EXHIBIT 99
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STATEMENT OF EXECUTIVE COMPENSATION
Composition of the Employee Compensation Committee
The Employee Compensation Committee of the Board of Directors (the "Committee")
is comprised of three directors of the Corporation who are neither officers nor
employees of the Corporation or its subsidiaries. The members of the Committee
are Mr. Kent Plumley, the Chairman of the Committee, Dr. Denzil Doyle and Mr.
Daniel Rusheleau.
As established by the Board of Directors, the terms of reference for the
Committee include overall review of current compensation policies and processes
to ensure that (i) the Chief Executive Officer and the other Executive Officers
are fairly and competitively compensated; (ii) human resources development,
succession planning and performance evaluation programs are established and
operating effectively throughout the Corporation and (iii) the Corporation's
Consolidated Key Employee Stock Option Plan (the "Consolidated Plan") is
properly administered.
Report on Executive Compensation
The establishment of salary levels for the executive officers of the Corporation
is the responsibility of the Chairman and Chief Executive Officer, together with
the President and Chief Operating Officer in the case of those Executive
Officers reporting to him; all are subject to review by the Committee. Salaries
are reviewed annually and are based on individual performance against specific
goals or overall accomplishment, the extent of individual responsibility and
comparisons with salaries paid in the industry. On occasion a bonus may be
awarded to an individual Executive Officer in recognition of a specific
achievement.
A significant component of Executive Compensation consists of grants of stock
options under the Consolidated Key Employee Stock Option Plan (the "Consolidated
Plan"). Options are granted primarily based on the extent of individual
responsibility and performance and on occasion are granted to attract new
executives and to recognize job promotions. While the cash compensation of
executives is generally believed to be below industry norms in relation to the
size and profitability of the Corporation, stock options provide a substantial
connection between the total long term remuneration of Executive Officers and
corporate performance as reflected in the market value of the Corporation's
Common Shares, as well as to directly align the interests of Executive Officers
with those of the shareholders.
Options vest after one year and have a maximum term of five years from the date
of grant. Shareholders will be asked to approve certain amendments to the
Consolidated Plan including amendments to the vesting period (see heading
"Resolution No. 1 - Amendment to Newbridge Networks Corporation Consolidated Key
Employee Stock Option Plan" below). The exercise price is equal to the average
of the average of the daily high and low board lot trading prices on The Toronto
Stock Exchange for the five days preceding the date of grant. The value of the
options granted to Executive Officers depends on the market price of the Common
Shares of the Corporation. Options are not transferable and may be exercised
only for so long as the optionholder remains an employee subject to certain
exceptions such as death, disability or retirement. When an option is exercised,
the Common Shares must be paid for in full.
The Corporation implemented the Newbridge Group Retirement Savings Plan/Deferred
Profit Sharing Plan effective January 1, 1997 (the "Group Plan"). Full-time and
permanent part-time employees of the Corporation in Canada are eligible to
participate in the Group Plan. Employees may contribute a percentage of annual
earnings (within the limits prescribed by current Canadian income tax
legislation) and the Corporation will, on a matching basis, contribute an amount
equal to 50% of the employees contribution, up to a maximum amount equal to 5%
of annual salary, into a deferred profit sharing plan. The Group Plan requires
two years of membership from the date of enrollment before the contributions
made by the Corporation vest to an employee.
The Board of Directors established the level of compensation to be paid to the
Chairman and Chief Executive Officer (the "CEO") in 1991 at an amount considered
to be reasonable, fair and equitable. Although the compensation of the CEO has
been reviewed since that time, the CEO has declined to receive any increase in
his annual cash compensation or stock options under either the Consolidated Plan
or its predecessor plans.
The foregoing has been furnished by the members of the Employee Compensation
Committee of the Board of Directors: Mr. Kent Plumley (Chairman) Dr. Denzil
Doyle, Mr. Daniel Rusheleau.
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Summary Compensation Table
The following table states the compensation paid for each of the Corporation's
three most recently completed financial years to the Chief Executive Officer and
the next four most highly compensated Executive Officers (the "Named Executive
Officers") during the fiscal year ended April 30, 1997.
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Long Term
Annual Compensation Compensation
-------------------------------------- ------------ All
Name and Principal Fiscal All Other Securities Under Other
Position Year Salary Bonus Compensation/(1)/ Options Granted/(2)/ Compensation
- --------------------------------------------------------------------------------------------------------------------------
Terence H. Matthews /(3)/ 1997 $175,790 -- $22,584 -- --
Chairman of the Board 1996 $149,791 -- $47,105 -- --
& CEO 1995 $148,800 -- $49,878 -- --
Peter Sommerer 1997 $209,511 -- $7,043 70,000 --
Vice Chairman of the 1996 $211,147 -- $3,472 40,000 --
Board 1995 $194,372 -- $3,342 20,000 --
F. Michael Pascoe 1997 $231,880 -- $13,525 20,000 $31,814/(5)/
Executive Vice President 1996 $231,438 -- $9,400 42,000 $16,869/(5)/
and General Manager 1995 $234,872 -- $9,443 12,000 $30,444/(5)/
Americas Region
John Everard 1997 $258,875 -- $29,860 40,000 $20,710/(4)/
Executive Vice President 1996 $237,574 -- $27,902 12,000 $19,006/(4)/
and General Manager 1995 $215,987 -- $21,395 10,000 $13,291/(4)/
European Region
Scott Marshall 1997 $202,413 -- $10,063 20,000 --
Executive Vice President 1996 $135,243 -- $6,308 96,000 --
Research & Development 1995 $136,270 -- $6,279 16,000 --
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(1) Except as specifically disclosed, the value of each Named Executive
Officer's perquisites and other benefits was less than the lesser of (i)
$50,000 and (ii) 10% of such officer's total annual salary and bonus. The
amounts paid under "All Other Compensation" to Mr. Matthews, Mr. Sommerer,
Mr. Pascoe, Mr. Marshall and Mr. Everard principally represent payments
for automobile leases unless otherwise indicated.
(2) During the fiscal year ended on April 30, 1997, the Board of Directors
declared a two-for-one stock split effected in the form of a 100% stock
dividend. The numbers shown in the table for previous years have been
adjusted to reflect the stock split. Each option entitles the holder to
acquire the indicated number of Common Shares. Particulars of stock
options are provided under the heading "Stock Options".
(3) Terence H. Matthews' compensation is paid by means of a management fee to
a company which is controlled by Mr. Matthews.
(4) Amounts paid to Mr. Everard under "All Other Compensation" represent
contributions paid into a Retirement Benefit Plan on Mr. Everard's behalf,
which Plan is available to all employees of the Corporation's United
Kingdom subsidiary. Under the Plan the employer contributed 8% of the
Executive Officer's pensionable earnings. Benefits payable upon retirement
under the Plan are derived from a pension annuity policy purchased from an
insurance company.
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(5) Amounts paid to Mr. Pascoe under "All Other Compensation" represent, in
part, the Corporation's share of contributions paid into a 401(k)
retirement benefit plan on Mr. Pascoe's behalf, which plan is available to
all employees of the United States subsidiary. Under the plan, the
employer contributed 50% of the first 6% of the employees base salary
contributed to the plan. The balance of the amount disclosed under "All
Other Compensation" represents employer contributions paid for health and
disability insurance. [In 1995, the amount disclosed under "All Other
Compensation" includes relocation benefits paid to Mr. Pascoe.
Stock Options
The following table provides details of grants of options to purchase Common
Shares of the Corporation to each of the Named Executive Officers during the
fiscal year ended April 30, 1997:
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Securities % of Total Exercise Market Value Expiration
Name Under Options Granted Price of Securities Date
Options to Employees in per Underlying
Granted Financial Year Security Options on
Date of Grant
- -------------------------------------------------------------------------------------------------------------------
Terence H. Matthews -- -- -- -- --
Peter Sommerer 20,000 .281% $30.18 $30.18 July 26/00
50,000 .704% $38.86 $38.86 Jan. 6/02
F. Michael Pascoe 20,000 .281% $30.18 $30.18 July 26/00
John Everard 40,000 .563% $30.18 $30.18 July 26/00
Scott Marshall 20,000 .281% $30.18 $30.18 Jan. 6/02
- -------------------------------------------------------------------------------------------------------------------
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The following table provides details of exercises of stock options by each of
the Named Executive Officers during the fiscal year ended April 30, 1997 and the
fiscal year end value of unexercised stock options based on the closing price of
$44.60 per Common Share on April 30, 1997:
- -----------------------------------------------------------------------------------------------------------------
Securities Aggregate Unexercised Value of
Acquired Value Options Unexercised
Name on Exercise Realized Exercisable(E) in-the-Money
Unexercisable(U) Options
Exercisable [E]
Unexercisable [U]
- -----------------------------------------------------------------------------------------------------------------
Terence H. Matthews -- -- -- --
Peter Sommerer 132,000 $3,805,920 [E] 59,996 [E] $1,143,185
[U] 120,004 [U] $1,856,899
F. Michael Pascoe - - [E] 35,332 [E] $844,707
[U] 58,668 [U] $1,232,832
John Everard 10,666 $232,476 [E] 2 [E] $49
[U] 54,668 [U] $928,303
Scott Marshall 92,000 $2,744,385 [E] 42,664 [E] $841,162
[U] 89,336 [U] $1,438,757
- -----------------------------------------------------------------------------------------------------------------
Compensation of Directors
Non-employee directors of the Corporation ("Director Participants") receive an
option to purchase 10,000 Common Shares under the Consolidated Plan on the date
of each annual meeting of shareholders at which such director is elected to the
Board of Directors. A Director Participant who is appointed to the Audit
Committee, the Employee Compensation Committee, the Directors' Affairs Committee
or any future committee established by the Board of Directors and declared by
the Board of Directors to be a standing committee ("Standing Committee"), other
than as Chair of such Standing Committee, receives an option to purchase 2,000
Common Shares upon annual appointment to a Standing Committee. A Director
Participant who is appointed Chair of a Standing Committee receives an option to
purchase 4,000 Common Shares upon annual appointment as Chair. Directors are
entitled to reimbursement of all expenses for attendance at Board and Standing
Committee meetings. Directors do not receive a fee for attendance at meetings of
the Board of Directors or Committees thereof. During the fiscal year ended April
30, 1997 Director Participants as a group received options to purchase 277,000
Common Shares at a weighted average exercise price of $38.06 per share. During
the fiscal year ended April 30, 1997, Director Participants as a group exercised
options to purchase 257,998 Common Shares. The aggregate market value of these
Common Shares as at the respective dates of purchase, less the exercise price,
was $1,809,500. As at June 12, 1997, 12 Director Participants held options to
purchase 672,670 Common Shares.
Directors' and Officers' Liability Insurance
The Corporation maintains Directors' and Officers' Liability Insurance in the
amount of US$15,000,000 for the benefit of the directors and officers of the
Corporation and its subsidiaries. During the fiscal year ended April 30, 1997,
the amount of premium paid under the policy was US$1,041,021 which covers a 3
year period from November 1, 1996 to November 1, 1999. No portion of the premium
was paid by the directors and officers of the Corporation. The policy provides
for a retention of US$1 million for each loss claimed by the Corporation. The
by-laws of the Corporation generally provide that the Corporation shall
indemnify a director or officer of the Corporation against liability incurred in
such capacity including acting at the Corporation's request as director or
officer of another corporation, to the extent permitted or required by the CBCA.
Performance Graph
The following graph compares the cumulative return on $100 invested in Common
Shares of the Corporation with selected indices, assuming reinvestment of all
dividends. The Corporation's management consistently cautions that
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the stock price performance shown in the graph below should not be considered
indicative of potential future share price performance.
Comparison of Cumulative Total Return Among Newbridge, NYSE Composite Index,
Pacific Stock Exchange Technology Index and TSE 300 Index for the period May 1,
1992 to April 30, 1997
[LINE GRAPH APPEARS HERE]
- -------------------------------------------------------------------------------------------------------------------
April '92 April '93 April '94 April '95 April '96 April '97
- -------------------------------------------------------------------------------------------------------------------
Newbridge $100 $455 $812 $493 $1,024 $1,042
- -------------------------------------------------------------------------------------------------------------------
Pacific Stock $100 $111 $139 $190 $264 $298
Exchange
Technology Index
- -------------------------------------------------------------------------------------------------------------------
NYSE Composite $100 $107 $110 $121 $154 $183
- -------------------------------------------------------------------------------------------------------------------
TSE 300 Index $100 $113 $127 $128 $156 $178
- -------------------------------------------------------------------------------------------------------------------
Interest of Insiders in Material Transactions
The Corporation leases facilities in Canada and the United Kingdom from
companies controlled by Terence H. Matthews, Chairman of the Board and Chief
Executive Officer and the largest shareholder of the Corporation, under terms
and conditions reflecting prevailing market conditions at the time the leases
were entered into. Approximately 343,000 square feet has been leased for various
terms expiring between September 1997 and May 2002 at rates between $9.25 and
$14.00 per square foot (approximately $3,200,000 per year). During the fiscal
year ended April 30, 1996 the Corporation purchased a facility from a company
controlled by Mr. Matthews for its fair market value of $5,244,000.
During the fiscal year ended April 30, 1997, the Corporation paid $2,621,000 for
research and development services from associated companies under usual trade
terms and conditions (fiscal 1996 -- $507,000). The Corporation also purchased
$8,597,000 of equipment and software from associated companies under usual trade
terms, generally for resale (fiscal 1996 -- $7,442,000). The Corporation sold
$20,559,000 of equipment and software to associated
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companies under usual trade terms, generally for resale (fiscal 1996 --
$1,207,000). The Corporation has equity interests in these associated companies
ranging from 22% to 39% and is represented on the boards of directors of these
companies.
During the fiscal year ended April 30, 1997, the Corporation purchased
approximately $3,393,000 of equipment under usual trade terms and conditions
from companies in which the Corporation has no equity interest, but for which
certain directors of the Corporation served as chief executive officer and as a
director and from corporations for which Terence H. Matthews served as a
director (fiscal 1996 -- $944,000).
During the fiscal year ended April 30, 1996, the Corporation performed
subcontracted research and development under agreements between the Corporation
and corporations controlled by three directors of the Corporation. Subcontracted
research and development under these agreements totalled $3,200,000 for fiscal
1996 (fiscal 1995 -- $4,900,000) and is accounted for as a recovery of gross
research and development costs. The period covered by the subcontracted research
and development agreements ended in the third quarter of fiscal 1996. The
Corporation will pay a net royalty between 2% and 10%, depending on the level of
cumulative royalties paid, on all sales of products developed.
Certain officers and directors of the Corporation and members of their immediate
families own Common Shares in entities in which the Corporation also owns Common
Shares.
The Corporation has a policy that all transactions between the Corporation and
it's officers, directors, principal shareholders or their affiliates, including
the extension of any credit, will be on terms no less favourable to the
Corporation than could be obtained from unrelated third parties and will be
approved by a majority of the Board of Directors and a majority of the
Corporation's disinterested directors.
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