Enterasys - Secure Networks

Under the U.S. Federal Securities laws, it is illegal for any person, either personally or on behalf of others, to trade in securities on the basis of material, non-public information. It is also illegal to communicate or "tip" material, non-public information to others so that they may trade in securities on the basis of that information. These illegal activities are commonly referred to as "insider trading."

Enterasys Networks, Inc. (the "Company") has adopted this Insider Trading Policy (the "Policy") to provide guidelines to members of its Board of Directors and its officers, employees, consultants and contractors with respect to transactions in the Company’s securities. The objective of the Policy is to help prevent any actual or apparent impropriety, either of which could lead to allegations of insider trading and the potential for significant liability on the part of any implicated parties. This Policy does not replace your responsibility to understand and comply with insider trading laws. Because insider trading laws are technical, and changes and new interpretations are frequent, this Policy should not be relied upon in any particular instance.

Compliance with this Policy is of the utmost importance to you and the Company. If you have any questions about any of the matters discussed in this Policy, a particular transaction or insider trading laws generally, please contact our Chief Legal Officer or Assistant General Counsel. Advice from the Chief Legal Officer or the Assistant General Counsel should not be regarded as investment advice or as a guarantee that your transaction will not violate insider trading laws. You are ultimately responsible for compliance with the Policy and all applicable law.

The Company takes its obligations under the securities laws very seriously, and any violation or suspected violation of this or any other Company policy could subject you to disciplinary action, up to and including termination of your employment for cause.

1. Covered Transactions.
This Policy applies to all transactions in the Company’s securities, including common stock, stock options and any other securities the Company may issue from time to time, as well as to derivative securities relating to the Company’s securities, whether or not issued by the Company, such as exchange-traded options (eg. put options and call options). Transactions that may be necessary or justifiable for independent reasons, personal or otherwise, (such as the need to raise money for an emergency) are not an exception to this Policy.

 

2. Covered Persons. This Policy applies to all officers, employees, consultants and contractors of the Company and its subsidiaries and all members of the Company’s Board of Directors, and including individuals living in such persons’ households or whose security transactions are directed or influenced by such persons (collectively, "Insiders" and individually, an "Insider"). You are responsible for ensuring the compliance of members of your household with this Policy.

Any Insider who possesses Material Non-Public Information (defined below) regarding the Company or its subsidiaries remains subject to the restrictions contained in this Policy until such information has been publicly announced by the Company, even after an Insiders’ employment or other relationship with the Company has ended.

3. Definition of Material Non-Public Information. Information is considered "Material" if a reasonable investor would consider it important in making a decision to buy, sell or hold securities. Information that is likely to affect the price of securities is almost always "Material." Either positive or negative information may be "Material."

Information is considered "Non-Public" if it has not been broadly and publicly disseminated for a sufficient period to be reflected in the security’s price. Information remains "Non-Public" until it has been "publicly disclosed," meaning that it has been broadly distributed to the public in a non-exclusionary manner, such as via a press release or the inclusion of such information in a Form 8-K, 10-Q or 10-K filed with the Securities and Exchange Commission ("SEC"). No transactions in Company securities may take place for two full trading days after disclosure of Material Information by the Company.

Examples of Material Non-Public Information include, but are not limited to:

• Financial results and financial forecasts or changes therein
• Sales and revenue levels
• Significant new product developments
• Significant new contracts or other agreements
• Gain or loss of a substantial customer or supplier
• Significant strategic relationships
• Possible mergers, acquisitions, joint ventures and other purchases, sales or investments in companies or other entities
• Purchase or sale of significant assets, including divestitures and acquisitions of a product line or division
• Significant expansion or curtailment of operations
• Major financing developments, including establishment of bank lines and offering of additional debt or equity securities
• Changes in senior management or the Company’s Board of Directors
• Declaration of a stock split or stock dividends, or adoption of or changes to a stock repurchase program and the timing of repurchases under such a program
• Litigation developments
• Claims made, by or against, the Company
4. Restrictions. Insiders may:
• NOT trade in Company securities while in possession of Material Non-Public Information regarding the Company (whether or not a Trading Blackout Period (described below) is in effect).


• NOT trade in Company securities during any Trading Blackout Period.


• NOT trade in securities of another company at any time when he or she is in possession of Material Non-Public Information regarding that company, including any of the Company’s customers, vendors, suppliers or other company with which the Company has a business relationship ("Business Partners"). Note also that Enterasys’ Code of Conduct prohibits Insiders from acquiring financial interests in other companies if ownership would constitute a conflict of interest.


• NOT disclose ("tip") Material Non-Public Information to any other person.


• NOT make recommendations or express opinions regarding the securities of the Company or its Business Partners on the basis of Material Non-Public Information.


• NOT hold Company securities in a margin account or, without prior approval from the Chief Legal Officer, pledge Company securities to secure loans.


• NOT engage in short selling (sales of Company securities which are not owned, or which, if owned, are not delivered against within 20 days after the sale).


• NOT write or purchase call or put options (of any kind) on the Company’s securities.


5. Trading Blackout Periods.
1. Pre-Earnings Blackouts. Because of the particular sensitivity of trading in Company securities near the end of each fiscal quarter, the Company imposes, and Insiders must comply with, the following regular trading blackout periods:

Director Level Employees and Above. Members of the Company’s Board of Directors, those Insiders that are director level and above, and any additional Insiders designated from time to time by the Chief Executive Officer or the Chief Legal Officer may not trade in the Company’s securities during each fiscal quarter for the period beginning on the first day of the last month of the fiscal quarter and ending at the close of business on the second full trading day after the Company’s quarterly earnings release.

All Other Insiders. All other Insiders may not trade in the Company’s securities during each fiscal quarter for the period beginning on the 15^th day of the last month of the fiscal quarter and ending at the close of business on the second full trading day after the Company’s earnings release for that quarter.

 

2. Transactional or Other Blackouts. The Company reserves the right to impose a trading black-out from time to time on specified groups of Insiders when, in the judgment of the Chief Executive Officer or Chief Legal Officer, a blackout is warranted. Though these blackouts generally will arise because the Company is (or may be) involved in a material transaction, they may be declared for any reason. If a blackout is declared, those Insiders to which it applies will be notified.
3. Exceptions. The foregoing trading blackouts do not apply to:
• "Exercise and Hold" transactions involving the exercise of stock options for cash under the Company’s stock option plans (however any shares acquired must be held until the Trading Blackout Period has expired).
• The purchase of stock through the Company’s employee stock purchase plan (however any shares acquired must be held until the Trading Blackout Period has expired).

 

6. Pre-Clearance Requirement. Certain insiders must contact our Chief Legal Officer to obtain "pre-clearance" at any time prior to transacting in Company securities. This pre-clearance requirement is designed to help minimize the risks of (a) trading on Material Non-public Information and (ii) the possible appearance of impropriety sometimes associated with activity by senior insiders. Individuals subject to this pre-clearance requirement are:
1. Board Members and Executive Officers. All members of the Company’s Board of Directors and all Executive Officers must pre-clear their transactions with our Chief Legal Officer, both during their tenure at the Company and for six (6) months after their relationship with the Company terminates.


2. Direct Reports to CEO & President. Those Insiders that report directly to the CEO or President must pre-clear their transactions with our Chief Legal Officer, both during their tenure at the Company and for six (6) months after their relationship with the Company terminates.


3. Other Restricted Insiders. From time to time we will notify other Insiders that they are subject to the pre-clearance requirement if we believe that, in the normal course of their duties, they are likely to have access to Material Non-Public Information. Some typical examples of Insiders subject to pre-clearance by virtue of their jobs are members of senior management and their administrative staff, and members of the legal, investor relations, finance and business development departments.

 

In addition to causing potentially serious harm to the Company’s business, the consequences of insider trading violations can be staggering. For individuals who trade on insider information (or "tip" information to others) legal penalties may include:

• A civil penalty of up to three times the profit gained (or loss avoided).
• A criminal fine of up to $1 million, no matter how small the profit (or loss) avoided.
• A jail term of up to ten years.

It is important to note that these penalties apply whether or not the individual derives any benefit from trading. The SEC, the stock exchanges and the National Association of Securities Dealers use sophisticated electronic surveillance techniques to uncover possible insider trading. In addition, any violation or suspected violation of this Policy could subject you to disciplinary action, up to and including termination.

As discussed above, the disclosure of Material Non-Public Information to others can lead to significant problems and legal consequences. Therefore you should not discuss Material Non-Public Information about the Company with anyone, including other Company personnel, except as required in the performance of your regular duties.

In addition, the SEC has also enacted rules explicitly banning selective disclosure. Generally, when a public company (such as Enterasys) discloses Material, Non-Public Information, it must provide broad, non-exclusionary public access to the information. Violations of these rules can result in SEC enforcement actions, potentially resulting in injunctions and severe monetary penalties.

Due to these and other considerations, Insiders, other than executive management and Investor Relations personnel, are not authorized to communicate with the news media, securities market professionals (such as investment analysts) or the Company’s stockholders. All inquiries from such persons should be directed to Investor Relations, or, if they are unavailable, directly to our our Chief Financial Officer or our Chief Legal Officer.

Members of the Company’s Board of Directors and Executive Officers must also comply with the reporting obligations and limitations on "short-swing" transactions imposed by U.S. federal securities laws. These rules require such individuals to report their transactions in Company securities to the SEC within two (2) days from the execution date and prohibit "matching" purchases and sales of the Company’s securities made within a six-month period. Additional information on these obligations is provided separately to individuals who are subject to them and any questions should be directed to the our Chief Legal Officer.