-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JE0+uS5zxfMG0zZKKFMpan85TxJJbOzffmErw3R/RG4OFvAOxxrw36SxPQMGog4b ZsZsUeTIMr41cNrE9tOgCA== 0000898430-96-005163.txt : 19961108 0000898430-96-005163.hdr.sgml : 19961108 ACCESSION NUMBER: 0000898430-96-005163 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19961023 ITEM INFORMATION: Changes in control of registrant ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19961107 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HI TIGER INTERNATIONAL INC CENTRAL INDEX KEY: 0001005974 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-TELEPHONE INTERCONNECT SYSTEMS [7385] IRS NUMBER: 870378021 STATE OF INCORPORATION: UT FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-27580 FILM NUMBER: 96656270 BUSINESS ADDRESS: STREET 1: 350 WEST 300 SOUTH CITY: SALT LAKE CITY STATE: UT ZIP: 84101 BUSINESS PHONE: 8013221221 MAIL ADDRESS: STREET 1: 350 WEST 300 SOUTH CITY: SALT LAKE CITY STATE: UT ZIP: 84101 8-K 1 FORM 8-K DATED 10-23-96 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) October 23, 1996 -------------------- AVTEL COMMUNICATIONS, INC. -------------------------- (Exact name of registrant as specified in its charter) COMMISSION FILE NO. 0-27580 ----------- Utah 87-0378021 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 130 Cremona Drive, Santa Barbara, California 93117 - --------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 805-685-0355 ----------------- Hi, Tiger International, Inc., 350 West 300 South, Salt Lake City, Utah 84101 - ----------------------------------------------------------------------------- (Former Name or Former Address, if changed since last report) INFORMATION TO BE INCLUDED IN THE REPORT ITEM 1. CHANGES IN CONTROL OF REGISTRANT -------------------------------- On October 23, 1996, the Registrant completed a merger transaction (the "Merger") in which it acquired 100% of the issued and outstanding capital stock of AvTel Holdings, Inc. a California corporation ("AvTel") formerly called "AvTel Communications, Inc., in exchange for 4,252,508 shares of the Registrant's $.001 par value common stock, comprising approximately 61% of the --- Registrant's issued and outstanding common stock after giving effect to the Merger. The Merger, which was consummated in accordance with the terms of an Acquisition Agreement dated August 30, 1996, was approved by the Registrant's --- shareholders at a special meeting held October 23, 1996. Pursuant to the Merger, the three shareholders of AvTel, namely Anthony E. Papa, James P. Pisani, and Barry A. Peters, acquired 1,594,690, 1,594,690 and 1,063,128 shares, respectively, of the issued and outstanding common stock of the Registrant. Accordingly, Messrs. Papa, Pisani and Peters now own approximately 23%, 23%, and 15%, respectively, of the issued and outstanding common stock of the Registrant. As a result of the Merger, the Registrant's shareholders also approved, at the special meeting on October 23, 1996, the acceptance and resignations of the Registrant's prior board members, namely Paul G. Begum, Kent Poole, and Scott Hunt and the election of Messrs. Papa, Pisani and Peters as directors of the Registrant. Messrs. Papa and Pisani were elected President and Chief Executive Officer and Executive Vice President, Chief Operating Officer, Chief Financial Officer and Secretary, respectively, of the Registrant. In connection with the Acquisition Agreement, Peter D. Olson and Paul G. Begum who, after giving effect to the Merger, collectively own, beneficially or of record, approximately 28% of the Registrant's issued and outstanding common stock, provided certain other undertakings to the effect, generally, that they will not (a) either separately or in combination with others and without the prior written consent of the Board of Directors of the Registrant, offer or propose to acquire shares of the Registrant's common stock, in excess of certain limits, (b) solicit, from other shareholders of the Registrant, proxies or written consents to vote on matters upon which such shareholders may be entitled to vote or otherwise seek to change or influence the management of the Registrant, and (c) offer to sell, negotiate, or solicit from others, offers to purchase all or substantially all of the business and assets of the Registrant or any of the Registrant's common stock held by them. ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS ------------------------------------ On October 23, 1996, the Registrant completed a Merger transaction in which it acquired 100% of the issued and outstanding capital stock of AvTel Holdings, Inc., a California corporation ("AvTel") formerly called "AvTel Communications, Inc." in exchange for 4,252,508 shares of the Registrant's $.001 par value common stock. The Merger was consummated in accordance with the terms of an Acquisition Agreement dated August 30, 1996, and amended October 22, 1996. The --- ---------------------------- Merger, the Acquisition Agreement and the transaction contemplated therein were approved by the Registrant's shareholder at a special meeting held October 23, 1996. In connection with the Merger and the Acquisition Agreement, as approved by the shareholders, the shareholders also adopted resolutions approving the following: 1. Adopting Amended and Restated Articles of Incorporated providing for (i) changing the name of the Registrant to "AvTel Communications, Inc."; (ii) authorizing 5,000,000 shares of preferred stock; (iii) providing for the designation of 1,000,000 shares of Series A Convertible Preferred Stock; (iv) eliminating the liability of officers, directors, employees and agents of the Registrant for monetary damage arising from breaches of their fiduciary duties to the maximum extent permitted under the Utah Revised Business Corporation Act; 2. Adopting Amended and Restated Bylaws of the Corporation; 3. Electing Anthony E. Papa, James P. Pisani and Barry A. Peters, nominees of AvTel, as directors of the Registrant. Pursuant to the Merger, the three shareholders of AvTel, namely Anthony E. Papa, James P. Pisani and Barry A. Peters, were issued an aggregate of 4,252,508 shares of the Registrant's common stock, representing, in the aggregate, approximately 61% of the issued and outstanding common stock of the Registrant after giving effect to the transactions contemplated by the Merger. Moreover, in connection with the transactions contemplated by the Merger, the Registrant also issued 1,000,000 shares of its Series A Convertible Preferred Stock, $1.00 par value, in exchange for 1,000,000 of the Series A Preferred Stock of AvTel that had been issued and outstanding immediately prior to the Merger. ITEM 7. FINANCIAL STATEMENT AND EXHIBITS -------------------------------- A. FINANCIAL STATEMENTS OF BUSINESS ACQUIRED. It is impracticable, as of the date this report must have been filed, for the Registrant to provide, for the business acquired, the required Financial Statements as of September 30, 1996 and for the period commencing March 1996, the date the business acquired commenced operations and ending September 30, 1996. The Registrant intends to file the required Financial Statements under cover of Form 8-K/A as soon as practicable; but not later than 60 days after the date this report must have been filed. B. PRO FORMA FINANCIAL INFORMATION. It is impracticable for the Registrant to provide the required pro forma financial information on the date this report is being filed. The Registrant intends to file the required financial statements under cover of Form 8-K/A as soon as practicable; but not later than 60 days after the date this report must have been filed. C. EXHIBITS. 2.1 Acquisition Agreement, dated as of August 30, 1996, by and among Hi-Tiger International, Inc., a Utah corporation, AvTel Communications, Inc., a Utah corporation, and AvTel Holdings, Inc., a California corporation./(1)/ 2.2 Amendment No. 1 to Acquisition Agreement, Dated October 22, 1996. 3.1 Amended and Restated Articles of Incorporation of Hi, Tiger, International, Inc. 3.2 Amended Bylaws of Hi, Tiger, International, Inc. 4.1 Designation of Rights, Preferences and Privileges of the Registrant's Series A Convertible Preferred Stock. 4.2 Rights Agreements dated October 23, 1996, between the Registrant and holders of Series A Convertible Preferred Stock. 20. Notice of Special Meeting of Shareholders and Information Statement dated October 2, 1996./(2)/ 22. Press Release dated October 24, 1996, announcing acquisition of AvTel Holdings, Inc., a California corporation. 27. Financial Data Schedule./(none)/ /(1)/ Filed as an Exhibit to the Registrant's Information Statement dated October 2, 1996, as filed with the Commission on October 2, 1996. /(2)/ Filed with the Commission on October 2, 1996, and incorporated herein by reference. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AV TEL COMMUNICATIONS, INC. By: /s/ Anthony E. Papa Date: November 7, 1996 ------------------------------------- Anthony E. Papa President and Chief Executive Officer By: /s/ James P. Pisani Date: November 7, 1996 ------------------------------------- James P. Pisani Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officers) EX-2.2 2 AMENDMENT NO. 1 TO ACQUISITION AGREEMENT, DATED OCTOBER 22, 1996. EXHIBIT 2.2 =========== AMENDMENT NO. 1 TO ACQUISITION AGREEMENT This AMENDMENT NO. 1 TO ACQUISITION AGREEMENT ("Amendment") is entered into as of this ______ day of October, 1996 between and among Hi, Tiger International, Inc., a Utah corporation ("Hi, Tiger"); AvTel Communications, Inc., a Utah corporation ("Merger Subsidiary") and AvTel Holdings, Inc., formerly AvTel Communications, Inc., a California corporation ("AvTel") based on the following: PREMISES A. Hi, Tiger, Merger Subsidiary and AvTel have heretofore made and entered into that certain Acquisition Agreement dated as of August 30, 1996 (the "Agreement"). B. Hi, Tiger, Merger Subsidiary and AvTel wish to amend the Agreement in accordance with and subject to the terms and conditions of this Amendment. AGREEMENT NOW, THEREFORE, on the state of premises which are incorporated herein by reference and for and in consideration of the mutual covenants and agreements hereinafter set forth, the mutual benefits to the parties to be derived herefrom and other good and valuable consideration, the receipt and adequacy which are hereby acknowledged and agreed as follows: 1. The Agreement (as hereby amended the "Agreement") is hereby amended as follows: 1.1 PREMISES. Paragraph D of the Premises is hereby amended by deleting -------- the reference to "4,171,845 shares of common stock of Hi, Tiger..." and substituting in lieu thereof, "4,252,508 shares of common stock of Hi, Tiger;..." 1.2 THE MERGER. The references in Section 1.01(a) and (d) to "...1.042961 ---------- shares of Hi, Tiger exchange common stock..." is deleted in its entirety and the following substituted in lieu thereof, "...1.063127 shares of Hi, Tiger exchange common stock..." Further, all references to the exchange ratio in the Agreement and in all other agreements executed or delivered by the parties hereto in connection with the Agreement and the transactions contemplated thereby to the "exchange ratio" shall be deemed to be "1.063127". 1.3 AVTEL DISCLOSURE SCHEDULE. The AvTel Disclosure Schedule dated August ------------------------- 30, 1996 which is attached and made a part of the Agreement is hereby amended by the Supplement to AvTel Disclosure Schedule dated October 21, 1996, copies of which have been received by Hi, Tiger and Merger Subsidiary. 1.4 CHANGE OF NAME. All references in the Agreement to AvTel -------------- Communications, Inc., a California corporation, are amended to refer to AvTel Holdings, Inc., a California corporation. 2. NO OTHER CHANGES. Except as expressly set forth herein, there are no other ---------------- modifications, changes or revisions to this Agreement. IN WITNESS WHEREOF, the corporate parties hereto have caused this Agreement to be executed by their respective officers, hereunto duly authorized, as of the date first above written. HI, TIGER INTERNATIONAL, INC. A Utah Corporation By ______________________________________ Its Duly Authorized Officer AVTEL HOLDINGS, INC. (Formerly AvTel Communications, Inc.) A California Corporation By _______________________________________ Its Duly Authorized Officer AVTEL COMMUNICATIONS, INC. A Utah Corporation By_______________________________________ Its Duly Authorized Officer EX-3.1 3 AMENDMENT AND RESTATED ARTICLES OF INCORP. OF HI, TIGER, INT'L EXHIBIT 3.1 =========== AMENDED AND RESTATED ARTICLES OF INCORPORATION OF HI, TIGER INTERNATIONAL, INC. The undersigned, the President and Secretary of Hi, Tiger International, Inc. (the "Corporation") whose original Articles of Incorporation were filed with the State of Utah on October 27, 1981, do hereby certify that the Corporation has set forth the Amended and Restated Articles of Incorporation, as adopted by the Board of Directors of the Corporation and approved by the shareholders of the Corporation, as required pursuant to Section 16-10a-1003 of the Utah Revised Business Corporation Act. 1. Article I of the Articles of Incorporation is amended to read: ARTICLE I - NAME ---------------- The name of the corporation is AVTEL COMMUNICATIONS, INC., A UTAH CORPORATION. 2. Article II of the Articles of Incorporation is amended to read: ARTICLE II - PURPOSE -------------------- The purpose of this Corporation is to engage in any lawful act or activity for which a corporation may be organized under the Utah Revised Business Corporation Act other than the banking business, the trust company business, or the practice of a profession permitted to be incorporated by the Utah Revised Business Corporation Act. 3. Article III of the Articles of Incorporation is amended to read: ARTICLE III - SHARES -------------------- This Corporation is authorized to issue two classes of shares of stock, to be designated common voting and preferred, respectively. The Corporation is 1 authorized to issue 50,000,000 shares of common stock and 5,000,000 shares of preferred stock. The Board of Directors may amend these Articles of Incorporation to do any of the following: (A) designate in whole or in part, the preferences, limitations and relative rights, within the limits set forth in the Utah Revised Business Corporation Act, of any class of shares, before the issuance of any shares of that class; (B) create one or more series within a class of shares, fix the number of shares of each such series, and designate, in whole or part, the preferences, limitations and relative rights of the series within the limits set forth in the Utah Revised Business Corporation Act, all before the issuance of any shares of that series; (C) alter or revoke the preferences, limitations and relative rights granted to or imposed upon any wholly unissued class of shares or any wholly unissued series of any class of shares; or (D) increase or decrease the number of shares constituting any series, the number of shares of which was originally fixed by the board, either before or after the issuance of shares of the series, provided that the number may not be decreased below the number of shares of the series than outstanding, or increased above the total number of authorized shares of the applicable class of shares available for designation as a part of the series. 4. Article IV of the Articles of Incorporation is amended to read: ARTICLE IV - LIABILITY ---------------------- The liability of the Directors of the Corporation for monetary damages shall be eliminated or limited to the fullest extent permissible under Utah law. 2 5. Article V of the Articles of Incorporation is amended to read: ARTICLE V - INDEMNITY --------------------- The Corporation is authorized to provide indemnification of officers, employees, fiduciaries, and agents for breach of duty to the Corporation and its stockholders through Bylaw provisions or through agreements with the agents, or both, to the maximum allowable by Section 16-10a-902 of the Utah Revised Business Corporation Act and any other provisions of Utah law. 6. Article VI of the Articles of Incorporation is amended to read: ARTICLE VI - SHAREHOLDER CONSENT -------------------------------- Shareholders of the Corporation shall be able to take shareholder action through a consent of the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take the action at a meeting at which all shares entitled to vote thereon where present and voted as provided in Section 16-10a-704 of the Utah Revised Business Corporation Act. 7. Article VII of the Articles of Incorporation is amended to read: ARTICLE VII - REGISTERED AGENT FOR SERVICE OF PROCESS ----------------------------------------------------- The name and address in the State of Utah of this Corporation's registered agent for service of process is: CT Corporation Systems 50 West Broadway, 8th Floor Salt Lake City, Utah 84101 8. Article XI of the Articles of Incorporation is deleted. 9. The Amendments herein have been duly approved and recommended to the shareholders by the Board of Directors. 10. The Amended and Restated Articles of Incorporation do not provide for any exchange, reclassification or cancellation of issued shares. 3 11. The Amendments and Deletions herein have been duly approved by the required shareholder vote in accordance with Section 16-10a-1003 of the Utah Revised Business Corporation Act. At the time of the vote, the Corporation had only one class of shares outstanding, and the number of outstanding shares was 2,513,299. The number of shares voting in favor of the amendment equaled or exceeded the vote required. The percentage vote required for the approval of the amendments herein was more than fifty percent (50%). IN WITNESS WHEREOF, the foregoing Amended and Restated Articles of Incorporation have been executed this 23rd day of October, 1996. /s/ Anthony E. Papa -------------------------------------- Anthony E. Papa, President of Hi, Tiger International, Inc. /s/ James P. Pisani --------------------------------------- James P. Pisani, Secretary of Hi, Tiger International, Inc. 4 EX-3.2 4 AMENDED BYLAWS OF HI, TIGER, INTERNATIONAL, INC. BYLAWS OF AVTEL COMMUNICATIONS, INC. A UTAH CORPORATION (FORMERLY HI, TIGER INTERNATIONAL, INC, A UTAH CORPORATION) PRICE, POSTEL & PARMA, LLP Attorneys at Law 200 East Carrillo Street Santa Barbara, California 93101 BYLAWS ------ Table of Contents -----------------
Article Page - ------- ---- ARTICLE I SHAREHOLDERS........................................ 1 Section 1. Place of Meetings................................... 1 Section 2. Annual Meetings..................................... 1 Section 3. Special Meetings.................................... 1 Section 4. Notice of Meetings.................................. 2 Section 5. Consent to Shareholders' Meetings................... 2 Section 6. Shareholders Acting Without a Meeting............... 3 Section 7. Quorum.............................................. 4 Section 8. Voting Rights....................................... 4 Section 9. Proxies............................................. 4 ARTICLE II DIRECTORS........................................... 5 Section 1. Powers.............................................. 5 Section 2. Number and Qualification of Directors............... 6 Section 3. Election and Term of Office......................... 7 Section 4. Vacancies........................................... 7 Section 5. Place of Meeting.................................... 8 Section 6. Organization Meeting................................ 8 Section 7. Other Regular Meetings.............................. 8 Section 8. Special Meetings.................................... 8 Section 9. Action Without Meeting.............................. 9 Section 10. Action at a Meeting: Quorum and Required Vote...... 9 Section 11. Validation of Defectively Called or Noticed Meetings............................................ 9 Section 12. Adjournment......................................... 10 Section 13. Notice of Adjournment............................... 10 Section 14. Fees and Compensation............................... 10 ARTICLE III OFFICERS............................................ 10 Section 1. Officers............................................ 10 Section 2. Election............................................ 10 Section 3. Subordinate Officers, Etc........................... 11 Section 4. Removal and Resignation............................. 11
- i - Section 5. Vacancies........................................... 11 Section 6. Chairman of the Board............................... 11 Section 7. President........................................... 11 Section 8. Vice-President...................................... 12 Section 9. Secretary........................................... 12 Section 10. Chief Financial Officer............................. 12 ARTICLE IV MISCELLANEOUS....................................... 13 Section 1. Record Date......................................... 13 Section 2. Corporate Records................................... 13 Section 3. Inspection of Corporate Records..................... 14 Section 4. Checks, Drafts, Etc................................. 14 Section 5. Annual and Other Reports............................ 15 Section 6. Contracts, Etc., How Executed....................... 15 Section 7. Certificate for Shares.............................. 15 Section 8. Representation of Shares of Other Corporations...... 16 Section 9. Inspection of Bylaws................................ 16 Section 10. Construction and Definitions........................ 16 ARTICLE V INDEMNIFICATION..................................... 17 Section 1. Definitions......................................... 17 Section 2. Indemnification in Actions by Third Parties............................................. 17 Section 3. Indemnification in Actions by or in the Right of the Corporation........................ 17 Section 4. Indemnification Against Expenses.................... 18 Section 5. Required Determinations............................. 18 Section 6. Advance of Expenses................................. 19 Section 7. Other Indemnification............................... 19 Section 8. Forms of Indemnification not Permitted.............. 19 Section 9. Insurance........................................... 19 ARTICLE VI AMENDMENTS.......................................... 20 Section 1. Power of Shareholders............................... 20 Section 2. Power of Directors.................................. 20
- ii - CERTIFICATE OF AMENDMENT OF THE BYLAWS OF AVTEL COMMUNICATIONS, INC., A UTAH CORPORATION (FORMERLY HI, TIGER INTERNATIONAL, INC., A UTAH CORPORATION) 1. The Bylaws of this corporation were amended in full, effective October 23, 1996 by the Board of Directors and by approval of the Shareholders of the Corporation at a special meeting on October 23, 1996, to read in their entirety as follows: ARTICLE I SHAREHOLDERS Section 1. Place of Meetings ----------------- All meetings of the shareholders shall be held either at the principal executive office of the corporation or at any other place within or without the State of Utah which may be designated for that purpose from time to time by the Board of Directors. Section 2. Annual Meetings --------------- The annual meeting of the shareholders shall be held on the third Monday of September in each year, if not a legal holiday, and if a legal holiday, then on the next succeeding business day, at the hour of 10:00 a.m., at which time the shareholders shall elect by plurality vote a Board of Directors, consider reports of the affairs of the corporation, and transact such other business as may properly be brought before the meeting. Section 3. Special Meetings ---------------- Special meetings of the shareholders, for any purpose or purposes whatsoever, may be called at any time by the Chairman of the Board or the President, or by the Board of Directors, or by one or more shareholders holding not less than ten percent (10%) of the voting power of the corporation. Upon request, in writing, directed to the Chairman of the Board, President, any Vice- President or Secretary by any person (other than the Board) entitled to call a special meeting of shareholders, the officer forthwith shall cause notice to be given to shareholders entitled to vote that a meeting will be held at a time requested by the person or persons calling the meeting, not less than thirty- five nor more than sixty days after receipt of the request. If the notice is not given within twenty days after receipt of the request, the person entitled to call the meeting may give the notice. The Board may call a special meeting at any time upon compliance with the notice requirements set forth in Section 4 of Article I of these Bylaws. - 1 - Section 4. Notice of Meetings ------------------ Notice of meetings, annual or special, shall be given in writing to shareholders entitled to vote by the Secretary or the Assistant Secretary, or if there be no such officer, or in case of officer's neglect or refusal, by any director or shareholder. Such notices shall be sent to the shareholder's address appearing on the books of the corporation, or supplied by shareholder to the corporation for the purpose of notice, not less than ten days nor more than sixty days before such meeting. Such notice shall specify (a) the place, the date, and the hour of such meeting; (b) those matters which the board, at the time of the mailing of the notice, intends to present for action by the shareholders; (c) if directors are to be elected, the names of nominees intended at the time of the notice to be presented by management for election; (d) the general nature of a proposal, if any, to take action with respect to approval of, (i) a contract or other transaction with an interested director, (ii) amendment of the Articles of Incorporation, (iii) a reorganization of the corporation as defined in the Utah Revised Business Corporation Act, (iv) voluntary dissolution of the corporation, or (v) a distribution in dissolution other than in accordance with rights of outstanding preferred shares, if any; (e) in the case of a special meeting, the general nature of the business to be transacted, and no other business may be transacted; and (f) such other matters, if any, as may be expressly required by statute. When a meeting is adjourned for forty-five days or more, or if after adjournment a new record date is fixed, notice of the adjourned meeting shall be given as in case of an original meeting. Otherwise, it shall not be necessary to give any notice of the adjournment or of the business to be transacted at an adjourned meeting other than by announcement of the time and place thereof at the meeting at which such adjournment is taken. Section 5. Consent to Shareholders' Meetings --------------------------------- The transactions of any meeting of shareholders, either annual or special, however called and noticed, shall be as valid as though at a meeting duly held after regular call - 2 - and notice, if a quorum be present either in person or by proxy, and if, either before or after the meeting, each of the persons entitled to vote, not present in person or by proxy, or who, though present, has, at the beginning of the meeting, properly objected to the trans action of any business because the meeting was not lawfully called or convened, or to par ticular matters of business legally required to be included in the notice, but not so included, signs a written waiver of notice, or a consent to the holding of such meeting, or an approval of the minutes thereof. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Section 6. Shareholders Acting Without a Meeting ------------------------------------- Directors may be elected without a meeting by a consent in writing, setting forth the action so taken, signed by all of the persons who would be entitled to vote for the election of directors, provided that, without notice except as hereinafter set forth, a director may be elected at any time to fill a vacancy not filled by the directors by the written consent of persons holding a majority of the outstanding shares entitled to vote for the election of directors. Any other action which, under any provision of the Utah Revised Business Corporation Act, may be taken at a meeting of the shareholders, may be taken without a meeting, and without notice except as hereinafter set forth, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Unless the consents of all shareholders entitled to vote have been solicited in writing, (a) Notice of any proposed shareholder approval of, (i) a contract or other transaction with an interested director, (ii) indemnification of an agent of the corporation as authorized by the Utah Revised Business Corporation Act, (iii) a reorganization of the corporation as defined in the Utah Revised Business Corporation Act, or (iv) a distribution in dissolution other than in accordance with the rights of outstanding preferred shares, if any, without a meeting by not less than unanimous written consent, shall be given at least ten (10) days before the consummation of the action authorized by such approval; and (b) Prompt notice shall be given of the taking of any other corporate action approved by shareholders without meeting by less than unanimous written consent, to those shareholders entitled to vote who have not consented in writing. Such notices shall be given in the manner and shall be deemed to have been given as provided in Section 4 hereof. Section 7. Quorum ------ - 3 - The holders of a majority of the shares entitled to vote thereat, present in person, or represented by proxy, shall be requisite and shall constitute a quorum at all meet ings of the shareholders for the transaction of business except as otherwise provided by law, by the Articles of Incorporation, or by these Bylaws. If, however, such majority shall not be present or represented at any meeting of the shareholders, the shareholders entitled to vote there, present in person, or by proxy, shall have power to adjourn the meeting from time to time, until the requisite amount of voting shares shall be present. At such adjourned meeting at which the requisite amount of voting shares shall be represented, any business may be transacted which might have been transacted at the meeting as originally notified. The shareholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum. Section 8. Voting Rights ------------- Only persons in whose names shares entitled to vote stand on the stock records of the corporation at the close of business on the business day next preceding the day on which notice of the meeting is given or if such notice is waived, at the close of business on the business next day preceding the day on which the meeting of shareholders is held, shall be entitled to vote at such meeting, and such day shall be the record date for such meeting. Such vote may be viva voce or by ballot; provided, however, that all elections for directors --------- must be by ballot upon demand made by a shareholder at any election and before the voting begins. If a quorum is present, except with respect to election of directors, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on any matter shall be the act of the shareholders, unless the vote of a greater number or voting by classes is required by the Utah Revised Business Corporation Act or the Articles of Incorporation. Section 9. Proxies ------- Every person entitled to vote or execute consents shall have the right to do so either in person or by one or more agents authorized by a written proxy executed by such person or such person's duly authorized agent and filed with the Secretary of the corporation. Any proxy duly executed is not revoked and continues in full force and effect until, (i) an instrument revoking it or a duly executed proxy bearing a later date is filed with the Secretary of the corporation prior to the vote pursuant thereto, (ii) the person executing the proxy attends the meeting and votes in person, or (iii) written notice of the death or incapacity of the maker of such proxy is received by the corporation before the vote pursuant thereto is counted; provided that no such proxy shall be valid after the expiration of eleven (11) months from the date of its execution, unless the person executing it specifies therein the length of time for which such proxy is to continue in force. - 4 - ARTICLE II DIRECTORS Section 1. Powers ------ Subject to limitations of the Articles of Incorporation and of the Utah Revised Business Corporation Act as to action to be authorized or approved by the shareholders, and subject to the duties of directors as prescribed by the Bylaws, all corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation shall be controlled by, the Board of Directors. Without prejudice to such general powers, but subject to the same limitations, it is hereby expressly declared that the directors shall have the following powers, to wit: First - To select and remove all the officers, agents and employees of ----- the corporation; prescribe such powers and duties for them as may not be inconsistent with law, with the Articles of Incorporation or the Bylaws; fix their compensation; and require from them security for faithful service. Second - To conduct, manage, and control the affairs and business of the ------ corporation, and to make such rules and regulations therefor not inconsistent with law, or with the Articles of Incorporation or the Bylaws, as they may deem best. Third - To change the principal executive office and principal office for ----- the transaction of the business of the corporation from one location to another as provided in Article I, Section 1, hereof; to fix and locate from time to time one or more subsidiary offices of the corporation within or without the State of Utah; to designate any place within or without the State of Utah for the holding of any shareholders' meeting or meetings; and to adopt, make and use a corporate seal, and to prescribe the forms of certificates of stock, and to alter the form of such seal and of such certificates from time to time, as in their judgment they may deem best, provided such seal and such certificates shall at all times comply with the provisions of law. Fourth - To authorize the issue of shares of stock of the corporation ------ from time to time, upon such terms as may be lawful. Fifth - To borrow money and incur indebtedness for the purposes of the ----- corporation, and to cause to be executed and delivered therefor, in the corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages, pledges, hypothecations or other evidences of debt and securities therefor. Sixth - By resolution adopted by a majority of the authorized number of ----- directors, to designate an executive and other committees, each consisting of two or more directors, to serve at the pleasure of the Board, and to prescribe the manner in which - 5 - proceedings of such committee shall be conducted. Unless the Board of Directors shall otherwise prescribe the manner of proceedings of any such committee, meetings of such committee may be regularly scheduled in advance and may be called at any time by any two members thereof; otherwise, the provisions of these Bylaws with respect to notice and conduct of meetings of the Board shall govern. Any such committee, to the extent provided in a resolution of the Board, shall have all of the authority of the Board, except with respect to: (i) the approval of any action for which the Utah Revised Business Corporation Act or the Articles of Incorporation also require shareholder approval; (ii) the filling of vacancies on the Board or in any committee; (iii) the fixing of compensation of the directors for serving on the Board or on any committee; (iv) the adoption, amendment or repeal of Bylaws; (v) the amendment or repeal of any resolution of the Board; (vi) any distribution to the shareholders, except at a rate or in a periodic amount or within a price range determined by the Board; and (vii) the appointment of other committees of the Board or the members thereof. Section 2. Number and Qualification of Directors ------------------------------------- The authorized number of directors shall be no less than three (3) and no more than five (5) until changed by amendment of the Articles of Incorporation or by a Bylaw amendment of this Section 2 duly adopted by the vote or written consent of holders of a majority of the outstanding shares entitled to vote; provided that a proposal to reduce the authorized number of directors below three (3) cannot be adopted if the votes cast against its adoption at a meeting, or the shares not consenting in the case of action by written consent, are equal to more than 16-2/3 percent of the outstanding shares entitled to vote. Section 3. Election and Term of Office --------------------------- The directors shall be elected at each annual meeting of shareholders but, if any such annual meeting is not held or the directors are not elected thereat, the directors may be elected at any special meeting of shareholders held for that purpose. All directors shall hold office until their respective successors are elected, subject to the Utah Revised Business Corporation Act and the provisions of these Bylaws with respect to vacancies on the Board. - 6 - Section 4. Vacancies --------- A vacancy in the Board of Directors shall be deemed to exist in case of the death, resignation or removal of any director, if a director has been declared of unsound mind by order of court or convicted of a felony, if the authorized number of directors be increased, or if the shareholders fail, at any annual or special meeting of shareholders at which any director or directors are elected, to elect the full authorized number of directors to be voted for at that meeting. Vacancies in the Board of Directors, except for a vacancy created by the removal of a director, may be filled by a majority of the remaining directors, though less than a quorum, or by a sole remaining director, and each director so elected shall hold office until his or her successor is elected at an annual or a special meeting of the shareholders. A vacancy in the Board of Directors created by the removal of a director may only be filled by the vote of a majority of the shares entitled to vote represented at a duly held meeting at which a quorum is present, or by the written consent of the holders of a majority of the outstanding shares. The shareholders may elect a director or directors at any time to fill any vacancy or vacancies not filled by the directors. Any such election by written consent shall require the consent of holders of a majority of the outstanding shares entitled to vote. Any director may resign effective upon giving written notice to the Chairman of the Board, the President, the Secretary or the Board of Directors of the corporation, unless the notice specifies a later time for the effectiveness of such resignation. If the Board of Directors accepts the resignation of a director tendered to take effect at a future time, the Board or the shareholders shall have power to elect a successor to take office when the resignation is to become effective. No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of the director's term of office. - 7 - Section 5. Place of Meeting ---------------- Regular meetings of the Board of Directors shall be held at any place within or without the state which has been designated from time to time by resolution of the Board or by written consent of all members of the Board. In the absence of such designation regular meetings shall be held at the principal executive office of the corporation. Special meetings of the Board may be held either at a place so designated or at the principal executive office. Section 6. Organization Meeting -------------------- Immediately following each annual meeting of shareholders the Board of Directors shall hold a regular meeting at the place of said annual meeting or at such other place as shall be fixed by the Board of Directors, for the purpose of organization, election of officers, and the transaction of other business. Call and notice of such meetings need not be given. Section 7. Other Regular Meetings ---------------------- Other regular meetings of the Board of Directors shall be held quarterly without call on the third Friday of December, March and June of each year; provided, however, should said day fall upon a legal holiday, then said meeting shall be held at the same time on the next day thereafter ensuing which is a full business day. Notice of all such regular meetings of the Board of Directors need not be given. Section 8. Special Meetings ---------------- Special meetings of the Board of Directors for any purpose or purposes shall be called at any time by the Chairman of the Board, the President, any Vice-President, the Secretary or by any two directors. Special meetings of the Board shall be held upon four days' written notice or 48 hours' notice given personally or by telephone, telegraph, telex, or other similar means of communication. Any such notice shall be addressed or delivered to each director at such director's address as it is shown upon the records of the corporation or as may have been given to the corporation by the director for purposes of notice or, if such address is not shown on such records or is not readily ascertainable, at the place in which the meetings of the directors are regularly held. - 8 - Notice by mail shall be deemed to have been given at the time a written notice is deposited in the United States mails, postage prepaid. Any other written notice shall be deemed to have been given at the time it is personally delivered to the recipient or is delivered to a common carrier for transmission, or actually transmitted by the person giving the notice by electronic means, to the recipient. Oral notice shall be deemed to have been given at the time it is communicated, in person or by telephone or wireless, to the recipient or to a person at the office of the recipient who the person giving the notice has reason to believe will promptly communicate it to the recipient. Section 9. Action Without Meeting ---------------------- Any action by the Board of Directors may be taken without a meeting if all members of the Board shall individually or collectively consent in writing to such action. Such written consent or consents shall be filed with the minutes of the proceedings of the Board and shall have the same force and effect as a unanimous vote of such directors. Section 10. Action at a Meeting: Quorum and Required Vote ------------------------------------------- ---- Presence of a majority of the authorized number of directors at a meeting of the Board of Directors constitutes a quorum for the transaction of business, except as herein after provided. Members of the Board may participate in a meeting through use of conference telephone or similar communications equipment, so long as all members partici pating in such meeting can hear one another. Participation in a meeting as permitted in the preceding sentence constitutes presence in person at such meeting. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the Board of Directors, unless a greater number, or the same number after disqualifying one or more directors from voting, is required by law, by the Articles of Incorporation, or by these Bylaws. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of a director, provided that any action taken is approved by at least a majority of the required quorum for such meeting. Section 11. Validation of Defectively Called or ----------------------------------- Noticed Meetings ---------------- The transactions of any meeting of the Board of Directors, however, called and noticed or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum is present and if, either before or after the meeting, each of the directors not present or who, though present, has prior to the meeting or at its com mencement, protested the lack of proper notice to him or her, signs a written waiver of notice or a consent to holding such meeting or an approval of the minutes thereof. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting. - 9 - Section 12. Adjournment ----------- A quorum of the directors may adjourn any directors' meeting to meet again at a stated day and hour; provided, however, that in the absence of a quorum a majority of the directors present at any directors' meeting, either regular or special, may adjourn from time to time until the time fixed for the next regular meeting of the Board. Section 13. Notice of Adjournment --------------------- If the meeting is adjourned for more than twenty- four (24) hours, notice of any adjournment to another time or place shall be given prior to the time of the adjourned meeting to the directors who were not present at the time of adjournment. Otherwise notice of the time and place of holding an adjourned meeting need not be given to absent directors if the time and place be fixed at the meeting adjourned. Section 14. Fees and Compensation --------------------- Directors and members of committees may receive such compensation, if any, for their services, and such reimbursement for expenses, as may be fixed or determined by resolution of the Board. ARTICLE III OFFICERS Section 1. Officers -------- The officers of the corporation shall be a President, a Vice-President, a Secretary and a Chief Financial Officer. The corporation may also have, at the discretion of the Board of Directors, a Chairman of the Board, a Chief Executive Officer, a Treasurer, one or more additional Vice-Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers, and such other officers as may be appointed in accordance with the provisions of Section 3 of this Article. One person may hold two or more offices. Section 2. Election -------- The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Section 3 or Section 5 of this Article, shall be chosen annually by the Board of Directors, and each officer shall hold office until he or she shall resign or shall be removed or otherwise disqualified to serve, or the officer's successor shall be elected or qualified. -10- Section 3. Subordinate Officers, Etc. -------------------------- The Board of Directors may appoint, and may empower the President to appoint, such other officers as the business of the corporation may require, each of whom shall hold office, for such period, have such authority and perform such duties as are provided in the Bylaws or as the Board of Directors may from time to time determine. Section 4. Removal and Resignation ----------------------- Any officer may be removed, either with or without cause, by the Board of Directors, at any regular or special meeting thereof, or, except in case of an officer chosen by the Board of Directors, by any officer upon whom such power of removal may be conferred by the Board of Directors (subject, in each case, to the rights, if any, of an officer under any contract of employment). Any officer may resign at any time by giving written notice to the Board of Directors or to the President, or to the Secretary of the corporation, without prejudice however, to the rights, if any, of the corporation under any contract to which such officer is a party. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 5. Vacancies --------- A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in the Bylaws for regular appointments to such office. Section 6. Chairman of the Board --------------------- The Chairman of the Board, if there shall be such an officer, shall, if present, preside at all meetings of the Board of Directors and exercise and perform such other powers and duties as may be from time to time assigned to the Chairman of the Board by the Board of Directors or prescribed by the Bylaws. Section 7. President --------- Subject to such supervisory powers, if any, as may be given by the Board of Directors to the Chairman of the Board, if there be such an officer, the President shall be the chief executive officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the corporation. The Chairman shall preside at all meetings of the shareholders and, in the absence of the Chairman of the Board, or if there be none, at all meetings of the Board of - 11 - Directors. The chairman shall be ex-officio a member of all standing committees, including the executive committee, if any, and shall have the general powers, and duties of management usually vested in the office of President of a corporation, and shall have such other powers and duties as may be prescribed by the Board of Directors or the Bylaws. Section 8. Vice-President -------------- In the absence or disability of the President, the Vice-Presidents in order of their rank as fixed by the Board of Directors or, if not ranked, the Vice- President designated by the Board of Directors, shall perform all the duties of the President, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the President. The Vice-Presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board of Directors or the Bylaws. Section 9. Secretary --------- The Secretary shall record or cause to be recorded, and shall keep or cause to be kept, at the principal executive office and such other place as the Board of Directors may order, a book of minutes of actions taken at all meetings of directors and shareholders, with the time and place of holding, whether regular or special, and, if special, how authorized, the notice thereof given, the names of those present or represented at shareholders' meetings, and the proceedings thereof. The Secretary shall keep, or cause to be kept, at the principal executive office or at the office of the corporation's transfer agent, a share register, or a duplicate share register, showing the names of the shareholders and their addresses, the number and classes of shares held by each, the number and date of certificates issued for the same, and the number and date of cancellation of every certificate surrendered for cancellation. The Secretary shall give, or cause to be given, notice of all the meetings of the shareholders and of the Board of Directors required by the Bylaws or by law to be given, and shall keep the seal of the corporation in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or by the Bylaws. Section 10. Chief Financial Officer ----------------------- The Chief Financial Officer shall be the chief financial officer of the corporation and shall keep and maintain, or cause to be kept and maintained, adequate and correct accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, surplus, and shares. Any surplus, including earned surplus, paid-in surplus, and surplus arising from a reduction of stated capital, shall be classified according to source and shown in a separate - 12 - account. The books of account shall at all reasonable times be open to inspection by any director. The Chief Financial Officer shall deposit all moneys and other valuables in the name and to the credit of the corporation with such depositaries as may be designated by the Board of Directors. The Chief Financial Officer shall disburse the funds of the corporation as may be ordered by the Board of Directors, shall render to the President and directors, whenever they request it, an account of all of the Chief Financial Officer's transactions as such Officer and of the financial condition of the corporation, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or the Bylaws. ARTICLE IV MISCELLANEOUS Section 1. Record Date ----------- The Board of Directors may fix a time in the future as a record date for the determination of the shareholders entitled to notice of and to vote at any meeting of share holders or entitled to give consent to corporate action in writing without a meeting, to receive any report, to receive any dividend or distribution, or any allotment of rights, or to exercise rights in respect to any change, conversion, or exchange of shares. The record date so fixed shall be not more than sixty (60) days nor less than ten (10) days prior to the date of any meeting, nor more than sixty (60) days prior to any other event for the purposes of which it is fixed. When a record date is so fixed, only shareholders of record on that date are entitled to notice of and to vote at any such meeting, to give consent without a meeting, to receive any report, to receive a dividend, distribution, or allotment of rights, or to exercise the rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date, except as otherwise provided in the Articles of Incorporation or Bylaws. Section 2. Corporate Records ----------------- First: The corporation shall keep as permanent records minutes of all ----- meetings of its shareholders and board, a record of all actions taken by the shareholders or board without a meeting, and a record of all actions taken on behalf of the corporation by a board committee in place of the board, and a record of all waivers of notices of meetings of shareholders, board meetings, or any board committee meetings. The corporation shall also maintain all appropriate accounting records. Second: The corporation or its agent shall maintain a record of the names ------ and addresses of its shareholders, in a form that permits preparation of a list of shareholders: (i) that is arranged by voting group and within each voting group by class or series of shares; (ii) - 13 - that is in alphabetical order within each class or series; and (iii) that shows the address of and the number of shares of each class and series held by each shareholder. Third: The corporation shall maintain at its principal office: (i) its ----- articles of incorporation currently in effect; (ii) its bylaws currently in effect; (iii) the minutes of all shareholders' meetings, and records of all action taken by shareholders without a meeting, for the past three years; (iv) all written communications within the past three years to shareholders as a group or to the holders of any class or series of shares as a group; (v) a list of the names and business addresses of its current officers and directors; (vi) it most recent annual report delivered to the Division of Corporations and Commercial Code under Section 16-10a-1605 of the Utah Revised Business Corporation Act; and (vii) all financial statements prepared for periods ending during the last three years that a shareholder could request under Section 16- 10a-1605 of the Utah Revised Business Corporation Act. Fourth: After fixing a record date for a shareholders' meeting, the ------ corporation shall prepare a list of its shareholders who are entitled to be given notice of the meeting, pursuant to Section 16-10a-720(1). Section 3. Inspection of Corporate Records ------------------------------- Any shareholder or director may inspect and copy, during regular business hours at the corporation's principal office, any of the corporate records described in the Third paragraph of Section 2 of this Article if such person ----- gives the corporation five (5) days written notice of such a request. Any shareholder or director may inspect and copy the accounting books and records, the record of shareholders, and minutes of proceedings of the shareholders and the Board and committees of the Board of this corporation and any subsidiary of this corporation at any reasonable time during usual business hours, if: (i) such person provides written notice of such a demand five (5) days before the date the person wishes to inspect and copy, (ii) the demand is made in good faith and for a proper purpose, (iii) the shareholder or director describes with reasonable particularity the purpose and the records the person wishes to inspect; and (iv) the records are directly connected with the purpose. Section 4. Checks, Drafts, Etc. -------------------- All checks, drafts or other orders for payment of money, notes or other evidences of indebtedness, issued in the name of or payable to the corporation, shall be signed or endorsed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the Board of Directors. Section 5. Annual and Other Reports ------------------------ - 14 - The corporation shall deliver to the Division of Corporations and Commercial Code for filing in a form provided by the Division that sets forth the following: (i) the corporate name, (ii) the state under which law the corporation is incorporated, (iii) the street address of its registered office and the name of its registered agent at that office in Utah, (iv) the street address of its principal office, (v) the names and addresses of its directors and principal officers, and (vi) a brief description of the nature of its business. Section 6. Contracts, Etc., How Executed ----------------------------- The Board of Directors, except as these Bylaws otherwise provide, may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances; and, unless so authorized by the Board of Directors, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or to any amount. Section 7. Certificate for Shares ---------------------- Every holder of shares in the corporation shall be entitled to have a certificate signed in the name of the corporation by the Chairman or Vice- Chairman of the Board or the President or a Vice-President and by the Chief Financial Officer or an Assistant Treasurer or the Secretary or any Assistant Secretary, certifying the number of shares and the class or series of shares owned by the shareholder. Any of the signatures on the certificate may be facsimile, provided that in such event at least one signature, including that of either officer or the corporation's registrar or transfer agent, if any, shall be manually signed. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if such person were an officer, transfer agent or registrar at the date of issue. Any such certificate shall also contain such legend or other statement as may be required by Section 16-10a-625 of the Utah Revised Business Corporation Act the federal securities laws, and any agreement between the corporation and the issuee thereof. Certificates for shares may be issued prior to full payment under such restrictions and for such purposes as the Board of Directors or the Bylaws may provide; provided, however, that any such certificate so issued prior to full payment shall state on the face thereof the amount remaining unpaid and the terms of payment thereof. No new certificate for shares shall be issued in lieu of an old certificate unless the latter is surrendered and canceled at the same time; provided, however, that a new certificate will be issued without the surrender and cancellation of the old certificate if (1) the - 15 - old certificate is lost, apparently destroyed or wrongfully taken; (2) the request for the issuance of the new certificate is made within a reasonable time after the owner of the old certificate has notice of its loss, destruction, or theft; (3) the request for the issuance of a new certificate is made prior to the receipt of notice by the corporation that the old certificate has been acquired by a bona fide purchaser; (4) the owner of the old certificate files a sufficient indemnity bond with or provides other adequate security to the corporation; and (5) the owner satisfies any other reasonable requirements imposed by the corporation. Section 8. Representation of Shares of Other Corporations ---------------------------------------------- The President or any Vice-President and the Secretary or any Assistant Secretary of this corporation are authorized to vote, represent and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority herein granted to said officers to vote or represent on behalf of this corporation any and all shares held by this corporation in any other corporation or corporations may be exercised either by such officers in person or by any other person authorized so to do by proxy or power of attorney duly executed by said officers. Section 9. Construction and Definitions ---------------------------- Unless the context otherwise requires, the general provisions, rules of construction and definitions contained in the Utah Revised Business Corporation Act shall govern the construction of these Bylaws. Without limiting the generality of the foregoing, the masculine gender includes the feminine and neuter, the singular number includes the plural and the plural number includes the singular, and the term "person" includes a corporation as well as a natural person. - 16 - ARTICLE V INDEMNIFICATION Section 1. Definitions ----------- For the purposes of this Article, "agent" includes any person who is or was a director, officer, employee, or other agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, or other enterprise, or was a director, officer, employee, or agent of a foreign or domestic corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation; "proceeding" includes any threatened, pending, or completed action or proceeding, whether civil, criminal, administrative or investigative; and "expenses" includes, without limitation, attorneys' fees and any expenses of establishing a right to indemnification under Section 4 or Section 5(c) of this Article. Section 2. Indemnification in Actions by Third Parties ------------------------------------------- The corporation shall have the power to indemnify any person who was or is a party or is threatened to be made a party to any proceeding (other than an action by or in the right of the corporation) by reason of the fact that such person is or was an agent of the corporation, against expenses, judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with such proceeding if such person acted in good faith and in a manner such person reasonably believed to be in the best interests of the corporation and, in the case of a criminal proceeding, had no reasonable cause to believe the conduct of such person was unlawful. The termination of any proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in the best interests of the corporation or that the person had reasonable cause to believe that the person's conduct was unlawful. Section 3. Indemnification in Actions by or in the Right of ------------------------------------------------ the Corporation --------------- The corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed - 17 - action by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was an agent of the corporation, against expenses actually and reasonably incurred by such person in connection with the defense or settlement of such action if such person acted in good faith, in a manner such person believed to be in the best interests of the corporation, and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances. No indemnification shall be made under this Section 3: (a) In respect of any claim, issue, or matter as to which such person shall have been adjudged to be liable to the corporation in the performance of such person's duty to the corporation, unless and only to the extent that the court in which such action was brought shall determine upon application that, in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for the expenses which such court shall determine; (b) Of amounts paid in settling or otherwise disposing of a threatened or pending action, with or without court approval; or (c) Of expenses incurred in defending a threatened or pending action which is settled or otherwise disposed of without court approval. Section 4. Indemnification Against Expenses -------------------------------- To the extent that an agent of the corporation has been successful on the merits in defense of any proceeding referred to in Sections 2 or 3 of this Article or in defense of any claim, issue, or matter therein, the agent shall be indemnified against expenses actually and reasonably incurred by the agent in connection therewith. Section 5. Required Determinations ----------------------- Except as provided in Section 4 of this Article, any indemnification under this Article shall be made by the corporation only if authorized in the specific case, upon a deter mination that indemnification of the agent is proper in the circumstances because the agent has met the applicable standards of conduct set forth in Sections 2 or 3 of this Article by: (a) A majority vote of a quorum consisting of directors who are not parties to such proceeding; (b) Approval of the shareholders, with the shares owned by the person to be indemnified not being entitled to vote thereon; or - 18 - (c) The court in which such proceeding is or was pending upon application made by the corporation or the agent or the attorney or other person rendering services in connection with the defense, whether or not such application by the agent, attorney, or other person is opposed by the corporation. Section 6. Advance of Expenses ------------------- Expenses incurred in defending any proceeding may be advanced by the corporation prior to the final disposition of such proceeding upon receipt of an undertaking by or on behalf of the agent to repay such amount unless it shall be determined ultimately that the agent is entitled to be indemnified as authorized in this Article. Section 7. Other Indemnification --------------------- No provision made by the corporation to indemnify its or its subsidiary's directors or officers for the defense of any proceeding, whether contained in the Articles, Bylaws, a resolution of shareholders or directors, an agreement, or otherwise, shall be valid unless consistent with this Article. Nothing contained in this Article shall affect any right to indemnification to which persons other than such directors and officers may be entitled by contract or otherwise. Section 8. Forms of Indemnification not Permitted -------------------------------------- No indemnification or advance shall be made under this Article, except as provided in Section 4 or Section 5(c) in any circumstance where it appears: (a) That it would be inconsistent with a provision of the Articles, these Bylaws, a resolution of the shareholders or an agreement in effect at the time of the accrual of the alleged cause of action asserted in the proceeding in which the expenses were incurred or other amounts were paid, which prohibits or otherwise limits indemnification; or (b) That it would be inconsistent with any condition expressly imposed by a court in approving a settlement. Section 9. Insurance --------- The corporation shall have the power to purchase and maintain insurance on behalf of any agent of the corporation against any liability asserted against or incurred by the agent in such capacity or arising out of the agent's status as such whether or not the corporation would have the power to indemnify the agent against such liability under the provisions of this Article. - 19 - ARTICLE VI AMENDMENTS Section 1. Power of Shareholders --------------------- New Bylaws may be adopted or these Bylaws may be amended or repealed by the affirmative vote of a majority of the outstanding shares entitled to vote or by the written assent of shareholders entitled to vote such shares, except as otherwise provided by law or by the Articles of Incorporation. Section 2. Power of Directors ------------------ Bylaws, other than a Bylaw or amendment thereof changing the authorized number of directors, may be adopted, amended or repealed by the Board of Directors, subject to the right of shareholders as provided in Section 1 of this Article to adopt, amend or repeal Bylaws. - 20 - CERTIFICATE OF SECRETARY I, the undersigned, do hereby certify: 1. That I am the duly elected and acting Secretary of AVTEL COMMUNICATIONS, INC., a Utah corporation, formerly Hi, Tiger International, Inc., a Utah corporation; and 2. That the foregoing Bylaws, comprising twenty (20) pages, constitute the Bylaws of said corporation as duly adopted by action of the Board of Directors of the corporation and by approval of the Shareholders of the Corporation at a special meeting duly held on October 23, 1996. IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal of said corporation this ________ day of October, 1996. _______________________________ JAMES P. PISANI - 21 - EX-4.1 5 DESIGNATION OF RIGHTS, PREFERENCES AND PRIVILEGES OF THE REG. EXHIBIT 4.1 =========== 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. 1 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. 2 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 3 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, 4 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 5 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 6 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 7 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. 8 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 9 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 10 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 -------- 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 11 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 12 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 13 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 14 EX-4.2 6 RIGHTS AGREEMENT DATED 10-23-96 EXHIBIT 4.2 RIGHTS AGREEMENT The securities represented hereby have been acquired for investment and have not been registered under the securities act of 1933. Such securities and any securities or shares issued hereunder or thereunder may not be sold or transferred in the absence of such registration or an exemption therefrom under said act. It is unlawful to consummate a sale or transfer of these securities, or any interest therein, or to receive any consideration therefor, without the prior written consent of the commissioner of corporations of the state of California, except as permitted in the commissioner's rules. THIS RIGHTS AGREEMENT ("RIGHTS AGREEMENT") is made and entered into as of this ___ day of October, 1996 by and between Hi, Tiger International, Inc., a Utah corporation (the "Company") and Patrick Lin (the "Investor"). RECITALS A. Pursuant to the terms and conditions of that certain Acquisition Agreement dated August 30, 1996 (the "Acquisition Agreement") by and among AvTel Communications, Inc., a California corporation ("AvTel"), Hi, Tiger International, Inc., a Utah corporation (the "Company") and AvTel Communications, Inc., a Utah corporation ("Merger Sub") and, after giving effect to the transactions contemplated by the Acquisition Agreement, the holders of all the issued and outstanding common stock of AvTel are to receive a controlling interest in the issued and outstanding common stock of the Company, and all of the holders of the Series A Preferred Stock of AvTel (the "AvTel Preferred Stock") issued and outstanding prior to the consummation of the transactions contemplated by the Acquisition Agreement are to receive, in connection with such transactions, shares of the Series A Convertible Preferred Stock of Hi, Tiger (the "Hi Tiger Preferred"); B. The Investor is the holder of AvTel Preferred Stock and, pursuant to the terms and conditions of the Acquisition Agreement, is to receive shares of the Hi Tiger Preferred Stock; and C. It is an express condition precedent to the consummation of the transactions contemplated by the Acquisition Agreement that the Company and the Investor enter into this Rights Agreement. 1 NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the parties hereto agree as follows: 1. REGISTRATION RIGHTS. 1.1 DEFINITIONS. Capitalized terms used in this Agreement shall, unless otherwise defined herein, have the same meanings as are ascribed to them in the Acquisition Agreement. As used in this Rights Agreement, the following terms shall have the meanings set forth below: (a) COMMISSION shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. (b) EXCHANGE ACT shall mean the Securities Exchange Act of 1934, as amended, or any similar successor federal statute and the rules and regulations thereunder, all as the same shall be in effect from time to time. (c) HOLDER shall mean any Investor who holds Registrable Securities. (d) INITIATING HOLDERS shall mean any Holder or Holders who in the aggregate hold not less than fifty percent (50%) of the outstanding Registrable Securities. (e) INVESTOR(S) shall mean persons who purchased Shares pursuant to the Purchase Agreement. (f) OTHER STOCKHOLDERS shall mean persons other than Holders who, by virtue of agreements with the Company, are entitled to include their securities in certain registrations hereunder. (g) REGISTRABLE SECURITIES shall mean (i) shares of Common Stock issued or issuable pursuant to the conversion of the Shares and (ii) any Common Stock issued as a dividend or other distribution with respect to or in exchange for or in replacement of the shares referenced in (i) above; provided, however, that Registrable Securities shall not include any shares of Common Stock which have previously been registered or which have been sold to the public either pursuant to a registration statement or Rule 144, or which have been sold in a private transaction in which the transferor's rights under this Agreement are not assigned. (h) The terms REGISTER, REGISTERED and REGISTRATION shall refer to a registration effected by preparing and filing a Registration Statement in compliance with the Securities Act and applicable rules and regulations thereunder, 2 and the declaration or ordering of the effectiveness of such registration statement. (i) REGISTRATION EXPENSES shall mean all expenses incurred in effecting any registration pursuant to this Agreement, including, without limitation, all registration, qualification and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company, blue sky fees and expenses and expenses of any regular or special audits incident to or required by any such registration, but shall not include Selling Expenses, fees and disbursements of counsel for the Holders and the compensation of regular employees of the Company, which shall be paid in any event by the Company. (j) REGISTRATION STATEMENT shall mean a registration statement filed by the Company on Form S-1, S-3 or 10-SB of the Securities Act. (k) 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 the same shall be in effect from time to time. (l) SELLING EXPENSES shall mean all underwriting discounts, selling commissions and stock transfer taxes applicable to the sale of Registrable Securities and fees and disbursements of counsel for any Holder (other than the fees and disbursements of counsel for any Holder (other than the fees and disbursements of counsel included in Registration Expenses). (m) SHARES shall mean the Company's Series A Convertible Preferred Stock. 1.2 DEMAND REGISTRATION RIGHTS. If the Company shall receive from Initiating Holders at any time or times not earlier than the earlier of (i) three (3) years after the Effective Date or (ii) one (1) year after the effective date of the first Registration Statement filed by the Company covering an underwritten offering of any of its securities to the general public, a written request (the "Demand Notice") that the Company effect any registration by filing a Registration Statement ("Demand Registration Statement") with respect to all or a part of the Registrable Securities, the Company will: (a) promptly give written notice of the proposed registration to all Other Stockholders; and (b) as soon as practicable, use its best efforts to effect such registration (including, without limitation, filing post- effective amendments, 3 appropriate qualifications under applicable blue sky or other state securities laws, and appropriate compliance with the Securities Act) as would permit or facilitate the sale and distribution of all or such portion of such Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any Other Stockholders joining in such request as are specified in a written request received by the Company from such Other Stockholders within twenty (20) days after such written notice from the Company is mailed or delivered. 1.3 LIMITATIONS. The Company shall not be obligated to effect, or to take any action to effect, any such registration pursuant to Section 1.2: (a) in any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, qualification or compliance, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act; (b) after the Company has initiated one such registration pursuant to Section 1.2 (counting for these purposes only a registration which has been declared or ordered effective and pursuant to which securities have been sold); (c) during the period starting the date sixty (60) days prior to the Company's good faith estimate of the date of filing of, and ending on a date one hundred eight (180) days after the effective date of, a Company-initiated registration; provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective; (d) if the Initiating Holders propose to dispose of shares of Registrable Securities which may be immediately registered pursuant to a request made under Section 1.4 hereof; (e) if the Initiating Holders do not request that such offering be firmly underwritten by underwriters selected by the Initiating Holders (subject to the consent of the Company, which consent will not be unreasonably withheld); or (f) if the Company and the Initiating Holders are unable to obtain the commitment of the underwriter described in clause (e) above to firmly underwrite the offer. 4 Subject to the foregoing clauses (a) through (f), the Company shall file a Registration Statement covering Registrable Securities so requested to be registered as soon as practicable after receipt of the Demand Notice from the Initiating Holders; provided, however, that if (i) in the good faith judgment of the Board of Directors of the Company, such registration would be seriously detrimental to the Company and the Board of Directors of the Company concludes, as a result, that it is essential to defer the filing of such Registration Statement at such time, and (ii) the Company shall furnish to such Holders a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company for such registration statement to be filed in the near future and that it is, therefore, essential to defer the filing of such registration statement, then the Company shall have the right to defer such filing (except as provided in clause (c) above) for a period of not more than one hundred eighty (180) days after receipt of the Demand Notice from the Initiating Holders, and, provided, further, that the Company shall not defer its obligation in this manner more than twice in any twelve- month period. 1.4 PIGGYBACK REGISTRATION RIGHTS. If at any time after the first anniversary of the Issuance Date hereof, or from time to time thereafter, the Company shall determine to register any shares of its capital stock of the same class as the Registrable Securities for its own account or for the account of any shareholder (other than any Holder) in an underwritten offering, the Holder(s) shall be entitled to include Registrable Securities in such registration (a "Piggyback Registration Statement") on the following terms and conditions: (a) PIGGYBACK NOTICE. The Company shall promptly give written notice of such determination to the Holders (a "Piggyback Notice") and the Holders shall have the right to request, by written notice given to the Company not later than ten (10) days following the date the Piggyback Notice is received from the Company, that a specific number of Registrable Securities be included in the Piggyback Registration Statement and related underwritten offering. (b) UNDERWRITING. The right of any Holder to registration pursuant to this Section 1.4 shall be conditioned upon the participation in such underwriting by Holder's representing and the inclusion therein, of not less than 33 1/3% of the then outstanding Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder with respect to such participation and inclusion) to the extent provided herein. A Holder may elect to include in such underwriting all or a part of the Registrable Securities he holds. 5 (c) PROCEDURES. Each Holder must agree to sell such Holder's Registrable Securities on the same basis provided in the underwriting arrangements approved by the Company and to timely complete and execute all questionnaires, powers of attorney, indemnities, "standstill", "lock-up" and "holdback" agreements, underwriting agreements and other documents required under the terms of such underwriting arrangements or by the Commission or otherwise considered reasonable and appropriate under the circumstances by counsel for the Company or the underwriters. If the managing underwriter for any underwritten offering under the Piggyback Registration Statement determines that inclusion of all or any portion of the Registrable Securities in such offering would adversely affect the ability of the underwriter for such offering to sell all of the securities requested to be included for sale in such offering, the number of shares that may be sold in such offering shall be allocated first to the Company (or, if the offering is being made principally for the account of another Person, to such Person) and thereafter pro rata among the Holders who have requested that Registrable Securities be included in the underwriting ("Selling Shareholders") and to any other shareholders holding applicable pre-existing contractual registration rights. Selling Shareholders shall have the right to withdraw their Registrable Securities from the Piggyback Registration Statement, but they may only do so during the time period and on terms agreed upon among the underwriters. Notwithstanding anything to the contrary, no Piggyback Registration shall be permitted with respect to any registration of securities required as a condition to the closing of the Hi, Tiger Merger. 1.5 EXPENSES. All expenses incident to the Company's performance of or compliance with this Agreement, including Registration Expenses shall be borne by the Company. Investor(s) shall be responsible for payment of all fees and disbursements of their counsel and accountants, all other out of pocket expenses of Investor(s) in connection with their participation in any offering pursuant to this Rights Agreement and all Selling Expenses applicable to the sale of Registrable Securities by Investor(s) in any registered offering pursuant to this Rights Agreement. 1.6 INDEMNIFICATION. (a) INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and hold harmless each Holder of Registrable Securities who participates in any registered offering pursuant to this Rights Agreement from and against any and all losses, claims, damages and liabilities, joint or several (including any investigation, legal or other expenses reasonably incurred in connection with, and any amount paid in 6 settlement of, any action suit or proceeding or any claim asserted), to which such Holder may become subject under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement, prospectus or preliminary prospectus or any amendment or supplement thereto or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading or (ii) any violation by the Company of the Securities Act or the Exchange Act, or other federal or state law applicable to the Company and relating to any action or inaction required by the Company in connection with such registration; provided, however, that the Company shall not be liable to any such holder in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any alleged untrue statement or alleged omission made in such Registration Statement, prospectus, preliminary prospectus or amendment or supplement in reliance upon any information furnished to the Company by such Holder. (b) INDEMNIFICATION BY HOLDERS. Each Holder, by exercising the registration rights hereunder, agrees to indemnify and hold harmless the Company, its directors and each officer who signed such Registration Statement under the same circumstances as the foregoing indemnity from the Company to the Holders to the extent that such losses, claims, damages, liabilities or actions arise out of or are based upon any alleged untrue statement of a material fact or alleged omission of a material fact that was made in the Registration Statement, the prospectus, the preliminary prospectus or any amendment or supplement thereto, in reliance upon any information furnished to the Company by Holders. (c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person entitled to indemnification hereunder will (i) give prompt notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) permit such indemnification and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided, however, that any Person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such Person and not of the indemnifying party unless (x) the indemnifying party has agreed to pay such fees or expenses, or (y) the indemnifying party shall have 7 failed to assure the defense of such claim or employ counsel reasonably satisfactory to such Person, or (z) in the reasonable judgment of the Person to be indemnified, a conflict of interest may exist between such Person and the indemnifying party with respect to such claims (in which case, if the Person notifies the indemnifying party in writing that such Person elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such claim on behalf of such Person). If such defense is not assumed by the indemnifying party, the indemnifying party will not be subject to any liability for any settlement made without its consent (but such consent will not be unreasonably withheld). No indemnified party will b e required to consent to entry of any judgement or enter into any settlement which does not include as an unconditional term thereof the giving by all claimants or plaintiffs to such indemnified party of a release from all liability in respect to such claim. 2. RESTRICTIONS AND LIMITATIONS 2.1 TRANSFERABILITY AND NONNEGOTIABILITY. The Shares may not be transferred or assigned in whole or in part without compliance with all applicable federal and state securities laws by each Investor and the transferee of any Investor (including the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, if such are requested by the Company). 2.2 COMPLIANCE WITH SECURITIES LAWS. Each Investor hereby acknowledges that the Shares and any Common Stock to be issued upon conversion thereof are being acquired solely for the Investor's own account and not as a nominee for any other party, and for investment, and that the Investor will not offer, sell or otherwise dispose of any Shares or any Common Stock to be issued upon conversion thereof except under circumstances that will not result in a violation of the Act or any state securities laws. Upon execution of this Rights Agreement, and from time to time thereafter, each Investor shall, if requested by the Company, confirm in writing, in a form satisfactory to the Company, that the Shares are being acquired solely for the Investor's own account and not as a nominee for any other party, for investment and not with a view toward distribution or resale. This Rights Agreement, the Shares and all Common Stock issued upon conversion thereof shall be stamped or imprinted with a legend in substantially the following form (in addition to any legend required by state securities laws): The securities represented hereby have been acquired for investment and have not been registered under the securities act of 1933, as amended (the "act"). Such securities and any securities or shares issued 8 hereunder or thereunder may not be sold or transferred in the absence of such registration or an exemption therefrom under said act. 3. COVENANTS OF THE COMPANY. 3.1 So long as any Shares remain outstanding, the Company shall not, and shall not permit any Subsidiary to, without the vote or written consent of the Holders of more than 50% of the then outstanding Shares, declare or pay any dividends (other than stock dividends) on or declare or make any other distribution, direct or indirect, on account of the Common Stock or set apart any sum for any such purpose. 3.2 So long as any Shares remain outstanding, the Company covenants and agrees in the Holders of the Shares that the Company will furnish the Holders within forty-five (45) days of the end of each fiscal quarter, copies of the Company's unaudited consolidated balance sheet, consolidated statement of income and consolidated statement of cash flows, prepared in accordance with generally accepted accounting principles and, within ninety (90) days of the end of each fiscal year, copies of the Company's consolidated balance sheet, consolidated statement of income and consolidated statement of cash flows audited by an independent firm of certified public accountants; and within ninety (90) days after the filing thereof, copies of any report, application or documents which the Company may be required to file with the Securities and Exchange Commission, or any state securities commission or other comparable regulatory authority. 4. MISCELLANEOUS 4.1 INVESTOR UNDERTAKING. Investor hereby agrees to take whatever additional action and execute whatever additional documents the Company may deem necessary or advisable in order to carry out or effect one or more of the obligations or restrictions imposed on either Investor or the Shares pursuant to the express provisions of this Rights Agreement. 4.2 AGREEMENT IS ENTIRE CONTRACT. This Rights Agreement constitutes the entire contract between the parties hereto with regard to the subject matter hereof. 4.3 GOVERNING LAW. This Rights Agreement shall be governed by, and construed in accordance with, the laws of the State of Utah without resort to that State's conflict-of-laws rules. 4.4 COUNTERPARTS. This Rights Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. 9 4.5 SUCCESSORS AND ASSIGNS. The provisions of this Rights Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and Investor and Investor's legal representatives, heirs, legatees, distributees, assigns and transferees by operation of law, whether or not any such Person shall have become a party to this Rights Agreement and have agreed in writing to join herein and be bound by the terms and conditions hereof. 4.6 SURVIVAL OF WARRANTIES. The warranties, representations and covenants of the Company and the Investor(s) contained in or made pursuant to this Rights Agreement shall survive the execution and delivery of this Rights Agreement and the Closing. 4.7 NOTICES. Unless otherwise provided, all notices and other communications required or permitted under this Rights Agreement shall be in writing and shall be mailed by United States first class mail, postage prepaid, sent by facsimile or delivered personally by hand or by nationally recognized courier addressed to the party to be notified at the address or facsimile number indicated for each Person on the signature page hereof, or at such other address or facsimile number as such party may designate by ten (10) days' advance written notice to the other parties hereto. All such notices and other written communications shall be effective on the date of mailing, facsimile transfer or delivery. 4.8 FINDER'S FEES. Each party represents that it neither is nor will be obligated for any finder's fee or commission in connection with this transaction. Each Investor agrees to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finder's fee (and the cost and expenses of defending against such liability or asserted liability) for which the Investor or any of its officers, partners, employees or representatives is responsible. The Company agrees to indemnify and hold harmless each Investor from liability for any commission or compensation in the nature of a finder's fee (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its officer, employees or representatives is responsible. 4.9 ATTORNEYS' FEES. In the event of any litigation or other action in connection with this Agreement, the prevailing party shall be entitled to recover its reasonable attorneys' fees and disbursements from the other party as costs of suit and not as damages. IN WITNESS WHEREOF, the parties have executed this Rights Agreement on the day and year first indicated above. 10 INVESTOR HI, TIGER INTERNATIONAL, INC. A UTAH CORPORATION _______________________________ _____________________________ Tommy Lin 11 EX-22 7 PRESS RELEASE DATED 10-24-96 Exhibit 22 HI, TIGER INTERNATIONAL ANNOUNCES THE COMPLETED ACQUISITION OF AVTEL COMMUNICATIONS SALT LAKE CITY, Oct. 24/PRNewswire/ -- Hi, Tiger International, Inc., (OTC:HITI) today announced that the Company has completed the acquisition of AvTel Communications, Inc. As a result, Hi, Tiger now has approximately 7.4 million fully diluted shares of common stock and 1.0 million shares of preferred stock is issued and outstanding. Shareholders of the Company approved the transaction as well as a newly elected three member board of directors including Anthony E. Papa as Chairman and Chief Executive Officer, James P. Pisani as Executive Vice President and Chief Operating Officer, and Barry A. Peters. Shareholders also approved the change of the Company name to AvTel Communications, Inc. Anthony E. Papa, newly elected Chairman and Chief Executive Officer said, "The combined Company's objectives include expanding our PointStream and FrameLink high-speed digital network connections to customers nationwide." The Company provides corporate customers and individuals with broadband dedicated and dial-up voice and data connections, and expects to increase its full suite of services to include follow-me routing, interactive voice mail, fax mail, contact management, local and long distance telephone service, and wireless paging. As a convenient single source provider, the Company is uniquely positioned to capture significant market share as it bundles and distributes a broad spectrum of telecommunications, data, Internet and interactive voice processing services. SOURCE Hi, Tiger International, Inc. -0- 10/24/96 /Contact: James P. Pisani, Chief Operating Officer of AvTel Communications, Inc., 805-685-0355 or 801-532-1117/ -0- -----END PRIVACY-ENHANCED MESSAGE-----