1
Exhibit 4.1
CERTIFICATE OF INCORPORATION
OF
TELCO SYSTEMS, INC.
FIRST: The name of this Corporation is TELCO SYSTEMS, INC.
SECOND: The address of the registered office of this Corporation in the
State of Delaware is 1209 Orange Street, in the city of Wilmington, County of
New Castle, and the name of its registered agent at that address is The
Corporation Trust Company.
THIRD: The name of the mailing address of the incorporator of the
corporation is:
Kent L. Robertson
333 Twin Dolphin Drive
Suite 725
Redwood City, California 94065
FOURTH: The purpose of this Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FIFTH:
(A) This Corporation is authorized to issue two classes of stock,
preferred stock and common stock, and the authorized number of shares of
preferred stock is Five Million (5,000,000) and the authorized number of shares
of common stock is Twenty-Five Million (25,000,000). The stock, whether
preferred stock or common stock, shall have a par value of $.01 per share.
(B) (1) Shares of preferred stock may be issued from time to time in
one or more series. The Board of Directors is hereby authorized to fix the
voting rights, designations, powers, preferences and the relative,
participating, optional or other rights, if any, and the qualifications,
limitations or restrictions thereof, of any wholly unissued series of preferred
stock; and to fix the number of shares constituting such series, and to increase
or decrease the number of shares of any such series (but not below the number of
shares thereof then outstanding).
(2) Twenty-Four Million (24,000,000) shares of the common stock
authorized herein shall hereafter be designated "Common Stock," and, subject to
reconstitution and conversion as provided in subparagraph (b) below, One Million
(1,000,000) shares of the common stock authorized herein are designated "Series
A Junior Common Stock."
(a) The rights, preferences, privileges and restrictions of
Common Stock and Series A Junior Common Stock shall be identical in all
respects, except as follows:
-1-
2
(i) VOTING RIGHTS. On all matters submitted to a
vote of the holders of this Corporation's common stock, each share of Common
Stock shall entitle the holder thereof to one vote. Series A Junior Common
Stock shall have no voting rights.
(ii) Liquidation. In the event of any liquidation,
dissolution or winding up of this Corporation, whether voluntary or involuntary,
the holders of Common Stock shall be entitled to receive for each share of
Common Stock then held by them an amount equal to forty (40) times the amount
which, after such distribution, would remain available for distribution to
holders of Series A Junior Common Stock for each share of Series A Junior
Common Stock then held by them.
(iii) Dividends. In the event of any declaration
or payment of dividends with respect to common stock, the dividend for each
share of Common Stock shall be equal to twenty (20) times the dividend for each
share of Series A Junior Common Stock.
(b) Upon the occurrence of any of the following events,
each share of Series A Junior Common Stock (whether issued or unissued) shall
automatically be converted into or reconstituted as one (1) share of Common
Stock:
(i) On the date of issuance of the report of this
Corporation's independent public accountants for any fiscal year of this
Corporation in which the income of this Corporation, before provision for income
tax and extraordinary items, exceeds $1.40 per share on a fully diluted basis,
as determined under generally accepted accounting principles;
(ii) Upon the sale of all or substantially all of the
assets of this Corporation;
(iii) Upon the effectiveness of any reorganization in
which the stockholders of this Corporation immediately before the reorganization
do not own immediately after the reorganization at least 50% of the voting power
of this Corporation or its successor. For the purpose of this subsection (b), a
reorganization shall be defined as:
(x) A merger pursuant to Article IX of the Delaware General
Corporation Law other than a merger pursuant to Section 253 of such
law;
(y) The acquisition by one corporation in exchange in whole
or in part for its equity securities (or the equity securities of a
corporation which is in control of the acquiring corporation) of
shares of another corporation if, immediately after the
acquisition, the acquiring corporation has control (defined as
ownership, directly or indirectly, of shares possessing more than
50% of the votes eligible to be cast for the election of directors
at the time in question) of such other corporation; or
-2-
3
(z) The acquisition by one corporation in exchange in whole
or in part for its equity securities (or the equity securities of a
corporation which is in control of the acquiring corporation) or
for its debt securities (or debt securities of a corporation which
is in control of the acquiring corporation) which are not
adequately secured and which have a maturity date in excess of five
years after the consummation of the reorganization, or both, of all
or substantially all of the assets of another corporation.
(c) Each conversion of shares hereunder shall be effected
by the surrender at the office of this Corporation or any transfer agent for
such shares of the certificate therefor, in such form and accompanied by such
documents, if any, as this Corporation may require. This Corporation shall, as
soon as practicable thereafter, issue and deliver at such office a certificate
or certificates representing the number and class or series of shares into which
such shares are convertible hereunder. Such conversion shall be deemed to have
occurred as of the time set forth in subparagraph (b) hereinabove.
(d) In the event of any (i) stock split, reverse stock
split, or other subdivision or combination of the Common Stock or (ii) stock
dividend or other distribution on the Common Stock payable in Common Stock,
unless there has been a corresponding change in or distribution of Series A
Junior Common Stock, an appropriate pro rata adjustment or adjustments shall be
made in the rights set forth in subparagraph (a) hereinabove and the conversion
ratio and events set forth in subparagraph (b) hereinabove. No fractional shares
shall be issued upon conversion of Series A Junior Common Stock. In lieu of any
fractional share to which a stockholder would otherwise be entitled, this
Corporation shall pay cash equal to such fraction multiplied by the then fair
market value per share of Series A Junior Common Stock as determined in good
faith by this Corporation's Board of Directors.
SIXTH: In furtherance and not in limitation of the powers conferred
by statute, the Board of Directors is expressly authorized to adopt, amend or
repeal from time to time any or all of the Bylaws of this Corporation.
SEVENTH: The number of directors which shall constitute the whole
Board of Directors of this Corporation shall be as specified in the Bylaws of
this Corporation, subject to the provisions of Article SIXTH and this Article
SEVENTH.
EIGHTH: No action shall be taken by the stockholders except at an
annual or special meeting of stockholders. No action shall be taken by
stockholders by written consent.
NINTH: Special meetings of the stockholders of this Corporation for
any purpose or purposes may be called at any time by the Board of Directors, the
Chairman of the Board of Directors, the President, by a committee of the Board
of Directors which has been duly designated by the Board of Directors and whose
powers and authority, as provided in resolution of the Board of Directors or in
the Bylaws of this Corporation, include the power to call such
-3-
4
meetings, and by stockholders of the Corporation owning, directly or indirectly,
shares possessing not less than 20% of the votes eligible to be cast for the
election of directors at the time in question, but such special meetings may not
be called by any other person or persons; provided, that if and to the extent
that any special meeting of stockholders may be called by any other person or
persons specified in any certificate filed under Section 151(g) of the Delaware
General Corporation Law designating the number of shares of Preferred Stock to
be issued and the rights, preferences, privileges and restrictions granted to or
imposed on the holders of such designated Preferred Stock, as permitted by
Article FIFTH hereof, then such special meeting may also be called by such
person or persons in the manner, at the times and for the purposes so specified.
TENTH:
(A) In addition to any affirmative vote required by law or this
Certificate of Incorporation or a certificate filed under Section 151(g) of the
General Corporation Law of the State of Delaware or the Bylaws and except as
otherwise expressly permitted in paragraph (b) of this Article TENTH, a Business
Combination (as hereafter defined) with, for, or on behalf of, any Interested
Shareholder (as hereafter defined) or any Affiliate or Associate (as hereafter
defined) of such Interested Shareholder shall require the affirmative vote of at
least 66 2/3% of the votes entitled to be cast by the holders of all the
then-outstanding Voting Stock (as hereafter defined), voting together as a
single class. Such affirmative vote shall be required notwithstanding the fact
that no vote may be required, or that a lesser percentage of a separate class
vote may otherwise be specified, by law or by any agreement between this
Corporation and any national securities exchange or otherwise.
(B) The provisions of paragraph A of this Article TENTH shall not be
applicable to any particular Business Combination, and such Business Combination
shall require only such vote, if any, as is required by law or by any other
provisions of this Certificate of Incorporation or a certificate filed under
Section 151(g) of the General Corporation Law of the State of Delaware or the
Bylaws, or by any agreement between this Corporation and any national securities
exchange, if (i) such Business Combination shall have been specifically approved
by a majority of the Disinterested Directors (as hereafter defined) at the time
or (ii) all the conditions specified in each of the following subparagraphs 1,
2, 3, 4, 5, and 6 are satisfied.
(1) The aggregate amount of cash and the Fair Market Value (as
hereafter defined) as of the Consummation Date (as hereafter defined) of any
consideration other than cash to be received per share by holders of Voting
Stock in such Business Combination, shall be at least equal to the highest
amount determined under clauses (a) and (b) below;
(a) (if applicable) the highest per share price (including
any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by
or on behalf of such Interested Shareholder for any share of Voting Stock in
connection with the acquisition by the Interested Shareholder of Beneficial
Ownership (as hereafter defined) of shares of Voting Stock (i) within the five-
year period immediately prior to the Announcement Date (as hereafter defined) or
(ii) in
-4-
5
the transaction or series of transactions in which it became an Interested
Shareholder, whichever is higher, in either case adjusted for any subsequent
stock split, stock dividend, subdivision or reclassification with respect to
Voting Stock; or
(b) the Fair Market Value per share of Voting Stock on the
Announcement Date or the Determination Date (as hereafter defined), whichever is
higher, as adjusted for any subsequent stock split, stock dividend, subdivision
or reclassification with respect to Voting Stock.
(2) The consideration to be received by holders of a particular
class or series of outstanding Voting Stock shall be in cash or in the same form
as previously has been paid by or on behalf of the Interested Shareholder in
connection with its direct or indirect acquisition of Beneficial Ownership of
shares of such class or series of Voting Stock. If the consideration so paid for
shares of any class or series of Voting Stock varied as to form, the form of
consideration for such class or series of Voting Stock shall either be cash or
the form used to acquire Beneficial Ownership of the largest number of shares of
such class or series of Voting Stock acquired by the Interested Shareholder
during the five-year period prior to the Announcement Date. If non-cash
consideration is to be paid, the Fair Market Value of such non-cash
consideration shall be determined on and as of the Consummation Date.
(3) After the Determination Date and prior to the Consummation
Date there shall have been (a) no failure to declare and pay at the regular date
therefor any full quarterly dividends (whether or not cumulative) payable in
accordance with the terms of any outstanding Voting Stock; (b) no reduction in
the annual rate of dividends paid on the Voting Stock (except as necessary to
reflect any split or subdivision of the Voting Stock), except as approved by a
majority of the Disinterested Directors; (c) an increase in such annual rate of
dividends (as necessary to prevent any such reduction) in the event of any
reclassification (including any reverse stock split or combination of shares),
recapitalization, reorganization or any similar transaction that has the effect
of reducing the number of outstanding shares of the Voting Stock, unless the
failure so to increase such annual rate is approved by a majority of the
Disinterested Directors; and (d) no transaction by which such Interested
Shareholder has become the Beneficial Owner of any additional shares of Voting
Stock except as part of the transaction that results in the Interested
Shareholder becoming an Interested Shareholder and except in a transaction that,
after giving effect thereto, would not result in any increase in the Interested
Shareholder's percentage Beneficial Ownership of any class or series of Voting
Stock.
(4) After the Determination Date, such Interested Shareholder
shall not have received the benefit, directly or indirectly (except as a
stockholder of this Corporation, in proportion to its stockholding), of any
loans, advances, guarantees or similar financial assistance or any tax credits
or tax advantages provided by this Corporation (collectively, "Financial
Assistance"), whether in anticipation of or in connection with such Business
Combination or otherwise.
-5-
6
(5) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the Securities
Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent
provisions replacing such Act, rules or regulations) shall be mailed to
stockholders of this Corporation at least 30 days prior to the consummation of
such Business Combination (whether or not such proxy or information statement is
required to be mailed pursuant to such Act, rules or regulations, or subsequent
provisions). The proxy or information statement shall contain on the first page
thereof, in a prominent location, any statement as to the advisability or
inadvisability of the Business Combination that the Disinterested Directors, or
any of them, may desire to make and, if deemed advisable by a majority of the
Disinterested Directors, the proxy or information statement shall contain the
opinion of an independent investment banking firm selected by a majority of the
Disinterested Directors as to the fairness or lack of fairness of the terms of
the Business Combination from a financial point of view to the holders of the
outstanding shares of Voting Stock other than the Interested Shareholder and its
Affiliates or Associates, such investment banking firm to be paid a reasonable
fee for its services by this Corporation.
(6) Such Interested Shareholder shall not have made any major
change in this Corporation's business or equity capital structure without the
approval of a majority of the Disinterested Directors.
(C) The following definitions shall apply with respect to this Article
TENTH:
(1) The terms "Affiliate" and "Associate" shall have the
respective meanings ascribed to those terms in Rule 12b-2 under the Securities
Exchange Act of 1934, as amended, and as in effect on the date that this
provision of this Corporation's Certificate of Incorporation is approved by the
stockholders (the term "registrant" in said Rule 12b-2 meaning in this case this
Corporation).
(2) The term "Announcement Date" with respect to any Business
Combination means the date of the first public announcement of the proposal of
such Business Combination.
(3) A person shall be a "Beneficial Owner" of, or have
"Beneficial Ownership" of, or "Beneficially Own," any Voting Stock over which
such person or any of its Affiliates or Associates, directly or indirectly,
through any contract, arrangement, understanding or relationship, has or shares
or, upon the exercise of any conversion right, exchange right, warrant, option
or similar interest (whether or not then exercisable) would have or share,
either (a) voting power (including the power to vote or to direct the voting) of
such security or (b) investment power (including the power to dispose or direct
the disposition) of such security. For the purposes of determining whether a
person is an Interested Shareholder, the number of shares of Voting Stock deemed
to be outstanding shall include any shares Beneficially Owned by such person
even though not actually outstanding, but shall not include any other shares of
Voting Stock which are not outstanding but which may be issuable to other
persons pursuant to any
-6-
7
agreement, arrangement or understanding, or upon exercise of any conversion
right, exchange right, warrant, option or similar interest.
(4) The term "Business Combination" shall mean:
(a) any merger or consolidation of this Corporation or any
Subsidiary (as hereafter defined) with (i) any Interested Shareholder (as
hereafter defined) or (ii) any other corporation (whether or not itself an
Interested Shareholder) which after such merger or consolidation would be an
Affiliate or Associate of an Interested Shareholder; or
(b) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition or security agreement, investment, loan, advance,
guarantee, agreement to purchase, agreement to pay, extension of credit, joint
venture participation or other arrangement (in one transaction or a series of
related transactions) with or for the benefit of any Interested Shareholder or
any Affiliate or Associate of any Interested Shareholder, involving any assets,
securities, or commitments of this Corporation, any Subsidiary or any Interested
Shareholder or any Affiliate or Associate of any Interested Shareholder which,
together with all other such arrangements (including all contemplated future
events) have an aggregate Fair Market Value (as hereafter defined) and/or
involve aggregate commitments of $5,000,000 or more; or
(c) the issuance or transfer by this Corporation or any
Subsidiary (in one transaction or a series of related transactions) to an
Interested Shareholder or Affiliate or Associate of an Interested Shareholder of
any securities of this Corporation or any Subsidiary in exchange for cash,
securities or other property (or a combination thereof, having an aggregate Fair
Market Value as of the Announcement Date of $5,000,000 or more, other than the
issuance of securities upon the conversion or exchange of securities of this
Corporation or in exchange for securities of any Subsidiary which were acquired
by an Interested Shareholder from this Corporation or a Subsidiary in a Business
Combination which was approved by a vote of the shareholders pursuant to this
Article TENTH; or
(d) the adoption of any plan or proposal for the
liquidation or dissolution of this Corporation;
(e) any reclassification of any securities of this
Corporation (including any reverse stock split), any recapitalization of the
Voting Stock of this Corporation, any merger of consolidation of this
Corporation with or into any Interested Shareholder, or any other transaction
(whether or not with or otherwise involving any Interested Shareholder) that has
the effect, directly or indirectly, of increasing the proportionate share of the
outstanding shares of any class of Voting Stock or series thereof of this
Corporation or of any Subsidiary Beneficially Owned by any Interested
Shareholder or Affiliate or Associate of an Interested Shareholder or as a
result of which the shareholders of this Corporation would cease to be
shareholders of a corporation having, as part of its certificate or articles of
incorporation, provisions to the same
-7-
8
effect as this Article TENTH and the provisions of Article ELEVENTH of this
Certificate of Incorporation relating to the provisions of this Article TENTH;
or
(f) any agreement, contract or other arrangement providing
for one or more of the actions specified in the foregoing paragraphs (a) through
(e), or any series of transactions which, if taken together, would constitute
one or more of the actions specified in the foregoing paragraphs (a) through
(e).
(5) The term "Consummation Date" means the date of the
consummation of a Business Combination.
(6) The term "Determination Date" in respect to an Interested
Shareholder means the date on which such Interested Shareholder first became an
Interested Shareholder.
(7) The term "Disinterested Director" with respect to a Business
Combination means any member of the Board of Directors of this Corporation who
is not an Interested Shareholder or an Affiliate or Associate of, and was not
directly or indirectly a nominee of, any Interested Shareholder involved in such
Business Combination or any Affiliate or Associate of such Interested
Shareholder and who either (a) was a member of the Board of Directors prior to
the time that such Interested Shareholder became an Interested Shareholder, or
(b) is a successor of a Disinterested Director and was nominated to succeed a
Disinterested Director by a majority of the Disinterested Directors at the time
of his nomination. Any reference to "Disinterested Directors" shall refer to a
single Disinterested Director if there be but one.
(8) The term "Fair Market Value" as of any particular date means
(a) in the case of cash, the amount of such cash, (b) in the case of stock
(including Voting Stock), the highest closing price per share of such stock
during the thirty-day period immediately preceding the date in question on the
principal United States security exchange registered under the Securities
Exchange Act of 1934, as amended, on which such stock is listed or, if such
stock is not listed on any such exchange, the highest last sales price as
reported by the National Association of Securities Dealers, Inc., Automated
Quotation System ("NASDAQ") during the thirty-day period immediately preceding
the date in question if the stock is a National Market System security, or, if
such stock is not a National Market System security, the highest reported
closing bid quotation for a share of such stock during the thirty-day period
preceding the date in question on NASDAQ or any successor quotation reporting
system or, if quotations are not available in such system, as furnished by the
National Quotation Bureau Incorporated or any similar organization furnishing
quotations, or if no such quotations are available, the fair market value on the
date in question of a share of such stock as determined by a majority of the
Disinterested Directors in good faith; and (c) in the case of stock of any class
or series which is not traded on any securities exchange or in the
over-the-counter market, or in the case of property other than cash or stock, or
in the case of Financial Assistance, the fair market value of such stock,
property or Financial Assistance, as the case may be, on the date in question as
determined by a majority of the Disinterested Directors in good faith.
-8-
9
(9) The term "Interested Shareholder" shall mean any person,
other than this Corporation, any Subsidiary or any employee benefit plan of this
Corporation or any Subsidiary, who or which
(a) is or has announced or publicly disclosed a plan or
intention to become the Beneficial Owner, directly or indirectly, of shares of
Voting Stock representing 20% or more of the total votes which all of the then-
outstanding shares of Voting Stock are entitled to cast in the election of
directors; or
(b) is an Affiliate or Associate of any person described in
subparagraph 9(a) at any time during the five-year period immediately preceding
the date in question; or
(c) acts with any other person as a partnership, limited
partnership, syndicate, or other group for the purpose of acquiring, holding or
disposing of securities of this Corporation, and such group is the Beneficial
Owner, directly or indirectly, of shares of Voting Stock representing 15% or
more of the total votes which all of the then-outstanding shares of Voting Stock
are entitled to cast in the election of directors.
Any reference to a particular Interested Shareholder involved in a
Business Combination shall also refer to any Affiliate or Associate thereof, any
predecessor thereto and any other person acting as a member of a partnership,
limited partnership, syndicate or group with such particular Interested
Shareholder within the meaning of the foregoing clause c of this subparagraph 9.
(10) A "person" shall mean any individual, firm, company,
corporation (which shall include a business trust), partnership, joint venture,
trust or estate, association or other entity.
(11) The term "Subsidiary" in respect of this Corporation means any
corporation or partnership of which a majority of any class of its equity
securities is owned, directly or indirectly, by this Corporation.
(12) The term "Voting Stock" shall mean all shares of capital
stock that entitle the holder to vote for the election of directors, including,
without limitation, this Corporation's Common Stock.
(D) A majority of the Disinterested Directors shall determine, on the
basis of information known to them after reasonable inquiry, all facts necessary
to determine compliance with this Article TENTH, including, without limitation
(1) whether a person is an Interested Shareholder, (2) the number of shares of
Voting Stock Beneficially owned by any person, (3) whether a person is an
Affiliate or Associate of another person, (4) whether the requirements of
paragraph B of this Article TENTH have been met with respect to any Business
Combination, (5)
-9-
10
whether the proposed transaction is with, or proposed by, or on behalf of an
Interested Shareholder or an Affiliate or Associate of an Interested
Shareholder, and (6) whether the assets which are the subject of any Business
Combination have, or the consideration to be received for the issuance or
transfer of securities by this Corporation or any Subsidiary in any Business
Combination has, an aggregate Fair Market Value of $5,000,000 or more. The good
faith determination of a majority of the Disinterested Directors on such matters
shall be conclusive and binding for all purposes of this Article TENTH.
(E) Nothing contained in this Article TENTH shall be construed to
relieve any Interested Shareholder from any fiduciary obligation imposed by law.
(F) The fact that any Business Combination complies with paragraph
(B) of this Article TENTH shall not be construed to impose any fiduciary duty,
obligation or responsibility on the Board of Directors, or any member thereof,
to approve such Business Combination or recommend its adoption or approval to
the Shareholders of this Corporation, nor shall such compliance limit, prohibit
or otherwise restrict in any manner the Board, or any member thereof, with
respect to evaluations of or actions and responses taken with respect to such
Business Combination.
(G) For purposes of this Article TENTH, a Business Combination or any
proposal to amend, repeal or adopt any provision of the Articles of
Incorporation inconsistent with this Article TENTH (collectively, "Proposed
Action") is presumed to have been prepared by, or on behalf of, an Interested
Shareholder or an Affiliate or Associate of an Interested Shareholder or a
person who thereafter would become such if (1) after the Interested Shareholder
became such, the Proposed Action is proposed following the election of any
director of this Corporation who, with respect to such Interested Shareholder,
would not qualify to serve as a Disinterested Director or (2) such Interested
Shareholder, Affiliate, Associate or person votes for or consents to the
adoption of any such Proposed Action, unless as to such Interested Shareholder,
Affiliate, Associate or person, a majority of the Disinterested Directors makes
a good faith determination that such Proposed Action is not proposed by or on
behalf of such Interested Shareholder, Affiliate, Associate or person, based on
information known to them after reasonable inquiry.
ELEVENTH: At all elections of directors of this Corporation, a holder of
any class or series of stock then entitled to vote in such election shall be
entitled to as many votes as shall equal the number of votes which (except for
this Article as to cumulative voting) he would be entitled to cast for the
election of directors with respect to his shares of stock multiplied by the
number of directors to be elected in the election in which his class or series
of stock is entitled to vote, and each stockholder may cast all of such votes
for a single nominee for director or may distribute them among the number to be
voted for, or for any two or more of them as he may see fit.
TWELFTH: A director of this Corporation shall not be personally liable to
this Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director,
-10-
11
except for liability (i) for any breach of the director's duty of loyalty to
this Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the General Corporation Law of the State of Delaware,
or (iv) for any transaction from which the director derived an improper personal
benefit.
THIRTEENTH:
(A) This Corporation reserves the right at any time and from time to
time to amend, alter, change or repeal any provision contained herein, and other
provisions authorized by the laws of the State of Delaware at the time in force
may be added or inserted, in the manner now or hereafter prescribed by law, and
all rights, preferences, and privileges of whatsoever nature conferred upon
shareholders, directors, or any other person whomsoever by or pursuant to the
Certificate of Incorporation in its present form or as hereafter are granted,
subject to the rights reserved in this Article THIRTEENTH.
(B) In addition to any requirements of law and any other provisions
herein (and notwithstanding the fact that approval by a lesser vote may be
permitted by law or any other provision hereof), the affirmative vote of the
holders of 66 2/3% or more of the combined voting power of the then-outstanding
shares of Voting Stock, voting together as a single class, shall be required to
amend, alter or repeal, or adopt any provision inconsistent with, this Article
THIRTEENTH or Articles EIGHTH or TENTH hereof.
THE UNDERSIGNED, being of the incorporator hereinabove named, for the
purpose of forming a corporation to do business both within and without the
State of Delaware, and in pursuance of the Delaware General Corporation Law,
does hereby make and file this Certificate.
DATED: November 6, 1986
/s/ KENT L. ROBERTSON
-----------------------------------------
Kent L. Robertson
-11-
12
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
TELCO SYSTEMS, INC.
Kent L. Robertson certifies that:
1. He is the sole incorporator of Telco Systems, Inc., a Delaware
corporation.
2. The following amendment of the Certificate of Incorporation of this
Corporation is hereby adopted:
Article ELEVENTH is amended to read as follows:
ELEVENTH: At all elections of directors of this Corporation, a holder of
any class or series of stock then entitled to vote in such election shall
be entitled to as many votes as shall equal the number of votes which
(except for this Article as to cumulative voting) he would be entitled to
cast for the election of directors with respect to his shares of stock
multiplied by the number of directors to be elected in the election in
which his class or series of stock is entitled to vote, and each
stockholder may cast all of such votes for a single nominee for director
or may distribute them among the number to be voted for, or for any two
or more of them as he may see fit. Elections of directors at an annual or
special meeting of stockholders need not be by written ballot unless the
Bylaws of this Corporation shall so provide.
3. This Corporation has not received any payment for any of its stock.
4. This amendment to the Certificate of Incorporation has been duly
adopted in accordance with the provisions of Section 241 of the Delaware
Corporation Law.
/s/ KENT L. ROBERTSON
-----------------------------------------
Kent L. Robertson
Date: NOVEMBER 17, 1986
-----------------
13
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER ("Merger Agreement") is made and entered into as
of December 15, 1986 by and between TELCO SYSTEMS, INC., a California
corporation ("Telco-California"), and TELCO SYSTEMS, INC., a Delaware
corporation ("Telco-Delaware").
W I T N E S S E T H:
WHEREAS, Telco-Delaware is a corporation duly organized and existing
under the laws of the State of Delaware;
WHEREAS, Telco-California is a corporation duly organized and existing
under the laws of the State of California;
WHEREAS, on the date of this Merger Agreement, Telco-Delaware has
authority to issue 25,000,000 shares of common stock, par value $.01 per share
(the "Delaware common stock"), of which 24,000,000 have been designated Common
Stock and 1,000,000 have been designated Series A Junior Common Stock, and of
which 100 shares of Common Stock are issued and outstanding and owned by
Telco-California, and 5,000,000 shares of preferred stock, par value $.01 per
share, none of which have been issued or are outstanding;
WHEREAS, the respective Boards of Directors of Telco-Delaware and
Telco-California have determined that, for the purpose of effecting the
reincorporation of Telco-California in the State of Delaware, it is advisable
and to the advantage of such corporations and their stockholders that
Telco-California merge with and into Telco-Delaware upon the terms and
conditions herein provided; and
WHEREAS, the respective Boards of Directors of Telco-Delaware and
Telco-California have approved this Merger Agreement and the Board of Directors
of Telco-Delaware and Telco-California have directed that this Merger Agreement
be submitted to a vote of their stockholders.
NOW, THEREFORE, in consideration of the mutual agreements and covenants
set forth herein, Telco-California and Telco-Delaware hereby agree to merge as
follows:
(1) Merger. Telco-California shall be merged with and into
Telco-Delaware, and Telco-Delaware shall survive the merger (the
"Merger"), effective upon the date when this Merger Agreement is made
effective in accordance with applicable law (the "Effective Date").
(2) Directors and Officers and Governing Documents. The directors
and officers of Telco-Delaware shall be the same upon the Effective Date
as they are immediately prior thereto. The Certificate of Incorporation
of Telco-Delaware, as in effect on the Effective Date, shall continue to
be the Certificate of Incorporation of Telco-Delaware as the surviving
corporation without change or amendment until further
14
amended in accordance with the provision thereof and applicable laws. The
Bylaws of Telco-Delaware, as amended and in effect on the Effective Date,
shall continue to be the Bylaws of Telco-Delaware as the surviving
corporation without change or amendment until further amended in
accordance with the provisions thereof and applicable laws.
(3) Succession. On the Effective Date, Telco-Delaware shall
succeed to Telco-California in the manner of and as more fully set forth
in Section 259 of the General Corporation Law of the State of Delaware.
All corporate acts, plans, policies, agreements, arrangements, approvals
and authorizations of Telco-California, its shareholders, Board of
Directors and committees thereof, officers and agents which were valid
and effective immediately prior to the Effective Date, shall be taken for
all purposes as the acts, plans, policies, agreements, arrangements,
approvals and authorizations of Telco-Delaware and shall be as effective
and binding thereon as the same were with respect to Telco-California.
The requirements of any plans or agreements of Telco-California involving
the issuance or purchase by Telco-California of certain shares of its
capital stock shall be satisfied by the issuance or purchase of a like
number of shares of Telco-Delaware.
(4) Further Assurances. From time to time, as and when required
by Telco-Delaware or by its successors and assigns, there shall be
executed and delivered on behalf of Telco-California such deeds and other
instruments, and there shall be taken or caused to be taken by it such
further and other action, as shall be appropriate or necessary in order
to vest, perfect or confirm, of record or otherwise, in Telco-Delaware
the title to and possession of all the property, interests, assets,
rights, privileges, immunities, powers, franchises and authority of
Telco-California, and otherwise to carry out the purposes of this Merger
Agreement, and the officers and directors of Telco-Delaware are fully
authorized in the name and on behalf of Telco-California or otherwise to
take any and all such action and to execute and deliver any and all such
deeds and other instruments.
(5) Common Stock of Telco-California. Upon the Effective Date, by
virtue of the Merger and without any action on the part of the holder
thereof, each share of each series of common stock, no par value, of
Telco-California (the "California common stock") outstanding immediately
prior thereto shall be changed and converted into one fully paid and
non-assessable share of the corresponding series of Delaware common
stock.
(6) Stock Certificates. On and after the Effective Date, all of
the outstanding certificates which prior to that time represented shares
of California common stock shall be deemed for all purposes to evidence
ownership of and to represent the shares of Delaware common stock into
which the shares of California common stock represented by such
certificates have been converted as herein provided. The registered owner
on the books and records of Telco-Delaware or its transfer agent of any
such outstanding stock certificate shall, until such certificate shall
have been surrendered for transfer or otherwise
-2-
15
accounted for to Telco-Delaware or its transfer agent, have and be
entitled to exercise any voting and other rights with respect to and to
receive any dividend and other distributions upon the shares of Delaware
common stock evidenced by such outstanding certificate as above provided.
(7) Options. Forthwith upon the Effective Date, each outstanding
option to purchase shares of California common stock granted under the
1980 Stock Option Plan and each right to purchase California common stock
under the Employee Stock Purchase Plan (the "Plans") of Telco-California
shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into and become an option or right,
respectively, to purchase the same number of shares of Delaware common
stock at the same price per share as in effect on the Effective Date and
upon the same terms and subject to the same conditions as set forth in
said Plans or any agreements entered into by Telco-California pursuant
thereto. A number of shares of Delaware common stock shall be reserved
for purposes of said Plans equal to the number of shares of California
common stock so reserved as of the Effective Date. As of the Effective
Date, Telco-Delaware hereby assumes all obligations of Telco-California
under said Plans and the outstanding options or portions thereof granted
pursuant to said Plans.
(8) Other Employee Benefit Plans. As of the Effective Date,
Telco-Delaware hereby assumes all obligations of Telco-California under
any and all employee benefit plans in effect as of said date or with
respect to which employee rights or accrued benefits are outstanding as
of said date.
(9) Delaware Common Stock. Forthwith upon the Effective Date, the
100 shares of Delaware common stock presently issued and outstanding in
the name of Telco-California shall be canceled and retired and resume the
status of authorized and unissued shares of Delaware common stock, and no
shares of Delaware common stock or other securities of Telco-Delaware
shall be issued in respect thereof.
(10) Covenants of Telco-Delaware. Telco-Delaware covenants and
agrees that it will on or before the Effective Date:
(a) Qualify to do business as a foreign corporation in the
State of California, and in connection therewith irrevocably
appoint an agent for service of process as required under the
provisions of Section 2105 of the California Corporations Code.
(b) File any and all documents with the California Franchise
Tax Board necessary for the assumption by Telco-Delaware of all of
the franchise tax liabilities of Telco-California.
-3-
16
(11) Amendment. Subject to applicable law, at any time before or
after approval and adoption by the stockholders of Telco-California, this
Merger Agreement may be amended, supplemented or modified in any manner.
(12) Abandonment. At any time before the Effective Date, this
Merger Agreement may be terminated and the Merger may be abandoned by the
Board of Directors of either Telco-California or Telco-Delaware, or both,
notwithstanding approval of this Merger Agreement by the stockholders of
Telco-Delaware or the stockholders of Telco-California or both.
(13) Counterparts. In order to facilitate the filing and recording
of this Merger Agreement, the same may be executed in any number of
counterparts, each of which shall be deemed to be an original and the
same agreement.
IN WITNESS WHEREOF, this Merger Agreement, having first been duly
approved by resolutions of the Board of Directors of Telco-Delaware and
Telco-California, is hereby executed on behalf of each of said two corporations
by their respective officers thereunto duly authorized.
TELCO SYSTEMS, INC.
A Delaware corporation
By: /s/ JACK SHIRMAN
----------------
President
ATTEST:
/S/ KENT L. ROBERTSON
- ---------------------
Secretary
TELCO SYSTEMS, INC.
A California corporation
By: /s/ JACK SHIRMAN
----------------
President
ATTEST:
/s/ KENT L. ROBERTSON
- ---------------------
Kent L. Robertson, Secretary
-4-
17
CERTIFICATE OF THE SECRETARY
OF
TELCO SYSTEMS, INC.
I, Kent L. Robertson, Secretary of Telco Systems, Inc., a Delaware
corporation ("Telco-Delaware"), do hereby certify, as such Secretary, in
accordance with the General Corporation Law of the State of Delaware, that the
Agreement of Merger to which this Certificate is attached, after having been
first duly approved, adopted and executed by Telco-Delaware and Telco Systems,
Inc., a California corporation, was duly submitted to the sole stockholder of
Telco-Delaware at a special meeting of stockholders called for the purpose of
acting on said Agreement of Merger, notice of the time, place and purpose of
said meeting having been waived by the sole shareholder of Telco-Delaware, and
that at said meeting the Agreement of Merger was considered and a vote taken for
its adoption or rejection and that at said meeting all of the outstanding shares
of Telco-Delaware entitled to vote thereon were voted for the adoption of said
Agreement of Merger and that thereby said Agreement of Merger was at said
meeting duly adopted as the act of the stockholders of Telco-Delaware and as the
agreement and act of Telco-Delaware.
IN WITNESS WHEREOF, the undersigned has executed this certificate as of
this December 15, 1986.
/s/ KENT L. ROBERTSON
---------------------
Kent L. Robertson
Secretary
CERTIFICATE OF THE SECRETARY
OF
TELCO SYSTEMS, INC.
I, Kent L. Robertson, Secretary of Telco Systems, Inc., a California
corporation ("Telco-California"), do hereby certify, as such Secretary, in
accordance with the General Corporation Law of the State of Delaware, that the
Agreement of Merger to which this Certificate is attached, after having been
first duly approved, adopted and executed by Telco-California and Telco Systems,
Inc., a Delaware corporation, was duly submitted to the stockholders of
Telco-California at a special meeting of stockholders called for the purpose of
acting on said Agreement of Merger after due notice of the time, place and
purpose of said meeting was mailed to each holder of common stock of
Telco-California at his address as it appears on the records of Telco-California
in the manner provided under the provisions of Section 601 of the California
Corporations Code, and that at said meeting the Agreement of Merger was
considered and a vote taken for its adoption or rejection and that at said
meeting a majority of the outstanding common stock of Telco-California entitled
to vote thereon was voted for the adoption of said Agreement of Merger and that
thereby said Agreement of Merger was at said meeting duly adopted as the act of
the stockholders of Telco-California and as the agreement and act of
Telco-California.
IN WITNESS WHEREOF, the undersigned has executed this certificate as of
this December 15, 1986.
/s/ KENT L. ROBERTSON
---------------------
Kent L. Robertson
Secretary
18
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
TELCO TRANSMISSION SYSTEMS, INC.,
TELCO SYSTEMS FIBER OPTICS CORPORATION
and
TELCO SYSTEMS NETWORK ACCESS CORPORATION
INTO
TELCO SYSTEMS, INC.
Telco Systems, Inc., a Delaware Corporation (the "Corporation"), does
hereby certify;
FIRST: That the Corporation was incorporated and duly organized
pursuant to the General Corporation Law of the State of Delaware.
SECOND: That the Corporation owns all of the outstanding shares of
capital stock of Telco Transmission Systems, Inc., a Delaware corporation, Telco
Systems Fiber Optics Corporation, a California corporation, and Telco Systems
Network Access Corporation, an Illinois corporation (hereinafter referred to
individually as a "Subsidiary Corporation" and collectively as the "Subsidiary
Corporations").
THIRD: That the Corporation, by the following resolution duly adopted by
its Board of Directors on the 24th day of August, 1993, determined to merge with
and into itself each of the Subsidiary Corporations pursuant to Section 253 of
the General Corporation Law of the State of Delaware, effective August 29, 1993:
RESOLVED: That Telco Systems, Inc. merge with and into itself each of its
subsidiaries, Telco Transmission Systems, Inc., Telco Systems Fiber Optics
Corporation and Telco Systems Network Access Corporation and assume all of each
of such subsidiaries' liabilities and obligations; that the merger shall be
effective on August 29, 1993; and that the proper officers of this corporation
be and they hereby are directed to prepare and execute a Certificate of
Ownership and Merger setting forth a copy of the resolutions to merge into
itself said Telco Transmission Systems, Inc., Telco Systems Fiber Optics
Corporation and Telco Systems Network Access Corporation and assume all of their
respective liabilities and obligations, and the date of adoption thereof, to
cause the same to be filed with the secretary of State of Delaware and a
certified copy recorded in the office of the Recorder of Deeds of New Castle
County and to do all acts and things whatsoever, whether within or without the
State of Delaware, which may be in any necessary or proper to effect said
merger.
19
IN WITNESS WHEREOF, Telco Systems, Inc. has caused this Certificate to be
signed by Paul D. Lazay, its President, and attested by John A. Ruggiero, its
Secretary, this 24th day of August, 1993.
By: /s/ PAUL D. LAZAY
----------------------------------
Paul D. Lazay, President
ATTEST:
By: /s/ JOHN A. RUGGIERO
--------------------------------------
John A. Ruggiero
Secretary
-2-
20
CERTIFICATE OF THE VOTING POWERS,
DESIGNATIONS, PREFERENCES AND RELATIVE
PARTICIPATING, OPTIONAL AND OTHER SPECIAL
RIGHTS AND QUALIFICATIONS, LIMITATIONS
OR RESTRICTIONS OF SERIES A
PARTICIPATING CUMULATIVE
PREFERRED STOCK OF
TELCO SYSTEMS, INC.
Pursuant to Section 151 of the General Corporation Law of the State
of Delaware, Telco Systems, Inc. (the "Corporation"), a corporation organized
and existing under the General Corporation Law of the State of Delaware, in
accordance with the provisions of Section 103 thereof, DOES HEREBY CERTIFY:
That, pursuant to the authority conferred upon the Board of
Directors of the Corporation by Paragraphs (A) and (B)(1) of Article FIFTH of
the Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation"), the Board of Directors of the Corporation on February 19, 1997,
adopted the following resolution creating a series of Preferred Stock designated
as Series A Participating Cumulative Preferred Stock:
RESOLVED, that, pursuant to the authority vested in the Board of
Directors of the Corporation in accordance with the provisions of the
Certificate of Incorporation of the Corporation, a series of Preferred
Stock of the Corporation is hereby created and that the designation and
number of shares thereof and the voting powers, preferences and relative,
participating, optional and other special rights of the shares of such
series, and the qualifications, limitations or restrictions thereof are
as follows:
SECTION 1. DESIGNATION AND NUMBER OF SHARES. The shares of such
series shall be designated as "Series A Participating Cumulative Preferred
Stock" (the "Series A Preferred Stock"), par value $.01 per share. The number of
shares initially constituting the Series A Preferred Stock shall be 200,000;
PROVIDED, HOWEVER, that, if more than a total of 200,000 shares of Series A
Preferred Stock shall be issuable upon the exercise of Rights (the "Rights")
issued pursuant to the Rights Agreement dated as of February 19, 1997, between
the Corporation and The First National Bank of Boston, a national banking
association, as Rights Agent (the "Rights Agreement"), the Board of Directors of
the Corporation, pursuant to Section 151(g) of the General Corporation Law of
the State of Delaware, shall direct by resolution or resolutions that a
certificate be properly executed, acknowledged, filed and recorded, in
accordance with the provisions of Section 103 thereof, providing for the total
number of shares of Series A Preferred Stock authorized to be issued to be
increased (to the extent that the Certificate of Incorporation then permits) to
the largest number of whole shares (rounded up to the nearest whole number)
issuable upon exercise of such Rights.
SECTION 2. DIVIDENDS OR DISTRIBUTIONS. (a) Subject to the prior and
superior rights of the holders of shares of any other series of Preferred Stock
or other class of capital stock of the Corporation ranking prior and superior to
the shares of Series A Preferred Stock with respect to dividends, the holders of
shares of the Series A Preferred Stock shall be entitled to
21
receive, when, as and if declared by the Board of Directors, out of the assets
of the Corporation legally available therefor, (1) quarterly dividends payable
in cash on the last day of each fiscal quarter in each year, or such other dates
as the Board of Directors of the Corporation shall approve (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing on the
first Quarterly Dividend Payment Date after the first issuance of a share or a
fraction of a share of Series A Preferred Stock, in the amount of $1.00 per
whole share (rounded to the nearest cent) less the amount of all cash dividends
declared on the Series A Preferred Stock pursuant to the following clause (2)
since the immediately preceding Quarterly Dividend Payment Date or, with respect
to the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series A Preferred Stock (the total of which
shall not, in any event, be less than zero) and (2) dividends payable in cash on
the payment date for each cash dividend declared on the Common Stock in an
amount per whole share (rounded to the nearest cent) equal to the Formula Number
(as hereinafter defined) then in effect times the cash dividends then to be paid
on each share of Common Stock. In addition, if the Corporation shall pay any
dividend or make any distribution on the Common Stock payable in assets,
securities or other forms of noncash consideration (other than dividends or
distributions solely in shares of Common Stock), then, in each such case, the
Corporation shall simultaneously pay or make on each outstanding whole share of
Series A Preferred Stock a dividend or distribution in like kind equal to the
Formula Number then in effect times such dividend or distribution on each share
of the Common Stock. As used herein, the "Formula Number" shall be 100;
PROVIDED, HOWEVER, that if at any time after February 19, 1997, the Corporation
shall (i) declare or pay any dividend on the Common Stock payable in shares of
Common Stock or make any distribution on the Common Stock in shares of Common
Stock, (ii) subdivide (by a stock split or otherwise) the outstanding shares of
Common Stock into a larger number of shares of Common Stock or (iii) combine (by
a reverse stock split or otherwise) the outstanding shares of Common Stock into
a smaller number of shares of Common Stock, then in each such event the Formula
Number shall be adjusted to a number determined by multiplying the Formula
Number in effect immediately prior to such event by a fraction, the numerator of
which is the number of shares of Common Stock that are outstanding immediately
after such event and the denominator of which is the number of shares of Common
Stock that are outstanding immediately prior to such event (and rounding the
result to the nearest whole number); and PROVIDED FURTHER, that, if at any time
after February 19, 1997, the Corporation shall issue any shares of its capital
stock in a merger, reclassification, or change of the outstanding shares of
Common Stock, then in each such event the Formula Number shall be appropriately
adjusted to reflect such merger, reclassification or change so that each share
of Series A Preferred Stock continues to be the economic equivalent of a Formula
Number of shares of Common Stock prior to such merger, reclassification or
change.
(b) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in Section 2(a) immediately prior to or at
the same time it declares a dividend or distribution on the Common Stock (other
than a dividend or distribution solely in shares of Common Stock); PROVIDED,
HOWEVER, that, in the event no dividend or distribution (other than a dividend
or distribution in shares of Common Stock) shall have been declared on the
Common Stock during the period between any Quarterly Dividend Payment Date and
the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per
share on the Series A Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date. The Board of Directors may fix a
record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive a dividend or distribution declared thereon, which
-2-
22
record date shall be the same as the record date for any corresponding dividend
or distribution on the Common Stock.
(c) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from and after the Quarterly
Dividend Payment Date next preceding the date of original issue of such shares
of Series A Preferred Stock; PROVIDED, HOWEVER, that dividends on such shares
which are originally issued after the record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive a quarterly
dividend and on or prior to the next succeeding Quarterly Dividend Payment Date
shall begin to accrue and be cumulative from and after such Quarterly Dividend
Payment Date. Notwithstanding the foregoing, dividends on shares of Series A
Preferred Stock which are originally issued prior to the record date for the
determination of holders of shares of Series A Preferred Stock entitled to
receive a quarterly dividend on the first Quarterly Dividend Payment Date shall
be calculated as if cumulative from and after the last day of the fiscal quarter
next preceding the date of original issuance of such shares. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Series A
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding.
(d) So long as any shares of the Series A Preferred Stock are
outstanding, no dividends or other distributions shall be declared, paid or
distributed, or set aside for payment or distribution, on the Common Stock
unless, in each case, the dividend required by this Section 2 to be declared on
the Series A Preferred Stock shall have been declared.
(e) The holders of the shares of Series A Preferred Stock shall not
be entitled to receive any dividends or other distributions except as provided
herein.
SECTION 3. VOTING RIGHTS. The holders of shares of Series A
Preferred Stock shall have the following voting rights:
(a) Each holder of Series A Preferred Stock shall be entitled to a
number of votes equal to the Formula Number then in effect, for each share of
Series A Preferred Stock held of record on each matter on which holders of the
Common Stock or stockholders generally are entitled to vote, multiplied by the
maximum number of votes per share which any holder of the Common Stock or
stockholders generally then have with respect to such matter (assuming any
holding period or other requirement to vote a greater number of shares is
satisfied).
(b) Except as otherwise provided herein or by applicable law, the
holders of shares of Series A Preferred Stock and the holders of shares of
Common Stock shall vote together as one class for the election of directors of
the Corporation and on all other matters submitted to a vote of stockholders of
the Corporation.
(c) If, at the time of any annual meeting of stockholders for the
election of directors, the equivalent of six quarterly dividends (whether or not
consecutive) payable on any share or shares of Series A Preferred Stock are in
default, the number of directors constituting the Board of Directors of the
Corporation shall be increased by two. In addition to voting together with the
holders of Common Stock for the election of other directors of the Corporation,
the
-3-
23
holders of record of the Series A Preferred Stock, voting separately as a class
to the exclusion of the holders of Common Stock, shall be entitled at said
meeting of stockholders (and at each subsequent annual meeting of stockholders),
unless all dividends in arrears have been paid or declared and set apart for
payment prior thereto, to vote for the election of two directors of the
Corporation, the holders of any Series A Preferred Stock being entitled to cast
a number of votes per share of Series A Preferred Stock equal to the Formula
Number. Until the default in payments of all dividends which permitted the
election of said directors shall cease to exist, any director who shall have
been so elected pursuant to the next preceding sentence may be removed at any
time, either with or without cause, only by the affirmative vote of the holders
of the shares of Series A Preferred Stock at the time entitled to cast a
majority of the votes entitled to be cast for the election of any such director
at a special meeting of such holders called for that purpose, and any vacancy
thereby created may be filled by the vote of such holders. If and when such
default shall cease to exist, the holders of the Series A Preferred Stock shall
be divested of the foregoing special voting rights, subject to revesting in the
event of each and every subsequent like default in payments of dividends. Upon
the termination of the foregoing special voting rights, the terms of office of
all persons who may have been elected directors pursuant to said special voting
rights shall forthwith terminate, and the number of directors constituting the
Board of Directors shall be reduced by two. The voting rights granted by this
Section 3(c) shall be in addition to any other voting rights granted to the
holders of the Series A Preferred Stock in this Section 3.
(d) Except as provided herein, in Section 11 or by applicable law,
holders of Series A Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for authorizing or taking
any corporate action.
SECTION 4. CERTAIN RESTRICTIONS. (a) Whenever quarterly dividends
or other dividends or distributions payable on the Series A Preferred Stock as
provided in Section 2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on shares of Series
A Preferred Stock outstanding shall have been paid in full, the Corporation
shall not
(i) declare or pay dividends on, make any other distributions on,
or redeem or purchase or otherwise acquire for consideration any shares
of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends on or make any other distributions
on any shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A Preferred
Stock, except dividends paid ratably on the Series A Preferred Stock and
all such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares
are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred
Stock; PROVIDED that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares
of
-4-
24
any stock of the Corporation ranking junior (either as to dividends or
upon dissolution, liquidation or winding up) to the Series A Preferred
Stock; or
(iv) purchase or otherwise acquire for consideration any shares of
Series A Preferred Stock, or any shares of stock ranking on a parity with
the Series A Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates
and other relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (a) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
SECTION 5. LIQUIDATION RIGHTS. Upon the liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, no distribution
shall be made (1) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received an amount equal to the accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment, plus an amount equal to the greater of (x) $100.00 per whole share
or (y) an aggregate amount per share equal to the Formula Number then in effect
times the aggregate amount to be distributed per share to holders of Common
Stock or (2) to the holders of stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A Preferred
Stock, except distributions made ratably on the Series A Preferred Stock and all
other such parity stock in proportion to the total amounts to which the holders
of all such shares are entitled upon such liquidation, dissolution or winding
up.
SECTION 6. CONSOLIDATION, MERGER, ETC. In case the Corporation
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash or any other property, then in any such case the then
outstanding shares of Series A Preferred Stock shall at the same time be
similarly exchanged or changed into an amount per share equal to the Formula
Number then in effect times the aggregate amount of stock, securities, cash or
any other property (payable in kind), as the case may be, into which or for
which each share of Common Stock is exchanged or changed. In the event both this
Section 6 and Section 2 appear to apply to a transaction, this Section 6 will
control.
SECTION 7. NO REDEMPTION; NO SINKING FUND. (a) The shares of Series
A Preferred Stock shall not be subject to redemption by the Corporation or at
the option of any holder of Series A Preferred Stock; PROVIDED, HOWEVER, that
the Corporation may purchase or otherwise acquire outstanding shares of Series A
Preferred Stock in the open market or by offer to any holder or holders of
shares of Series A Preferred Stock.
-5-
25
(b) The shares of Series A Preferred Stock shall not be subject to
or entitled to the operation of a retirement or sinking fund.
SECTION 8. RANKING. The Series A Preferred Stock shall rank junior
to all other series of Preferred Stock of the Corporation, unless the Board of
Directors shall specifically determine otherwise in fixing the powers,
preferences and relative, participating, optional and other special rights of
the shares of such series and the qualifications, limitations and restrictions
thereof.
SECTION 9. FRACTIONAL SHARES. The Series A Preferred Stock shall be
issuable upon exercise of the Rights issued pursuant to the Rights Agreement in
whole shares or in any fraction of a share that is one one-hundredth (1/100th)
of a share or any integral multiple of such fraction which shall entitle the
holder, in proportion to such holder's fractional shares, to receive dividends,
exercise voting rights, participate in distributions and to have the benefit of
all other rights of holders of Series A Preferred Stock. In lieu of fractional
shares, the Corporation, prior to the first issuance of a share or a fraction of
a share of Series A Preferred Stock, may elect (1) to make a cash payment as
provided in the Rights Agreement for fractions of a share other than one
one-hundredth (1/100th) of a share or any integral multiple thereof or (2) to
issue depository receipts evidencing such authorized fraction of a share of
Series A Preferred Stock pursuant to an appropriate agreement between the
Corporation and a depository selected by the Corporation; PROVIDED that such
agreement shall provide that the holders of such depository receipts shall have
all the rights, privileges and preferences to which they are entitled as holders
of the Series A Preferred Stock.
SECTION 10. REACQUIRED SHARES. Any shares of Series A Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock, without designation as to series until such shares
are once more designated as part of a particular series by the Board of
Directors pursuant to the provisions of Section (B)(1) of Article V of the
Certificate of Incorporation.
SECTION 11. AMENDMENT. None of the powers, preferences and
relative, participating, optional and other special rights of the Series A
Preferred Stock as provided herein or in the Certificate of Incorporation shall
be amended in any manner which would alter or change the powers, preferences,
rights or privileges of the holders of Series A Preferred Stock so as to affect
them adversely without the affirmative vote of the holders of at least 66-2/3%
of the outstanding shares of Series A Preferred Stock, voting as a separate
class; PROVIDED, HOWEVER, that no such amendment approved by the holders of at
least 66-2/3% of the outstanding shares of Series A Preferred Stock shall be
deemed to apply to the powers, preferences, rights or privileges of any holder
of shares of Series A Preferred Stock originally issued upon exercise of the
Rights after the time of such approval without the approval of such holder.
-6-
26
IN WITNESS WHEREOF, the Corporation has caused this Certificate to
be duly executed in its corporate name on this 19th day of February, 1997.
TELCO SYSTEMS, INC.
By: /s/ WILLIAM B. SMITH
-------------------------
Name: Dr. William B. Smith
Title: President and
Chief Executive Officer
Attest:
/s/ EDWARD N. GADSBY, JR.
- ---------------------------
Name: Edward N. Gadsby, Jr.
Title: Assistant Secretary
-7-