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Exhibit 2.4
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
of the
SERIES A AND SERIES B PARTICIPATING CONVERTIBLE PREFERRED STOCK
of
CABLETRON SYSTEMS, INC.
Pursuant to Section 151 of the General Corporation
Law of the State of Delaware
We, Piyush Patel, Chief Executive Officer, President and Chairman, and
Eric Jaeger, Assistant Secretary, of Cabletron Systems, Inc. (the
"Corporation"), a corporation organized and existing under the laws of the State
of Delaware, in accordance with Section 151 of the Delaware General Corporation
Law, certify:
FIRST: The Restated Certificate of Incorporation of the Corporation
authorizes the issuance of up to 2,000,000 shares of preferred stock, par value
$1.00 per share, in one or more series, with such designations, preferences and
relative, participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, as may be stated and expressed in a
resolution or resolutions providing for the issuance of any such series adopted
by the Board of Directors of the Corporation, pursuant to authority expressly
vested in the Board of Directors by the Restated Certificate of Incorporation of
the Corporation.
SECOND: The Board of Directors of the Corporation duly adopted the
following resolution authorizing the creation of two new series of such
preferred stock, to be known as "Series A Participating Convertible Preferred
Stock", stating that 65,000 shares of the authorized and unissued preferred
stock shall constitute such series, and "Series B Participating Convertible
Preferred Stock", stating that 25,000 shares of the authorized and unissued
preferred stock shall constitute such series, and setting forth a statement of
the voting powers, designation, preferences and relative, participating,
optional or other special rights, and the qualifications, limitations and
restrictions thereof as follows:
BE IT RESOLVED, that the terms of the Series A Participating
Convertible Preferred Stock and the Series B Participating Convertible Preferred
Stock shall be as follows:
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1. Designation of Preferred Stock. The rights, preferences, privileges and
restrictions granted to and imposed on the Series A Participating Convertible
Preferred Stock, $1.00 par value per share (the "Series A Preferred Stock"), and
the Series B Participating Convertible Preferred Stock, $1.00 par value per
share (the "Series B Preferred Stock" and, together with the Series A Preferred
Stock, the "Preferred Stock"), are set forth below. The number of shares of
Series A Preferred Stock shall initially be 65,000 and the number of shares of
Series B Preferred Stock shall initially be 25,000, subject in the case of each
series to decrease (but not below the number of shares of such series (i)
required to be issued pursuant to the Purchase Agreement or (ii) then
outstanding) from time to time by action of the Board of Directors.
2. Rank. The Preferred Stock shall rank senior to the Common Stock, senior to
any other class or series of capital stock of the Corporation the terms of which
do not expressly provide that it ranks on a parity with the Preferred Stock
(collectively and together with the Common Stock, the "Junior Stock"), and pari
passu with any other class or series of capital stock of the Corporation the
terms of which expressly provide that it ranks on a parity with the Preferred
Stock (collectively, the "Parity Stock"), in each case as to receipt of amounts
distributable upon any liquidation, dissolution or winding up of the Corporation
(a "Liquidation"); provided, that at any such time that fewer than fifty percent
(50%) of the aggregate number of shares of Preferred Stock originally issued
pursuant to the Purchase Agreement remain outstanding, the Corporation shall
have the right, in its sole discretion, to issue shares of capital stock ranking
senior to the Preferred Stock, including without limitation, as to receipt of
amounts distributable upon Liquidation and as to dividends. Nothing in this
Certificate shall prevent or otherwise affect the declaration or payment of any
dividend or distribution on the Common Stock or any other class or series of
capital stock of the Corporation outstanding from time to time other than upon a
Liquidation, as long as the dividends are accruing on the Preferred Stock as
provided in Section 3. The Series A Preferred Stock and the Series B Preferred
Stock shall rank on a parity with each other.
3. Dividends and Distributions. The holder of each share of Preferred Stock
shall be entitled to receive dividends on such share of Preferred Stock from and
including the date of issuance of such share to but excluding the date of the
redemption or conversion of such share or the date of Liquidation. Such
dividends shall accrue on a daily basis from the date of issuance (computed on
the basis of a 360-day year of twelve 30-day months) on the Preference Amount of
such share, compounded as of the end of each of the Corporation's fiscal
quarters at a rate per annum equal to the greater of (i) the Accumulation Rate
and (ii) the Common Equivalent Rate with respect to such fiscal quarter, and
such dividends shall accrue whether or not they have been declared and whether
or not there are profits, surplus or other funds of the Corporation legally
available for the payment of dividends. The Corporation shall not pay any cash
dividends on the Preferred Stock to any holder of shares of the Preferred Stock
pursuant to this Section 3 without the written consent or affirmative vote of
the holders of a majority of the then issued and outstanding shares of Preferred
Stock. The holders of shares of Preferred Stock shall not be entitled to receive
or participate in any dividends or other distributions made by the Corporation
that are not provided for in this Section 2 except upon Liquidation as provided
in Section 4 of this Certificate or following conversion as provided in Section
6.8 of this Certificate.
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4. Liquidation, Dissolution or Winding Up.
4.1. Liquidation Preference. In the event of any Liquidation, either
voluntary or involuntary, distributions to the holders of the Preferred Stock
shall be made in the following manner:
4.1.1. Each holder of Preferred Stock shall be entitled to receive, after
distribution of any of the assets of the Corporation to the holders of any other
series or class of capital stock of the Corporation ranking senior to the
Preferred Stock with respect to the Liquidation ("Senior Stock"), pro rata with
any shares of Parity Stock (in proportion to their respective liquidation
preferences) and prior and in preference to any distribution of any of the
assets of the Corporation to the holders of any shares of Junior Stock, by
reason of their ownership of such stock, an amount per share of Preferred Stock
held by such holder (the "Liquidation Amount") equal to the greater of (i) the
Preference Amount as of the date of the Liquidation and (ii) the amount such
holder would be entitled to receive with respect to the Liquidation if such
share had been converted immediately prior to the effectiveness of the
Liquidation into shares of Common Stock pursuant to the provisions of Section 6
hereof. If after distribution of any of the assets of the Corporation to the
holders of any shares of Senior Stock, the assets of the Corporation shall be
insufficient to permit the payment in full to the holders of the Preferred Stock
of the full Liquidation Amount and the payment in full to the holders of any
shares of Parity Stock of the liquidation preference applicable to such Parity
Stock, then the entire remaining assets of the Corporation legally available for
distribution shall be distributed ratably among the holders of Preferred Stock
and Parity Stock, to the exclusion of any Junior Stock, in accordance with the
respective amounts which would be payable in respect of the shares held by each
of them upon such distribution if all amounts payable on or in respect of such
shares were paid in full.
4.1.2. After payment has been made to the holders of Preferred Stock of the
full amount to which they are entitled pursuant to Section 4.1.1, the holders of
Preferred Stock shall not be entitled to any further distributions of the assets
of the Corporation with respect to the Liquidation.
4.1.3. The Corporation shall give written notice of a Liquidation to each
holder of record of Preferred Stock at least 30 days prior to the date for
payment or distribution to stockholders stated in the Corporation's notice.
4.2. Change of Control. A Change of Control of the Corporation shall not be
deemed a Liquidation for purposes of this Section 4.
4.3. Distributions Other Than Cash. Whenever any distribution provided for in
this Section 4 shall be payable in property other than cash, the value of such
distribution shall be the Current Market Price of such property as of the record
date for holders entitled to participate in the Liquidation.
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5. Voting Rights; Amendments.
5.1. Voting Rights. Except as otherwise required by law, the holders of
Preferred Stock shall vote together with the holders of Common Stock (and any
other shares of the Corporation's capital stock which, by their terms, are
entitled to vote together with the Common Stock as a single class) as a single
class on any matter submitted to the holders of Common Stock. Each holder of
Preferred Stock shall have, on any matter submitted to the holders of Common
Stock, the number of votes in respect of its shares of Preferred Stock equal to
the number of shares of Common Stock into which the shares of Preferred Stock
held by such holder may be converted pursuant to Section 6 hereof on the record
date for holders entitled to participate in such vote. Record holders of
Preferred Stock shall be entitled to notice of any stockholders' meeting or
solicitation of stockholders' consents to the same extent as the holders of
Common Stock.
5.2. Amendments. The Corporation shall not amend or restate this Certificate
of Designation or any other provision of its Certificate of Incorporation (other
than insofar as any such amendment or restatement applies to Section 1 or
Section 6.3 of this Certificate of Designation or the second sentence of this
Section 5.2 and such amendment or restatement is subject to the requirements of
the next succeeding sentence) in any manner that adversely affects the powers,
preferences and rights of the Preferred Stock without the written consent or
affirmative vote of the holders of a majority of the then outstanding shares of
Preferred Stock. The Corporation shall not amend or restate this Certificate of
Designation or any other provision of its Certificate of Incorporation insofar
as any such amendment or restatement applies to Section 1 or Section 6.3 of this
Certificate of Designation or to this sentence in any manner that adversely
affects (i) the powers, preferences and rights of the Series A Preferred Stock
without the written consent or affirmative vote of the holders of a majority of
the then outstanding shares of Series A Preferred Stock or (ii) the powers,
preferences and rights of the Series B Preferred Stock without the written
consent or affirmative vote of the holders of a majority of the then outstanding
shares of Series B Preferred Stock.
6. Conversion Rights. The holders of Preferred Stock shall have the following
rights with respect to the conversion of the Preferred Stock into shares of
Common Stock:
6.1. General. Subject to and in compliance with the provisions of this
Section 6, shares of Preferred Stock may, at the option of the holder thereof,
be converted at any time and from time to time into the number of validly
issued, fully-paid and non-assessable shares of Common Stock equal to the
product obtained by multiplying the Applicable Conversion Rate (determined as
provided in Section 6.2) by the number of shares of Preferred Stock held by such
holder being converted.
6.2. Applicable Conversion Rate. The conversion rate in effect at any time
for shares of the Preferred Stock to be converted (the "Applicable Conversion
Rate") shall be the quotient obtained by dividing the Preference Amount of the
shares of Preferred Stock to be converted by the Applicable Conversion Value
then in effect for such shares.
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6.3. Applicable Conversion Value. The Applicable Conversion Value shall
initially be $40.00 per share of Common Stock in the case of the Series A
Preferred Stock and $30.00 per share of Common Stock in the case of the Series B
Preferred Stock, and shall be adjusted in the case of each series from time to
time in accordance with Sections 6.4 and 7.4(c) hereof (as so adjusted in either
such case, the "Applicable Conversion Value" for such series).
6.4. Adjustments to Applicable Conversion Value. In the event at any time of
(A) a subdivision (by a stock split, stock dividend, recapitalization or
otherwise) by the Corporation of outstanding shares of Common Stock into a
greater number of shares of Common Stock, or (B) a combination (by a reverse
stock split or otherwise) of the Corporation of outstanding shares of Common
Stock into a smaller number of shares of Common Stock (any of the foregoing
being referred to as an "Extraordinary Common Stock Event"), the Applicable
Conversion Value of each series of Preferred Stock shall, effective as of the
time such Extraordinary Common Stock Event becomes effective, be adjusted to
equal the product of (i) the Applicable Conversion Value for such series in
effect immediately prior to the effectiveness of such Extraordinary Common Stock
Event, multiplied by (ii) a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding immediately prior to such Extraordinary
Common Stock Event and the denominator of which shall be the number of shares of
Common Stock outstanding immediately after the effectiveness of such
Extraordinary Common Stock Event.
6.5 Corporate Change. Prior to the consummation of any Corporate Change, the
Corporation shall make appropriate provisions to ensure that each holder of
Preferred Stock shall have the right to receive, upon conversion of the holder"s
Preferred Stock into shares of Common Stock, in lieu of the shares of Common
Stock that the holder otherwise would have been entitled to receive upon
conversion, the stock, securities or assets that the holder would have received
in connection with the Corporate Change if the holder had converted the holder"s
Preferred Stock immediately prior to the close of business on the record date
for holders of Common Stock entitled to receive the stock, securities or assets
delivered to such holders as a result of the Corporate Change (assuming such
holder failed to exercise any rights of election and received per share the kind
and amount of consideration receivable per share by a plurality of the non-
electing shares of Common Stock). The Corporation shall not effect any Corporate
Change unless, prior to the consummation of the Corporate Change, the successor
corporation (if other than the Corporation) or the purchasing corporation
assumes by written instrument the obligation to deliver to each holder of
Preferred Stock such shares of stock, securities or assets that the holder is
entitled to receive in accordance with this Section 6.5.
6.6 Conversion Procedure.
(a) To exercise its conversion rights pursuant to this Section 6, a
holder of Preferred Stock shall surrender the certificate or certificates
representing the shares being converted to the Corporation at its principal
office or, if the Corporation has appointed an agent and provided the holders of
Preferred Stock notice thereof, at the office of the agent designated by the
Corporation for such purpose, together with written notice (a "Conversion
Notice") to the Corporation that such
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holder elects to convert such shares, or if fewer than all the shares
represented by a single share certificate are to be converted, the number of
shares represented thereby to be converted. The certificate or certificates for
shares of Preferred Stock surrendered for conversion shall be accompanied by
proper assignment thereof to the Corporation or in blank.
(b) Each conversion of Preferred Stock shall be deemed to have been
effected as of the close of business on the effective date of such conversion as
specified in the Conversion Notice (the "Conversion Date"); provided, however,
that the Conversion Date shall not be a date earlier than the date such
Conversion Notice is received by the Corporation (or its designated agent), and
if such Conversion Notice does not specify a conversion date, the Conversion
Date shall be deemed to be the date such Conversion Notice is received by the
Corporation (or its designated agent). On the Conversion Date, the rights as a
holder of the holder of the Preferred Stock to be converted (including the right
to receive dividends thereon, except as provided in Section 6.8 hereof) shall
cease, and the person or persons in whose name or names any certificate or
certificates for shares of Common Stock are to be issued upon such conversion
shall be deemed to have become the holder or holders of record of the shares of
Common Stock represented thereby
(c) Promptly after the Conversion Date (and in any event within two
Business Days), the Corporation shall deliver to the converting holder at the
address set forth in the conversion notice (i) a certificate or certificates
representing, in the aggregate, the number of shares of Common Stock issued upon
such conversion, in the same name or names as the certificates representing the
converted shares or in such other name or names as the converting holder shall
specify (subject to any applicable legal, contractual or other restrictions on
transfer) and in such denomination or denominations as the converting holder
shall specify and a check for cash with respect to any fractional interest in a
share of Common Stock as provided in Section 6.7, and (ii) a certificate
representing any shares of Preferred Stock that were represented by the
certificate or certificates delivered to the Corporation in connection with such
conversion but that were not converted.
(d) The issuance of certificates for shares of Common Stock upon the
conversion of Preferred Stock shall be made without charge to the holder of such
Preferred Stock for any issuance tax in respect thereof if issued in the name of
such holder, and otherwise any certificates shall not be issued until payment of
any applicable transfer tax has been made by such holder.
6.7 Cash in Lieu of Fractional Shares. No fractional share of Common Stock or
scrip representing a fractional share shall be issued upon the conversion of any
shares of Preferred Stock, provided, that if more than one share of Preferred
Stock shall be surrendered for conversion at any one time by the same holder,
the number of full shares of Common Stock issuable upon conversion thereof shall
be computed on the basis of the aggregate number of shares of Preferred Stock so
surrendered. Instead of any fractional share of Common Stock which would
otherwise be issuable upon conversion of any shares of Preferred Stock, the
Corporation shall pay to the holder of the converted shares of Preferred Stock
cash in respect of any such fractional share of Common Stock in an amount equal
to the same fraction of the Current Market Price per share of Common Stock on
the Conversion Date.
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6.8 Certain Distributions. Upon the conversion by any holder of Preferred
Stock of shares of Preferred Stock into Common Stock pursuant to this Section 6,
such holder shall have the right to receive, and shall be paid promptly
thereafter (and in any event within two Business Days), any dividends or
distributions as shall have been declared and paid or made by the Corporation on
or with respect to the Common Stock as a class during the period commencing on
the date on which the shares of Preferred Stock being converted were issued and
ending on the Conversion Date in such amounts as such holder would have received
had such holder converted such shares of Preferred Stock immediately prior to
the close of business on the record date established for holders of Common Stock
entitled to receive such dividends or distributions; provided, however, that the
terms of this Section 6.8 shall not apply to ordinary cash dividends
(specifically excluding any extraordinary dividends or distributions) declared
during a fiscal quarter with respect to shares of Common Stock to the extent
that such dividends resulted in the Common Equivalent Rate being in excess of
the Accumulation Rate. Upon effecting any dividend or distribution in which a
holder of shares of Preferred Stock shall be entitled to participate following
conversion as contemplated by this Section 6.8, the Corporation shall place in
escrow on customary business terms at the Corporation's expense, for the benefit
of the holders of the Preferred Stock, the property to which such holders shall
be entitled upon conversion as contemplated by this Section 6.8, and such
property shall be maintained in escrow at the Corporation's expense until such
time as the related shares of Preferred Stock have been converted or redeemed;
provided, however, that the Corporation may, at its expense, substitute another
arrangement for such escrow arrangement to the extent advisable based upon of
consultation with the Corporation's outside counsel in connection with any tax
treatment desired to be achieved in connection with any distribution of property
by the Corporation, provided, that such other arrangement does not adversely
affect the rights of the holders of Preferred Stock to receive any property upon
conversion as compared to the escrow arrangement described above.
6.9 Notice to Holders. In the event the Corporation shall propose to take or
otherwise undergo any action of the type described in Section 6.4 (but only if
the action of the type described in Section 6.4 would result in an adjustment in
the Applicable Conversion Value), engage in a Corporate Change as contemplated
by Section 6.5 or pay or make a dividend or distribution of the type described
in Section 6.8, the Corporation shall give notice to each holder of shares of
Preferred Stock in the manner set forth in Section 11, which notice shall
specify the record date, if any, with respect to any such action and the
approximate date on which such action is to take place. Such notice shall also
set forth such facts as are reasonably necessary to indicate the effect of such
action (to the extent such effect may be known at the date of such notice) on
the Applicable Conversion Value and the number, kind or class of shares or other
securities or property which shall be deliverable upon conversion of shares of
Preferred Stock. In the case of any action which would require the fixing of a
record date, such notice shall be given at least ten days prior to such record
date, and in case of all other action, such notice shall be given at least
fifteen days prior to the taking of such proposed action. Failure to give such
notice, or any defect therein, shall not affect the legality or validity or any
such action.
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6.10 Listing of Common Stock. If, and so long as, any Common Stock into which
the shares of Preferred Stock are then convertible is listed or admitted to
trading on any national securities exchange or designated as a National Market
Security by the NASD, the Corporation will, at its expense, list and have
admitted to trading, and keep listed and admitted to trading (as applicable), on
each such exchange, upon official notice of issuance, all shares of Common Stock
issuable upon conversion of the Preferred Stock.
6.11 Valid Issuance. All shares of Common Stock which may be issued upon
conversion of the shares of Preferred Stock shall upon issuance by the
Corporation be duly and validly issued, fully paid and nonassessable and shall
not be issued in violation of any preemptive rights arising under law or
contract, and the Corporation shall take no action which will cause a contrary
result (including without limitation, any action which would cause the
Applicable Conversion Value to be less than the par value, if any, of the Common
Stock).
7. Redemptions
7.1. Redemptions At Holder's Option.
(a) Subject to Section 7.4, at any time on or after February 23, 2003,
each holder of Preferred Stock shall have the right to require the Corporation
to redeem all (but not less than all) of the holder's Preferred Stock at a
redemption price equal to the aggregate Preference Amount of the shares to be
redeemed on the date set for redemption. Any holder of Preferred Stock may
exercise its redemption right under this Section 7.1(a) by delivering to the
Corporation a written notice stating the holder's intention to exercise its
redemption right. Following the receipt of any such notice, the Corporation
shall set a date for the payment of the redemption price, which date shall be a
Business Day not later than the 30th day following its receipt of the holder's
notice.
(b) In the event the Corporation enters into any agreement providing
for a transaction which if consummated would result in a Change of Control, the
Corporation shall give written notice of such event to the holders of Preferred
Stock within ten Business Days following entering into any such agreement.
Subject to Section 7.4 and subject to the consummation of the transaction
provided for in such agreement resulting in a Change of Control, each holder of
Preferred Stock shall have the right to require the Corporation, to redeem all
(but not less than all) of such holder's shares of Preferred Stock at a
redemption price (the "Change of Control Amount") equal to the greater of (i)
101% of the aggregate Preference Amount of the shares to be redeemed on the date
of redemption (the "Change of Control Preference Amount"), and (ii) the
aggregate Market Price of the shares of Common Stock into which such shares of
Preferred Stock could then be converted pursuant to the provisions of Section 6
hereof upon the consummation of such Change of Control (the "Change of Control
Market Price"). Any holder of Preferred Stock may exercise its redemption right
under this Section 7.1(b) by giving, within five Business Days following written
notice from the Corporation or public announcement of the Corporation's having
obtained stockholder approval for the transaction that will result in a Change
of Control (or, in the event that stockholder approval is not required for such
transaction, five Business Days prior to the consummation of such Change of
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Control, and the Company shall provide the holders written notice of such five
Business Day period), a written notice to the Corporation stating the holder's
intention to exercise its redemption right under this Section 7.1(b). Following
receipt of any such notice, the Corporation shall set a date (the "Change of
Control Payment Date") for the payment of the Change of Control Amount, which
date shall be a Business Day not later than the later of (i) the first Business
Day following consummation of the applicable Change of Control and (ii) the date
which is the 10th day following its receipt of the holder's notice.
7.2. Redemption At Corporation's Option. At any time on or after February 23,
2004, the Corporation shall have the right to redeem on a Business Day set forth
in such notice all (but not less than all) of the outstanding shares of
Preferred Stock at a redemption price equal to the aggregate Preference Amount
of the shares to be redeemed, upon written notice of the redemption to all
holders of Preferred Stock given at least 30 days prior to the redemption date.
The Corporation's exercise of its redemption rights under this Section 7.2 shall
be subject to the conversion rights under Section 6 of each holder of Preferred
Stock, who may exercise those rights at any time prior to the close of business
on the redemption date.
7.3. Payment of Redemption Price. For each share of Preferred Stock which is
to be redeemed pursuant to Section 7.1 or 7.2, the Corporation shall be
obligated on the redemption date to pay to the holder, upon the holder's
surrender at the Corporation's principal office of the certificate(s)
representing the shares to be redeemed, the full redemption price of the shares
in immediately available funds; provided, however, that in the case of any
redemption pursuant to Section 7.1(b), in the event (i) the Change of Control
Amount of any shares of Preferred Stock of any holder shall be equal to the
Change of Control Market Price applicable to such shares and (ii) the relevant
Change of Control results from a transaction in which the holders of Common
Stock are entitled to receive, as all or any portion of the consideration in
such transaction, securities ("Change of Control Property"), the Company (or any
successor to the Company) may elect, in its sole discretion, to pay (a) that
portion of the applicable Change of Control Amount of such shares equal to the
Change of Control Preference Amount of such shares in immediately available
funds, and (b) that portion of the applicable Change of Control Amount of such
shares equal to the excess (the "Payment Differential") of the total Change of
Control Amount of such shares, over the Change of Control Preference Amount of
such shares, by issuing or paying to the holder of such shares that amount of
Change of Control Property as shall have an aggregate Market Price as of the
consummation of the Change of Control equal to the Payment Differential.
7.4. Redemption Restrictions.
(a) In the case of a redemption pursuant to Section 7.1, if the funds
of the Corporation legally available for the redemption of Preferred Stock on
the redemption date are insufficient to redeem the total number of shares of
Preferred Stock that the Corporation is required to redeem, those funds which
are legally available shall be used to redeem the maximum possible number of
shares of Preferred Stock pro rata among the holders of the shares to be
redeemed on the basis of the number of shares held by each holder. As and when
following the redemption date additional funds of the Corporation become legally
available for the redemption of Preferred Stock,
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the Corporation shall immediately use such funds to redeem the balance of the
shares of Preferred Stock which the Corporation became obligated to redeem on
any prior redemption date but which it has not redeemed as may be redeemed at a
redemption price equal to the aggregate Preference Amount of such shares of
Preferred Stock on the actual date of redemption (and, if such funds are
insufficient to effect a redemption of all such shares at such redemption price,
such funds shall be used to redeem the maximum number of shares of Preferred
Stock pro rata among the holders of the shares to be redeemed on the basis of
the number of shares held by each holder, and any shares which cannot then be
redeemed by reason of the insufficiency of such funds shall remain subject to
the provisions of this sentence requiring later redemption). In the case of a
redemption pursuant to Section 7.2, the Corporation may not redeem any shares of
Preferred Stock unless the funds of the Corporation legally available for the
redemption of Preferred Stock are sufficient to affect the redemption of all
shares of Preferred Stock set for redemption.
(b) In the event that the Corporation on the date set for any
redemption under this Section 7 is prohibited under the terms of any agreement
by which it is bound from redeeming the shares of Preferred Stock held by such
holder, the Corporation shall not be required to effect any such redemption
until each such prohibition is no longer in effect. The Corporation shall not
enter into any agreement while any shares of Preferred Stock are outstanding
solely for the purpose of avoiding the redemption of shares of Preferred Stock
under this Section 7.
(c) In the event the Corporation does not redeem any shares of
Preferred Stock on the date specified therefor pursuant to Section 7.1 or 7.2 by
reason of the existence of any circumstance set forth in paragraphs (a) or (b)
of this Section 7.4, the Applicable Conversion Value of any shares of Preferred
Stock not so redeemed shall be immediately adjusted to equal the product of (i)
ninety percent (90%) multiplied by (ii) the Market Price of the Common Stock on
the date specified for such redemption (or, if no such date was specified, on
the date of receipt of notice of such impediment by the holders of the Preferred
Stock); provided, however, that such adjustment shall not be the exclusive
remedy of the holders of the Preferred Stock.
8. Capital Stock.
8.1. No Reissuance of Preferred Stock. No share or shares of Preferred Stock
acquired by the Corporation by reason of purchase, redemption, conversion or
otherwise shall be reissued, and all such shares shall be canceled, retired and
eliminated from the shares which the Corporation shall be authorized to issue.
The Corporation may from time to time take such appropriate corporate action as
may be necessary to reduce the authorized number of shares of the Preferred
Stock accordingly.
8.2. Reservation of Stock. The Corporation shall at all times reserve and
keep available out of its authorized but unissued shares of Common Stock (or out
of its authorized shares of Common Stock held in the treasury of the
Corporation), for the purpose of effecting the conversion of the Preferred
Stock, the full number of shares of Common Stock then issuable upon conversion
pursuant to Section 6 of all outstanding shares of Preferred Stock.
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9. Registration of Transfer.
The Corporation shall keep at its principal office a register for the
registration of shares of Preferred Stock. Upon the surrender of any certificate
representing Preferred Stock at the Corporation's principal office accompanied
by proper assignment thereof to the Corporation or in blank, the Corporation
shall, at the request of the record holder of the certificate, execute and
deliver a new certificate or certificates in exchange representing in the
aggregate the number of shares of Preferred Stock represented by the surrendered
certificate. Each new certificate shall be registered in the name and represent
the number of shares of Preferred Stock requested by the holder of the
surrendered certificate and shall be substantially identical in form to the
surrendered certificate. Any transfer of Preferred Stock shall be subject to any
applicable legal, contractual or other restrictions on transfer and the payment
of any applicable transfer taxes by the transferring holder.
10. Replacement.
Upon receipt of evidence reasonably satisfactory to the Corporation of the
ownership and the loss, theft, destruction or mutilation of any certificate
evidencing shares of Preferred Stock, and in the case of any such loss, theft or
destruction, upon receipt of indemnity and a surety bond satisfactory to the
Corporation, or, in the case of any such mutilation, upon surrender of the
mutilated certificate, the Corporation shall execute and deliver in replacement
a new certificate of like kind representing the number of shares of Preferred
Stock represented by the lost, stolen, destroyed or mutilated certificate and
dated the date of the lost, stolen, destroyed or mutilated certificate.
11. Notices.
All notices under this Certificate of Designation shall be in writing and
sent by (i) certified or registered mail, return receipt requested, (ii) a
recognized overnight courier service, (iii) telecopier or (iv) personal
delivery. Notices to the Corporation shall be addressed to the Corporation's
chief executive officer and secretary at the Corporation's principal executive
offices, and notices to any holder shall be addressed to such holder's address
in the records of the Company. Any notice shall be deemed duly given (i) in the
case of a notice sent other than by mail, on the date actually delivered at such
addressed (evidenced, in the case of delivery by courier or other delivery
service, by confirmation of delivery from the service making the delivery or, in
the case of a notice sent by telecopier, by receipt of a transmission
confirmation form or the addressee's confirmation of receipt), and (ii) in the
case of any notice sent by mail, on the third Business Day following deposit in
the U.S. mails with first-class postage prepaid.
12. Definitions.
12.1. "Accumulation Rate" means four percent (4%).
12.2. "Business Day" means any day other than a Saturday or Sunday or a day
on which commercial banking institutions in Boston, Massachusetts or New York,
New York are authorized by law to be closed. Any reference to "days" (unless
Business Days are specified) shall mean calendar days.
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12.3. "Change of Control" shall mean any consolidation, merger, issuance of
capital stock, sale of all or substantially all the assets of the Corporation or
similar transaction to which the Corporation is a party (whether in a single
transaction or series of related transactions) in which the stockholders of the
Corporation immediately prior to such event do not own, directly or indirectly,
a majority of the outstanding voting power of the surviving corporation or
acquiring entity, as the case may be, received in respect of their Corporation
shares, immediately after such event.
12.4. "Common Equivalent Rate" means, with respect to any fiscal quarter of
the Corporation, the quotient of (i) the product of (a) all ordinary cash
dividends (specifically excluding any extraordinary dividends or distributions)
declared during such fiscal quarter with respect to a share of Common Stock, (b)
four and (c) the number of shares of Common Stock issuable upon conversion of a
share of Preferred Stock on the first day of such fiscal quarter, divided by
(ii) the Preference Amount of a share of Preferred Stock on the first day of
such fiscal quarter.
12.5. "Corporate Change" shall mean any capital reorganization,
reclassification, consolidation, merger or sale of all or substantially all of
the Corporation's assets to another Person which is effected in such a way that
holders of Common Stock are entitled to receive (either directly or upon a
subsequent liquidation of the Corporation) securities or assets in respect of or
in exchange for Common Stock.
12.6. "Current Market Price" shall mean on any date specified herein (a) with
respect to any securities, the average daily Market Price during the period of
the most recent 10 trading days, ending on such date, except that if such
securities are not then listed or admitted to trading on any national securities
exchange or quoted in the over-the-counter market, the Current Market Price
shall be the Market Price on such date, and (b) with respect to any property
other than securities, the fair value thereof on such date as reasonably
determined in good faith by the Board of Directors of the Corporation as of the
date on which the determination is to be made; provided, however, that a holder
of Preferred Stock shall have no right to object to such determination unless
such holder submits an objection in good faith to the Board of Directors within
10 days of notice thereof.
12.7. "Market Price" shall mean on any date specified herein with respect to
securities issued by any Person, the amount per share or other applicable unit
of such securities equal to (a) the last sale price of such securities, regular
way, on such date or, if no such sale takes place on such date, the average of
the closing bid and asked prices thereof on such date, in each case as
officially reported on the principal national securities exchange on which such
securities are then listed or admitted to trading; or (b) if such securities are
not then listed or admitted to trading on any national securities exchange but
are designated as a national market system security by the NASD, the last
trading price of such securities on such date, or (c) if there shall have been
no trading on such date or if such securities are not so designated, the average
of the closing bid and asked prices of such securities on such date as shown by
the NASD automated quotation system, or (d) if such securities are not then
listed or admitted to trading on any national exchange or quoted in the
over-the-counter
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market, the fair value thereof on such date as reasonably determined in good
faith by the Board of Directors of the Corporation as of the date on which the
determination is to be made; provided, however, that the holders of the
Preferred Stock shall have no right to object to such determination unless such
holder submits an objection in good faith to the Board of Directors within 10
days of notice thereof.
12.8. "NASD" shall mean the National Association of Securities Dealers, Inc.
12.9. "Person" shall mean an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization or other
entity.
12.10. "Preference Amount" shall mean with respect to each share of Preferred
Stock the sum of (i) $1,000.00 plus (ii) all accrued and unpaid dividends on
such share.
12.11. "Purchase Agreement" shall mean the Securities Purchase Agreement
among the Corporation and the initial purchasers of the Preferred Stock, dated
as of July 26, 2000, as amended and in effect from time to time. 1.1.
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CABLETRON SYSTEMS, INC. has caused this Certificate of Designation to
be signed by Piyush Patel, its Chairman, and attested by Eric Jaeger, its
Assistant Secretary, this 29th day of August, 2000.
/s/ Piyush Patel
-------------------------
Chairman
ATTEST:
/s/ Eric Jaeger
-----------------------------
Assistant Secretary
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