<PAGE> 1
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended June 29, 1996
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition period from _____ to _____
Commission File Number 0-24918
-------
SHIVA CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 04-2889151
------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
28 Crosby Drive, Bedford, MA 01730
(Address of principal executive offices, including Zip Code)
(617) 270-8300
(Registrant's telephone number, including area code)
----------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
--- ---
The number of shares outstanding of the registrant's Common Stock as of June 29,
1996 was 28,493,368.
Total Number of Pages: 14
- --------------------------------------------------------------------------------
1
<PAGE> 2
SHIVA CORPORATION
<TABLE>
INDEX
-----
<CAPTION>
Part I Financial Information Page
----
<S> <C> <C> <C>
Item 1 Consolidated Financial Statements
Consolidated Balance Sheet
June 29, 1996 and December 30, 1995 3
Consolidated Statement of Operations
Three and six months ended June 29, 1996 and July 1, 1995 4
Consolidated Statement of Cash Flows
Six months ended June 29, 1996 and July 1, 1995 5
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Part II Other Information
Item 4 Submission of Matters to a Vote of Security Holders 12
Item 6 Exhibits and Reports on Form 8-K 12
Signature 14
</TABLE>
2
<PAGE> 3
SHIVA CORPORATION
<TABLE>
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE RELATED DATA)
<CAPTION>
JUNE 29, DECEMBER 30,
1996 1995
-------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 95,233 $ 93,203
Short-term investments 4,992 9,125
Accounts receivable, net of allowances of $5,941 at
June 29, 1996 and $5,252 at December 30, 1995 36,260 22,982
Inventories 11,852 7,846
Prepaid expenses and other current assets 3,738 2,351
-------- --------
Total current assets 152,075 135,507
Property, plant and equipment, net 18,371 12,965
Deferred income taxes 4,219 548
Other assets 1,573 1,103
-------- --------
Total assets $176,238 $150,123
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and capital lease obligations $ 478 $ 700
Accounts payable 13,453 9,032
Accrued compensation and benefits 6,018 5,367
Accrued expenses 11,478 7,509
Deferred revenue 2,766 3,523
-------- --------
Total current liabilities 34,193 26,131
Long-term debt and capital lease obligations 235 452
Other long-term liabilities 393 401
Deferred income taxes 235 235
-------- --------
Total liabilities 35,056 27,219
-------- --------
Stockholders' equity:
Preferred stock, $.01 par value; 1,000,000 shares
authorized, none issued - -
Common stock, $.01 par value; 100,000,000 and
50,000,000 shares authorized, 28,493,368 and
27,960,580 shares issued and outstanding at
June 29, 1996 and December 30, 1995, respectively 285 280
Additional paid-in capital 142,383 133,457
Unrealized gain on investments 112 137
Cumulative translation adjustment (528) (586)
Accumulated deficit (1,070) (10,384)
-------- --------
Total stockholders' equity 141,182 122,904
-------- --------
Total liabilities and stockholders' equity $176,238 $150,123
======== ========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
3
<PAGE> 4
SHIVA CORPORATION
<TABLE>
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------ -----------------------
JUNE 29, JULY 1, JUNE 29, JULY 1,
1996 1995 1996 1995
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Revenues $51,485 $26,376 $94,794 $52,113
Cost of revenues 21,397 11,180 38,782 22,257
------- ------- ------- -------
Gross profit 30,088 15,196 56,012 29,856
------- ------- ------- -------
Operating expenses:
Research and development 5,462 3,537 10,656 6,356
Selling, general and administrative 16,801 10,280 31,506 20,032
Merger expenses 1,987 - 1,987 -
------- ------- ------- -------
Total operating expenses 24,250 13,817 44,149 26,388
------- ------- ------- -------
Income from operations 5,838 1,379 11,863 3,468
Interest income 987 475 2,331 980
Interest expense (180) (215) (298) (462)
------- ------- ------- -------
Income before income taxes 6,645 1,639 13,896 3,986
Income tax provision 1,670 666 4,582 1,631
======= ======= ======= =======
Net income $ 4,975 $ 973 $ 9,314 $ 2,355
======= ======= ======= =======
Net income per share $ 0.16 $ 0.04 $ 0.30 $ 0.09
======= ======= ======= =======
Shares used in computing net income per share 32,067 27,030 31,296 27,045
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
4
<PAGE> 5
SHIVA CORPORATION
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(IN THOUSANDS)
<CAPTION>
SIX MONTHS ENDED
-------------------------
JUNE 29, JULY 1,
1996 1995
-------- --------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 9,314 $ 2,355
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,726 1,686
Gain on sale of property, plant and equipment (42) (22)
Deferred income taxes (1,511) 95
Changes in assets and liabilities:
Accounts receivable (13,199) (896)
Inventories (4,028) (1,717)
Prepaid expenses and other current assets 444 (463)
Accounts payable 4,416 (483)
Accrued compensation and benefits 644 452
Accrued expenses 7,595 1,802
Deferred revenue (734) 1,621
Other long term liabilities (9) (12)
-------- --------
Net cash provided by operating activities 5,616 4,418
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (7,739) (2,686)
Capitalized software development costs (593) (264)
Purchases of short-term investments -- (10,334)
Proceeds from sales of short-term investments 4,108 550
Change in other assets (211) (141)
-------- --------
Net cash used by investing activities (4,435) (12,875)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net repayments under short-term debt -- (677)
Principal payments on long-term debt and capital
lease obligations (439) (880)
Proceeds from exercise of stock options and warrants 1,338 473
-------- --------
Net cash provided (used) by financing activities 899 (1,084)
-------- --------
Effects of exchange rate changes on cash and cash equivalents (50) 22
-------- --------
Net increase (decrease) in cash and cash equivalents 2,030 (9,519)
Cash and cash equivalents, beginning of period 93,203 36,068
Elimination of Spider net cash activiy for the three months
ended April 1, 1995 -- (998)
======== ========
Cash and cash equivalents, end of period $ 95,233 $ 25,551
======== ========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements
5
<PAGE> 6
SHIVA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION:
The accompanying unaudited consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries,
and have been prepared by the Company in accordance with generally
accepted accounting principles. In the opinion of management, these
unaudited consolidated financial statements contain all adjustments,
consisting only of those of a normal recurring nature, necessary for a
fair presentation of the Company's financial position, results of
operations and cash flows at the dates and for the periods indicated.
The results of operations for the three-month and six-month periods
ended June 29, 1996 are not necessarily indicative of the results
expected for the full fiscal year. While the Company believes that the
disclosures presented are adequate to make the information not
misleading, these consolidated financial statements should be read in
conjunction with the consolidated financial statements and related
notes included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 30, 1995.
In June 1996, the Company issued approximately 691,587 shares of its
common stock in exchange for all the outstanding shares of AirSoft,
Inc. (the "AirSoft Acquisition"). AirSoft, Inc. ("AirSoft") designs,
manufactures and sells performance enhancement software products. The
AirSoft Acquisition has been accounted for as a pooling of interests,
and therefore the consolidated financial statements for all periods
prior to the AirSoft Acquisition have been restated to include the
accounts and operations of AirSoft with those of the Company.
Certain amounts have been reclassified with regard to presentation of
the financial information of the two companies. Revenues and net income
(loss) for each of the previously separate companies for the periods
prior to the AirSoft Acquisition are as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended Three Months Ended
---------------------------------------------- --------------------------
December 30, December 31, January 1, March 30, April 1,
1995 1994 1994 1996 1995
------------ ------------ ---------- --------- --------
(Fiscal 1995) (Fiscal 1994) (Fiscal 1993)
<S> <C> <C> <C> <C> <C>
Revenues:
Shiva $117,721 $80,971 $61,259 $42,513 $25,703
AirSoft 860 87 3 79 34
-------- ------- ------- ------- -------
$118,581 $81,058 $61,262 $43,309 $25,737
======== ======= ======= ======= =======
Net income (loss):
Shiva $ (2,879) $ 3,881 $ 909 $ 4,366 $ 2,157
AirSoft (1,973) (1,841) (493) (27) (775)
-------- ------- ------- ------- -------
$ (4,852) $ 2,040 $ 416 $ 4,339 $ 1,382
======== ======= ======= ======= =======
</TABLE>
In connection with the AirSoft Acquisition, the Company incurred
charges to operations of $1,987,000 in the quarter ended June 29, 1996,
the quarter in which the acquisition was consummated. Such charges
include: (a) transaction costs to effect the acquisition, consisting of
financial advisor fees of $1,350,000 plus $325,000 for legal,
regulatory and accounting expenses and (b) employee severance payments
and other miscellaneous expenses of $312,000.
2. NET INCOME PER SHARE:
Net income per share is calculated based on the weighted average number
of common shares and common equivalent shares assumed outstanding
during the period.
6
<PAGE> 7
3. COMMON STOCK:
On April 2, 1996, the Company's Board of Directors declared a
two-for-one stock split, payable in the form of a stock dividend, on
all shares of its common stock, which was paid on April 22, 1996 to
stockholders of record on April 12, 1996. These financial statements
and related notes have been retroactively adjusted, where appropriate,
to reflect this two-for-one stock split.
At the Annual Meeting of Stockholders on May 15, 1996, the stockholders
of the Company approved (1) an increase in the number of authorized
shares of common stock of the Company from 50,000,000 to 100,000,000
shares and (2) an increase in the number of shares available for
issuance under the Company's Amended and Restated 1988 Stock Plan from
4,100,000 to 4,850,000 shares.
4. CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS:
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents, and
those with maturities of greater than three months as short-term
investments. At June 29, 1996, the Company had $4,992,000 of short-term
investments, including an unrealized gain of $112,000, recorded as a
separate component of stockholders' equity in accordance with Statement
of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." The Company's short-term
investments at June 29, 1996, classified as available-for-sale, consist
of U.S. Treasury securities with various maturity dates through
September 1996. Realized gains or losses on the sale of securities are
calculated using the specific identification method. The Company has
had no realized gains or losses on its securities to date.
5. INVENTORIES:
<TABLE>
Inventories consist of the following:
<CAPTION>
June 29, December 30,
(in thousands) 1996 1995
-------- ------------
<S> <C> <C>
Raw materials $ 5,871 $3,137
Work-in-process 1,043 1,037
Finished goods 4,938 3,672
------- ------
$11,852 $7,846
======= ======
</TABLE>
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE-MONTH PERIOD ENDED JUNE 29, 1996 COMPARED WITH THE THREE-MONTH PERIOD
ENDED JULY 1, 1995.
RESULTS OF OPERATIONS
REVENUES. Revenues increased by 95%, to $51,485,000, for the
three-month period ended June 29, 1996, from $26,376,000 in the comparable
period in fiscal 1995. This increase was principally due to higher revenues
from the Company's remote access products. Remote access product revenues
increased by 145%, to $43,639,000, in the three-month period ended June 29,
1996 from $17,782,000 during the comparable period in fiscal 1995, principally
due to higher revenues from the Company's LanRover[Registered Trademark]
product family, including the LanRover Access Switch[Trademark]. Sales to
OEM customers accounted for 24% of revenues in the three months ended
June 29, 1996 and were not significant in the comparable period in fiscal 1995.
These increases were partially offset by a 16% decline in revenues from the
Company's other communications products. The Company anticipates that revenues
from other communications products will continue to decline and will account
for a decreasing percentage of revenue in future periods. The Company provides
its distributors and resellers with product return rights for stock balancing
and product evaluation. Revenues were reduced by provisions for product returns
of $2,291,000 and $2,104,000 in the three month periods ended June 29, 1996 and
July 1, 1995, respectively, representing 4% and 7% of gross revenues,
respectively. International revenues increased to $18,390,000, or 36% of
revenues, in the three-month period ended June 29, 1996, from $12,972,000, or
49% of revenues, in the comparable period in fiscal 1995.
GROSS PROFIT. Gross profit as a percentage of revenues was 58% in each
of the three-month periods ended June 29, 1996 and July 1, 1995. Increases in
gross profit that resulted from increased revenues from the Company's LanRover
product family, which carry higher gross margins than the Company's other
products, were offset by increased revenues from lower margin OEM remote access
products.
RESEARCH AND DEVELOPMENT. Research and development expenses increased
to $5,462,000, or 11% of revenues, in the three-month period ended June 29,
1996, from $3,537,000, or 13% of revenues, during the comparable period in
fiscal 1995. The absolute increase in these expenses was primarily due to the
hiring of additional research and development staff. Research and development
expenses during the three-month period ended June 29, 1996 related primarily to
continued enhancements and development of the Company's remote access products,
including the LanRover Access Switch and the Shiva AccessPort[Trademark], a new
ISDN client router. Customer-funded development fees reimbursed to the Company,
which are reflected as an offset to research and development expenses, were
$564,000 in the three-month period ended June 29, 1996 compared to $250,000 for
the comparable period in fiscal 1995. Capitalized software development costs
were $147,000 in the three-month period ended June 29, 1996. No software
development costs were capitalized in the three-month period ended July 1,
1995. The Company anticipates continued significant investment in research and
development.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses increased to $16,801,000 for the three-month period
ended June 29, 1996 from $10,280,000 for the comparable period in fiscal 1995.
These expenses represented 33% and 39% of revenues in the three-month periods
ended June 29, 1996 and July 1, 1995, respectively. The absolute increase in
expenses was primarily due to worldwide expansion of the Company's sales,
marketing and administrative operations necessary to support the Company's
growth. The Company plans to further invest in its distribution channels in
order to continue its global market penetration.
MERGER EXPENSES. In connection with the AirSoft Acquisition, the
Company incurred charges to operations of $1,987,000 in the quarter ended June
29, 1996, the quarter in which the acquisition was consummated. Such charges
include: (a) transaction costs to effect the acquisition, consisting of
financial advisor fees of $1,350,000 plus $325,000 for legal, regulatory and
accounting expenses and (b) employee severance payments and other miscellaneous
expenses of $312,000. Approximately $778,000 of such expenses were paid in the
quarter ended June 29, 1996, and the remaining $1,209,000 of these charges are
expected to be cash outflows in the third quarter of fiscal 1996.
INTEREST INCOME AND EXPENSE. The Company had higher interest income
during the three-month period ended June 29, 1996, due to higher investment
balances related to funds generated by the Company's secondary public offering
in November 1995. Interest expense decreased due to the Company's repayment of
the outstanding
8
<PAGE> 9
debt of Spider Systems, Ltd. ("Spider") assumed as part of the Company's
acquisition of Spider on August 22, 1995, (the "Spider Acquisition") with the
exception of the European Coal and Steel Community Fund loans, in the third
quarter of fiscal 1995.
INCOME TAX PROVISION. The Company's effective tax rate was 25% for the
three-month period ended June 29, 1996, compared to 41% for the comparable
period in fiscal 1995. The decrease in the effective tax rate for the
three-month period ended June 29, 1996 was due to a reduction in the net
deferred tax asset valuation allowance as a result of certain net operating
losses that could now be realized, partially offset by non-deductible merger
expenses.
SIX-MONTH PERIOD ENDED JUNE 29, 1996 COMPARED WITH THE SIX-MONTH PERIOD ENDED
JULY 1, 1995.
RESULTS OF OPERATIONS
REVENUES. Revenues increased by 82%, to $94,794,000, for the six-month
period ended June 29, 1996, from $52,113,000 in the comparable period in fiscal
1995. This increase was principally due to higher revenues from the Company's
remote access products. Remote access product revenues increased by 136%, to
$79,016,000, in the six-month period ended June 29, 1996, from $33,497,000
during the comparable period in fiscal 1995, principally due to higher revenues
from the Company's LanRover product family, including the LanRover AccessSwitch.
Sales to OEM customers accounted for 20% of revenues in the six months ended
June 29, 1996 and were not significant in the comparable period in fiscal 1995.
These increases were partially offset by a 24% decline in revenues from the
Company's other communications products. The Company anticipates that revenues
from other communications products will continue to decline and will account for
a decreasing percentage of revenue in future periods. The Company provides its
distributors and resellers with product return rights for stock balancing and
product evaluation. Revenues were reduced by provisions for product returns of
$3,978,000 and $4,077,000 in the six month periods ended June 29, 1996 and July
1, 1995, respectively, representing 4% and 7% of gross revenues, respectively.
International revenues increased to $37,247,000, or 39% of revenues, in the
six-month period ended June 29, 1996, from $27,259,000, or 52% of revenues, in
the comparable period in fiscal 1995.
GROSS PROFIT. Gross profit increased as a percentage of revenues to 59%
in the six-month period ended June 29, 1996, compared to 57% for the comparable
period in fiscal 1995. This increase was primarily attributable to increased
revenues from the Company's LanRover product family, which carry higher gross
margins than the Company's other products, partially offset by increased
revenues from lower gross margin OEM remote access products.
RESEARCH AND DEVELOPMENT. Research and development expenses increased
to $10,656,000, or 11% of revenues, in the six-month period ended June 29, 1996
from $6,356,000, or 12% of revenues, during the comparable period in fiscal
1995. The absolute increase in these expenses was primarily due to the hiring of
additional research and development staff. Research and development expenses
during the six-month period ended June 29, 1996 related primarily to continued
enhancement and development of the Company's remote access products, including
the LanRover Access Switch and the Shiva AccessPort, a new ISDN client router.
Customer-funded development fees reimbursed to the Company, which are reflected
as an offset to research and development expenses, were $851,000 in the
six-month period ended June 29, 1996, compared to $515,000 for the comparable
period in fiscal 1995. Capitalized software development costs were $593,000 in
the six-month period ended June 29, 1996 compared to $264,000 in the comparable
period in fiscal 1995.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses increased to $31,506,000 for the six-month period ended
June 29, 1996, from $20,032,000 for the comparable period in fiscal 1995. These
expenses represented 33% and 38% of revenues in the six-month periods ended June
29, 1996 and July 1, 1995, respectively. The absolute increase in expenses was
primarily due to worldwide expansion of the Company's sales, marketing and
administrative operations necessary to support the Company's growth. The Company
plans to further invest in its distribution channels in order to continue its
global market penetration.
MERGER EXPENSES. In connection with the AirSoft Acquisition, the
Company incurred charges to operations of $1,987,000 in the quarter ended June
29, 1996, the quarter in which the acquisition was consummated. Such charges
include: (a) transaction costs to effect the acquisition, consisting of
financial advisor fees of $1,350,000 plus $325,000 for legal, regulatory and
accounting expenses and (b) employee severance payments and other miscellaneous
expenses of $312,000. Approximately $778,000 of such expenses were paid in the
quarter ended June 29, 1996, and the remaining $1,209,000 of these charges are
expected to be cash outflows in the third quarter of fiscal 1996.
9
<PAGE> 10
INTEREST INCOME AND EXPENSE. The Company had higher interest income
during the six-month period ended June 29, 1996, due to higher investment
balances related to funds generated by the Company's secondary public offering
in November 1995. Interest expense decreased due to the Company's repayment of
the outstanding debt of Spider assumed as part of the Spider Acquisition, with
the exception of the European Coal and Steel Community Fund loans, in the third
quarter of fiscal 1995.
INCOME TAX PROVISION. The Company's effective tax rate was 33% for the
six-month period ended June 29, 1996 compared to 41% for the comparable period
in fiscal 1995. The decrease in the effective tax rate for the six-month period
ended June 29, 1996 was due to a reduction in the net deferred tax asset
valuation allowance as a result of certain net operating losses that could now
be realized, partially offset by non-deductible merger expenses.
FOREIGN CURRENCY FLUCTUATIONS
A substantial portion of the Company's international revenues is
denominated in currencies other than the U.S. dollar and is consequently subject
to foreign exchange fluctuations. The net income impact of such fluctuations is
offset to the extent that expenses of the Company in international operations
are incurred in the same currencies as its revenues. Foreign currency
fluctuations did not have a significant impact on the comparison of results of
operations in the three-month or six-month periods ended June 29, 1996 with
those of the comparable periods in fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
As of June 29, 1996, the Company had $95,233,000 of cash and cash
equivalents and $4,992,000 of short-term investments. Working capital increased
to $117,882,000 at June 29,1996 from $109,376,000 at December 30, 1995.
Net cash provided by operations totaled $5,616,000 for the six-month
period ended June 29, 1996, compared with net cash provided by operations of
$4,418,000 during the comparable period in fiscal 1995. Net cash provided by
operations during the six-month period ended June 29, 1996 consisted primarily
of net income adjusted for non-cash expenses including depreciation and
amortization, and increased current liabilities, partially offset by increased
accounts receivable and inventories. The increase in accounts receivable was due
to increased revenue levels. The increase in inventories is necessary to support
the Company's revenue growth and the introduction of the LanRover Access Switch
product.
Net cash used by investing activities totaled $4,435,000 for the
six-month period ended June 29, 1996, compared to $12,875,000 during the
comparable period in fiscal 1995. Investment activity in the six months ended
June 29, 1996 consisted primarily of purchases of property and equipment to
support the Company's growth, partially offset by proceeds from short-term
investments upon maturity. Investment activity for the comparable period in
fiscal 1995 consisted primarily of purchases of short-term investments and
property, plant and equipment.
Net cash provided by financing activities, which consisted of proceeds
from stock option exercises, partially offset by payments on long-term debt and
capital lease obligations, totaled $899,000 for the six-month period ended June
29, 1996. Net cash used by financing activities was $1,084,000 during the
comparable period in fiscal 1995, and consisted primarily of payments on the
Company's outstanding debt and capital lease obligations.
The Company has a $5,000,000 unsecured revolving credit facility with a
bank which expires in June 1997. Borrowings under the revolving credit facility
bear interest at the bank's prime rate. The terms of the Credit Agreement
require the Company to maintain a minimum level of profitability and specified
financial ratios. The Company had no borrowings outstanding under this line at
June 29, 1996. The Company also has a foreign credit facility of approximately
$1,552,000, of which approximately $587,000 was available at June 29, 1996.
Available borrowings under this facility are decreased by the value of the
outstanding debt payable to the European Coal and Steel Community Fund and
guarantees on certain foreign currency transactions. The terms of the foreign
credit facility require the Company to maintain a minimum level of profitability
and specified financial ratios. There were no borrowings outstanding under this
foreign credit facility at June 29, 1996.
10
<PAGE> 11
The Company enters into forward exchange contracts to hedge against
certain foreign currency transactions for periods consistent with the terms of
the underlying transactions. The forward exchange contracts have maturities that
do not exceed one year. At June 29, 1996, the total amount of forward exchange
transactions covered by hedging contracts was $17,020,000.
The Company believes that its existing cash and short-term investment
balances, together with available borrowings available under the Company's bank
credit facilities, are sufficient to meet the Company's cash requirements for
the foreseeable future.
FACTORS THAT MAY AFFECT FUTURE RESULTS
From time to time, information provided by the Company or statements
made by its employees may contain `forward-looking' information which involve
risks and uncertainties. In particular, statements contained in the Management's
Discussion and Analysis of Financial Condition and Results of Operations which
are not historical facts (including, but not limited to, statements concerning
anticipated operating expense levels and the availability of funds to meet cash
requirements) may be `forward-looking' statements. The Company's actual future
results may differ significantly from those stated in any forward-looking
statements. Factors that may cause such differences are discussed more fully in
the Company's Annual Report to Stockholders, Form 10-K and the Company's other
Securities and Exchange Commission filings.
11
<PAGE> 12
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders (the "Annual Meeting") held on
May 15, 1996, the stockholders of the Company entitled to vote thereat approved:
<TABLE>
(i) the election of two Class II Directors. The following table sets
forth each Class II Director elected at the Annual Meeting (with the vote
results) and each Director whose term of office extended beyond the Annual
Meeting:
<CAPTION>
Name Class Will Expire For Withheld
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Henry F. McCance I 1998 -- --
Paul C. O'Brien I 1998 -- --
David C. Cole II 1999 10,339,058 1,094,109
Mitchell E. Kertzman II 1999 10,339,058 1,094,109
L. John Doerr III 1997 -- --
Frank A. Ingari III 1997 -- --
</TABLE>
(ii) by vote of 9,528,702 shares of Common Stock in favor, 715,383
shares opposed, 1,114,549 shares abstaining and 74,533 broker non-votes, the
stockholders approved an amendment to the Restated Articles of Organization, as
amended, of the Company to increase the number of authorized shares of common
stock, par value $0.01 per share (the "Common Stock"), of the Company from
50,000,000 to 100,000,000 shares.
(iii) by vote of 5,745,288 shares of Common Stock in favor, 3,008,782
shares opposed, 1,115,010 shares abstaining and 1,564,087 broker non-votes, the
stockholders approved amendments to the Company's Amended and Restated 1988
Stock Plan (the "1988 Plan") to (a) increase the aggregate number of shares of
Common Stock of the Company available for issuance thereunder from 4,100,000
shares to 4,850,000 shares and (b) to extend the expiration date of the 1988
Plan from December 31, 1997 to December 31, 2000.
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
(a) Exhibits
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------
<S> <C>
10.1 Lease by and between Walford Company, Landlord, and
Shiva Corporation, Tenant dated May 24, 1996.
10.2+ Amendment #2 dated June 27, 1996 to the License and
Development Agreement between Shiva Corporation and
Microsoft Corporation dated March 4, 1994.
10.3+ First Amendment dated June 28, 1996 to the
Development and License Agreement effective as of
December 30, 1994 between Shiva Corporation and
Hewlett-Packard Company.
10.4+ Letter Agreement dated March 15, 1996 between Shiva
Corporation and Northern Telecom Limited to amend the
Shiva/Nortel Contract dated May 15, 1995.
10.5+ First Amendment dated May 16, 1996 to the
Shiva/Nortel Contract dated May 15, 1995.
11.0 Statement of Computation of Earnings per share
included herein on page 14.
27.0 Financial Data Schedule.
<FN>
- --------------------
+ Confidential treatment requested.
</TABLE>
12
<PAGE> 13
(b) Reports on Form 8-K: The Company filed a Current Report on Form 8-K
dated June 27, 1996, as amended by Amendment No. 1 on Form 8-K/A dated July 9,
1996 and Amendment No. 2 on Form 8-K/A dated August 13, 1996. The Current
Report, as amended, announced the completion of the Company's acquisition of
AirSoft, Inc. ("AirSoft"), a Delaware Corporation, in exchange for approximately
691,587 shares of the Company's Common Stock. Amendment No. 2 to the Current
Report contained the following financial statements pursuant to Item 7 of Form
8-K for AirSoft: Balance Sheets as of December 31, 1995, December 31, 1994 and
March 31, 1996; Statements of Operations for the years ended December 31, 1995,
1994 and 1993 and the three months ended March 31, 1996 (unaudited) and March
31, 1995 (unaudited); Statements of Stockholders' Equity for the years ended
December 31, 1995, 1994 and 1993; and Statements of Cash Flows for the years
ended December 31, 1993, 1994 and 1993 and the three months ended March 31, 1996
(unaudited) and March 31, 1995 (unaudited). Amendment No. 2 to the Current
Report also contained the following pro forma combined financial statements:
Unaudited Pro Forma Combined Balance Sheet at March 30, 1996 and Unaudited Pro
Forma Combined Statement of Operations for the years ended December 30, 1995,
December 31, 1994 and January 1, 1994 and the three months ended March 30, 1996
and April 1, 1995.
13
<PAGE> 14
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SHIVA CORPORATION
Date: August 13, 1996 by: /S/ Cynthia M. Deysher
------------------------
Cynthia M. Deysher
Senior Vice President Finance and
Administration and Chief Financial Officer
(Principal Financial and Accounting Officer)
14
<PAGE> 15
EXHIBIT INDEX
The following exhibits are filed herewith.
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit No. Description Page
- ----------- ----------- ------------
<S> <C>
10.1 Lease by and between Walford Company, Landlord, and
Shiva Corporation, Tenant dated May 24, 1996. 16
10.2+ Amendment #2 dated June 27, 1996 to the License and
Development Agreement between Shiva Corporation and
Microsoft Corporation dated March 4, 1994. 32
10.3+ First Amendment dated June 28, 1996 to the
Development and License Agreement effective as of
December 30, 1994 between Shiva Corporation and
Hewlett-Packard Company. 36
10.4+ Letter Agreement dated March 15, 1996 between Shiva
Corporation and Northern Telecom Limited to amend the
Shiva/Nortel Contract dated May 15, 1995. 37
10.5+ First Amendment dated May 16, 1996 to the
Shiva/Nortel Contract dated May 15, 1995. 39
11.0 Statement of Computation of Earnings per share
included herein on page 14. 44
27.0 Financial Data Schedule. 45
<FN>
- --------------------
+ Confidential treatment requested.
</FN>
</TABLE>
<PAGE> 1
EXHIBIT 10.1
COMMERCIAL LEASE
1. PARTIES WALFORD COMPANY, c/o Bernard H. Kayden, 550 Mamaroneck
Avenue, Harrison, NY 10528 ("LANDLORD"), which expression
shall include its successors and assigns where the context
so admits, does hereby lease to Shiva Corporation, 28 Crosby
Drive, Bedford, MA 01730-1437 ("TENANT"), which expression
shall include its successors and assigns where the context
so admits.
2. PREMISES TENANT hereby leases the following described premises (the
"Premises"): the land described in Exhibit A attached hereto
and incorporated herein by reference (the "Land"), together
with the buildings and improvements thereon, including the
building known as 205 Burlington Road, Bedford,
Massachusetts (the "Building") which Building is more
particularly described in Exhibit B attached hereto and
incorporated herein by reference.
3. TERM The term of this lease shall be for seven (7) years
commencing on September 1, 1996 (the "Commencement Date")
and ending on September 1, 2003. TENANT shall have two
options to extend the lease. The first option period shall
be for a term expiring on February 14, 2006 and the second
option period shall be for a term of five (5) years. Each
option period shall require six (6) months prior written
notice. The rental rate for any option period shall be at
fair market but in no event less than the prior term's
average annual net rental rate.
4. RENT In the event that the prior tenant, Pre-Owned Electronics,
Inc., does not deliver the Premises on or before August 31,
1996, the Commencement Date will be the date which is the
date the prior tenant vacates the Premises. TENANT shall pay
to the LANDLORD rent at the annual rate set forth in Exhibit
C attached hereto and incorporated herein by reference.
Annual rent shall be payable in advance in equal monthly
installments, on the first day of each calendar month during
the term, as set forth in Exhibit C.
5. ADDITIONAL
COVENANTS (a) In addition to the rent stated in Section 4 above,
TENANT shall pay, directly to the appropriate entity all
costs and expenses incurred by TENANT for the following:
taxes, electricity and heating, rubbish removal, water and
sewer, pest control, snow removal, and grounds maintenance.
(b) The TENANT shall have the right to contest the amount or
validity of any real estate tax levied on the Premises, by
appropriate legal proceedings conducted in good faith.
(c) TENANT shall pay before any fine, penalty, interest or
cost may be added thereto for the non-payment thereof, all
real estate taxes, assessments, water and sewer estate
taxes, assessment, water and sewer charges which may be
assessed or levied or become a lien against the Premises.
TENANT shall exhibit to LANDLORD paid receipts from the
appropriate taxing authority showing payment of the above at
least 10 days prior to the time when same would become
delinquent.
6. UTILITIES The TENANT will arrange for, and pay or cause to be paid,
all charges for all public or private utility services at
any time rendered to or in connection with the Premises or
any part thereof. The LANDLORD, upon the request of TENANT,
shall grant to TENANT all utility easements reasonably
necessary in connection with the use of the Premises, and
shall, if required, consent to all applications for
<PAGE> 2
permits or other approvals required in connection with the
use of the Property and its appurtenances, as TENANT
reasonably deems necessary.
7. USE OF LEASED
PREMISES The TENANT shall have the right to use the Premises for the
purpose of storage, assembly, repair, customer service,
disassembly and distribution, light manufacturing and office
use.
In addition, the TENANT shall have the right to use the
Premises for retail sales to the extent that such retail
sales do not violate any applicable law or regulation. The
LANDLORD agrees to assist the TENANT in procuring a special
permit, variance or similar approval that will allow retail
sales on the Premises.
8. SIGNS The TENANT shall have the right to install signs on and
about the Premises, provided that these signs conform to
applicable laws and regulations. In order to compensate the
TENANT for expenses related to the TENANT's purchase and
installation of signs, the LANDLORD shall reimburse TENANT,
in an amount not to exceed Eight Thousand Dollars
($8,000.00), for expenses incurred by TENANT, within five
days after LANDLORD's receipt of a statement from TENANT
containing the amount of such expenses. The LANDLORD shall
assist TENANT in obtaining any permits or authorizations
required by any governmental authority in connection with
signs installed pursuant to this Section 8.
9. COMPLIANCE
WITH LAWS (a) The TENANT acknowledges that no trade or occupation
shall be conducted in the Premises or use made thereof which
will be unlawful, improper, noisy or offensive, or contrary
to any law or any municipal by-law or ordinance in force in
the city or town in which the Premises are situated.
(b) TENANT shall promptly comply with all laws, ordinances,
orders, rules and requirements of all Federal, State and
municipal authorities, applicable to the Premises.
10. FIRE
INSURANCE The Tenant shall not permit any use of the Premises which
will make voidable any insurance on the property of which
the Premises are a part, or on the contents of said property
or which shall be contrary to any law or regulation from
time to time established by the New England Fire Insurance
Rating Association, or any similar body succeeding to its
powers.
11. MAINTENANCE
AND REPAIRS (a) LANDLORD shall throughout the Term, at LANDLORD's sole
cost and expense,keep and maintain in good order, condition
and repair the roof and the exterior of the Building, all
structural portions of the improvements located on the Land,
including without limitation the structural portions of the
roof, the load bearing walls, the foundation, the structural
floor slabs and other structural elements of the Building,
and repairs to the parking lot other than routine
maintenance and minor repairs requiring patching only, and
other than repairs occasioned by the TENANT's fault. The
LANDLORD shall also be responsible, at the LANDLORD's sole
cost and expense, for the repair to good working order, of
the heating, ventilation and air-conditioning systems and
the electrical and plumbing systems, only to the extent that
such repairs involve other than routine maintenance. In case
LANDLORD is prevented or delayed in making any repairs,
alterations or improvements, or furnishing any services or
performing any other covenant or duty to be performed on
LANDLORD's part, by reason of any cause reasonably beyond
LANDLORD's control, LANDLORD shall use best efforts to avoid
unreasonable interference with the conduct by TENANT of
2
<PAGE> 3
TENANT's business on the Premises, and LANDLORD shall,
except in case of emergency repairs, give reasonably advance
notice to TENANT of any contemplated work by LANDLORD on the
Premises.
(b) Other than for those repairs for which LANDLORD is
responsible under the terms of Sections 11)(a) and 17
hereof, TENANT shall, from and after possession of the
Premises is delivered to TENANT, at TENANT's sole cost and
expense, keep and maintain the Premises in the same
condition as it was in on the Commencement Date, or as it
may be put in thereafter, damage by fire or other casualty,
taking, and reasonable wear and tear excepted. Without
limiting the generality of the foregoing, TENANT shall
perform and be solely responsible for the following: (i)
snow removal, to the extent required by TENANT, with respect
to entrance drives, parking areas, walkways, (ii) lawn
maintenance, trimming and the maintenance and care of trees,
shrubs and other plantings, (iii) routine maintenance of the
parking lot and minor repairs thereto requiring patching
only and (iv) preventative maintenance of heating,
ventilating and air-conditioning systems (the "HVAC") of the
Premises. The TENANT, at the TENANT's sole cost, shall
maintain, through the term, a contract with a reputable
service company to provide for the preventative maintenance
of the HVAC. At the expiration or earlier termination of
this leased, TENANT shall yield up the Premises in the
condition in which TENANT is obligated hereunder to repair
and maintain the same.
(c) TENANT shall not create or permit to remain, shall
discharge any mechanics or other similar lien which might be
or become a lien or encumbrance upon the Premises for work
done or material furnished on behalf of the Tenant.
12. ALTERATIONS-
ADDITIONS The TENANT shall not make structural alterations or
additions to the Premises, but may make non-structural
alterations provided the LANDLORD consents thereof in
writing, which consent shall not be unreasonably withheld or
delayed. All such allowed alterations shall be at TENANT's
expense and shall be in quality at least equal to the
present construction. LANDLORD specifically consents to
TENANT's construction of a loading dock on the Premises
provided that such construction is at TENANT's sole expense.
TENANT shall not permit any mechanics' liens, or similar
liens, to remain upon the Premises for labor and material
furnished to TENANT or claimed to have been furnished to
TENANT in connection with work of any character performed or
claimed to have been performed at the direction of TENANT
and shall cause any such lien to be released of record
forthwith after receipt of notice thereof without cost to
LANDLORD. Any alterations or improvements made by the TENANT
shall become the property of the LANDLORD at the termination
of occupancy as provided herein. The parties agree that
office furniture, cubicles, removable appliances and office
equipment remain the property of TENANT upon termination of
this Lease.
3
<PAGE> 4
13. ASSIGNMENT-
SUBLEASING The TENANT shall have the right to assign this lease or
sublet the whole or any part of the Premises with LANDLORD's
prior written consent, which consent shall not be
unreasonably withheld or delayed. LANDLORD shall, within
five (5) business days after receiving the information
concerning a proposed sublease, give notice to TENANT to
permit or deny the proposed sublease. If LANDLORD denies
consent, it must explain the reasons for the denial. If a
LANDLORD does not give notice within the two (2)
business-day period, then TENANT may sublease or assign part
or all of the Premises upon the terms TENANT gave in the
notice of the proposed sublease. Notwithstanding such
consent, TENANT shall remain liable to LANDLORD for the
payment of all rent and for the full performance of the
covenants and conditions of this lease.
14. LANDLORD'S
ACCESS The LANDLORD or agents of the LANDLORD may, at reasonable
times, during normal business hours, and upon reasonable
notice of TENANT, enter to view the Premises and to make
such repairs as LANDLORD shall elect or be required to make,
and at any time within three (3) months before the
expiration of the term, may affix to any suitable part of
the outside of the Premises a notice for letting or selling
the Premises or property of which the Premises are a part
and keep the same so affixed without hindrance or
molestation.
15. INDEMNIFICATION
AND LIABILITY The TENANT shall save the LANDLORD harmless from all loss
and damage occasioned by any nuisance made or suffered on
the Premises caused by the negligence or willful misconduct
of TENANT, its agents, employees or invitees. The removal of
snow and ice from the sidewalks bordering upon the Premises,
all landscaping and garbage disposal, shall be the TENANT's
responsibility.
16. TENANT'S
LIABILITY
INSURANCE The TENANT shall maintain with respect to the Premises and
the property of which the Premises are a part, comprehensive
public liability insurance in the amount of $1,000,000
combined single limit per occurrence, $2,000,000 policy
aggregate, in responsible companies qualified to do business
in Massachusetts and in good standing therein insuring the
LANDLORD as well as TENANT against injury to persons or
damage to property as provided. The TENANT shall deposit
with the LANDLORD certificates for such insurance at or
prior to the commencement of the term, and thereafter within
thirty (30) days prior to the expiration of any such
policies. All such insurance certificates shall provide that
such policies shall not be canceled without at least ten
(10) days prior written notice to each assured name therein.
17. FIRE, CASUALTY
EMINENT DOMAIN (a) In case of any material damage to or destruction of the
Premises or any part thereof, TENANT will promptly give
written notice thereof to LANDLORD, generally describing the
nature and extent of such damage or destruction.
(b) In case of any damage to or destruction of the Premises
or any part thereof, LANDLORD shall commence and prosecute
with reasonable diligence the restoration, replacement or
rebuilding of the Premises as nearly as practicable to its
value, condition and character immediately prior to such
damage or destruction (such restoration, replacement and
rebuilding, together with any temporary repairs and property
protection pending completion of the work, being herein
called "Casualty Restoration").
4
<PAGE> 5
(c) (i) If the Premises are substantially damaged by fire or
other casualty or (ii) if LANDLORD fails to complete the
Casualty Restoration within one hundred and twenty (120)
days after such damage or destruction, TENANT may elect to
terminate this Lease giving to LANDLORD written notice of
such election (specifying the termination date which shall
not be less than 10 nor more than 90 days after the date of
such notice) (a) within 30 days after such fire or other
casualty in the case of a termination right under subsection
(i) above, or (b) within thirty days after the expiration of
such one hundred twenty (120) day period, in the case of a
termination right under subsection (ii) above; provided that
such Casualty Restoration has not been completed prior to
the giving of such notice. For the purposes of this Section
17(c), the Premises shall be deemed to have been
substantially damaged or destroyed if the damage is of such
a character that the same cannot in the ordinary course
reasonably be expected to be restored or repaired within one
hundred (100) days from the time that repair work would be
commenced.
(d) The rent and all other sums payable thereunder by TENANT
shall be equitably abated from the date of such damage or
destruction until the date on which the Casualty Restoration
has been completed, unless this lease has sooner terminated
as provided herein. In the event of any disagreement between
LANDLORD and TENANT as to the amount of such abatement, the
same shall be determined by arbitration by an appraiser
selected by LANDLORD and TENANT.
(e) In the case of a taking of all or a substantial portion
of the Premises by eminent domain, so that in the TENANT's
reasonable opinion the Premises are no longer suitable for
their intended use, the TENANT may elect to terminate this
lease by written notice to LANDLORD within thirty (30) days
notice to LANDLORD within thirty (30) days after TENANT
obtains actual notice of such taking. Upon such election to
terminate, this lease shall have no further effect.
(f) In the case of a taking whereby the TENANT does not
elect to terminate this lease, the Rent, Additional Rent and
Other sums payable by TENANT under this lease shall be
equitably abated.
18. DEFAULT AND
BANKRUPTCY In the event that:
(a) The TENANT shall default in the payment of any
installment of rent or other sum herein specified and such
default shall continue for ten (10) days after receipt by
TENANT of written notice thereof; or
(b) The TENANT shall default in the observance or
performance of any other of the TENANT's covenants,
agreements, or obligations hereunder and such default shall
not be corrected within thirty (30) days after written
notice thereof or, if such default cannot reasonably be
corrected within such thirty (30) day period, if TENANT
shall fail, within such period, to commence to cure such
default or thereafter to prosecute and complete the same
with due diligence; or
(c) The TENANT shall be declared bankrupt or insolvent
according to law, or, if any assignment shall be made of
TENANT's property for the benefit of creditors, then the
LANDLORD shall have the right thereafter, while such default
continues, to re-enter and take complete possession of the
Premises, to declare the term of this lease ended, and
remove the TENANT's effects, without prejudice to any
remedies which might be otherwise used for arrears of rent
or other default. The
5
<PAGE> 6
TENANT shall indemnify the LANDLORD against all loss of rent
and other reasonable payments which the LANDLORD may incur
by reason of such termination during the residue of the
term. If the TENANT shall default after reasonable notice
thereof, in the observance or performance of any conditions
or covenants on TENANT's part to be observed or performed
under or by virtue of any of the provisions in any article
of this lease, the LANDLORD, without being under any
obligation to do so and without thereby waiving such
default, may remedy such default for the account and at the
expense of the TENANT. If the LANDLORD makes any
expenditures or incurs any obligations for the payment of
money in connection therewith, including but not limited to,
reasonable attorney's fees in instituting, prosecuting or
defending any action or proceeding, such sums paid or
obligations insured shall be paid to the LANDLORD by the
TENANT as additional rent.
19. NOTICE Any notice from the LANDLORD to the TENANT relating to the
Premises or the occupancy thereof, shall be deemed duly
served upon receipt, if personally delivered or if mailed to
the Premises, registered or certified mail, return receipt,
requested, postage prepaid, addressed to the TENANT. Any
notice from the TENANT to the LANDLORD relating to the
Premises or to the occupancy thereof, shall be deemed duly
served, upon receipt, if mailed to the LANDLORD by
registered of, certified mail, return receipt requested,
postage prepaid, addressed to the LANDLORD at such address
as the LANDLORD may from time to time advise in writing. All
rent and notices shall be paid and sent to the LANDLORD at
the address set forth in Section 1 above.
20. SURRENDER The TENANT shall at the expiration or other termination of
this lease remove all TENANT's goods and effects from the
Premises. TENANT shall deliver to the LANDLORD the Premises
and all keys, locks thereto, and other fixtures connected
therewith and all alterations and additions made to or upon
the Premises, in the same condition as they were at the
commencement of the term, or as they were put in during the
term hereof, reasonable wear and tear and damage by fire or
other casualty and taking by eminent domain excepted.
Notwithstanding anything herein to the contrary, the
Landlord shall incur the entire cost and responsibility for
removing the signs installed by the LANDLORD or the TENANT
pursuant to Section 8 hereof.
21. WAIVER OF
SUBROGATION Any insurance carried by either party with respect to the
Premises, the Building or the Land or occurrences thereon
shall, if it can be so written without additional premium,
or with an additional premium which the other party agrees
to pay, include a clause or endorsement denying to the
insurer rights of subrogation against the other party to the
extent rights have been waived by the insured prior to the
occurrence of the injury or the loss. Each party,
notwithstanding other provisions of this lease to the
contrary, hereby waives any rights of recovery against the
other for injury or loss due to hazards covered by such
insurance to the extent of the indemnification received
thereunder.
6
<PAGE> 7
22. CASUALTY
INSURANCE TENANT, at TENANT's sole cost and expense, shall maintain at
all times during the term of this lease with respect to the
Premises and the Building and property of which such
Premises are a part, insurance naming the LANDLORD as
insured against loss or damage under a so-called "all risk"
type insurance policy. Such insurance shall be in an amount
equal to the full replacement value of said Building and
other improvements on the Land, and shall be maintained with
responsible companies qualified to do business and in good
standing in the Commonwealth of Massachusetts. TENANT shall
provide LANDLORD with a certificate evidencing procurement
of insurance in accordance with this paragraph within
fourteen (14) days of the date hereof, and in the case of
the renewal of such policy, at least thirty (30) days prior
to the expiration of the policy.
23. DELIVERY OF
THE PREMISES On the Commencement Date of the term hereof, as set forth in
Section 3 of this Lease, LANDLORD shall deliver the Premises
to TENANT, broom clean, with carpets shampooed, tile floor
areas cleaned and waxed, free of all tenants and other
occupants, with all of the improvements to the Premises
shown on Exhibit B completed by LANDLORD, at LANDLORD's sole
cost and expense and with all building systems in good
working order. The improvements to be made by LANDLORD to
the Building and the Premises as shown on Exhibit B attached
hereto shall be of good quality, and shall be made in a good
and workmanlike manner, in compliance with all applicable
laws. The LANDLORD shall cause the TENANT to be named as a
beneficiary of any and all warranties and guaranties of
electrical, mechanical and other equipment and systems that
the LANDLORD has purchased for the Premises.
If the LANDLORD is unable to deliver the Premises to the
TENANT on the Commencement Date in accordance with this
Section 23, then, unless the delay is due to a delay beyond
the LANDLORD's reasonable control, the TENANT shall have the
option of terminating this lease. (The LANDLORD's financial
inability to complete improvements is not a delay beyond the
LANDLORD's reasonable control). Notwithstanding anything in
this paragraph to the contrary, if an event beyond the
LANDLORD's reasonable control occurs and the LANDLORD can
not deliver the Premises on the Commencement Date, then the
TENANT shall have the option of terminating this Lease if
the LANDLORD is unable to deliver the Premises to the Tenant
in accordance with this Section 23 on or before September 1,
1996.
24. ESTOPPEL
CERTIFICATE Either party will, upon the request of the other, execute,
acknowledge and deliver to the requesting party, within
fifteen (15) business days after request, a certificate
certifying (a) that this lease is unmodified and in full
force and effect (or, if there have been modifications, that
this lease is in full force and effect, as modified, and
stating the modifications), (b) the dates, if any, to which
the basic and additional rents have been paid, (c) whether
or not there are then existing any offsets or defenses
against the enforcement of any term hereof on the part of
the requesting party to be performed or complied with (and,
if so, specifying the same), (d) whether or not there are
any defaults-under this lease (and, if so, specifying the
same), and (e) that no notice has been received by the
certifying party of any default which has not been cured.
7
<PAGE> 8
25. ATTORNEYS'
FEES ln the event of any litigation between the parties to this
lease arising out of or resulting from the terms and
conditions herein contained, the prevailing party shall be
entitled to be reimbursed by the other party in an amount
equal to the sum of all attorneys' fees and expenses
reasonably incurred by such prevailing party in connection
with such litigation.
26. ENVIRONMENTAL
MATTERS (a) The term "Hazardous Materials" shall include, without
limitation, (i) any "hazardous waste" as defined by the
Resource Conservation and Recovery Act of 1976, or
Massachusetts General Laws Chapter 21C, as either may be
amended from time to time, the regulations promulgated
thereunder; (ii) any "hazardous substance" as defined by the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended from time to time, or the
regulations promulgated thereunder; and (iii) any substance
the presence of which on or within the Premises, the
Building or on, under or above the Land is prohibited by any
applicable federal, state, or local law and regulations, if
any, promulgated pursuant thereto, including, but not
limited to, any "oil" or "hazardous material" as defined by
the Massachusetts Oil and Hazardous Material Release
Prevention and Response Act of 1983, Massachusetts General
Laws, Chapter 21E, as amended from time to time, or the
regulations promulgated thereunder.
(b) The Landlord is not aware of the existence of any
reports of Hazardous Materials found or disposed of on the
Premises, the Building or the Land other than those listed
on Exhibit D, attached hereto.
(c) In the event that concentrations of volatile organic
chemicals exceed the permissible exposure limits (the
"Excessive Levels") established (i) by regulations now or at
any time in the future promulgated by the Occupational
Safety and Health Administration, U.S. Department of Labor,
or (ii) under any similar federal, state or local
legislation or regulations governing exposure of employees
to such substances, then unless the LANDLORD elects to
remedy such condition in accordance with the following
subsection (d), or, in the event LANDLORD is required by
Federal or state government environmental regulations to
excavate any portion of the Building, the TENANT shall have
the option of terminating this lease upon written notice to
the LANDLORD, and upon such election the LANDLORD shall
return to TENANT a pro rata share of prepaid rent along with
the Security (as defined in Section 27 hereof), and this
Lease shall be of no further force and effect.
(d) The LANDLORD may elect to lower any Excessive Levels by
providing TENANT with written notice of such election within
ten (10) days of such discovery. Upon such election, the
LANDLORD shall have sixty (60) days to lower the
Excessive-Levels to levels that do not exceed any then
current law or regulation. The LANDLORD may not interfere
with the TENANT's business operations in order to lower the
levels of Hazardous Materials. If the levels are not lowered
by the end of the sixty (60) day period, then the TENANT
shall have the option to terminate this lease, and upon such
termination, LANDLORD shall refund any rent applicable to
such sixty (60) day remedial period.
(e) The LANDLORD and the TENANT acknowledge that the TENANT
bears no responsibility for subsurface conditions existing
at the Premises and that the TENANT bears no responsibility
for air and other gases that emanate from below the surface
of the Premises.
8
<PAGE> 9
(f) LANDLORD shall indemnify and save harmless the TENANT
against all penalties, claims or demands from a governmental
authority or third party (including reasonable attorney's
fees incurred in defending such claims or demands) arising
from the presence of Hazardous Materials on or about the
Premises, except for those caused by TENANT's negligence or
misconduct provided however, that TENANT shall have no right
to recover any of its own business losses (including, but
not limited to TENANT's moving costs and lost profits)
incurred by TENANT as a result of the presence of Hazardous
Materials on or about the Premises. TENANT agrees that
TENANT's sole remedy related to business losses resulting
from Hazardous Materials on or about the Premises is
TENANT's option to terminate this lease in accordance with
subsections 26(c) and 26(d) of this lease.
(g) The remedies provided herein are in addition to other
remedies available under law.
27. SECURITY
DEPOSIT TENANT has delivered to LANDLORD on the date hereof the sum
of $33,003.38 as security (the "Security") for the
performance by the TENANT of the terms, provisions,
covenants and conditions of this lease. The LANDLORD shall
deposit this sum in a federally insured interest bearing
account that is segregated from all of the LANDLORD's other
accounts. If the TENANT defaults under this lease, and such
default is not cured within the time periods stated in
Section 18 hereof, then the LANDLORD may use, apply and
retain the whole or any part of the security for the payment
of any monies owed by the TENANT under this Lease, and
the-LANDLORD shall thereafter promptly provide the TENANT
with an accounting of such use, application or retention. If
the TENANT complies with the terms, provisions, covenants
and conditions of this lease, then the Security, or any
balance thereof, plus any interest accrued thereon, shall be
returned to the TENANT on or prior to three business days
after the expiration or termination of the term of this
lease.
28. NON-
DISTURBANCE Upon written request by LANDLORD, TENANT shall execute and
deliver an agreement subordinating this lease to any first
mortgage upon the Premises; provided, however, such
subordination shall be upon the express condition that the
validity of this lease shall be recognized by the persons
succeeding to the interest of the LANDLORD, including a
purchaser at a foreclosure sale, and that, notwithstanding
any default by the mortgagor with respect to said mortgage
or any foreclosure thereof, TENANT's possession and right of
use under this lease in and to the Premises shall not be
disturbed by such successor unless and until TENANT shall
breach any of the provisions hereof and this lease or
TENANT's right to possession hereunder shall have been
terminated in accordance with the provisions of this lease.
29. TENANT'S
INDEMNITY TENANT indemnifies, defends, and holds LANDLORD harmless
from claims:
(i) for personal injury, death, or property damage;
(ii) for incidents occurring on or about the Premises; and
(iii) caused by the negligence or willful misconduct of
TENANT, its agents, employees, or invitees.
When the claim is caused by the joint negligence or willful
misconduct of TENANT and LANDLORD or TENANT and a third
party unrelated to TENANT, except TENANT's agent employees,
or invitees, TENANT's duty to defend, indemnify, and hold
LANDLORD harmless shall be in proportion to TENANT's
allocable share of the joint negligence or willful
misconduct.
9
<PAGE> 10
LANDLORD'S
INDEMNITY LANDLORD indemnifies, defends, and holds TENANT harmless
from claims:
(i) for personal injury, death, or property damage;
(ii) for incidents occurring in or about the Premises; and
(iii) caused by the negligence or willful misconduct of
LANDLORD, its agents, employees, or invitees.
When the claim is caused by the joint negligence or willful
misconduct of LANDLORD and TENANT or LANDLORD and a third
party unrelated to LANDLORD, except LANDLORD's agents,
employees, or invitees, LANDLORD's duty to defend,
indemnify, and hold TENANT harmless shall be in proportion
to LANDLORD's allocable share of the joint negligence or
willful misconduct.
Release of
Claims Notwithstanding TENANT's Indemnity and LANDLORD's Indemnity,
the parties release each other from any claims either party
(Injured Party) has against the other. This release is
limited to the extent the claim is covered by the Injured
Party's insurance.
30. RENT
INSURANCE TENANT shall, at TENANT's sole cost and expense, naming the
LANDLORD as insured, maintain during the term of this lease
rent insurance in an amount equal to rent and real estate
taxes for the next twelve month period.
10
<PAGE> 11
IN WITNESS WHEREOF, the LANDLORD and TENANT have hereunto set their
hands and common seals this 24th day of May, 1996.
Witness: TENANT: SHIVA CORPORATION
/s/ M. Elizabeth Potthoff By: /s/ Cynthia M. Deysher
- ------------------------- -----------------------
Witness: LANDLORD: WALFORD COMPANY
/s/ Rita Levitan By: /s/ Bernard H. Kayden
- ------------------------- -----------------------
General Partner
11
<PAGE> 12
EXHIBIT A
DESCRIPTION OF LAND
That certain parcel of land situated in Bedford in the County of Middlesex and
the Commonwealth of Massachusetts, bounded and described as follows:
Northeasterly by Burlington Road, four hundred and twenty-two feet;
Southeasterly by lot 22 as shown on plan hereinafter mentioned, four
hundred eighty-seven and 67/100 feet;
Southwesterly by lot 21 on said plan, three hundred forty-four and
35/100 feet;
Southwesterly again, one hundred nine and 81/100 feet, and
Northwesterly, four hundred ten and 02/100 feet by land nor or formerly
of Bedford Research and Office Park.
Said parcel is shown as lot 28 on said plan.
All of said boundaries are determined by the Court to be located as shown on a
subdivision plan, as approved by the Court, filed in the Land Registration
Office, and copy of which is filed in the Registry of Deeds for the South
Registry District of Middlesex County in Registration Book 648, Page 48, with
Certificate 103598.
12
<PAGE> 13
EXHIBIT B
205 BURLINGTON ROAD
TENANT ALLOWANCES FOR SHIVA CORPORATION
INTERIOR OFFICE FINISHES AND IMPROVEMENTS
- - premises delivered "as is"
- - 51,502 ventable square feet
- - 1200A 480/227V 3 phase electrical service
13
<PAGE> 14
EXHIBIT C
RENT SCHEDULE
<TABLE>
<CAPTION>
Lease Year Annual Rent Monthly Rent
- ---------- ----------- ------------
<S> <C> <C>
(1) 09/01/96 - 08/31/97 $396,040.00 $33,003.38*
(2) 09/01/97 - 08/31/98 $396,040.00 $33,003.38
(3) 09/01/98 - 08/31/99 $396,040.00 $33,003.38
(4) 09/01/99 - 08/31/00 $396,040.00 $33,003.38
(5) 09/01/00 - 08/31/01 $396,040.00 $33,003.38
(6) 09/01/01 - 08/31/02 $396,040.00 $33,003.38
(7) 09/01/02 - 08/31/03 $396,040.00 $33,033.38
</TABLE>
*The first month's rent will be $16,003.38. If the Commencement Date under the
Lease is not September 1, 1996, then the beginning and end of each Lease Year
shall be adjusted accordingly so that each of the seven Lease Years will always
be a full calendar year. Rent for any period which is less than as full calendar
month shall be prorated accordingly.
14
<PAGE> 15
EXHIBIT D
ENVIRONMENTAL REPORTS AND INFORMATION
205 Burlington Road, Bedford
11/15/90 Goldberg-Zoino Associates, Inc. Report to Pre-Owned Electronics,
Inc.
9/12/90 Goldberg-Zoino Associates, Inc. Report to Pre-Owned Electronics,
Inc. (GZA File No. 12190).
6/21/90 Clean Harbors "Results of Laboratory Analysis for Groundwater
Samples Collected at the Walford Company, 205 Burlington Road,
Bedford, Massachusetts. CHE Job No. E1459."
8/9/89 Clean Harbors Letter Report (no title)
2/1/89 Clean Harbors Letter Report (no title)
12/15/88 Clean Harbors Letter Report concerning the additional work
undertaken to remove the remaining oil beneath the building at
205 Burlington Road, Bedford, Massachusetts.
Sept., 1988 Clean Harbors Report (Insert Title)
5/5/87 DEQE Notice of Responsibility letter to the John Aitken Company,
requiring remedial response actions including, at a minimum, the
investigation and assessment of site conditions.
15
<PAGE> 1
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
EXHIBIT 10.2
Amendment No. 2 to the
License and Development Agreement Between
SHIVA CORPORATION and MICROSOFT CORPORATION
This Amendment No. 2 is made and entered into by and between MICROSOFT
CORPORATION ("MS") and SHIVA CORPORATION ("COMPANY") this 27th day of June, 1996
Recitals
The parties have entered into that certain License and Development Agreement
dated March 4, 1994 and Amendment dated June 30, 1995 (collectively the
Agreement); and
The parties hereby agree to amend the Agreement as follows:
Amendment
1. Capitalized terms shall have the same meaning as set forth in the
Agreement, except as otherwise provided.
2. Section 3 is modified as follows:
(a) the delivery date for the ********************* is extended from
October 1, 1995 to April 1, 1996;
(b) a new delivery date is added: ********************************** due
July 1, 1996.
3. Section 5 is deleted in its entirety and replaced with the following:
"5. Effective April 1, 1996, COMPANY shall provide MS support for the *****
*************** of the Licensed Software under the terms described in
Exhibit F. COMPANY shall provide corrections to and other support for the
**************** of the Licensed Software to MS *********************
***************************************************************."
4. The attached Exhibit F is added to the Agreement and is incorporated herein
by reference.
5. This Amendment shall amend, modify and supersede to the extent of any
inconsistencies, the provisions of the Agreement. Except as expressly
amended by this Amendment, the Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties have executed this Amendment to the
Agreement as of the date set forth above. All signed copies of this
Amendment to the Agreement shall be deemed originals. This Amendment does
not constitute an offer by MS. This Amendment shall be effective upon
execution on behalf of COMPANY and MS by their duly authorized
representative.
MICROSOFT CORPORATION SHIVA CORPORATION
By: /s/ Brian Valentine By: /s/ Cynthia M. Deysher
------------------------------------- ----------------------------
Name (Print): Brian Valentine Name (Print): Cynthia M. Deysher
Title: General Mgr., Exchange Prod. Unit Title: Sr. Vice President
Date: 7/11/96 Date: 6/27/96
<PAGE> 2
EXHIBIT F
SUPPORT
Definitions
"Version" shall mean a binary version of the Licensed Software designated by a
numeric identification of the form "N.M" where "N" designates the Version
identification.
"Revision" shall mean a release of the binary version of the Licensed Software
incorporating corrections and minor enhancements. A Revision is designated by a
numeric identification of the form "N.M" where "M" designates the Revision
identification.
"Documentation" shall mean any printed manuals, on-line help, and release notes
provided with the Licensed Software, as more particularly described in Exhibit
B.
All other terms shall be interpreted in accordance with the definitions as set
forth in the Agreement.
SUPPORT OBLIGATIONS OF MS
MS shall review all reported problems in MS's Other Products(s) to determine
whether the reported problem is attributable to the Licensed Software or the
Other Product(s). If MS determines that a problem exists in the Licensed
Software (i.e. that the Licensed Software does not perform in accordance with
the Documentation for the Licensed Software), MS shall use all reasonable
efforts to resolve the problem themselves. If MS is unable to resolve the
problem then MS may submit the problem to COMPANY for resolution.
If MS submits a problem to COMPANY for resolution, MS shall do so by submitting
to COMPANY: (i) if possible, a sample program separate from MS's Other Product,
which, when executed in conjunction with the Licensed Software, clearly
illustrates the problem with such Licensed Software, and (ii) a detailed
description of the problem. MS and COMPANY shall prioritize any such problem
submitted to COMPANY for resolution in accordance with the hierarchy described
below. MS shall supply any additional information reasonably requested by
COMPANY and MS shall make its support personnel available to assist in the
problem identification and resolution.
Any Problem submitted to COMPANY for resolution must be referred to COMPANY's
online support group by MS's Primary Support Liaison. Similarly, COMPANY's
response to a problem submitted by MS will be conveyed only by COMPANY's on-line
support group to MS's Primary Support Liaison. However, in the event that MS's
Primary Support Liaison is unavailable, MS's Alternate Support Liaison may
substitute in place of MS's Primary Support Liaison. The Support Liaison shall
be the persons identified below. A Support Liaison may be changed upon
reasonable notice to COMPANY.
BOTH THE MS'S PRIMARY AND SECONDARY SUPPORT LIAISONS MUST ATTEND THE TRAINING
DESCRIBED ABOVE. Unless both COMPANY and MS agree otherwise.
MS's Primary Support
Liaison l: Glenn Meacham Liaison 2: Shannon McMorris
(206) 704-5766 (214) 756-7000
MS's Alternate Support Liaison: Sid Siddiqui
(206) 704-5386
PROBLEM HIERARCHY
The following hierarchy SHALL BE USED IN CLASSIFYING PROBLEMS:
<PAGE> 3
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
PROBLEM
LEVEL DESCRIPTION OF PROBLEM
- ----- ----------------------
CRITICAL End-user is unable to use or install the product, resulting in
critical impact on operations. For example: Data is corrupted;
no obvious work around; requires program or design changes;
causes a system failure; corrupts operating system or hardware.
SERIOUS End-user is able to use the product but is severely restricted.
For example: Causes program failure; work around is awkward or
inefficient; misleading output. System crashes may also be
classified as serious if caused by an unusual or unlikely set of
commands.
MEDIUM End-user can use the product with limitations that are not
critical to overall operations. For example: The work around is
acceptable and does not seriously impact operations; prevents a
user from using preferable procedure; confusing interface;
externals not affected. Low End-user can circumvent the problem
and use the product with only slight inconvenience. For
example: The work around becomes the permanent solution;
correct use is obvious.
SUPPORT OBLIGATIONS OF COMPANY
Support for MS's technical and customer service support personnel:
MS will provide the first line of technical support to its customers for both
the Licensed Software and Other Products(s). COMPANY will provide MS with direct
technical telephone support. The fee for the first 12 months is ********** for
Maintenance and Support with subsequent renewal terms at a rate of ******* per
year. This support includes:
- - Guaranteed call back within *******
- - Toll free 800[pound sign]
- - Available 9am to 8pm access (EST), Monday - Friday, COMPANY Holidays excluded
- - MS can designate up to 2 primary contacts and an alternate
- - MS can submit less critical incidents via E-mail or Fax
- [email protected] (Must be accompanied by Contract Number)
- Fax - 617-270-8337
- Guaranteed one business day response
- - ** Support Incidents annually
- - COMPANY will provide a fax number to MS for support purposes
COMPANY's support obligations hereunder shall be limited to responding to a
problem in the Licensed Software as follows:
CRITICAL PROBLEM: COMPANY shall use reasonable efforts to acknowledge (i.e.
calling MS back to scope and define the problem and make a first attempt at
problem resolution) within **************** and provide a response (i.e.
making further attempts to resolve the problem; this may include exchange of
code and documentation of trouble shooting work completed) within *************
and a full solution within ************** days of receiving problem referral
from MS. If a solution cannot reasonably be provided within *************** of
receiving problem referral, COMPANY shall develop and present a plan to MS to
provide a solution as soon as reasonably practicable.
SERIOUS PROBLEM: COMPANY shall use reasonable efforts to acknowledge within ***
*********** and provide a response within **************** and a full solution
within **************** of receiving problem referral from MS. If a solution
cannot reasonably be provided within ********** of receiving problem referral,
COMPANY shall develop and present a plan to MS to provide a solution as soon as
reasonably practicable.
<PAGE> 4
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
MEDIUM OR LOW PROBLEM: COMPANY shall *********************************** either
as a correction or in a subsequent Revision of the Licensed Software. After the
expiration of this Agreement, subsequent Revisions will be provided to MS in
order for MS to support its customers as long as a support agreement is in place
between MS and COMPANY.
ESCALATION CHANNEL
In the event the above guidelines are not met or are at risk of not being met,
the support issue will be escalated as follows:
- - Technical Support Manager Michael Knox (617) 270-8449
- - V.P. Customer Service Rich Lanchantin (617) 270-8868
In addition, when the assigned Microsoft Support representative or Microsoft
Management are concerned about the progress being made on a particular support
issue, the above escalation channel should be used.
Incident Reporting
A summary report of activity will be provided to Microsoft's Support
Representative on a Quarterly basis. The format will consist of the following
information:
- - Case Number
- COMPANY's internal tracking number. Provided to Microsoft for each
incident opened with COMPANY Technical Support
- - Open Date
- Original Date the incident was opened in COMPANY Technical Support
- - Severity
- Severity Level of Incident
- - Status
- Current status. Research, Followup, Engineering
- - Brief Description
- - Complete Date
- Date Case was closed.
- - Solution Description
- Details of steps used to solve problem.
COMPANY shall have **********************************************************
*************************************************************************
**************************************************************************
***********************************************************************.
COMPANY shall have ************************************************************
******************************************************************************
***************************************************************************
*******.
COMPANY shall provide support for the Licensed Software until ***************
after the termination of the Agreement.
<PAGE> 1
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
EXHIBIT 10.3
FIRST AMENDMENT TO THE
DEVELOPMENT AND LICENSE AGREEMENT
EFFECTIVE AS OF DECEMBER 30, 1994 BETWEEN
SHIVA CORPORATION
AND
HEWLETT-PACKARD COMPANY
This first amendment to the Development and License Agreement dated December 30,
1994 between Shiva Corporation, a Massachusetts corporation having a principal
place of business at 28 Crosby Drive, Bedford, Massachusetts ("Shiva") and
Hewlett-Packard Company, a California corporation having a place of business at
8000 Foothills Boulevard, Roseville, CA 95747-6588 ("HP") ("the Prior
Agreement") is hereby entered into as of June 28, 1996. Capitalized terms used
herein and not otherwise defined shall have the meanings set forth in the Prior
Agreement. Except as expressly stated in this Amendment, the terms of the Prior
Agreement will continue in full force and effect.
For good and valuable consideration, Shiva and HP hereby amend the Prior
Agreement as follows:
1. Paragraph 10.1.1 is amended as follows:
For the SECOND and THIRD ROYALTY PERIODS, **********************************
*******************************************************************************
****************************************************************************
*****************************************************************************
*******************************************************.
2. Paragraph 10.1.3 is not applicable for the SECOND and THIRD ROYALTY
PERIODS.
IN WITNESS WHEREOF, a duly authorized representative of each party hereto has
executed this First Amendment as of the date first set forth above.
SHIVA CORPORATION HEWLETT-PACKARD COMPANY
By: /s/ WOODY BENSON By: /s/ JANIS JASINSKY
Print: Woody Benson Print: Janis Jasinsky
Title: Senior Vice President Title: Controller -- WND HP
Date: June 28, 1996 Date: June 28, 1996
<PAGE> 1
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTED SUCH OMISSIONS.
EXHIBIT 10.4
3/15/96
Dear Mickey:
We have prepared this agreement to permit Shiva and Nortel to amend the
Shiva/Nortel Agreement, effective May 15, 1995 as follows:
Non-refundability of prior development expenses
<TABLE>
Nortel agrees to amend Section 13.5 of the original agreement *****. Nortel
and Shiva agree to the following schedule as a substitute for the original
repayment language.
<CAPTION>
Amount Event/Deliverable Status of amount paid
------ ----------------- ---------------------
<S> <C> <C>
***** Signature of both parties on this letter ********** upon occurrence of event
agreement
***** Shiva's delivery of ******************** ********** upon supply of deliverable,
**************************************** provided that such delivery occurs no later than
********************** *****
***** Shiva's delivery of ******************** ********** upon supply of deliverable,
**************************************** provided that such delivery occurs no later than
********************** *****
***** Shiva's interim delivery of ************* ********** upon Nortel's acceptance of
**************************************** delivery, currently planned for *****
***** Shiva's delivery of ************* ********** upon Nortel's acceptance of
delivery, currently planned for *****
***** Shiva's delivery of************* ********** upon Nortel's acceptance of
delivery, currently planned for *****
</TABLE>
<PAGE> 2
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTED SUCH OMISSIONS.
Volume Commitment and Termination Clause:
-----------------------------------------
Both Shiva and Nortel agree to cancel **********.
If this letter agreement is consistent with your understanding of the
changes that we have agreed to, please have the appropriate Nortel
signatory execute one copy of the amending letter and return to my
attention. You can retain an original with my signature for your
files. If changes need to be made, please phone or email me.
Very truly yours,
/s/ Ed Gregory
Agreed to for Nortel by:
Signature /s/ Micky Tsui Date 3/19/96
Print Name Micky Tsui
<PAGE> 1
Exhibit 10.5
------------
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
AMENDMENT 1
Shiva/Nortel Agreement
05/16/96
This First Amendment to the agreement dated as of 15 May 1995 (the "Agreement")
is made as of the 16th day of May 1996, by and between Northern Telecom Limited
("Nortel"), on behalf of itself and its Affiliates (as defined in the
Agreement), a Canadian corporation having its principal place of business at
2920 Matheson Blvd. East, Mississauga, Ontario, Canada, and Shiva Corporation
("Shiva"), a Massachusetts corporation having its principal place of business at
28 Crosby Drive, Bedford, MA 01730 USA.
WHEREAS, Nortel and Shiva want to amend the Agreement to reflect the following
changes to the original Agreement;
OEM ******** Amendments
1. *********************************************************************will be
added to the Agreement. ************************************************* in the
United States and ***************** markets.
2. Shiva will sell *************************************************************
*********************.
NOW, THEREFORE, the parties agree to amend the Agreement as follows,
1.0 Definitions
1.1 New Definitions. In addition to the terms defined in the Agreement, each of
the following additional terms shall have the meaning ascribed to it below:
1.1.1 ***************************************************************** *
*********************************************************
***************************.
1.1.2 ********************************************************************
************;
1.1.3 ***************************************************************** *
***********************************************.
1.1.4 ********************************************************************
************************;
1.1.8 ********************************************************************
***********************************.
1.2 Altered Definitions. The following term defined in the Agreement shall now
have the meaning ascribed to it below:
<PAGE> 2
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
1.2.1 ************************************************************
************************************************************.
1.3 Currency. All currency amounts in the Agreement are denominated in US
dollars unless otherwise specified.
2.0 ************* of the OEM ********
2.1 Shiva's Obligations. ******************************************************
***************************************************************************
***************************************************************************
***************************************************************************
***********************:
1. Shiva and Nortel agreed upon both a *******************************
and
2. Shiva and Nortel have agreed upon the ********************************
**********************************************************************
**********************************************************************
**********************************************************************
********************.
Days Delayed ************ *******************
******
******** **
********** **
********* ***
Once Shiva delivers the Nortel Software Stream to Nortel, the above
*********************** ********************** does not apply.
2.2 Nortel's Obligations.******************************************************
************************.
2.3 Ownership of the OEM ******************************************************
**************************************************** For the purpose of
this Amendment, ********************************************************* *
************************************************************************* *
***************************************************************************
**************************.
***************************************************************************
***************************************************************************
***************************************************************************
***************************************************************************
******************.
2.4 ***************************************************************************
***************************************************************************
***************************************************************************
***************************************************************************
******************.
<PAGE> 3
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
2.5 General Pricing of *********. All other pricing terms in the Agreement
shall apply to purchase of ***************************.
3.0 General Changes to Agreement.
3.1 Exhibit P. Exhibit P is added to the Agreement.
3.2 Exhibit Q. Exhibit Q is added to the Agreement.
3.3 Other Terms. Except as set forth above, all other terms and conditions
of the Agreement remain unchanged.
IN WITNESS of this First Amendment to the Agreement the parties have executed
this document on the dates set forth below.
SHIVA CORPORATION NORTHERN TELECOM LIMITED
Signature: /s/ Cynthia Deysher Signature: /s/ Mike Ennis
Name: Cynthia Deysher Name: Mike Ennis
Title: Sr. VP Finance & Administration Title: Group VP
and CFO
Signature: /s/ M. Elizabeth Potthoff Signature: /s/ David Archibald
Name: M. Elizabeth Potthoff Name: David Archibald
Title: General Counsel Title: VP and Deputy General Counsel
<PAGE> 4
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
Exhibit P
OEM *********
See Nortel *********** for a description of deliverables including requirements
for ****************************************. The provisions of the **********
*** are incorporated into this First Amendment with the following modifications
in addition to such modifications as are inherent in the provisions of the body
of the Agreement.
1.0 Delivery and Payment Schedule.
Nortel agrees to make the following payments to Shiva on the achievement***
************************************************************************
********.
Milestone Target Date Payment
- --------- ----------- -------
Amendment Execution ***************** ******
Delivery and Acceptance ****** ****************** *******
**********************
Delivery and acceptance by Nortel **************** *******
*******************
Acceptance by Nortel **************** ***************** *******
****************
Acceptance by Nortel ************* *** *******
*****************************
***************
Acceptance by Nortel **** *** *******
*********************
Total ********
2.0 Certification/Homologation. Deliverables for the **************************
**************** pursuant to Exhibit K of the Agreement that are covered in the
payment schedule in Section 1.0 of this exhibit.
3.0 Delivery. Delivery of the ************ product *********************
*****************************************************************************
********************************************************************************
*********.
4.0 Documentation. Shiva will delivery **************************. Shiva will
also deliver ***************************************. Nortel will *************
**************************************************************************
********************************************************************************
*********************.
<PAGE> 5
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
5.0 Acceptance Criteria for OEM ********.
Nortel will accept the product in two stages:
Stage 1: *************************************
Stage 2: ****************************
Nortel will accept the product based on the following criteria for Stage 1 and
Stage 2 and other future deliverables as per the milestone schedule:
*************************:
- - *************:
*****************************
- - *******:
*************************************************************************
- - ********:
******************************************************************************
- - ********:
***************************************************
- - *********:
*****************************
- - *************:
********************************************************************************
- - *************************:
*****************************************************
- - *************:
******************************************************************************.
<PAGE> 6
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.
Exhibit Q
Nortel ***********
Project Plan
The contents of pages 1 through 9 of Exhibit Q consist of confidential
information which has been omitted and filed
separately with the Securities and Exchange Commission
<PAGE> 1
EXHIBIT 11.0
SHIVA CORPORATION
<TABLE>
COMPUTATION OF NET INCOME PER SHARE(1)
<CAPTION>
Three months ended Six months ended
--------------------------- ----------------------------
June 29, July 1, June 29, July 1,
1996 1995(2) 1996 1995(2)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Weighted Average Common and
Common Equivalent Shares:
Weighted Average Common Shares
Outstanding During the Period 28,541,041 24,025,223 28,185,953 23,965,064
Weighted Average Common
Equivalent Shares 3,525,482 3,004,852 3,109,845 3,080,315
----------- ----------- ----------- -----------
32,066,523 27,030,075 31,295,798 27,045,379
=========== =========== =========== ===========
Net Income $ 4,975,000 $ 973,000 $ 9,314,000 $ 2,355,000
Primary Net Income Per Share $ 0.16 $ 0.04 $ 0.30 $ 0.09
<FN>
(1) Fully diluted net income per share has not been separately presented, as the amounts would not
be materially different from primary net income per share.
(2) Retroactively adjusted to reflect the one-for-one stock dividend on all shares of the Company's
common stock declared by the Company's Board of Directors on April 2, 1996. The stock dividend
was paid on April 22, 1996, to all stockholders of record on April 12, 1996.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> JUN-29-1996
<EXCHANGE-RATE> 1
<CASH> 95233
<SECURITIES> 4992
<RECEIVABLES> 42201
<ALLOWANCES> 5941
<INVENTORY> 11852
<CURRENT-ASSETS> 152075
<PP&E> 31667
<DEPRECIATION> 13296
<TOTAL-ASSETS> 176238
<CURRENT-LIABILITIES> 34193
<BONDS> 235
0
0
<COMMON> 285
<OTHER-SE> 140897
<TOTAL-LIABILITY-AND-EQUITY> 176238
<SALES> 94794
<TOTAL-REVENUES> 94794
<CGS> 38782
<TOTAL-COSTS> 38782
<OTHER-EXPENSES> 44149
<LOSS-PROVISION> 338
<INTEREST-EXPENSE> 298
<INCOME-PRETAX> 13896
<INCOME-TAX> 4582
<INCOME-CONTINUING> 9314
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9314
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
