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STANDSTILL AND DISPOSITION AGREEMENT
Between
EFFICIENT NETWORKS, INC.
and
CABLETRON SYSTEMS, INC.
Dated as of December 17, 1999
TABLE OF CONTENTS
Page
----
ARTICLE 1
DEFINITIONS...........................................................
1
1.1 Certain
Definitions................................................... 1
ARTICLE 2 STANDSTILL AND RELATED
COVENANTS...................................... 5
2.1 Cabletron Ownership of Efficient
Securities........................... 5
2.2 Standstill
Provisions................................................. 5
2.3
Voting................................................................
6
2.4 Voting
Trust.......................................................... 6
2.5 Solicitation of
Proxies............................................... 6
2.6 Acts in Concert with
Others........................................... 6
2.7
Termination...........................................................
7
ARTICLE 3 RESTRICTIONS ON TRANSFER OF SECURITIES; COMPLIANCE WITH
SECURITIES
LAWS............................................................ 7
3.1 Restrictions on Transfer of Voting Securities of
Efficient............ 7
3.2 Restrictive
Legends................................................... 8
3.3 Procedures for Certain
Transfers...................................... 9
3.4 Covenant Regarding Exchange Act
Filings............................... 10
3.5
Termination...........................................................
10
ARTICLE 4 REGISTRATION
RIGHTS................................................... 11
4.1 Demand
Registration................................................... 11
4.2 Shelf
Registration.................................................... 11
4.3 Piggyback
Registration................................................ 12
4.4 Demand and Shelf Registration Procedures, Rights and
Obligations...... 14
4.5
Expenses..............................................................
18
4.6
Indemnification.......................................................
18
4.7 Issuances by Efficient or Other
Holders............................... 19
4.8 Information by
Cabletron.............................................. 19
4.9 Market Standoff
Agreements............................................ 19
4.10 Additional Registration Rights
Covenants.............................. 20
4.11
Termination...........................................................
20
ARTICLE 5
MISCELLANEOUS.........................................................
21
5.1 Governing
Law......................................................... 21
5.2 Successors and
Assigns................................................ 21
5.3 Entire Agreement;
Amendment........................................... 21
5.4 Notices and
Dates..................................................... 21
5.5 Language
Interpretation............................................... 22
5.6 Table of Contents; Titles;
Headings................................... 23
5.7
Counterparts..........................................................
23
5.8
Severability..........................................................
23
5.9 Injunctive
Relief..................................................... 23
5.10 Automatic Adjustments to Share
Numbers................................ 23
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STANDSTILL AND DISPOSITION AGREEMENT
THIS STANDSTILL AND DISPOSITION AGREEMENT (this "Agreement") is
made as of
December 17, 1999, between Cabletron Systems, Inc., a Delaware
corporation
("Cabletron"), and Efficient Networks, Inc., a Delaware corporation
("Efficient").
RECITALS
--------
A. Pursuant to the terms of the Agreement and Plan of
Reorganization,
dated as of November 21, 1999 (the "Merger Agreement"), by and among
Efficient,
Cabletron, Fire Acquisition Corporation, a California corporation and
Flowpoint
Corporation, a California corporation, Cabletron will receive 7,200,000
shares
of Efficient's Common Stock, par value $0.01 per share (the "Shares")
and 6,300
shares of Efficient's Series A Non-Voting Convertible Stock (the
"Preferred
Stock").
B. The Merger Agreement provides for the execution and delivery
of this
Agreement.
NOW, THEREFORE, in consideration of the representations,
warranties,
covenants and conditions herein and in the Merger Agreement, the parties
hereto
hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Certain Definitions. As used in this Agreement:
-------------------
(a) "Affiliate" shall have the meaning set forth in Section
3.3(c).
(b) "Available Shares" shall have the meaning set forth in
Section
4.3(c)(ii).
(c) "Base Shares" means the number of shares of Efficient
equal to ten
percent (10%) of Efficient's Voting Securities.
(d) "Beneficial ownership" or "beneficial owner" has the
meaning
provided in Rule 13d-3 promulgated under the Exchange Act. References to
ownership of Voting Securities hereunder mean record and/or beneficial
ownership.
(e) "Change in Control of Efficient" shall mean a merger,
consolidation or other business combination or the sale of all or
substantially
all of the assets of Efficient (other than a transaction pursuant to
which the
holders of the voting stock of Efficient outstanding immediately prior
to such
transaction have the entitlement to exercise, directly or indirectly,
fifty
percent (50%) or more of the Total Voting Power of the continuing,
surviving
entity or transferee immediately after such transaction).
(f) "Cabletron" has the meaning set forth in the recitals
hereto and
includes any Person controlling Cabletron.
(g) "Cabletron Competitor" is any of the top five (5) data
networking
companies, as measured by revenues from time to time.
(h) "Cabletron Conflict of Interest Transaction" means any
transaction
requiring the approval of Efficient's Stockholders (i) between Efficient
and one
(or more) Persons in which Cabletron owns or controls a five percent
(5%) equity
interest or (ii) a Change of Control of Efficient with a Cabletron
Competitor.
(i) "Cabletron Pooling Transaction Lock-Up" has the meaning
set forth
in Section 4.9(a).
(j) "Cabletron Public Offering Lock-Up" has the meaning set
forth in
Section 4.9(a).
(k) "Controlled Affiliate" means, with respect to any Person,
any
Person directly or indirectly controlled by such other Person where, for
purposes of this definition, "control" or "controlled by" means the
possession,
directly or indirectly, of the power to direct or cause the direction of
the
management and policies of such Person, whether through the ownership of
Voting
Securities, by contract or otherwise.
(l) "Conversion Stock" shall mean the Efficient Common Stock
received
upon conversion of the Preferred Stock.
(m) "Demand Breathing Period" means (x) 180 days after the
closing of
the offering related to a prior Demand Request or (y) 90 days after the
closing
of the last public offering of securities by Efficient for its own
account.
(n) "Demand Registration Statement" has the meaning set forth
in
Section 4.1(a).
(o) "Demand Request" has the meaning set forth in Section
4.1(a).
(p) "Demand Managing Underwriters" has the meaning set forth
in
Section 4.4(c).
(q) "Demand Market Cut-Back" has the meaning set forth in
Section
4.4(d).
(r) "Exchange Act" means the Securities Exchange Act of 1934,
as
amended.
(s) "Exclusive Demand Period" means the period between the
date hereof
and December 31, 2000; provided, that, the Exclusive Demand Period shall
be
extended day per day for the duration of any Suspension Condition in
effect
prior to December 31, 2000.
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(t) "Exclusive Demand Period Offering" means a public offering of
Voting
Securities for cash by Efficient for its own account (excluding the
First
Offering) during the Exclusive Demand Period.
(u) "First Offering" means the first underwritten public offering
of
Voting Securities for cash by Efficient for its own account following
the date
hereof.
(v) "Group" or "group" shall have the meaning provided in Section
13(d)(3)
of the Exchange Act and the rules and regulations promulgated
thereunder, but
shall exclude any institutional underwriter purchasing Voting Securities
of
Efficient in connection with an underwritten registered offering for
purposes of
a distribution of such securities.
(w) "Indemnified Party" has the meaning set forth in Section
4.6(c).
(x) "Indemnifying Party" has the meaning set forth in Section
4.6(c).
(y) "Investors" shall have the meaning set forth in the Investors"
Rights
Agreement.
(z) "Investors" Rights Agreement" shall mean that certain
Investors"
Rights Agreement of Efficient dated July 30, 1993, as amended (or any
successor
to such agreement).
(aa) "Minimum Demand Portion" shall have the meaning set forth in
Section
4.4(d)(i).
(bb) "Passive Investor" means a bank, a qualified pension trust or
a
registered mutual fund which reports its ownership of securities under
and
utilizing Section 13(G) of the Exchange Act (and Form 13(G) under the
Exchange
Act) and which has not, within the two (2) year period prior to the time
of
determination, participated in a solicitation of proxies against a
portfolio
company or filed a Form 13(d) or converted from a Form 13(G) filer to a
Form
13(d) filer with respect to any portfolio company.
(cc) "Person" shall mean any person, individual, corporation,
partnership,
trust, limited liability company or other non-governmental entity or any
governmental agency, court, authority or other body (whether foreign,
federal,
state, local or otherwise).
(dd) "Piggyback Market Cut-Back" has the meaning set forth in
Section
4.3(c).
(ee) "Piggyback Registrable Securities" has the meaning set forth
in
Section 4.3(a).
(ff) "Piggyback Registration Statement" has the meaning set forth
in
Section 4.3(a).
(gg) "Piggyback Request" has the meaning set forth in Section
4.3(a).
(hh) "Piggyback Underwriting Agreement" has the meaning set forth
in
Section 4.3(b).
-3-
(ii) "Preferred Stock" has the meaning set forth in Section A of
the
Recitals.
(jj) "Proportionately" has the meaning set forth in Section 2.3.
(kk) "Register," "registered" and "registration" refer to a
registration
effected by preparing and filing a registration statement in compliance
with the
Securities Act, and the declaration or ordering of the effectiveness of
such
registration statement.
(ll) "Registrable Securities" means (i) the Shares, (ii) Conversion
Stock
and (iii) any securities issued in respect of the foregoing as a result
of any
stock split, stock dividend, recapitalization, or similar transaction.
(mm) "Registration Expenses" shall mean all expenses incurred in
connection
with a registration hereunder, including, without limitation, all
registration
and filing fees, listing fees, printing and automated document
preparation
expenses, custody fees, fees and disbursements of counsel for Efficient,
blue
sky fees and expenses, and the expenses of Efficient's independent
accountants,
including any special audits or comfort letters incident to or required
by any
such registration, but excluding the expenses of regular employees of
Efficient,
which shall be paid in any event by Efficient.
(nn) "Reserved Portion" shall mean (i) with respect to the First
Offering,
provided the preliminary prospectuses with respect to such offering are
printed
and distributed prior to May 1, 2000 and such offering closes by June 1,
2000
(the "Criteria"), 35% of the number of shares to be distributed in such
offering; (ii) with respect to an Exclusive Demand Period Offering (or
the First
Offering if the Criteria are not met), the greater of 40% of the shares
to be
distributed in such offering or 3,000,000 shares.
(oo) "Reserved Shares" shall have the meaning set forth in Section
4.4(d)(ii).
(pp) "Securities" has the meaning set forth in Section 3.2(a).
(qq) "Securities Act" means the Securities Act of 1933, as amended.
(rr) "SEC" means the Securities and Exchange Commission or any
other
federal agency at the agency administering the Securities Act.
(ss) "Selling Expenses" shall mean with respect to any registration
pursuant to this Agreement, all underwriting discounts and selling
commissions
applicable to the sale of shares and all fees and disbursements of
counsel to
any Person other than the Company.
(tt) "Shares" has the meaning set forth in Section A of the
recitals above;
provided, however, if not capitalized, "shares" shall mean shares of
Efficient's
common stock generally.
(uu) "Shelf Registrable Securities" has the meaning set forth in
Section
4.2(a).
(vv) "Shelf Registration Statement" has the meaning set forth in
Section
4.2(a).
-4-
(ww) "Suspension Condition" has the meaning set forth in Section
4.4(f).
(xx) "Total Consideration Shares" shall mean the aggregate of (x)
the total
number of Shares held by Cabletron and (y) the total number of shares of
Efficient Common Stock which the Preferred Stock has been converted into
or is
convertible into.
(yy) "Voting Securities" means all securities of Efficient,
entitled, in
the ordinary course, to vote in the election of directors of Efficient.
Voting
Securities shall not include stockholder rights or other comparable
securities
having Voting Power only upon the happening of a trigger event or
comparable
contingency and which can only be transferred together with the Voting
Securities to which they attach. References herein to meetings of
holders of
Voting Securities shall include meetings of any class or type thereof.
(zz) "Voting Power" or "Total Voting Power" of Efficient (or any
other
corporation) refer to the votes or total number of votes which at the
time of
calculation may be cast in the election of directors of Efficient (or
such
corporation) at any meeting of stockholders of Efficient (or such
corporation)
if all securities entitled to vote in the election of directors of
Efficient (or
such corporation) were present and voted at such meeting; provided that
for
purposes of references herein made to any Person's "Voting Power" or
percentage
beneficial ownership of "Total Voting Power," any rights (other than
rights
referred to in any rights plan of Efficient (or any such other
corporation) or a
successor to such rights plan so long as such rights can only be
transferred
together with the Voting Securities to which they attach) of such Person
to
acquire Voting Securities (whether or not the exercise of any such right
shall
be conditioned upon any contingency) shall be deemed to have been
exercised in
full.
All capitalized terms used and not defined herein shall have the
respective
meanings assigned to such terms in the Merger Agreement.
ARTICLE 2
STANDSTILL AND RELATED COVENANTS
2.1 Cabletron Ownership of Efficient Securities. On the date
hereof, and
-------------------------------------------
without giving effect to the transactions contemplated by the Merger
Agreement,
neither Cabletron nor any Controlled Affiliate of Cabletron beneficially
owns
any Voting Securities of Efficient.
2.2 Standstill Provisions. Cabletron shall not acquire, directly
or
---------------------
indirectly, and shall not cause or permit any Controlled Affiliate of
Cabletron
to acquire, directly or indirectly (through market purchases or
otherwise),
record or beneficial ownership of any Voting Securities of Efficient
without the
prior written consent of the Board of Directors of Efficient; provided,
however,
that the prior written consent of the Board of Directors of Efficient
shall not
be required for the acquisition of any Voting Securities of Efficient
directly
from Efficient or resulting from a stock split, stock dividend or
similar
recapitalization by Efficient. Nothing contained in this Section 2.2
shall
adversely affect any right of Cabletron or any Controlled Affiliate of
Cabletron
to acquire record or beneficial ownership of Voting Securities of
Efficient
pursuant to any rights plan instituted by Efficient.
-5-
2.3 Voting. Unless the Board of Directors of Efficient otherwise
consents
------
in writing in advance, Cabletron shall take such action (and shall cause
each
Controlled Affiliate of Cabletron that beneficially owns Voting
Securities of
Efficient to take such action) as may be required so that all Voting
Securities
of Efficient beneficially owned by Cabletron (or any such Controlled
Affiliate
of Cabletron) from time to time, other than the Base Shares, are voted
on all
matters to be voted on by holders of Voting Securities of Efficient in
the same
proportion (for, against and abstain, with lost, damaged or disfigured
ballots
counting as abstentions to the extent that they cannot be counted as for
or
against under applicable law) as the votes cast by the other holders of
Voting
Securities of Efficient with respect to such matters
("Proportionately");
provided, however, that on any matter that constitutes, involves or is
part of,
a Cabletron Conflict of Interest Transaction, Cabletron and any
Controlled
Affiliate of Cabletron must vote all Voting Securities, including the
Base
Shares, Proportionately. Cabletron (or any Controlled Affiliate of
Cabletron),
as the holder of Voting Securities of Efficient, shall be present, in
person or
by proxy, at all meetings of the stockholders of Efficient so that all
Voting
Securities of Efficient beneficially owned by Cabletron (or such
Controlled
Affiliate of Cabletron) from time to time may be counted for the
purposes of
determining the presence of a quorum at such meetings. The foregoing
provision
shall also apply to the execution by Cabletron of any written consent in
lieu of
a meeting of holders of Voting Securities of Efficient or any class
thereof.
2.4 Voting Trust. Cabletron shall not, and shall not cause or
permit any
------------
Controlled Affiliate of Cabletron to, deposit any Voting Securities of
Efficient
in a voting trust or, except as otherwise provided herein, subject any
Voting
Securities of Efficient to any arrangement or agreement with respect to
the
voting of such Voting Securities of Efficient.
2.5 Solicitation of Proxies. Without the prior written consent of
the
-----------------------
Board of Directors of Efficient, Cabletron shall not, and shall not
cause or
permit any Controlled Affiliate of Cabletron to, directly or indirectly
(i)
initiate, propose or otherwise solicit Efficient stockholders for the
approval
of one or more stockholder proposals with respect to Efficient or induce
or
attempt to induce any other Person to initiate any stockholder proposal,
(ii)
make, or in any way participate in, any "solicitation" of "proxies" (as
such
terms are defined or used in Regulation 14a-1 under the Exchange Act)
with
respect to any Voting Securities of Efficient, or become a "participant"
in any
"election contest" (as such terms are used in Rule 14a-11 of Regulation
14A
under the Exchange Act), with respect to Efficient or (iii) call or seek
to have
called any meeting of the holders of Voting Securities of Efficient.
2.6 Acts in Concert with Others. Except as contemplated herein,
Cabletron
---------------------------
shall not, and shall not cause or permit any Controlled Affiliate of
Cabletron,
to participate in the formation, or encourage the formation, of any
Person which
owns or seeks to acquire beneficial ownership of, or otherwise acts in
concert
in respect of the Voting or disposition of, Voting Securities of
Efficient.
Without limiting the generality of the foregoing, and except as
contemplated
herein, Cabletron shall not, and shall not cause or permit any
Controlled
Affiliate of Cabletron to: (i) join a partnership, limited partnership,
syndicate or other group, or otherwise act in concert with any third
person, for
the purpose of acquiring, holding, or disposing of Voting Securities of
Efficient; (ii) seek election to or seek to place a representative on
the Board
of Directors of Efficient; (iii) seek the removal of any member of the
Board of
Directors of Efficient; (iv) otherwise seek control of the management,
Board of
Directors or policies of Efficient; (v) solicit, propose, seek to effect
or
negotiate with any other Person with respect to any form of business
combination
transaction with Efficient or any Controlled
-6-
Affiliate thereof, or any restructuring, recapitalization or similar
transaction
with respect to Efficient or any Controlled Affiliate thereof; (vi)
solicit,
make or propose or encourage or negotiate with any other Person with
respect to,
or announce an intent to make, any tender offer or exchange offer for
any Voting
Securities of Efficient; (vii) disclose an intent, purpose, plan or
proposal
with respect to Efficient or any Voting Securities of Efficient
inconsistent
with the provisions of this Agreement, including an intent, purpose,
plan or
proposal that is conditioned on or would require Efficient to waive the
benefit
of or amend any provision of this Agreement; or (vii) assist,
participation in,
facilitate, encourage or solicit any effort or attempt by any Person to
do or
seek to do any of the foregoing. Cabletron shall not, and shall not
cause or
permit any Controlled Affiliate of Cabletron to, encourage or render
advice to
or make any recommendation or proposal to any Person to engage in any of
the
actions covered by Section 2.5 and this Section 2.6 hereof.
2.7 Termination. The provisions of this Article 2 shall terminate
at such
-----------
time as (i) Cabletron (together with all Controlled Affiliates of
Cabletron)
beneficially owns in the aggregate Voting Securities of Efficient
representing
less than five percent (5%) of the Total Voting Power of Efficient or
(ii) upon
a Change in Control of Efficient.
ARTICLE 3
RESTRICTIONS ON TRANSFER OF SECURITIES; COMPLIANCE WITH SECURITIES
LAWS
3.1 Restrictions on Transfer of Voting Securities of Efficient.
Cabletron
----------------------------------------------------------
shall not, and shall not cause or permit any Controlled Affiliate of
Cabletron
to, directly or indirectly, offer to sell, contract to sell, make any
short sale
of, or otherwise sell, dispose of, loan, gift, pledge or grant any
options or
rights with respect to, any Securities, now or hereafter acquired, or
with
respect to which Cabletron or any Controlled Affiliate of Cabletron has
or
hereafter acquires the power of disposition or enter into any agreement
or
understanding with respect to the foregoing, except as set forth below
(for
purposes of the following, the Preferred Stock shall be deemed converted
into
Conversion Stock):
(a) to Efficient, or any Person or group approved in writing
in
advance by the Board of Directors of Efficient;
(b) subject to Section 3.3(a) below, to any Controlled
Affiliate of
Cabletron, so long as such Controlled Affiliate agrees in writing, in
form
reasonably acceptable to counsel for Efficient, to hold such Voting
Securities
or Preferred Stock of Efficient subject to all the provisions of this
Agreement,
and so agrees to transfer such Voting Securities or Preferred Stock of
Efficient
to Cabletron or another Controlled Affiliate of Cabletron if it ceases
to be a
Controlled Affiliate of Cabletron;
(c) pursuant to a firm commitment, underwritten public
offering of
Securities registered under the Securities Act;
(d) subject to Section 3.3(b) below, through a sale of
Securities
pursuant to Rule 144 under the Securities Act or pursuant to the Shelf
Registration Statement; provided, however, that any such sale complies
with the
manner of sale provisions under paragraph (f) of Rule
-7-
144 or the plan of distribution set forth in the Shelf Registration
Statement,
as applicable and is not made to: (A) any Person or group which has
theretofore
filed a Schedule 13D with the SEC with respect to any class of "equity
security"
(as defined in Rule 13a11-1 under the Exchange Act) of Efficient and
which, at
the time of such sale, continues to reflect beneficial ownership in
excess of
five percent (5%) of the Total Voting Power of Efficient; (B) any Person
or
group which, after giving effect to the sale and to the actual knowledge
of
Cabletron (with no duty of investigation), will beneficially own in
excess of
five percent (5%) of any Voting Securities of Efficient or to be
accumulating
stock on behalf of or acting in concert with any such Person or group or
a
Person or group contemplated by clause (A) above, provided however, that
this
clause (B) shall not apply with respect to transfers less than 100,000
shares;
or (C) any Person or group that has announced or commenced an
unsolicited offer
for any Voting Securities or Preferred Stock of Efficient or publicly
initiated,
proposed or otherwise solicited Efficient stockholders for the approval
of one
or more stockholder proposals with respect to Efficient or publicly
made, or in
any way participated in, any "solicitation" of "proxies" (as such terms
are
defined or used in Regulation 14A under the Exchange Act) with respect
to any
Voting Securities or Preferred Stock of Efficient, or become a
"participant" in
any "election contest" (as such terms are used in Rule 14a-11 of
Regulation 14A
under the Exchange Act);
(e) (i) subject to Section 3.3(a) below, pursuant to any
private sale
of Securities exempt from the registration requirements under the
Securities
Act; provided, however, that (i) no such sale may be made to any Person
or group
which, to the knowledge of Cabletron after reasonable inquiry and after
giving
effect to such sale, will beneficially own or have the right to acquire
Voting
Securities or Preferred Stock of Efficient with aggregate Voting Power
of more
than five percent (5%) of the Total Voting Power of Efficient or group,
except,
however, if such Person or group is a Passive Investor, such limitation
shall be
ten percent (10%) of the Total Voting Power of Efficient; and (ii) in
any event
any such purchaser shall agree to take and hold such Securities subject
to the
provisions and upon the conditions specified in Sections 2 and 3 of this
Agreement, and it will be a condition precedent to the effectiveness of
any such
transfer that Cabletron shall have delivered to Efficient a written
agreement of
such purchaser to that effect in form and substance reasonably
satisfactory to
Efficient; or
(f) in response to an offer to purchase or exchange for cash
or other
consideration any Voting Securities or Preferred Stock, which in any
case is not
opposed by the Board of Directors of Efficient within the time such
Board is
required, pursuant to Regulations under the Exchange Act, to advise the
stockholders of Efficient of such Board's position with respect to such
offer,
or, if no such Regulations are applicable, within ten (10) business days
of the
commencement of such offer, or pursuant to a merger, consolidation or
other
business combination involving Efficient approved by the Board of
Directors of
Efficient.
3.2 Restrictive Legends.
-------------------
-8-
(a) The certificate or certificates representing the (i) the
Shares,
(ii) the Preferred Stock, (iii) the Conversion Stock and (iv) any
securities
issued in respect of the foregoing as a result of any stock split, stock
dividend, recapitalization, or similar transaction (collectively, the
"Securities") shall be stamped or otherwise imprinted with a legend
substantially in the following form (in addition to any legend required
under
applicable state Securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER AS TO THE
AVAILABILITY OF AN EXEMPTION FROM REGISTRATION.
(b) In addition to the legend provided for in Section 3.2
(a), the
certificate or certificates representing the Securities and any other
securities
of Efficient hereafter acquired (for example, in compliance with Section
2.2)
shall be stamped or otherwise imprinted with a legend substantially in
the
following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER, INCLUDING ANY SALE, PLEDGE OR
OTHER HYPOTHECATION, WHICH RESTRICTIONS ARE SET FORTH IN AN
AGREEMENT BETWEEN THE ISSUER AND CABLETRON SYSTEMS, INC., A
COPY OF WHICH MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST
MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF THE ISSUER AT THE ISSUER'S PRINCIPAL EXECUTIVE
OFFICES.
3.3 Procedures for Certain Transfers.
--------------------------------
(a) Prior to any proposed transfer of any Securities pursuant
to
Sections 3.1(b) and 3.1(e)(i) hereof, Cabletron shall give written
notice to
Efficient of Cabletron's intention to effect such transfer. Each such
notice
shall describe the manner and circumstances of the proposed transfer in
sufficient detail, and shall be accompanied by either: (i) a written
opinion of
legal counsel (including in-house counsel), who shall be reasonably
satisfactory
to Efficient, addressed to Efficient and reasonably satisfactory in form
and
substance to Efficient's counsel, to the effect that the proposed
transfer of
the Securities may be effected without registration under the Securities
Act; or
(ii) a "no action" letter from the SEC and a copy of any request by
Cabletron
(together with all supplements or amendments thereto), which shall have
been
provided to Efficient at or prior to the time of first delivery to the
SEC's
staff, to the effect that the transfer of such Securities without
registration
will not result in a recommendation by the staff of the SEC that action
be taken
with respect thereto, whereupon Cabletron shall be entitled to transfer
such
Restricted Securities in accordance with the terms of the notice
delivered by
Cabletron to Efficient.
-9-
(b) In connection with any proposed transfer of Securities
pursuant
to Rule 144 as provided in Section 3.1(d) above, Cabletron shall comply
with the
reasonable requirements of Efficient's transfer agent with respect to
sales of
restricted securities pursuant to Rule 144.
(c) Each certificate evidencing the Securities transferred as
herein
provided (other than a transfer pursuant to Section 3.1(c) or pursuant
to the
Shelf Registration Statement) shall bear the appropriate restrictive
legend set
forth (or described) in Section 3.4(a) above, except that such
certificate shall
not bear such restrictive legend if: (i) in the opinion of counsel for
Efficient, such legend is not required in order to establish compliance
with any
provisions of the Securities Act; (ii) the Securities have been held by
the
holder for more than two years, and the holder represents to counsel for
Efficient that it has not been an "Affiliate" (as such term is defined
for
purposes of Rule 144) of Efficient during the three-month period prior
to the
sale and shall not become an affiliate (as such term is defined for
purposes of
Rule 144) of Efficient without resubmitting the Securities for
reimposition of
the legend; or (iii) the Securities have been sold pursuant to Rule 144
and in
compliance with Section 3.1(d). In addition, each certificate evidencing
the
Securities transferred pursuant to this Article 3 (other than transfers
pursuant
to Sections 3.1(c) or pursuant to the Shelf Registration Statement)
shall bear
the legend set forth in Section 3.2(b) above. The restrictive legend
specified
in Section 3.2(a) shall promptly be removed in connection with a sale
pursuant
to Section 3.1(c) or the Shelf Registration Statement or the
satisfaction of
subclause (i), (ii) or (iii) above. The restrictive legend specified in
Section
3.2(b) shall be removed upon termination of Article 3 as set forth in
Section
3.5 below or in connection with a transfer of securities which does not
require
the transferee to be bound by this Section 3.
3.4 Covenant Regarding Exchange Act Filings. With a view to making
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available to Cabletron the benefits of Rule 144 promulgated under the
Act and
any other rule or regulation of the SEC that may any time permit
Cabletron to
sell securities of Efficient to the public without registration.
Efficient
agrees to:
(i) Make and keep public information available, as
those terms
are understood and defined in SEC Rule 144;
(ii) File with the SEC in a timely manner all reports
and other
documents required of the Company under the Act and the 1934 Act; and
(iii) Furnish to Cabletron, so long as Cabletron owns any
Voting
Securities, forthwith upon request (i) a written statement by Efficient
that it
has complied with the reporting requirements of SEC Rule 144; (ii) a
copy of the
most recent annual or quarterly report of Efficient and such other
reports and
documents so filed by Efficient and (iii) such other information as may
be
reasonably requested in availing Cabletron of any rule or regulation of
the SEC
which permits the selling of any such securities without registration.
3.5 Termination. The provisions of this Article 3 shall terminate
(other
-----------
than insofar they relate to general application of securities laws) upon
the
later to occur of: (i) the tenth anniversary date of this Agreement and
(ii)
such time as Cabletron (together with all Controlled Affiliates of
Cabletron)
beneficially owns in the aggregate Voting Securities of Efficient
representing
less than five percent (5%) of the Total Voting Power of Efficient or
upon the
closing or other completion of a Change in Control of Efficient.
