SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12
THE DIANA CORPORATION
________________________________________________________________
(Name of Registrant as Specified In Its Charter)
________________________________________________________________
(Name of Person(s) Filing Proxy Statement
if other than Registrant)
<PAGE>
The Diana Corporation
26025 Mureau Road
Calabasas, California 91302
(818) 878-7711
October 28, 1997
Dear Shareholder:
You are cordially invited to attend the 1997 Annual Meeting of
Shareholders (the "Meeting") of The Diana Corporation (the "Company") to be
held on November 20, 1997, at 10:00 a.m., local time, at the Radisson
Hotel, 30100 Agoura Road, Agoura Hills, California 91301.
At the Meeting, you will be asked to approve (i) the election of two
directors to serve for a three-year term and (ii) an amendment to the
Company's Restated Certificate of Incorporation (the "Charter") changing
the Company's name to COYOTE NETWORK SYSTEMS, INC., to be effective upon
approval.
The Board of Directors unanimously recommends that shareholders vote
"FOR" each of the proposals described in the accompanying Proxy Statement.
The proposed amendments to the Company's Charter must be approved by
shareholders holding a majority of the outstanding shares of the Company's
common stock.
DETAILS ABOUT THE PROPOSALS AND OTHER IMPORTANT INFORMATION ARE SET
FORTH IN THE ACCOMPANYING NOTICE OF THE 1997 ANNUAL MEETING AND PROXY
STATEMENT. EVERY SHAREHOLDER SHOULD CONSIDER THESE DOCUMENTS CAREFULLY.
WHETHER OR NOT YOU PLAN TO ATTEND THE 1997 ANNUAL MEETING AND
REGARDLESS OF THE NUMBER OF SHARES OF THE COMPANY'S COMMON STOCK THAT YOU
OWN, I URGE YOU TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND
RETURN IT PROMPTLY IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE. YOU MAY, OF
COURSE, ATTEND THE ANNUAL MEETING IN PERSON, EVEN IF YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY CARD. PLEASE DO NOT SEND IN YOUR STOCK CERTIFICATES
WITH YOUR PROXY CARD.
Sincerely,
James J. Fiedler
Chairman of the Board
<PAGE>
The Diana Corporation
26025 Mureau Road
Calabasas, California 91302
(818) 878-7711
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 20, 1997
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Shareholders
(the "Meeting") of The Diana Corporation (the "Company"), a Delaware
corporation, will be held at the Radisson Hotel, 30100 Agoura Road, Agoura
Hills, California 91301 on November 20, 1997, at 10:00 a.m., local time.
The Meeting will be conducted to consider and vote upon the following
proposals, each as more fully described in the accompanying Proxy
Statement:
(a) The election of two directors for a three-year term to expire at
the Company's 2000 Annual Meeting of Shareholders;
(b) Approval of an amendment to the Restated Certificate of
Incorporation of the Company (the "Charter") changing the name of
the Company to COYOTE NETWORK SYSTEMS, INC., to be effective upon
approval; and
(c) To take action upon any other business as may properly come
before the Meeting and any adjournment thereof.
THE EFFECTIVENESS OF EACH OF THESE PROPOSALS IS NOT CONDITIONED ON THE
APPROVAL OF THE OTHER PROPOSALS.
The record date for shareholders entitled to notice of, and to vote
at, the Meeting is the close of business on October 24, 1997. This Notice,
the accompanying Proxy Statement and the accompanying form of proxy are
first being mailed to shareholders of the Company on or about October 28,
1997.
Additionally, the Chairman of the Board of Directors of the Company
may determine to withdraw the Proposal to change the name of the Company
from consideration at the Meeting, or if adopted by the shareholders, may
determine not to file the amendment to the Charter with the Delaware
Secretary of State, if further investigation reveals that COYOTE NETWORK
SYSTEMS, INC. may not be reasonably available for use by the Company. In
such case, the Company intends to propose a change to another name for a
vote by shareholders at the 1998 Annual Meeting of Shareholders of the
Company.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" ALL OF THE PROPOSALS.
You are invited to attend the Meeting, but whether or not you expect
to attend in person, please mark, sign, date and return the enclosed proxy
in the accompanying postage-paid envelope so that your shares will be
represented at the Meeting and any adjournment thereof. PLEASE DO NOT SEND
IN YOUR STOCK CERTIFICATES WITH YOUR PROXY CARD.
By Order of the Board of Directors,
Brian A. Robson
Secretary
October 28, 1997
<PAGE>
PROXY
ANNUAL MEETING OF SHAREHOLDERS OF THE DIANA CORPORATION
JAMES J. FIEDLER and DANIEL W. LATHAM, and each of them, are hereby
appointed proxies, with full power of substitution, to represent and to
vote, as set forth on the reverse side, all shares of stock the undersigned
is entitled to vote at the Annual Meeting of Shareholders of The Diana
Corporation, to be held at the Radisson Hotel, 30100 Agoura Road, Agoura
Hills, California 91301 on November 20, 1997 at 10:00 a.m. local time, and
at any adjournments thereof, hereby revoking any proxy heretofore given.
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO CHOICE I plan to attend
IS INDICATED, WILL BE VOTED FOR ITEMS 1 AND 2. the meeting
[ ]
1. ELECTION OF DIRECTORS: JAMES J. FIELDER AND STEPHEN W.
PORTNER
FOR all nominees WITHHOLD (INSTRUCTION: To withhold authority
listed (except as AUTHORITY to vote for any individual nominee,
marked to the to vote for write that nominee's name on the
contrary.) all nominees space provided below.)
listed
___________________________________
[ ] [ ]
2. Changing the name of the Company to COYOTE NETWORK SYSTEMS, INC.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. In their discretion on such other matters as may properly come before
the meeting.
Dated:_____________________________, 1997
_________________________________________
_________________________________________
(Please sign exactly as name appears
hereon. If stock is owned by more than
one person, all owners should sign.) If
signing as attorney, administrator,
executor, guardian or trustee, please
indicate such capacity. A proxy given by
a corporation should be signed by an
authorized officer.
THIS PROXY IS SOLICITED BY THE BOARD OF
DIRECTORS OF THE CORPORATION.
<PAGE>
PROXY STATEMENT
The Diana Corporation
26025 Mureau Road
Calabasas, California 91302
1997 Annual Meeting of Shareholders of The Diana Corporation
to be held on November 20, 1997
This Proxy Statement is being furnished to the shareholders of The
Diana Corporation (the "Company") in connection with the solicitation of
proxies by the Company's Board of Directors from holders of record of
Company common stock as of the close of business on the Annual Meeting
Record Date for use at the 1997 Annual Meeting of Shareholders (the
"Meeting") to be held on November 20, 1997 at 10:00 a.m. and at any
adjournment or postponement thereof. This Proxy Statement is being first
mailed to the Company's shareholders on or about October 28, 1997.
Each copy of this Proxy Statement mailed to holders of Company common
stock is accompanied by the Company's Form 10-K for the fiscal year ended
March 31, 1997 ("Form 10-K") and a form of proxy for use at the Meeting.
Date, Place and Time of Meeting
The Meeting will be held at the Radisson Hotel, 30100 Agoura Road, in
the city of Agoura Hills, California, on November 20, 1997, at 10:00 a.m.
local time.
Purpose of Meeting
The Meeting will be conducted to consider and vote upon the following
Proposals:
(a) The election of two directors for a three-year term to expire at
the Company's 2000 Annual Meeting of Shareholders;
(b) Approval of an amendment to the Restated Certificate of
Incorporation of the Company (the "Charter") changing the name of
the Company to COYOTE NETWORK SYSTEMS, INC., to be effective upon
approval; and
(c) To take action upon any other business as may properly come
before the Meeting and any adjournment thereof.
THE EFFECTIVENESS OF EACH OF THESE PROPOSALS IS NOT CONDITIONED ON THE
APPROVAL OF THE OTHER PROPOSALS.
THE COMPANY BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
EACH OF THE PROPOSALS.
<PAGE>
Meeting Record Date
The Company's Board of Directors has fixed the close of business on
October 24, 1997 as the record date ("Meeting Record Date") for the
determination of the holders of Company common stock entitled to receive
notice of, and to vote at, the Meeting and at any adjournments or
postponements thereof.
Votes Required
As of October 24, 1997, there were 7,499,377 shares of Company common
stock outstanding. Each share of Company common stock outstanding on the
Meeting Record Date is entitled to one vote upon each matter properly
submitted at the Meeting. Shares of Company Common stock held in the
Company's treasury will not be counted as present or voted at the Meeting.
The proposed amendments to the Company's Charter must be also be approved
by shareholders holding a majority of the outstanding shares of Company
common stock. Shareholder approval of the proposed amendments to the
Company's Charter is required by the General Corporation Law (the "DGCL")
of the State of Delaware.
The presence in person or by proxy at the Meeting of a majority of the
outstanding shares of Company common stock is necessary to constitute a
quorum for the transaction of business. Shares of Company common stock
held in the Company's treasury will not be counted as present for purposes
of determining whether a quorum is present. Abstentions will be counted as
present. Since the proposed amendments to the Company's Charter require
the approval of a majority of the outstanding shares of Company common
stock, abstentions will have the same effect as a negative vote for this
proposal. Under the DGCL, a broker non-vote will not be counted as present
for purposes of a quorum.
As of October 24, 1997, current directors and executive officers of
the Company and their affiliates owned beneficially an aggregate of 901,729
shares of Company common stock (including 673,636 shares which may be
acquired upon exercise of employee stock options and warrants; and shares
issuable upon conversion of Sattel Communications LLC ("Sattel") Class A or
B Units into Company common stock, see Security Ownership of Certain
Beneficial Owners and Management), or approximately 11.0 percent of the
shares of Company common stock outstanding on such date. Directors and
executive officers of the Company have indicated their intention to vote
their shares of Company common stock to approve and adopt each of the
Proposals.
Voting and Revocation of Proxies
Shares of Company common stock represented by a proxy properly signed
and received at or prior to the Meeting, unless subsequently revoked, will
be voted in accordance with the instructions thereon. If a proxy is signed
and returned without indicating any voting instructions, shares of Company
common stock represented by the proxy will be voted FOR each of the
Proposals. Proxy holders may in their discretion vote shares voted FOR the
Proposals to adjourn the Meeting to solicit additional proxies in favor of
such proposal. Proxy holders will not vote shares voted AGAINST the
proposals to adjourn the Meeting. Any proxy given pursuant to this
solicitation may be revoked by the person giving it at any time before the
proxy is voted by the filing of an instrument revoking it or of a duly
executed proxy bearing a later date with the Secretary of the Company prior
to or at the Meeting, or by voting in person at the Meeting. All written
notices of revocation and other communications with respect to revocation
of proxies should be addressed as follows: The Diana Corporation, 26025
Mureau Road, Calabasas, California 91302, Attention: Secretary.
Solicitation of Proxies
The Company will bear the costs of the solicitation of proxies.
In addition to solicitation by mail, directors, officers and employees
of the Company, who will not be specifically compensated for such services,
may solicit proxies from the shareholders of the Company, personally or by
telephone, telecopy or telegram or other forms of communication. Brokerage
houses, nominees, fiduciaries and other custodians will be requested to
forward soliciting materials to beneficial owners and will be reimbursed
for their reasonable expenses incurred in sending proxy materials to
beneficial owners.
<PAGE>
Appraisal Rights
Holders of Company common stock will not be entitled to any dissenters
or appraisal rights as a result of the matters to be voted upon at the
Meeting.
Annual Meeting; Shareholders' Proposals
The next annual meeting of the Company will be held on or about August
27, 1998. Proposals made by shareholders of the Company intended to be
presented at the next annual meeting must be received by the Company no
later than April 2, 1998, in order to be considered for inclusion in the
Company's proxy statement and form of proxy.
Independent Public Accountants
Price Waterhouse LLP was the Company's independent public accountant
for the fiscal year ended March 31, 1997. A representative of Price
Waterhouse LLP is not expected to be present at the Meeting. On October
16, 1997, Price Waterhouse LLP confirmed in a letter to the Company's
Chairman and Chief Executive Officer that the client - auditor relationship
has ceased. The Company's Audit Committee was not involved by Price
Waterhouse LLP regarding its decision to end the client - auditor
relationship with the Company.
The reports of Price Waterhouse LLP on the financial statements for
the past two fiscal years contained no adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope
or accounting principle, except as to the uncertainties noted in the Report
of Independent Accountants filed with the Registrant's Form 10-K dated
September 22, 1997.
During the audit of the fiscal 1997 financial statements a difference
of opinion arose relating to the audit procedures necessary with respect to
certain customer sales, including CNC. This potential disagreement was
resolved to Price Waterhouse LLP's satisfaction. The Audit Committee
discussed the subject matter of the potential disagreement with Price
Waterhouse LLP. The Company has authorized Price Waterhouse LLP to respond
fully to the inquiries of its successor auditors concerning the subject
matter of this potential disagreement.
The Company's recently appointed Audit Committee is in the process of
evaluating independent accounting firms for the fiscal year ending March
31, 1998. The Company will file a Form 8-K once a selection has been made.
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of October 24,
1997 with respect to the common stock ownership of each director, the Chief
Executive Officer, the other executive officers of the Company and three
former executive officers identified in the Summary Compensation Table
below (collectively with the Chief Executive Officer, the "named executive
officers"), all directors and executive officers as a group and each person
or group of persons known by the Company to own beneficially more than 5%
of the common stock of the Company.
<TABLE>
<CAPTION>
Shares
Issuable
Amount and Nature Shares Issuable Upon
of Beneficial Upon Exercise of Conversion
Ownership (1)(2) ----------------- of Sattel
------------------- Stock Class
Name of Number of Percent Options Warrants A or B
Beneficial Owner Shares of Class (3) (3) Units (4)
- ------------------ --------- -------- ------- -------- ----------
<S> <C> <C> <C> <C> <C>
Jack E. Donnelly 20,234 * 12,155 0 0
James J. Fiedler 540,000 6.9 0 175,000 175,000
Daniel W. Latham 125,000 1.6 0 0 125,000
Sydney B. Lilly 193,995 (5) 2.5 125,231 0 50,000
Brian A. Robson 0 * 0 0 0
Stephen W. Portner 22,500 * 0 11,250 0
All Directors and
Executives as a
Group
(6 individuals) 901,729 11.0 137,386 186,250 350,000
Richard Y. Fisher 275,378 (5) 3.5 275,378 0 0
Donald E. Runge 275,378 3.5 275,378 0 0
R. Scott Miswald 18,078 (5) * 16,578 0 0
Richard L. Haydon
1114 Avenue of the
Americas
New York, NY 10036 1,263,000 (6) 15.5 0 625,000 0
Dawson-Samberg
Capital Management,
Inc. et al
345 Pequot Avenue
Southport, CT 06490 452,985 (7) 6.0 0 0 0
Ardent Research
Partners
200 Park Avenue
39th floor
New York, NY 10066 450,000 (8) 5.8 0 225,000 0
</TABLE>
* The amount shown is less than 1% of the outstanding shares of common
stock.
(1) Except as otherwise noted, all persons have sole voting and investment
power over the shares listed.
(2) Includes shares of common stock issuable upon the exercise of stock
options and warrants exercisable within 60 days of October 24, 1997;
and shares issuable upon the conversion of Sattel Class A or B Units.
(3) Only includes stock options or warrants exercisable within 60 days of
October 24, 1997.
(4) Mr. Fiedler and Mr. Latham own 350 and 250 Class B Units of Sattel
Communications, LLC ("Sattel"), respectively. Mr. Lilly owns 100
Class A Units of Sattel. Mr. Fiedler's and Mr. Latham's Class B Units
are convertible into 175,000 and 125,000 shares, respectively, of the
Company common stock. Mr. Lilly's Class A Units are convertible into
50,000 shares of the Company common stock.
<PAGE>
(5) Mr. Fisher owns 20,000 shares (less than 1%) of common stock of Entree
Corporation ("Entree"), an 81.25%-owned subsidiary of the Company.
Mr. Lilly owns 30,000 shares (less than 1%) of Entree common stock.
Mr. Miswald owns 10,000 shares (less than 1%) of Entree common stock.
All directors and executive officers as a group beneficially own
40,000 shares (less than 1%) of Entree common stock.
(6) Based on its Schedule 13D filed July 28, 1997, Mr. Haydon has sole
voting and dispositive power over 1,263,000 shares.
(7) Based on its Schedule 13D filed January 31, 1997, Dawson-Samberg
Capital Management, Inc. ("Dawson-Samberg") has shared voting and
dispositive power over 284,040 shares held in managed accounts for
which it acts as an investment advisor. Porridge Partners II has sole
voting and dispositive power over 63,000 shares. Mr. Arthur Samberg
has sole voting and dispositive power over 105,945 shares.
(8) Based on its Schedule 13D filed August 20, 1997, Ardent Research
Partners, L.P. has sole voting and dispositive power over 450,000
shares.
<PAGE>
PROPOSAL ONE: ELECTION OF DIRECTORS
The Board of Directors is divided into three classes of directors
consisting of two classes of two members and one class of three members or
seven members in the aggregate. However, the Board currently includes only
five members. The election of directors is staggered so that the term of
only one class of directors expires each year. Generally, the term of each
class is three years. Presently, the Board of Directors has two vacant
positions. The term of each class is three years and the term of office
for Messrs. Fiedler and Portner will expire in 2000.
The Board of Directors believes that all nominees will stand for
election, but if any person nominated fails to stand for election, the
persons named in the accompanying form of proxy or their substitutes will
vote for a substitute nominee selected by the Board of Directors, unless
the Board reduces the number of directors to be elected. The Board of
Directors believes that each nominee named herein will serve if elected to
the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" ALL
NOMINEES TO BE ELECTED AS DIRECTORS.
Nominees For Terms Expiring in 2000
James J. Fiedler, age 51, has been a Director of the Company since
August 1996. He has been Chairman and Chief Executive Officer of the
Company since November 1996 and Chairman and Chief Executive Officer of
Sattel Communications ("Sattel"), since September 1995. Previously, Mr.
Fiedler was a principal in the consulting firm of Johnson & Fiedler. From
November 1992 to September 1994, Mr. Fiedler was Vice President of Sales
and Marketing and subsequently President and Director of Summa Four, Inc.
From June 1989 to July 1992, Mr. Fiedler was Executive Vice President and
Chief Operating Officer of Timeplex, a subsidiary of Unisys engaged in the
business of manufacturing data and telecommunications equipment. Prior to
June 1989, Mr. Fiedler held executive positions with Unisys Corporation and
Sperry Corporation (subsequently acquired by Unisys Corporation). He has
been a Director of Entree Corporation since November 1996.
Stephen W. Portner, age 45, was appointed a Director of the Company on
August 29, 1997. He is the Managing Director of North America for JMJ
Associates, a global management consulting company, and has served in
various capacities from January 1994 to May 1997 at JMJ Associates. From
December 1991 to January 1994, Mr. Portner held positions in plant and
project management as well as Director of Quality for Air Products
Incorporated.
Director With Term Expiring in 1998
Sydney B. Lilly, age 68, has been a Director of the Company since
1988. He was Executive Vice President of the Company from April 1995 to
November 1996 and a consultant from 1984 to 1995. He was a Director of
Entree Corporation from 1991 to 1996.
Directors With Term Expiring in 1999
Jack E. Donnelly, age 62, has been a Director of the Company since
November 1991. Since 1986, he has been a principal of Bailey & Donnelly
Associates, Inc., an investment company.
Daniel W. Latham, age 48, has been a Director of the Company since
November 1996. He has been President and Chief Operating Officer of the
Company since November 1996 and President and Chief Operating Officer of
Sattel since September 1995. Prior to his association with Sattel, Mr.
Latham was the President of Frontier Long Distance, a leading U.S. long
distance company in the U.S. Mr. Latham also served as a Senior Vice
President at Racal Datacom where he was responsible for world-wide sales.
Prior to Racal, Mr. Latham held executive positions at Digital Equipment
Corporation, the Bell System and IBM. He has been a Director of Entree
Corporation since November 1996.
<PAGE>
The Board of Directors, its Committees, and Director Compensation
The Board of Directors held a total of 22 meetings during the fiscal
year ended March 31, 1997. Each director, except Mr. Michael Camp, a
former Director, attended at least 75% of the aggregate total number of
meetings of the Board of Directors held during the last fiscal year and the
total number of meetings held by all committees of the Board of Directors
on which he served during the year.
The Board of Directors has two standing committees: an Audit
Committee and an Executive Committee. The Audit Committee recommends to
the Board of Directors the independent certified public accountants to
perform audit and non-audit services, reviews the scope and results of such
services, reviews with management and the independent certified public
accountants the systems of internal control, assures adherence in
accounting and financial reporting to generally accepted accounting
principles and performs such other duties deemed appropriate by the Board
of Directors. Messrs. Donnelly and Portner are the present members of the
Audit Committee and were appointed on September 10, 1997. Previously, Mr.
Jay Lieberman, a former Director, was the sole member of the Audit
Committee until February 1997. Mr. Bruce Borchardt and Mr. Camp were
members of the Audit Committee from March 7, 1997 until their resignations
on July 1, 1997 and September 5, 1997, respectively. The Audit Committee
did not meet during the fiscal year ended March 31, 1997, however, it met
during April 1997 with Mr. Bruce Borchardt, a former Director and member of
the Audit Committee, to discuss the fiscal 1997 audit with the Company's
independent accountants. In addition, the audit committee met on September
22, 1997 to discuss the fiscal 1997 audit with the Company's independent
accountants.
The Executive Committee has and may exercise all of the powers of the
Board of Directors in the management of the business and affairs of the
corporation during intervals between meetings of the Board of Directors,
except with respect to amendments to the Certificate of Incorporation or
by-laws, merger, consolidation, sale of all or substantially all of the
corporation's assets, dissolution, declaration of dividends, authorization
of issuance of stock, or filling vacancies on the Board of Directors. The
Executive Committee consists of Messrs. Fiedler, Latham, Donnelly and
Lilly. The Executive Committee met once during the fiscal year ended March
31, 1997.
The Company has no standing nominating or compensation committee of
the Board of Directors, or committees performing similar functions, because
decisions regarding nomination of directors and executive compensation are
made by the full Board of Directors.
Directors receive an annual fee of $15,000, paid on a monthly basis.
Directors are also reimbursed for travel expenses. In addition, Directors
also receive $1,250 per meeting for service on the Audit Committee of the
Board of Directors.
In June 1997, stock options to purchase 5,000 shares of the Company's
common stock were granted to each of two outside members of the Board of
Directors that joined the Board in fiscal 1997, namely, Bruce Borchardt and
J. Michael Camp. These options have an exercise price of $3.00 per share.
In fiscal 1997, certain Board members were also compensated for performing
certain other services for the Company. See "Compensation Committee
Interlocks and Insider Participation."
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the total annual compensation paid or
accrued by the Company for the account of the executive officers of the
Company serving as such at March 31, 1997 and for two former executive
officers:
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation
------------------------------ Long-Term Compensation
Other ------------------------
Annual Restricted Securities All Other
Name and Salary Bonus Compensa- Stock Underlying Compensation
Principal Position Year ($) ($) tion ($) Awards (#) Options (#) ($)
- ------------------ ---- ---------- ------ --------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
James J. Fiedler 1997 200,000 0 3,750 (7) 0 0 0
Chairman, CEO 1996 111,538 (4) 0 0 2.5%(9) 150,000 (11) 19,612 (13)
and Director(1)
Daniel W. Latham 1997 175,000 0 3,750 (7) 0 0 170,197 (13)
President, COO 1996 90,865 (5) 0 0 1.5%(10) 150,000 (11) 26,416 (13)
and Director(2)
Brian A. Robson 1997 56,250 (6) 0 0 0 10,500 13,041 (13)
Vice President
and Controller
R. Scott Miswald 1997 125,000 0 0 52,500 0 0
Vice President 1996 110,000 11,614 0 0 10,000 0
and Treasurer(3) 1995 110,000 0 0 0 0 0
Richard Y. Fisher 1997 137,308 0 27,003 (8) 0 0 342,692 (12)
Former Chairman 1996 210,000 64,550 0 0 0 0
(3) 1995 444,538 0 0 0 0 0
Donald E. Runge 1997 137,308 0 0 0 0 82,692 (12)
Former President 1996 210,000 64,550 0 0 0 0
and Director(3)
</TABLE>
______________________
(1) On November 29, 1996 Mr. Fiedler was appointed CEO of the Company.
Mr. Fiedler also continued as CEO of Sattel (see Employment and
Severance Agreements).
(2) On November 29, 1996 Mr. Latham was appointed as President and COO of
the Company. Mr. Latham also continued as President and COO of Sattel
(see Employment and Severance Agreements).
(3) Mr. Fisher resigned from the Company as an executive officer and
director on November 29, 1996. Mr. Runge resigned as an executive
officer and director of the Company on August 22, 1996. Mr. Miswald's
employment with the Company terminated September 26, 1997.
(4) Represents part-year compensation from start of employment as CEO of
Sattel on September 11, 1995 to end of fiscal year, based on
annualized salary of $200,000.
(5) Represents part-year compensation from start of employment as
President and COO of Sattel on September 25, 1995 to end of fiscal
year, based on annualized salary of $175,000.
(6) Started employment on October 31, 1996. Current annualized salary:
$135,000.
(7) Directors fees paid to officers.
(8) Perquisites include group health insurance and long-term disability
premium payments.
(9) Mr. Fiedler was granted 250 Class B Units in Sattel (equivalent to a
2.5% ownership interest) of which 38 Class B Units remain subject to
forfeiture as of October 1, 1997.
(10) Mr. Latham was granted 150 Class B Units in Sattel (equivalent to a
1.5% ownership interest) of which 23 Class B Units remain subject to
forfeiture as of October 1, 1997.
(11) Performance-based options for the indicated number of shares of
Company common stock surrendered on November 11, 1996 in connection
with loans (see Certain Relationships and Related Transactions).
(12) See Employment and Severance Agreements.
(13) Represents relocation assistance paid by the Company on behalf of the
various individuals. Also includes $98,000 paid to Mr. Latham to
cover his loss on a personal residence and the related real estate
commissions and selling expenses.
<PAGE>
The table below provides information regarding stock options granted during
fiscal 1997 to the persons named in the Summary Compensation Table:
Option Grants In Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants Potential Realizable
-------------------------------------------------- Value at Assumed Annual
Number of % of Total Rate of Stock Price
Shares Options Appreciation for
Underlying Granted to Option Term (3)
Options Employee in Exercise Expiration ----------- -----------
Granted (1) Fiscal Year Price Date 5% 10%
----------- ----------- -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
James J. Fiedler 0 --- $ --- --- $ --- $ ---
Daniel W. Latham 0 --- --- --- --- ---
Brian A. Robson 10,500 (2) 5.4% 19.05 8/20/01 55,263 122,117
R. Scott Miswald 0 --- --- --- --- ---
Richard Y. Fisher 0 --- --- --- --- ---
Donald E. Runge 0 --- --- --- --- ---
</TABLE>
(1) The options granted under the Sattel Communications LLC 1996 Stock
Option Plan are non-qualified stock options. The exercise price per
share is 100% of the fair market value of a share of common stock on
the date of the grant. In June 1997, current employees owning stock
options, including Mr. Robson, were granted the right to exchange
existing stock options for new options that have an exercise price of
$3.00 per share. The new options vest equally over a three year
period commencing June 1, 1997.
(2) The options vest as follows: October 30, 1997 - 2,625; October 30,
1998 - 2,625; October 30, 1999 - 5,250.
(3) The option term is five years. The dollar amounts under these columns
are the results of calculations at the 5% and 10% rates set by the
Securities and Exchange Commission. The potential realizable values
are not intended to forecast possible future appreciation, if any, in
the market price of the common stock.
The table below provides information regarding the value of in-the-
money stock options held by named executive officers at March 31, 1997.
Named executive officers did not exercise any stock options during the
fiscal year.
Unexercised Company Stock Options
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money Options
Options at March 31, 1997 at March 31, 1997 (1)
-------------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ----------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
James J. Fiedler 0 0 $ 0 $ 0
Daniel W. Latham 0 0 0 0
Brian A. Robson 0 10,500 0 0
R. Scott Miswald 16,578 0 8,343 0
Richard Y. Fisher 275,378 0 166,792 0
Donald E. Runge 275,378 0 166,792 0
</TABLE>
(1) Value based on a fair market value of common stock of $6.00 on
March 31, 1997, less the option exercise price.
<PAGE>
Severance Agreements
The Company entered into Separation Agreements, dated November 20,
1996 (the "Separation Agreements"), with each of Richard Y. Fisher, Sydney
B. Lilly and Donald E. Runge (the "Departing Officers") that provide for
termination of employment of the Departing Officers by, and resignation of
the Departing Officers from all offices, and, except for Mr. Lilly's
directorship of the Company, directorships in, the Company and its
subsidiaries. The Separation Agreements provide for payment by the
Company, as of November 29, 1996, of $186,000 and $749,000, respectively,
to Mr. Runge and Mr. Fisher, in settlement of deferred compensation
previously earned and payments of $343,000 to Mr. Fisher and $83,000 to
each of Mr. Runge and Mr. Lilly as severance settlements. In accordance
with provisions of the Amended and Restated Employment Agreements entered
into by the Company and each of the Departing Officers on April 2, 1995,
each Departing Officer shall be entitled to have all medical, dental,
hospital, optometrical, nursing, nursing home and drug expenses for
themselves and their spouses paid by the Company for life, or in the case
of Mr. Lilly, until March 31, 2000. The Separation Agreement for Mr.
Fisher provides that he shall repay in full a promissory note dated April
11, 1988, in the amount of $42,469, which he did. The Separation
Agreements further provide that all stock options of the Departing Officers
shall remain exercisable until December 31, 1997 (April 2, 2000 with
respect to 82,688 options granted to Mr. Lilly on April 2, 1995) and amends
existing Stock Option Agreements with Messrs. Fisher, Lilly and Runge to
provide for, among other things, the Company to maintain the effectiveness
of the Form S-8 Registration Statement currently in effect covering the
exercise of the stock options. The Company has made all required payments
under the Separation Agreements.
Compensation Committee Interlocks and Insider Participation
As noted above, the Board of Directors does not have a compensation
committee, because executive compensation decisions are made by the full
Board. All Directors participate in the deliberations.
Mr. Fiedler is the Company's Chief Executive Officer. Mr. Latham is
the Company's President and Chief Operating Officer. Messrs. Fiedler's and
Latham's fiscal 1997 compensation and employment contracts are described
under Employment and Severance Agreements. Fiscal 1997 executive
compensation decisions made by the Board of Directors with respect to
Messrs. Fiedler and Latham were made prior to their appointment to the
Board of Directors.
In December 1991, Mr. Donnelly entered into a consulting agreement
with the Company to serve as chairman and consultant to C&L Communications,
Inc. ("C&L"), one of the Company's subsidiaries. The agreement, which was
subsequently amended, terminates on March 31, 1998. Upon expiration or
termination of the agreement, the Company will pay Mr. Donnelly 10% of the
"increase in value" of C&L. The increase in value is defined generally as
the previous fiscal year's net pre-tax earnings of C&L, multiplied by four,
minus $9 million. During fiscal 1995 Mr. Donnelly's consulting agreement
was amended to provide for an extension of the term of the agreement from
December 23, 1996 to March 31, 1997, and Mr. Donnelly was provided an
option to extend the term one additional year. Also, Mr. Donnelly has the
ability to obtain a loan from the Company at the prime rate, not to exceed
25% of the amount accrued by the Company for the estimated payment due at
the termination of the agreement. No amounts have been loaned to Mr.
Donnelly pursuant to this provision. In addition Mr. Donnelly is paid
$50,000 per year in accordance with the agreement.
Mr. Lieberman, a former Director of the Company, was paid an aggregate
of $4,000 during fiscal 1997 for consulting services.
<PAGE>
Board of Directors Report on Executive Compensation
The Board of Directors (the "Board") is composed of three non-employee
directors and two executive officers. The Board is responsible for
establishing and administering the policies which govern both annual
compensation and equity incentive compensation.
This report is submitted by the Board and addresses the Company's
policies for fiscal 1997 and 1998 as they apply to the Named Executive
Officers.
Executive Compensation Philosophy. The Company's executive
compensation program is designed to provide compensation that attracts,
motivates and retains highly qualified people to serve the Company's
customers and to achieve its strategic objectives. The Company's executive
compensation program is comprised of four elements: (i) base salary; (ii)
bonus; (iii) long term incentive compensation in the form of stock options
or other convertible equity instruments, and (iv) other benefits generally
available to all of the Company's employees.
Base Salary and Bonus. Cash compensation levels for the Company's
executive officers are based primarily on the Board's subjective evaluation
of competitive salary levels of executive officers with similar backgrounds
and experience as the Company's executive officers. Each executive
officer's cash compensation is comprised of base salary and cash bonus. In
determining salary adjustments the Board considers individual performance
and contributions to the Company. Cash bonuses are awarded based on the
attainment of certain corporate and individual objections, with corporate
objectives relating primarily to the attainment of sales and profit goals.
Salary levels and the bonus program are reviewed by the Board on an annual
basis.
Long Term Incentive Compensation. The Company's long term incentive
compensation program is implemented through the grant of stock options or
other convertible equity instruments. This program is intended to both (i)
align executive interests with the long-term interests of stockholders by
integrating long-term stock performance into each executive officer's
overall compensation package and (ii) through multi-year vesting, provide
an incentive for the Company's executive officers to remain with the
Company.
Generally, stock options or other convertible equity instruments are
granted at prevailing market rates and only have value if the Company's
stock price increases, thereby providing an incentive for the Company's
executive officers to improve long-term shareholder value. Generally,
stock options vest in three equal annual installments and executive
officers must be employed by the Company at the time of vesting in order to
exercise the options. The Board determines the number of shares subject to
option grants to executive officers based on individual accomplishments
measured against certain objectives and contributions to the Company. The
Board or a Committee also considers the number, value and vesting schedule
of options already held by each executive officer.
Benefits. The Company's executive officers are entitled to receive
medical benefits and life insurance benefits and to participate in the
Company's proposed 401(k) Savings Plan on the same basis as other full-time
employees of the Company. The Company's Chief Executive Officer and the
Company's President each receive a monthly car allowance.
Summary of Compensation of the Chief Executive Officer and the
President. The compensation philosophy applied by the Board in
establishing the compensation for the Company's Chief Executive Officer and
the President is the same as for the other senior management of the
Company--to provide a competitive compensation opportunity that rewards
performance for the attainment of sales and profit goals.
The Company employed two persons as Chief Executive Officer during
fiscal year 1997. Until November 1996, Mr. Fisher served as Chairman and
Chief Executive Officer and a Director of the Company and was paid a salary
of $137,308 for the portion of the fiscal year 1997 during which he held
that position. Mr. Fisher resigned from the position of Chairman and Chief
Executive Officer and a Director on November 29, 1997.
<PAGE>
Mr. Fiedler succeeded Mr. Fisher without adjustments to his annual
compensation. Mr. Fiedler was elected to the Board on August 22, 1996.
Mr. Fiedler also continued to serve in the positions of Chairman and Chief
Executive Officer of Sattel Communications and was paid a salary of
$200,000 during fiscal year 1997. Mr. Fiedler was awarded 250 Class B
Units in Sattel (equivalent to a 2.5% ownership interest) of which 38 Class
B Units remain subject to forfeiture as of October 1, 1997. Mr. Fiedler
surrendered 150,000 performance-based stock options on November 11, 1996 in
connection with a loan (see Certain Relationships and Related
Transactions), the proceeds of which were used to acquire additional Class
B Units in Sattel from a former Sattel employee.
The Company employed two persons as President during fiscal year 1997.
Until August 22, 1996, Mr. Runge served as President and a Director of the
Company and was paid a salary of $137,308 for the portion of the fiscal
year 1997 during which he held that position.
Mr. Latham was appointed President and Chief Operating Officer and a
Director on November 29, 1996, succeeding Mr. Runge who resigned on August
22, 1996. Mr. Latham succeeded Mr. Runge without adjustments to his annual
compensation. Mr. Latham also continued to serve in the positions of
President and Chief Operating Officer of Sattel Communications and was paid
a salary of $175,000 during fiscal year 1997. Mr. Latham received $170,197
in relocation assistance in fiscal 1997, which included $98,000 paid to Mr.
Latham to cover his loss on a personal residence and the related real
estate commissions and selling expenses. Mr. Latham was granted 150 Class
B Units in Sattel (equivalent to a 1.5% ownership interest) of which 23
Class B Units remain subject to forfeiture as of October 1, 1997. Mr.
Latham surrendered 150,000 performance-based stock options on November 11,
1996 in connection with a loan (see Certain Relationships and Related
Transactions), the proceeds of which were used to acquire additional Class
B Units in Sattel from a former Sattel employee.
Employment Agreements. Messrs. Fiedler and Latham, the Company's
Chief Executive Officer and President, respectively, were employed by
Sattel until December 31, 1996 pursuant to contracts that provided for
salaries of $200,000 and $175,000, respectively, per year with a year-end
bonus equal to 10% and 5%, respectively, of Sattel's pre-tax earnings for
the calendar year, up to the salary for the year, and such fringe benefits
as Sattel's executive committee should make available. From January 1,
1997 to September 3, 1997, Messrs. Fiedler and Latham continued their
employment at the same salary without a contract.
On September 4, 1997, Messrs. Fiedler and Latham entered into new
employment agreements with the Company covering the 1998 fiscal year and
providing for salaries of $200,000 and $175,000, respectively, per year.
Such employment agreements provide for customary fringe benefits, including
a car allowance for each Executive of $600 per month. The Executive may
become entitled to bonuses based on the Company's pre-tax profits for each
half year in the fiscal year covered by the employment agreements, equal to
10% of such pre-tax profits in the case of Mr. Fiedler and 5% in the case
of Mr. Latham, but not to exceed 100% of the Executive's annual salary in
the case of Mr. Fiedler and 75% in the case of Mr. Latham.
Additionally, the Executives are entitled to an incentive bonus equal
to one-half percent of the sales revenues of Sattel for each month during
the term of the agreement, subject to certain limitations, and in any event
not to exceed 100% of the Executive's annual salary. As previously noted,
each of the Executives has a $300,000 note payable to the Company. Under
the employment agreements, equal one third portions of such notes were
forgiven at the date of the employment agreement, and equal one third
portions will be forgiven if their respective employments are renewed, at
each of the next two anniversaries of the date of the employment
agreements, provided that such Executive remains as an employee of the
Company at each such forgiveness date. These employment agreements also
contemplate that the Class A and Class B Units of Sattel, including the
units held by the Executives, will become convertible into the Company's
common stock, at the rate of 500 shares of the Company's common stock for
each such unit, immediately and without the requirements that Sattel
achieve cumulative pre-tax profits of at least $15 million over four
consecutive quarters. The Company has also granted certain registration
rights with respect to the shares of common stock issuable upon such
conversion.
<PAGE>
On September 4, 1997, the Board of Directors authorized an amendment
to certain Class B Units owned by directors and employees of Diana and
Sattel at June 30, 1997, to provide for the elimination of the minimum pre-
tax profits measure requirement discussed above and the conversion into
Company common stock at the option of the holder.
Compliance with Section 162(m) of the Internal Revenue Code of 1986,
as Amended (the "Code"). Section 162(m) of the Code, enacted in 1993,
generally disallows tax deductions to publicly-traded corporations for
compensation over $1,000,000 paid to the corporation's Chief Executive
Officer or any of its other four most highly compensated executive
officers. Qualifying performance-based compensation is not subject to this
disallowance if certain requirements are met. The Company currently
intends to structure the compensation arrangements of its executive
officers in a manner that will avoid disallowances under Section 162(m).
Respectfully submitted by:
Jack E. Donnelly
James J. Fiedler
Daniel W. Latham
Sydney B. Lilly
Stephen W. Portner
<PAGE>
PERFORMANCE GRAPH
The SEC requires the Company to include in the Proxy Statement a graph
comparing cumulative five year common stock returns with a broad-based
stock index and either a nationally recognized industry index or an index
of peer companies selected by the Company. Historically, the Company
elected to compare shareholder returns to an index of similarly capitalized
issuers because it was unable to identify a published industry or line-of-
business index which closely resembled its mix of businesses. This index
was developed in June 1993 based upon companies with similar
capitalizations. The issuers included in the index are; Cobra Electronics
Corporation, Courier Corporation, Frequency Electronics, Inc., Noodle
Kidoodle Inc., Jay Jacobs, Inc., Lindberg Corporation and Sharper Image
Corporation. The graph assumes $100 was invested on April 1, 1992 in the
Company's common stock and the Standard & Poor's 500 Stock Index and
assumes the reinvestment of dividends. The index of similarly capitalized
issuers (Peer Group) was calculated based on an initial $100 investment
weighted annually according to the beginning of the period market
capitalization of the companies and assumes the reinvestment of dividends.
In fiscal 1997, the Company's Board of Directors approved a
restructuring plan to separate its central office voice and data switching
equipment business from its other business. The Company sold the majority
of the assets of Atlanta Provision Company, Inc. in fiscal 1997 and is
presently attempting to sell C&L Communications, Inc. and Valley
Communications, Inc. Consequently, the Company has decided to change from
a self-constructed peer group index to the NASDAQ Telecom Index. The
Company also changed the broad-based index from the Standard & Poor's 500
Stock Index to the Standard & Poor's Midcap 400 Stock Index. The Company
is required to present both performance graphs in the year that the indices
are changed.
Set forth below is a line graph comparing the cumulative total
shareholder return on the Company's common stock over the last five fiscal
years with the cumulative total return of companies in the Standard &
Poor's 500 Stock Index and with an index compiled by the Company of issuers
with similar market capitalizations.
PERFORMANCE GRAPH
COMPARISON OF CUMULATIVE TOTAL RETURN*
From April 1, 1992 to March 31, 1997
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The Diana Corporation $100 $294 $478 $239 $1,479 $324
- --------------------------------------------------------------------------
S&P 500 100 115 117 135 179 214
- --------------------------------------------------------------------------
Peer Group 100 87 107 110 141 132
</TABLE>
__________
ASSUMES INITIAL INVESTMENT OF $100
* Total return assumes reinvestment of dividends.
Note: Total returns based on market capitalization.
<PAGE>
Set forth below is a line graph comparing the cumulative total
shareholder return on the Company's common stock over the last five fiscal
years with the cumulative total return of companies in the Standard &
Poor's 400 Midcap Stock Index and the NASDAQ Telecom Index.
PERFORMANCE GRAPH
COMPARISON OF CUMULATIVE TOTAL RETURN*
From April 1, 1992 to March 31, 1997
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The Diana Corporation $100 $294 $478 $239 $1,479 $324
- --------------------------------------------------------------------------
S&P 400 100 116 123 134 172 190
- --------------------------------------------------------------------------
Nasdaq Telecom 100 133 160 161 213 192
</TABLE>
__________
ASSUMES INITIAL INVESTMENT OF $100
* Total return assumes reinvestment of dividends.
Note: Total returns based on market capitalization.
Certain Relationships and Related Transactions
The Company's directors have certain business relationships with the
Company. See "Compensation Committee Interlocks and Insider
Participation."
Mr. Fiedler, the Company's Chairman and Chief Executive Officer,
loaned the Company $250,000 in June 1997. The principal amount of the loan
was converted to common stock in conjunction with Mr. Fiedler's purchase of
Company common stock pursuant to the Regulation D private placement in July
1997. Mr. Latham, the Company's President and Chief Operating officer,
loaned the Company $98,000 subsequent to March 31, 1997. This loan was
repaid in July 1997. Mr. Portner, a Director, purchased Company common
stock pursuant to a Regulation D private placement.
On November 11, 1996 the Company loaned $300,000 to each of Messrs.
Fiedler and Latham. Messrs. Fiedler and Latham both executed unsecured
Promissory Notes due November 1, 1999 which provide interest at 6.07% per
annum compounded on the anniversary date and payable on November 1, 1999.
In addition, each person agreed to surrender previously awarded options
they each held to purchase 150,000 shares of the Company's common stock.
The largest amount outstanding to the Company under each promissory note
during the fiscal year ended March 31, 1997 was $300,000.
<PAGE>
The Promissory Notes provide for full repayment prior to November 1,
1999 in the event of the following: (a) upon any transfer of Messrs.
Fiedler's or Latham's Class B Units in Sattel (other than to a Permitted
Transferee, as defined in the Agreement Regarding Award of Class B Units
(the "Award Agreement")), or by any such Permitted Transferee (including
without limitation certain transfers contemplated by the Award Agreement)
or (b) upon any exchange or conversion of Class B Units for or into
securities registered under the Securities Exchange Act of 1934, as
amended, in accordance with the Award Agreement. In connection with the
employment agreements with Messrs. Fiedler and Latham entered into on
September 4, 1997, the Company's Board of Directors agreed to forgive the
notes. Under the employment agreements, equal one third portions of the
notes were forgiven at September 4, 1997 and, if their respective
employments are renewed, equal one third portions will be forgiven at each
of the next two anniversaries of the date of the employment agreements,
provided that each individual remains as an employee of the Company at each
such forgiveness date.
In July 1997, the Company issued 1,880,750 shares of its common stock
at $2.00 per share in a private placement under Regulation D of the
Securities Act of 1933. The Company received $3,362,000 from the private
placement, net of fees of $400,000. In addition, warrants to purchase
1,880,750 shares of the Company's common stock at $3.00 per share were
issued to the Regulation D participants. The warrants are exercisable
immediately and expire 5 years from issuance. Mr. Fiedler, the Company's
Chairman and Chief Executive Officer, participated in the private placement
and purchased 175,000 shares of common stock and received warrants to
purchase 175,000 shares of the Company's common stock. In addition, Mr.
Stephen W. Portner, a Director, and his daughter collectively participated
in the private placement and purchased 11,250 shares of common stock and
received warrants to purchase 11,250 shares of the Company's common stock.
The common stock and common stock warrants issued in the private placement
are subject to registration rights.
PROPOSAL TWO: AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF THE COMPANY
Approval of Proposal Two will constitute approval of the amendment to
the Company's Restated Certificate of Incorporation discussed under this
heading. Approval of Proposal Two is being sought because the Delaware
General Corporation Law requires such approval. Accordingly, if Proposal
Two is not approved by the Company's shareholders, the proposed amendment
could not occur.
Name Change
Shareholders will be asked to vote to amend the Company's Restated
Certificate of Incorporation to change the name of The Diana Corporation to
COYOTE NETWORK SYSTEMS, INC., effective immediately upon approval.
Shareholders are being asked to vote so to amend the Company's Restated
Certificate of Incorporation so that the Company will be able to conduct
its business under that name.
The Company's Chairman of the Board may determine to withdraw the Name
Change Proposal from consideration at the Meeting, or if adopted by the
shareholders, may determine not to file the amendment to the Company's
Restated Certificate of Incorporation with the Delaware Secretary of State,
if further investigation reveals that COYOTE NETWORK SYSTEMS, INC. may not
be reasonably available for use by the Company. In such case, the Company
intends to propose a change to another name for a vote by shareholders at
the 1998 Annual Meeting of Shareholders or at any special meeting of the
shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
APPROVAL OF THE FOREGOING AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE
OF INCORPORATION.
<PAGE>
Other Matters
Management is not aware of any other matters which may be brought
before the Meeting. If other matters not now known come before the
Meeting, or any adjournments thereof, the persons named in the accompanying
form of proxy or their substitutes will vote such proxy in accordance with
their best judgment.
By Order of the Board of Directors,
/s/ Brian A. Robson, Secretary
Calabasas, California
October 28, 1997
YOUR COOPERATION IN SIGNING AND RETURNING
YOUR PROXY WILL BE GREATLY APPRECIATED.
