EXHIBIT 4.1
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AVTEL COMMUNICATIONS, INC.
DESIGNATION OF RIGHTS, PRIVILEGES AND PREFERENCES OF
SERIES A CONVERTIBLE PREFERRED STOCK
Pursuant to the provisions of (S)16-10a-602, of the Utah Revised Business
Corporation Act, the above corporation (the "Corporation") hereby adopts the
following Designation of Rights, Privileges and Preferences of Series A
Convertible Preferred Stock (the "Designation"):
WE, ANTHONY E. PAPA AND JAMES P. PISANI HEREBY CERTIFY THAT:
1. We are the President and Chief Executive Officer and the Executive
Vice President, Secretary and Chief Financial Officer,
respectively, of AvTel Communications, Inc., a Utah corporation
formerly called Hi, Tiger, International, Inc., a Utah corporation.
2. The number of shares of Preferred Stock of this corporation is
5,000,000, none of which has been issued.
3. The Board of Directors duly adopted the following resolution:
WHEREAS, the Amended and Restated Articles of Incorporation
authorize the Preferred Stock of the corporation to be issued in
series and authorize the Board of Directors to determine the
rights, preferences, privileges and restrictions granted to or
imposed upon any wholly unissued class or series of Preferred Stock
and to fix the number of shares and designation of any such series;
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does
hereby establish a series of Preferred Stock as follows:
SECTION 1 DESIGNATION AND NUMBER OF SHARES
The shares of such preferred stock shall be designated AvTel
Communications, Inc. Series A Convertible Preferred Stock ("Series
A Convertible Preferred Stock"). The par value of each share of
Series A Convertible Preferred Stock shall be $1.00. The number of
shares constituting Series A Convertible Preferred Stock shall be
1,000,000.
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SECTION 2 GENERAL DEFINITIONS. For purposes of designating the preferences,
privileges, restrictions and rights of the Series A Convertible
Preferred Stock, the following definitions shall apply:
2.1 BOARD OF DIRECTORS shall mean the Board of Directors of the
Corporation.
2.2 BUSINESS DAY shall mean any day other than Saturdays, Sundays or
other days on which commercial banks are authorized or required
to close in Salt Lake City, Utah.
2.3 COMMON STOCK shall refer to the Common Stock of the Corporation.
2.4 CONSIDERATION shall mean in any issuance (other than a Non-
Dilutive Issuance) of securities, including but not limited to
common stock or Convertible Securities or Options (a
"Transaction"), (a) in case of an issuance of Common Stock for
cash or property (i) the net amount of the cash and the fair
market value of the property received by the issuer for such
securities, or (b) in the case of Convertible Securities or
Options, the price at which the holders of such Convertible
Securities or Options may, upon the conversion, exchange or
exercise thereof, acquire such Common Stock.
2.5 CONVERTIBLE SECURITIES shall mean any evidence of indebtedness,
shares (other than Common Stock) or other securities of the
Corporation, convertible into or exchangeable for Common Stock.
2.6 CORPORATION shall mean AvTel Communications, Inc., a Utah
corporation.
2.7 CURRENT MARKET PRICE of any security on any Trading Day shall be
(a) if such security is traded on a national securities
exchange, its last sale price on such Trading Day on such
national securities exchange or, if there was no sale on that
day, the last Trading Day on which there was a sale or (b) if
the principal market for such security is the over-the-counter
market, and such security is quoted on the National Association
of Securities Dealers Automated Quotations System ("NASDAQ"),
the last sale price reported on NASDAQ on such Trading Day or,
if such security is an issue for which last sale prices are not
reported on NASDAQ, the mean between the bid and ask quotation
on such day, but, in each of the preceding two cases, if the
relevant NASDAQ price or quotation did not exist on such day,
then the price or quotation on the preceding Trading Day in
which there was such a price or quotation.
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2.8 DISTRIBUTION shall mean the transfer of cash or property without
consideration, whether by way of dividend or otherwise, or the
purchase or redemption of shares of this Corporation for cash or
property, including any such transfer, purchase or redemption by
a Subsidiary of this Corporation.
2.9 EQUIVALENT SHARES shall mean common stock and shares of any new
class (a "New Class") of securities without fixed maximum
dividends or which share with such common stock in the residual
value of the issuer on liquidation.
2.10 ISSUANCE DATE shall mean the first date upon which any shares of
Series A Convertible Preferred Stock are issued by the
Corporation.
2.11 ISSUE PRICE shall mean the result determined by dividing the
Consideration received by the deemed number of Equivalent Shares
issued in any Transaction.
2.12 JUNIOR SHARES shall mean all Common Stock and any other shares
of this Corporation other than the Series A Convertible
Preferred Stock.
2.13 LIQUIDATION PREFERENCE shall mean the par value of each share of
Series A Convertible Preferred Stock, in addition to the
aggregate amount of any cumulative, unpaid dividends, for each
share of Series A Convertible Preferred Stock as determined in
accordance with Section 3 below.
2.14 NON-DILUTIVE ISSUANCES means (a) the issuance of any series of
the Corporation's preferred stock, (b) the issuance of Common
Stock upon conversion of any Series A Convertible Preferred
Stock, (c) the issuance of Options to purchase shares of Common
Stock, or the issuance of Common Stock upon the exercise of such
Options, provided that (i) such Options are issued to employees,
officers, directors or consultants of the Corporation, (ii) such
Options are issued pursuant to one or more employee stock
purchase or stock option plans or long-term incentive plans or
as part of bona fide reasonable compensation arrangements in the
ordinary course of business, (iii) in the case of Options, the
exercise price of such Options shall be substantially equal to
the then Current Market Price of the underlying Common Stock on
the date of grant unless issued pursuant to an employee stock
purchase plan intended to meet the requirements of Section 423
of the Internal Revenue Code of 1986, or (e) issuances of any
Common Stock or Options by the Corporation pursuant to any
strategic alliance which, for purposes hereof
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shall mean any contract or agreement between the Corporation or
one of its Subsidiaries and one or more other parties involving
an acquisition by the Corporation, or one of its Subsidiaries,
of an ownership interest (whether partial or whole and whether
in the form of an acquisition of stock, voting or non-voting
securities, general or limited partnership interests, or similar
equity participation interests) in any other corporation,
partnership, joint venture or other business entity, or any such
agreement or contract involving the development,
commercialization, marketing, sale, distribution, provisioning,
supply, licensing or production of any products or services by
or for the Corporation or one or more of its Subsidiaries.
2.15 OPTION shall mean rights, options or warrants to subscribe for,
purchase or otherwise acquire Common Stock or Convertible
Securities.
2.16 PERSON means a corporation, an association, a trust, a
partnership, a joint venture, an organization, a business, an
individual, a government or political subdivision thereof or a
governmental body.
2.17 PUBLIC OFFERING with respect to any securities means the
registration of such securities under the Securities Act, under
a firm commitment underwriting, for sale to the public.
2.18 SECURITIES ACT shall mean the Securities Act of 1933, as
amended, or any similar successor federal statute and the rules
and regulations thereunder, all as may be in effect from time to
time.
2.19 SERIES A CONVERTIBLE PREFERRED STOCK shall refer to the Series A
Convertible Preferred Stock of this Corporation.
2.20 SUBSIDIARY shall mean any corporation at least 50% of whose
outstanding voting shares shall at the time be owned by the
Corporation or by one or more of such subsidiaries.
2.21 TRADING DAY shall mean any day on which trading occurs on the
New York Stock Exchange.
SECTION 3 DIVIDEND RIGHTS OF PREFERRED STOCK. The holders of the Series A
Convertible Preferred Stock shall be entitled to receive, out of any
funds legally available therefor, cumulative dividends, on each
outstanding share of Series A Convertible Preferred Stock, at the
rate of eight percent (8.0%) of the par value of the Series A
Convertible Preferred Stock per annum per share, on each outstanding
share of Series A Convertible Preferred Stock, and no more,
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payable prior and in preference to any payment of any dividend on, or
other distribution with respect to, Junior Shares and payable semi-
annually, commencing one hundred eighty (180) days from the Issuance
Date, from funds legally available therefor. Such dividends shall
accrue from the date of issuance whether or not earned so that no
dividends (other than those payable solely in Common Stock) shall be
made with respect to Junior Shares until cumulative dividends on the
Series A Convertible Preferred Stock for all past dividend periods
and for the then current six-month dividend period shall have been
declared and paid or set apart. Such dividends shall be payable to
holders of record of shares of Series A Convertible Preferred Stock
as of a record date, determined by the Board of Directors, which
shall be not more than thirty (30) days prior to the dividend payment
date. Other than with respect to the dividends paid on the Series A
Convertible Preferred Stock which represent payment cumulative
dividends thereon for all past dividend periods and for the then
current six-month dividend period, no dividend shall be declared,
paid on or set apart for the outstanding shares of Series A
Convertible Preferred Stock. The holders of at least 50% of the
Series A Convertible Preferred Stock may at any time by written
consent waive payment of any accumulated but unpaid dividends with
respect to such Series A Convertible Preferred Stock or eliminate any
requirement to declare, pay, set apart or accumulate any dividends
with respect to such Series A Convertible Preferred Stock.
SECTION 4 RESTRICTION ON DIVIDEND RIGHTS OF JUNIOR SHARES. No dividend or
other Distribution (other than those payable solely in Common Stock)
shall be declared or paid with respect to Junior Shares while any
shares of Series A Convertible Preferred Stock are outstanding
without the vote or written consent by the holders of at least 50% of
the outstanding shares of Series A Convertible Preferred Stock.
SECTION 5 LIQUIDATION RIGHTS OF SERIES A CONVERTIBLE PREFERRED STOCK. In the
event of any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, the holders of the
Series A Convertible Preferred Stock shall be entitled to receive,
prior and in preference to any distribution of any of the assets or
surplus funds of the Corporation to the holders of Junior Shares by
reason of their ownership of such stock, an amount (the "Liquidation
Preference") equal to the sum of $1.00 for each share of Series A
Convertible Preferred Stock then held by them and, in addition, an
amount equal to all declared but unpaid dividends, if any, on the
Series A Convertible Preferred Stock. If the assets and funds thus
distributed among the holders of the Series A Convertible Preferred
Stock shall be insufficient to permit the payment to such holders of
the aggregate Liquidation Preference payable to such holders, then
the entire assets and funds of the Corporation legally available for
distribution shall be distributed among the holders of the Series A
Convertible Preferred Stock, pro rata among the holders of such
Series A Convertible
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Preferred Stock according to the number of shares held by each such
holder. After payment to the holders of Series A Convertible
Preferred Stock of the Liquidation Preference as aforesaid, the
entire assets and funds of the Corporation legally available for
distribution, if any, shall be distributed among the holders of the
Junior Shares.
SECTION 6 REDEMPTION. The Corporation may, from funds legally available
therefore, redeem all or any part of the outstanding Series A
Convertible Preferred Stock as follows:
6.1 REDEMPTION OF SERIES A CONVERTIBLE PREFERRED STOCK AFTER SECOND
ANNIVERSARY. After the second anniversary of the Issuance Date,
the Corporation may redeem, at any time, and from time to time,
after the second anniversary of the Issuance Date, all or any
part, but if less than all, not less than 25%, of the Series A
Convertible Preferred Stock outstanding. Any redemption effected
pursuant to this Section 8 shall be made on a pro-rata basis
among the holders of Series A Convertible Preferred Stock in
proportion to the Shares of Series A Convertible Preferred Stock
then held by them.
6.2 REDEMPTION OF SERIES A CONVERTIBLE PREFERRED STOCK BEFORE FIRST
ANNIVERSARY. The Corporation may, at any time, and from time to
time, prior to the first anniversary of the Issuance Date redeem
all or any part, but if less than all, not less than 25%, of the
outstanding Series A Convertible Preferred Stock immediately
following any period of twenty (20) consecutive Trading Days on
which the Current Market Value of Common Stock was $2.00 per
share or more.
6.3 REDEMPTION PRICE. The Corporation may redeem shares of Series A
Convertible Preferred Stock pursuant to either Section 6.1 or
6.2 above by paying in cash therefore an amount (the "Redemption
Price") equal to the Liquidation Preference per share of Series
A Convertible Preferred Stock.
6.4 REDEMPTION NOTICE. In order to effect a redemption pursuant to
Section 6.1 or 6.2 above, the Corporation shall, by written
notice (herein the "Redemption Notice"), mailed first class
postage prepaid, to each holder of record (at the close of
business on the Business Day immediately preceding the day on
which notice is given) of a Series A Convertible Preferred Stock
to be redeemed, at the address shown on the records of the
Corporation for such holder, notify such holder of the
redemption to be effected. Such Redemption Notice shall specify
the number of shares
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of Series A Convertible Preferred Stock to be redeemed from
suchholder, the Redemption Price, the place at which payment may
be obtained and calling upon such holder to surrender to the
Corporation, in the manner and at the place designated, and a
date (herein the "Delivery Date") which shall not be less than
forty-five (45) days nor more than sixty (60) days following the
date of such Redemption Notice, his certificate or certificates
representing the shares to be redeemed. On or before the
Delivery Date, each holder of Series A Convertible Preferred
Stock to be redeemed shall surrender to the Corporation a
certificate or certificates representing such shares, in the
manner and at the place designated in the Redemption Notice, and
thereupon the Redemption Price of such shares shall be payable
to the order of the Person whose name appears on such
certificate or certificates as the owner thereof, any
surrendered certificate shall be canceled. In the event that
less than all the shares represented by any such certificate are
redeemed, a new certificate shall be issued representing the
unredeemed shares.
6.5 CONTINUING RIGHTS OF HOLDERS OF SERIES A CONVERTIBLE PREFERRED
STOCK FOLLOWING REDEMPTION. From and after the Delivery Date,
unless there shall have been a defaulted payment of the
Redemption Price, all rights of the holders of shares of Series
A Convertible Preferred Stock designated for redemption and the
Redemption Notice as holders of Series A Convertible Preferred
Stock (except the right to receive the Redemption Price without
interest upon surrender of their certificate or certificates)
shall cease with respect to such shares, and such shares shall
not thereafter be transferred on the books of the Corporation or
be deemed to be outstanding for any purpose whatsoever. If the
funds of the Corporation are legally available for redemption of
shares of Series A Convertible Preferred Stock on the Delivery
Date and are not sufficient to redeem the total number of shares
of Series A Convertible Preferred Stock deemed redeemed on such
date, those funds which are legally available will be used to
redeem the maximum possible number of such shares, ratably from
the holders of such shares to be redeemed, based upon their
holdings of Series A Convertible Preferred Stock. The shares of
Series A Convertible Preferred Stock not redeemed shall remain
outstanding and entitled to the rights and preferences provided
herein and shall no longer be considered as having been
designated for redemption in the relevant Redemption Notice.
6.6 DEPOSIT OF REDEMPTION PRICE. On or prior to each Delivery Date,
the Corporation shall deposit the Redemption Price of all shares
of Series A Convertible Preferred Stock designated for
redemption in the
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Redemption Notice and not yet redeemed with a bank or trust
corporation having aggregate capital and surplus in excess
of$10,000,000 as a trust fund for the benefit of the respective
holders in shares designated for redemption and not yet
redeemed, with irrevocable instructions and authority to the
bank or trust corporation to pay the redemption price for such
shares to the respective holders on or after the Delivery Date
on receipt of notification from the Corporation that such holder
has surrendered his or her share certificates to the Corporation
pursuant to Subsection 6.5 above. As of the Delivery Date, the
deposit shall constitute full payment of the shares to their
holders, and from and after the Delivery Date shares so called
for redemption shall be redeemed and shall be deemed to be no
longer outstanding, and holders thereof shall cease to be
stockholders with respect to such shares and shall have no
rights with respect thereto, except for rights to receive a bank
or trust corporation payment of the Redemption Price of the
shares, without interest, upon surrender of their certificates
therefore. Such instructions shall also provide that any monies
deposited by the Corporation pursuant to this Subsection 6.6 for
the redemption of shares thereafter converted into shares of
Common Stock pursuant to Section 8 hereof, prior to the Delivery
Date, shall be returned to the Corporation forthwith upon such
conversion. The balance of any monies deposited by the
Corporation pursuant to this Subsection 6.6 remaining unclaimed
at the expiration of one (1) year following the Delivery Date
shall thereupon be returned to the Corporation upon its request
as expressed in the resolution adopted by its Board of
Directors.
SECTION 8 CONVERSION RIGHTS OF SERIES A CONVERTIBLE PREFERRED STOCK. The
holders of the Series A Convertible Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
8.1 RIGHT TO CONVERT. Subject to the terms and conditions hereof,
each share of Series A Convertible Preferred Stock shall be
convertible, at the option of the holder thereof, at any time
after the first anniversary of the Issuance Date, into such
number of fully paid and nonassessable shares of Common Stock,
as determined by dividing $1.00 by the Conversion Price
applicable to such share, determined as hereinafter provided, in
effect on the date the certificate is surrendered for
conversion. The price at which shares of Common Stock shall be
deliverable upon conversion of shares of the Series A
Convertible Preferred Stock (the "Conversion Price") shall
initially be $1.00 per share of Common Stock. The Conversion
Price shall be subject to adjustment as hereinafter provided in
Section 8.5.
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8.2 AUTOMATIC CONVERSION ON PUBLIC OFFERING. Each share of Series A
Convertible Preferred Stock shall automatically be converted
into the number of fully paid and nonassessable shares of Common
Stock upon the closing of a Public Offering pursuant to an
effective Registration Statement under the Securities Act,
covering the offer and sale of Common Stock to the public at a
public offering price (prior to underwriters' discounts and
expenses) equal to or exceeding $10.00 per share of Common Stock
(as adjusted for stock dividends, combinations or splits with
respect to such shares) and the proceeds to the Corporation of
not less than $15 million (net only of underwriters' commissions
and expenses relating to the issuance, including without
limitation expenses of the Corporation's counsel). In the event
of a Public Offering, the person(s) entitled to receive the
Common Stock issuable upon such conversion of Series A
Convertible Preferred Stock shall not be deemed to have
converted such Series A Convertible Preferred Stock until the
date of the closing of such sale of Common Stock. The Conversion
Price of shares of Series A Convertible Preferred Stock which
are converted pursuant to this Section 8.3 shall be the lower of
$1.00 per share or a price determined by multiplying .80 times
the Issue Price per share of the Common Stock issued in such
Public Offering.
8.3 MECHANICS OF CONVERSION. No fractional shares of Common Stock
shall be issued upon conversion of Series A Convertible
Preferred Stock. In lieu of any fractional shares to which the
holder would otherwise be entitled, the Corporation shall pay
cash equal to such fraction multiplied by a fair and reasonable
conversion price to be determined by the Board of Directors
solely for calculating payments due for fractional shares. No
shares of Common Stock will be issued in respect of accrued or
declared and unpaid dividends on the Series A Convertible
Preferred Stock; however, except in the case of an Automatic
Conversion on Public Offering as set forth in subparagraph 8.2
hereof, the Corporation shall remain liable after conversion of
any Series A Convertible Preferred Stock for cumulative unpaid
dividends accrued on such Series A Convertible Preferred Stock
prior to the time of conversion. Before any holder of Series A
Convertible Preferred Stock shall be entitled to convert the
same into full shares of Common Stock, he shall surrender the
certificate or certificates therefor, duly endorsed, at the
office of the Corporation and, except for the automatic
conversion pursuant to subparagraph 8.2 above, shall give
written notice (the "Conversion Notice") to the Corporation, at
such office that he elects to convert the same. The Corporation
shall, as soon as practicable thereafter issue and deliver or
cause to be issued and delivered to such holder of Series A
Convertible Preferred Stock, at such office or at such other
place as the
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holder shall specify in the Conversion Notice, a certificate or
certificates for the number of shares of Common Stock, to which
he shall be entitled as aforesaid, registered in the name of
such holder or in such other name as the holder shall specify in
the aforementioned written notice. Except as set forth in
subparagraph 8.2 above, such conversion shall be deemed to have
been made immediately prior to the close of business on the date
of such surrender of the shares of Series A Convertible
Preferred Stock to be converted, and the person or persons
entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on such date.
8.4 ADJUSTMENTS FOR DILUTING ISSUES.
(a) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Corporation at any time or from time to time after the
Issuance Date effects a subdivision of the outstanding
Common Stock (meaning to increase the number of shares of
Common Stock into which each share of Series A Convertible
Preferred Stock is convertible), the Conversion Price then
in effect immediately before that subdivision shall be
proportionately increased, and conversely, if the
Corporation at any time or from time to time after the
Issuance Date combines the outstanding shares of Common
Stock (meaning to decrease the number of shares of Common
Stock into which each share of Series A Convertible
Preferred Stock is convertible), the Conversion Price then
in effect immediately before the combination shall be
proportionately increased. Any adjustment under this
subparagraph (a) shall become effective at the close of
business on the date the subdivision or combination becomes
effective.
(b) ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISBURSEMENTS. In the
event the Corporation at any time, or from time to time,
after the Issuance Date, makes or fixes a record date for
the determination of holders of Common Stock entitled to
receive a dividend or other distribution payable in
additional shares of Common Stock, then and in each such
event, the Conversion Price then in effect shall be
decreased as of the time of such issuance or, in the event
such record date is fixed, as of the close of business on
such record date, by multiplying the Conversion Price then
in effect by a fraction (a) the numerator of which shall be
the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance
or the close of business on such
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record date (but excluding shares of Common Stock
previously issued by the Corporation upon conversion of
Series A Convertible Preferred Stock) plus the number of
shares of Common Stock issuable in payment of such dividend
or distribution, and (b) the denominator of which is the
total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance
or the close of business on such record date (but excluding
shares of Common Stock previously issued by the Corporation
upon conversion of Series A Convertible Preferred Stock);
provided, however, that if such record date is fixed and
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such dividend is not fully paid or if such distribution is
not fully made on the date fixed thereof, the Conversion
Price shall be recomputed accordingly as of the close of
business on such record date and thereafter the Conversion
Price shall be adjusted such that the number of shares of
Common Stock into which each share of Series A Convertible
Preferred Stock is convertible pursuant to this subsection
as of the time of actual payment of such dividends or
distributions.
(c) ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the
event the Corporation at any time or from time to time
after the Issuance Date makes, or fixes a record date for
the determination of holders of Common Stock entitled to
receive a dividend or other distribution payable in
securities of the Corporation other than shares of Common
Stock, then in each such event a provision shall be made so
that the holders of Series A Convertible Preferred Stock
shall receive upon conversion thereof, in addition to the
number of shares of Common Stock receivable thereupon, the
amount of securities of the Corporation which they would
have received had their Series A Convertible Preferred
Stock been converted into Common Stock on the date of such
event and had they thereafter, during the period from the
date of such event to and including the date of conversion,
retained such securities receivable by them as aforesaid
during such period, subject to all other adjustments called
for during such period under this Section 8 with respect to
the rights of the holders of the Series A Convertible
Preferred Stock.
(d) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION.
If the Common Stock issuable upon the conversion of the
Series A Convertible Preferred Stock is changed into the
same or a different number of shares of any class or
classes of stock, whether by recapitalization,
reclassification or otherwise (other
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than a subdivision or combination of shares or stock
dividend or a reorganization, merger, consolidation or sale
of assets, provided for elsewhere in this Section 8) then
and in any such event each holder of Series A Convertible
Preferred Stock shall have the right thereafter to convert
such stock into the kind and amount of stock and other
securities and property receivable upon such
reorganization, reclassification or other change, by
holders of the number of shares of Common Stock into which
such shares of Series A Convertible Preferred Stock might
have been converted immediately prior to such
reorganization, reclassification or change, all subject to
further adjustment as provided herein.
(e) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF
ASSETS. If at any time or from time to time there is a
capital reorganization of the Common Stock (other than
either a recapitalization, subdivision, combination,
reclassification or exchange of shares provided for
elsewhere in this Section 8) or a merger or consolidation
of the Corporation with or into another corporation, or the
sale of all or substantially all of the Corporation's
properties and assets to any other person, then, as a part
of such reorganization, merger, consolidation or sale,
provision shall be made so that the holders of the Series A
Convertible Preferred Stock shall thereafter be entitled to
receive upon conversion of the Series A Convertible
Preferred Stock, the number of shares of stock or other
securities or property of the Corporation, or of the
successor corporation resulting from such merger or
consolidation or sale, to which a holder of Common Stock
deliverable upon conversion would have been entitled on
such capital reorganization, merger, consolidation or sale.
In any such case, appropriate adjustment shall be made in
the application of the provisions of this Section 8 with
respect to the rights of the holders of the Series A
Convertible Preferred Stock after the reorganization,
merger, consolidation or sale to the end that the
provisions of this Section 8 (including adjustment of the
Conversion Price then in effect) shall be applicable after
that event and be as nearly equivalent to the provisions
hereof as may be practicable.
8.5 NO IMPAIRMENT. The Corporation will not, by amendment of its
Articles of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek
to avoid the observance or
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performance of any of the terms to be observed or performed
hereunder by the Corporation but will at all times in good faith
assist in the carrying out of all the provisions of this Section
8 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the
holders of the Series A Convertible Preferred Stock against
dilution or other impairment.
8.6 NOTICES OF RECORD DATE. In the event of any taking by the
Corporation of a record of the holders of any class of
securities for the purpose of determining the holders thereof
who are entitled to receive any dividend (other than a cash
dividend which is the same as cash dividends paid in previous
quarters) or other distribution, the Corporation shall mail to
each holder of Series A Convertible Preferred Stock at least
twenty (20) days prior to the date specified herein, a notice
specifying the date on which any such record is to be taken for
the purpose of such dividend or distribution.
We further certify that the statements contained in the foregoing
resolution creating and designating the said Series of Preferred Stock and
fixing the number, powers, preferences and relative optional, participation and
other special rights and the qualifications, limitations, restrictions and other
distinguishing characteristics thereof shall, upon the effective date of said
Series, be deemed to be included in and be a part of the Articles of
Incorporation of the Corporation.
IN WITNESS WHEREOF, the foregoing Designation of Rights, Privileges and
Preferences of Series A Preferred Stock of the Corporation has been executed
this 23rd day of October, 1996.
ATTEST: AVTEL COMMUNICATIONS, INC.
/s/ James P. Pisani /s/ Anthony E. Papa
- ------------------------------ --------------------------------------
James P. Pisani, Secretary and Anthony E. Papa, President and
Chief Financial Officer Chief Executive Officer
STATE OF UTAH )
): ss
COUNTY OF SALT LAKE )
On October 23, 1996, before me the undersigned, a notary public in and for
the above county and state, personally appeared Anthony E. Papa and James P.
Pisani, who being by me duly sworn, did state, each for himself, that he,
Anthony E. Papa, is the President, and that he, James P. Pisani, is the
Secretary, of AvTel Communications, Inc., a Utah corporation, and
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that the foregoing Designation of Rights, Preferences of Series A Preferred
Stock of the corporation was signed on behalf of such corporation by authority
of a resolution of its Board of Directors, and that the statements contained
therein are true.
WITNESS MY HAND AND OFFICIAL SEAL
/s/ Elliott N. Taylor
----------------------------------
Notary Public
My Commission Expires March 3, 1997, State of Utah
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