SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For
[ X ] Definitive Proxy Statement Use of the Commission
Only (as permitted by
Rule 14a-6(e) (2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Shiva Corporation
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Shiva Corporation
------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transactions
applies:
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule
0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
<PAGE>
SHIVA CORPORATION
28 Crosby Drive
Bedford, Massachusetts 01730
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 18, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders
of Shiva Corporation (the "Company") will be held at the Fleet
Headquarters, Fleet Center, 75 State Street, 8th Floor, Boston,
Massachusetts 02109 on Thursday, June 18, 1998 at 10:00 a.m., local
time, to consider and act upon each of the following matters:
1. To elect two members to the Board of Directors, each to
serve for a three-year term as a Class I Director.
2. In their discretion, the proxies are authorized to vote
upon such other business as may properly come before
the Annual Meeting or any adjournment or postponement
thereof including without limitation a motion to adjourn
the Annual Meeting.
Information relating to the above matters is set forth in
the attached Proxy Statement. Stockholders entitled to notice of
and to vote at the meeting shall be determined as of the close of
business on April 20, 1998, the record date fixed by the Board of
Directors for such purpose.
All stockholders are cordially invited to attend the meeting.
By Order of the Board of Directors
M. Elizabeth Potthoff
Clerk
Bedford, Massachusetts
April 30, 1998
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE
ENCLOSED ENVELOPE IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES.
NO POSTAGE NEED BE AFFIXED IF THE PROXY CARD IS MAILED IN THE
UNITED STATES.
<PAGE>
SHIVA CORPORATION
28 Crosby Drive
Bedford, Massachusetts 01730
----------------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
To Be Held on June 18, 1998
---------------------------------------
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Shiva
Corporation, a Massachusetts corporation (the "Company"), for use
at the Annual Meeting of Stockholders to be held at the Fleet
Headquarters, Fleet Center, 75 State Street, 8th Floor, Boston,
Massachusetts 02109, on Thursday, June 18, 1998, at 10:00 a.m.,
local time, and at any adjournments thereof (the "Annual Meeting").
Only stockholders of record as of the close of business on April
20, 1998, the record date fixed by the Board of Directors, will
be entitled to vote at the Annual Meeting and at any adjournments
thereof. At the close of business on April 20, 1998, there were
an aggregate of 30,307,346 shares of common stock, par value $.01
per share (the "Common Stock"), of the Company outstanding and
entitled to vote. The holders of Common Stock are entitled to
one vote per share on any proposal presented at the Annual
Meeting. Stockholders may vote in person or by proxy. Execution
of a proxy will not in any way affect a stockholder's right to
attend the meeting and vote in person. Any proxy may be revoked
by a stockholder at any time before it is exercised by delivering
a written revocation or a later dated proxy to the Clerk of the
Company or by attending the Annual Meeting and voting in person.
The Company's Annual Report to Stockholders containing financial
statements for the fiscal year ended January 3, 1998, is being
mailed together with this Proxy Statement to all stockholders
entitled to vote at the Annual Meeting. It is anticipated that
this Proxy Statement and the accompanying proxy will be first
mailed to stockholders on or about May 3, 1998.
The Company will, upon written request of any stockholder, provide
without charge a copy of its Annual Report on Form 10-K for the
fiscal year ended January 3, 1998, including financial statements
and financial statement schedules, as filed with the Securities and
and Exchange Commission. Requests should be addressed to the Investor
Relations department of the Company, 28 Crosby Drive, Bedford,
Massachusetts 01730.
Quorum and Votes Required
Under the Company's by-laws, representation, in person or by proxy,
of at least a majority of the outstanding shares of Common Stock
entitled to vote at the Annual Meeting is necessary to constitute
a quorum for the transaction of business. Shares represented by
proxies that contain one or more abstentions or broker "non-votes"
are counted as present or represented for purposes of determining
the presence or absence of a quorum for the Annual Meeting. A
"non-vote" occurs when a broker or other nominee holding shares for
a beneficial owner does not vote a proposal because, with respect
to such proposal, the broker does not have discretionary voting
power and has not received instructions from the beneficial owner.
Shares which abstain from voting as to a particular matter, and
broker non-votes, will not be voted in favor of such matter and
will also not be counted as votes cast or shares voting on such
matter. Accordingly, abstentions and broker non-votes will have
no effect on the election of directors any or any other matter
that requires the affirmative vote of a certain percentage of the
shares present and voting on the matter.
With respect to the election of Class I Directors, the two nominees
receiving the highest number of affirmative votes of the shares
present or represented and entitled to vote at the Annual Meeting
shall be elected as Class I Directors.
<PAGE>
The persons named as attorneys in the proxies are officers of the
Company. All properly executed proxies received prior to the
Annual Meeting will be voted. Any stockholder giving a proxy has
the right to withhold authority to vote for any individual nominee
to the Board of Directors by writing that nominee's name in the
space provided on the proxy. All proxies will be voted in accordance
with the stockholder's instructions, and if no choice is specified,
the enclosed proxy card (or any signed and dated copy thereof) will
be voted in favor of the matters set forth in the accompanying Notice
of Meeting.
The Board of Directors does not know of any other business that
may be presented for consideration at the Annual Meeting other
than one shareholder proposal that has been omitted from this
Proxy Statement because it does not comply with the rules of the
Securities and Exchange Commission. The proposal resolves that
the Company adopt a by-law amendment providing that in no event
shall any stock option already issued and outstanding be repriced
to a lower strike price at any time during the term of such option,
without the prior approval of stockholders, and that this by-law
amendment may only be amended or repealed with the affirmative
vote of the holders of a majority in interest of the capital stock
present and entitled to vote. If this shareholder proposal or any
other business should properly come before the meeting, the shares
represented by the proxies and voting instructions solicited hereby
may be discretionarily voted on such business in accordance with the
judgment of the proxy holders to the extent allowed by the rules of
the Securities and Exchange Commission, unless otherwise indicated
on the proxy card. The proxy holders intend to vote against the
shareholder proposal pursuant to this discretionary authority.
Two-for-One Stock Split
The information contained in this Proxy Statement has been adjusted
to give effect to a two-for-one stock split in the form of a 100%
stock dividend paid on April 22, 1996 to the stockholders of record
on April 12, 1996.
<PAGE> 2
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of January 31, 1998,
with respect to the beneficial ownership of the Company's Common
Stock by (i) each person who is known to the Company to be the
beneficial owner of more than five percent of the outstanding
shares of Common Stock, (ii) each director of the Company as of
April 20, 1998, (iii) each of the executive officers named in the
Summary Compensation Table under the caption "Executive Compensation"
below, and (iv) all directors, nominees for director and executive
officers of the Company as a group as of April 20, 1998. Except as
otherwise indicated in the footnotes to the table, to the knowledge
of the Company, the beneficial owners listed have sole voting and
investment power (subject to community property laws where applicable)
as to all of the shares beneficially owned by them.
<TABLE>
<CAPTION>
Amount
and Nature
Name and Address of of Beneficial Percent
Beneficial Owner Ownership of Class
- ------------------ ------------- --------
<S> <C> <C>
David C. Cole (1) 417,935 1.4%
Richard J. Egan 0 *
Henry F. McCance (2) 623,422 2.1%
Paul C. O'Brien (3) 22,418 *
David B. Yoffie 0 *
James L. Zucco, Jr. (4) 175,000 *
Frank A. Ingari (5) 792,397 2.7%
Angelo J. Santinelli (6) 55,000 *
Michael J. Duffy (7) 68,750 *
James F. Finucane (8) 68,750 *
Steven J. Benson (9) 96,166 *
Jean-Pierre Boespflug (10) 76,666 *
All Directors and Executive
Officers as a group (9)
persons (11) 1,445,02 4.9%
- -----------------------
<FN>
* Less than 1% of the outstanding Common Stock.
(1) Includes 24,980 shares of Common Stock owned by the Cole
Gilburne Fund, L.P. and 1,332 shares of Common Stock owned by
Catalyst II. David Cole is the sole general partner of the
Cole Gilburne Fund, L.P., and may be deemed to share voting
and investment power with respect to such shares. David Cole
d/b/a/ Cole and Company is the President of Aquaterra
Corporation, and Aquaterra Corporation is the sole general
partner of Pan Pacific Ventures, L.P.; Pan Pacific Ventures,
L.P. is a general partner of Catalyst II and Mr. Cole may be
deemed to share voting and investment power with respect to
all such shares. Mr. Cole disclaims beneficial ownership of
such shares, except to the extent of his proportionate pecuniary
interest therein. 400 shares are held by Mr. Cole's minor
children; 330,394 shares are held by The Cole Family Foundation;
550 are held by The William Francis Cole Irrevocable Trust;
1,873 shares are held by The Jessica Butler Cole Irrevocable
Trust; 1,673 shares are held by The Sean Joshua Patrick Cole
Irrevocable Trust; 1,673 shares are held by the Christopher
Andrew Cole Irrevocable Trust; 12,270 shares are held by The
David Clayton Cole 1996 Retained Annuity Trust; and 24,540
shares are held by The Cole Charitable Remainder Trust. Mr.
Cole disclaims beneficial ownership of the shares described in
the preceding sentence. Also includes 18,250 shares issuable
pursuant to options that are currently exercisable or will
become exercisable within 60 days of January 31, 1998.
(2) Includes 394,468 shares of Common Stock owned by Greylock
Limited Partnership and 150,468 shares of Common Stock owned
by Greylock Equity Limited Partnership, both venture capital
limited partnerships. Mr. McCance is a managing general
partner of Greylock Limited Partnership and Greylock Equity
Limited Partnership and may be deemed to share voting and
investment power with respect to such shares. Mr. McCance
disclaims beneficial ownership of such shares, except to the
extent of his proportionate pecuniary interest therein. Also
includes 18,250 shares issuable pursuant to options that are
currently exercisable or will become exercisable within 60
days of January 31, 1998.
<PAGE> 3
(3) Includes 18,418 shares issuable pursuant to options that
are currently exercisable or will become exercisable within 60
days of January 31, 1998.
(4) Includes 175,000 shares issuable pursuant to options that
are currently exercisable or will become exercisable within 60
days of January 31, 1998.
(5) Includes 623,370 shares issuable pursuant to options that
are currently exercisable or will become exercisable within 60
days of January 31, 1998. Mr. Ingari exercised 535,870 of
these options prior to their termination in March 1998. Also
includes 25,000 shares held by the Cushing Irrevocable Trust
and 1,100 shares held by Mr. Ingari's minor children, as to
which shares Mr. Ingari disclaims beneficial ownership. Mr.
Ingari resigned as an Executive Officer of the Company
effective January 1998 and as a Director and Chairman of the
Board effective March 1998.
(6) Includes 35,000 shares issuable pursuant to options that
are currently exercisable or will become exercisable within 60
days of January 31, 1998. Mr. Santinelli exercised 10,000 of
these options prior to their termination in April 1998. Mr.
Santinelli became an Executive Officer in April 1997 and
resigned as an Executive Officer of the Company effective
January 1998.
(7) Includes 68,750 shares issuable pursuant to options that are
currently exercisable or will become exercisable within 60
days of January 31, 1998.
(8) Includes 68,750 shares issuable pursuant to options that are
currently exercisable or will become exercisable within 60
days of January 31, 1998.
(9) Includes 84,166 shares issuable pursuant to options that
are currently exercisable or will become exercisable within 60
days of January 31, 1998. All of these options terminated on
February 2, 1998 pursuant to the terms of Mr. Benson's option
agreements. Mr. Benson resigned as an Executive Officer of
the Company effective June 1997.
(10) Includes 76,666 shares issuable pursuant to options that
are currently exercisable or will become exercisable within 60
days of January 31, 1998. All of these options will terminate
on June 9, 1998 pursuant to the terms of Mr. Boespflug's
option agreements. Mr. Boespflug became an Executive Officer
in February 1997 and resigned as an Executive Officer of the
Company effective July 1997.
(11) Includes the shares described in notes (1)-(4) and (7)-(8)
above and an additional 68,750 shares issuable pursuant to
options that are currently exercisable or will become exercisable
within 60 days of January 3, 1998.
</TABLE>
<PAGE> 4
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
The Board of Directors is divided into three classes. Each class
serves a three-year term. The Class I Directors' term will expire
at the Annual Meeting. All directors will hold office until their
successors have been duly elected and qualified. Prior to the
Annual Meeting, Paul C. O'Brien and James L. Zucco, Jr. were the
Class I Directors; David C. Cole and Richard Egan were the Class II
Directors; and Henry F. McCance and David B. Yoffie were the Class
III Directors. L. John Doerr, formerly a Class III Director, resigned
from the Board of Directors effective April 1998. Certain of the
Directors were reclassified in 1998, with the consent of the directors
being reclassified and the full Board of Directors, in order to
balance the number of Directors in each class due to director resigna-
tions and appointments that occurred in 1997 and 1998.
The nominees for Class I Directors are Paul C. O'Brien and James L.
Zucco, Jr. who are each currently serving as a Class I Director of
the Company. Shares represented by all proxies received by the
Board of Directors and not so marked as to withhold authority to
vote for Mr. O'Brien and Mr. Zucco will be voted FOR the election of
both nominees. Messrs. O'Brien and Zucco will be elected to hold
office until the Annual Meeting of Stockholders to be held in 2001
and until their respective successors are duly elected and qualified.
Both of the nominees have indicated their willingness to serve, if
elected; however, if either should be unable or unwilling to serve,
the proxies will be voted for the election of a substitute nominee
designated by the Board of Directors or for fixing the number of
directors at a lesser number.
The following table sets forth for each nominee to be elected at
the Annual Meeting and for each director whose term of office
will extend beyond the Annual Meeting, the year each such nominee
or director was first elected a director, his age, the positions
currently held by each nominee or director with the Company, the
year each nominee's or director's term will expire and the class
of director of each nominee or director.
<TABLE>
<CAPTION>
Nominee or Director's
Name and Year Nominee or
Director First Became Position(s) Year Term Class of
a Director Age Held Will Expire Director
- ------------------------ --- ----------- ----------- --------
<S> <C> <C> <C> <C>
Paul C. O'Brien 58 Director 1998 I
(1994)
James L. Zucco, Jr 46 President, 1998 I
(1997) Chief Executive
Officer,
Director and
Chairman of the
Board
David C. Cole 45 Director 1999 II
(1993)
Richard J. Egan 62 Director 1999 II
(1997)
Henry F. McCance 55 Director 2000 III
(1991)
David B. Yoffie 43 Director 2000 III
(1998)
</TABLE>
Mr. O'Brien has served as a director of the Company since May
1994. Mr. O'Brien is currently President of the O'Brien Group,
Inc., a consulting and management firm based in Boston. From
June 1993 to December 1994, Mr. O'Brien served as Chairman of
NYNEX New England. From June 1988 to June 1993, Mr. O'Brien was
President and Chief Executive Officer of New England Telephone.
From 1977 to 1988, Mr. O'Brien was Executive Vice President and
Chief Operating Officer of New England Telephone. Mr. O'Brien is
a director of The BankBoston Corporation, and Cambridge
Neuroscience Inc., First Pacific Networks, Inc., The Registry,
Inc. and View Tech, Inc.
<PAGE> 5
Mr. Zucco has served as a director of the Company since May 1997
and as Chairman of the Board since February 1998. Mr. Zucco was
appointed Chief Operating Officer and President of the Company in
April 1997, and was appointed Chief Executive Officer in October
1997. Prior to joining the Company, Mr. Zucco was President,
Network Communication Software, at Lucent Technologies from
February 1997 to April 1997 and was previously Vice President and
General Manager, Network Systems North America Carrier Business,
since February 1996. From January 1995 to February 1996, Mr.
Zucco served as Vice President and General Manager of AT&T
Advanced Network Applications at AT&T Business Communications
Services. Mr. Zucco was Chief Information and Chief Technology
Officer at AT&T Business Communications Services from November
1993 to January 1995. Mr. Zucco served as Senior Vice President
at MCI Communications Corporation from February 1991 to November
1993.
Mr. Cole has served as a director of the Company since October
1993. Since January 1986, Mr. Cole has been a general partner of
two investment firms: The Cole Gilburne Fund and Pan Pacific
Ventures, L.P. Since January 1993, Mr. Cole has served as a
managing general partner for Catalyst II, a venture capital firm
specializing in interactive media and communications. From
November 1994 to November 1996, Mr. Cole served as Senior Vice
President of America Online Incorporated and President of AOL New
Enterprises. From August 1993 to November 1994, Mr. Cole served
as Chairman of Navisoft, Inc., which was acquired by AOL in
November 1994. Mr. Cole currently serves as a director of
several privately-held companies.
Mr. Egan has served as a director of the Company since October
1997. Mr. Egan is a founder, Director and Chairman of the Board
of EMC Corporation and held the position of President and Chief
Executive Officer from EMC Corporation's inception in 1979 until
January 1992. Mr. Egan is the Director of the Massachusetts High
Technology Council, a Trustee of the Catholic Schools Foundation,
a Trustee of Northeastern University and founder and the Director
of the Hopkinton Technology for Education Trust. Mr. Egan is
also a director of Boston Edison Company, a public utility, and
Cognition Corporation, a CAD/CAM software supplier.
Mr. McCance has served as a director of the Company since
September 1991. Mr. McCance has been President since 1990 and
Chairman of the Board since 1997 of Greylock Management
Corporation, a private venture capital firm. Mr. McCance has
been a general partner of Greylock Capital Limited Partnership
since 1987, Greylock Limited Partnership since 1990, Greylock
Equity Limited Partnership since 1994 and Greylock IX Limited
Partnership since 1997.
Dr. Yoffie has served as a director of the Company since March
1998. Dr. Yoffie has been on the faculty at Harvard Business
School since 1981 and is currently the Max and Doris Starr
Professor of International Business Administration. Dr. Yoffie
currently is a director of Intel Corporation and three privately
held biotechnology and software companies.
THE BOARD OF DIRECTORS BELIEVES THAT THE ELECTION OF EACH OF THE
NOMINEES AS DIRECTORS IS IN THE BEST INTERESTS OF THE COMPANY AND
ITS STOCKHOLDERS AND RECOMMENDS A VOTE FOR PROPOSAL NO. 1.
<PAGE> 6
Meetings of the Board of Directors and Committees
The Board of Directors of the Company held eight meetings and took
action by unanimous written consent two times during the fiscal
year ended January 3, 1998 ("fiscal 1997"). Each of the directors
attended at least 75% of the aggregate of all meetings of the Board
of Directors and of all committees of the Board of Directors on which
he then served during fiscal 1997.
The Company has standing Compensation and Audit Committees. The
Compensation Committee, of which Messrs. Cole, Doerr and McCance
were members during fiscal 1997, reviews and recommends to the
Board the compensation of the directors, reviews the compensation
of senior management and reviews and recommends to the Board
adoption of compensation plans in which directors and executive
officers are eligible to participate. The Committee is also
responsible for administering the Company's Amended and Restated
1988 Stock Plan ("the 1988 Plan"), the 1997 Stock Incentive Plan
("the 1997 Plan"), the 1997 Employee Stock Incentive Plan ("the
1997 Employee Plan") and the 1994 Employee Stock Purchase Plan.
The Compensation Committee held three meetings and took action by
unanimous written consent fifteen times during fiscal 1997.
The Audit Committee, of which Messrs. Cole and O'Brien are members,
is responsible for nominating the Company's independent accountants
for approval by the Board of Directors; reviewing the scope, results
and costs of the audit with the Company's independent accountants;
and reviewing the financial statements and audit practices of the
Company. The Audit Committee held two meetings during fiscal 1997.
The Board of Directors does not have a nominating committee.
Nominations for director are made by and through the full Board
of Directors.
Compensation of Directors
Directors are not paid a retainer and are not reimbursed for their
out-of-pocket expenditures incurred in attending meetings. Non-
employee directors receive options under the Company's 1994 Non-
Employee Director Stock Option Plan, as described below.
1994 Non-Employee Director Stock Option Plan. On October 21,
1994, the Company's stockholders approved the 1994 Non-Employee
Director Stock Option Plan (the "Director Plan"), which provides
for the grant of options to purchase a maximum of 550,000 shares
of Common Stock of the Company to non-employee directors of the
Company. The Director Plan is intended to promote the interests
of the Company by providing an inducement to obtain and retain
the services of qualified persons who are not employees or
officers of the Company to serve as members of its Board of
Directors. The Director Plan is administered by the Board of
Directors.
Under the Director Plan, each non-employee director (i)
automatically received an option to purchase 33,000 shares (the
"Initial Option") on July 17, 1995, or when elected if subsequent
to July 17, 1995, and (ii) will receive an option to purchase an
additional 7,000 shares on the third Monday in July of each year
thereafter through and including December 31, 1999; provided,
however, that a director who previously received any option under
the 1988 Plan did not receive the Initial Option. The exercise
price per share for all options granted under the Director Plan
is equal to the fair market value of the Common Stock on the date
of grant. The options become exercisable in four equal annual
installments beginning one year from the date of grant, provided
that the optionee remains a director. The term of each option is
for a period of ten years from the date of grant. Options may
not be assigned or transferred except by will or by the laws of
descent and distribution and are exercisable to the extent vested
only while the optionee is serving as a director of the Company
or within ninety (90) days after the optionee ceases to serve as
a director of the Company (except that if the director dies or
becomes disabled while he or she is serving as a director of the
Company, the option is exercisable for a 180-day period thereafter).
As of January 31, 1998, options to purchase 261,000 shares of
Common Stock have been granted under the Director Plan at a
weighted average exercise price of $26.67 per share. During
fiscal 1997, Messrs. McCance, O'Brien, Cole and Doerr were each
granted an option under the Director Plan to purchase 7,000
shares of Common Stock at an exercise price of $10.563 per share,
and Mr. Egan was granted an initial option under the Director
Plan to purchase 33,000 shares of Common Stock at an exercise
price of $12.438 per share.
<PAGE> 7
EXECUTIVE COMPENSATION
The Summary Compensation Table sets forth certain information
concerning the compensation for services in all capacities to the
Company for the fiscal years ended December 30, 1995, December 28,
1996 and January 3, 1998 of (i) each person who served as chief
executive officer during fiscal 1997, (ii) the three other executive
officers of the Company as of the end of fiscal 1997 whose salary
and bonus during fiscal 1997 exceeded $100,000, and (iii) two
additional individuals who were executive officers during fiscal
1997 and would have been among the four most highly compensated
executive officers but were not executive officers at the end of
fiscal 1997 (such seven officers and former officers collectively,
the "Named Executive Officers").
<TABLE>
Summary Compensation Table
<CAPTION>
Long-Term
Annual Compensation (1) Compensation
------------------------------------------------------------
Securities All Other
Name and Underlying Compensation
Principal Position Year Salary($) Bonus($) Options(#) ($)
- ------------------ ---- --------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C>
James L. Zucco, Jr. (2) 1997 $221,539 $400,000(3) 700,000 $ ---
President and Chief 1996 --- --- --- ---
Executive Officer 1995 --- --- --- ---
Frank A. Ingari (4) 1997 305,769 --- 250,000 4,750 (5)
Former Chief Executive 1996 300,000 --- 200,000 2,250 (5)
Officer and Chairman of 1995 300,000 277,200 --- 2,250 (5)
the Board
Angelo J. Santinelli (6) 1997 205,661(7) --- 135,000 (8) 2,917 (5)
Former Senior Vice 1996 141,000 38,493 30,000 (9) 1,464 (5)
President, Worldwide 1995 136,500 44,069 30,000 (9) 2,072 (5)
Marketing and Business
Development
Michael J. Duffy (10) 1997 69,231 108,333 (11) 275,000 ---
Senior Vice President, 1996 --- --- --- ---
Worldwide Sales & 1995 --- --- --- ---
Marketing
James F. Finucane (12) 1997 93,827 40,000(13) 275,000 7,138(14)
Senior Vice President, 1996 --- --- --- ---
Research and Develop- 1995 --- --- --- ---
ment
Steven J. Benson (15) 1997 234,154 --- --- 4,750 (5)
Former Senior Vice 1996 239,280 --- 106,666 2,250 (5)
President, Worldwide 1995 280,760 70,000 --- 2,250 (5)
Sales & Marketing
Jean-Pierre Boespflug(16) 1997 179,201 44,991 86,666(17) 144,805(14)
Former Senior Vice 1996 185,944 48,147 86,666(18) 4,423(19)
President, Research 1995 180,763 50,000 --- 4,909(19)
and Development
- -------------------------------
<FN>
(1) In accordance with the rules of the Securities and Exchange
Commission, other annual compensation in the form of perquisites
and other personal benefits has been omitted in those instances
where the aggregate amount constituted less than the lesser of
$50,000 or 10% of the total annual salary and bonus for the Named
Executive Officer for such year.
(2) Mr. Zucco joined the Company in April 1997.
(3) Includes a one-time signing bonus of $200,000.
<PAGE> 8
(4) Mr. Ingari resigned as an Executive Officer of the Company in
January 1998 and resigned as Chairman of the Board of the Company
in March 1998.
(5) Consists of the Company's matching contributions to its 401(k) Plan.
(6) Mr. Santinelli became an Executive Officer in April 1997 and
resigned as an Executive Officer of the Company in January 1998.
(7) Includes sales commissions paid to Mr. Santinelli in 1997 in the
amount of $25,000.
(8) Includes 60,000 options originally granted in 1995 and 1996 that
were repriced in March 1997.
(9) These options were repriced in March 1997. See Note (8).
(10) Mr. Duffy joined the Company in August 1997.
(11) Includes a one-time signing bonus of $50,000.
(12) Mr. Finucane joined the Company in July 1997.
(13) Includes a one-time signing bonus of $40,000.
(14) Consists of relocation reimbursements.
(15) Mr. Benson resigned as an Executive Officer of the Company in
June 1997.
(16) Mr. Boespflug became an Executive Officer in February 1997 and
resigned as an Executive Officer of the Company in July 1997.
(17) Includes 86,666 options originally granted in 1996 that were
repriced in March 1997.
(18) These options were repriced in March 1997. See Note (17).
(19) Consists of company automobile reimbursements.
</TABLE>
Employment, Severance and Loan Agreements
The Company and James L. Zucco, Jr. are parties to a letter
agreement dated April 28, 1997 as amended on September 5, 1997.
Pursuant to the letter agreement, Mr. Zucco's annual base salary
is $320,000, with a target bonus of $400,000 if the Company
meets its operating plan and other objectives set by the Board of
Directors. $200,000 of the 1997 bonus was guaranteed under the
terms of the letter agreement. Mr. Zucco also received a
$200,000 one-time signing bonus pursuant to the terms of the
letter agreement. On September 8, 1997, the Company provided Mr.
Zucco with a $700,000 no-interest loan pursuant to the terms of
his letter agreement. The Company will make available at the end
of each of 1998 and 1999 loans for an additional amount up to the
lesser of $200,000 or the difference between $800,000 and Mr.
Zucco's total salary and earned bonus for the preceding year. As
of April 20, 1998, $700,000, representing the entire principal
amount of the loan, was outstanding. Mr. Zucco's note is payable
on September 8, 2002 unless Mr. Zucco terminates his employment
with the Company, in which instance the note is payable on
demand, or if no demand is made, ninety (90) days after Mr.
Zucco's termination date. The Company may terminate Mr. Zucco's
employment for cause, without liability beyond payment of wages
to the date of discharge, or may terminate Mr. Zucco's employment
for any other reason and continue to pay his salary and benefits
for one year; provided, however, that if Mr. Zucco commences
subsequent employment within one year of termination, the Company's
payment obligations terminate.
Pursuant to Mr. Zucco's letter agreement, on April 28, 1997 the
Company granted to Mr. Zucco an option to purchase 700,000 shares
of the Company's Common Stock at a price of $8.3125 per share.
The option is exercisable with respect to 175,000 shares on the
date of the grant and an additional 43,750 shares each quarter
beginning August 1, 1998 and ending May 1, 2001. See "Option
Grants in Last Fiscal Year."
The Company and Frank A. Ingari were parties to an employment
agreement dated September 15, 1993, which was terminated January
9, 1998. Under the terms of the agreement, upon termination of
Mr. Ingari's employment in January 1998 the Company paid Mr.
Ingari his annual salary of $300,000 in a lump sum payment and
continued his benefits for one year.
The Company and Angelo J. Santinelli entered into a severance
agreement dated November 19, 1997. Pursuant to the terms of the
severance agreement, Mr. Santinelli's employment with the Company
terminated on January 31, 1998, and Mr. Santinelli received a
lump sum payment of $100,000. All unexercised portions of Mr.
Santinelli's options terminated on April 1, 1998 pursuant to the
terms of the option agreements.
The Company and Michael J. Duffy are parties to a letter agreement
dated August 27, 1997. Pursuant to the letter agreement, Mr.
Duffy's annual base salary is $225,000, with a target bonus of
$175,000 if the Company meets its operating plan and other objec-
tives set by the Board of Directors. A prorated portion of the
1997 bonus and $87,500 of the 1998 bonus were guranteed under the
terms of the letter agreement. Mr. Duffy received a $50,000 one-
time signing bonus after the first thirty (30) days of employment
pursuant to the terms of his letter agreement. The Company may
terminate Mr. Duffy's employment for cause, without liability beyond
payment of wages to the date of discharge, or may terminate Mr.
Duffy's employment for any other reason with the payment of $350,000
<PAGE> 9
in severance pay. Pursuant to the letter agreement, on August 29,
1997 the Company granted to Mr. Duffy an option to purchase 275,000
shares of the Company's Common Stock at a price of $14.75 per share.
The option is exercisable with respect to 68,750 shares on the date
of the grant and an additional 17,187.5 shares each quarter beginning
November 29, 1998 and ending August 29, 2001. See "Option Grants in
Last Fiscal Year."
The Company and James F. Finucane are parties to a letter agreement
dated July 9, 1997. Pursuant to the letter agreement, Mr. Finucane's
annual base salary is $205,000, with a target bonus of $102,500 if
the Company meets its operating plan and other objectives set by the
Board of Directors. Mr. Finucane received a $40,000 one-time signing
bonus after the first sixty (60) days of employment pursuant to the
terms of his letter agreement. The Company may terminate Mr. Finucane's
employment for cause, without liability beyond payment of wages to the
date of discharge, or may terminate Mr. Finucane's employment for any
other reason and continue to pay his salary and benefits for one year;
provided, however, that if Mr. Finucane commences subsequent employment
within one year of termination, the Company's payment obligations terminate.
Pursuant to the letter agreement, on July 22, 1997 the Company granted
to Mr. Finucane an option to purchase 275,000 shares of the Company's
Common Stock at a price of $10.563 per share. The option is exercisable
with respect to 68,750 shares on the date of the grant and an additional
17,187.5 shares each quarter beginning October 22, 1998 and ending July
22, 2001. See "Option Grants in Last Fiscal Year."
The Company and Steven J. Benson entered into a letter agreement dated
March 12, 1997, which set Mr. Benson's 1997 annual base salary at
$250,000 and entitled Mr. Benson to continued salary and benefits for
six (6) months after the termination of his employment with the Company.
Mr. Benson resigned from his position with the Company on June 4, 1997.
All unexercised portions of Mr. Benson's options terminated on February
2, 1998 pursuant to the terms of the option agreements.
The Company and Mr. Boespflug entered into a severance agreement dated
October 24, 1997. Pursuant to the terms of the severance agreement, Mr.
Boespflug's employment as an executive officer of the Company terminated
on July 23, 1997, and Mr. Boesplfug was entitled to continued salary and
benefits until April 10, 1998 and certain relocation expense reimbursements.
All unexercised portions of Mr. Boespflug's options will terminate on June 9,
1998 pursuant to the terms of the option agreements.
<PAGE> 10
Option Grants in Last Fiscal Year
The following table sets forth grants of stock options during the year
ended January 3, 1998 to the Named Executive Officers. The Company
has never granted stock appreciation rights.
<TABLE>
Option Grants in Last Fiscal Year
Individual Grants
-------------------------------------------------------
<CAPTION>
Potential
Realizable Value
at Assumed
Number of Percent of Annual Rates of
Securities Total Options Exercise or Stock Price
Underlying Granted to Base Price Appreciation for
Name Options Employees in Per Expiration Option Term($)(3)
Granted(#) Fiscal Year(%)(1) Share($)(2) Date 5% 10%
- ---- ---------- ----------------- ----------- ---------- --- ---
<S> <C> <C> <C> <C> <C> <C>
James L. Zucco, Jr. 700,000 (4) 10.01% $8.3125 4/28/2007 $3,659,381 $9,273,589
Frank A. Ingari 250,000 (5) 3.57% $10.563 7/22/2007(6) $1,660,753 $4,208,675
Angelo J. Santinelli 30,000 (7) 0.45% $15.125 6/28/2005(8) $165,141 $457,436
30,000 (9) 0.45% $15.125 1/23/2006(8) $182,675 $508,546
40,000 (10) 0.60% $12.875 5/30/2007(8) $323,881 $820,777
35,000 (11) 0.52% $8.3125 4/28/2007(8) $182,969 $463,679
Michael J. Duffy 275,000 (12) 3.93% $14.75 8/29/2007 $2,550,954 $6,464,618
James F. Finucane 275,000 (13) 3.93% $10.563 7/22/2007 $1,826,829 $4,629,543
Steven J. Benson 0 --- --- --- --- ---
Jean-Pierre Boespflug 66,666 (14) 0.95% $15.125 1/11/2006 (15) $403,764 $1,123,400
20,000 (16) 0.29% $15.125 1/23/2006 (15) $121,784 $339,030
__________________________
<FN>
(1) The number of options granted in 1997 includes 2,194,276 shares
that were repriced in March 1997.
(2) Options were granted by the Compensation Committee pursuant to
the 1988 Plan or the 1997 Plan at "fair market value" determined
on the date of the grant, based upon the last reported sale price
of the Common Stock on the Nasdaq National Market. Repriced
options were granted at ten percent (10%) above fair market value.
(3) Amounts reported in these columns represent amounts that may be
realized upon exercise of the options immediately prior to the
expiration of their term assuming the specified compound rates of
appreciation (5% and 10%) on the market value of the Company's
Common Stock on the date of option grant over the term of the
options. These numbers are calculated based on rules promulgated
by the Securities and Exchange Commission and do not reflect the
Company's estimate of future stock price growth. Actual gains,
if any, on stock option exercise and Common Stock holdings are
dependent on the timing of such exercise and the future performance
of the Company's Common Stock. There can be no assurance that the
rates of appreciation assumed in this table can be achieved or that
the amounts reflected will be received by the individuals.
(4) 175,000 of the shares became exercisable April 28, 1997, and 43,750
of the shares become exercisable each quarter beginning August 1,
1998 and ending May 1, 2001. This option is subject to certain
accelerated vesting provisions upon a "change in control" (as
defined in the option agreement). In addition, the last one-fourth
of this option will vest if the Company's stock price has maintained
a 90-day trading average day-ending price of $35.00 for a period of
ninety (90) days.
(5) 62,500 of the shares became exercisable July 22, 1998, and 15,625 of
the shares become exercisable each quarter beginning October 22,
1998 and ending July 22, 2001.
(6) This option terminated on March 10, 1998 pursuant to the terms of
the option agreement.
(7) 10,000 of the shares became exercisable on June 28, 1997; 10,000
shares on June 28, 1998; and 10,000 shares on June 28, 1999. This
is a repriced option that replaced an option originally granted
in 1995.
(8) This option terminated on April 1, 1998 pursuant to the terms of
the option agreement.
(9) 7,500 of the shares became exercisable January 23, 1997, and 1,875
of the shares become exercisable each quarter beginning April 23,
1997 and ending January 23, 2000. This is a repriced option that
replaced an option originally granted in 1996.
(10) 10,000 of the shares became exercisable May 30, 1998, and 2,500 of
the shares become exercisable each quarter beginning August 30,
1998 and ending May 30, 2001.
(11) 8,750 of the shares became exercisable April 28, 1998, and 2,187.5
of the shares become exercisable each quarter beginning July 28,
1998 and ending April 28, 2001.
(12) 68,750 of the shares became exercisable August 29, 1997, and 17,287.5
of the shares become exercisable each quarter beginning November 29,
1998 and ending August 29, 2001. This option is subject to certain
accelerated vesting provisions upon a "change in control" (as defined
in the option agreement).
(13) 68,750 of the shares became exercisable July 22, 1997, and 17,187.5
of the shares become exercisable each quarter beginning October 22,
<PAGE> 11
1998 and ending July 22, 2001. This option is subject to certain
accelerated vesting provisions upon a "change in control" (as defined
in the option agreement).
(14) 66,666 of the shares became exercisable January 11, 1996. This is
a repriced option that replaced an option originally granted in 1996.
(15) This option will terminate on June 9, 1998 pursuant to the terms of
the option agreement.
(16) 5,000 of the shares became exercisable January 23, 1997, and 1,250 of
the shares become exercisable each quarter beginning April 23, 1997
and ending January 23, 2000. This is a repriced option that replaced
an option originally granted in 1996.
</TABLE>
Option Exercises and Fiscal Year-End Values
The following table sets forth certain information with respect to the
Named Executive Officers, including (i) the number of shares of Common
Stock purchased upon exercise of options in fiscal year 1997; (ii) the
net value realized upon such exercise; (iii) the number of unexercised
options outstanding at January 3, 1998; and (iv) the value of such
unexercised options at January 3, 1998.
<TABLE>
Aggregated Option Exercises In Last Fiscal Year
And Fiscal Year-End Option Values
<CAPTION>
Number of Securities Value of
Underlying Unexercised In-the-
Unexercised Options Money Options at
at Fiscal Year End Fiscal Year End
Shares Value (#) ($) (2)
Acquired on Realized Exercisable/ Exercisable/
Name Exercise(#) ($) (1) Unexercisable Unexercisable
- ---- ----------- -------- -------------------- -------------------
<S> <C> <C> <C> <C>
James L. Zucco, Jr. 0 --- $175,000/525,000 $114,886/$344,661
Frank A. Ingari 35,000 $347,340 623,370/362,500(3) $4,404,314/50
Angelo J. Santinelli 10,000 $110,000 23,125/121,875(4) $0/$93,916
Michael J. Duffy 0 --- 68,750/206,250 $0/$0
James F. Finucane 0 --- 68,750/206,250 $0/$0
Steven J. Benson 87,866 $887,406 105,750/0 (5) $129,713/$0
Jean-Pierre Boespflug 169,998 $1,285,605 75,416/67,918 (6) $0/$338,251
_________________________
<FN>
(1) Value is based on the difference between the option exercise price
and the fair market value on the date of exercise (as quoted on the
Nasdaq National Market) multiplied by the number of options exercised.
(2) Value is based on the difference between the option exercise price and
the fair market value at January 2, 1998 ($8.969 per share as quoted
on the Nasdaq National Market) multiplied by the number of shares
underlying the option.
(3) The unexercised portion of these options terminated on March 10, 1998
pursuant to the terms of the option agreement.
(4) The unexercised portion of these options terminated on April 1, 1998
pursuant to the terms of the option agreement.
(5) The unexercised portion of these options terminated on February 2,
1998 pursuant to the terms of the option agreement.
(6) The unexercised portion of these options will terminate on June 9,
1998 pursuant to the terms of the option agreement.
</TABLE>
<PAGE> 12
Report of the Compensation Committee on Executive Compensation
This report is submitted by the Compensation Committee, which is
responsible for establishing and administering the Company's executive
compensation policies and plans and administering the Company's stock
option and other employee equity and bonus plans. The Compensation
Committee is currently composed of Messrs. Cole, Egan and Yoffie,
and during fiscal 1997 was composed of Messrs. Cole, Doerr and McCance,
none of whom is an employee of the Company.
General Compensation Policy
The Company's compensation policy for executive officers for fiscal
1997 was reviewed and approved by the Compensation Committee. The
Company's compensation policy for executive officers is designed to
achieve the following objectives:
- To enhance profitability of the Company and to increase
stockholder value.
- To reward executives consistent with the Company's quarterly
and long-term performance goals.
- To recognize individual initiative and achievement.
- To provide competitive compensation that will attract and
retain qualified executives.
Procedures for Establishing Compensation
The Company performs periodic reviews of executive compensation
to confirm the competitiveness of the overall executive compensation
package as compared with industry peers who compete with the Company
for prospective employees who possess the technical knowledge and
skills required to develop, manufacture and market high technology
products and associated services.
Executive Officer Compensation Program
The compensation program for executive officers consists of three
elements: (1) base salary, which is set on an annual basis and is
primarily dependent on external market data; (2) quarterly incentive
compensation in the form of cash bonuses, which are based on achieve-
ment of pre-determined financial objectives of the Company and
individual objectives; and (3) long-term incentive compensation, in
the form of stock options, granted when the executive officer joins
the Company and periodically thereafter with the objective of aligning
the executive officers' long-term interests with those of the stock-
holders and encouraging the achievement of superior results over an
extended period.
Base Salary
Base salary is intended to be competitive with base salary offered for
for similar executive positions at other industry peer companies. The
Compensation Committee reviews external market data on executive base
salary, and such data is an important consideration in setting base
salary. Base salary for certain sales executive officers also includes
sales commissions. In addition to external market data, the Company
also reviews each executive's total compensation package, the Company's
financial performance and individual performance when adjusting base
salary annually.
Annual Incentive Compensation
Pursuant to the 1997 Shiva Corporate Bonus Plan (the "Bonus Plan"),
all executive officers (including the Chief Executive Officer) were
eligible to receive cash bonuses based on the Company's attainment of
its pre-tax income objectives. Because the Company did not meet the
Bonus Plan's pre-tax income objectives, no bonuses were paid to Senior
Vice Presidents or the Chief Executive Officer pursuant to the terms
of the Bonus Plan, except when such bonuses were guaranteed pursuant
to the terms of individual employment agreements.
<PAGE> 13
Long-Term Incentive Compensation
Long-term incentive compensation, in the form of stock options, allows
the executive officers to share in any appreciation in the value of
the Company's Common Stock. The Board of Directors believes that stock
option participation aligns executive officers' interests with those of
the stockholders. In addition, the Board of Directors believes that
equity ownership by executive officers helps to balance the short term
focus of quarterly incentive compensation with a longer-term view and is
vital to attract and retain key executive officers.
Because of a decline in market value of the Company's Common Stock,
certain outstanding options were exercisable at prices that exceeded
the market value of the Common Stock. In view of this decline and in
keeping with the Company's philosophy of using equity incentives to
motivate and retain qualified executives, the Board of Directors believed
it important to regain the incentive intended to be provided by options to
purchase shares of the Company's Common Stock. On January 24, 1997, the
Board of Directors of the Company approved a repricing of certain options
granted to employees pursuant to the Company's 1988 Plan. The Company's
Chief Executive Officer and senior vice presidents were not eligible to
participate in the repricing. Only two of the Company's then-current
executive officers, Mr. Peter Howells, Vice President-Network Services
Division, and Mr. Richard Lanchantin, Vice President-Customer Service,
participated in the repricing. Additional details regarding the repricing
of their options can be found under the heading "Repricing of Options" below.
When establishing stock option grant levels, the Compensation Committee
considers existing levels of stock ownership, previous grants of stock
options, vesting schedules of outstanding options and the current stock
price. To date, stock options granted under the Company's Stock Plans
have had an exercise price equal to or greater than the fair market value
of the Company's Common Stock on the date of grant and generally vest over
a four-year period.
It is the standard policy of the Company to grant an initial stock option
grant to all executive officers at the time they commence employment or
are promoted to an executive officer position. In addition, the Compensa-
tion Committee may also make performance-based grants. For additional
information concerning option grants to the Named Executive Officers,
see the table under the heading "Option Grants in Last Fiscal Year."
Chief Executive Officer Compensation
In October 1997, James L. Zucco, Jr. replaced Frank A. Ingari as the
Company's Chief Executive Officer. The Compensation Committee con-
sidered multiple factors in determining the compensation package for
Mr. Zucco, including, but not limited to, Mr. Ingari's current
compensation package and industry peer Chief Executive Officer
packages. The Compensation Committee found that it needed a larger
compensation package than what Mr. Ingari was then receiving to
attract the talent and experience that the Compensation Committee
believed was necessary to lead the Company.
Mr. Zucco's annual base salary was established as $320,000, with a
target bonus of 125% of salary, which is $400,000, if the Company
meets its operating plan and other objectives set by the Board of
Directors. $200,000 of Mr. Zucco's 1997 bonus was guaranteed under
the terms of his letter agreement. Mr. Zucco also received a one-
time $200,000 signing bonus pursuant to the terms of the letter
agreement. On September 8, 1997, the Company provided Mr. Zucco
with a $700,000 no-interest loan pursuant to the terms of his letter
agreement, as amended. The Company will make available at the end of
each 1998 and 1999 loans for an additional amounts up to the lesser
of $200,000, or the difference between $800,000 and Mr. Zucco's total
salary and earned bonus for the preceding year.
Mr. Zucco was granted an initial stock option on April 28, 1997 to
purchase 700,000 shares of Common Stock at a price of $8.3125 per
share under the 1988 Plan. The option is exercisable with respect
to 175,000 shares on the date of the grant and an additional 43,750
shares each quarter beginning August 1, 1998 and ending May 1, 2001.
This option is subject to certain accelerated vesting provisions upon
a "change in control" (as defined in his option agreement). In
addition, the last one fourth of this option will vest if the Company's
stock price has maintained a 90-day trading average day-ending price
of $35.00 for a period of ninety (90) days.
<PAGE> 14
In fiscal 1997, Frank A. Ingari received a base salary of $300,000.
Mr. Ingari's salary, which was reviewed each year by the Compensation
Committee, was adjusted by the Compensation Committee to $300,000
effective January 1, 1995, based on the Company's performance in
1994. Mr. Ingari did not receive any other material cash compensation
for fiscal 1997. Mr. Ingari resigned as the Chief Executive Officer
on October 27, 1997 and as an Executive Officer on January 9, 1998.
Under the terms of his employment agreement, the Company paid Mr.
Ingari his annual salary of $300,000 in a lump sum payment and continued
his benefits for one year. Mr. Ingari was also granted a stock option
in July 1997 to purchase 250,000 shares of Common Stock under the 1988
Plan. This entire stock option and all of Mr. Ingari's previous
unexercised portions of his other stock options terminated on March 10,
1998 pursuant to the terms of the option agreement.
Mr. Ingari's 1997 compensation level was based on the Compensation
Committee's subjective assessment of the Company's 1996 financial
performance, external market data regarding executive compensation
levels at other local companies, and the Company's 1996 accomplishments.
Certain Tax Considerations
The Company does not believe Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code"), which disallows a tax deduction
for compensation to any of the executive officers appearing in the
Summary Compensation Table in excess of $1 million, will generally
have an effect on the Company. The Compensation Committee has con-
sidered these requirements and the related proposed regulations. It
is the Compensation Committee's present intention that, so long as it
is consistent with its overall compensation objectives, substantially
all executive compensation will be deductible for Federal income tax
purposes. The Compensation Committee believes that the 1988 Plan and
the 1997 Stock Incentive Plan have satisfied the requirements of an
exception to the Section 162(m) limitation.
The Compensation Committee
--------------------------
David C. Cole
Richard J. Egan
David B. Yoffie
<PAGE> 15
Repricing of Options
The following table sets forth information with respect to the repricing
of options during fiscal 1997: (i) the name and position of the executive
officer, (ii) the date of the repricing, (iii) the number of securities
underlying the replacement or amended options, (iv) the per-share market
price of the underlying security at the time of the repricing, (v) the
original exercise price or base price of the canceled or amended option,
(vi) the per share exercise price or base price of the replacement option
and (vii) the amount of time remaining before the replaced or amended
option would have expired. The Company never repriced options, while
publicly-traded, prior to fiscal 1997. The Company's Chief Executive
Officer and senior vice presidents were not eligible to participate in
the repricing. In accordance with the rules of the Securities and Exchange
Commission, the following table includes information only with respect to
optionees who were executive officers of the Company at the time of the
repricing.
<TABLE>
Ten-Year Option Repricings
<CAPTION>
Number of Market Price Exercise Length of
Securities of Stock at Price At Original
Underlying Time of Time of New Option Term
Options Repricing Repricing Exercise Remaining at
Name Date Repriced ($) ($) Price ($) Date of Repricing
- ---- ---- ---------- ------------ --------- --------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Peter Howells (1) 3/7/97 70,000 $13.75 $31.250 $15.125 9/20/2005
Former Vice President 3/7/97 20,000 $13.75 $33.375 $15.125 1/23/2006
Network Services
Richard Lanchantin 3/7/97 80,000 $13.75 $41.625 $15.125 3/5/2006
- ------------------------------
<FN>
(1) Mr. Howells was no longer deemed an executive officer of the Company
effective May 1997.
(2) Mr. Lanchantin resigned from the Company in March 1997.
</TABLE>
Compensation Committee Report on Repricing of Options
On January 24, 1997, the Compensation Committee of the Company approved
a repricing of certain options granted to employees purusant to the
Company's 1988 Plan. Because of a decline in market value of the
Company's Common Stock, certain outstanding options were exercisable
at prices that exceeded the market value of the Common Stock. In
view of this decline and in keeping with the Company's philosophy of
using equity incentives to motivate and retain qualified employees,
the Compensation Committee believed it important to regain the
incentive intended to be provided by options to purchase shares of
the Company's Common Stock. The Compensation Committee believed the
repricing was necessary as a result of the intense competition in the
Company's industry for skilled engineers, sales people, manager and other
employees. Further, equity-based compensation is of particular importance
among technology companies, and the failure of the Company to provide
competitive equity-based compensation could require the Company to pay
significantly higher cash salaries and bonuses in order to attract and
retain the best personnel. Because increased cash compensation would
reduce earnings and would likely result in an immediate drop in the
value of the stockholders' investments, the Compensation Committee
believed that repricing outstanding options and regaining the incentive
intended to be provided by such options would be in the best interests
of the Company and its stockholders.
The exercise price of the repriced options was ten percent (10%) above
the then-current fair market value of the Common Stock, thus requiring
the stock price to increase in order for the optionees to realize any
value. In addition, in exchange for the repricing, optionees were
prohibited from exercising the repriced options for six months. In
the event the optionee's employment terminated with the Company during
such six-month period, the repriced options, including the vested
portions of such options, immediately terminated in their entirety.
<PAGE> 16
The Company's Chief Executive Officer and senior vice presidents were
not eligible to participate in the repricing. Since two of the
individuals the Company considered executive officers at the time
of the repricing were below the level of senior vice presidents--
Mr. Peter Howells, Vice President - Network Services Division, and Mr.
Richard Lanchantin, Vice President - Customer Service -- those officers
were permitted to participate in the repricing. Certain details
regarding the repricing of their options can be found in the above
table, "Ten-Year Option Repricings." In addition, Mr. Santinelli
and Mr. Boespflug, who are Named Executive Officers but were not
executive officers of the Company at the time of the repricing, had
options repriced. Mr. Santinelli had 30,000 options with an exercise
price of $41.00 per share and 30,000 options with an exercise price of
$66.75 per share repriced to $15.125 per share. Mr. Boespflug had
66,666 options with an exercise price of $31.625 per share and 20,000
options with an exercise price of $33.375 per share repriced to $15.125
per share.
Pursuant to the terms of the repricing, 545 option holders, holding
options to purchase an aggregate of 2,194,276 shares of the Company's
Common Stock, that had exercise prices ranging from $16.75 to $80.00
(the "Existing Options"), were issued 2,194,276 new options having an
exercise price of $15.1250 per share (the "New Options"). This
exercise price was based on the closing price of the Company's
Common Stock on March 7, 1997, plus ten percent (10%). In addition,
all New Options were subject to a six (6) month holding period from
the date of the repricing, and in the event the optionee's employment
terminated with the Company during such six-month period, the New
Options, including the vested portions of such options, immediately
terminated in their entirety. Except as otherwise noted, vesting
schedules of the New Options remained the same as those of the Exisiting
Options.
The Compensation Committee
--------------------------
David C. Cole
Richard J. Egan
David B. Yoffie
<PAGE> 17
Stock Performance Graph
The following graph compares the percentage change in the cumulative
stockholder return on the Company's Common Stock against the
cumulative return for the Nasdaq Stock Market Index ("Nasdaq Index")
and the Electronic and Other Electrical Equipment (SIC Code 36)
Index ("SIC Code 36 Index"), as provided by the Center for Research
in Security Prices (CRSP) by the University of Chicago, Graduate School
of Business, for the period commencing November 18, 1994 and ending
January 2, 1998.
<TABLE>
Stock Performance Graph
<CAPTION>
11/18/94 12/30/94 12/29/95 12/27/96 1/2/98
-------- -------- -------- -------- ------
<S> <C> <C> <C> <C> <C>
$100 $127 $231 $222 $57
Nasdaq Index $100 $98 $139 $171 $212
SIC Code 36 Index $100 $101 $158 $239 $254
</TABLE>
This graph assumes the investment of $100 in the Company's Stock, the
Nasdaq Index and the SIC Code 36 Index on November 18, 1994 (the date
on which the Company's Common Stock was first registered under Section
12 of the Securities Exchange Act of 1934) and assumes any dividends
reinvested. The graph's measurement points are annual and are measured
as of the last business day of the fiscal year.
<PAGE> 18
Independent Accountants
The Company has retained Price Waterhouse LLP as its independent
accountants. A representative of Price Waterhouse LLP will be at
the Annual Meeting and will be given an opportunity to make a statement
if so desired and will be available to respond to appropriate questions
from the stockholders.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers, directors and persons who own
more than ten percent of a registered class of the Company's equity
securities, to file reports of ownership on Forms 3, 4 and 5 with
the Securities and Exchange Commission and the Company. Based solely
on the Company's review of copies of such forms or written representa-
tions received from persons required to file such reports, the Company
believes that all its officers, directors and greater than ten percent
stockholders complied with all filing requirements applicable to them
with respect to transactions during 1997.
Expenses and Solicitation
The cost of soliciting proxies on behalf of the Company will be borne
by the Company. The Company will pay banks, brokers and other entities
that exercise fiduciary powers which hold shares of Common Stock of
record in nominee name or otherwise or as a participant in a registered
clearing agency or which hold shares of Common Stock on behalf of
beneficial owners and deposit such shares for safekeeping with another
entity that exercises fiduciary powers their reasonable expenses for
completing the mailing to security holders of proxy soliciting material
supplied by the Company. Solicitation by officers, directors and regular
employees of the Company, without additional compensation, may also be
made of some stockholders in person or by mail, telephone or telegraph
following the original solicitation. The Company has retained Morrow
& Co., Inc., an independent proxy solicitation firm, to assist in
soliciting proxies. The Company paid the firm an annual fee of $8,000,
and will reimburse the firm for its disbursements.
Deadline for Submission of Stockholder Proposals
Proposals of stockholders intended to be presented at the 1999 Annual
Meeting of Stockholders must be received by the Company at its principal
office in Bedford, Massachusetts, not later than December 4, 1998 for
inclusion in the proxy statement for that meeting. Any such proposal
must comply with the rules and regulations of the Securities and Exchange
Commission and the Company's by-laws.
-------------------------
THE BOARD OF DIRECTORS ENCOURAGES STOCKHOLDERS TO ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE,
SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE.
PROMPT RESPONSE WILL GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING
AND YOUR COOPERATION WILL BE APPRECIATED. STOCKHOLDERS WHO ATTEND THE
MEETING MAY VOTE THEIR STOCK PERSONALLY EVEN THOUGH THEY HAVE SENT IN
THEIR PROXIES.
<PAGE> 19
SHIVA CORPORATION
Proxy for Annual Meeting of Stockholders
June 18, 1998
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert P. Cirrone and M. Elizabeth
Potthoff, and each of them, proxies, with full power of substitution,
to vote all shares of stock of Shiva Corporation (the "Company")
which the undersigned is entitled to vote at the Annual Meeting of
Stockholders of the Company to be held on Thursday, June 18, 1998,
at 10:00 a.m., local time, at the Fleet Headquarters, Fleet Center,
75 State Street, 8th Floor, Boston, Massachusetts 02109, and at
any adjournments thereof, upon matters set forth in the Notice of
of Annual Meeting of Stockholders and Proxy Statement dated April
30, 1998, a copy of which has been received by the undersigned.
Execution of a proxy will not in any way affect a stockholder's
right to attend the meeting and vote in person. The proxies are
further authorized to vote, in their discretion, upon such other
business as may properly come before the meeting or any adjournments
thereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR,
IF NO DIRECTION IS GIVEN, WILL BE VOTED "FOR" THE ELECTION OF
DIRECTORS AND IN THE MANNER DIRECTED BY THE BOARD OF DIRECTORS
WITH RESPECT TO ANY OTHER MATTER PROPERLY BROUGHT BEGFORE THE
ANNUAL MEETING.
SEE REVERSE SIDE
The Board of Directors Recommends a vote FOR Proposals 1 and 2.
Please mark your
votes as indicated [ X ]
in this example.
[ ] To vote for all items AS RECOMMENDED BY THE BOARD OF
DIRECTORS, mark this box, sign, date and return this
Proxy. (No additional vote necessary.)
1. To elect two members to the Board of Directors, FOR WITHHELD
each to serve for a three-year term as a Class [ ] [ ]
I Director:
Nominees: Paul C. O'Brien and James L. Zucco, Jr.
For all nominees except as noted below
- -----------------------------
2. In their discretion, the proxies FOR AGAINST ABSTAIN
are authorized to vote upon such [ ] [ ] [ ]
other business as may properly come
before the Annual Meeting or any
adjournment or postponement thereof
including without limitation a motion
to adjourn the Annual Meeting.
- ------------------------------ MARK HERE FOR ADDRESS [ ]
- ------------------------------ CHANGE AND NOTE AT LEFT
- ------------------------------
MARK HERE IF YOU PLAN TO [ ]
ATTEND THE MEETING
Date
-------------------------, 1998
-----------------------------------
SIGNATURE
-----------------------------------
SIGNATURE IF HELD JOINTLY
NOTE: If signing as attorney, executor, trustee or guardian,
please give your full title as such. If stock is held
jointly, each owner should sign.
Two new ways to vote
Vote by Telephone Vote by Internet
It's fast, convenient, and It's fast, convenient, and
your vote is immediately your vote is immediately
confirmed and posted. confirmed and posted.
Using a touch-tone phone
call the toll-free number WWW.PROXYVOTE.COM
shown on the voting
instruction form.
Just follow these 4 easy steps: Just follow these 4 easy steps:
1. Ready the accompanying Proxy 1. Read the accompanying Proxy
Statement and voting in- Statement and voting in-
struction form. struction form.
2. Call the toll-free number 2. Call the toll-free number
shown on your voting in- shown on your voting in-
struction form. struction form.
3. Enter your 12 digit Control 3. Enter your 12 digit Control
Number located on your Number located on your
voting instruction form. voting instruction form.
4. Follow the simple recorded 4. Follow the simple recorded
instructions. instructions.
Your vote is important! Your vote is important!
Do not return Voting Form if you are voting by telephone
or Internet.
<PAGE>
