SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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) August 25, 1997
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AvTel Communications, Inc.
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(Exact name of registrant as specified in its charter)
Commission File No. 0-27580
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Utah 87-0378021
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
130 Cremona Drive, Santa Barbara, California 93117
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 805-685-0355
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(Former Name or Former Address, if changed since last report)
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INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 5. OTHER EVENTS
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As previously reported, on April 29, 1997, the Registrant entered
into a Stock Exchange Agreement (the "Exchange Agreement") with Matrix
Telecom, Inc., a Texas corporation ("Matrix"), pursuant to which persons or
entities who own the issued and outstanding common stock of Matrix ("Matrix
Stockholders") will transfer to the Registrant all of their Matrix stock and,
in exchange, the Registrant will issue to the Matrix Stockholders shares of
the Registrant's common stock.
On August 25, 1997, the Registrant and Matrix entered into an
Amendment to Stock Exchange Agreement (the "Amendment"). The Amendment
modifies the Exchange Agreement to (i) extend the time for closing to no later
than November 30, 1997, (ii) reflect the acquisition of Best Connections, Inc.
by Matrix, (iii) finalize the terms of Registrant's reincorporation from Utah
to Delaware, (iv) provide for an effective 1 for 4 reverse stock split as part
of such reincorporation, (v) provide that all outstanding shares of Matrix
common stock will be acquired in exchange for 9,582,514 shares (after
adjustment for the 1 for 4 reverse stock split described above) of the
Registrant's common stock, (vi) provide that Matrix Stockholders holding at
least 90% of the outstanding shares of Matrix common stock must enter into the
share exchange contemplated by the Exchange Agreement, (vii) increase the
amount of the bridge loan from Matrix to the Registrant from $500,000 to
$750,000 and to adjust the interest rate on such loan, (viii) update the
disclosure schedules and (ix) make certain other changes to the Exchange
Agreement, all as set forth in more detail in the Amendment. A copy of the
Amendment is attached hereto as Exhibit 2, and is incorporated by this
reference into this report.
The consummation of the transactions under the Stock Exchange
Agreement is subject to the satisfaction of a number of conditions, including
approval of the Registrant's shareholders of the terms and conditions of the
amended Stock Exchange Agreement and the reincorporation of the Registrant in
the state of Delaware. The Registrant now expects to hold a special meeting
of its shareholders in October 1997 to approve these transactions.
The Registrant issued a press release with respect to the Amendment
on August 28, 1997. A copy of such press release is attached hereto as
Exhibit 99, and is incorporated by this reference into this report.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
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C. EXHIBITS. Page Number
In Sequential
Numbering
System
Exhibit 2. Stock Exchange Agreement, dated as
of August 29, 1997, by and between
AvTel Communications, Inc. and Matrix
Telecom, Inc. 5
Exhibit 27. Financial Data Schedule. None
Exhibit 99. Press Release dated August 28, 1997 13
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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, hereunto duly authorized.
AVTEL COMMUNICATIONS, INC.
By: /s/ ANTHONY E. PAPA Date: September 10, 1997
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Anthony E. Papa
President and Chief Executive Officer
By: /s/ JAMES P. PISANI Date: September 10, 1997
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James P. Pisani
Executive Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
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AMENDMENT TO STOCK EXCHANGE AGREEMENT
DATED AUGUST 25, 1997
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EXHIBIT 2
AMENDMENT TO STOCK EXCHANGE AGREEMENT
This Amendment to Stock Exchange Agreement, dated August 25, 1997 is by
and between Matrix Telecom, Inc. ("Matrix") and AvTel Communications, Inc.
("AvTel").
W I T N E S S E T H
WHEREAS, Matrix and AvTel have entered into that certain Stock Exchange
Agreement, dated April 29, 1997 (the "Stock Exchange Agreement") which
provided for, among other things, the exchange by the stockholders of Matrix
of all of the issued and outstanding capital stock and options of Matrix for
capital stock and options of AvTel;
WHEREAS, by letter agreement, dated July 28, 1997 (the "Letter Agreement")
the date by which completion of the transactions by the Stock Exchange
Agreement is required to be completed was extended through November 30, 1997;
and
WHEREAS, as contemplated by Paragraph 9(b) of the Stock Exchange
Agreement, AvTel and Matrix have agreed to effect the Reverse Stock Split (as
defined in the Stock Exchange Agreement) by the conversion of each share of
AvTel common stock into the right to receive 1/4 of a share of common stock of
Newco (thereby effecting a four to one reverse stock split) pursuant to the
terms of the Merger (as defined in the Stock Exchange Agreement);
WHEREAS, since the date of the Stock Exchange Agreement, Matrix has
acquired all of the issued and outstanding capital stock of Best Connections,
Inc. in exchange for 376,727 shares of Matrix common stock;
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Defined Terms. Capitalized terms used herein, unless otherwise defined
or the context requires otherwise, are used herein as defined in the Stock
Exchange Agreement.
2. Amendment to Paragraph 1. Paragraph 1 of the Stock Exchange Agreement
is hereby amended to read in its entirety as follows:
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"At Closing (as hereinafter defined), the stockholders of Matrix listed on
Schedule I (the "Stockholders") will deliver to AvTel 3,860,987 properly
endorsed, unencumbered shares of Matrix common stock, representing 100% of the
outstanding Matrix common stock, in exchange for 9,582,514 shares of common
stock of AvTel, after giving effect to the Merger and Reverse Stock Split
(defined below), which will not be registered under the Securities Act of
1933, as amended."
3. Amendment to Paragraph 2. Paragraph 2 of the Stock Exchange Agreement
is hereby amended by adding the following sentence at the end of the
paragraph:
"Prior to the Closing, Matrix shall deliver to AvTel a duly executed Exchange
Statement from each holder of a non-qualified stock option of Matrix in the
form attached as Exhibit B."
4. Amendment to Paragraph 3. Paragraph 3 of the Stock Exchange Agreement
is hereby amended to read in its entirety as follows:
"At Closing, Matrix will cancel all non-qualified stock options (covering
9,000 Matrix shares) that it has granted and that remain outstanding as of the
date hereof, and AvTel will issue to the beneficiaries thereof, 22, 338 AvTel
non-qualified stock options, after giving effect to the Merger and Reverse
Stock Split, having the exercise period and exercise price set forth in
Exhibit B hereto."
5. Amendment to Paragraph 6. Paragraph 6 of the Stock Exchange Agreement,
including the heading thereto, is hereby deleted and replaced entirely by the
following:
"[Intentionally Omitted.]"
6. Amendment to Paragraph 9(a). The last sentence of Paragraph 9(a)
of the Stock Exchange Agreement is hereby amended to read in its entirety as
follows:
"At the effective time of the Merger, by virtue of the Merger, and without any
action on the part of AvTel or Newco or the stockholders of Newco, each share
of common stock and preferred stock, and each option of AvTel issued and
outstanding immediately prior to the effective time of the Merger shall by
virtue of the Merger be canceled and extinguished and be converted into the
right to receive one quarter of a share of common stock or preferred stock or
an option to acquire one quarter of a share of common stock, as applicable,
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of Newco; provided, however, that Newco shall not be required to issue any
fractional shares of common stock or preferred stock but instead shall be
entitled to purchase any fractional shares resulting from the Merger at the
fair market value thereof. This ¼ to 1 conversion of shares is referred
to herein as the "Reverse Stock Split."
7. Amendment to Paragraph 9(b). Paragraph 9(b) of the Stock Exchange
Agreement shall be deleted in its entirety.
8. Amendments to Paragraph 12.
(a) The $500,000 amount set forth in the first sentence of Paragraph 12
is hereby deleted and replaced with $750,000.
(b) The following clause is hereby inserted after clause (b) of Paragraph
12 and clauses (c), (d) and (e) of Paragraph 12 are hereby renumbered to be
clauses (d), (e) and (f), respectively:
"(c) up to an additional $250,000 may be drawn by AvTel at any time on or
after July 1, 1997 and prior to the earlier of (i) September 30, 1997, or (ii)
the termination of this Agreement."
(c) The date "August 31, 1997" set forth in the first sentence of clause
(d) of Paragraph 12 of the Stock Exchange Agreement (which after giving effect
to this Amendment will become clause (e)) is hereby deleted and replaced with
the date "October 31, 1997."
9. Amendment to Paragraph 15. Clause (f) of Paragraph 15 of the Stock
Exchange Agreement is hereby amended to read in its entirety as follows:
"Stockholders holding at least 90% of the issued and outstanding common stock
of Matrix shall have executed and delivered to Matrix an Exchange Statement."
10. Amendment to Paragraph 19. The date "July 1, 1997" set forth in the
first sentence of Paragraph 19 is hereby deleted and replaced with the date
"November 30, 1997", consistent with the terms of the Letter Agreement.
11. Amendment to Schedules. Schedules I, II, and VII of the Stock
Exchange Agreement are hereby deleted and replaced with Schedules I, II, and
VII attached hereto.
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12. Amendment to Registration Rights Agreement. The Registration Rights
Agreement included as Exhibit B to the Stock Exchange Agreement (Exhibit C
after giving effect to this Agreement) is hereby amended by deleting Section
2(b) thereof.
13. Amendment to Exhibits. Any references in the Stock Exchange Agreement
to Exhibit B are hereby amended to refer to Exhibit C to the Stock Exchange
Agreement and the Registration Rights Agreement previously included as Exhibit
B to the Stock Exchange Agreement is hereby amended to become Exhibit C
thereto. Exhibit B to the Stock Exchange Agreement shall read entirely as set
forth in Exhibit B attached hereto.
14. Effectiveness of Amendment. This Amendment shall become effective
upon the execution hereof by each of the parties hereto. Except as amended
hereby, the Stock Exchange Agreement shall remain in full force and effect.
15. Counterparts. This Amendment may be executed simultaneously in
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
on the dated first above written by their duly authorized representatives.
MATRIX TELECOM, INC. AVTEL COMMUNICATIONS, INC.
By: /s/ GARY L. FRIEDMAN By: /s/ ANTHONY E. PAPA
Title: Secretary Title: Chief Executive Officer
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EXHIBIT B
FORM OF OPTION EXCHANGE STATEMENT
The undersigned understands that the option or options to acquire common
stock of AvTel Communications, Inc. ("Avtel") to be issued to the undersigned
as consideration for options to acquire shares of common stock of Matrix
Telecom, Inc. ("Matrix") pursuant to that certain Stock Exchange Agreement
(the "Stock Exchange Agreement") entered into as of April 29, 1997 between
Avtel and Matrix will not be registered under the Securities Act of 1933, as
amended (the "1933 Act"), or any applicable state securities laws, but rather
are being issued pursuant to the "private placement" exemption from
registration provided by Section 4(2) under the 1933 Act and certain analogous
state exemptions. In connection with the offer and sale of the Avtel options
to the undersigned pursuant to the Stock Exchange Agreement, the undersigned
hereby represents and warrants as follows:
(a) The undersigned (i) has such knowledge and experience in
financial and business matters that the undersigned is capable of evaluating
the merits and risks of the prospective investment in Avtel options and the
resulting Avtel shares to be issued upon the exercise of the options and (ii)
is capable of assuming the risk of the loss of the entire investment in
connection therewith.
(b) The undersigned is not acquiring the Avtel options pursuant to
the Stock Exchange Agreement as a result of any general solicitation or
general advertising, including advertisements, articles, notices or other
communications published in any newspaper, magazine or similar media or
broadcast over radio or television, or any seminar or meeting whose attendees
have been invited by general solicitation or general advertising.
(c) The Avtel options being acquired by the undersigned are acquired for
the undersigned's own account for investment and not with a view toward
subdivision, resale or redistribution thereof in a manner prohibited under the
1933 Act or under the securities laws of any state, and the undersigned does
not presently have any reason to anticipate any change in the undersigned's
circumstances or other particular occasion or event that would create a need
to sell such options. The undersigned has no contract, undertaking,
agreement, understanding or arrangement with any person to sell, transfer or
pledge to any person any part or all of the Avtel options the undersigned is
acquiring or any interest therein, and the undersigned has no present plans to
enter into the same.
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(d) The undersigned received the annual report on Form 10-K filed by
Avtel with respect to its most recently completed fiscal year (and the related
proxy statement for Avtel's 1997 Annual Stockholder's Meeting) and all other
documents filed by Avtel with the Securities Exchange Commission since the
date of such Annual Report. The undersigned has understood such materials and
has had an opportunity to ask questions and receive answers about the terms
and conditions of the offering and the issuance of Avtel options under the
Stock Exchange Agreement, and has received all information that the
undersigned has requested from Avtel concerning Avtel and the transactions
contemplated by the Stock Exchange Agreement.
(e) The undersigned has not relied, in connection with this transaction,
upon any statements, representations, warranties or agreements other than
those set forth in the documents referred to in clause (d) above and the Stock
Exchange Agreement.
(f) In connection with an intended exchange of the options to acquire
shares of Matrix common stock held by the undersigned for options to acquire
shares of Avtel common stock, the undersigned hereby directs that all Matrix
options held by the undersigned be exchanged at the Closing (as defined in the
Stock Exchange Agreement) for Avtel options in the manner contemplated by the
Stock Exchange Agreement. The officers of Matrix are hereby authorized to
take all action on behalf of the undersigned and to act as attorney-in-fact,
with full power of substitution, for the undersigned in connection with the
consummation of the transactions contemplated by the Stock Exchange
Agreement. All Avtel options received are to be registered in the same name
as the Matrix options held by the undersigned.
(g) The undersigned hereby represents and warrants that the undersigned
has full power to direct the exchange of the Matrix options as set forth above
and that the options to acquire shares of Matrix common stock to be exchanged
by the undersigned are free and clear of any liens or encumbrances.
(h) The undersigned understands that a false statement herein may be a
violation of law and could result in a claim for damages against the
undersigned.
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(i) The undersigned understands and agrees that the undersigned shall
receive the number of options to acquire Avtel shares listed below, that the
exercise price of such options shall be $2.24 per share, that all such options
shall be fully vested when issued and that the options shall expire at the
close of business on December 31, 2002 unless they shall have been exercised
by the undersigned on or before such date.
Signature_______________________________
Print Name______________________________
Date:___________________________________
No. of Matrix Options Held:_________
No. of Avtel Options to be acquired:_____
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PRESS RELEASE
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AVTEL COMMUNICATIONS ANNOUNCES REVISED AGREEMENT
FOR THE ACQUISITION OF MATRIX TELECOM
Best Connections Distribution and Sales Organization
Now Part of the Transaction
Santa Barbara, California, August 28, 1997 -- AvTel Communications, Inc.
(OTC:AVCO) today announced revised terms for its agreement to acquire Matrix
Telecom, Inc., a privately-held domestic and international long distance
telephone company with a customer base of more than 200,000. Under the
revised agreement, AvTel will reincorporate by forming a Delaware
corporation. Each AvTel share will be exchanged for 1/4 share in the new
corporation (an effective 1-for-4 reverse split), and Matrix will be acquired
through the issuance of 9,582,514 shares of the new AvTel common stock. The
number of new AvTel shares to be outstanding will total 11,616,720.
The transaction is subject to the approval of the shareholders of AvTel
and Matrix. AvTel is in the process of filing a proxy statement for a
shareholders' meeting tentatively scheduled for September 26 in Santa Barbara.
These terms reflect the acquisition by Matrix of BestConnections, Inc., a
national distribution and sales organization that holds contracts with
third-party sales forces, such as affinity groups and industry sales groups
with more than 3,000 independent sales agents. BestConnections provides
training resources, marketing materials and administrative services to its
client companies, including Matrix Telecom.
Anthony E. Papa, Chairman and CEO of AvTel Communications, commented:
"We are pleased to be nearing a closing date for the acquisition of Matrix,
and are particularly pleased that, in the interim, BestConnections could
become part of the transaction. BestConnections brings in-depth, experienced
marketing and promotional talent to the new company, along with valuable
contracts with third-party distributors of telecommunications services.
Moreover, we will now be able to effect significant savings by consolidating
intermediary commissions, and expect to realize substantial economics of scale
in administration and billing. AvTel's Business Network Services Division
will utilize BestConnections' marketing and promotional capabilities to
further fortify the Company's third-party distribution channels."
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James P. Pisani, Executive Vice President and COO of AvTel, added: "Upon
completion of the acquisition, AvTel will operate two primary business units:
Business Network Services, which was launched in November of last year, and
Mass Market Services, which will be comprised of the consolidated sales
departments of Matrix and BestConnections. Both divisions will continue to
provide valuable telecommunications services to corporate customers,
individuals and the SOHO market. Our Internet services subsidiary will expand
the portfolio of services offered to local businesses and individuals in
select geographic markets by integrating the product resources acquired with
Matrix."
Matrix is fully certified by the FCC and registered in all 48 contiguous
states and Hawaii. In addition, the company holds billing agreements with all
the Regional Bell Operating Companies, GTE and other independent telephone
companies. Matrix provides domestic and international long distance telephone
service, wireless paging, 800 numbers and calling cards to individuals and
business customers.
AvTel Communications, Inc. is a non-facilities based telecommunications
carrier that provides a comprehensive array of broadband network services
integrating voice, data and video networking solutions for small to mid-sized
business customers. AvTel markets a variety of products and services tailored
around its PointStream private-line facilities, FrameLink Frame Relay
facilities, and Internet access through its subsidiaries.
