As filed with the Securities and Exchange Commission on July 29, 1999
File No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
CABLETRON SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-2797263
- -------------------------------- -------------------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
35 Industrial Way
Rochester, New Hampshire 03867
(Address of Principal Executive Offices, including Zip Code)
CABLETRON SYSTEMS, INC.
1998 EQUITY INCENTIVE PLAN
--------------------------
(Full title of the Plan)
David J. Kirkpatrick
Chief Financial Officer
Cabletron Systems, Inc.
35 Industrial Way
Rochester, New Hampshire 03867
(603) 332-9400
------------------------------
(Name, Address and Telephone Number, including Area Code, of Agent for Service)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CALCULATION OF REGISTRATION FEE
- ------------------------- ------------------- -------------------------- ------------------------- =================
Proposed Maximum Proposed Maximum
Title of Securities To Offering Price Aggregate Offering Amount of
Be Registered Amount To Be Per Share (1) Price (1) Registration Fee
Registered
- ------------------------- ------------------- -------------------------- ------------------------- =================
Common Stock,
$0.01 par value 14,500,000 $12.6875 $183,968,750 $51,144
- ------------------------- ------------------- -------------------------- ------------------------- =================
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(h) on the basis of the high and low sale price of
Cabletron Systems, Inc. Common Stock, par value $0.01, reported on the New
York Stock Exchange Composite Transaction Tape on July 26, 1999.
<PAGE>
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
Cabletron Systems, Inc. (the "Registrant" or the "Company") hereby
incorporates the following documents herein by reference:
(a) Annual Report on Form 10-K for the fiscal year ended February 28,
1999 filed with the Commission on June 2, 1999.
(b) Current Report on Form 8-K filed with Commission on June 16,
1999 and Quarterly Report on Form 10-Q for the fiscal quarter
ended May 31, 1999 and filed with the Commission on July 16,1999.
(c) Description of the Registrant's Common Stock contained in its
registration statement on Form 8-A filed with the Commission
under Section 12 of the Exchange Act on April 19, 1989, as
amended by the description contained in the Registrant's Form 8
filed with the Commission on May 22, 1989.
All documents subsequently filed by the Registrant or the Plan pursuant to
Section 13(a), Section 13(c), Section 14 and Section 15(d) of the Exchange Act
prior to the filing of a post-effective amendment to this Registration Statement
that indicates that all securities offered have been sold or which deregisters
all securities then remaining unsold, shall be deemed to be incorporated herein
by reference from the date of filing of such documents.
Item 4. Description of Securities.
Not applicable.
Item 5. Interests of Named Experts and Counsel.
Not applicable.
Item 6. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law, as amended, provides
that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal or investigative (other than an
action by or in the right of the corporation) by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Section 145 further
provides that a corporation similarly may indemnify any such person serving in
any such capacity who was or is a party or is threatened to be made a party to
any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor, against expenses actually and
reasonably incurred in connection with the defense or settlement of such action
or suit if he acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interest of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Delaware Court of Chancery or such other
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
Section 102(b)(7) of the Delaware General Corporation Law, as amended,
permits a corporation to include in its certificate of incorporation a provision
eliminating or limiting the personal liability of a director to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, provided that such provision shall not eliminate or limit the
liability of a director (i) for any breach of the director's duty of loyalty to
the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware General Corporation Law (relating to
unlawful payment of dividends and unlawful stock purchase and redemption), or
(iv) for any transaction from which the director derived an improper personal
benefit.
<PAGE>
The Registrant's Restated Certificate of Incorporation, as amended,
provides that the Company's directors shall not be liable to the Registrant or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent that exculpation from liabilities is not
permitted under the Delaware General Corporation Law as in effect at the time
such liability is determined. The Restated Certificate of Incorporation, as
amended, further provides that the Registrant shall indemnify its directors and
officers to the full extent permitted by the law of the State of Delaware.
Item 7. Exemption From Registration Claimed.
Not applicable.
Item 8. Exhibits.
Exhibit
-------
4.1 Cabletron Systems, Inc. 1998 Equity Incentive Plan.
5.1 Opinion of Ropes & Gray.
23.1 Consent of KPMG LLP.
23.3 Consent of Ropes & Gray (See Exhibit 5.1).
24.1 Power of Attorney (See Signature Page).
Item 9. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement,
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, (ii) to reflect in the prospectus any
facts or events arising after the effective date of the
registration statement (or the most recent post-effective
amendment thereof), which, individually or in the aggregate,
represent a fundamental change in the information set forth in
the registration statement, and (iii) to include any material
information with respect to the plan of distribution not
previously disclosed in the registration statement or any
material change to such information in the registration
statement; provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) shall not apply if the information required to be
included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration
statement.
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof;
(3) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this registration
statement on Form S-8 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Rochester, The State of New Hampshire, on this
29th day of July, 1999.
CABLETRON SYSTEMS, INC.
By: /s/ Piyush Patel
-------------------
Name: Piyush Patel
Title: President, Chief Executive Officer,
and Chairman
POWER OF ATTORNEY
Pursuant to the requirement of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each person whose signature appears below
hereby constitutes and appoints each of Piyush Patel and David J. Kirkpatrick,
each with full power of substitution, his true and lawful attorney-in-fact and
agent with full power to him to sign for him and in his name in the capacities
indicated below any and all amendments (including post-effective amendments) to
this Registration Statement and to file the same, with exhibits thereto, and
other documents in connection therewith, and he hereby ratifies and confirms his
signature as it may be signed by said attorney to any and all such amendments.
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Capacity Date
- -------------------------------- ---------------------------------------------- -------------
/s/ Piyush Patel July 29, 1999
- -------------------------
Piyush Patel President, Chief Executive Officer and
Chairman
/S/ David J. Kirkpatrick July 29, 1999
- -------------------------
David J. Kirkpatrick Corporate Executive Vice President of Finance
and Chief Financial Officer (Principal Financial
Officer and Principal Accounting Officer)
/S/ Craig R. Benson July 29, 1999
- -------------------------
Craig R. Benson Director
/S/ Paul R. Duncan July 29, 1999
- -------------------------
Paul R. Duncan Director
/S/ Donald F. McGuinness July 29, 1999
- -------------------------
Donald F. McGuinness Director
/S/ Michael D. Myerow July 29, 1999
- -------------------------
Michael D. Myerow Secretary and Director
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit
Number Title of Exhibit
------- --------------------------------------
4.1 Cabletron Systems, Inc. 1998 Equity
Incentive Plan.
5.1 Opinion of Ropes & Gray.
23.1 Consent of KPMG LLP.
23.3 Consent of Ropes & Gray.
24.1 Power of Attorney.
<PAGE>
EXHIBIT 4.1
CABLETRON SYSTEMS, INC.
1998 EQUITY INCENTIVE PLAN
1. PURPOSE
The purpose of this Equity Incentive Plan (the "Plan") is to advance the
interests of Cabletron Systems, Inc. (the "Company") and its subsidiaries by
enhancing their ability to attract and retain employees and other individuals or
entities who are in a position to make significant contributions to the success
of the Company and its subsidiaries through awards based on the Company's common
stock, $.01 par value ("Stock"), and cash incentives.
The Plan is intended to accomplish these goals by enabling the Company to
grant awards ("Awards") in the form of Options, Stock Appreciation Rights,
Restricted Stock or Unrestricted Stock Awards, Deferred Stock Awards,
Performance Awards, Other Stock-Based Awards, or loans or supplemental grants,
or combinations thereof, all as more fully described below.
2. ADMINISTRATION
Unless otherwise determined by the Board of Directors of the Company (the
"Board"), the Plan will be administered by a committee of the Board designated
for such purpose (the "Committee"). The Committee shall consist of at least two
directors. A majority of the members of the Committee shall constitute a quorum,
and all determinations of the Committee shall be made by a majority of its
members. Any determination of the Committee under the Plan may be made without
notice or meeting of the Committee by a writing signed by a majority of the
Committee members. During such times as the Stock is registered under the
Securities Exchange Act of 1934 (the "1934 Act"), at least two members of the
Committee shall be "non-employee directors" within the meaning of Rule 16b-3
promulgated under the 1934 Act and "outside directors" within the meaning of
Section 162(m)(4)(C)(i) of the Internal Revenue Code of 1986, as amended (the
"Code") (the "Outside Directors"). If any member of the Committee is not an
Outside Director, a sub-committee (the "Sub-Committee") consisting solely of the
Outside Directors shall administer the Plan in connection with Awards to
"officers" of the Company within the meaning of Section 16(b) of the 1934 Act or
with respect to any Award intended to be exempt under Section 162(m)(3) of the
Code. Any references to the Committee in this Plan shall also mean the
Sub-Committee.
The Committee will have authority, not inconsistent with the express
provisions of the Plan and in addition to other authority granted under the
Plan, to (a) grant Awards at such time or times as it may choose; (b) determine
the size of each Award, including the number of shares of Stock subject to the
Award; (c) determine the type or types of each Award; (d) determine the terms
and conditions of each Award; (e) waive compliance by a holder of an Award with
any obligations to be performed by such holder under an Award and waive any
terms or conditions of an Award; (f) amend or cancel an existing Award in whole
or in part (and if an award is canceled, grant another Award in its place on
such terms and conditions as the Committee shall specify), except that the
Committee may not, without the consent of the holder of an Award, take any
action under this clause with respect to such Award if such action would
<PAGE>
adversely affect the rights of such holder; (g) prescribe the form or forms of
any instruments to be used under the Plan, including any written notices and
elections required of Participants (as defined below), and change such forms
from time to time; (h) adopt, amend and rescind rules and regulations for the
administration of the Plan; and (i) interpret the Plan and decide any questions
and settle all controversies and disputes that may arise in connection with the
Plan. Such determinations and actions of the Committee, and all other
determinations and actions of the Committee made or taken under authority
granted by any provision of the Plan, will be conclusive and will bind all
parties. Nothing in this paragraph shall be construed as limiting the power of
the Committee to make adjustments under Section 7.3 or Section 8.6.
3. EFFECTIVE DATE AND TERM OF PLAN
The Plan will become effective on the date on which it is approved by the
stockholders of the Company. Awards may be made prior to such stockholder
approval if made subject thereto. No Award may be granted under the Plan after
May 14, 2008 (the 10th anniversary of day before Board approval), but Awards
previously granted may extend beyond that date.
4. SHARES SUBJECT TO THE PLAN
(a) Number of Shares. Subject to adjustment as provided in Section 8.6,
the aggregate number of shares of Stock that may be delivered under
the Plan will be 14,500,000. If any Award requiring exercise by the
Participant for delivery of Stock terminates without having been
exercised in full, or if any Award payable in Stock or cash is
satisfied in cash rather than Stock, the number of shares of Stock as
to which such Award was not exercised or for which cash was
substituted will be available for future grants.
(b) Special Limitations Applicable to Certain Awards. Subject to
adjustment as provided in Section 8.6(a) to the extent such adjustment
is consistent with the continued satisfaction with respect to Awards
of the requirements of Section 162(m)(4)(C) of the Code, the maximum
number of shares of Stock for which Options and Stock Appreciation
Rights may be awarded under the Plan to any participant during any
three-calendar-year period is in the case of each such form of Award
2,000,000 shares. For purposes of the preceding sentence, the regrant
of a canceled Option or Stock Appreciation Right, or the repricing of
an Option or Stock Appreciation Right, shall be treated as a separate
Award to the extent required under Section 162(m)(4)(C) of the Code.
For maximum limits relating to Performance Awards, see Section 6.5
below.
(c) Shares to be Delivered. Stock delivered under the Plan may be either
authorized but unissued Stock or previously issued Stock acquired by
the Company and held in treasury. No fractional shares of Stock will
be delivered under the Plan.
<PAGE>
5. ELIGIBILITY AND PARTICIPATION
Each key employee of the Company or any of its subsidiaries (an "Employee")
and each other individual or entity (other than employees of the Company or any
of its subsidiaries, but including without limitation directors of the Company
or a subsidiary of the Company) who, in the opinion of the Committee, is in a
position to make a significant contribution to the success of the Company or its
subsidiaries will be eligible to receive Awards under the Plan (each such
Employee, other individual or entity receiving an Award, "a Participant").
Participants shall also include individuals who have accepted an offer of
employment from the Company and who the Company reasonably believes will be key
employees upon commencing employment with the Company (a "New Hire").
6. TYPES OF AWARDS
6.1 Options
(a) Nature of Options. An option ("Option") is an Award giving the
recipient the right on exercise thereof to purchase Stock.
Both "incentive stock options," as defined in Section 422(b) of
the Code (any Option intended to qualify as an incentive stock
option being hereinafter referred to as an "ISO"), and Options
that are not ISOs, may be granted under the Plan. ISOs shall be
awarded only to Employees. An Option awarded under the Plan shall
be a non-ISO unless it is expressly designated as an ISO at time
of grant.
(b) Exercise Price. The exercise price of an Option will be
determined by the Committee subject to the following:
(1) The exercise price of an ISO or an Option intended to
qualify as performance based compensation under Section
162(m) of the Code shall not be less than 100% of the fair
market value of the Stock subject to the Option, determined
as of the time the Option is granted.
(2) In no case may the exercise price paid for Stock which is
part of an original issue of authorized Stock be less than
the par value per share of the Stock.
(c) Duration of Options. The latest date on which an Option may be
exercised will be the tenth anniversary of the day immediately
preceding the date the Option was granted, or such earlier date
as may have been specified by the Committee at the time the
Option was granted.
<PAGE>
(d) Exercise of Options. An Option will become exercisable at such
time or times, and on such conditions, as the Committee may
specify. The Committee may at any time and from time to time
accelerate the time at which all or any part of the Option may be
exercised. Except as otherwise determined by the Committee, any
period during which a Participant who is an Employee is on an
unpaid leave of absence (or other unpaid absence) from the
Company shall toll the period of time over which an option
becomes exercisable. Any exercise of an Option must be in
writing, signed by the proper person and delivered or mailed to
the Company, accompanied by (1) any documents required by the
Committee and (2) payment in full in accordance with paragraph
(e) below for the number of shares for which the Option is
exercised.
(e) Payment for Stock. Stock purchased on exercise of an Option must
be paid for as follows: (1) in cash or by check (acceptable to
the Company in accordance with guidelines established for this
purpose), bank draft or money order payable to the order of the
Company or (2) if so permitted by the Committee at or after the
grant of the Option, (i) through the delivery of shares of Stock
which have been held for at least six months (unless the
Committee approves a shorter period) and which have a fair market
value equal to the exercise price, (ii) by delivery of a
promissory note of the Participant to the Company containing such
terms as are specified by the Committee, (iii) by delivery of an
unconditional and irrevocable undertaking by a broker to deliver
promptly to the Company sufficient funds to pay the exercise
price, or (iv) by any combination of the foregoing permissible
forms of payment.
(f) Discretionary Payments. If (i) the market price of shares of
Stock subject to an Option (other than an Option which is in
tandem with a Stock Appreciation Right as described in Section
6.2) exceeds the exercise price of the Option at the time of its
exercise, and (ii) the person exercising the Option so requests
in writing, the Committee may in its sole discretion cancel the
Option and cause the Company to pay in cash or in shares of
Common Stock (valued at fair market value) to the person
exercising the Option an amount equal to the difference between
the fair market value of the Stock which would have been
purchased pursuant to the exercise (determined on the date the
Option is canceled) and the aggregate exercise price which would
have been paid.
6.2. Stock Appreciation Rights.
(a) Nature of Stock Appreciation Rights. A Stock Appreciation Right
("Stock Appreciation Right" or "SAR") is an Award entitling the
holder on exercise to receive an amount in cash or Stock or a
combination thereof (such form to be determined by the Committee)
determined in whole or in part by reference to appreciation, from
and after the date of grant, in the fair market value of a share
of Stock. SARs may be based solely on appreciation in the fair
market value of Stock or on a comparison of such appreciation
with some other measure of market growth such as (but not
limited) to appreciation in a recognized market index. The date
as of which such appreciation or other measure is determined
shall be the exercise date unless another date is specified by
the Committee.
<PAGE>
(b) Grant of Stock Appreciation Rights. Stock Appreciation Rights may
be granted in tandem with, or independently of, Options granted
under the Plan.
(1) Rules Applicable to Tandem Awards. When Stock Appreciation
Rights are granted in tandem with Options, (A) the Stock
Appreciation Right will be exercisable only at such time or
times, and to the extent, that the related Option is
exercisable and will be exercisable in accordance with the
procedure required for exercise of the related Option; (B)
the Stock Appreciation Right will terminate and no longer be
exercisable upon the termination or exercise of the related
Option, except that a Stock Appreciation Right granted with
respect to fewer than the full number of shares covered by
an Option will not be reduced until the number of shares as
to which the related Option has been exercised or has
terminated exceeds the number of shares not covered by the
Stock Appreciation Right; (C) the Option will terminate and
no longer be exercisable upon the exercise of the related
Stock Appreciation Right; and (D) the Stock Appreciation
Right will be transferable only with the related Option.
(2) Exercise of Independent Stock Appreciation Rights. A Stock
Appreciation Right not granted in tandem with an Option will
become exercisable at such time or times, and on such
conditions, as the Committee may specify. Except as
otherwise determined by the Committee, any period during
which a Participant who is an Employee is on an unpaid leave
of absence (or other unpaid absence) from the Company shall
toll the period of time over which a Stock Appreciation
Right becomes exercisable. The Committee may at any time
accelerate the time at which all or any part of the Right
may be exercised.
Any exercise of an independent Stock Appreciation Right must be in
writing, signed by the proper person and delivered or mailed to the
Company, accompanied by any other documents required by the Committee.
6.3. Restricted and Unrestricted Stock.
(a) Grant of Restricted Stock. Subject to the terms and provisions of
the Plan, the Committee may grant shares of Stock in such amounts
and upon such terms and conditions as the Committee shall
determine subject to the restrictions described below
("Restricted Stock").
(b) Restricted Stock Agreement. The Committee may require, as a
condition to an Award, that a recipient of a Restricted Stock
Award enter into a Restricted Stock Award Agreement, setting
forth the terms and conditions of the Award. In lieu of a
Restricted Stock Award Agreement, the Committee may provide the
terms and conditions of an Award in a notice to the Participant
of the Award, in the resolution approving the Award, or in such
other manner as it deems appropriate. The stock certificate
representing the Restricted Stock shall be appropriately legended
to reflect the applicable restrictions.
(c) Transferability and Other Restrictions. Except as otherwise
provided in this Section 6.3, the shares of Restricted Stock
granted herein may not be sold, transferred, pledged, assigned,
or otherwise alienated or hypothecated until the end of the
applicable period or periods established by the Committee and the
satisfaction of any other conditions or restrictions established
by the Committee (such period during which a share of Restricted
Stock is subject to such restrictions and conditions is referred
to as the "Restricted Period"). Except as the Committee may
otherwise determine under Section 7.1 or Section 7.2, if a
Participant dies or suffers a Status Change (as defined at
Section 7.2(a)) for any reason during the Restricted Period, the
Company may purchase the shares of Restricted Stock subject to
such restrictions and conditions for the amount of cash paid by
the Participant for such shares; provided, that if no cash was
paid by the Participant such shares of Restricted Stock shall be
automatically forfeited to the Company.
<PAGE>
During the Restricted Period with respect to any shares of
Restricted Stock, the Company shall have the right to retain in
the Company's possession the certificate or certificates
representing such shares.
(d) Removal of Restrictions. Except as otherwise provided in this
Section 6.3, a share of Restricted Stock covered by a Restricted
Stock grant shall become free from restrictions under the Plan
upon completion of the Restricted Period, including the passage
of any applicable period of time and satisfaction of any
conditions to vesting. Except as otherwise determined by the
Committee, any period during which a Participant who is an
Employee is on leave of absence (or other unpaid absence) from
the Company shall, to the extent the Restricted Period relates to
the passage of time, toll such time period. The Committee shall
have the right at any time, in its sole discretion, immediately
to waive all or any part of the restrictions and conditions with
regard to all or any part of the shares held by any Participant.
(e) Voting Rights, Dividends and Other Distributions. During the
Restricted Period, Participants holding shares of Restricted
Stock granted hereunder may exercise full voting rights and shall
receive all regular cash dividends paid with respect to such
shares. Except as the Committee shall otherwise determine, any
other cash dividends and other distributions paid to Participants
with respect to shares of Restricted Stock, including any
dividends and distributions paid in shares, shall be subject to
the same restrictions and conditions as the shares of Restricted
Stock with respect to which they were paid.
(f) Other Awards Settled with Restricted Stock. The Committee may, at
the time any Award described in this Section 6 is granted,
provide that any or all of the Stock delivered pursuant to the
Award will be Restricted Stock.
(g) Unrestricted Stock. Subject to the terms and provisions of the
Plan, the Committee may grant shares of Stock free of
restrictions under the Plan in such amounts and upon such terms
and conditions as the Committee shall determine.
6.4. Deferred Stock.
A Deferred Stock Award ("Deferred Stock Award") is an unfunded and
unsecured promise by the Company to deliver shares of Stock in
the future ("Deferred Stock"). Delivery of the Stock will take
place at such time or times, and on such conditions, as the
Committee may specify. The Committee may at any time accelerate
the time at which delivery of all or any part of the Stock will
take place. At the time any Award described in this Section 6 is
granted, the Committee may provide that any or all of the Stock
delivered pursuant to the Award will be Deferred Stock.
<PAGE>
6.5. Performance Awards.
The Committee may, at the time an Award described in Sections 6.1,
6.2, 6.3, 6.4 or 6.7 is granted, impose the additional condition that
performance goals must be met prior to the Participant's realization of any
vesting, payment or benefit under the Award. In addition, the Committee may
make awards entitling the Participant to receive an amount in cash upon
attainment of specified performance goals (a "Cash Incentive"). Any Award
or Cash Incentive made subject to performance goals as described in the
preceding two sentences shall be a "Performance Award" subject to the
provisions of this Section 6.5 in addition to any other applicable
provisions of the Plan or the Award. Performance Awards may consist of Cash
Incentives or Awards that are intended to qualify for the performance-based
compensation exception under Section 162(m) of the Code, other than Options
or Stock Appreciation Rights intended to qualify for such exception by
reason of the special rules under Section 162(m) of the Code applicable to
stock options and stock appreciation rights granted at an exercise price
not less than fair market value on the date of grant ("Qualified
Performance Awards") or Cash Incentives or Awards that either are not
intended so to qualify or are Options or Stock Appreciation Rights intended
to qualify for such exception by reason of the special rules under Section
162(m) of the Code applicable to stock options and stock appreciation
rights granted at an exercise price not less than fair market value on the
date of grant ("Other Performance Awards"). The Committee will determine
the performance measures, the period or periods during which performance is
to be measured, and all other terms and conditions applicable to the
Performance Award. The performance measures to which a Performance Award is
subject may be related to personal performance, corporate performance,
departmental performance, or any other category of performance established
by the Committee. In the case of a Qualified Performance Award, payment
under the Award or of the Cash Incentive must be conditioned on the
satisfaction of one or more "qualified performance measures" preestablished
by the Committee in accordance with the rules under Section 162(m) of the
Code and on certification (within the meaning of the rules under Section
162(m) of the Code) by the Committee that such measure or measures have
been met or exceeded. For purposes of the preceding sentence, a qualified
performance measure is an objectively determinable measure of performance
based on any one or more of the following (on a consolidated, divisional,
subsidiary, line of business or geographical basis or in combinations
thereof): (i) sales; revenues; assets; expenses; earnings before or after
deduction for all or any portion of interest, taxes, depreciation or
amortization, whether or not on a continuing operations or an aggregate or
per share basis; return on equity, investment, capital or assets; inventory
level or turns; one or more operating ratios; borrowing levels, leverage
ratios or credit rating; market share; capital expenditures; cash flow;
stock price; stockholder return; or any combination of the foregoing; or
(ii) acquisitions and divestitures (in whole or in part); joint ventures
and strategic alliances; spin-offs, split-ups and the like;
reorganizations; recapitalizations, restructurings, financings (issuance of
debt or equity) and refinancings; transactions that would constitute a
change of control; or any combination of the foregoing. A qualified
performance measure and targets with respect thereto determined by the
Committee need not be based upon an increase, a positive or improved result
or avoidance of loss. The maximum number of shares of Stock subject to
Performance Awards (other than Cash Incentives) awarded to any Participant
in any three-calendar-year period shall be 2,000,000 shares. The maximum
amount payable under Cash Incentives to any Participant for any year shall
be $1,000,000.
6.6. Loans and Supplemental Grants.
(a) Loans. The Company may make a loan to a Participant, either at
the time of or after the grant to him or her of any Award. Such a
loan may be made in connection with either the purchase of Stock
under the Award or the payment of any federal income tax in
respect of income recognized as a result of the Award. The
Committee will have full authority to decide whether to make such
a loan and to determine the amount, terms and conditions of the
loan, including the interest rate (which may be zero), whether
the loan is to be secured or unsecured or with or without
recourse against the borrower, the terms on which the loan is to
be repaid and the conditions, if any, under which it may be
forgiven. However, no loan may have a term (including extensions)
exceeding ten years in duration.
(b) Cash Grants. In connection with any Award, the Committee may at
the time such Award is made or at a later date provide for and
make a cash payment to the Participant not to exceed an amount
equal to (a) the amount of any federal, state and local income
tax on ordinary income for which the Participant will be liable
<PAGE>
with respect to the Award, plus (b) an additional amount on a
grossed-up basis necessary to make him or her whole after tax,
discharging all the Participant's income tax liabilities arising
from all payments under this Section 6, all based on such
reasonable estimates of applicable tax rates as the Committee may
determine.
6.7. Other Stock-Based Awards.
(a) Nature of Awards. The Committee may grant other Awards under
which Stock is or may in the future be acquired ("Other
Stock-Based Awards"). Such awards may include, without
limitation, debt securities convertible into or exchangeable for
shares of Stock upon such conditions, including attainment of
performance goals, as the Committee shall determine. Such
convertible or exchangeable securities may have such terms and
conditions as the Committee may determine at the time of grant.
However, no convertible or exchangeable debt shall be issued
unless the Committee shall have provided (by Company right of
repurchase, right to require conversion or exchange, or other
means deemed appropriate by the Committee) a means of avoiding
any right of the holders of such debt to prevent a Company
transaction by reason of covenants in such debt.
(b) Purchase Price; Form of Payment. The Committee may determine the
consideration, if any, payable upon the issuance or exercise of
an Other Stock-Based Award. The Committee may permit payment by
certified check or bank check or other instrument acceptable to
the Committee or by surrender of other shares of Stock (excluding
shares then subject to restrictions under the Plan).
(c) Forfeiture of Awards; Repurchase of Stock; Acceleration or Waiver
of Restrictions. The Committee may determine the conditions under
which an Other Stock-Based Award shall be forfeited or, in the
case of an Award involving a payment by the recipient, the
conditions under which the Company may or must repurchase such
Award or related Stock. At any time the Committee may in its sole
discretion accelerate, waive, or, amend any or all of the
limitations or conditions imposed under any Other Stock-Based
Award.
7. EVENTS AFFECTING OUTSTANDING AWARDS
7.1. Death.
Except as the Committee may otherwise determine, if a Participant dies
the following will apply:
(a) All Options and Stock Appreciation Rights held by the Participant
immediately prior to death, to the extent then exercisable, may
be exercised by the Participant's executor or administrator or
the person or persons to whom the Option or Right is transferred
by will or the applicable laws of descent and distribution, at
any time within the one year period ending with the first
anniversary of the Participant's death (or such shorter or longer
period as the Committee may determine), and shall thereupon
terminate. In no event, however, shall an Option or Stock
Appreciation Right remain exercisable beyond the latest date on
which it could have been exercised without regard to this Section
7. All Options and Stock Appreciation Rights held by a
Participant immediately prior to death that are not then
exercisable shall terminate at death.
<PAGE>
(b) All Restricted Stock held by the Participant must be transferred
to the Company (and, in the event the certificates representing
such Restricted Stock are held by the Company, such Restricted
Stock will be so transferred without any further action by the
Participant in accordance with Section 6.3(c)).
(c) Any payment or benefit under a Deferred Stock Award, Performance
Award or Other Stock-Based Award to which the Participant was not
irrevocably entitled prior to death will be forfeited and the
Award canceled as of the time of death.
7.2. Termination of Service (Other Than By Death).
If (i) a Participant who is an Employee ceases to be an Employee for
any reason other than death, (ii) there is a termination (other than by
reason of death or satisfactory completion of the project or service as
determined by the Committee) of the consulting, service or similar
relationship in respect of which a non-Employee Participant was granted an
Award hereunder or (iii) a New Hire's offer of employment is terminated
prior to the New Hire commencing employment with the Company or the New
Hire does not commence his or her employment with the Company within two
months after receipt of an Award hereunder (such termination of the
employment or other relationship being hereinafter referred to as a "Status
Change"), then, except as the Committee may otherwise determine, the
following will apply:
(a) All Options and Stock Appreciation Rights held by the Participant
that were not exercisable immediately prior to the Status Change
shall terminate at the time of the Status Change. Any Options or
Rights that were exercisable immediately prior to the Status
Change will continue to be exercisable for a period of three
months, and shall thereupon terminate, unless the Award provides
by its terms for immediate termination in the event of a Status
Change or unless the Status Change results from a discharge for
cause which in the opinion of the Committee casts such discredit
on the Participant as to justify immediate termination of the
Award. In no event, however, shall an Option or Stock
Appreciation Right remain exercisable beyond the latest date on
which it could have been exercised without regard to this Section
7. For purposes of this paragraph, in the case of a Participant
who is an Employee, a Status Change shall not be deemed to have
resulted by reason of (i) a sick leave or other bona fide leave
of absence approved for purposes of the Plan by the Committee, so
long as the Employee's right to reemployment is guaranteed either
by statute or by contract, or (ii) a transfer of employment
between the Company and a subsidiary or between subsidiaries, or
to the employment of a corporation (or a parent or subsidiary
corporation of such corporation) issuing or assuming an option in
a transaction to which Section 424(a) of the Code applies.
(b) All Restricted Stock held by the Participant at the time of the
Status Change must be transferred to the Company (and, in the
event the certificates representing such Restricted Stock are
held by the Company, such Restricted Stock will be so transferred
without any further action by the Participant) in accordance with
Section 6.3(c) above.
<PAGE>
(c) Any payment or benefit under a Deferred Stock Award, Performance
Award or Other Stock-Based Award to which the Participant was not
irrevocably entitled prior to the Status Change will be forfeited
and the Award canceled as of the date of such Status Change.
7.3. Certain Corporate Transactions.
Except as otherwise provided by the Committee, in the event of a
consolidation or merger in which the Company is not the surviving
corporation or which results (or that is part of a series of related
transactions that results) in the acquisition of substantially all the
Company's outstanding Stock by a single person or entity or by a group of
persons or entities acting in concert, or in the event of the sale or
transfer of substantially all the Company's assets or a dissolution or
liquidation of the Company (a "covered transaction"), the following rules
shall apply:
(a) Subject to paragraph (b) below, all outstanding Awards requiring
exercise will cease to be exercisable, and all other Awards to
the extent not fully vested (including Awards subject to
conditions not yet satisfied or determined) will be forfeited, as
of the effective time of the covered transaction, provided that
the Committee may in its sole discretion, on or prior to the
effective date of the covered transaction, (1) make any
outstanding Option and Stock Appreciation Right exercisable in
full, (2) remove the restrictions from any Restricted Stock, (3)
cause the Company to make any payment and provide any benefit
under any Deferred Stock Award or Performance Award or (4) remove
any performance or other conditions or restrictions on any Award;
or
(b) With respect to an outstanding Award held by a participant who,
following the covered transaction, will be employed by or
otherwise providing services to an entity which is a surviving or
acquiring entity in the covered transaction or an affiliate of
such an entity, the Committee may at or prior to the effective
time of the covered transaction and in lieu of the action
described in paragraph (a) above, arrange to have such surviving
or acquiring entity or affiliate assume any Award held by such
participant outstanding hereunder or grant a replacement award
which, in the judgment of the Committee, is substantially
equivalent to any Award being replaced.
8. GENERAL PROVISIONS
8.1. Documentation of Awards.
Awards will be evidenced by such written instruments, if any, as may
be prescribed by the Committee from time to time. Such instruments may be
in the form of agreements to be executed by both the Participant and the
Company, or certificates, letters or similar instruments, which need not be
executed by the Participant but acceptance of which will evidence agreement
to the terms thereof.
8.2. Rights as a Stockholder, Dividend Equivalents.
Except as specifically provided by the Plan, the receipt of an Award
will not give a Participant rights as a stockholder; the Participant will
obtain such rights, subject to any limitations imposed by the Plan or the
instrument evidencing the Award, only upon the issuance of Stock. However,
the Committee may, on such conditions as it deems appropriate, provide that
a Participant will receive a benefit in lieu of cash dividends that would
have been payable on any or all Stock subject to the Participant's Award
had such Stock been outstanding. Without limitation, the Committee may
provide for payment to the Participant of amounts representing such
dividends, either currently or in the future, or for the investment of such
amounts on behalf of the Participant.
<PAGE>
8.3. Conditions on Delivery of Stock.
The Company will not be obligated to deliver any shares of Stock
pursuant to the Plan or to remove restriction from shares previously
delivered under the Plan (a) until all conditions of the Award have been
satisfied or removed, (b) until, in the opinion of the Company's counsel,
all applicable federal and state laws and regulation have been complied
with, (c) if the outstanding Stock is at the time listed on any stock
exchange or The Nasdaq National Market, until the shares to be delivered
have been listed or authorized to be listed on such exchange or market upon
official notice of issuance, and (d) until all other legal matters in
connection with the issuance and delivery of such shares have been approved
by the Company's counsel. If the sale of Stock has not been registered
under the Securities Act of 1933, as amended, the Company may require, as a
condition to exercise of the Award, such representations or agreements as
counsel for the Company may consider appropriate to avoid violation of such
Act and may require that the certificates evidencing such Stock bear an
appropriate legend restricting transfer.
If an Award is exercised by the Participant's legal representative,
the Company will be under no obligation to deliver Stock pursuant to such
exercise until the Company is satisfied as to the authority of such
representative.
8.4. Tax Withholding.
The Company will withhold from any cash payment made pursuant to an
Award an amount sufficient to satisfy all federal, state and local
withholding tax requirements (the "withholding requirements").
In the case of an Award pursuant to which Stock may be delivered, the
Committee will have the right to require that the Participant or other
appropriate person remit to the Company an amount sufficient to satisfy the
withholding requirements, or make other arrangements satisfactory to the
Committee with regard to such requirements, prior to the delivery of any
Stock or removal of restrictions thereon. If and to the extent that such
withholding is required, the Committee may permit the Participant or such
other person to elect at such time and in such manner as the Committee
provides to have the Company hold back from the shares to be delivered, or
to deliver to the Company, Stock having a value calculated to satisfy the
withholding requirement. The Committee may make such share withholding
mandatory with respect to any Award at the time such Award is made to a
Participant.
If at the time an ISO is exercised the Committee determines that the
Company could be liable for withholding requirements with respect to the
exercise or with respect to a disposition of the Stock received upon
exercise, the Committee may require as a condition of exercise that the
person exercising the ISO agree (a) to provide for withholding under the
preceding paragraph of this Section 8.4, if the Committee determines that a
withholding responsibility may arise in connection with the exercise, (b)
to inform the Company promptly of any disposition (within the meaning of
section 424(c) of the Code) of Stock received upon exercise, and (c) to
give such security as the Committee deems adequate to meet the potential
liability of the Company for other withholding requirements and to augment
such security from time to time in any amount reasonably deemed necessary
by the Committee to preserve the adequacy of such security.
8.5. Transferability of Awards.
Unless otherwise permitted by the Committee, no Award (other than an
Award in the form of an outright transfer of cash or Unrestricted Stock)
may be transferred other than by will or by the laws of descent and
distribution.
8.6. Adjustments in the Event of Certain Transactions.
(a) In the event of a stock dividend, stock split or combination of
shares, recapitalization or other change in the Company's
capitalization, or other distribution to holders of Stock other
than normal cash dividends, after the effective date of the Plan,
the Committee will make any appropriate adjustments to the
maximum number of shares that may be delivered under the Plan
under the first paragraph of Section 4 above and to the limits
described in the second paragraph of Section 4 and in Section
6.5(c).
<PAGE>
(b) In any event referred to in paragraph (a), the Committee will
also make any appropriate adjustments to the number and kind of
shares of Stock or securities subject to Awards then outstanding
or subsequently granted, any exercise prices relating to Awards
and any other provision of Awards affected by such change. The
Committee may also make such adjustments to take into account
material changes in law or in accounting practices or principles,
mergers, consolidations, acquisitions, dispositions or similar
corporate transactions, or any other event, if it is determined
by the Committee that adjustments are appropriate to avoid
distortion in the operation of the Plan.
(c) In the case of ISOs or Awards intended to qualify for the
"performance-based compensation" exception under Section
162(m)(4)(C) of the Code, the adjustments described in (a) and
(b) will be made only to the extent consistent with continued
qualification of the Option or other Award under Section 422 of
the Code or Section 162(m) of the Code, as the case may be.
8.7. Employment Rights, Etc.
Neither the adoption of the Plan nor the grant of Awards will confer
upon any person any right to continued retention by the Company or any
subsidiary as an Employee or otherwise, or affect in any way the right of
the Company or subsidiary to terminate an employment, service or similar
relationship at any time. Except as specifically provided by the Committee
in any particular case, the loss of existing or potential profit in Awards
granted under the Plan will not constitute an element of damages in the
event of termination of an employment, service or similar relationship even
if the termination is in violation of an obligation of the Company or any
of its subsidiaries to the Participant.
8.8. Deferral of Payments.
The Committee may agree at any time, upon request of the Participant,
to defer the date on which any payment under an Award will be made.
8.9. Past Services as Consideration.
Where a Participant purchases Stock under an Award for a price equal
to the par value of the Stock the Committee may determine that such price
has been satisfied by past services rendered by the Participant.
9. EFFECT, AMENDMENT AND TERMINATION
Neither adoption of the Plan nor the grant of Awards to a Participant will
affect the Company's right to grant to such Participant awards that are not
subject to the Plan, to issue to such Participant Stock as a bonus or otherwise,
or to adopt other plans or arrangements under which Stock may be issued to
Employees.
The Committee may at any time or times amend the Plan or any outstanding
Award for any purpose which may at the time be permitted by law, or may at any
time terminate the Plan as to any further grants of Awards, provided that
(except to the extent expressly required or permitted by the Plan) no such
amendment will, without the approval of the stockholders of the Company,
effectuate a change for which stockholder approval is required in order for the
Plan to continue to qualify for the award of ISOs under Section 422 of the Code
or for the award of performance-based compensation under Section 162(m) of the
Code.
<PAGE>
EXHIBIT 5.1
July 29, 1999
Cabletron Systems, Inc.
35 Industrial Way
Rochester, NH 03867
Ladies and Gentlemen:
This opinion is furnished to you in connection with a registration
statement on Form S-8 (the "Registration Statement") to be filed with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended, for the registration of 14,500,000 shares of common stock,
par value $0.01 per share (the "Shares"), of Cabletron Systems, Inc., a Delaware
corporation (the "Company"), issuable upon exercise of options issued under the
Cabletron Systems, Inc. 1998 Equity Incentive Plan (the "Options" under the
"Plan").
We have acted as counsel for the Company in connection with the
establishment of the Plan and the issuance of the Options and are familiar with
the actions taken by the Company in connection therewith. For purposes of this
opinion, we have examined the Registration Statement, the Plan and such other
documents as we have deemed appropriate.
Based upon the foregoing, we are of the opinion that the Shares (i)
have been duly authorized and (ii) when issued and sold in accordance with the
terms of the Options and the Plan, will have been validly issued and will be
fully paid and non-assessable.
We hereby consent to your filing this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Ropes & Gray
----------------
Ropes & Gray
<PAGE>
EXHIBIT 23.1
The Board of Directors
Cabletron Systems, Inc.:
We consent to the use of our reports incorporated herein by reference.
KPMG LLP
Boston, Massachusetts
July 29, 1999
