<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. __)
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of Commission Only
/X/ Definitive Proxy Statement (as permitted by Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
FORE SYSTEMS, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
- ----------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- ----------------------------------------------------------------------------
(3) 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):
- ----------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- ----------------------------------------------------------------------------
(5) Total fee paid:
- ----------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------
(2) Form, Schedule or Registration No.:
------------------------------
(3) Filing Party:
------------------------------
(4) Date Filed:
------------------------------
<PAGE> 2
June 25, 1996
DEAR STOCKHOLDER:
You are cordially invited to attend the 1996
Annual Meeting of Stockholders of FORE Systems, Inc.
to be held on Thursday, July 25, 1996, at 10:00
a.m., at The Westin William Penn Hotel, 530 William
Penn Place, in Pittsburgh, Pennsylvania. Your Board
of Directors and management look forward to greeting
those stockholders able to attend.
This year, in addition to electing two Class
III Directors and ratifying the selection of Price
Waterhouse LLP as independent accountants, you are
being asked to consider and approve the 1996 Stock
Option Plan. We urge you to read carefully the
accompanying Proxy Statement which describes these
proposals. Your Board of Directors recommends that
you vote FOR these proposals.
Whether or not you plan to attend, you can
ensure that your shares are represented and voted at
the Annual Meeting by promptly completing, signing,
dating and returning the enclosed proxy card in the
envelope provided.
Thank you for your cooperation and continued
support.
Sincerely,
LOGO
Eric C. Cooper
Chairman and
Chief Executive Officer
LOGO
<PAGE> 3
FORE SYSTEMS, INC.
174 THORN HILL ROAD
WARRENDALE, PENNSYLVANIA 15086-7586
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, JULY 25, 1996
------------------------
The Annual Meeting of Stockholders (the "Annual Meeting") of FORE Systems,
Inc., a Delaware corporation (the "Company"), will be held on Thursday, July 25,
1996, at 10:00 a.m., local time, at The Westin William Penn Hotel, 530 William
Penn Place, Pittsburgh, Pennsylvania 15219, for the following purposes:
1. To elect two Class III directors to serve for a term of three years
and until their respective successors are duly elected and qualified;
2. To approve the FORE Systems, Inc. 1996 Stock Option Plan;
3. To ratify the selection of Price Waterhouse LLP, independent
accountants, to audit the books and accounts of the Company for the year
ending March 31, 1997; and
4. To transact such other business as may properly come before the
Annual Meeting and any and all adjournments and postponements thereof.
The Board of Directors has fixed the close of business on June 7, 1996 as
the record date for the determination of stockholders entitled to notice of, and
to vote at, the Annual Meeting and any adjournment or postponement thereof.
The enclosed proxy is solicited by the Board of Directors of the Company.
Reference is made to the accompanying Proxy Statement for further information
with respect to the business to be transacted at the Annual Meeting.
A complete list of the stockholders entitled to vote at the Annual Meeting
will be available during ordinary business hours for examination by any
stockholder, for any purpose germane to the Annual Meeting, for a period of at
least ten days prior to the Annual Meeting, at the offices of the Company, 174
Thorn Hill Road, Warrendale, Pennsylvania.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE,
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD PROMPTLY. YOU ARE CORDIALLY
INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. THE RETURN OF THE ENCLOSED PROXY
CARD WILL NOT AFFECT YOUR RIGHT TO REVOKE YOUR PROXY OR TO VOTE IN PERSON IF YOU
DO ATTEND THE ANNUAL MEETING.
By Order of the Board of
Directors,
ROBERT D. SANSOM
Vice President and Secretary
Warrendale, Pennsylvania
June 25, 1996
YOUR VOTE IS IMPORTANT, NO MATTER HOW MANY SHARES
YOU OWNED ON THE RECORD DATE.
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATE IT,
SIGN IT AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH IS ADDRESSED FOR YOUR
CONVENIENCE AND NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. IN ORDER TO
AVOID THE ADDITIONAL EXPENSE TO THE COMPANY OF FURTHER SOLICITATION, WE ASK YOUR
COOPERATION IN MAILING YOUR PROXY PROMPTLY.
<PAGE> 4
FORE SYSTEMS, INC.
174 THORN HILL ROAD
WARRENDALE, PENNSYLVANIA 15086-7586
------------------------
PROXY STATEMENT
------------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors ("Board") of FORE Systems, Inc., a Delaware
corporation (the "Company"), for use at the Company's 1996 Annual Meeting of
Stockholders (together with any and all adjournments and postponements thereof,
the "Annual Meeting") to be held on Thursday, July 25, 1996, at 10:00 a.m.,
local time, at The Westin William Penn Hotel, 530 William Penn Place,
Pittsburgh, Pennsylvania 15219, for the purposes set forth in the accompanying
Notice of Annual Meeting of Stockholders (the "Notice"). This Proxy Statement,
together with the accompanying Notice and the enclosed proxy card, are first
being sent to stockholders on or about June 25, 1996.
RECORD DATE; VOTING SECURITIES; VOTING AND PROXIES
The Board has fixed the close of business on June 7, 1996 as the record
date for the determination of stockholders entitled to notice of, and to vote
at, the Annual Meeting (the "Record Date"). On the Record Date, there were
89,248,403 shares of Common Stock of the Company, par value $.01 per share
("Common Stock"), outstanding and entitled to vote. Each share of Common Stock
is entitled to one vote per share on each matter properly brought before the
Annual Meeting. Abstentions may be specified as to all proposals to be brought
before the Annual Meeting other than the election of directors.
Shares can be voted at the Annual Meeting only if the stockholder is
present in person or is represented by proxy. If the enclosed proxy card is
properly executed and returned prior to voting at the Annual Meeting, the shares
represented thereby will be voted in accordance with the instructions marked
thereon. In the absence of instructions, shares represented by executed proxies
will be voted as recommended by the Board. Brokers, banks and other nominee
holders will be requested to obtain voting instructions of beneficial owners of
stock registered in their names, and shares represented by a duly completed
proxy submitted by such a nominee holder on behalf of a beneficial owner will be
voted to the extent instructed by the nominee holder on the proxy card. Rules
applicable to nominee holders may preclude them from voting shares held by them
in nominee capacity on certain kinds of proposals unless they receive voting
instructions from the beneficial owners of the shares (the failure to vote in
such circumstances is referred to as a "broker non-vote").
The Board knows of no matters which are to be brought before the Annual
Meeting other than those set forth in the accompanying Notice. If any other
matters properly come before the Annual Meeting, the persons named in the
enclosed proxy card, or their duly appointed substitutes acting at the Annual
Meeting, will be authorized to vote or otherwise act thereon in accordance with
their judgment on such matters.
Any proxy may be revoked at any time prior to its exercise by attending the
Annual Meeting and voting in person, by notifying the Secretary of the Company
of such revocation in writing or by delivering a duly executed proxy bearing a
later date, provided that such notice or proxy is actually received by the
Company prior to the taking of any vote at the Annual Meeting.
The cost of solicitation of proxies for use at the Annual Meeting will be
borne by the Company. Solicitations will be made primarily by mail or by
facsimile, but regular employees of the Company may solicit proxies personally
or by telephone. In addition, the Company has retained D. F. King & Co., Inc.,
at an estimated cost of $10,000, to assist in the solicitation of proxies from
brokers, nominees, institutions and individuals on behalf of the Company.
Arrangements will also be made with custodians, nominees and
<PAGE> 5
fiduciaries for forwarding of proxy solicitation materials to beneficial owners
of shares held of record by such custodians, nominees and fiduciaries, and the
Company will reimburse such custodians, nominees and fiduciaries for reasonable
expenses incurred in connection therewith.
QUORUM; VOTES REQUIRED
The presence at the Annual Meeting, in person or by proxy, of shares of
Common Stock representing at least a majority of the total number of shares of
Common Stock entitled to vote on the Record Date will constitute a quorum for
purposes of the Annual Meeting. Shares represented by duly completed proxies
submitted by nominee holders on behalf of beneficial owners will be counted as
present for purposes of determining the existence of a quorum (even if some such
proxies reflect broker non-votes). In addition, abstentions will be counted as
present for purposes of determining the existence of a quorum.
Under applicable Delaware law, directors are to be elected by a plurality
of the votes of the shares of Common Stock present in person or represented by
proxy at the Annual Meeting. Accordingly, and in accordance with the Company's
By-Laws, the two nominees for election as directors who receive the highest
number of votes actually cast will be elected. Broker non-votes will be treated
as shares that neither are capable of being voted nor have been voted and,
accordingly, will have no effect on the outcome of the election of directors.
The remaining proposals to be brought before the Annual Meeting require the
affirmative vote of a majority of the shares present and entitled to vote at the
Annual Meeting. Abstentions will be counted as shares present at the Annual
Meeting and will thus increase the minimum number of affirmative votes necessary
to approve these proposals. Because they will not be recorded as votes in favor
of such proposals, however, abstentions will have the effect of votes against
such proposals. Broker non-votes with respect to these proposals will be treated
as shares not capable of being voted on these proposals; accordingly, broker
non-votes will have no effect either on the minimum number of affirmative votes
necessary to approve such proposals or on the outcome of voting on such
proposals.
ELECTION OF DIRECTORS
The Amended and Restated Certificate of Incorporation, as amended, and the
By-Laws of the Company provide that the number of directors (which is to be not
less than three) is to be determined from time to time by resolution of the
Board. The Board is currently comprised of seven persons.
Pursuant to the Company's Amended and Restated Certificate of
Incorporation, as amended, the members of the Board are divided into three
classes, designated Class I, Class II and Class III. Each class is to consist,
as nearly as may be possible, of one-third of the total number of members of the
Board. The term of the Class III directors expires at the Annual Meeting. The
terms of the Class I and Class II directors will expire at the 1997 and 1998
Annual Meetings of Stockholders, respectively. At each Annual Meeting, the
directors elected to succeed those whose terms expire are of the same class as
the directors they succeed and are elected for a term to expire at the third
Annual Meeting of Stockholders after their election and until their successors
are duly elected and qualified. A director of any class who is elected to fill a
vacancy resulting from an increase in the number of directors holds office for
the remaining term of the class to which he is elected and a director who is
elected to fill a vacancy arising in any other manner holds office for the
remaining term of his predecessor.
The two incumbent Class III directors are nominees for election this year
for a three-year term expiring at the 1999 Annual Meeting of Stockholders. In
the election, the two persons who receive the highest number of votes actually
cast will be elected. The proxies named in the proxy card intend to vote for the
election of the two Class III nominees listed below unless otherwise instructed.
If a holder does not wish his or her shares to be voted for a particular
nominee, the holder must identify the exception in the appropriate space
provided on the proxy card, in which event the shares will be voted for the
other listed nominee. If any nominee becomes unable to serve, the proxies may
vote for another person designated by the Board or the Board may reduce the
number of directors. The Company has no reason to believe that any nominee will
be unable to serve.
2
<PAGE> 6
Set forth below is certain information with regard to both of the nominees
for election as Class III directors and each continuing Class I and Class II
director.
NOMINEES FOR ELECTION AS CLASS III DIRECTORS
<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
- ------------------------------ ------------------------------------------------------------
<S> <C>
John C. Baker................. Mr. Baker has served as a director since December 1992. He founded
Age 46 Baker Capital Corporation (a private equity investment firm) in
September 1995, where he continues to serve as its President. Until
August 1995, he had been a Senior Vice President of Patricof & Co.
Ventures, Inc. (a multi-national venture capital firm) for more than
five years. Mr. Baker is a director of Intermedia Communications Inc.
(a provider of competitive telecom services), Xpedite Systems, Inc.
(a provider of enhanced facsimile services), Resource Bancshares
Mortgage Group, Inc. (a correspondent mortgage bank) and of several
other private companies.
Francois J. Bitz.............. Mr. Bitz is a co-founder of the Company and has served as a director
Age 36 since February 1994 and as Vice President, Engineering since
December 1993. From April 1990 until December 1992, Mr. Bitz was a
director of the Company and held the title of the Company's Chief
Engineer; from December 1992 until December 1993 he was Vice
President, Advanced Development of the Company. Prior to co-founding
the Company, Mr. Bitz was a Research Engineer at Carnegie Mellon
University's Robotics Institute and its school of Computer Science.
Mr. Bitz received his M.S. in Electrical and Computer Engineering
from Carnegie Mellon University in 1985.
</TABLE>
DIRECTORS CONTINUING AS CLASS I DIRECTORS
<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
- ------------------------------ ------------------------------------------------------------
<S> <C>
Eric C. Cooper, Ph.D.......... Dr. Cooper is a co-founder of the Company and has served as Chairman
Age 37 and Chief Executive Officer and as a director since April 1990.
Dr. Cooper served as President from April 1990 until December 1994.
Prior to co-founding the Company, Dr. Cooper was a faculty member at
Carnegie Mellon University. Dr. Cooper received his Ph.D. in Computer
Science from the University of California at Berkeley in 1985.
Onat Menzilcioglu, Ph.D....... Dr. Menzilcioglu is a co-founder of the Company and has served as a
Age 37 director since April 1990. Dr. Menzilcioglu served as Vice President,
Engineering from June 1990 until December 1994 and has served as
President since December 1994. Prior to co-founding the Company,
Dr. Menzilcioglu was a member of the Computer Science research faculty
of Carnegie Mellon University where he received his Ph.D. in Computer
Engineering in 1988.
George Archuleta.............. Mr. Archuleta has served as a director and President of the Company's
Age 63 LAN Switching Division since February 1996. From September 1991
through February 1996, he had served as President, Chief Executive
Officer and a director of ALANTEC Corporation ("ALANTEC"), which
became a wholly-owned subsidiary of the Company on February 23, 1996.
From June 1990 to September 1991, Mr. Archuleta was an independent
consultant. From January 1986 to June 1990, Mr. Archuleta was the
President, Chief Executive Officer and a director of Vitalink
Communications Corporation ("Vitalink") (a networking and satellite
communications company). He served as Vice President, Marketing and
Sales of Vitalink from May 1984 to January 1986.
</TABLE>
3
<PAGE> 7
DIRECTORS CONTINUING AS CLASS II DIRECTORS
<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
- ------------------------------ ------------------------------------------------------------
<S> <C>
Thomas J. Crotty.............. Mr. Crotty has served as a director since December 1992. He has been a
Age 38 General Partner of Battery Ventures (a venture capital partnership)
since September 1989. Prior thereto he was a Senior Associate of
Abacus Ventures (a venture capital partnership). Mr. Crotty is a
director of AnswerSoft, Inc. (a designer of software products) and
Instream Corporation (an information services company).
Robert D. Sansom, Ph.D........ Dr. Sansom is a co-founder of the Company and has served as a
Age 36 director from April 1990 to December 1992 and since February
1994. Dr. Sansom served as Executive Vice President from the
Company's inception in April 1990 to December 1993, has
served as Secretary since 1992 and has served as Vice
President, Engineering since December 1993. Prior to
co-founding the Company, Dr. Sansom was a member of the
Computer Science research faculty at Carnegie Mellon
University where he received his Ph.D. in Computer Science
in 1988.
</TABLE>
VOTES REQUIRED
The Class III directors will be elected by a plurality of the votes of
shares present and entitled to vote. Accordingly, the two nominees for election
as directors who receive the highest number of votes actually cast will be
elected. Broker non-votes will be treated as shares that neither are capable of
being voted nor have been voted and, accordingly, will have no effect on the
outcome of the election of directors.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE NOMINEES FOR
ELECTION AS CLASS III DIRECTORS.
BOARD OF DIRECTORS AND COMMITTEES
The Board met eight times during the fiscal year ended March 31, 1996. The
Board has an Executive Committee, an Audit Committee and a Compensation
Committee. The Board does not have a standing Nominating Committee.
The Executive Committee is authorized, subject to Delaware law, to exercise
the power and authority of the Board in the management of the business and
affairs of the Company between meetings of the full Board. The members of the
Executive Committee are Dr. Cooper (Chairman), Mr. Bitz, Dr. Menzilcioglu and
Dr. Sansom.
The Audit Committee is responsible for nominating the Company's independent
accountants for approval by the Board, reviewing the scope, results and costs of
the audit with the Company's independent accountants and reviewing the financial
statements of the Company and the audit function to ensure compliance with
requirements of regulatory agencies and appropriate disclosure of necessary
information to the stockholders of the Company. The members of the Audit
Committee are Messrs. Baker and Crotty. The Audit Committee met six times during
fiscal 1996.
The Compensation Committee is responsible for administering compensation
levels, for administering the Company's Incentive Stock Option and Nonqualified
Stock Option Plan ("1992 Stock Option Plan"), its 1994 Stock Option Plan, its
1995 Stock Incentive Plan, its 1994 Employee Stock Purchase Plan, the ALANTEC
Corporation Second Amended and Restated 1991 Stock Option Plan ("ALANTEC 1991
Stock Option Plan") and the ALANTEC Corporation 1994 Stock Option Plan ("ALANTEC
1994 Stock Option Plan"), and for recommending other compensation decisions to
the Board. The members of the Compensation Committee are Messrs. Baker and
Crotty. The Compensation Committee held five meetings during fiscal 1996.
4
<PAGE> 8
No director attended fewer than 75% of the total number of meetings of the
Board and the meetings of any committee of the Board on which he served during
the fiscal year ended March 31, 1996.
APPROVAL OF THE FORE SYSTEMS, INC. 1996 STOCK OPTION PLAN
On June 17, 1996, the Board adopted and approved the FORE Systems, Inc.
1996 Stock Option Plan (the "Plan"), under which awards of options to acquire
shares of Common Stock may be made to employees, directors, consultants and
advisors of the Company or any of its subsidiaries ("Discretionary Awards") and
awards of options will automatically be made to directors of the Company
("Automatic Awards"). The purpose of the Plan is to promote the interests of the
Company and its stockholders by (i) attracting and retaining employees,
directors, consultants and advisors of outstanding ability, (ii) motivating such
persons, by means of performance-related incentives, to achieve longer-range
performance goals and (iii) enabling such persons to participate in the
long-term growth and financial success of the Company. Subject to the approval
of the stockholders at the Annual Meeting, the Plan will become effective on
August 15, 1996. The following description of the Plan is qualified in its
entirety by reference to the complete copy of the Plan attached hereto as
Exhibit A.
GENERAL PROVISIONS
Administration. The Plan is to be administered by a Committee (the
"Committee") of the Board. The Board has designated the Compensation Committee
of the Board to serve as the Committee that administers the Plan. The Committee
will at all times consist of two or more persons, each of whom qualifies as an
"outside director" within the meaning of Section 162(m) or any successor
provision of the Internal Revenue Code of 1986, as amended (the "Code"), and
applicable Treasury regulations thereunder, if such qualification is deemed
necessary in order for the grant or the exercise of awards made under the Plan
to qualify for any tax or other material benefit to participants or the Company
under applicable law.
Shares Available. The maximum number of shares of Common Stock as to which
awards may be granted under the Plan is 5,500,000 shares. During the term of the
Plan, no participant in the Plan will be granted awards in respect of more than
400,000 shares of Common Stock in any calendar year. The Common Stock to be
offered under the Plan will be authorized but unissued Common Stock, or issued
Common Stock which will have been reacquired by the Company and held in its
treasury. As of June 25, 1996, no awards had been made under the Plan.
Shares Subject to Terminated Awards. The Common Stock covered by any
unexercised portion of terminated stock options granted under the Plan may again
be subject to new awards under the Plan. In the event the purchase price of a
stock option is paid in whole or in part through the delivery of Common Stock,
only the net number of shares of Common Stock issuable in connection with the
exercise of the stock option will be counted against the number of shares
remaining available for the grant of awards under the Plan.
Adjustments. The number of shares subject to outstanding options under the
Plan, the exercise price of such stock options and the number of shares
available for stock options subsequently granted under the Plan will be
appropriately adjusted to reflect any stock dividend, stock split, combination
or exchange of shares, merger, consolidation or other change in capitalization
with a similar substantive effect upon the Plan or the awards granted under the
Plan.
DISCRETIONARY AWARDS OF STOCK OPTIONS
Discretionary Awards. The Committee will have discretion to grant awards
under the Plan to employees, directors, consultants or advisors of the Company
or any of its subsidiaries, provided that such consultants or advisors render
bona fide services which are not in connection with the offer or sale of
securities in a capital-raising transaction. The Committee will determine those
individuals who will receive Discretionary Awards and the number of shares of
Common Stock to be covered by each Discretionary Award. Discretionary Awards may
be in the form of stock options meeting the requirements of Section 422 of the
Code ("Incentive Stock Options") or stock options which do not meet such
requirements ("Nonqualified Options").
5
<PAGE> 9
Terms and Conditions of Discretionary Awards. The Committee will determine
the terms and conditions of each Discretionary Award, provided that (i)
Discretionary Awards will be granted at an exercise price of not less than 100%
of the fair market value of the Common Stock on the date of grant (110% of the
fair market value in the case of a grant of Incentive Stock Options to a
participant who at the time of such grant owns (within the meaning of Section
424(d) of the Code) more than 10% of the voting power of all classes of stock of
the Company (a "10% Holder"), (ii) the period within which a Discretionary Award
may be exercised will not exceed ten years from the date of grant (five years in
the case of a grant of Incentive Stock Options to a 10% Holder), and (iii) the
aggregate fair market value (determined on the date of grant) of Common Stock
with respect to which Incentive Stock Options granted to a participant under the
Plan or any other plan of the Company and its subsidiaries become exercisable
for the first time in any single calendar year will not exceed $100,000. Unless
otherwise determined by the Committee, all rights to exercise options under
Discretionary Awards will terminate on the first to occur of (i) the scheduled
expiration date as set forth in the applicable stock option agreement, (ii)
thirty days following the date of termination of employment for any reason other
than death or permanent disability (as defined in the Code) of the participant
or (iii) one year following the date of termination of employment by reason of
the participant's death or permanent disability.
AUTOMATIC AWARDS OF STOCK OPTIONS
Initial Awards. An individual who first becomes a member of the Board after
August 15, 1996 will receive a Nonqualified Option to purchase 10,000 shares of
Common Stock on the date of his or her election to the Board (an "Initial
Award"). No current member of the Board will be eligible to receive an Initial
Award. Initial Awards will become exercisable in three annual installments of
3,334, 3,333 and 3,333 shares, respectively, beginning on the first anniversary
of the date of grant, provided that the optionee is serving as a member of the
Board on each such anniversary date.
Annual Awards. Each person who is a member of the Board immediately
preceding the annual meeting of stockholders in each year beginning in 1996 (the
"Annual Meeting Date") will receive a Nonqualified Option to purchase 2,000
shares of Common Stock (an "Annual Award") on the Annual Meeting Date. Annual
Awards will be immediately exercisable in full. An Annual Award will be made on
August 15, 1996 to each person who is then a member of the Board and who was a
member of the Board on the Annual Meeting Date in 1996.
Terms and Conditions of Automatic Awards. The exercise price of each
Initial Award and each Annual Award will be the fair market value of the Common
Stock on the date of grant. The term of each Initial Grant and each Annual Grant
will be ten years. All rights to exercise options will terminate on the first to
occur of (i) the scheduled expiration date of such option or (ii) one year
following the date of termination of service as a director.
OTHER TERMS AND CONDITIONS
The exercise price of all stock options granted under the Plan will be
payable in cash or in such other form of consideration as the Committee may
approve in the applicable option agreement, including, without limitation, (i)
by the delivery to the Company by the participant of a promissory note
containing such terms as the Committee may determine, (ii) by the delivery to
the Company by the participant of shares of Common Stock that have been held by
the participant for at least six months prior to exercise of the option, valued
at the fair market value of such shares on the date of exercise or (iii)
pursuant to a cashless exercise arrangement with a broker. Unless otherwise
determined by the Committee with respect to Nonqualified Options, stock options
will not be transferable, except by will or the laws of descent and
distribution, and may be exercised during a participant's lifetime only by the
participant.
WITHHOLDING OBLIGATIONS
The Company has the right to deduct from a participant's salary, bonus or
other compensation any taxes required by law to be withheld with respect to
awards made under the Plan. In the Committee's discretion, a
6
<PAGE> 10
participant may be permitted to elect to have withheld from the shares otherwise
issuable to the participant, or to tender to the Company, the number of shares
of Common Stock whose fair market value equals the amount required to be
withheld.
AMENDMENT AND TERMINATION
The Board may, by resolution, amend or revise the Plan. Such action will
not be effective without stockholder approval if such approval is required to
maintain the compliance of the Plan and/or awards granted to directors,
executive officers or other persons with Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended, or any successor rule. The Board
may not modify any options previously granted under the Plan in a manner adverse
to the holders thereof without the consent of such holders (other than such
adjustments required to reflect capital changes). The Plan will terminate on
August 14, 2006, unless it is earlier terminated by the Board.
NEW PLAN BENEFITS
The following table sets forth the benefits which will be received on
August 15, 1996 if stockholders approve the Plan at the Annual Meeting by (i)
each executive officer who is also a director, (ii) all current executive
officers as a group and (iii) all current directors who are not executive
officers as a group.
NEW PLAN BENEFITS
1996 STOCK OPTION PLAN
<TABLE>
<CAPTION>
SHARES SUBJECT
TO STOCK
NAME AND POSITION(1) OPTIONS(2)
- -------------------- --------------
<S> <C>
Eric C. Cooper................................................................. 2,000
Chief Executive Officer, Chairman and Director
Onat Menzilcioglu.............................................................. 2,000
President and Director
Robert D. Sansom............................................................... 2,000
Vice President, Engineering and Director
Francois J. Bitz............................................................... 2,000
Vice President, Engineering and Director
Executive Group................................................................ 8,000
Non-Executive Director Group................................................... 6,000
</TABLE>
- ---------
(1) An Annual Award will be made on August 15, 1996 to each person who is then a
member of the Board, provided that such person was a member of the Board on
the date of the Annual Meeting.
(2) The exercise price per share will be equal to the fair market value of a
share of Common Stock on August 15, 1996.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the principal federal income tax
consequences of awards under the Plan based upon current federal income tax
laws. The summary is not intended to be exhaustive and, among other things, does
not describe state, local or foreign tax consequences.
A participant is not subject to federal income tax either at the time of
grant or at the time of exercise of an Incentive Stock Option. However, in the
year of exercise, the difference between the fair market value of the stock and
the exercise price is an item of tax preference subject to the possible
application of the alternative minimum tax. If a participant does not dispose of
shares of Common Stock acquired through the exercise of an Incentive Stock
Option within one year after their receipt and within two years after the date
of
7
<PAGE> 11
grant of the Incentive Stock Option (either event, a "disqualifying
disposition"), the taxable income recognized upon the sale of such shares will
be taxed at the long-term capital gains rate.
The Company will not receive any tax deduction on the exercise of an
Incentive Stock Option or, if there is no disqualifying disposition, on the sale
of the underlying stock. If there is a disqualifying disposition, the
participant will be treated as receiving compensation subject to ordinary income
tax in the year of the disqualifying disposition and the Company will be
entitled to a deduction for compensation expense. The tax will be imposed on the
lesser of (i) the difference between the fair market value of the stock at the
time of exercise and the exercise price or (ii) the difference between the
amount realized on disposition and the exercise price. Any appreciation in value
after the time of exercise will be taxed as capital gain and will not result in
any deduction by the Company.
There are no federal income tax consequences at the time of grant of a
Nonqualified Stock Option. Upon exercise of a Nonqualified Stock Option, the
participant must pay tax on ordinary income equal to the difference between the
exercise price and the fair market value of the stock on the date of exercise.
The Company will receive a corresponding tax deduction at the time of exercise.
VOTE REQUIRED
The proposal to approve the Plan will be approved by the stockholders if it
receives the affirmative vote of a majority of the shares present and entitled
to vote on the proposal. If a proxy card is specifically marked as abstaining
from voting on the proposal to approve the Plan, the abstention will have the
effect of a vote against the proposal, even though the shares represented
thereby will not be counted as having been voted against the proposal. Broker
non-votes will be treated as shares not capable of being voted on the proposal
and, accordingly, will have no effect on the outcome of voting on the proposal.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE THE PLAN.
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Board has selected Price Waterhouse LLP to serve as the Company's
principal accountants for the year ending March 31, 1997. A representative of
Price Waterhouse LLP will be present at the Annual Meeting and will have the
opportunity to make a statement, if such person desires to do so, and to respond
to appropriate questions.
The proposal to ratify the selection of Price Waterhouse LLP will be
approved by the stockholders if it receives the affirmative vote of a majority
of the shares present and entitled to vote on the proposal. If a proxy card is
specifically marked as abstaining from voting on the proposal to approve the
ratification of the selection of Price Waterhouse LLP as independent
accountants, the abstention will have the effect of a vote against the proposal,
even though the shares represented thereby will not be counted as having been
voted against the proposal. Broker non-votes will be treated as shares not
capable of being voted on the proposal and, accordingly, will have no effect on
the outcome of voting on the proposal.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION OF THE SELECTION OF
PRICE WATERHOUSE LLP AS INDEPENDENT ACCOUNTANTS.
8
<PAGE> 12
EXECUTIVE COMPENSATION
COMPENSATION SUMMARY
The following table sets forth information regarding compensation of the
Chief Executive Officer and the four most highly compensated executive officers
of the Company other than the Chief Executive Officer (the "Named Executive
Officers") of the Company for the fiscal years ended March 31, 1996, 1995 and
1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------------- ------------
OTHER ANNUAL STOCK OPTION ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) AWARDS(#) COMPENSATION($)
- ------------------------------ ------- ------- ------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Eric C. Cooper................ 1996 165,263 90,894 -- -- 6,611(1)
Chairman and 1995 132,500 62,937 -- -- 5,300(1)
Chief Executive Officer 1994 125,000 62,500 -- -- 5,000(1)
Onat Menzilcioglu............. 1996 145,000 79,750 -- -- 5,800(1)
President 1995 106,000 50,350 -- -- 4,240(1)
1994 100,000 50,000 -- -- 4,000(1)
Francois J. Bitz.............. 1996 117,621 64,692 -- -- 4,705(1)
Vice President, Engineering 1995 106,000 50,350 -- -- 4,240(1)
1994 100,000 50,000 -- -- 4,000(1)
Robert D. Sansom.............. 1996 117,621 64,692 -- -- 4,705(1)
Vice President, Engineering 1995 106,000 50,350 -- -- 4,240(1)
1994 100,000 50,000 -- -- 4,000(1)
Michael I. Green.............. 1996 140,288 70,421 -- -- 5,122(1)
Vice President, Sales 1995 106,000 50,350 -- -- 4,240(1)
and Marketing 1994 100,000 50,000 56,317(2) 315,000(3) 4,000(1)
</TABLE>
- ---------
(1) Consists of a discretionary contribution by the Company under the Company's
401(k) plan.
(2) Consists of a relocation allowance of $50,917 and an automobile allowance of
$5,400.
(3) On May 6, 1996, the Board declared a two-for-one Common Stock split effected
in the form of a Common Stock dividend paid on June 3, 1996 to stockholders
of record on May 20, 1996 ("Stock Dividend"). Common Stock share data
presented in this table has been retroactively adjusted to give effect to
the Stock Dividend.
SUBSEQUENT EVENT
Subsequent to the end of the 1996 fiscal year, stock options were granted
to each of the Named Executive Officers to acquire shares in the following
amounts (adjusted for the Stock Dividend): Dr. Cooper, 500,000 shares; Dr.
Menzilcioglu, 450,000 shares; Mr. Bitz, 300,000 shares; Dr. Sansom, 300,000
shares; and Mr. Green, 100,000 shares. These stock options, which were granted
pursuant to the Company's 1995 Stock Incentive Plan, vest over a four-year
period beginning on the date of grant, and have an exercise price equal to the
fair market value of the Company's Common Stock on the date of grant, which was
$33.38 (as adjusted for the Stock Dividend).
STOCK OPTION EXERCISES/YEAR-END STOCK OPTION VALUES
The following table sets forth certain information with respect to the
exercise of options by the Named Executive Officers during the year ended March
31, 1996 and the value of options held at that date.
9
<PAGE> 13
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
SHARES FISCAL YEAR-END(#)(1) FISCAL YEAR-END($)(1)(2)
ACQUIRED ON VALUE ----------------------------- -----------------------------
NAME EXERCISE(#)(1) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael I. Green....... 202,500 3,341,688 138,752 236,248 4,873,993 8,256,132
</TABLE>
- ---------
(1) Common Stock share data presented in this table has been retroactively
adjusted to give effect to the Stock Dividend.
(2) Represents the difference between the closing price of the Common Stock as
reported on the Nasdaq National Market on March 29, 1996 ($35.75 (adjusted
for the Stock Dividend)) and the exercise price of the options, multiplied
by the number of shares of Common Stock issuable upon exercise of the
options.
ARRANGEMENTS REGARDING TERMINATION OF EMPLOYMENT
The Company has entered into non-competition agreements with Dr. Cooper,
Dr. Menzilcioglu, Mr. Bitz and Dr. Sansom. Pursuant to the terms of each
agreement, if the employment of a party is terminated for any reason, the
Company may exercise an option to prevent him from engaging in any business
involving the development, production, testing, sale or servicing of local area
Asynchronous Transfer Mode networking products in North America for a period of
one year after his termination. If the Company exercises such option, it must
pay the terminated party twelve monthly payments, each equal to his monthly
salary at the time of termination. Each of such non-competition agreements
expires on December 21, 1997.
On April 18, 1996, the Board adopted the FORE Systems, Inc. Change in
Control Separation Plan ("Change in Control Separation Plan") wherein each Named
Executive Officer is eligible to receive from the Company certain separation
benefits if a change in control occurs and if, within two years thereafter, the
Named Executive Officer's employment with the Company is terminated either by
action of the Company without cause or by the Named Executive Officer's
resignation from employment for good reason as defined in the Change in Control
Separation Plan. Such separation benefits include payment of one year of base
salary and bonus plus a prorated bonus payment for that portion of the year of
termination for which the Named Executive Officer was employed, provision of
welfare benefits for the Named Executive Officer and his family for three years
and acceleration of vesting of stock options that would have vested within
eighteen months after the date of the Named Executive Officer's termination of
employment.
A "change in control" is deemed to occur under the Change in Control
Separation Plan upon any of the following events: (i) an individual, entity or
group (as specified in the Change in Control Separation Plan) acquires, other
than from the Company, beneficial ownership of 30% or more of the then
outstanding shares of Common Stock or voting power of the Company's then
outstanding securities; (ii) individuals (a) who, as of the effective date of
the Change in Control Separation Plan, constitute the Board (the "Incumbent
Board") or (b) whose nomination or election to the Board is approved by a
majority of the directors then comprising the Incumbent Board, cease to
constitute at least a majority of the Board; (iii) a reorganization, merger or
consolidation of the Company (a "Business Combination") other than one in which
the beneficial owners of the Company's Common Stock or voting securities own
more than 50% of the shares of Common Stock or voting securities of the
surviving or resulting entity in substantially the same proportion as their
ownership of the Company's Common Stock or voting securities immediately prior
to the Business Combination; or (iv) (A) the consummation of a complete
liquidation or dissolution of the Company or (B) the disposition of all or
substantially all of the assets of the Company other than to a corporation of
which the beneficial owners of the Company's Common Stock or voting securities
immediately prior to such disposition own more than 50% of the shares of Common
Stock or voting securities in substantially the same proportion as their
ownership of the Company's Common Stock or voting securities immediately prior
to such disposition.
10
<PAGE> 14
COMPENSATION OF DIRECTORS
During the fiscal year ended March 31, 1996, directors did not receive
compensation for serving as members of the Board. Directors are reimbursed for
travel and other expenses relating to attendance at meetings of the Board or
committees thereof.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Baker and Crotty served as members of the Compensation Committee
during the fiscal year ended March 31, 1996.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of May 31, 1996 held (i) by each
person who is known by the Company to have been the beneficial owner of more
than five percent of the Company's Common Stock on such date, (ii) by each
director and Named Executive Officer of the Company and (iii) by all directors
and executive officers of the Company as a group (based on 89,148,176 shares of
Common Stock outstanding as of such date as adjusted for the Stock Dividend).
<TABLE>
<CAPTION>
SHARES OWNED BENEFICIALLY(1)
----------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT
- ------------------------------------ ------ -------
<S> <C> <C>
Eric C. Cooper................................................... 3,587,970(2) 4.0
Onat Menzilcioglu................................................ 3,223,000(3) 3.6
Francois J. Bitz................................................. 4,000,000 4.5
Robert D. Sansom................................................. 3,780,000(4) 4.2
George Archuleta................................................. 653,559(5) *
John C. Baker.................................................... 104,282 *
Thomas J. Crotty................................................. 4,270 *
Michael I. Green................................................. 355,602(6) *
Entities affiliated with Twentieth............................... 5,160,000(7) 5.8
Century Companies, Inc.
4500 Main Street, P.O. Box 418210
Kansas City, MO 64141-8120
Chancellor Capital Management, Inc............................... 4,758,800(8) 5.3
and Chancellor Trust Company
1166 Avenue of the Americas
New York, NY 10036
All directors and executive officers as a group (9 persons)...... 15,876,633(9) 17.7
</TABLE>
- ---------
* Less than 1%
(1) Common Stock share data presented in this table has been retroactively
adjusted to give effect to the Stock Dividend.
(2) Includes 562,220 shares owned by Dr. Cooper's spouse and 255,140 shares
owned by trusts of which Dr. Cooper's spouse is trustee and his children are
beneficiaries. Dr. Cooper disclaims beneficial ownership of all such shares.
(3) Includes 40,000 shares owned by Dr. Menzilcioglu's spouse. Dr. Menzilcioglu
disclaims beneficial ownership of all such shares.
11
<PAGE> 15
(4) Includes 600,000 shares owned by Dr. Sansom's spouse. Dr. Sansom disclaims
beneficial ownership of all such shares.
(5) Includes 168,165 shares which could be acquired pursuant to the exercise of
stock options exercisable within 60 days of May 31, 1996.
(6) Includes 75,002 shares which could be acquired pursuant to the exercise of
stock options exercisable within 60 days of May 31, 1996. Also includes
4,400 shares owned by Mr. Green as custodian for his children; Mr. Green
disclaims beneficial ownership of all such shares.
(7) Based on information contained in Amendment No. 1 to a Schedule 13G filed by
Twentieth Century Companies, Inc. with the Securities and Exchange
Commission on or about February 9, 1996. Investors Research Corporation, a
wholly-owned subsidiary of Twentieth Century Companies, Inc., acts as
investment advisor to several investment companies registered under Section
8 of the Investment Company Act of 1940. The ownership of one investment
company, Twentieth Century Investors, Inc., amounted to 4,800,000 shares of
Common Stock.
(8) Based on information contained in a Schedule 13G filed by Chancellor Capital
Management, Inc. and Chancellor Trust Company with the Securities and
Exchange Commission on or about February 13, 1996. Chancellor Capital
Management, Inc. and Chancellor Trust Company are investment advisers for
various fiduciary accounts.
(9) Includes 391,917 shares which could be acquired pursuant to the exercise of
stock options exercisable within 60 days of May 31, 1996.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee administers the 1992 Stock Option Plan, the 1994
Stock Option Plan, the 1994 Employee Stock Purchase Plan and the 1995 Stock
Incentive Plan, as well as the ALANTEC 1991 Stock Option Plan and the ALANTEC
1994 Stock Option Plan, which were assumed by the Company pursuant to its
acquisition of ALANTEC in February 1996. The Compensation Committee also
recommends to the Board salaries, bonuses, benefits and other remuneration
payable to the officers and key employees of the Company. The members of the
Compensation Committee are John C. Baker and Thomas J. Crotty, neither of whom
is employed by the Company.
In the 1996 fiscal year, the Company had six officers, four of whom
(including the Chief Executive Officer) are founders of the Company and members
of the Board. Each of the founders owns a significant percentage of the
Company's Common Stock and, therefore, each of them participates proportionately
in any increase in stockholder value. During the 1996 fiscal year, none of the
founders were granted options under any of the Company's stock option plans. The
other two officers of the Company have been granted options under the Company's
stock option plans, but, because both of them had been granted a significant
number of options in prior fiscal years, no grants were made in fiscal 1996.
The Compensation Committee believes that the salaries paid to the Company's
officers (including the Chief Executive Officer) are modest in comparison to the
average in the computer networking industry. The salary levels reflect the fact
that the Company was founded only six years ago and, from its inception,
attempted to become profitable by controlling costs. The Company's compensation
philosophy has been to grant each key employee an equity stake in the Company so
as to align employees' interests with stockholders' interests. The Company's
officers (including the Chief Executive Officer) have profited from the increase
in stockholder value of the Company.
In April 1995, the Compensation Committee adopted a Senior Management Bonus
Plan for the 1996 fiscal year which would reward the Company's officers with
bonus payments if certain revenue, earnings per share and individual performance
objectives were achieved. Under the Senior Management Bonus Plan, no bonus pool
would be available unless specific revenue and earnings per share objectives
were met in each fiscal quarter. If these objectives were met in each fiscal
quarter, then, at the conclusion of the fiscal year, a bonus pool of 30% of each
officer's base salary would become available, and for each $5 million by which
the revenue objective was exceeded, an additional 5% of base salary would become
available, up to a maximum of 100% of
12
<PAGE> 16
base salary for each officer. Of the available bonus pool, 70% of each officer's
bonus was payable based exclusively on the achievement of the corporate revenue
and earnings per share objectives and the other 30% was payable based on the
Compensation Committee's assessment of the individual performance of each
officer within the context of the officer's duties and responsibilities. No
specific, predetermined goals or milestones were employed by the Compensation
Committee in awarding the personal performance component of the bonus pool.
The Compensation Committee calculated the Company's revenue and earnings on
a stand-alone basis for FORE Systems, Inc., excluding the revenue and earnings
of ALANTEC, for the first three fiscal quarters, and included ALANTEC's revenue
and earnings for the fourth fiscal quarter because the acquisition of ALANTEC
was completed during that quarter. Based on this calculation, the Company
exceeded the revenue and earnings objectives for each fiscal quarter. Therefore,
a total bonus pool of approximately 55% of each officer's salary was available
under the Senior Management Bonus Plan. The Compensation Committee awarded the
entire bonus amount available to each of the Company's officers.
The Company does not maintain benefit plans exclusively for its officers,
nor does it provide officers with other benefits that are not generally
available to all of the Company's employees.
The Compensation Committee has considered the potential impact of Section
162(m) of the Code which imposes a limit on tax deductions for annual
compensation in excess of $1,000,000 paid to any of the five most highly
compensated executive officers. The Committee does not believe that this
limitation will apply to the Company in the foreseeable future because the 1995
Stock Incentive Plan and the 1996 Stock Option Plan have been designed to
qualify options awarded to executive officers under these plans as "performance
based" compensation that is excluded from the calculation of the $1,000,000
limitation, and the Committee does not expect the base salaries and bonuses of
the Chief Executive Officer and the other executive officers to exceed the
$1,000,000 level.
JOHN C. BAKER THOMAS J. CROTTY
13
<PAGE> 17
COMPARISON OF CUMULATIVE TOTAL RETURN SINCE MAY 23, 1994
The following graph shows the cumulative total stockholder return on the
Common Stock from May 23, 1994 (the last trading day before the date of the
Company's initial public offering) through March 31, 1996, as compared to the
returns of the Total Return Index for The Nasdaq Stock Market (US) and the
Nasdaq Computer Manufacturer Stocks Index. The graph assumes that $100 was
invested in the Common Stock of the Company and in the Total Return Index for
The Nasdaq Stock Market (US) and the Nasdaq Computer Manufacturer Stocks Index
as of May 23, 1994, and assumes reinvestment of dividends.
<TABLE>
<CAPTION>
Total Return Index Nasdaq Computer
Measurement Period for The Nasdaq Manufacturer
(Fiscal Year Covered) FORE Systems, Inc. Stock Market (US) Stocks Index
<S> <C> <C> <C>
5/23/94 100.00 100.00 100.00
6/30/94 184.38 97.78 93.52
9/30/94 278.13 105.88 113.71
12/31/94 421.88 104.67 130.67
3/31/95 493.75 114.11 137.74
6/30/95 378.13 130.52 167.51
9/29/95 462.50 146.24 201.55
12/29/95 743.75 148.05 205.84
3/29/96 893.75 154.94 212.57
</TABLE>
<TABLE>
<CAPTION>
5/23/94 6/30/94 9/30/94 12/31/94 3/31/95 6/30/95 9/29/95 12/29/95 3/29/96
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FORE Systems, Inc. 100.00 184.38 278.13 421.88 493.75 378.13 462.50 743.75 893.75
Total Return Index
for The Nasdaq
Stock Market (US) 100.00 97.78 105.88 104.67 114.11 130.52 146.24 148.05 154.94
Nasdaq Computer
Manufacturer
Stocks Index 100.00 93.52 113.71 130.67 137.74 167.51 201.55 205.84 212.57
</TABLE>
14
<PAGE> 18
OTHER MATTERS
Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as
amended (the "Act"), stockholders may present proper proposals for inclusion in
the Company's proxy statement and for consideration at the next Annual Meeting
of Stockholders by submitting such proposals to the Company in a timely manner.
In order to be so included for the 1997 Annual Meeting, stockholder proposals
must be received by the Company no later than February 25, 1997, and must
otherwise comply with the requirements of Rule 14a-8.
The Company's By-Laws provide that advance notice of stockholder-proposed
business to be brought before an Annual Meeting of Stockholders and of
nominations for election as directors must be given to the Secretary of the
Company not less than 60 days in advance of the date of the Annual Meeting. To
propose business for an Annual Meeting, a stockholder must specify in writing
the business desired to be brought before the Annual Meeting and the reasons for
conducting such business at the Annual Meeting, the proposing stockholder's name
and address, the class and number of shares beneficially owned by the
stockholder and any material interest of the stockholder in such business. The
Company's By-Laws also provide that a stockholder may request that persons be
nominated for election as directors by submitting such request, together with
the written consent of the persons proposed to be nominated, to the Secretary of
the Company not less than 60 days prior to the date of the Annual Meeting. To be
in proper form, the nominating stockholder must set forth in writing, as to each
proposed nominee, the nominee's age, business address, residence address,
principal occupation or employment, number of shares of Common Stock of the
Company beneficially owned by such person and such other information related to
such person as is required to be disclosed by applicable law, and, as to the
stockholder submitting the request, such stockholder's name and address as they
appear on the Company's books and the number of shares of Common Stock of the
Company owned beneficially by such person. The Company may require any proposed
nominee to furnish such other information as may reasonably be required by the
Company to determine the eligibility of such proposed nominee to serve as a
director of the Company.
Under Section 16(a) of the Act, the Company's directors, officers and
persons who are directly or indirectly the beneficial owners of more than 10% of
the Common Stock of the Company are required to file with the Securities and
Exchange Commission (the "Commission"), within specified monthly and annual due
dates, a statement of their initial beneficial ownership and all subsequent
changes in ownership of Common Stock. Rules of the Commission require such
persons to furnish the Company with copies of all Section 16(a) forms they file.
Based solely upon a review of such forms, the Company believes that, during
fiscal 1996, other than Robert D. Sansom, Francois J. Bitz and John C. Baker who
each filed one late report (each relating to a single transaction) required by
Section 16(a) of the Act to be filed during fiscal 1996 or prior fiscal years,
all such persons complied with all applicable filing requirements.
STOCKHOLDERS MAY OBTAIN A COPY (WITHOUT EXHIBITS) OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED MARCH 31, 1996, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION WITHOUT CHARGE BY WRITING TO: INVESTOR
RELATIONS, FORE SYSTEMS, INC., 174 THORN HILL ROAD, WARRENDALE, PENNSYLVANIA
15086-7586.
15
<PAGE> 19
EXHIBIT A
FORE SYSTEMS, INC.
1996 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN
The purpose of the FORE Systems, Inc. 1996 Stock Option Plan (the "Plan")
is to promote the interests of FORE Systems, Inc. (the "Company") and its
stockholders by (i) attracting and retaining employees, directors, consultants
and advisors of outstanding ability, (ii) motivating such persons, by means of
performance-related incentives, to achieve longer-range performance goals, and
(iii) enabling such persons to participate in the long-term growth and financial
success of the Company.
2. ADMINISTRATION
Except as set forth in Section 6, the Plan shall be administered by a
committee (the "Committee") of the Board of Directors of the Company (the
"Board"). The Committee shall at all times consist of two or more persons, each
of whom qualifies as an "outside director" within the meaning of Section 162(m)
or any successor provision of the Internal Revenue Code of 1986, as amended (the
"Code") and applicable Treasury regulations thereunder, if such qualification is
deemed necessary in order for the grant or the exercise of awards made under the
Plan to qualify for any tax or other material benefit to participants or the
Company under applicable law. The Committee is authorized to interpret the Plan,
to prescribe, amend and rescind rules and regulations to further the purposes of
the Plan, and to make all other determinations necessary for the administration
of the Plan. All such actions by the Committee shall be final and binding.
3. SHARES
(A) SHARES AVAILABLE. Subject to adjustment as provided in Section 7,
awards in respect of an aggregate of up to 5,500,000 shares of the Common Stock
of the Company, par value $.01 per share (the "Common Stock"), may be made under
the Plan. During the term of the Plan, no participant shall be granted awards in
respect of more than 400,000 shares of Common Stock in any calendar year. The
Common Stock to be offered under the Plan shall be authorized and unissued
Common Stock, or issued Common Stock which shall have been reacquired by the
Company and held in its treasury.
(B) SHARES SUBJECT TO TERMINATED AWARDS. The Common Stock covered by any
unexercised portion of terminated stock options granted under the Plan may again
be subject to new awards under the Plan. In the event the purchase price of a
stock option is paid in whole or in part through the delivery of Common Stock,
only the net number of shares of Common Stock issuable in connection with the
exercise of the option shall be counted against the number of shares remaining
available for the grant of awards under the Plan.
4. FAIR MARKET VALUE
For all purposes under the Plan, the term "Fair Market Value" shall mean,
as of any applicable date: (i) if the principal securities market on which the
Common Stock is traded is a national securities exchange or The Nasdaq National
Market ("NNM"), the closing price of the Common Stock on such exchange or NNM,
as the case may be, or if no sale of the Common Stock shall have occurred on
such date, on the next preceding date on which there was a reported sale; or
(ii) if the Common Stock is not traded on a national securities exchange or NNM,
the closing price on such date as reported by The Nasdaq SmallCap Market, or if
no sale of the Common Stock shall have occurred on such date, on the next
preceding date on which there was a reported sale; or (iii) if the principal
securities market on which the Common Stock is traded is not a national
securities exchange, NNM or The Nasdaq SmallCap Market, the average of the bid
and asked prices reported by the National Quotation Bureau, Inc.; or (iv) if the
price of the Common Stock is not so reported, the Fair Market Value of the
Common Stock as determined in good faith by the Committee.
5. DISCRETIONARY AWARDS OF STOCK OPTIONS
(A) DISCRETIONARY AWARDS. The Committee shall have the discretion to grant
awards of stock options under the Plan to employees, directors, consultants and
advisors of the Company or any of its subsidiaries ("Discretionary Awards"),
provided that such consultants or advisors render bona fide services which are
not
A-1
<PAGE> 20
in connection with the offer or sale of securities in a capital-raising
transaction. The Committee shall determine and designate from time to time those
individuals who shall receive Discretionary Awards and the number of shares of
Common Stock to be covered by, and the other terms and conditions of, each
Discretionary Award. In making its determinations, the Committee shall take into
account the present and potential contributions of the respective individuals to
the success of the Company, and such other factors as the Committee shall deem
relevant in connection with accomplishing the purposes of the Plan. Each
Discretionary Award shall be evidenced by a written stock option agreement in
such form as the Committee shall approve from time to time.
(B) DESIGNATION OF DISCRETIONARY AWARDS. Discretionary Awards may be in the
form of stock options which qualify as "incentive stock options" ("Incentive
Stock Options") within the meaning of Section 422 or any successor provision of
the Code, or stock options which do not so qualify ("Nonqualified Options").
Each Discretionary Award shall be designated in the applicable stock option
agreement as an Incentive Stock Option or a Nonqualified Option, as appropriate.
(C) EXERCISE PRICE. Discretionary Awards shall be granted at an exercise
price of not less than 100% of the Fair Market Value on the date of grant.
Incentive Stock Options granted to a participant who at the time of such grant
owns (within the meaning of Section 424(d) of the Code) more than ten percent of
the voting power of all classes of stock of the Company (a "10% Holder") shall
be granted at an exercise price of not less than 110% of the Fair Market Value
on the date of grant.
(D) TERM AND TERMINATION. The Committee shall determine the term within
which each Discretionary Award may be exercised, in whole or in part, provided
that (i) such term shall not exceed ten years from the date of grant; (ii) the
term of an Incentive Stock Option granted to a 10% Holder shall not exceed five
years from the date of grant; and (iii) the aggregate Fair Market Value
(determined on the date of grant) of Common Stock with respect to which
Incentive Stock Options granted to a participant under the Plan or any other
plan of the Company and its subsidiaries become exercisable for the first time
in any single calendar year shall not exceed $100,000. Unless otherwise
determined by the Committee, all rights to exercise Discretionary Awards shall
terminate on the first to occur of (i) the scheduled expiration date as set
forth in the applicable stock option agreement, or (ii) thirty (30) days
following the date of termination of employment for any reason other than the
death or permanent disability (as defined in the Code) of the participant, or
(iii) one (1) year following the date of termination of employment by reason of
the participant's death or permanent disability.
(E) OTHER TERMS AND CONDITIONS. The Committee shall have the discretion to
determine terms and conditions, consistent with the Plan, that will be
applicable to Discretionary Awards. Awards granted to the same or different
participants, or at the same or different times, need not contain similar
provisions.
6. AUTOMATIC AWARDS OF STOCK OPTIONS TO MEMBERS OF THE BOARD
(A) INITIAL AWARD. Each person who first becomes a member of the Board
after August 15, 1996 shall receive a Nonqualified Option to purchase 10,000
shares of the Common Stock (an "Initial Award") on the date such person first
becomes a member of the Board. Unless otherwise determined by the Board, each
Initial Award shall become exercisable in three annual installments of 3,334,
3,333 and 3,333 shares, respectively, beginning on the first anniversary of the
date of grant, provided that the optionee continues to serve as a member of the
Board on each such anniversary date.
(B) ANNUAL AWARDS. Each person who is a member of the Board immediately
preceding the annual meeting of the stockholders of the Company in each year
beginning in 1996 (the "Annual Meeting Date") shall receive a Nonqualified
Option to purchase 2,000 shares of the Common Stock (an "Annual Award") on the
Annual Meeting Date, provided that in 1996, the Annual Award shall be made on
August 15, 1996 to each person who is then a member of the Board and who was a
member of the Board on the Annual Meeting Date in 1996. Each Annual Award shall
be immediately exercisable in full.
(C) EXERCISE PRICE. The exercise price of each Initial Award and each
Annual Award shall be the Fair Market Value on the date of grant.
A-2
<PAGE> 21
(D) TERM AND TERMINATION. The term of each Initial Award and each Annual
Award shall be ten years, provided that all rights to exercise options granted
thereunder shall terminate on the first to occur of (i) the scheduled expiration
date of such option, or (ii) one year following the date of termination of
service as a director.
7. ADJUSTMENTS TO REFLECT CAPITAL CHANGES
The number and kind of shares subject to outstanding Discretionary Awards,
Initial Awards and Annual Awards, the exercise price applicable thereto, and the
number and kind of shares available for Discretionary Awards, Initial Awards and
Annual Awards subsequently granted under the Plan shall be appropriately
adjusted to reflect any stock dividend, stock split, combination or exchange of
shares, merger, consolidation or other change in capitalization with a similar
substantive effect upon the Plan or the awards granted under the Plan. The
Committee shall have the power and sole discretion to determine the nature and
amount of the adjustment to be made in each case. The adjustment so made shall
be final and binding on all participants.
8. PAYMENT FOR STOCK
Full payment for shares purchased upon exercise of awards granted under the
Plan shall be made at the time the award is exercised in whole or in part.
Payment of the purchase price shall be made in cash or in such other form as the
Committee may approve, including, without limitation, (i) by the delivery to the
Company by the participant of a promissory note containing such terms as the
Committee may determine, or (ii) by the delivery to the Company by the
participant of shares of Common Stock that have been held by the participant for
at least six months prior to exercise of the award, valued at the Fair Market
Value of such shares on the date of exercise or (iii) pursuant to a cashless
exercise arrangement with a broker on such terms as the Committee may determine;
provided, however, that if payment is made pursuant to clause (i), the par value
of the purchased shares shall be paid in cash. No shares of Common Stock shall
be issued to the participant until such payment has been made, and a participant
shall have none of the rights of a stockholder with respect to options held by
such participant.
9. TRANSFERABILITY
Unless otherwise determined by the Committee with respect to Nonqualified
Options, options granted under the Plan shall not be transferable other than by
will or the laws of descent and distribution and are exercisable during a
participant's lifetime only by the participant.
10. WITHHOLDING
The Company shall have the right to deduct from all amounts paid to a
participant in cash as salary, bonus or other compensation any taxes required by
law to be withheld in respect of awards granted under the Plan. In the
Committee's discretion, a participant may be permitted to elect to have withheld
from the shares otherwise issuable to the participant, or to tender to the
Company, the number of shares of Common Stock whose Fair Market Value equals the
amount required to be withheld.
11. CONSTRUCTION OF THE PLAN
The validity, construction, interpretation, administration and effect of
the Plan and of its rules and regulations, and rights relating to the Plan,
shall be determined solely in accordance with the laws of the Commonwealth of
Pennsylvania, without regard to the conflict of law provisions of such laws.
12. NO RIGHT TO AWARD; NO RIGHT TO EMPLOYMENT
Except as set forth in Section 6, no person shall have any claim of right
to be granted an award under the Plan. Neither the Plan nor any action taken
hereunder shall be construed as giving any employee any right to be retained in
the employ of the Company or any of its subsidiaries or as giving any
consultant, advisor or director any right to continue to serve in such capacity.
A-3
<PAGE> 22
13. AWARDS NOT INCLUDABLE FOR BENEFIT PURPOSES
Income recognized by a participant pursuant to the provisions of the Plan
shall not be included in the determination of benefits under any employee
pension benefit plan (as such term is defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974) or group insurance or other benefit
plans applicable to the participant which are maintained by the Company or any
of its subsidiaries, except as may be provided under the terms of such plans or
determined by resolution of the Board.
14. NO STRICT CONSTRUCTION
No rule of strict construction shall be implied against the Company, the
Committee, or any other person in the interpretation of any of the terms of the
Plan, any award granted under the Plan or any rule or procedure established by
the Committee.
15. CAPTIONS
All Section headings used in the Plan are for convenience only, do not
constitute a part of the Plan, and shall not be deemed to limit, characterize or
affect in any way any provisions of the Plan, and all provisions of the Plan
shall be construed as if no captions have been used in the Plan.
16. SEVERABILITY
Whenever possible, each provision in the Plan and every award at any time
granted under the Plan shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of the Plan or any award at
any time granted under the Plan shall be held to be prohibited by or invalid
under applicable law, then such provision shall be deemed amended to accomplish
the objectives of the provision as originally written to the fullest extent
permitted by law, and all other provisions of the Plan and every other award at
any time granted under the Plan shall remain in full force and effect.
17. LEGENDS
All certificates for Common Stock delivered under the Plan shall be subject
to such transfer and other restrictions as the Committee may deem advisable
under the rules, regulations and other requirements of the Securities and
Exchange Commission, any stock exchange or quotation system upon which the
Common Stock is then listed or quoted and any applicable federal or state
securities law, and the Committee may cause a legend or legends to be put on any
such certificates to make appropriate references to such restrictions.
18. AMENDMENT
The Board may, by resolution, amend or revise the Plan, except that such
action shall not be effective without stockholder approval if such stockholder
approval is required to maintain the compliance of the Plan and/or awards
granted to directors, executive officers or other persons with Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended, or any
successor rule. The Board may not modify any options previously granted under
the Plan in a manner adverse to the holders thereof without the consent of such
holders, except in accordance with the provisions of Section 7.
19. EFFECTIVE DATE; TERMINATION OF PLAN
The Plan shall become effective on August 15, 1996, provided it has been
approved by the stockholders of the Company. The Plan shall terminate on August
14, 2006, unless it is earlier terminated by the Board. Termination of the Plan
shall not affect awards previously granted under the Plan.
A-4
<PAGE> 23
PROXY
FORE SYSTEMS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS
JULY 25, 1996
The undersigned stockholder of FORE Systems, Inc. (the "Company")
hereby appoints Eric C. Cooper and Onat Menzilcioglu, and each of them, as the
attorneys and proxies of the undersigned, with full power of substitution, to
vote all shares of Common Stock, par value $.01 per share, of the Company which
the undersigned would be entitled to vote if personally present at the Annual
Meeting of Stockholders of the Company, to be held at The Westin William Penn
Hotel, 530 William Penn Place, Pittsburgh, Pennsylvania on Thursday, July 25,
1996, commencing at 10:00 a.m., local time, and at any adjournment or
postponement thereof, as follows:
(CONTINUED AND TO BE SIGNED ON OTHER SIDE)
FOLD AND DETACH HERE
<PAGE> 24
<TABLE>
<S> <C> <C>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION AS CLASS III DIRECTORS PLEASE MARK
OF BOTH NOMINEES LISTED AND FOR PROPOSALS 2 AND 3. YOUR VOTE AS [ X ]
INDICATED IN
THE EXAMPLE
</TABLE>
<TABLE>
<S> <C> <C>
PROPOSAL 1. Election of Class III Directors PROPOSAL 2. To approve the FORE Systems, Inc. In their discretion, the proxy
1996 Stock Option Plan holders are authorized to vote
FOR upon such other matters as may
BOTH MEMBERS WITHHOLD FOR AGAINST ABSTAIN properly come before the meeting
LISTED (EXCEPT THOSE AUTHORITY [ ] [ ] [ ]
FOR WHOM AUTHORITY TO VOTE FOR
IS BEING WITHHELD) BOTH NOMINEES PROPOSAL 3. To ratify the selection of Price
Waterhouse LLP, independent
[ ] [ ] accountants,to audit the books
and accounts of the Company for
The year ending March 31, 1997.
NOMINEES: John C. Baker and Francois J. Bitz FOR AGAINST ABSTAIN
[ ] [ ] [ ]
(To withhold authority to vote for either nominee,
write the name of the nominee below.)
__________________________________________________
</TABLE>
Unless otherwise specified, the shares of Common stock represented
hereby will be voted "FOR" the election as Class III Directors
of both nominees listed and "FOR" Proposals 2 and 3.
Dated: __________________________________________________, 1996
_______________________________________________________________
Signature of Stockholder
_______________________________________________________________
Signature of Stockholder
NOTE: Please sign this proxy exactly as name(s) appear on your stock
certificate. When signing as attorney-in-fact, executor, administrator,
trustee or guardian, please add your title as such, and if signing as a
corporation, please sign with full corporate name by a duly authorized
officer or officers and affix the corporate seal. Where stock is issued
in the name of two (2) or more persons, all such persons should sign.
IMPORTANT: Please sign, date and return promptly.
FOLD AND DETACH HERE
