<PAGE> 1
As filed with the Securities and Exchange Commission on September 18, 1998
Registration No. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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FORE SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 25-1628117
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1000 FORE DRIVE
WARRENDALE, PENNSYLVANIA 15086-7502
(724) 742-4444
(Address, including zip code, and telephone
number, including area code, of
registrant's principal executive offices)
--------------------------------
THOMAS J. GILL
PRESIDENT AND CHIEF EXECUTIVE OFFICER
FORE SYSTEMS, INC.
1000 FORE DRIVE
WARRENDALE, PENNSYLVANIA 15086-7502
(724) 742-4444
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
CHRISTOPHER H. GEBHARDT
VICE PRESIDENT, CORPORATE COUNSEL AND SECRETARY
FORE SYSTEMS, INC.
1000 FORE DRIVE
WARRENDALE, PENNSYLVANIA 15086-7502
(724) 742-7658
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after this registration statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
/ / ________________
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / / ________________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
Proposed Maximum Proposed Maximum Amount of
Amount to be Offering Price Per Aggregate Offering Registration
TITLE OF SECURITIES TO BE REGISTERED Registered Share(1) Price Fee(1)
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<S> <C> <C> <C> <C>
STOCK, PAR VALUE $.01 PER SHARE 8,648,264 Shares $19.625 $169,722,181 $50,069
====================================================================================================================================
(1) Estimated solely for the purpose of calculating the registration fee; computed in accordance with Rule 457(c) on the basis
of the average of the high and low sales prices for the Common Stock on September 17, 1998 as reported on The Nasdaq
National Market.
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE> 2
FORE SYSTEMS, INC.
8,648,264 SHARES
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
-----------------------
The common stock, par value $.01 per share ("Common Stock"), of FORE
Systems, Inc. (the "Company" or "FORE") is quoted on The Nasdaq National Market
under the symbol "FORE." The last reported sale price of the Common Stock on the
Nasdaq National Market on September 16, 1998 was $20.438 per share. FORE's
principal executive offices are located at 1000 FORE Drive, Warrendale,
Pennsylvania 15086 and its telephone number is (724) 742-4444.
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SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE COMMON STOCK.
-----------------------
This Prospectus relates to the public offering of 8,648,264 shares of
Common Stock. All 8,648,264 shares (the "Shares") may be offered by the
stockholders of the Company included herein or by pledgees, donees, transferees
or other successors in interest that receive such shares as a gift, partnership
distribution or other non-sale related transfer (the "Selling Stockholders").
All of the shares were originally issued by the Company in connection with the
purchase of the capital stock of Berkeley Networks, Inc. ("Berkeley") by means
of the merger of a wholly owned subsidiary of FORE with and into Berkeley
pursuant to which Berkeley became a wholly owned subsidiary of the Company (the
"Berkeley Transaction"). The Shares were issued pursuant to an exemption from
the registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), provided by Rule 506 under the Securities Act. The Shares are
being registered by the Company pursuant to the Registration Rights Agreement,
dated September 11, 1998, by and among FORE and the Selling Stockholders
identified therein.
The purpose of this Prospectus is to permit the Selling Stockholders, if
they desire, to dispose of some or all of the Shares at such times as they
choose. Whether such sales will be made and the timing and amount of any sale is
within the sole discretion of each Selling Stockholder. The Shares offered
hereby may be sold by the Selling Stockholders in open market transactions,
privately negotiated transactions or a combination of such methods of sale. Such
sales may be made at prices and at terms then prevailing or at prices related to
the then-current market price or in negotiated transactions. The Selling
Stockholders may effect such transactions by selling the Shares to or through
broker-dealers, and such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Stockholders and/or the
purchasers of the Shares for whom such broker-dealers may act as agents or to
whom they sell as principals, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions). See "Plan of
Distribution."
The Company will not receive any of the proceeds from the sale of the
Shares. The Company has agreed to bear certain expenses in connection with the
registration of the Shares being offered and sold by the Selling Stockholders.
The Selling Stockholders and any broker-dealers or agents that
participate with the Selling Stockholders in the distribution of the Shares may
be deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act, and any commissions received by them and any profit on the sale
of the Shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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The date of this Prospectus is September __ , 1998
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices
located at 7 World Trade Center, Suite 1300, New York, New York 10048 and 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials can be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Information
concerning the operation of the Public Reference Section may be obtained by
calling the SEC at 1-800-SEC-0330. In addition, reports, proxy statements,
registration statements and certain other filings made with the Commission
through its Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system
are publicly available through the Commission's site on the Internet's World
Wide Web, located at http://www.sec.gov. The registration statement of which
this Prospectus forms a part, including all exhibits thereto and amendments
thereof, has been filed with the Commission through EDGAR.
The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act with respect to the offering
made hereby. This Prospectus does not contain all of the information set forth
in the Registration Statement, certain portions of which are omitted in
accordance with the rules and regulations of the Commission. Statements
contained in this Prospectus as to the contents of any agreement or other
document are summaries which are not necessarily complete and in each instance
reference is made to the copy of such agreement or other document filed as an
exhibit to the Registration Statement, each such statement herein being
qualified in all respects by such reference. Such additional information may be
obtained from the Commission's principal office in Washington, D.C. as set forth
above. For further information, reference is hereby made to the Registration
Statement.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended March
31, 1998, the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1998, the Company's Form 8-K dated September 11, 1998 and the
description of the Common Stock contained in the Company's Registration
Statement on Form 8-A under the Exchange Act are hereby incorporated by
reference in this Prospectus. All reports and other documents filed by the
Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date hereof and prior to the termination of the offering
described herein shall be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the date of the filing of such
documents. Any statement contained herein or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus. The
Company will provide, without charge, to each person to whom this Prospectus is
delivered, upon written or oral request of such person, a copy (without certain
exhibits) of any or all documents incorporated by reference in this Prospectus.
Requests for such copies should be directed to Investor Relations, FORE Systems,
Inc., 1000 FORE Drive, Warrendale, Pennsylvania 15086-7502, telephone (724)
742-4444.
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RISK FACTORS
Prospective investors should consider carefully the following factors, in
addition to the other information contained in this Prospectus or incorporated
herein by reference, in evaluating an investment in the shares of Common Stock
offered hereby.
The following risk factors, in addition to the risks described elsewhere in
the reports and other filings incorporated herein by reference, may cause actual
results to differ materially from those in any forward-looking statements
contained herein, under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended June 30, 1998 and Annual Report on
Form 10-K for the fiscal year ended March 31, 1998, as well as under the caption
"Item 1 - Business" in such Form 10-K and other such statements contained in the
reports and other filings incorporated herein by reference or which have
otherwise been made or may be made in the future by the Company or its
representatives:
PRODUCT DEVELOPMENT AND NEW TECHNOLOGIES. The development of new products
and technologies is a complex process involving substantial risks and
uncertainties. Berkeley is a start-up stage development company with a limited
operating history. To date, Berkeley has generated no significant revenue and
has not shipped a completed product. The products currently under development by
Berkeley will need to be further developed by FORE prior to shipment to
customers. The successful combination of FORE and Berkeley is substantially
dependent on the timely introduction of new products under development by
Berkeley and the integration of Berkeley's product offerings into FORE's
distribution and marketing channels. There can be no assurance that development
of Berkeley's products will be completed in a timely manner or at all, and if
the development of such products is completed, that they will be accepted in the
marketplace. If Berkeley's products are not developed successfully or in a
timely way, or if they do not achieve commercial acceptance, FORE's business,
financial position and results of operations could be materially adversely
affected.
DIFFICULTY OF INTEGRATING TWO COMPANIES. The successful combination of
companies in the high technology industry may be more difficult to accomplish
than in other industries. The possible business and financial advantages of the
Berkeley Transaction will not be achieved unless the operations of Berkeley are
successfully combined with those of FORE in a timely manner. The transition will
require substantial attention from management of both companies. The diversion
of the attention of management and any difficulties encountered in the
transition process could have a material adverse effect on the revenues and
operating results of FORE following the Berkeley Transaction. The combination of
the two companies will also require integration of the companies' product
offerings and the coordination of their research and development and sales and
marketing efforts. In-process technologies of Berkeley may require substantial
adaptation, including integration of technical personnel to support such
products and services. The difficulties of assimilation may be increased by the
necessity of coordinating geographically separated organizations, integrating
personnel with disparate business backgrounds and combining two different
corporate cultures. There can be no assurance that FORE will not encounter
difficulties in integrating these disparate operations. In addition, the process
of integrating the two organizations could cause interruptions of, or a loss of
momentum in, the activities of either or both of the companies' businesses,
which could have a material adverse effect on their operations. There can be no
assurance that FORE will realize any technological or sales benefits or any
other possible business and financial advantages of the Berkeley Transaction.
POTENTIAL DILUTIVE EFFECT TO STOCKHOLDERS. There can be no assurance that
the combination of FORE's and Berkeley's businesses and products, even if
achieved in an efficient, effective and timely manner, will result in combined
results of operations and financial condition superior to what would have been
achieved by FORE and Berkeley operating independently. The issuance of the
Shares in connection with the Berkeley Transaction will have the immediate
effect of reducing FORE's net income per share and could reduce the market price
of the Common Stock unless and until revenue and income growth and business
synergies sufficient to offset the effect of such issuance can be achieved.
There can be no assurance that such synergies will ever be achieved. In
addition, there can be no assurance that shareholders of Berkeley would not
achieve greater returns on investment if Berkeley were to remain an independent
company.
POTENTIAL VOLATILITY OF STOCK PRICE. The market price of the Common Stock
has been, and may continue to be, volatile. Such volatility results from many
factors, including fluctuations in FORE's operating results, both sequentially
and in year-over-year comparisons, changes in financial estimates by, or
expectations or recommendations of, securities analysts, sales of substantial
amounts of the Common Stock in the public market or the prospect of such sales
and market conditions. Volatility in the price of the Common Stock could have a
material adverse effect on FORE's business, financial position and results of
operations by making it more difficult to attract and retain qualified personnel
and to complete business acquisitions. In addition, it is not uncommon for class
action securities litigation to be instituted against a company following a
significant drop in the market price of such company's securities, and such
litigation, even if it is without merit, may result in substantial costs and a
diversion of management's attention and resources.
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SUBSTANTIAL DEPENDENCE ON ATM. Because FORE's business strategy is based
upon the belief that ATM will be the technology of choice for the information
technology infrastructure, FORE's business, financial position and results of
operations would be materially adversely affected if ATM fails to gain broad
commercial acceptance or if other networking technologies gain competitive
advantages over ATM. Sales of ATM networking products have represented, and are
expected to continue to represent for the foreseeable future, a substantial
portion of FORE's revenue. Accordingly, FORE's business opportunities and
results of operations will be dependent on continued growth and market
acceptance of ATM technology and the ability of FORE to offer products that
provide a smooth and seamless migration path from existing networking
technologies to ATM. In the event that other networking technologies gain
competitive advantages over ATM, or networking products based on ATM fail to
achieve broad commercial acceptance, FORE's business, financial position and
results of operations would be materially adversely affected.
ABILITY TO DEVELOP AND MARKET NEW PRODUCTS. The networking industry is
intensely competitive, and FORE's growth and results of operations depend upon
its ability to develop and market new products and enhancements to existing
products on a timely basis. There can be no assurance that FORE can continue to
successfully develop and market new products and enhancements. Even if ATM
achieves broad commercial acceptance, there can be no assurance that FORE can
continue successfully to develop and introduce new products and enhancements
given the fact that many of FORE's competitors have significantly greater
financial, technological and personnel resources than does FORE. There can be no
assurance that FORE, even if it develops new products and enhancements, will be
successful in marketing such new products and enhancements.
DECLINE IN GROWTH RATE. Although FORE has historically experienced
increasing sales on an annual basis, the rate of revenue growth has slowed in
the last two fiscal years. Revenue in fiscal 1998 increased 16% over fiscal
1997. This compares with a revenue increase of 68% in fiscal 1997 over fiscal
1996, and a revenue increase of 121% in fiscal 1996 over fiscal 1995. FORE's
rate of revenue growth may continue to decline, and there can be no assurance
that FORE will experience revenue growth in the future at historic rates or at
all.
COMPETITION. The networking industry is intensely competitive. Many
networking companies, including 3Com Corporation, Bay Networks, Inc. (which
recently announced a merger with Northern Telecom), Cabletron Systems, Inc.,
Cisco Systems, Inc., Ascend Communications, Inc. and Newbridge Networks
Corporation, and certain computer companies, including Digital Equipment
Corporation (now part of Compaq Computer Corp.), NEC Corporation and
International Business Machines Corporation, sell, or have announced their
intention to develop, networking products that are, or will be, competitive with
FORE's products. In addition, other companies, such as central-office equipment
vendors, long-distance carriers and cable television operators, are applying
their communications expertise to the markets served by FORE or have announced
plans to do so, or, as in the case of Northern Telecom, are acquiring data
networking companies. Many of these current and prospective competitors have
greater name recognition, a larger installed base of networking products, more
extensive engineering, manufacturing, marketing and distribution capabilities
and greater financial, technological and personnel resources than does FORE.
FORE expects price competition to persist in the networking industry. FORE has
lowered prices on a regular basis and added new products and features without
increasing prices. There can be no assurance that FORE will be able to compete
in such a price environment. If such pricing pressures are not mitigated by cost
reduction or changes in product mix, FORE's business, results of operations and
financial condition could be materially adversely affected.
INDUSTRY CONSOLIDATION. The networking industry is currently undergoing a
period of consolidation in which companies, including some of FORE's major
competitors, are participating in business combinations and acquisitions,
thereby creating companies with larger market shares, customer bases, sales
forces, product offerings and technology and marketing expertise. There can be
no assurance that FORE will be able to compete successfully in such an
environment.
ACQUISITIONS. FORE has in the past and may in the future make acquisitions
of companies and technologies. Acquisitions are subject to numerous risks, and
can increase research and development and other expenses without necessarily
leading to the introduction of new products or enhancements. Risks inherent in
acquisitions include the difficulty of assessing the values, strengths,
weaknesses and potential profitability of acquisition candidates, and the
potential of adverse effects on FORE's operating results, as well as the
diversion of management's attention, the loss of key personnel and the risks of
unanticipated problems and liabilities. There can be no assurance that FORE can
successfully identify acquisition opportunities or that any acquisitions that
are completed will be successfully integrated with FORE's operations. Moreover,
the trend towards consolidation in the networking industry may raise the prices
of prospective acquisition candidates, thereby making it more difficult for FORE
to complete acquisitions or making it more difficult for any acquisitions that
are completed to prove profitable or successful.
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MANUFACTURING. All of the materials used in FORE's products are purchased
under contracts and purchase orders with third parties. While FORE believes that
many of the materials used in the production of its products are generally
readily available from a variety of sources, certain components are available
from one or a limited number of suppliers. Among these sole- or limited-source
components are microprocessors (obtained from Intel Corporation), memory chips
(obtained from Integrated Device Technologies, Inc., Micron Semiconductor,
Samsung Semiconductor, Inc., Advanced Micro Devices and Cypress Semiconductor
Corporation), ATM framing, segmentation and reassembly chips (obtained from
PMC-Sierra, Inc., LSI Logic Corporation and Integrated Device Technologies,
Inc., respectively), pre-formed enclosures (obtained from Electronic
Manufacturing Systems and Electro Space Fabricators), optical data links
(obtained from Hewlett-Packard Components) and Application Specific Integrated
Circuits ("ASICs") (obtained from Toshiba America Electronic Components, Inc.,
LSI Logic Corporation and Lucent Technologies). The lead times for delivery of
certain of these components, including ASICs, can be at least twelve weeks. If
FORE fails to forecast its requirements accurately for such long lead-time
components, then it may experience shortages which could result in product
shipment delays which would adversely affect FORE's financial position and
results of operations.
EVOLVING INDUSTRY STANDARDS AND RAPID TECHNOLOGICAL DEVELOPMENT. The
markets for FORE's products are characterized by evolving industry standards and
rapid technological development. FORE's success will depend, in part, upon its
ability to influence the development of industry standards, to maintain its
technological leadership, to enhance and expand its existing product offerings
and to develop in a timely manner new products which achieve market acceptance.
FORE believes that its ability to compete successfully is also dependent upon
the continued compatibility and interoperability of its products with products
and architectures offered by various vendors and on the timely development of
industry standards. There can be no assurance that FORE will be able effectively
to address the compatibility and interoperability issues raised by technological
changes or that new industry standards will be developed in a timely manner.
FORE's business, financial position and results of operations would be
materially adversely affected if it were to incur significant delays or be
unsuccessful in developing new products or enhancements, if any such products or
enhancements did not gain market acceptance or if a delay in the creation of
industry standards resulted in customers deciding not to deploy ATM in their
networks or to delay such deployment. In addition, there can be no assurance
that products or technologies developed by others will not render FORE's
products noncompetitive or obsolete.
INTELLECTUAL PROPERTY. FORE's growth and its ability to compete
successfully in the networking industry depend in part on its ability to protect
the proprietary technology contained in its products. FORE relies on a
combination of patent, trade secret, copyright and trademark laws and
contractual restrictions to establish and protect its proprietary rights. FORE
has also entered into confidentiality and invention assignment agreements with
its employees and enters into non-disclosure agreements with its suppliers,
distributors and certain customers so as to limit access to and disclosure of
its proprietary information. There can be no assurance that these statutory and
contractual arrangements will prove sufficient to deter misappropriation of
FORE's proprietary technologies or independent third-party development of
similar technologies. In addition, the laws of some countries do not provide the
same degree of protection of FORE's proprietary information as do the laws of
the United States, and FORE's adherence to industry-wide technical standards and
specifications may limit FORE's opportunities to provide proprietary product
features capable of protection. From time to time, FORE receives notification
that it is or may be infringing the intellectual property rights of third
parties. At the present time, FORE is in separate discussions with certain third
parties regarding the alleged infringement by FORE of certain patents owned by
such third parties. There can be no assurance that such third parties or other
persons will not institute litigation against FORE in the future which could
result in substantial costs and the diversion of management's attention and
resources. The failure of FORE to prevail in any such litigation, or otherwise
to obtain needed licenses on commercially reasonable terms, could have a
material adverse effect on FORE's business, financial position and results of
operations.
DEPENDENCE ON KEY PERSONNEL. FORE believes that its future success will
depend not merely on retaining its key personnel, but also upon its ability to
attract and retain additional highly-skilled technical, managerial,
manufacturing, sales and marketing personnel. Competition for such personnel is
intense. There can be no assurance that FORE will be able to anticipate
accurately, or to obtain, the personnel that it may require in the future. The
failure to obtain needed personnel, when and as needed, could have a material
adverse effect on FORE's business, financial position and results of operations.
INTERNATIONAL SALES, REGULATORY STANDARDS AND CURRENCY EXCHANGE. FORE
competes in international markets and is, accordingly, subject to numerous
risks. Sales to foreign customers in fiscal 1998 decreased in dollars and as a
percentage of revenue in comparison with fiscal 1997, and there can be no
assurance that such sales will not continue to decline. In addition, FORE's
international business may be adversely affected by foreign regulatory
requirements, changes in demand resulting from fluctuations in currency exchange
rates and local purchasing practices, difficulties in distribution, slower
payment of invoices, increases in duty rates, foreign political and economic
conditions and constraints upon international trade.
DEPENDENCE ON CUSTOMERS. Revenue from United States government agencies
represented approximately 7%, 9% and 7% of FORE's revenue on a consolidated
basis for the years ended March 31, 1998, 1997 and 1996, respectively. These
United States government customers include more than twenty different agencies,
each of which makes its own procurement decisions. These government customers
may from time to time reduce their budgets and expenditures or cancel orders. In
addition, current Congressional initiatives to balance the federal budget could
curtail spending of government agencies in a manner which may lead such
customers to reduce their
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<PAGE> 7
expenditures for FORE's products. Reductions in sales to current customers, if
not offset by sales to new or existing customers, would have a material adverse
effect on FORE's business, financial position and results of operations.
DECLINE OF MARGINS. FORE's gross margins have been adversely affected and
may continue to be adversely affected by competitive pricing pressures and a
change in the mix of products sold toward lower-margin workgroup and desktop
products for both ATM and Ethernet. In addition, FORE's operating margins may be
adversely affected by the need to hire additional sales, marketing and other
personnel. FORE plans its operating expense levels based primarily on forecasted
revenue, and such operating expenses are relatively fixed in the short term. If
revenue is below expectations in any particular period, operating results are
likely to be lower than expected in that period. Any such failure to meet
expectations would be likely to result in a decrease in the market price of the
Common Stock.
POTENTIAL FLUCTUATIONS IN OPERATING RESULTS. FORE has experienced
fluctuating operating results on a quarterly and annual basis and may continue
to do so. These fluctuations are caused by many factors, including a
disproportionate share of sales occurring late in a given quarter, the
announcement or introduction of new products and technologies by FORE or its
competitors, the pattern and seasonality of customer purchasing cycles,
variations in the mix of products sold and sales channels, price competition,
manufacturing lead times, developments with respect to patents or proprietary
rights and changes in industry or general economic conditions. These factors
make it difficult to predict operating results for any given period, and have
led to, and are likely to continue to lead to, volatility in the market price of
the Common Stock. Revenue in any one quarter may not be indicative of revenue in
any future period and, accordingly, FORE believes that period-to-period
comparisons of its results of operations are not necessarily meaningful and
should not be relied upon as indicators of future performance.
YEAR 2000. FORE believes that all of its current products are Year 2000
compliant. However, certain products previously sold by FORE may not be Year
2000 compliant, and FORE has undertaken a study to determine what actions may be
appropriate for it to take with respect to any such products which continue to
be used by customers. FORE believes that most of its internal information
systems are Year 2000 compliant, in that they will be able to distinguish
accurately between 20th century and 21st century dates, and that the costs of
converting or replacing those that are not Year 2000 compliant will not have a
material adverse effect on FORE's business, financial position or results of
operations. However, the information systems of FORE's suppliers and customers
may not be Year 2000 compliant, and it is possible that various business
functions which require the interaction of FORE's systems with those of
suppliers or customers will fail or malfunction in the Year 2000. In addition,
it is possible that FORE's revenue may be adversely affected if current and
prospective customers divert their spending resources away from networking
equipment over the next two years in order to correct or replace information
systems which are not Year 2000 compliant.
ANTITAKEOVER EFFECT OF CERTAIN CHARTER, BY-LAW AND OTHER PROVISIONS.
Certain provisions of FORE's Amended and Restated Certificate of Incorporation,
as amended, and Second Amended and Restated Bylaws and Delaware law could have
the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, control of FORE. Such
provisions could limit the price that certain investors might be willing to pay
in the future for shares of the Common Stock. Certain of such provisions allow
FORE to issue preferred stock with rights senior to those of the Common Stock
and impose various procedural and other requirements which could make it more
difficult for stockholders to effect certain corporate actions, including an
advance notification procedure for stockholder proposed business at an annual
meeting of stockholders and for nominees for election as directors and a
provision that special meetings of stockholders may be called only by the
President and Chief Executive Officer or the Board of Directors.
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<PAGE> 8
USE OF PROCEEDS
The Company will not derive any proceeds from the sale of any of the Shares
offered hereby.
THE SELLING STOCKHOLDERS
The 8,648,264 Shares offered hereby were acquired by the Selling
Stockholders in connection with the acquisition by the Company of all the issued
and outstanding shares of capital stock of Berkeley Networks, Inc. pursuant to
an Agreement and Plan of Reorganization, dated as of August 25, 1998, by and
among the Company, Fastwire Acquisition Corporation and Berkeley. Prior to the
Berkeley Transaction, Ravinder Sethi, Robert Thomas, Donal Byrne, Cuneyt Ozveren
and David Butler served as executive officers of Berkeley, and Ravinder Sethi,
Ujjal Kohli, Sam Lee (a representative of Advanced Technology Ventures IV,
L.P.), Nicholas Mitsakos and Peter Morris (a representative of New Enterprise
Associates VI, Limited Partnership) served as directors of Berkeley. Ravinder
Sethi is currently the Vice President and General Manager, Frame Internetworking
Business Center of FORE. The Selling Stockholders were the holders of all the
outstanding capital stock of Berkeley and received in exchange therefor an
aggregate of 8,648,264 shares of Common Stock.
The following table lists the Selling Stockholders, the number of shares of
the Common Stock which each Selling Stockholder owned as of September 11, 1998
and the number of shares of Common Stock being offered hereby by each such
Selling Stockholder. Because the Selling Stockholders may sell all or some of
the Shares which they own pursuant to the offering contemplated by this
Prospectus, and because there are currently no agreements, arrangements or
understandings with respect to the sale of any of the Shares, no estimate can be
given as to the number of Shares that will be owned by the Selling Stockholders
after completion of this offering. The Shares offered by this Prospectus may be
offered from time to time by the Selling Stockholders below.
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES
SELLING STOCKHOLDER OWNED AS OF REGISTERED FOR SALE
SEPTEMBER 11, 1998
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Ravinder S. Sethi 1,658,652 1,658,652
New Enterprise Associates VI, Limited Partnership 1,322,946 1,322,946
Advanced Technology Ventures IV, L.P. 1,021,473 1,021,473
Information Technology Ventures, L.P. 994,941 994,941
Robert E. Thomas 624,351 624,351
Donal Byrne (Jr.) 386,503 386,503
Cuneyt Ozveren 386,503 386,503
Gururaj Singh 166,493 166,493
M.I.S. VC Partners, L.P. 331,288 331,288
Jan Bialkowski 129,436 129,436
Dave Butler 82,822 82,822
Peter J. Roman 77,300 77,300
Kamaljit S. Anand 75,644 75,644
Doug Theriault 67,362 67,362
Parthiban Kandappan 59,461 59,461
Wing Cheung 59,461 59,461
Jeffrey Tuckey 59,461 59,461
VantagePoint Venture Partners 1996 55,214 55,214
Tongbi Pei 46,932 46,932
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
- 7 -
<PAGE> 9
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES
SELLING STOCKHOLDER OWNED AS OF REGISTERED FOR SALE
SEPTEMBER 11, 1998
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Ujjal Kohli 38,650 38,650
Mark Dickey 38,650 38,650
Xiangdong Ke 30,368 30,368
Erik Wehbring 30,368 30,368
Asif Iqbal 30,368 30,368
NEA Presidents Fund, L.P. 27,607 27,607
Radhakrishnan Sethuraman 27,607 27,607
Rajdak Investment, LLC 27,607 27,607
ITV Affiliates Fund, L.P. 26,531 26,531
John Chanak 24,846 24,846
Alex Waterman 24,846 24,846
Seth Redmore 24,156 24,156
Anh Nguyen 22,085 22,085
William Kish 22,085 22,085
David LeRoy 20,981 20,981
Other Former Berkeley Shareholders(1) 396,596 396,596
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Consists of 52 former Berkeley Shareholders who own in the aggregate less
than 1% of the outstanding Common Stock.
Approximately 928,843 Shares owned by the Selling Stockholders are being
held in escrow for a one-year period following the closing of the Berkeley
Transaction to secure indemnification obligations which may arise in connection
therewith. In addition, approximately 1,137,304 Shares owned by certain Selling
Stockholders who are employees of Berkeley are subject to repurchase by the
Company under certain circumstances. Accordingly, such Shares are not available
for sale at this time.
Pursuant to the terms of a certain Registration Rights Agreement entered
into at the closing of the Berkeley Transaction, the Company is obligated to
file at its expense a registration statement under the Securities Act and to use
reasonable commercial efforts to maintain the effectiveness of such registration
statement for a period ending on the first anniversary of the closing of the
Berkeley Transaction or such earlier date as the Selling Stockholders are
permitted by law to sell the Shares pursuant to Rule 144 under the Securities
Act. The Registration Statement, of which this Prospectus forms a part,
constitutes such registration statement.
The Company has agreed to indemnify the Selling Stockholders against
certain liabilities in connection with the offering made hereby, including
liabilities under the Securities Act.
- 8 -
<PAGE> 10
PLAN OF DISTRIBUTION
The Shares covered by this Prospectus may be sold by the Selling
Stockholders in open market transactions, privately negotiated transactions or a
combination of such methods of sale. Such sales may be made at fixed prices that
may be changed, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. The Shares may
be sold by one or more of the following methods: (a) block trades in which a
broker or dealer so engaged will attempt to sell all or a portion of the Shares
held by the Selling Stockholders as agent but may position and resell a portion
of the block as principal to facilitate the transaction; (b) purchases by a
broker or dealer as principal and resale by such broker or dealer for its
account pursuant to this Prospectus; (c) ordinary brokerage transactions and
transactions in which the broker solicits purchasers; and (d) in privately
negotiated transactions. The Selling Stockholders may effect such transactions
by selling Shares to or through broker-dealers, and such broker-dealers will
receive compensation in negotiated amounts in the form of discounts,
concessions, commissions or fees from the Selling Stockholders and/or the
purchasers of the Shares for whom such broker-dealers may act as agent or to
whom they sell as principal, or both (which compensation to a particular
broker-dealer might be in excess of customary commissions). Such brokers or
dealers or the participating brokers or dealers and the Selling Stockholders may
be deemed to be "underwriters" within the meaning of the Securities Act, in
connection with such sales, and any commissions received by such broker-dealers
may be deemed to be underwriting compensation.
Such Selling Stockholder will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including, without
limitation, Regulation M, which provisions may limit the timing of purchases and
sales of shares of the Common Stock by the Selling Stockholders. The Company
will make copies of this Prospectus available to the Selling Stockholders and
has informed them of the need for delivery of copies of this Prospectus to
purchasers at or prior to the time of any sale of the Shares offered hereby. The
Company assumes no obligation to so deliver copies of this Prospectus or any
related Prospectus Supplement.
Upon the Company being notified by a Selling Stockholder that any material
arrangement has been entered into with a broker-dealer for the sale of Shares
through a block trade, purchases by a broker or dealer as principal and resale
by such broker or dealer for its account, a Prospectus Supplement will be filed,
if required, pursuant to Rule 424(b) under the Securities Act, disclosing (i)
the name of each such Selling Stockholder and of the participating
broker-dealer(s); (ii) the number of Shares involved; (iii) the price at which
such Shares were sold; (iv) the commissions paid or discounts or concessions
allowed to such broker-dealer(s), where applicable; (v) that such
broker-dealer(s) did not conduct any investigation to verify the information set
out or incorporated by reference in this Prospectus; and (vi) other facts
material to the transaction.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference to the Company's Annual Report on Form 10-K for the year ended March
31, 1998 have been so incorporated in reliance upon the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
such firm as experts in auditing and accounting.
VALIDITY OF COMMON STOCK
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Morgan, Lewis & Bockius LLP, Pittsburgh, Pennsylvania.
As of September 17, 1998, Marlee S. Myers, a partner of Morgan, Lewis & Bockius,
LLP, held options to acquire up to 40,000 shares of the Common Stock.
- 9 -
<PAGE> 11
===============================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
----------------------
TABLE OF CONTENTS
Available Information................................2
Incorporation of Certain Information
by Reference.......................................2
Risk Factors.........................................3
Use of Proceeds......................................7
The Selling Stockholders.............................7
Plan of Distribution.................................9
Experts..............................................9
Validity of Common Stock.............................9
===============================================================================
===============================================================================
8,648,264 SHARES
FORE SYSTEMS, INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
===============================================================================
<PAGE> 12
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Following is an estimate of the expenses to be incurred in connection with
the offering and sale of the securities being registered, other than selling
commissions:
SEC registration fee..................................... $50,069
Transfer Agent........................................... 1,000
Accounting fees.......................................... 5,000
Legal fees and expenses.................................. 2,000
Miscellaneous............................................ 1,000
-------
Total.................................................... $59,069
=======
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102(b)(7) of the Delaware General Corporation Law (the "DGCL")
permits a corporation, in its certificate of incorporation, to limit or
eliminate, subject to certain statutory limitations, the liability of directors
to the corporation or its stockholders for monetary damages for breaches of
fiduciary duty, except for liability (a) for any breach of the director's duty
of loyalty to the corporation or its stockholders, (b) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (c) under Section 174 of the DGCL or (d) for any transaction from which the
director derived an improper personal benefit. Article Eighth of the Company's
Amended and Restated Certificate of Incorporation, as amended, provides that the
personal liability of directors of the Company is eliminated to the fullest
extent permitted by Section 102(b)(7) of the DGCL.
Under Section 145 of the DGCL, a corporation has the power to indemnify
directors and officers under certain prescribed circumstances and subject to
certain limitations against certain costs and expenses, including attorneys'
fees actually and reasonably incurred in connection with any action, suit or
proceeding, whether civil, criminal, administrative or investigative, to which
any of them is a party by reason of his being a director or officer of the
corporation if it is determined that he acted in accordance with the applicable
standard of conduct set forth in such statutory provision. Article V of the
Company's Second Amended and Restated By-Laws provides that the Company will
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding by reason of
the fact that he is or was a director, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another entity, against certain liabilities, costs
and expenses. Article V further permits the Company to maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another entity against any liability asserted
against such person and incurred by such person in any such capacity or arising
out of his status as such, whether or not the Company would have the power to
indemnify such person against such liability under the DGCL. The Company
maintains directors' and officers' liability insurance.
II - 1
<PAGE> 13
ITEM 16. EXHIBITS.
The following exhibits are filed as part of this registration statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------- ---------------------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Reorganization, dated as of August 25, 1998, by and
among FORE Systems, Inc., Fastwire Acquisition Corporation and Berkeley
Networks, Inc. (incorporated by reference to Exhibit 2.1 to FORE Systems, Inc's
Form 8-K dated September 11, 1998 (File No. 0-24156)).
5.1 Opinion of Morgan, Lewis & Bockius LLP as to the legality of the
securities being registered (filed herewith).
23.1 Consent of Morgan, Lewis & Bockius LLP (included in opinion
filed as Exhibit 5.1).
23.2 Consent of PricewaterhouseCoopers LLP (filed herewith).
24.1 Power of Attorney.
</TABLE>
ITEM 17. UNDERTAKINGS.
(1) The undersigned registrant hereby undertakes: (i) to file, during any
period in which offers or sales are being made, a post-effective amendment to
this Registration Statement to include any material information with respect to
the plan of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration Statement; (ii)
that, for the purpose of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof; and (iii) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(2) The undersigned registrant hereby undertakes that for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(3) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liability (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II - 2
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Borough of Warrendale, Commonwealth of Pennsylvania, on
September 17, 1998.
FORE Systems, Inc.
By: /s/ THOMAS J. GILL
-----------------------------------------
Thomas J. Gill
President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Eric C. Cooper and Thomas J. Gill, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this Registration
Statement, and to file the same, with all exhibits thereto, and other
documentation in connection therewith, with the Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/S/ ERIC C. COOPER Chairman and a Director September 17, 1998
- ------------------------------------
Eric C. Cooper
/S/ THOMAS J. GILL President and Chief Executive Officer September 17, 1998
- ------------------------------------- (Principal Executive Officer) and a Director
Thomas J. Gill
/S/ ROBERT D. SANSOM Senior Vice President and Chief Technical September 17, 1998
- --------------------------------- Officer and a Director
Robert D. Sansom
/S/ BRUCE E. HANEY Senior Vice President and Chief Financial September 17, 1998
- ----------------------------------- Officer (Principal Financial Officer)
Bruce E. Haney
/S/ GARY J. BRUNNER Vice President, Controller and Treasurer September 17, 1998
- ------------------------------------ (Principal Accounting Officer)
Gary J. Brunner
/S/ JOHN C. BAKER Director September 17, 1998
- --------------------------------------
John C. Baker
/S/ DANIEL W. MCGLAUGHLIN Director September 17, 1998
- ------------------------------
Daniel W. McGlaughlin
/S/ DANIEL R. HESSE Director September 17, 1998
- --------------------------------------
Daniel R. Hesse
/S/ JOHN T. LAMACCHIA Director September 17, 1998
- -----------------------------------
John T. LaMacchia
</TABLE>
<PAGE> 15
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ----------- ---------------------------------------------------------------
5.1 Opinion of Morgan, Lewis & Bockius LLP as to the legality
of the securities being registered
23.1 Consent of Morgan, Lewis & Bockius LLP (included in
opinion filed as Exhibit 5.1)
23.2 Consent of PricewaterhouseCoopers LLP
<PAGE> 1
EXHIBIT 5.1
September 17, 1998
FORE Systems, Inc.
1000 FORE Drive
Warrendale, PA 15086
Re: Form S-3 Registration Statement
-------------------------------
Gentlemen:
We have acted as counsel to FORE Systems, Inc., a Delaware corporation (the
"Company"), in connection with the Registration Statement on Form S-3 (the
"Registration Statement") filed by the Company with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended (the "Act"),
relating to the sale by certain selling stockholders identified in the
Registration Statement of an aggregate of up to 8,648,264 shares (the "Shares")
of the Company's Common Stock, par value $.01 per share.
We are familiar with the Registration Statement. We have reviewed the Company's
Amended and Restated Certificate of Incorporation, as amended, and Second
Amended and Restated Bylaws. We have also examined such other public and
corporate documents, certificates, instruments and corporate records and such
questions of law as we have deemed necessary for purposes of expressing an
opinion on the matters hereinafter set forth. In all examinations of documents,
instruments and other papers, we have assumed the genuineness of all signatures
on original and certified documents and the conformity to original and certified
documents of all copies submitted to us as conformed, photostatic or other
copies.
On the basis of the foregoing, we are of the opinion that the Shares have been
validly issued and are fully paid and non-assessable.
We consent to the filing of this opinion as Exhibit 5.1 to the Registration
Statement and to the use of our name in the Prospectus forming a part thereof
under the caption "Validity of Common Stock." In giving such consent, we do not
thereby admit that we are acting within the category of persons whose consent is
required under Section 7 of the Act or the rules and regulations of the
Securities and Exchange Commission thereunder.
Yours truly,
/s/ MORGAN, LEWIS & BOCKIUS LLP
- -------------------------------
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
April 22, 1998 appearing on page 24 of FORE Systems, Inc.'s Annual Report on
Form 10-K for the fiscal year ended March 31, 1998. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
/s/ PRICEWATERHOUSECOOPERS LLP
- ------------------------------
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
September 17, 1998
