but remain unpaid as of the thirtieth (30th) day
after such notice is given except that all benefits under Paragraphs 8.b., 8.c.
and 8.d. shall be extended to Employee as described in such paragraphs,
provided, however, that with respect to Paragraph 8.c., the period for continued
benefit plan coverage shall be limited to six months from the date of
termination. In addition, the noncompetition and nonsolicitation provisions of
Paragraphs 14 and 15 shall continue to apply for a period of six months from the
date of termination for disability. For purposes of this Agreement,
"disability" is defined to mean that, as a result of Employee's incapacity due
to physical or mental illness:
a. Employee shall have been absent from his duties as an officer
of the Company on a substantially full-time basis for six (6) consecutive
months; and
b. Within thirty (30) days after the Company notifies Employee in
writing that it intends to replace him, Employee shall not have returned to the
performance of his duties as an officer for the Company on a full-time basis.
Such notice may be given by the Company at any time after Employee has been
absent for a total of four consecutive months.
11. RETIREMENT. Employee shall be entitle to participate in the
----------
Company's Retirement Savings Plan and any other retirement plan hereafter made
available to senior executive officers of the Company in accordance with the
provisions thereof as in effect from time to time.
12. INDEMNIFICATION. If litigation shall be brought to enforce or
---------------
interpret any provision contained herein, the non-prevailing party shall
indemnify the prevailing party for reasonable attorneys' fees (including those
for negotiations, trial and appeals) and disbursements incurred by the
prevailing party in such litigation, and hereby agrees to pay prejudgment
interest on any money judgment obtained by the prevailing party calculated at
the generally prevailing Nations Bank of Florida, N.A. (or any successor
thereto) base rate of interest charge to its commercial customers in effect
from time to time from the date that payments(s) to him should have been made
under this Agreement.
13. NONCOMPETITION.
--------------
a. At all times during Employee's employment hereunder, and for
such additional periods as may otherwise be set forth in this Agreement in
reference to this Paragraph 13, Employee shall not, directly or indirectly,
engage in any business, enterprise or employment, whether as owner, operator,
shareholder, director, partner, creditor, consultant, agent or any capacity
whatsoever that manufactures products designed to compete directly with products
of the Company or markets such products anywhere in the world where the Company
(i) is engaged in business or (ii) has evidenced an intention of engaging in
business. Employee acknowledges that he has read the foregoing and agrees that
-8-
<PAGE>
the nature of the geographical restrictions are reasonable given the
international nature of the Company's business. In the event that these
geographical or temporal restrictions are judicially determined to be
unreasonable, the parties agree that the restrictions shall be judicially
reformed to the maximum restrictions which are reasonable.
b. Notwithstanding the provisions of the preceding Subparagraph,
the Employee may accept employment with a company that would be deemed to be a
competitor of the Company as described in the previous subparagraph
("Competitor"), so long as (i) the Competitor has had annual revenues of at
least $1 billion in each of the prior two fiscal years, (ii) the Competitor's
revenues for products and maintenance in direct competition with the Company do
not exceed 50% of its total revenues, and (iii) the Employee's responsibilities
are solely for divisions or subsidiaries of the Competitor that do not compete
with the Company.
14. NONSOLICITATION OF EMPLOYEES AND CUSTOMERS. At all times during
---------------------------------------------
the Employee's employment hereunder, and for such additional periods as may
otherwise be set forth in this Agreement, in reference to this Paragraph 14, the
Employee shall not, directly or indirectly, for himself or for any other person,
firm, corporation, partnership, association or other entity (a) attempt to
employ, employ or enter into any contractual arrangement with any employee or
former employee of the Company, its affiliates, subsidiaries or predecessors in
interest, unless such employee or former employee has not been employed by the
Company, its affiliates, subsidiaries or predecessors in interest, during the
six months prior to the Employee's attempt to employ him, or (b) call on or
solicit any of the actual or targeted prospective customers of the Company or
its affiliates, subsidiaries or predecessors in interest with respect to any
matters related to or competitive with the business of the Company.
15. CONFIDENTIALITY.
---------------
a. Nondisclosure: The Employee acknowledges and agrees that the
Confidential Information (as defined below) is a valuable, special and unique
asset of the Company's business. Accordingly, except in connection with the
performance of his duties hereunder, the Employee shall not at any time during
or subsequent to the term of his employment hereunder disclose, directly or
indirectly, to any person, firm, corporation, partnership, association or other
entity any proprietary or confidential information relating to the Company or
any information concerning the Company's financial condition or prospects, the
Company's customers, the design, development, manufacture, marketing or sale of
the Company's products or the Company's methods of operating its business
(collectively, "Confidential Information"). Confidential Information shall not
include information which, at the time of disclosure, is known or available to
the general public by publications or otherwise through no act or failure to act
on the part of Employee.
b. Return of Confidential Information: Upon termination of
Employee's employment, for whatever reason and whether voluntary or involuntary,
or at any time at the request of the Company, Employee shall promptly return all
Confidential Information in the possession or under the control of Employee to
the Company and shall not retain any copies or other reproductions or extracts
thereof. Employee shall at any time at the request of the Company destroy or
have destroyed all memoranda, notes, reports, and documents, whether in "hard
copy" form or as stored on magnetic or other media, and all copies and other
reproductions and extracts thereof, prepared by Employee and shall provide the
Company with a certificate that the foregoing materials have in fact been
returned or destroyed.
-9-
<PAGE>
c. Books and Records: All books, records and accounts whether
prepared by Employee or otherwise coming into Employee's possession, shall be
the exclusive property of the Company and shall be returned immediately to the
Company upon termination of Employee's employment hereunder or upon the
Company's request at any time.
16. INJUNCTION/SPECIFIC PERFORMANCE/SETOFF. Employee acknowledges that
--------------------------------------
a breach of any of the provisions of Paragraphs 13, 14, or 15 hereof would
result in immediate and irreparable injury to the Company which cannot be
adequately or reasonably compensated at law. Therefore, Employee agrees that
the Company shall be entitled, if any such breach shall occur or be threatened
or attempted, to a decree of specific performance and to a temporary and
permanent injunction, without the posting of a bond, enjoining and restraining
such breach by Employee or his agents, either directly or indirectly, and that
such right to injunction shall be cumulative to whatever other remedies for
actual damages to which the Company is entitled. Employee further agrees that
the Company may set off against or recoup from any amounts due under this
Agreement to the extent of any losses incurred by the Company as a result of any
breach by Employee of the provisions of Paragraphs 13, 14 or 15 hereof.
17. SEVERABILITY. Any provision in this Agreement that is prohibited
------------
or unenforceable in any jurisdiction shall, as to such jurisdiction, by
ineffective only to the extent of such prohibition or unenforceability without
invalidating or affecting the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
18. SUCCESSORS: This Agreement shall be binding upon Employee and
----------
inure to the benefit of the Company and any permitted successor of the Company.
Neither this Agreement nor any rights arising hereunder may be assigned or
pledged by Employee or anyone claiming through Employee; or by the Company,
except to any corporation which is the successor in interest to the Company by
reason of a merger, consolidation or sale of substantially all of the assets of
the Company. The foregoing sentence shall not be deemed to have any effect upon
the rights of Employee upon a Change of Control.
19. CONTROLLING LAW: This Agreement shall in all respects be governed
----------------
by, and construed in accordance with, the laws of the State of Georgia.
20. NOTICES: Any notice required or permitted to be given hereunder
-------
shall be written and sent by registered or certified mail, telecommunicated or
hand delivered at the address set forth herein or to any other address of which
notice is given:
TO THE COMPANY: CONCURRENT COMPUTER CORPORATION
4375 RIVER GREEN PARKWAY
DULUTH, GEORGIA 30096
TO THE EMPLOYEE: STEVE G. NUSSRALLAH
605 BUTTERCUP TRACE
ALPHARETTA, GEORGIA 30022
21. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
-----------------
between the parties hereto on the subject matter hereof and may not be modified
without the written agreement of both parties hereto. As such, this Agreement
completely replaces and supercedes the Original Agreement.
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<PAGE>
22. WAIVER. A waiver by any party of any of the terms and conditions
------
hereof shall not be construed as a general waiver by such party.
23. COUNTERPARTS. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original and both of which together shall
constitute a single agreement.
24. INTERPRETATION. In the event of a conflict between the provisions
--------------
of this Agreement and any other agreement or document defining rights and duties
of Employee or the Company upon Employee's termination, including the Original
Agreement, the rights and duties set forth in this Agreement shall control.
25. CERTAIN LIMITATIONS ON REMEDIES. Paragraph 7.b provides that
----------------------------------
certain payments and other benefits shall be received by Employee upon the
termination of Employee by the Company other than for Cause and states that
these same provisions shall apply if Employee terminates his employment in
accordance with the provisions of paragraph 6 hereof. It is the intention of
this Agreement that if the Company terminates Employee other than for Cause (and
other than as a consequence of Employee's death, disability or normal
retirement) or if Employee terminates his employment in accordance with the
provisions of paragraph 6 hereof, then the payments and other benefits set forth
in Paragraph 7.b shall constitute the sole and exclusive remedies of Employee.
This Paragraph 25 shall have no effect upon the provisions of Paragraph 8 of
this Agreement.
IN WITNESS WHEREOF, this Employment Agreement has been executed by the
parties as of the date first above written.
CONCURRENT COMPUTER CORPORATION EMPLOYEE
/S/ E. Courtney Siegel /S/ Steve G. Nussrallah
- - ---------------------- -------------------------
E. Courtney Siegel Steve G. Nussrallah
Chairman, President and Chief Executive Officer
555839.4
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<PAGE>
SCHEDULE A
OTHER BENEFITS
--------------
1. Use of golf club membership maintained by the Company at a private
country club to be designated by Employee. The initiation fee for such
membership should not exceed $70,000 without the approval of the Board.
2. Commencing January 1,2000, first class tickets on airlines when
travelling on Company business.
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<PAGE>
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT, made and entered into as of the 28th day of
October, 1999 by and between CONCURRENT COMPUTER CORPORATION, a Delaware
corporation ("Concurrent" or the "Company"), and Steven R. Norton (the
"Employee").
W I T N E S S E T H :
- - - - - - - - - - -
WHEREAS, the Company desires to employ the Employee and the Employee
desires to accept such employment with the Company;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
1. Employment
----------
The Company hereby employs the Employee and the Employee hereby
accepts employment with the Company for the term set forth in Section 2 below,
in the position and with the duties and responsibilities set forth in Section 3
below, and upon other terms and conditions hereinafter stated.
2. Term
----
The term of employment hereunder shall commence on the date hereof and
shall continue until otherwise terminated by either party at any time in
accordance with the terms hereof.
3. Position; Duties; Responsibilities
------------------------------------
3.1 It is intended that at all times during the term of employment
hereunder, the Employee shall serve as Executive Vice President, Chief Financial
Officer reporting to the Chief Executive Officer of the Company (the "Chief
Executive Officer"). The Employee agrees to perform such senior executive and
managerial services customary to such position as are necessary to the
operations of the Company and as may be assigned to him from time to time by the
Chief Executive Officer or by the Company's Board of Directors (the "Board of
Directors").
3.2 Throughout the term of employment hereunder, the Employee shall
devote his full time and undivided attention during normal business hours to the
business and affairs of the Company, as appropriate to his responsibilities and
duties hereunder, except for reasonable vacations and illness or other
disability, but nothing in this Agreement shall preclude the Employee from
devoting reasonable periods required for serving as a director or member of any
advisory committee of not more than two (at any time) "for profit" organizations
involving no conflict of interest with the interests of the Company (subject to
approval by the Chief Executive Officer, which approval shall not be
unreasonably withheld), or from engaging in charitable and community activities,
or from managing his personal investments, provided such activities do not
materially interfere with the performance of his duties and responsibilities
under this Agreement.
<PAGE>
4. Compensation
------------
4.1 Salary
------
For services rendered by the Employee during the term of
employment hereunder, the Employee shall be paid a salary, payable in equal
biweekly installments (or, if different, payable in accordance with the then
existing applicable payroll policy of the Company, but in no event less
frequently than equal monthly installments) at an annualized rate of no less
than $175,000.00, such salary to be reviewed for increase annually with such
increases, if any, as shall be awarded taking into account such factors as
corporate and individual performance and general business conditions, including
changes in the Atlanta metropolitan area cost of living index.
4.2 Annual Bonus Opportunity
--------------------------
During the term of employment hereunder, the Employee will be
provided an annual bonus opportunity in a target amount of $70,000.00 (pro-rated
based on the Employee's start date). The objectives for each year and other
terms and conditions of the bonus opportunity shall be established by the Board
of Directors or a committee thereof and shall be reasonably consistent with the
business plan of the Company for such year established in advance.
4.3 Employee Benefit Plans
------------------------
During the term of employment hereunder, the Employee will be
eligible to participate in all employee benefit programs of the Company now or
hereafter made available to senior executives, in accordance with the provisions
thereof as in effect from time to time. In any event, the Employee shall be
entitled to vacation days at the rate of three weeks per calendar year or such
greater amount as may be provided by Company policies in effect from time to
time.
During the term of employment hereunder, the Company agrees to
pay the Employee's normal recurring monthly membership fee at the Atlanta
Athletic Club.
4.4 Stock Options
--------------
Employee has initially been granted an option to purchase 400,000
shares of the Company's common stock. The per share exercise price of the option
is the fair market value of the Company's common stock ($10.125), and the option
vests 31.25% on the first anniversary date, 31.25% on the second anniversary
date and 37.5% on the third anniversary date of employment. The remaining terms
and conditions of this grant are as provided in the Company's Stock Option Plan.
2
<PAGE>
4.5 Business Expense Reimbursements
---------------------------------
During the term of employment hereunder, the Employee will be
entitled to receive reimbursement by the Company for all reasonable
out-of-pocket expenses incurred by him (in accordance with the policies and
procedures established by the Company for its senior level executives), in
connection with his performing services hereunder.
5. Consequences of Termination of Employment
---------------------------------------------
5.1 Death
-----
In the event of the death of the Employee during the term of
employment hereunder, the estate or other legal representatives of the Employee
shall be entitled to continuation of the salary provided for in Section 4.1 for
a period of 6 months from the date of the Employee's death, at the rate in
effect at such date.
5.2 Continuing Disability
----------------------
Notwithstanding anything in this Agreement to the contrary, the
Company is hereby given the option to terminate the Employee's employment in the
event of the Employee's Continuing Disability. Such option shall be exercised
by the Company by giving notice to the employee of the Company's intention to
terminate his employment due to Continuing Disability not earlier than 15 days
from the receipt of such notice.
In the event of the termination of the Employee's employment due
to Continuing Disability, the Employee shall be entitled to compensation in
accordance with the terms of all disability plan(s) made available to the
Employee in which he is a participant at the time of such termination, if any;
provided, however, that for a period of 6 months from such date of termination,
the Employee shall receive an amount at least equal to the salary provided for
in Section 4.1 above, at the rate in effect at the time of such termination, to
the extent not provided under any such disability plan. Other rights and
benefits under employee benefit plans and programs of the Company, generally,
will be determined in accordance with the terms and provisions of such plans and
programs.
For purposes hereof, Continuing Disability shall mean the
inability to perform the essential functions connected with the Employee's
duties hereunder, with or without reasonable accommodation, which inability
shall have existed for a period of 250 days, even though not consecutive, in any
24 month period. In the event the Employee does not agree with the Company
that his inability may reasonably be expected to exist for such period, the
opinion of a qualified medical doctor selected by the Employee and reasonably
satisfactory to the Company shall be determinative.
If, following a termination of employment hereunder due to
Continuing Disability, the Employee becomes otherwise employed (whether as an
3
<PAGE>
employee, consultant or otherwise, but not solely as a member of a board of
directors), any salary or other benefits earned by him from such employment
shall be offset against any disability compensation or salary continuation due
hereunder.
5.3 Termination by the Company for Due Cause
----------------------------------------------
Nothing herein shall prevent the Company from terminating the
employment of the employee for Due Cause. The Employee shall continue to
receive salary and any accrued and due bonus payments provided for herein only
through the period ending with the date of such termination and any other rights
and benefits he may have under employee benefit plans and programs of the
Company, generally, shall be determined in accordance with the terms of such
plans and programs. The term "Due Cause", as used herein, shall mean that (a)
the Employee has committed a willful serious act, such as embezzlement, against
the Company intended to enrich himself at the expense of the Company or has been
convicted of a felony involving moral turpitude or (b) the Employee has (i)
willfully and grossly neglected his duties hereunder or (ii) intentionally
failed to observe specific directives or policies of the Board of Directors or
CEO, which directives or policies were consistent with his positions, duties and
responsibilities hereunder, and which failure had, or continuing failure will
have, a material adverse effect on the Company. Prior to any such termination,
the Employee shall be given written notice by the Board of Directors or CEO that
the Company intends to terminate his employment for Due Cause under this Section
5.3, which written notice shall specify the particular acts or omissions on the
basis of which the Company intends to so terminate the Employee's employment,
and the Employee (with his counsel, if he so chooses) shall be given the
opportunity, within 15 days of his receipt of such notice, to have a meeting
with the Board of Directors to discuss such acts or omissions and given
reasonable time to remedy the situation, if it is deemed by the Board of
Directors, in their good faith business judgment, to be remediable. In the
event of such termination, the Employee shall be promptly furnished written
specification of the basis therefor in reasonable detail.
5.4 Termination by the Company other than for Due Cause
-----------------------------------------------------------
The foregoing notwithstanding, the Company may terminate the
Employee's employment for whatever reason it deems appropriate; provided,
however, that in the event such termination is not based on death or disability
as provided in Sections 5.1 or 5.2, above, or on Due Cause as provided in
Section 5.3 above, the Employee will be entitled to receive Severance
Compensation (as defined below) for a period of 12 months from the date of such
termination.
For purposes of the foregoing, Severance Compensation shall
consist of salary continuation, payable in equal biweekly installments (or, if
different, payable in accordance with the then existing applicable payroll
policy of the Company, but in no event less frequently than equal monthly
installments), at the rate in effect, pursuant to Section 4.1 above, immediately
prior to such termination.
4
<PAGE>
During the period beginning with the Employee's termination and
continuing through the period for which Severance Compensation is paid
hereunder, the Company will use its best efforts to continue the Employee's
existing coverage under its group life insurance, hospitalization, medical and
dental plans. To the extent he is not eligible under the terms of one or more of
such plans and programs, the Company will provide the Employee with the economic
equivalent for the 12 month period during which Severance Compensation is paid
hereunder. For this purpose, "economic equivalent" shall mean the cost the
Employee would incur if he were to provide himself with a benefit comparable to
the reduced or eliminated benefit. The amount paid to the Employee as the
economic equivalent, less the amount of the premium payment which is the
Employee's responsibility in accordance with the Company benefit plan, will be
"grossed-up", if taxable (that is, the amount necessary to make the Employee
whole after taking into account (i) the cost of the benefit and (ii) additional
income taxes, if any, incurred by the employee on amounts paid to him pursuant
to this sentence)).
The foregoing notwithstanding, upon a termination triggering
Severance Compensation payments hereunder the Company shall be under no
obligation to continue the Employee's coverage under any long term disability
plan or program; and the date of such termination shall be considered a
termination for purposes of participation in the Company's Retirement Savings
Plan.
Except as specifically set forth in this Section 5.4, the
Employee shall not be entitled to any other compensation or benefits following a
termination of employment by the Company as provided in this Section 5.4.
5.5 Constructive Termination of Employment by the Company without Due
---------------------------------------------- ------------------
Cause
-----
Anything herein to the contrary notwithstanding, if the Company:
(A) demotes or otherwise elects or appoints the Employee to a
lesser office than set forth in Section 3.1 or fails to elect or appoint him to
such position;
(B) causes a material change in the nature or scope of the
authorities, powers, functions, duties or responsibilities attached to the
Employee's position as described in Section 3.1;
(C) decreases the Employee's salary or annual bonus
opportunity below the levels provided for by the terms of Sections 4.1 and 4.2
(taking into account any salary increases made from time to time in accordance
with Section 4.1);
(D) materially reduces the Employee's benefits under any
employee benefit plan, program, or arrangement of the Company (other than a
change that affects all employees similarly situated) from the level in effect
upon the Employee's commencement of participation; or
5
<PAGE>
(E) commits any other material breach of this Agreement,
then such action (or inaction) by the Company, unless consented to in writing by
the Employee, shall constitute a termination of the Employee's employment by the
Company other than for Due Cause pursuant to Section 5.4 above. If, within
thirty (30) days of learning of the action (or inaction) described herein as a
basis for a constructive termination of employment, the Employee (unless he has
given written consent thereto) notifies the Company in writing that he wishes to
effect a constructive termination of his employment pursuant to this Section
5.5, and such action (or inaction) is not reversed or otherwise remedied by the
Company within 30 days following receipt by the Company of such written notice,
then effective at the end of such second 30 day period, the employment of the
Employee hereunder shall be deemed to have terminated pursuant to Section 5.4
above.
5.6 Voluntary Termination by Employee
------------------------------------
In the event the Employee terminates his employment of his own
volition (other than as provided in Section 5.5 above), such termination shall
constitute a voluntary termination and in such event the Employee shall be
limited to the same rights and benefits as provided in connection with
termination for Due Cause under the second sentence of Section 5.3 above. For
the purposes hereof, a decision by the Employee to voluntarily retire shall
constitute a voluntary termination.
6. Protective Agreement
---------------------
Concurrently with entering into this Agreement, the Employee will
enter into a Protective Agreement in favor of the Company substantially in the
form attached as Exhibit A hereto (the "Protective Agreement").
----------
7. Successors and Assigns
------------------------
7.1 Assignment by the Company
----------------------------
This Agreement shall be binding upon and inure to the benefit of
the Company or any corporation or other entity to which the Company may transfer
all or substantially all its assets and business and to which the Company may
assign this Agreement, in which case "Company" as used herein shall mean such
corporation or other entity.
7.2 Assignment by the Employee
-----------------------------
The Employee may not assign this Agreement or any part thereof
without the prior written consent of the Company, which consent may be withheld
by the Company for any reason it deems appropriate; provided, however, nothing
herein shall preclude the Employee from designating one or more beneficiaries to
receive any amount that may be payable following the occurrence of his legal
incompetency or his death and shall not preclude the legal representative of his
6
<PAGE>
estate from assigning any right hereunder to the person or persons entitled
thereto under his will or, in the case of intestacy, to the person or persons
entitled thereto under the laws of intestacy applicable to his estate. The term
"beneficiaries", as used in this Agreement, shall mean a beneficiary or
beneficiaries so designated to receive any such amount or if no beneficiary has
been so designated the legal representative of the Employee (in the event of his
incompetency) or the Employee's estate.
8. Arbitration
-----------
Any dispute or controversy arising out of, in connection with, or
relating to this Agreement or the Employee's employment by the Company or its
termination shall be settled exclusively by arbitration in Atlanta, Georgia by
one arbitrator in accordance with the employment arbitration rules of the
American Arbitration Association then in effect; provided, however, that this
arbitration agreement shall not preclude the Company from seeking to enforce the
Protective Agreement in any court of competent jurisdiction without resort to
arbitration. The arbitrator's award may include the manner in which fees of
counsel and other expenses in connection with the dispute or controversy are to
be borne by the parties. The arbitrator's authority and jurisdiction is limited
to interpreting and applying the express provisions of this Agreement and the
arbitrator shall not have the authority to alter or add to the provisions of
this Agreement. Judgment may be entered upon the arbitrator's award in any
court of competent jurisdiction.
9. Governing Law
--------------
This Agreement shall be deemed a contract made under, and for all
purposes shall be construed in accordance with, the laws of the State of Georgia
(without reference to the principles of conflicts of law).
10. Entire Agreement
-----------------
This Agreement, including the Protective Agreement, contains all the
understandings and representations between the parties hereto pertaining to the
subject matter hereof and supersedes all undertakings and agreements, whether
oral or in writing, if any there be, previously entered into by them with
respect thereto.
11. Amendment or Modification; Waiver
------------------------------------
No provision in this Agreement may be amended or waived unless such
amendment or waiver is agreed to in writing, signed by the Employee and an
officer of the Company thereunto duly authorized. Except as otherwise
specifically provided in the Agreement, no waiver by any party hereto of any
breach by another party hereto of any condition or provision of the Agreement to
be performed by such other party shall be deemed a waiver of a similar or
dissimilar provision or condition at the same or any prior or subsequent time.
7
<PAGE>
12. Notices
-------
Any notice to be given hereunder shall be in writing and delivered
personally or sent by certified mail, postage prepaid, return receipt requested,
addressed to the party concerned at the address indicated below or to such other
address as such party may subsequently give notice of hereunder in writing:
COMPANY: Concurrent Computer Corporation
4375 River Green Parkway
Duluth, GA 30096
Attn: Chief Executive Officer
With a copy to:
King & Spalding
191 Peachtree Street
Atlanta, GA 30303-1763
ATTN: Jack Capers
EMPLOYEE: Steven R. Norton
3095 Leeds Garden Lane
Alpharetta, GA 30022
13. Severability
------------
In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, the remaining
provisions or portions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law.
14. Withholding
-----------
Anything to the contrary notwithstanding, all payments required to be
made by the Company hereunder to the Employee or his estate or beneficiaries,
shall be subject to withholding of such amounts relating to taxes as the Company
may reasonably determine it should withhold pursuant to any applicable law or
regulation. In lieu of withholding such amounts, in whole or in part, the
Company may, in its sole discretion, accept other provision for payment of taxes
as required by law, provided it is satisfied that all requirements of law
affecting its responsibilities to withhold such taxes have been satisfied.
15. Survivorship
------------
The respective rights and obligations of the parties hereunder shall
survive any termination of this Agreement to the extent necessary to the
intended preservation of such rights and obligations.
8
<PAGE>
16. References
----------
In the event of the Employee's death or judicial determination of his
incompetence, reference in this Agreement to the Employee shall be deemed, where
appropriate, to refer to his legal representatives, or, where appropriate, to
his beneficiary or beneficiaries.
17. Titles
------
Titles to the sections in this Agreement are intended solely for
convenience and no provision of this Agreement is to be construed by reference
to the title of any section.
18. Counterparts
------------
This Agreement may be executed in several counterparts, each of which
shall be deemed to be an original but all of which together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
CONCURRENT COMPUTER CORPORATION
By: /S/ Steve Nussrallah
----------------------
Steve Nussrallah
President and CEO
EMPLOYEE
/S/ Steven R. Norton
-----------------------
Steven R. Norton
9
<PAGE>
Exhibit A
---------
PROTECTIVE AGREEMENT
--------------------
I, the undersigned, in consideration of and as a condition to my employment
by Concurrent Computer Corporation (the "Company), do hereby agree with the
Company as follows:
1. Noncompete and Nonsolicitation of Customers or Employees. During my
---------------------------------------------------------
employment by the Company, I will devote my full time and best efforts to the
business of the Company and I will not, directly or indirectly, alone or as a
partner, officer, director, employee or holder of more than 5% of the common
stock of any other organization, engage in any business activity which competes
directly or indirectly with the products or services being developed,
manufactured or sold by the Company. I also agree that, following any
termination of such employment, I will not, directly or indirectly, for any
period in which I receive severance payments from the Company, plus one (1)
year, (a) engage in or provide any services substantially similar to the
services that I provided to the Company at any time during the last twelve (12)
months of my employment to or on behalf of any person or entity that competes
with the Company in the "real time" or "video-on-demand" businesses anywhere in
the continental United States, which I acknowledge and agree is the primary
geographic area in which the Company competes in these businesses and thus, by
virtue of my senior executive position and responsibilities with the Company,
also the primary geographic area of my employment with the Company, (b) solicit
or attempt to solicit, for the purpose of competing with the Company in its
"real time" or "video-on-demand" businesses, any customers or active prospects
of the Company with which I had any material business contact for or on behalf
of the Company at any time during the last twelve (12) months of my employment,
or (c) recruit or otherwise seek to induce any employees of the Company to
terminate their employment or violate any agreement with the Company.
<PAGE>
2. Trade Secrets and Other Confidential Information. Except as may be
--------------------------------------------------
required in the performance of my duties with the Company, or as may be required
by law, I will not, whether during or after termination of my employment with
the Company, reveal to any person or entity or use any of the trade secrets of
the Company for as long as they remain trade secrets. I also agree to these
same restrictions, during my employment with the Company and for a period of
three (3) years thereafter, with respect to all other confidential information
of the Company, including its technical, financial and business information,
unless such confidential information becomes publicly available through no fault
of mine or unless it is disclosed by the Company to third parties without
similar restrictions.
Further, I agree that any and all documents, disks, databases, notes, or
memoranda prepared by me or others and containing trade secrets or confidential
information of the Company shall be and remain the sole and exclusive property
of the Company, and that upon termination of my employment or prior request of
the Company I will immediately deliver all of such documents, disks, databases,
notes or memoranda, including all copies, to the Company at its main office.
3. Inventions and Copyrights. If at any time or times during my
----------------------------
employment (or within six (6) months thereafter if based on trade secrets or
confidential information within the meaning of Paragraph 2 above), I make or
discover, either alone or with others, any invention, modification, development,
improvement, process or secret, whether or not patented or patentable
(collectively, "inventions") in the field of computer science or
instrumentation, I will disclose in reasonable detail the nature of such
invention to the Company in writing, and if it relates to the business of the
Company or any of the products or services being developed, manufactured or sold
by the Company, such invention and the benefits thereof shall immediately become
the sole and absolute property of the Company provided the Company notifies me
in reasonable detail within ninety (90) days after receipt of my disclosure of
such invention that it believes such invention relates to the business of the
Company or any of the products or services being developed, manufactured or sold
by the Company. I also agree to transfer such inventions and benefits and
2
<PAGE>
rights resulting from such inventions to the Company without compensation and
will communicate without cost, delay or prior publications all available
information relating to the inventions to the Company. At the Company's expense
I will also, whether before or after termination of my employment, sign all
documents (including patent applications) and do all acts and things that the
Company may deem necessary or desirable to effect the full assignment to the
Company of my right and title to the inventions or necessary to defend any
opposition thereto. I also agree to assign to the Company all copyrights and
reproduction rights to any materials prepared by me in connection with my
employment.
4. Conflicting Agreements. I represent that I have attached to this
------------------------
Agreement a copy of any written agreement, or a summary of any oral agreement,
which presently affects my ability to comply with the terms of this Agreement,
and that to the best of my knowledge my employment with the Company will not
conflict with any agreement to which I am subject. I have returned all
documents and materials belonging to any of my former employers. I will not
disclose to the Company or induce any of the Company's employees to use trade
secrets or confidential information of any of my former employers.
5. Miscellaneous.
--------------
(a) I hereby give the Company permission to use photographs of me,
during my employment, with or without using my name, for any purposes the
Company deems necessary or desirable.
(b) The Company shall have, in addition to any and all remedies of
law, the right to an injunction, specific performance and other equitable relief
as may be appropriate to prevent the violation of my obligations hereunder.
(c) I understand that this Agreement does not create an obligation
on the Company or any other person to continue my employment for any period of
time.
(d) This Agreement shall be construed in accordance with the laws
of the State of Georgia. I agree that each provision of this Agreement shall be
treated as a separate and independent clause, and the unenforceability of any
clause shall in no way impair the enforceability of any of the other clauses.
3
<PAGE>
Moreover, if one or more of the provisions contained in this Agreement shall for
any reason be held to be extensively broad as to scope, activity, time,
geographical area or subject so as to be unenforceable at law, such provision or
provisions shall be construed by the appropriate judicial body by limiting and
reducing it or them so as to be enforceable to the maximum extent compatible
with applicable law as it shall then appear.
(e) My obligations under this Agreement shall survive the
termination of my employment regardless of the manner of such termination for
the time periods set forth in this Agreement, and shall be binding upon my
heirs, executors and administrators.
(f) The term "Company" as used in this Agreement includes
Concurrent Computer Corporation and any of its subdivisions or affiliates. The
Company shall have the right to assign this Agreement to its successors and
assigns.
(g) The foregoing is the entire agreement between the Company and
me with regard to its subject matter, and may not be amended or supplemented
except by a written instrument signed by both the Company and me. The section
headings are inserted for convenience only, and are not intended to affect the
meaning of this Agreement.
/S/ Steven R. Norton
_______________________________
Steven R. Norton
4
<PAGE>
<TABLE>
<CAPTION>
CONCURRENT COMPUTER CORPORATION
EXHIBIT 11
BASIC AND DILUTED EARNINGS PER SHARE COMPUTATION
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, 1999 DECEMBER 31, 1999
------------------- ------------------
BASIC/DILUTED BASIC/DILUTED
------------------- ------------------
<S> <C> <C>
Average outstanding shares:. 51,560 50,262
Dilutive options outstanding - -
------------------- ------------------
Equivalent Shares. . . . . . 51,560 50,262
=================== ==================
Net Loss . . . . . . . . . . ($16,621) ($19,172)
=================== ==================
Loss per share . . . . . . . (0.32) (0.38)
=================== ==================
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, 1998 DECEMBER 31, 1998
----------------- -----------------
BASIC DILUTED BASIC DILUTED
------- -------- ------- --------
<S> <C> <C> <C> <C>
Average outstanding shares:. 47,852 47,852 47,763 47,763
Dilutive options outstanding - 1,362 - 1,457
------- -------- ------- --------
Equivalent Shares. . . . . . 47,852 49,214 47,763 49,220
======= ======== ======= ========
Net income . . . . . . . . . $ 915 $ 915 $ 489 $ 489
======= ======== ======= ========
Earnings per share . . . . . $ 0.02 $ 0.02 $ 0.01 $ 0.01
======= ======== ======= ========
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Companys
Consolidated Balance Sheet at December 31, 1999 and Consolidated Statement of
Operations for the six months ended December 31, 1999, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 7952
<SECURITIES> 0
<RECEIVABLES> 15031
<ALLOWANCES> 262
<INVENTORY> 4383
<CURRENT-ASSETS> 27810
<PP&E> 37964
<DEPRECIATION> 26490
<TOTAL-ASSETS> 46151
<CURRENT-LIABILITIES> 11863
<BONDS> 0
0
0
<COMMON> 532
<OTHER-SE> 31929
<TOTAL-LIABILITY-AND-EQUITY> 46151
<SALES> 17057
<TOTAL-REVENUES> 32606
<CGS> 8779
<TOTAL-COSTS> 17213
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 29
<INTEREST-EXPENSE> 50
<INCOME-PRETAX> (18872)
<INCOME-TAX> 300
<INCOME-CONTINUING> (19172)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (19172)
<EPS-BASIC> (.38)
<EPS-DILUTED> (.38)
</TABLE>
