-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ib9qwC4+TnSkbBNSI1ddqG29uqG6MoRg4ftdXZb7UBv+uqAE1a3D5ji+WaUNJg2D 0opRjwZ3CAoJ9q/45dib+w== 0000950135-96-003585.txt : 19960814 0000950135-96-003585.hdr.sgml : 19960814 ACCESSION NUMBER: 0000950135-96-003585 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19960629 FILED AS OF DATE: 19960813 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHIVA CORP CENTRAL INDEX KEY: 0000879136 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER COMMUNICATIONS EQUIPMENT [3576] IRS NUMBER: 042889151 STATE OF INCORPORATION: MA FISCAL YEAR END: 0101 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-24918 FILM NUMBER: 96611293 BUSINESS ADDRESS: STREET 1: 28 CROSBY DR CITY: BEDFORD STATE: MA ZIP: 01730 BUSINESS PHONE: 6172708300 MAIL ADDRESS: STREET 1: 28 CROSBY DR CITY: BEDFORD STATE: MA ZIP: 01730 10-Q 1 SHIVA CORPORATION 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 2 SHIVA CORPORATION INDEX -----
Part I Financial Information Page ---- 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
2 3 SHIVA CORPORATION CONSOLIDATED BALANCE SHEET (IN THOUSANDS, EXCEPT SHARE RELATED DATA)
JUNE 29, DECEMBER 30, 1996 1995 -------- ------------ (UNAUDITED) 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 ======== ========
The accompanying notes are an integral part of the consolidated financial statements. 3 4 SHIVA CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED ------------------------ ----------------------- JUNE 29, JULY 1, JUNE 29, JULY 1, 1996 1995 1996 1995 -------- ------- -------- ------- 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 ======= ======= ======= =======
The accompanying notes are an integral part of the consolidated financial statements. 4 5 SHIVA CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (IN THOUSANDS)
SIX MONTHS ENDED ------------------------- JUNE 29, JULY 1, 1996 1995 -------- -------- (UNAUDITED) 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 ======== ========
The accompanying notes are an integral part of the consolidated financial statements 5 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):
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) 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 ======== ======= ======= ======= =======
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 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: Inventories consist of the following:
June 29, December 30, (in thousands) 1996 1995 -------- ------------ Raw materials $ 5,871 $3,137 Work-in-process 1,043 1,037 Finished goods 4,938 3,672 ------- ------ $11,852 $7,846 ======= ======
7 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 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 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 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 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: (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:
Name Class Will Expire For Withheld - ------------------------------------------------------------------------------------------------- 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 -- --
(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 (a) Exhibits
Exhibit No. Description of Exhibit ----------- ---------------------- 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. - -------------------- + Confidential treatment requested.
12 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 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 15 EXHIBIT INDEX The following exhibits are filed herewith.
Sequentially Numbered Exhibit No. Description Page - ----------- ----------- ------------ 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 - -------------------- + Confidential treatment requested.
EX-10.1 2 COMMERCIAL LEASE 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 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 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 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 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 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 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 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 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 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 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 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 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 14 EXHIBIT C RENT SCHEDULE
Lease Year Annual Rent Monthly Rent - ---------- ----------- ------------ (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
*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 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 EX-10.2 3 AMENDMENT NO. 2 TO LICENSE & DEVELOPMENT AGMT 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 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: 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 - Support@Shiva.Com (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. 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. EX-10.3 4 AMENDMENT NO. 1 TO DEVELOP & LICENSE AGREEMENT 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 EX-10.4 5 LETTER AGREEMENT 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 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.
Amount Event/Deliverable Status of amount paid ------ ----------------- --------------------- ***** 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 *****
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 EX-10.5 6 AMENDMENT NO. 1 TO SHIVA/NORTEL AGREEMENT 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: 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 *************************************************************************** *************************************************************************** *************************************************************************** *************************************************************************** ******************. 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 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 ************* ************************************************************************** ******************************************************************************** *********************. 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: *************************: - - *************: ***************************** - - *******: ************************************************************************* - - ********: ****************************************************************************** - - ********: *************************************************** - - *********: ***************************** - - *************: ******************************************************************************** - - *************************: ***************************************************** - - *************: ******************************************************************************. 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 EX-11 7 COMPUTATION OF NET INCOME PER SHARE 1 EXHIBIT 11.0 SHIVA CORPORATION COMPUTATION OF NET INCOME PER SHARE(1)
Three months ended Six months ended --------------------------- ---------------------------- June 29, July 1, June 29, July 1, 1996 1995(2) 1996 1995(2) ----------- ----------- ----------- ----------- 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 (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.
EX-27 8 FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS 6-MOS DEC-28-1996 DEC-31-1995 JUN-29-1996 1 95233 4992 42201 5941 11852 152075 31667 13296 176238 34193 235 0 0 285 140897 176238 94794 94794 38782 38782 44149 338 298 13896 4582 9314 0 0 0 9314 .30 .30
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