SCHEDULE 14A
INFORMATION
PROXY STATEMENT
PURSUANT TO SECTION 14(A)
OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO.
)
Filed by the
Registrant ¨
Filed by a Party
other than the Registrant ¨
Check the appropriate
box:
¨ Preliminary Proxy
Statement
¨ Confidential, for
Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x Definitive Proxy
Statement
¨ Definitive
Additional Materials
¨ Soliciting Material
Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Cabletron Systems,
Inc.
(Name of
Registrant as Specified In Its Charter)
Cabletron Systems,
Inc.
(Name of Person(s)
Filing Proxy Statement)
Payment of Filing Fee
(check the appropriate box):
x No fee
required.
¨ Fee computed on
table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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(1) Title of each
class of securities to which transaction applies:
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(2) Aggregate
number of securities to which transaction applies:
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(3)
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Per unit price or
other underlying value of transaction computed pursuant to Exchange Act
Rule 0-11 (Set forth the amount on which the filing fee is calculated and
state how it was determined):
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(4) Proposed
maximum aggregate value of transaction:
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¨ Fee paid previously
with preliminary materials.
¨
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Check box if any
part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee was paid previously.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
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(1) Amount
Previously Paid:
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(2) Form, Schedule
or Registration Statement No.:
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[LOGO OF CABLETRON
APPEARS HERE]
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Rochester, New
Hampshire 03867
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Dear
Stockholder:
You are cordially
invited to attend our 2000 Annual Meeting of Stockholders to be held on July
11, 2000 at the Frank Jones Center, 400 Route One By-Pass, Portsmouth, New
Hampshire 03801 (see directions on last page).
At this meeting you
are being asked to (i) elect one Class II director, (ii) approve a proposal
to transform the Company by creating four separate operating subsidiaries by
transferring a substantial portion of our operating assets and related
liabilities to four subsidiaries, (iii) amend the Companys Restated
Certificate of Incorporation to increase the number of shares of the
Companys Common Stock authorized for issuance from 240,000,000 shares
to 450,000,000 shares, and (iv) transact such other business as may properly
come before the meeting and any and all adjourned sessions
thereof.
Your Board of
Directors recommends that you vote in favor of each of the proposals. You
should read with care the proxy statement that describes the nominee and
presents other important information about the proposals. Please complete,
sign and return your proxy promptly in the enclosed envelope. This year we
are also offering our stockholders the opportunity to vote electronically
via the Internet or by telephone, detailed instructions for which are
enclosed.
We hope that you will
join us on July 11, 2000.
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Chairman of the
Board, President and
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[CABLETRON LOGO
APPEARS HERE]
NOTICE OF ANNUAL
MEETING OF STOCKHOLDERS
JULY 11,
2000
Notice is hereby
given that the Annual Meeting of Stockholders of Cabletron Systems, Inc.
(the Company) will be held at the Frank Jones Center, 400 Route
One By-Pass, Portsmouth, New Hampshire 03801, on July 11, 2000 at 10:00
a.m., Eastern Time, for the following purposes:
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1.
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To elect one Class
II director to serve until the 2003 Annual Meeting of
Stockholders.
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2.
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To approve a
proposal to transform the Company by creating four separate operating
subsidiaries and transferring a substantial portion of our operating
assets and related liabilities to four subsidiaries.
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3.
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To amend the
Companys Restated Certificate of Incorporation to increase the
number of shares of the Companys Common Stock authorized for
issuance from 240,000,000 shares to 450,000,000 shares.
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4.
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To transact such
other business as may properly come before the meeting and any and all
adjourned sessions thereof.
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Only stockholders of
record at the close of business on May 15, 2000 are entitled to notice of
and to vote at the Annual Meeting of Stockholders and any and all adjourned
sessions thereof.
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By order of the
Board of Directors,
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MICHAEL D. MYEROW,
Secretary
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Rochester, New
Hampshire
June 1,
2000
IT IS IMPORTANT
THAT YOUR STOCK BE REPRESENTED AT THE MEETING. PLEASE VOTE EITHER
ELECTRONICALLY, BY TELEPHONE OR BY SIGNING AND RETURNING THE ENCLOSED PROXY
AS PROMPTLY AS POSSIBLE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN
PERSON.
TABLE OF
CONTENTS
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Page
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QUESTIONS and
ANSWERS |
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1 |
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SUMMARY |
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3 |
Annual
Meeting |
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3 |
Proposal 1Election of Director |
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3 |
Proposal 2Company Restructuring |
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3 |
Proposal 3Amendment to the Companys Restated Certificate
of Incorporation |
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4 |
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ANNUAL
MEETING |
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5 |
Matters
to be Considered at the Annual Meeting |
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5 |
Proxy
Solicitation |
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5 |
Outstanding Shares and Voting Power |
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5 |
Voting
Electronically via the Internet or by Telephone |
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6 |
Voting
and Revocation of Proxies |
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6 |
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PROPOSAL 1:
ELECTION OF CLASS II DIRECTOR |
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7 |
Securities Ownership of Certain Beneficial Owners and
Management |
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8 |
Information with Respect to the Board of Directors and Committee
Organization |
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9 |
Director Compensation |
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9 |
Executive Compensation |
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10 |
Option
Tables |
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11 |
Option
Grants |
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11 |
Option
Exercises |
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12 |
Report
of the Incentive Compensation Committee on Executive
Compensation |
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13 |
Executive
Officer Compensation |
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13 |
Chief
Executive Officer Compensation |
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14 |
Compensation
Committee Interlocks and Insider Participation |
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15 |
Employment Agreements |
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15 |
Change
in Control Severance Benefit Plan for Key Employees |
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15 |
Severance Arrangement with Mr. Solari |
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16 |
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PROPOSAL 2: COMPANY
RESTRUCTURING |
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17 |
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PROPOSAL 3:
AMENDMENT TO THE COMPANYS RESTATED CERTIFICATE OF
INCORPORATION |
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19 |
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OTHER
INFORMATION |
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20 |
Comparison of Stockholder Return |
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20 |
Certain
Transactions |
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21 |
Relationship with Independent Auditors |
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21 |
Stockholder Proposals |
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21 |
Section
16(a) Beneficial Ownership Reporting Compliance |
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22 |
Where
You Can Find More Information |
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22 |
Other
Business |
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23 |
Directions to the Frank Jones Center |
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24 |
CABLETRON
SYSTEMS, INC.
35 Industrial
Way
Rochester, New
Hampshire 03867
PROXY
STATEMENT
For the 2000
Annual Meeting of Stockholders
to be held on July
11, 2000
QUESTIONS AND
ANSWERS
Q: When and where
is the annual meeting?
We will be holding
the 2000 Annual Meeting of Stockholders (the Meeting) of
Cabletron Systems, Inc. (the Company) on Tuesday, July 11, 2000
at 10:00 a.m., Eastern time, at the Frank Jones Center, 400 Route One
By-Pass, Portsmouth, New Hampshire 03801.
Q: What am I being
asked to vote on at the annual meeting?
We are asking you to
vote on three matters at the annual meeting:
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the election of one
director to hold office for a three-year term;
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·
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the approval of our
transformation by creating four separate operating subsidiaries through
the transfer of a substantial portion of our operating assets and related
liabilities to four subsidiaries; and
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·
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the approval of an
amendment to our Restated Certificate of Incorporation to increase the
number of authorized shares of Common Stock.
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Q: How does the
Board of Directors recommend I vote on these proposals?
The Board of
Directors of the Company recommends that you vote FOR:
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the nominee for
director;
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·
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the Companys
transformation by creating four separate operating subsidiaries through
the transfer of a substantial portion of the Companys operating
assets and related liabilities to four subsidiaries; and
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·
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the amendment of
the Companys Restated Certificate of Incorporation to increase the
number of authorized shares of Common Stock.
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Q: Who is entitled
to vote at the annual meeting?
You are entitled to
vote at the annual meeting if you owned shares on May 15, 2000, the record
date for the annual meeting. On May 15, 2000, the Company had 184,547,296
shares of Common Stock outstanding.
Q: What vote of
the stockholders is needed to approve the proposals?
The nominee for
director who receives the greatest number of votes will be
elected.
We need the approval
of a majority of the outstanding shares of Common Stock to approve our
transformation by creating four separate operating subsidiaries through the
transfer of a substantial portion of our operating assets and related
liabilities to four subsidiaries and to amend our Restated Certificate of
Incorporation to increase the number of authorized shares of Common
Stock.
Q: Am I entitled
to appraisal rights?
No. Stockholders of
the Company do not have the right to vote against our transformation by
creating four separate operating subsidiaries through the transfer of a
substantial portion of our operating assets and related liabilities to four
subsidiaries and obtain payment of the fair value of their shares in cash,
sometimes referred to as appraisal rights.
Q: What do I need
to do now?
Please carefully read
this proxy statement, and then if you are a registered stockholder (hold
your shares directly with EquiServe) either (i) complete, sign and mail your
proxy card in the enclosed return envelope as soon as possible, (ii) visit
the Internet voting website at http://www.eproxyvote.com/cs, enter the
control number located on your proxy card and follow the instructions
provided for voting, or (iii) call the toll-free number on a touch-tone
telephone 1-877-PRX-VOTE (1-877-779-8683), enter the control number located
on your proxy card and follow the recorded instructions for voting. If you
vote via the Internet or by telephone, you do not need to return your proxy
card. If you are not a registered stockholder, but hold your shares at a
different bank or brokerage firm, then follow the instructions provided by
your bank or brokerage firm.
If you sign and send
in your proxy card and do not mark how you want to vote, your proxy will be
counted as a vote in favor of the nominee as director, our transformation by
creating four separate operating subsidiaries through the transfer of a
substantial portion of our operating assets and related liabilities to four
subsidiaries and the amendment to our Restated Certificate of Incorporation
to increase the number of shares of authorized Common Stock. The transfer of
operating assets and the amendment to the Restated Certificate of
Incorporation cannot be accomplished unless stockholders who hold a majority
of our shares approve each proposal. Your vote is very
important.
If you prefer, you
can attend the meeting and vote your shares in person rather than mailing
back your proxy card or voting via the Internet or by telephone.
Q: What do I do if
my shares are held in street name by my broker?
If your shares are
held in street name by a broker as your nominee, your broker will send you a
proxy card.
Q:
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What
happens if I do not instruct my broker how to vote on the proposals or if
I mark abstain on the proxy card?
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Unless the holders of
a majority of the shares approve our transformation by creating four
separate operating subsidiaries through the transfer of a substantial
portion of our operating assets and related liabilities to four subsidiaries
and the amendment of our Restated Certificate of Incorporation to increase
the number of authorized shares of Common Stock, such actions cannot be
completed. If your shares are held in street name by a broker, your broker
will not be able to vote your shares without instructions from
you.
If you mark your
proxy abstain or do not instruct your broker how to vote, your
shares will have the same effect as votes against our transfer of a
substantial portion of our operating assets and related liabilities to four
subsidiaries and the amendment to our Restated Certificate of Incorporation
to increase the number of authorized shares of Common Stock.
Q:
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Can I
change my mind after I have mailed in my signed proxy card or after I have
voted via the Internet or by telephone?
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Yes. There are three
ways you may withdraw your proxy at any time before the vote takes place:
(1) you may return to the Secretary of the Company another properly signed
proxy card bearing a later date; (2) you may deliver a written revocation of
your proxy to the Secretary of the Company; or (3) you may attend the annual
meeting, or any adjourned session thereof, in person and vote the shares
covered by the proxy.
The mailing address
for the Secretary of the Company is: Cabletron Systems, Inc., 35 Industrial
Way, Rochester, New Hampshire 03867, Attention: Michael D. Myerow,
Secretary.
Q: Who should I
call if I have any additional questions?
You may call the
Companys Investor Relations department at (603) 337-2247 or, with
respect to questions regarding voting, Morrow & Co., Inc., our proxy
solicitor, at (800) 662-5200.
SUMMARY
This summary
highlights selected information from this document and may not contain all
the information that is important to you. For a more complete understanding
of the Companys transformation by creating four separate operating
subsidiaries by transferring a substantial portion of our operating assets
and related liabilities to four subsidiaries, you should read carefully this
entire document and the other available information referred to in
Where You Can Find More Information on page 23.
Annual Meeting
(See page 5)
The 2000 Annual
Meeting of Stockholders will be held on Tuesday, July 11, 2000 at 10:00
a.m., Eastern time, at the Frank Jones Center, 400 Route One By-pass,
Portsmouth, New Hampshire 03801.
Proposal
1Election of Director (See page 7)
Information regarding
the nominee for election to the Board of Directors, the incumbent directors,
their level of ownership of the Companys Common Stock, and other
benefits and compensation are described herein. Also described is
information about executive officers and their compensation, as well as a
report of the Board of Directors on Executive Compensation under
Proposal 1: Election of Class II Director.
Proposal
2Company Restructuring (See page 18)
The transformation of
the the Company by creating four operating subsidiaries by transferring a
substantial portion of the Companys operating assets and related
liabilities to four subsidiaries, requires the approval of a majority of the
outstanding shares of Common Stock of the Company.
The Board of
Directors of the Company considers the Company Restructuring to be in the
best interests of the Company and its stockholders. The Board of Directors
of the Company has unanimously approved the Company Restructuring, and
recommends that you vote for such proposal.
If approved, the four
operating subsidiaries will be:
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Aprisma Management
Technologies, Inc., a provider of network management solutions to meet
service level requirements of enterprise and service provider
customers.
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Enterasys Networks,
Inc., a provider of network infrastructure solutions serving
enterprise-class customers.
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GlobalNetwork Technology Services, Inc., a network
consulting company delivering infrastructure solutions to enterprise and
service provider customers.
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Riverstone
Networks, Inc., a provider of network infrastructure solutions serving
content and infrastructure service provider customers.
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The assets to be
transferred to the four operating subsidiaries are located at the
Companys facilities worldwide, and include working capital, accounts
receivable, fixed assets and inventories, research and development
activities, and intangible assets such as patents, intellectual property,
contracts and agreements relating to each operating subsidiarys
operations. Liabilities related to these assets would also be transferred.
In addition, some liabilities not specifically related to the operations of
any of the subsidiaries may be allocated among and transferred to the
operating subsidiaries.
Each of the operating
subsidiaries has established an option pool for its employees, directors and
consultants. The operating subsidiaries have granted to existing employees,
directors and consultants options to purchase common stock representing
approximately 10% to 20% of the subsidiarys capital stock. Also, the
operating subsidiaries have reserved an additional 15% to 20% of their
common stock for issuance upon exercise of options granted to new hires,
employees of acquired companies and current holders of options to purchase
common stock of the Company. In addition, the Company has announced that it
intends to sell to third parties, or grant rights to purchase, minority
interests in the operating subsidiaries that would represent between 3.5% to
5.5% of each operating subsidiarys capital stock.
The Company will retain
certain assets, consisting primarily of cash, marketable securities,
administrative and other support functions, some non-core product lines and
minority investments in independent technology companies.
The purpose for this
transformation is to provide the Company with greater flexibility to better
develop and implement strategic transactions designed to maximize the
long-term competitive and strategic advantages of each of the Companys
products and services by separating the operations associated with each of
the operating subsidiaries. In turn, as smaller, independent companies, each
of the operating subsidiaries will be be able to make decisions more quickly
and use its resources more efficiently than it could as an operating
division of a larger company. Each of the operating subsidiaries will also
be able to adopt individualized incentive programs for employees and
management directly linked to the performance of the operating
subsidiarys business.
The Company currently
plans to conduct an initial public offering for each of the operating
subsidiaries, followed by a distribution of the remaining shares of one or
more of the operating subsidiaries to the Companys stockholders. This
plan would take 12-18 months to implement and complete. The Company has also
announced the sale of minority interests in the operating subsidiaries. In
addition, the Company may consider alternative strategic opportunities,
including a sale of one or more of the operating subsidiaries.
The mailing address
for Aprisma Management Technologies, Inc. is 121 Technology Drive, Durham,
New Hampshire 03824 and its general telephone number is (603) 337-7000. The
mailing address for each of Enterasys Network, Inc. and GlobalNetwork
Technology Services, Inc. is c/o Cabletron Systems, Inc., 35 Industrial
Way, Rochester, New Hampshire 03867. The general telephone number for each
of Enterasys Networks, Inc. and GlobalNetwork Technology Services,
Inc. is (603) 337-9400. The mailing address for Riverstone Networks, Inc. is
5200 Great America Parkway, Santa Clara, CA 95054 and its general telephone
number is (408) 878-6500.
Proposal
3Amendment to the Companys Restated Certificate of Incorporation
(See page 20)
In order to increase
the number of authorized shares of Common Stock from 240,000,000 to
450,000,000, the Company must amend its Restated Certificate of
Incorporation. Any amendment to the Restated Certificate of Incorporation
requires the approval of a majority of the outstanding shares of the
Company.
The purpose of the
increase in the number of authorized shares of Common Stock is to provide
the Company with the flexibility to issue its shares in connection with
possible future actions, such as stock splits, stock dividends, financings,
corporate mergers, acquisitions, use in employee benefit plans or other
corporate purposes. Currently, the Company has no agreements or commitments
with respect to the sale or issuance of any additional shares of Common
Stock, except in connection with its 1998 Equity Incentive Plan and 1989
Employee Stock Purchase Plan.
The newly authorized
shares of Common Stock will have the same rights as the presently authorized
shares of Common Stock, including the right to cast one vote per share. Any
future issuance of additional shares would have the effect of diluting the
voting rights and could have the effect of diluting earnings per share and
book value per share of existing stockholders.
Other Information
(See page 21)
A stock performance
graph, information with regard to certain transactions and other
disclosures, the independent auditors, stockholder proposals for the 2001
Annual Meeting of Stockholders and sources for additional information may be
found in Other Information.
ANNUAL
MEETING
The enclosed form of
proxy is solicited on behalf of the Board of Directors of Cabletron Systems,
Inc. (the Company) for use at the Annual Meeting of Stockholders
(the Meeting) to be held at the Frank Jones Center, 400 Route
One By-pass, Portsmouth, New Hampshire 03801, on July 11, 2000, at 10:00
a.m., Eastern Time, and at any and all adjourned sessions
thereof.
The proxies named in
the form of proxy have been designated by the Board of Directors of the
Company. Giving the proxy will not affect your right to revoke the proxy
prior to voting or your right to vote in person should you decide to attend
the Meeting. Shares represented by the enclosed form of proxy, when properly
executed and presented, will be voted as directed therein.
This Proxy Statement,
the enclosed form of proxy and the Companys Annual Report to
Stockholders, including financial statements for the fiscal year ended
February 29, 2000, were mailed together to the Companys stockholders
on or about June 7, 2000.
Matters to be
Considered at the Annual Meeting
The specific
proposals to be considered and acted upon at the Meeting are summarized in
the accompanying Notice of Annual Meeting of Stockholders.
Proxy
Solicitation
The expense of
soliciting proxies will be borne by the Company. Officers and regular
employees of the Company (who will receive no compensation therefor in
addition to their regular salaries) may communicate directly or by mail,
telephone, or other communication methods with stockholders to solicit
proxies. The Company will also reimburse brokers and other persons for their
reasonable charges and expenses in forwarding soliciting materials to their
principals. In addition, the Company has retained Morrow & Co., Inc. to
assist in the solicitation of proxies for a fee of approximately $8,000 plus
out-of-pocket expenses.
Outstanding Shares
and Voting Power
The holders of record
of shares of Common Stock, $.01 par value (the Common Stock), of
the Company at the close of business on May 15, 2000 are entitled to receive
notice of and to vote at the Meeting. As of that date the Company had issued
and outstanding 184,547,296 shares of Common Stock. Each such share of
Common Stock is entitled to one vote on each matter to come before the
Meeting.
Consistent with state
law and under the Companys by-laws, a majority of the shares entitled
to be cast on a particular matter, present in person or represented by
proxy, constitutes a quorum as to such matter. Abstentions and broker
non-votes (i.e., shares represented at the Meeting held by brokers or
nominees as to which (i) instructions have not been received from the
beneficial owners or persons entitled to vote and (ii) the broker or nominee
does not have discretionary voting power on a particular matter) are counted
as present for the purpose of determining the presence of a quorum for the
transaction of business. Votes cast by proxy or in person at the Meeting
will be counted by persons appointed by the Company to act as election
inspectors for the Meeting.
The nominee for
election as director at the Meeting will be elected if he receives a
plurality of votes properly cast. The election inspectors will count the
total number of votes cast for each nominee for the purpose of
determining whether sufficient affirmative votes have been cast. Neither
abstentions nor broker non-votes will have any effect on the outcome of
voting on the election of the Director.
The approval of
Proposal 2, the transformation of the Company by creating four separate
operating subsidiaries by transferring a substantial portion of the
Companys operating assets and related liabilities to four
subsidiaries, and the approval of Proposal 3, the amendment of the
Companys Restated Certificate of Incorporation to increase the number
of authorized shares of Common Stock, each requires the affirmative vote of
a majority of the outstanding shares of the Companys Common Stock.
The election inspectors will count the total number of votes cast
for each proposal for the purpose of determining whether
sufficient affirmative votes have been cast. Your failure to vote, vote to
abstain or broker non-vote will have the same legal effect as a vote cast
against these proposals. Your broker and, in many cases, your nominee, will
not have discretionary power to vote on these proposals. Accordingly, you
should instruct your brokers or nominee how to vote.
If there are
insufficient votes to approve Proposal 2 and Proposal 3, your proxy may be
voted by the persons named in the proxy to adjourn the meeting in order to
solicit additional proxies in favor of the approval of Proposal 2 and
Proposal 3. If the meeting is adjourned or postponed for any purpose, at any
subsequent reconvening of the meeting your proxy will be voted in the same
manner as it would have been voted at the original convening of the meeting
unless you withdraw or revoke your proxy. Your proxy may be voted in this
manner even though it may have been voted on the same or any other matter at
a previous meeting.
Voting
Electronically Via the Internet or by Telephone
Stockholders whose
shares are registered directly with EquiServe may vote either via the
Internet or by calling EquiServe. Specific instructions to be followed by
any registered stockholder interested in voting via the Internet or by
telephone are set forth on the enclosed proxy card. The Internet and
telephone voting procedures are designed to authenticate the
stockholders identity and to allow stockholders to vote their shares
and to confirm that their instructions have been properly
recorded.
If your shares are
registered in the name of a bank or brokerage firm and you have not elected
to receive your Annual Report and Proxy Statement over the Internet, you may
be eligible to vote your shares electronically over the Internet or by
telephone. A large number of banks and brokerage firms are participating in
the ADP Investor Communication Services online program. This program
provides eligible stockholders who receive a paper copy of the Annual Report
and Proxy Statement the opportunity to vote via the Internet or by
telephone. If your bank or brokerage firm is participating in ADPs
program, your voting form will provide instructions. If your voting form
does not reference Internet or telephone information, please complete and
return the paper proxy card in the self-addressed, postage paid envelope
provided. Stockholders who elected to receive the Annual Report and Proxy
Statement over the Internet will receive an e-mail by June 7, 2000 with
information on how to access stockholder information and instructions for
voting.
Voting and
Revocation of Proxies
You may revoke your
proxy at any time before it is exercised by (i) returning to the Company
another properly signed proxy representing such shares and bearing a later
date, (ii) delivering a written revocation to the Secretary of the Company,
or (iii) attending the Meeting or any adjourned session thereof and voting
in person the shares covered by the proxy. Shares represented by the
enclosed form of proxy properly executed and returned, and not revoked, will
be voted at the Meeting as directed therein. If a proxy is properly
executed and received by the Secretary of the Company, but no instructions
are indicated, then the proxy will be voted to approve and adopt the above
matters and in the manner as the person named on the enclosed proxy card in
his or her discretion determine upon such other business as may properly
come before the Meeting or any adjournment or postponement of the
Meeting.
PROPOSAL 1:
ELECTION OF CLASS II DIRECTOR
The Companys
Restated Certificate of Incorporation and by-laws provide for the
classification of the Board of Directors into three classes, as nearly equal
in number as possible, with the term of office of one class expiring each
year. The Board of Directors has voted to fix the number of directors at
four. One of the Companys current Class II Directors, Mr. Donald F.
McGuinness, has decided not to stand for reelection as a Class II Director.
Unless otherwise instructed, the enclosed proxy will be voted to elect the
person named below as a Class II director for a term of three years expiring
at the 2003 Annual Meeting of Stockholders and until his successor is duly
elected and qualified. If the nominee is unavailable as a candidate at the
Meeting, votes pursuant to the proxy will be voted either for a substitute
nominee designated by the Board of Directors or, in the absence of such
designation, in such other manner as the directors may in their discretion
determine. Alternatively, in such a situation, the Board of Directors may
take action to fix the number of directors for the ensuing year at less than
five, depending on if the nominee named herein is then able to serve. The
Board of Directors does not anticipate that either nominee will become
unavailable as a candidate. The nominee as Class II director and the
incumbent Class III and Class I directors are as follows:
Nominee as Class
II Director
Term Expires
2000
Piyush Patel,
44
Director since
1999
Mr. Patel has served
as Chairman, Class II Director, Chief Executive Officer and President of the
Company since June 1999. From October 1998 to June 1999, Mr. Patel served as
Senior Vice President of Worldwide Engineering of the Company. Prior to
joining the Company, Mr. Patel served as the CEO of Yago Systems, Inc. from
September 1996 to October 1998. From April 1995 to September 1996, Mr. Patel
served as Senior Project Manager for QED, and from October 1991 to April
1995, he served as Senior Project Manager for Sun Microsystems. From 1980 to
1991, Mr. Patel held a variety of senior management positions at Intel and
MIPS Computers.
Class III
Directors
Terms Expire
2001
Craig R. Benson,
45
Director since
1984
Mr. Benson was
Director of Operations of the Company from November 1984 until April 1989,
when he became Chairman, Chief Operating Officer and Treasurer. In September
1997, Mr. Benson resigned as Chief Operating Officer. In May 1998, Mr.
Benson was appointed President, Chief Executive Officer, Chairman, and
Treasurer of the Company. On June 3, 1999, Mr. Benson resigned as President,
Chief Executive Officer, Chairman, and Treasurer.
Paul R. Duncan,
59
Director since
1989
Member of the
Incentive Compensation Committee and Audit Committee
Mr. Duncan has been
an Executive Vice President of Reebok International Ltd., a manufacturer of
athletic footwear and apparel, since 1990, except for the period of May 1,
1999 through January 30, 2000 when Mr. Duncan temporarily retired. Mr.
Duncan also served as Chief Operating Officer of Reebok from June 1995 to
October 1995, Chief Financial Officer from May 1985 to June 1995 and has
been a Director of Reebok since February 1989.
Class I
Director
Term Expires
2002
Michael D. Myerow,
51
Director since
1989
Member of the
Incentive Compensation Committee
Mr. Myerow has been a
partner in the Franklin, Massachusetts law firm of Myerow & Poirier
since June 1987. He joined the firm in June 1986. He has served as a
Director of Vitts Networks, Inc. since August 1996. From September 1979 to
March 1986, Mr. Myerow was General Counsel of Exeter Equities, Inc., a
consulting firm.
Securities
Ownership of Certain Beneficial Owners and Management
The following table
sets forth the amount of Common Stock of the Company beneficially owned (as
determined under the rules of the SEC), directly or indirectly, as of May
15, 2000, by (i) each current director of the Company and each nominee
director, (ii) each executive officer of the Company named in the Summary
Compensation Table, (iii) all directors and officers of the Company as a
group, and (iv) each person who is known to the Company to beneficially own
more than five percent (5%) of the outstanding shares of Common Stock of the
Company, and the percentage of the Common Stock outstanding represented by
each such amount. Unless otherwise noted, the address of each person listed
below is c/o Cabletron Systems, Inc., 35 Industrial Way, Rochester, New
Hampshire 03867.
BENEFICIAL
OWNERSHIP
Name
|
|
Stock
Beneficially
Owned
|
|
Common
Stock
|
Craig R. Benson
(1) |
|
16,134,152 |
|
8.7 |
% |
Paul R. Duncan
(2) |
|
103,334 |
|
0.1 |
% |
Enrique P. Fiallo
(2) |
|
26,333 |
|
* |
|
Earle S. Humphreys
(2) |
|
13,020 |
|
* |
|
David J.
Kirkpatrick (2) |
|
46,375 |
|
* |
|
Donald F.
McGuinness (2) |
|
136,200 |
|
0.1 |
% |
Michael D. Myerow
(2), (3) |
|
304,650 |
|
0.2 |
% |
Piyush Patel
(2), (4) |
|
370,394 |
|
0.2 |
% |
Joseph A. Solari
(2) |
|
21,020 |
|
* |
|
All directors and
officers as a group (16 persons) |
|
17,310,750 |
|
9.4 |
% |
|
Director of the
Company
|
(1)
|
Includes 1,400 shares held
in the Benson Family Charitable Trust.
|
(2)
|
Includes options held by
Messrs. Duncan, Fiallo, Humphreys, Kirkpatrick, McGuinness, Myerow, Patel
and Solari exercisable with respect to 100,000, 26,333, 13,020, 32,000,
95,000, 75,000, 92,500 and 21,020 respectively, which are exercisable
within sixty days of May 15, 2000.
|
(3)
|
Includes a total of 225,000
shares held in two trusts for the benefit of the children of Mr. Benson
and Mr. Robert S. Levine, respectively. Mr. Myerow is the sole trustee of
each trust. Excludes 2,050 shares held by Mr. Myerows spouse and
2,600 shares held by Mr. Myerows spouse as custodian for their
children, as to which shares Mr. Myerow disclaims beneficial
ownership.
|
(4)
|
Includes 49,303 shares of
restricted stock for which Mr. Patel has the power to vote but which are
subject to repurchase by the Company if Mr. Patels employment
terminates. Such right of repurchase by the Company lapses ratably per
month through September 2000. Includes a total of 4,552 shares held in two
trusts for the benefit of the children of Mr. Patel.
|
Information with
Respect to the Board of Directors and Committee Organization
During the
Companys fiscal year ended February 29, 2000, the Board of Directors
of the Company held a total of 18 meetings and acted by unanimous written
consent on one other occasion. The Company has a standing Audit Committee
and a standing Incentive Compensation Committee. No director attended fewer
than 75% of the Board of Directors meetings or meetings of committees of the
board on which he served.
The Audit Committee,
which held two meetings during fiscal 2000, reviews with management and the
Companys independent public accountants the Companys financial
statements, the accounting principles applied in their preparation, the
scope of the audit, any comments made by the independent public accountants
upon the financial condition of the Company and its accounting controls and
procedures, and such other matters as the Audit Committee deems appropriate.
In addition, the Audit Committee reviews with management such matters
relating to compliance with corporate policies as the Audit Committee deems
appropriate. Messrs. Duncan and McGuinness, neither of whom is an executive
officer or employee of the Company, currently serve on the Audit
Committee.
The Incentive
Compensation Committee of the Board of Directors acted pursuant to written
consent on 169 occasions, primarily in connection with option grants, and
held three committee meetings during fiscal 2000. In general, the function
of the Incentive Compensation Committee is to review the operation of the
Companys 1998 Equity Incentive Plan and related programs of the
Company. Messrs. Duncan, McGuinness and Myerow, none of whom is an executive
officer or employee of the Company, currently serve on the Incentive
Compensation Committee. In order to comply with certain provisions of the
Securities Exchange Act of 1934, as amended, and the Internal Revenue Code
of 1986, as amended, Mr. Myerow does not participate in the administration
of the 1998 Equity Incentive Plan and related programs of the Company in
connection with awards to executive officers of the Company named in the
Summary Compensation Table.
Director
Compensation
For their services to
the Company, non-employee directors receive an annual retainer of $10,000,
plus $750 for each Board and committee meeting attended during the year.
Directors who are employed by the Company do not receive compensation for
attendance at Board or committee meetings. Outside directors are reimbursed
for any expenses attendant to Board membership.
Pursuant to the
Companys Directors Option Plan, Messrs. Duncan, McGuinness and
Myerow were initially granted options to purchase 100,000, 150,000 and
190,000 shares, respectively, of Common Stock upon the consummation of the
Companys initial public offering in 1989. During fiscal years
1989-1998, each non-employee director was automatically granted an option to
purchase 25,000 additional shares of Common Stock on the day after the date
of each annual meeting of Stockholders of the Company pursuant to the terms
of the Companys Directors Option Plan. As of March 1, 1999, the
Companys 1989 Directors Option Plan was replaced with the
Companys 1998 Equity Incentive Plan. During each of the Boards
meetings on March 5, 2000 and May 5, 1999, the Board voted unanimously to
grant non-employee directors options to purchase 25,000 additional shares of
Common Stock pursuant to the terms of the Companys 1998 Equity
Incentive Plan. These options to non-employee directors were granted at
their fair market value on the date of grant, vest after a period of three
years and expire ten years from the grant date. The Company will, on the
date of the annual meeting, accelerate the vesting of Mr. McGuinness
option to purchase 16,666 shares of stock that would have otherwise vested
on May 30, 2001 and extend the time period during which Mr. McGuinness could
exercise most of his vested options until July 11, 2001.
Executive
Compensation
The following table
discloses the compensation received for the fiscal years ended February 29,
2000, February 28, 1999 and February 28, 1998 by the Companys Chief
Executive Officer and the Companys other four most-highly compensated
executive officers. In addition, information is provided for Mr. Benson, the
former Chairman, President, Chief Executive Officer and Treasurer of the
Company.
Summary
Compensation Table
|
|
|
|
|
|
Long-term
Compensation
|
|
|
Name and
Principal Position
|
|
Year
|
|
Annual
Compensation
|
|
Securities
Underlying
Options
|
|
All Other
Compensation ($)
|
|
|
Salary
($)(1)
|
|
Bonus
($)
|
Craig R. Benson
(2) |
|
2000 |
|
21,924 |
|
|
|
|
|
|
Former
Chairman, President, |
|
1999 |
|
52,000 |
|
|
|
|
|
|
Chief
Executive Officer and
Treasurer |
|
1998 |
|
52,000 |
|
|
|
|
|
|
Piyush Patel
(3) |
|
2000 |
|
252,879 |
|
490,000 |
|
300,000 |
|
|
Chairman, President and |
|
1999 |
|
184,608 |
|
|
|
120,000 |
|
|
Chief
Executive Officer |
|
1998 |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
Enrique P. Fiallo
(4) |
|
2000 |
|
250,000 |
|
123,500 |
|
75,000 |
|
51,005 |
President of Enterasys |
|
1999 |
|
76,923 |
|
109,615 |
|
50,000 |
|
15,111 |
Networks |
|
1998 |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
Earle S. Humphreys
(5) |
|
2000 |
|
240,865 |
|
151,245 |
|
15,000 |
|
15,801 |
President of GlobalNetwork |
|
1999 |
|
138,462 |
|
177,750 |
|
100,100 |
|
39,748 |
Technology Services |
|
1998 |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
David J.
Kirkpatrick (6) |
|
2000 |
|
289,000 |
|
126,150 |
|
30,000 |
|
|
Corporate Executive Vice |
|
1999 |
|
271,212 |
|
95,625 |
|
35,000 |
|
|
President of Finance and Chief
Financial
Officer |
|
1998 |
|
240,317 |
|
165,000 |
|
75,000 |
|
|
Joseph H. Solari
(7) |
|
2000 |
|
178,849 |
|
175,676 |
|
30,000 |
|
78,750 |
President of Europe, |
|
1999 |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
Middle
East and Africa |
|
1998 |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
(1)
|
Amounts shown include cash
and non-cash compensation earned and received by executive officers as
well as amounts earned but deferred by certain executive officers at their
election pursuant to the Cabletron Systems, Inc. 401(k) Saving and
Investment Plan.
|
(2)
|
Mr. Benson resigned as
Chairman, President, Chief Executive Officer and Treasurer on June 3,
1999.
|
(3)
|
Mr. Patel has served as
Chairman, Chief Executive Officer and President since June 3, 1999, and
prior to that role, he served as Senior Vice President of Worldwide
Engineering.
|
(4)
|
Mr. Fiallo has served as
President of Enterasys since March 2000, and prior to that role, he served
as Chief Information Officer. Mr. Fiallos other compensation refers
to $48,044 of relocation expenses and $2,961 of imputed interest related
to promissory notes dated August 23, 1999 and January 1, 2000.
|
(5)
|
Mr. Humphreys has served as
President of GlobalNetwork Technology Services since
February 2000, and prior to that role, he served as Executive Vice
President, Global Services. Mr. Humphreys other compensation refers
to $14,455 of relocation expenses and $1,346 of imputed interest related
to a promissory note dated January 1, 2000.
|
(6)
|
Mr. Kirkpatrick has served
as Corporate Executive Vice President of Finance since June 1999 and as
Chief Financial Officer since August 1990.
|
(7)
|
Prior to his separation
from the Company in March 2000, Mr. Solari had served as President of
Europe, Middle East and Africa since August 1997. Mr. Solaris other
compensation refers to gains from stock options.
|
OPTION
TABLES
Option
Grants
The following table
sets forth, for applicable executive officers named in the Summary
Compensation Table, information regarding individual grants of options made
in the last fiscal year, and their potential realizable values.
Option Grants in
the Fiscal Year Ended February 29, 2000
Name
|
|
Number of
shares
underlying
options
Granted(#)
|
|
% of
Total Options
Granted to
Employees in
Fiscal Year
|
|
Per Share
Price($/sh)
|
|
Expiration
Date
|
|
Potential
Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation For
Option Term ($)(1)
|
|
|
|
|
|
5%
|
|
10%
|
Enrique P.
Fiallo |
|
10,000 |
(2) |
|
0.2 |
% |
|
8.8125 |
|
03/25/09 |
|
48,586 |
|
119,669 |
|
|
25,000 |
(3) |
|
0.4 |
% |
|
8.1875 |
|
04/23/09 |
|
112,850 |
|
277,955 |
|
|
40,000 |
(4) |
|
0.7 |
% |
|
13.5000 |
|
07/12/09 |
|
297,717 |
|
733,292 |
Earle S.
Humphreys |
|
15,000 |
(5) |
|
0.3 |
% |
|
13.5000 |
|
07/12/09 |
|
111,644 |
|
274,984 |
David J.
Kirkpatrick |
|
30,000 |
(6) |
|
0.5 |
% |
|
13.5000 |
|
07/12/09 |
|
223,288 |
|
549,969 |
Piyush
Patel |
|
300,000 |
(7) |
|
5.4 |
% |
|
13.8125 |
|
06/02/09 |
|
2,284,566 |
|
5,626,996 |
Joseph H.
Solari |
|
30,000 |
(8) |
|
0.5 |
% |
|
13.5000 |
|
07/12/09 |
|
223,288 |
|
549,969 |
(1)
|
These potential realizable
values are based on assumed rates of appreciation required by applicable
regulations of the Securities and Exchange Commission. The potential
realizable values are not discounted to present value.
|
(2)
|
The option will become
exercisable on September 22, 2001.
|
(3)
|
The option is exercisable
at a rate of 8,333 shares on April 23, 2000, 2001 and 8,334 shares on
April 23, 2002.
|
(4)
|
The option is exercisable
at a rate of 8,000 shares on July 13, 2000, 2001, 2002, 2003 and
2004.
|
(5)
|
The option is exercisable
at a rate of 3,000 shares on July 13, 2000, 2001, 2002, 2003 and
2004.
|
(6)
|
The option is exercisable
at a rate of 6,000 shares on July 13, 2000, 2001, 2002, 2003 and 2004. The
option becomes 100% exercisable in the event of a
change-in-control.
|
(7)
|
The option is exercisable
at a rate of 60,000 shares on June 3, 2000, 2001, 2002, 2003 and
2004.
|
(8)
|
The option is exercisable
at a rate of 6,000 shares on July 13, 2000, 2001, 2002, 2003 and 2004.
Pursuant to Mr. Solaris severance agreement, he will not be entitled
to the vesting of options subsequent to March 15, 2001.
|
Option
Exercises
The following table
depicts option exercise activity in the last fiscal year and last fiscal
year-end option values with respect to applicable executive officers named
in the Summary Compensation Table. The fair market value of the
Companys Common Stock on the New York Stock Exchange at February 29,
2000 was $49.00 per share.
Aggregated Option
Exercises in the Fiscal Year Ended
February 29, 2000
and February 29, 2000 Option Values
Name
|
|
Shares
Acquired
on Exercise (#)
|
|
Value
Realized ($)
|
|
Number of
Shares Underlying
Options at 2/29/00
Exercisable/Unexercisable
|
|
Value of
Unexercised
in-the-Money
Options at 2/29/00
Exercisable/Unexercisable ($)
|
Enrique P.
Fiallo |
|
0 |
|
0 |
|
10,000/115,000 |
|
376,250/4,347,188 |
Earle S.
Humphreys |
|
0 |
|
0 |
|
10,020/105,080 |
|
418,335/4,293,340 |
David J.
Kirkpatrick |
|
0 |
|
0 |
|
32,000/100,000 |
|
1,336,000/4,175,000 |
Piyush
Patel |
|
0 |
|
0 |
|
32,500/387,500 |
|
1,356,875/14,209,375 |
Joseph H.
Solari |
|
15,000 |
|
187,500 |
|
15,020/100,080 |
|
627,085/3,990,840 |
Report of the
Incentive Compensation Committee on Executive Compensation
The Companys
executive compensation program is administered by the Board of Directors.
The Boards Incentive Compensation Committee, comprised of the
Companys three outside directors, Messrs. Duncan, McGuinness and
Myerow, determines the recipients and terms of all grants of stock-based
incentive awards under the Companys 1989 Equity Incentive Plan and the
Companys 1998 Equity Incentive Plan except for grants of stock-based
incentive awards to executive officers named in the Summary Compensation
Table, in which case only Messrs. Duncan and McGuinness participate in
determining the recipients and terms of such grants. This report is
submitted by the Incentive Compensation Committee of the Board of Directors
and addresses the Companys compensation policies for fiscal 2000 as
they affected the Companys executive officers.
Executive Officer
Compensation
The Companys
executive compensation program is designed to attract, retain and reward
executives who are capable of leading the Company in achieving its business
objectives in the competitive and rapidly-changing computer networking
industry. The compensation program is based on the philosophy that cash
compensation should vary with the performance of the Company and any
long-term incentive should closely align the officers interests with
the interests of the Companys stockholders.
Compensation for the
executive officers consists of base salary, an incentive cash bonus segment
and a stock-based incentive segment. In setting base salary levels, the
Board of Directors reviews compensation for competitive positions in the
industry and the historical compensation levels of the executives. Increases
in annual salaries year-to-year are based upon corporate performance and
merit ratings measured by actual individual performance (against targeted
performance) and various subjective performance criteria. The Board does not
formally weigh these factors.
The Company pays
quarterly incentive bonuses to its executive officers. These bonuses are
based on objective and subjective performance goals individually tailored
for each executive. Objective performance goals typically include specific
targets for financial performance, such as revenue and expenses, and
operating measurements, such as improvements in inventory management and
logistics. An executives bonus may also depend upon discretionary
criteria, such as mix of products sold, end-of-quarter backlog, product
returns and other factors related to the executives operating unit. In
determining bonus payments to each executive officer, the Companys
performance in achieving company-wide goals and revenue and earnings targets
is also considered. On an annualized basis, target incentive cash bonus
awards for fiscal 2000 for the executive officers named in the Summary
Compensation Table, other than Mr. Benson and Mr. Patel, were 50% of
executives base salary. The bonus awards for the named executive
officers, other than Mr. Benson and Mr. Patel, averaged 100% of the fiscal
2000 targeted award levels. Incentive award payments for Mr. Patel are
discussed below under the Chief Executive Officer Compensation
section.
The Company also
seeks to provide long-term compensation through its stock-based incentive
compensation program. Stock options are granted to aid in the retention of
key employees, including eligible named executives, and to align the
interests of key employees with those of stockholders. Stock options are
granted at an exercise price equal to the fair market value on the date of
grant. During fiscal 2000, most of the stock options granted to executive
officers were subject to a five-year vesting period. Stock options are
granted to key employees, including the named executive officers, based on
current performance, anticipated future contribution based on such
performance, ability to contribute to the achievement of the Companys
strategic goals and objectives, awards generally made to persons in
comparable positions in the industry, and the individuals current
level of Company stock holdings.
The Incentive
Compensation Committee and the Board of Directors, at a meeting held on July
13, 1999, unanimously voted to grant most employees, excluding executive
officers, incentive stock options with a four-year vesting schedule. In
taking this action, the Incentive Compensation Committee and the Board of
Directors considered numerous factors including the fact that stock options
are viewed
by management and employees as a significant part of their compensation
packages, vesting programs of comparable companies, the potential impact on
the retention of certain employees, possible dilution of the Common Stock
and the desire to improve the general morale of the Companys
workforce.
Consistent with the
parameters of the Companys stock-based incentive compensation program,
Messrs. Fiallo, Humphreys, Kirkpatrick, Patel and Solari have been awarded
significant stock-based incentives. Details on stock options granted to the
named executive officers are provided in the table entitled Option
Grants in the Fiscal Year Ended February 29, 2000. Current levels of
stock ownership are provided in the table entitled Beneficial
Ownership.
Section 162(m) of the
Internal Revenue Code of 1986, as amended, generally limits to $1 million
the tax deduction a public company may claim in any taxable year for
compensation to the chief executive officer and the four other most highly
compensated executive officers unless certain conditions related to such
compensation are satisfied. Executive officer compensation in fiscal 2000
was not affected by Section 162(m) because compensation levels were below
the threshold established by that statute, and the Board does not expect
Section 162(m) to affect executive compensation in the foreseeable
future.
Chief Executive
Officer Compensation
Mr.
Benson. In fiscal 2000, until his resignation on
June 3, 1999, Mr. Benson served as the Companys Chairman, President,
Chief Executive Officer and Treasurer. In determining the application of the
Companys executive compensation program with respect to Mr. Benson,
the Board has generally drawn a distinction between Mr. Benson and the
Companys other executive officers.
Mr. Benson currently
owns 8.7% of the Companys outstanding Common Stock. As the
Companys principal stockholder, Mr. Benson has directly participated
in increasing the value of the Companys Common Stock since its initial
public offering. Accordingly, in the past, the Board of Directors has
determined that his cash compensation may remain low, both absolutely and in
relation to his contribution to the Companys growth. Therefore, Mr.
Bensons salary has not increased since the Companys initial
public offering. Mr. Bensons relatively low salary is not determined
by comparison to other companies in the industry or to the Companys
corporate performance. Rather, the Board of Directors has determined that it
is in the best interests of the Company that Mr. Bensons primary form
of compensation for his leadership of the Company should be derived from
sales and increases in the value of his Common Stock.
Mr.
Patel. Effective June 3, 1999, Mr. Patel was
elected President and Chief Executive Officer of the Company. In fiscal
2000, cash compensation for Mr. Patel consisted of a base salary of $300,000
and quarterly incentive cash bonuses that totaled $490,000, or 163% of his
base salary. On an annualized basis, Mr. Patels target incentive cash
bonus award was 125% of his base salary. Mr. Patels quarterly bonuses
are determined in the discretion of the Incentive Compensation Committee
based upon the factors the Incentive Compensation Committee deems
appropriate. These factors include corporate financial performance of the
Company, overall performance of the Company as measured against various
operating goals and the performance of the Companys stock price.
During Mr. Patels term as President and Chief Executive Officer, the
Companys revenues have grown significantly, the Company has met its
operating goals and the Companys stock price has increased
substantially. These achievements occurred during a period of heavy
competition in the Companys industry. Additionally, Mr. Patel has
established a strong record in technological advancement, innovation and
realizing value from within the Company, including in particular with the
sale of the Companys FlowPoint division. In connection with his
appointment as President and Chief Financial Officer, effective June 3,
1999, Mr. Patel was awarded stock-based compensation in the form of options
to purchase 300,000 shares of Common Stock under the Companys 1998
Equity Incentive Plan, exercisable in equal installments over a period of
five years commencing on June 3, 2000 and ending on June 3,
2004.
In setting Mr.
Patels overall salary, incentive award targets and stock compensation
levels, the Incentive Compensation Committee considered current compensation
levels for the Companys executive officers and Mr. Patels level
of responsibility.
Compensation
Committee Interlocks and Insider Participation
During fiscal 2000,
the law firm of Myerow & Poirier, of which Mr. Myerow is a partner, from
time to time provided legal services to the Company, for which the Company
paid such firm a total of approximately $79,992. The Company expects to
continue to retain the services of this firm from time to time during fiscal
2001.
|
INCENTIVE
COMPENSATION COMMITTEE
|
Employment
Agreements
Mr.
Patel. The Company does not regularly enter into
written employment agreements with its executive officers. In connection
with the Companys acquisition of Yago Systems, Inc., in March 1998,
the Company entered into an employment agreement with Mr. Patel, effective
as of March 16, 1998. At the time the agreement became effective, Mr. Patel
agreed to serve as the Companys Senior Vice President of Worldwide
Engineering.
Under the terms of
his employment agreement, Mr. Patel is entitled to a base salary of $200,000
per year, subject to increase by the Board of Directors. In connection with
Mr. Patels election as President and Chief Executive Officer of the
Company, in June 1999, Mr. Patels base salary was increased to
$300,000 per year and he was granted options to purchase 300,000 shares of
Common Stock, exercisable in equal installments over five years commencing
June 3, 2000 and ending June 3, 2004. Under the terms of the agreement, Mr.
Patel is also entitled to participate in all other employee benefit plans of
the Company for employees of the Company generally and to reimbursement of
expenses incurred in the performance of his duties and
responsibilities.
The Company has not
entered into employment agreements with any other executive officers named
in the Summary Compensation Table.
Change-in-Control
Severance Benefit Plan for Key Employees
The Company has
adopted a Change-in-Control Severance Benefit Plan for Key Employees. This
plan provides severance benefits for various key employees designated by the
Board, including the executive officers named in the Summary Compensation
Table, in the event of specified terminations of employment within 18 months
following a change-in-control of the Company. Events that constitute a
change in control under this plan are described below.
If, during the
18-month period following a change-in-control, the key employees
employment is terminated without cause or the employee terminates his or her
employment for good reason, the employee is entitled to receive
severance pay in an amount equal to the sum of:
|
(1)
|
his or her annual
salary, at the rate in effect immediately prior to the date of termination
or immediately prior to the change in control, whichever is higher,
plus
|
|
(2)
|
his or her actual
bonus paid (or, if not paid, deferred) for any one of the three most
recently completed fiscal years prior to the year in which the termination
occurs, whichever is higher.
|
In addition, the plan
provides for a pro rated bonus payment for the year in which the termination
occurs, the immediate vesting of stock options and other stock-based rights
that would have become vested and exercisable within 18 months following the
termination, the payment of all salary earned but not yet paid as of the
termination date and the payment of accrued vacation earned through the date
of termination. The key employees generally may continue to participate in
all medical, dental and life insurance plans or program maintained
immediately prior to the change-in-control for up to one year following the
termination.
The plan also provides for a
gross-up payment under which, if amounts paid under the plan
would be effectively reduced by a federal excise tax on excess
parachute payments, the Company will pay the employee an additional
amount of cash, so that, after payment of all parachute taxes by the
employee, the employee will have received the amount he would have received
in the absence of any such parachute tax.
A change-in-control
under the plan generally includes the following events:
|
(1)
|
a person or group
becomes the beneficial owner of more than 30% of the Companys Common
Stock or the voting power of the Companys securities;
|
|
(2)
|
directors at the
time of adoption of the plan, or later approved by the Board, cease to be
a majority of the Companys Board;
|
|
(3)
|
a reorganization,
merger or consolidation involving the Company, or a sale or other
disposition of all or substantially all of the assets of the Company,
unless following such event (i) beneficial owners of more than 50% of the
outstanding Common Stock and the voting power of the Companys voting
securities hold substantially the same proportions of the Common Stock and
voting power of the entity resulting after the event, (ii) no person or
group acquires more than 30% of the outstanding shares of Common Stock or
combined voting power of the Companys securities resulting from such
event, and (iii) at least a majority of the members of the Board resulting
from the event were either directors at the time the plan was adopted or
had been approved by the Board; or
|
|
(4)
|
approval by the
stockholders of a complete liquidation or dissolution of the
Company.
|
The transformation of
the Company by creating four operating subsidiaries through the transfer of
a substantial portion of the Companys operating assets and related
liabilities to four of its subsidiaries does not constitute a
change-in-control under the plan.
Severance
Arrangement with Mr. Solari
In connection with
the termination of Mr. Solaris employment with the Company as of March
15, 2000, the Company entered into a severance agreement with Mr. Solari.
Under the agreement, Mr. Solari is entitled to receive cash payments of (i)
$120,000, constituting 50% of his annual base salary in effect at the time
of his termination, payable in weekly installments for one year, (ii)
$32,000, constituting his bonus for the fourth quarter of fiscal year 2000,
(iii) $50,000, constituting his annual bonus, and (iv) 50% of any quarterly
bonus as it becomes payable by the Company for the one-year period following
Mr. Solaris termination, so long as Mr. Solari has not found other
employment. If at any time during the year following his termination Mr.
Solari obtains other employment, any payments owed to Mr. Solari under the
agreement will be reduced by amounts earned from the other employment during
that one-year period. In addition, any stock options previously granted to
Mr. Solari by the Company that would have vested in the one-year period
following Mr. Solaris termination will be permitted to vest and will
be exercisable in accordance with the Companys 1989 Equity Incentive
Plan. Mr. Solari is also entitled to receive payment for all accrued
vacation time, to continue to participate in the Companys group health
plan for one year following his termination, and to receive additional
benefits including his continuing use of a company car and office space and
tax equalization benefits for United Kingdom taxes.
PROPOSAL 2:
COMPANY RESTRUCTURING
The Board of
Directors has voted to approve and, for the reasons described below,
recommends that the Companys stockholders approve, the transformation
of the Company by creating four separate operating subsidiaries through the
transfer of a substantial portion of the Companys operating assets and
related liabilities to four subsidiaries (the Company
Restructuring).
The Company intends
to enter into agreements, subject to approval of the stockholders at the
Meeting, pursuant to which it will transfer a substantial portion of its
operating assets and related liabilities to the following four subsidiaries
(with their respective subsidiaries, the Operating
Subsidiaries): (1) Aprisma Management Technologies, Inc., (2)
Enterasys Networks, Inc., (3) GlobalNetwork Technology Services,
Inc., and (4) Riverstone Networks, Inc. (formerly known as Yago Systems,
Inc.).
Aprisma Management
Technologies is focused on delivering infrastructure management software for
enterprise and service provider customers around its flagship Spectrum
software suite. Enterasys Networks is a provider of network solutions for
e-business applications, global service and support 24 hours per day, 7 days
per week, focused on serving enterprise-class customers.
GlobalNetwork Technology Services provides professional networking
consulting primarily related to the design, performance, management and
security of complex networks. Riverstone Networks provides network
infrastructure solutions, including the data center needs of co-location,
content hosting and ASPs, as well as serving content and
infrastructure service provider customers.
Each of the Operating
Subsidiaries has been organized as a Delaware corporation. If this Proposal
No. 2 is approved, each Operating Subsidiary will receive from the Company
the operations, assets and liabilities of the Company related to the
Operating Subsidiarys particular line of business. The transferred
assets are located at the Companys facilities worldwide, and include
working capital, accounts receivable, fixed assets and inventories, research
and development activities and intangible assets such as patents,
intellectual property, contracts and agreements relating to each Operating
Subsidiarys operations. Such assets would be transferred subject to
their related liabilities. In addition, other liabilities that are not
specifically related to the operations of the Operating Subsidiaries will be
allocated among and transferred to the Operating Subsidiaries. The Company
will retain certain assets consisting primarily of cash, marketable
securities, administrative and other support functions, some non-core
product lines and minority investments in independent technology companies,
which may be later contributed to the Operating Subsidiaries as may be
determined by the Board of Directors and management. Each Operating
Subsidiary will have its own separate board of directors and management
team, although each will initially share directors and officers with the
Company. Initially, the administrative and financial resources of the
Company will support all of the Operating Subsidiaries. As part of this
process, the Company will enter into intercompany arrangements with each of
the Operating Subsidiaries to provide such administrative and other support
functions for a period of time.
Each of the operating
subsidiaries has established an option pool for its employees, directors and
consultants. The operating subsidiaries have granted to existing employees,
directors and consultants options to purchase common stock representing
approximately 10% to 20% of the subsidiarys capital stock. Also, the
operating subsidiaries have reserved an additional 15% to 20% of their
common stock for issuance upon exercise of options granted to new hires,
employees of acquired companies and current holders of options to purchase
common stock of the Company.
In addition, the
Company has announced that it intends to sell to third parties or grant
rights to purchase, minority interests in the operating subsidiaries that
would represent between 3.5% and 5.5% of each operating subsidiarys
capital stock.
The Board of
Directors has determined that the Company Restructuring will provide the
Company with flexibility to better develop and implement other strategic
transactions designed to maximize the long-term competitive and strategic
advantages of each of the Companys products and services by separating
the operations associated with each of the Operating Subsidiaries. We expect
that these strategic transactions will facilitate a greater strategic focus
at each of the Operating
Subsidiaries by allowing the subsidiary directors and management to
concentrate on developing business and strategic opportunities in their
separate lines of business and focusing on their specific products or
services and customer bases. As smaller, independent companies, we expect
the Operating Subsidiaries to be able to make decisions more quickly and
deploy their resources more efficiently than they could as operating
divisions of a larger company. In addition, this process is expected to
enable the Operating Subsidiaries to adopt individualized incentive programs
for employees and management directly linked to the performance of the
respective Operating Subsidiaries businesses. Finally, we expect that
the Operating Subsidiaries would have more direct access to the capital
markets to issue debt and equity securities and to use their own equity
securities to facilitate growth through acquisitions.
In order to fully
realize the benefits described above, the Company has announced that it
currently plans to conduct an initial public offering for each of the
Operating Subsidiaries, followed by a distribution of the remaining shares
of one or more of such subsidiaries to the Companys stockholders.
Implementation and completion of this plan would likely take a twelve to
eighteen month period. The Company may also consider alternative strategic
opportunities, including a sale of the business, assets and liabilities
associated with one or more of the Operating Subsidiaries, if it determines
that such a transaction is more favorable than the initial public
offering/distribution alternative. The Company is not obligated to complete
any of these strategic transactions and no assurance can be given as to
whether or when any of these strategic transactions will be approved and
implemented. For example, an initial public offering of any of the Operating
Subsidiaries will depend on each of their individual performance, market
conditions and similar considerations. Any distribution of the remaining
shares of an Operating Subsidiary to the Companys shareholders
following an initial public offering may depend upon receipt from the
Internal Revenue Service of a ruling that such distribution will be tax-free
to the Companys stockholders and that the transaction would qualify as
a tax-free reorganization. Any such strategic transaction would only be
implemented if the Board of Directors of the Company continues to believe
that it is in the best interests of each of the Operating Subsidiaries and
the Companys stockholders.
Depending on the
circumstances, the Company may need to solicit further authorization, by
vote of the stockholders, for one or more of these strategic transactions.
For certain transactions, no further approval of the stockholders would be
required or solicited.
The Operating
Subsidiaries may enter into various agreements to facilitate the Company
Restructuring, such as cross-licensing and reseller agreements. Each
Operating Subsidiary will be free to borrow at the subsidiary level and
guarantee other debt, and may issue stock and options to employees and other
investors, including the public in an initial public offering. The
implementation of the Company Restructuring will not otherwise have an
effect on the rights of the stockholders of the Company nor, as structured,
will it have any federal income tax consequences to the stockholders of the
Company. The Company is not in arrears with respect to the payment of
dividends of principal or interest in respect of any securities of the
Company.
THE BOARD OF
DIRECTORS OF THE COMPANY CONSIDERS THE COMPANY RESTRUCTURING TO BE IN THE
BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS. THE BOARD OF DIRECTORS
OF THE COMPANY HAS UNANIMOUSLY APPROVED THE COMPANY RESTRUCTURING, AND
RECOMMENDS THAT YOU VOTE FOR SUCH PROPOSAL.
The Company
Restructuring must be approved by the affirmative vote of a majority of the
outstanding shares of the Companys Common Stock. An abstention, a
broker non-vote or a failure to return a signed proxy card will be counted
as a vote against the Company Restructuring.
Under Delaware law,
stockholders of a Delaware corporation do not have the right to receive cash
equal to the appraised value of their shares of Common Stock.
PROPOSAL 3:
AMENDMENT TO THE COMPANYS
RESTATED
CERTIFICATE OF INCORPORTION
The Companys
Restated Certificate of Incorporation currently permits the Company to issue
up to 240,000,000 shares of Common Stock. On April 27, 2000, the Board of
Directors unanimously approved an amendment to the Companys Restated
Certificate of Incorporation to permit the Company to issue up to an
aggregate of 450,000,000 shares of Common Stock. The text of the proposed
amendment is set forth below.
As of May 15, 2000,
184,547,296 shares of Common Stock were issued and outstanding. Thus,
55,452,704 authorized shares of Common Stock currently remain available for
issuance, including an aggregate of 15,414,503 shares reserved for issuance
under the Companys 1998 Equity Incentive Plan and 1989 Employee Stock
Purchase Plan.
The Board of
Directors would like to increase the number of authorized shares of Common
Stock to provide the Company with flexibility to issue its shares in
connection with possible future actions, such as stock splits, stock
dividends, financings, corporate mergers, acquisitions, use in employee
benefit plans or other corporate purposes. As of the date of this proxy
statement, the Company has no agreements or commitments with respect to the
sale or issuance of such additional shares of Common Stock except in
connection with its 1998 Equity Incentive Plan and 1989 Employee Stock
Purchase Plan. The Company has, however, announced its intention to pursue
an aggressive acquisition strategy and may use such additional shares for
potential future acquisitions. The availability of additional authorized
shares would allow the Company to accomplish these goals, and other business
and financial objectives, in the future without stockholder approval, except
as may be required in particular cases by the Companys charter
documents, applicable law or the rules of any stock exchange or other system
on which the Companys securities may then be listed. In addition to
the more traditional uses described above, the Company could issue shares of
its Common Stock as a defense against efforts to obtain control of the
Company. The Board of Directors does not intend or view the increase in
authorized shares of Common Stock as an anti-takeover measure, nor is the
Company aware of any proposed or contemplated transaction of this
type.
If this Proposal No.
3 is adopted, the newly authorized shares of Common Stock would have the
same rights as the presently authorized shares, including the right to cast
one vote per share. Although the authorization of additional shares of
Common Stock would not, in itself, have any effect on the rights of any
holder of the Companys Common Stock, the future issuance of additional
shares of Common Stock (other than a stock split or dividend) would have the
effect of diluting the voting rights and could have the effect of diluting
earnings per share and book value per share of existing
stockholders.
If approved, the
first sentence of Article IV of the Companys Restated Certificate of
Incorporation will be further amended to read in its entirety as
follows:
|
The total
number of shares of stock that this Corporation shall have authority to
issue is Four Hundred Fifty Million (450,000,000) shares of Common Stock,
$.01 par value per share, and Two Million (2,000,000) shares of Preferred
Stock, $1.00 par value per share.
|
The Board of
Directors of the Company considers the proposed increase in the amount of
authorized shares of the Companys Common Stock to be
advisable.
THE BOARD OF
DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE PROPOSAL TO AMEND THE
COMPANYS RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE AMOUNT
OF AUTHORIZED SHARES OF COMMON STOCK, AND RECOMMENDS THAT YOU VOTE FOR SUCH
PROPOSAL.
The amendment to the
Companys Restated Certificate of Incorporation must be approved by the
affirmative vote of a majority of the outstanding shares of the
Companys Common Stock.
OTHER
INFORMATION
COMPARISON OF
STOCKHOLDER RETURN
The graph below
compares cumulative total stockholder returns for the Company for the
preceding five fiscal years with the Standard & Poors
(S&P) 500 Index and the S&P Communications
Equipment/Manufacturer Index. The graph assumes the investment of $100 at
the commencement of the measurement period with dividends
reinvested.
Comparison of Five
Year Cumulative Total Return, from
February 28, 1995
Through February 29, 2000
[GRAPH APPEARS
HERE]
Cumulative Total
Return
|
|
2/95
|
|
2/96
|
|
2/97
|
|
2/98
|
|
2/99
|
|
2/00
|
Cabletron Systems,
Inc. |
|
100 |
|
197 |
|
152 |
|
78 |
|
41 |
|
247 |
S&P
500 |
|
100 |
|
135 |
|
170 |
|
229 |
|
275 |
|
307 |
S&P
Communications Equipment Index |
|
100 |
|
166 |
|
184 |
|
268 |
|
402 |
|
828 |
Each of the Report of
the Incentive Compensation Committee on Executive Compensation and the
Performance Graph set forth above shall not be deemed incorporated by
reference by any general statement incorporating this Proxy Statement into
any filing under the Securities Act of 1933, as amended, or under the
Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates this information by reference, and shall
not otherwise be deemed filed under such Acts.
CERTAIN
TRANSACTIONS
On August 23, 1999,
the Company entered into a promissory note with Mr. Fiallo in the amount of
$100,000. The loan becomes due and payable in full on June 1, 2002. The
principal amount becomes due and payable earlier if Mr. Fiallos
employment with the Company is terminated by Mr. Fiallo or by the Company
for cause, Mr. Fiallo commits any criminal offense, becomes
disabled for more than six months in any twenty four consecutive months or
dies. As of May 15, 2000, the remaining principal balance on the loan was
$100,000.
On January 1, 2000,
the Company entered into promissory notes with Mr. Fiallo and Mr. Humphreys,
each for the principal amount of $125,000. Subject to the forgiveness
provisions discussed below, the principal amount is payable (i) in full on
January 1, 2002 and (ii) with the net proceeds of any sale by Messrs. Fiallo
or Humphreys, respectively, of shares of Common Stock during the two-year
period following the date of the note, which net proceeds will be applied
against any unpaid principal. If Messrs. Fiallo and Humphreys each maintain
continuous employment with the Company through January 1, 2001, the Company
will forgive 25% of the total loan or the remaining unpaid principal,
whichever is less. If Messrs. Fiallo and Humphreys each maintain continuous
employment with the Company through January 1, 2002, the Company will
forgive the remaining 75% of the total loan or the remaining unpaid
principal, whichever is less. Any loan amounts forgiven by the Company will
be reported as taxable wages in the year the loan was forgiven. As of May
15, 2000, the remaining principal balance on each loan was
$125,000.
On April 12, 2000,
the Company entered into a promissory note with Mr. Patel in the amount of
$385,000, to be applied to the payment of certain taxes owed by Mr. Patel
with respect to shares of the Companys Common Stock received by Mr.
Patel in connection with the Companys acquisition of Yago Systems,
Inc., in 1998. The loan becomes due and payable in full on April 12, 2002
and accrues interest at the rate of 6.46% per year. If Mr. Patel sells
shares of the Companys Common Stock during the two-year period
following the date of the note, Mr. Patel must apply the net proceeds of the
sale against any unpaid principal balance. As of May 15, 2000, the remaining
principal balance on the loan was $385,000.
See the discussion
under the caption Compensation Committee Interlocks and Insider
Participation relating to Mr. Myerow.
RELATIONSHIP WITH
INDEPENDENT AUDITORS
The Board of
Directors has selected the firm of KPMG LLP, independent auditors, as
auditors for the Company for the fiscal year ending March 3, 2001. A
representative of KPMG LLP is expected to be present at the Meeting with the
opportunity to make a statement if he or she desires and to respond to
appropriate questions.
STOCKHOLDER
PROPOSALS
Stockholder proposals
intended to be presented at the Companys 2001 Annual Meeting of
Stockholders must be received by the Company no later than January 26, 2001
in order to be considered by the Companys management to be included in
the next annual proxy statement and related proxy materials.
If a stockholder
wishing to present a proposal at the 2001 Annual Meeting of Stockholders
(without regard to whether it will be included in the proxy materials for
that meeting) fails to notify the Company by April 23, 2001, the proxies
management receives for the meeting will confer discretionary authority to
vote on any stockholder proposals properly presented at that
meeting.
SECTION 16(a)
BENEFICIAL
OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the
Securities Exchange Act of 1934, as amended, requires the Companys
officers and directors, and persons who own more than 10% of the
Companys outstanding Common Stock, to file reports of ownership and
changes in ownership with the SEC and the New York Stock Exchange. Officers,
directors and greater than 10% stockholders are required by SEC regulations
to furnish the Company with all copies of Section 16(a) forms they
file.
Based solely on its
review of the copies of such forms received by it, or written
representations from certain reporting persons that no Form 5s were required
for those persons, the Company believes that during the fiscal year ended
February 29, 2000, all filing requirements were timely satisfied except that
the filing of Form 3 for each of Mr. Thomas Bunce, Mr. Thomas Gleason and
Mr. John Roese, the filing of Form 4 for each of Mr. Benson, Mr. McGuinness
and Mr. Patel and the filing of Form 5 for Mr. Kirkpatrick were not timely
filed.
WHERE YOU CAN FIND
MORE INFORMATION
The Company files
annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any reports, statements, or
other information that the Company files at the SECs public reference
rooms at the following locations:
|
·
|
Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549;
|
|
·
|
The SECs
Regional Office located at 7 World Trade Center, Suite 1300, New York, New
York 10048;
|
|
·
|
The SECs
Regional Office located at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661.
|
Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. The
Companys SEC filings are also available to the public from commercial
document retrieval services and at the Internet World Wide Web site
maintained by the SEC at http://www.sec.gov.
In addition,
stockholders may inspect material information concerning the Company at the
New York Stock Exchange, 20 Broad Street, 7th Floor, New York, New York
10005.
The SEC allows the
Company to incorporate by reference information into this
document, which means that the Company can disclose important information to
you by referring to another document filed separately with the SEC. The
information incorporated by reference is deemed to be a part of this
document, except for any information superseded by information contained
directly in this document. The Companys Annual Report on Form 10-K for
the fiscal year ended February 29, 2000 (which Annual Report accompanies
this Proxy Statement) was previously filed by the Company and is
incorporated by reference in this Proxy Statement.
The Company also
incorporates by reference any documents that it may file with the SEC
between the time this Proxy Statement is sent to stockholders and the date
of the Meeting.
The Company may have
sent to you some of the documents incorporated by reference, but you can
obtain any of them through the Company, the SEC or the SECs Internet
World Wide Web site described above. Documents incorporated by reference are
available from the Company without charge, including exhibits. Stockholders
may obtain documents incorporated by reference into this document by
requesting them in writing or by telephone at the following address and
telephone number:
Cabletron Systems,
Inc.
35 Industrial
Way
Rochester, New
Hampshire 03867
(603)
337-2247
Attention: Investor
Relations
If you would like to request
documents from the Company, please do so promptly in order to receive timely
delivery of such documents prior to the Meeting.
You should rely on
the information contained or incorporated by reference in this document to
vote your shares at the Meeting. The Company has not authorized anyone to
provide you with information that is different from what is contained in
this document. This document is dated May 25, 2000. You should not assume
that the information contained in this document is accurate as of any date
other than that date, and the mailing of this document to stockholders at
any time after that date does not create an implication to the contrary.
This Proxy Statement does not constitute a solicitation of a proxy in any
jurisdiction where, or to or from any person to whom, it is unlawful to make
such proxy solicitations in such jurisdiction.
OTHER
BUSINESS
The Board of
Directors knows of no business to be brought before the Annual Meeting which
is not referred to in the accompanying Notice of Annual Meeting. Should any
such matters be presented, the persons named in the proxy shall have the
authority to take such action in regard to such matters as in their judgment
seems advisable.
DIRECTIONS TO THE
FRANK JONES CENTER
INTERSTATE 95 (NORTH)
take exit 5 and enter the Portsmouth traffic circle. Take the first exit off
the traffic circle (Route 1 South). At the second traffic light (less than
1
/2 a mile) take a left.
Continue down this road to the parking area. Bear right towards the Frank
Jones Center.
INTERSTATE 95 (SOUTH)
take exit 5 and stay right as you come off the exit. This road will take you
under Interstate 95. As you come to the Portsmouth traffic circle get into
the left lane. Enter the traffic circle and take the second exit off the
circle (Route 1 South). At the second traffic light (less than 1
/2 a mile) take a left.
Continue down this road to the parking area. Bear right towards the Frank
Jones Center.
SPAULDING TURNPIKE
(SOUTH). After you pass the Pease Tradeport stay in the left most lanes. As
you come to the Portsmouth traffic circle get into the left lane. Enter the
traffic circle and take the second exit off the circle (Route 1 South). At
the second traffic light (less than 1
/2 a mile) take a left.
Continue down this road to the parking area. Bear right towards the Frank
Jones Center.
[x] PLEASE MARK VOTES
AS IN THIS EXAMPLE
---------------------------------------------
CABLETRON SYSTEMS, INC.
---------------------------------------------
CONTROL NUMBER:
RECORD DATE SHARES:
1. Election of Class II Director:
For the Nominee
Withhold
(01) Piyush Patel
[_]
[_]
2. Proposal to transform the
Company by creating four
For
Against
Abstain
separate operating subsidiaries and transferring
a
[_]
[_]
[_]
substantial portion of the Company's operating
assets
and related liabilities to the four subsidiaries.
3. Proposal to amend the
Company's Restated Certificate
For
Against
Abstain
of Incorporation to increase the number of
shares of
[_]
[_]
[_]
Common Stock authorized for issuance.
---------------------
Please be sure to sign and date
this Proxy. Date
Mark box at right if an address change or comment
-------------------------------------------------------------------------
------------- has been
noted on the reverse side of
this
card.
[_]
----------- Stockholder sign here --------- Co-owner sign here----
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CARD
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CBOCM1
CABLETRON SYSTEMS, INC.
Proxy for the Meeting of Stockholders, July 11, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
The undersigned hereby appoints Piyush Patel attorney
and proxy, with full power of substitution and re-substitution, to represent
and to vote at the Annual Meeting of Stockholders of Cabletron Systems, Inc.
(the "Company") to be held at The Frank Jones Center, 300 Route
One By-Pass, Portsmouth, New Hampshire 03801, on July 11, 2000 at 10:00
a.m., and at any and all adjourned sessions thereof, all shares of Common
Stock of the Company which the undersigned could vote, if present, in such
manner as the proxy determines on any matters which may properly come before
the meeting and to vote on the following, as specified below, on the reverse
side hereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF THE NOMINEE FOR DIRECTOR, FOR THE PROPOSAL TO TRANSFORM THE
COMPANY BY CREATING FOUR SEPARATE OPERATING SUBSIDIARIES AND TRANSFERRING A
SUBSTANTIAL PORTION OF THE COMPANY'S OPERATING ASSETS AND RELATED
LIABILITIES TO THE FOUR SUBSIDIARIES, AND FOR APPROVAL OF THE AMENDMENT TO
THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER
OF SHARES OF COMMON STOCK AUTHORIZED FOR ISSUANCE. THE PROXY IS AUTHORIZED
TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES
AND FOR THE OTHER MATTERS SPECIFIED ON THE REVERSE HEREOF.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE.
Please sign exactly as your name(s) appear(s) on the
books of the Company. Joint owners should each sign personally. Trustees and
other fiduciaries should indicate the capacity in which they sign, and where
more than one name appears, a majority must sign. If a corporation, this
signature should be that of an authorized officer who should state his or
her title.
HAS YOUR ADDRESS
CHANGED?
DO YOU
HAVE ANY COMMENTS?
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CABLETRON SYSTEMS, INC.
Dear Stockholder,
Please take note of the important information enclosed
with this Proxy Ballot. There are a number of issues related to the
management and operation of your company that require your immediate
attention and approval. These are discussed in detail in the enclosed proxy
materials.
Your vote counts, and you are strongly encouraged to
exercise your right to vote your shares.
Please mark the boxes on this proxy card to indicate how
your shares will be voted. Then sign the card, detach it and return your
proxy vote in the enclosed postage paid envelope or by voting
electronically.
Your vote must be received prior to the Annual Meeting
of Stockholders on July 11, 2000.
Thank you in advance for your prompt consideration of
these matters.
Sincerely,
Cabletron Systems, Inc.
CBOCM2