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) December 1, 1997
-----------------
AvTel Communications, Inc.
--------------------------
(Exact name of registrant as specified in its charter)
Commission File No. 0-27580
---------
Delaware 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
------------
==============================================================
(Former Name or Former Address, if changed since last report)
1
<PAGE> INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
As previously reported, the Registrant and Matrix Telecom, Inc., a
Texas corporation ("Matrix") entered into a Stock Exchange Agreement dated
April 29, 1997, and subsequently amended (the "Exchange Agreement"), pursuant
to which the persons or entities who owned the issued and outstanding common
stock of Matrix ("Matrix Stockholders") would transfer to the Registrant all
of their Matrix stock and, in exchange, the Registrant would issue to the Matrix
Stockholders shares of the Registrant's Common Stock (the "Share Exchange").
The Share Exchange was completed pursuant to the terms of the Exchange
Agreement on December 1, 1997. Following the Share Exchange, the former Matrix
Stockholders now own approximately 81% of the issued and outstanding Common
Stock of the Registrant.
The consummation of the Share Exchange was subject to the satisfaction of
several conditions. These included the reincorporation of the Registrant
(then a Utah corporation; "AvTel-Utah") in Delaware by way of a merger (the
"Reincorporation Merger") with and into AvTel Communications, Inc., a Delaware
corporation, a wholly-owned subsidiary formed for the sole purpose of the
Reincorporation Merger. As part of the Reincorporation Merger, Registrant
(the surviving Delaware corporation) issued to its stockholders one share of
new Delaware Common Stock for each four shares of AvTel-Utah's Common Stock
outstanding immediately prior to the Reincorporation Merger. The Registrant's
Series A Convertible Preferred Stock and its outstanding options were
similarly adjusted. Accordingly, the Reincorporation Merger essentially
effected a one to four reverse stock split of the Registrant's shares (the
"Reverse Stock Split").
In connection with the completion of the Share Exchange, the Matrix
Stockholders and the Registrant entered into a Registration Rights and Lockup
Agreement dated December 1, 1997 (the "Registration Rights and Lockup
Agreement"). Pursuant to the Registration Rights and Lockup Agreement,
certain persons and entities who hold an aggregate of 67.4% of the outstanding
Matrix Common Stock (85.2% of the outstanding Matrix Common Stock, excluding
the shares held by BestConnections Inc., a wholly-owned subsidiary of Matrix;
"Best") agreed, for a two-year period commencing on the closing of the Share
Exchange, not to offer, pledge, sell, or otherwise dispose of any shares of the
Registrant issued to them pursuant to the terms of the Exchange Agreement.
The Matrix Stockholders who have agreed to this two-year lockup period are
Ronald L. Jensen, his adult children (James J. Jensen, Jami J. Jensen, Janet
Jensen Krieger, Jeffrey J. Jensen, and Julie J. Jensen), and United Group
Association, Inc. and UA Plus, Inc. (which are controlled by Mr. Jensen and
his adult children).
The Registration Rights and Lockup Agreement requires that the Registrant
use its best efforts to become listed on the NASDAQ Small Cap System or the
NASDAQ National Market System and to file a shelf registration statement
providing for the sale by the Matrix Stockholders of all securities issued to
them in connection with the Exchange Agreement, subject to the two-year
holding restriction imposed on certain of the Matrix Stockholders described
above. Under the Registration Rights and Lockup Agreement, the Registrant
is obliged to use its reasonable efforts to keep the shelf registration
statement effective on a continuous basis for a period described in the
Registration Rights and Lockup Agreement. If the Registrant's securities are
not listed on the NASDAQ Small Cap System or the NASDAQ NMS within six months
following the Closing or if the Registrant is unable to qualify for use of a
shelf registration statement within such period, the Matrix Stockholders
(other than those subject to the two-year
2<PAGE>
restriction) are entitled to demand that the Registrant register the
Registrant Delaware Common Stock received by them in connection with the Share
Exchange on any registration statement then available to the Registrant.
The Matrix Stockholders may also require the Registrant to undertake up to
two additional demand registrations of their securities. All costs and
expenses of both shelf and demand registrations (excluding any underwriting
discounts and fees of counsel to the Matrix Stockholders) will be borne by the
Registrant.
Pursuant to the terms of the Exchange Agreement, Barry A. Peters and Frank
Dziuba resigned as directors of the Registrant immediately prior to the
completion of the Share Exchange. Also pursuant to the terms of the Exchange
Agreement, on December 1, 1997, John E. Allen, Ronald W. Howard and Gregory
T. Mutz were appointed to fill vacancies on the Registrant's Board of
Directors. This was the only understanding between the Registrant and Matrix
with respect to the election of directors.
Ownership of Registrant Common Stock Prior to Share Exchange
The following table sets forth certain information regarding beneficial
ownership of the Registrant's Common Stock as of September 30, 1997, by (i)
each person who is known by the Registrant to own beneficially five percent or
more of the Registrant Common Stock as of such date, (ii) each of the
Registrant's directors and executive officers, and (iii) all current directors
and executive officers as a group. Share numbers are prior to adjustment for
the Reverse Stock Split.
Name and Address Number of Shares
of Beneficial Owner Beneficially Owned (1) Percent of Class (1)
- -------------------- ---------------------- --------------------
Tree of Stars, Inc.(2) 830,278
11.3%
350 West 300 South
Salt Lake City, UT 84101
Paul G. Begum(2) 830,278
11.3%
350 West 300 South
Salt Lake City, UT 84101
Peter D. Olsen 597,163
8.4%
521 North Arden Drive
Beverly Hills, CA 90210
Tommy Lin (3) 600,000
7.8%
921 North Roxbury
Beverly Hills, CA 90210
Patrick Lin(3) 400,000
5.3%
921 North Roxbury
Beverly Hills, CA 90210
Anthony E. Papa 2,051,854 28.7%
James P. Pisani 2,026,254 28.4%
Barry A. Peters 200,000 2.8%
3<PAGE>
Name and Address Number of Shares
of Beneficial Owner Beneficially Owned (1) Percent of Class (1)
- -------------------- ---------------------- --------------------
Frank Dziuba(4) 154,896 2.2%
D. Stephen Dewindt -- *
All directors and executive
officers as a group
(5 persons)(4) 4,433,004 61.7%
* Represents less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of the Registrant's Common Stock subject to options held by that person
that are exercisable within sixty (60) days following September 30, 1997 are
deemed outstanding. Shares of the Registrant's Common Stock into which the
Registrant Preferred Stock may be converted, are also deemed outstanding. In
both cases, however, such shares of Registrant Common Stock are not deemed
outstanding for the purpose of computing the percentage ownership of any other
person. Unless otherwise indicated in the footnotes to this table, the persons
and entities named in the table have sole voting and sole investment power
with respect to the shares set forth opposite such shareholder's name. On
September 30, 1997, there were 7,138,327 shares of the Registrant Common
Stock outstanding.
(2) Includes 561,667 shares held by Tree of Stars, Inc., a Utah corporation,
73,667 shares held by Paul G. Begum, the president and principal shareholder
of Tree of Stars, Inc., 50,000 shares that may be acquired under options held
by Tree of Stars, Inc. that were exercisable within 60 days of September 30,
1997, 144,444 shares that may be acquired upon exercise of options held by
Paul G. Begum that were exercisable within 60 days of September 30, 1997,
and 500 shares owned by Paul G. Begum, as custodian for Gibran Paul Begum.
(3) Tommy Lin's holdings consist of 600,000 shares of the Registrant's Series
A Convertible Preferred Stock, which were convertible at September 30, 1997
into 600,000 shares of the Registrant Common Stock. Patrick Lin's holdings
consist of 400,000 shares of the Registrant's Series A Convertible Preferred
Stock, which were convertible at September 30, 1997 into 400,000 shares of the
Registrant Common Stock. Tommy Lin and Patrick Lin, who are brothers, are the
sole shareholders of all outstanding shares of the Registrant's Preferred Stock.
(4) Includes 49,896 shares that may be acquired under options that were
exercisable within 60 days of September 30, 1997.
Ownership of Registrant Common Stock After Reincorporation Merger, Reverse
Stock Split and Share Exchange.
The following table sets forth certain information regarding the
beneficial ownership of the Registrant Common Stock (based on the share
ownership of the Registrant Common Stock as of September 30, 1997) as adjusted
for the completion of the Reincorporation Merger, the Reverse Stock Split and
the Share
4<PAGE>
Exchange. This information is set forth for (i) each person who was expected
by the Registrant to own beneficially more than five percent (5%) of the
Registrant Common Stock after such transactions, (ii) each of the Registrant's
directors and executive officers, and (iii) the executive officers and
directors of the Registrant as a group.
Name and Address Number of Shares
of Beneficial Owner Beneficially Owned (1) Percent of Class (1)
- -------------------- ---------------------- --------------------
Ronald L. Jensen(2)(3) 2,088,232
22.3%
4001 McEwen, Suite 200
Dallas, TX 75244
United Group Association,
Inc.(2)(3) 2,088,232 22.3%
4001 McEwen, Suite 200
Dallas, TX 75244
UA Plus, Inc.(2)(3) 2,088,232 22.3%
4001 McEwen, Suite 200
Dallas, TX 75244
Janet Jensen Krieger(3) 961,939 10.3%
9003 Airport Freeway
Fort Worth, TX 76180
Jeffrey J. Jensen(3) 851,738 9.1%
2121 Precinct Line Road
Hurst, TX 76054
James J. Jensen(3) 851,738 9.1%
6304 Alexandria Circle
Atlanta, GA 30326
Jami J. Jensen(3) 851,738 9.1%
1933 Swede Gulch
Golden, CO 80120
Julie J. Jensen(3) 851,738 9.1%
1023 15th Street N.W.
Washington, D.C. 20005
Anthony E. Papa 512,963 5.5%
James P. Pisani 506,563 5.4%
John E. Allen -- *
Ronald W. Howard -- *
Gregory T. Mutz -- *
Frank Dziuba(4) 38,724 *
5<PAGE>
Name and Address Number of Shares
of Beneficial Owner Beneficially Owned (1) Percent of Class (1)
- -------------------- ---------------------- --------------------
D. Stephen Dewindt -- *
All directors and executive
officers as a group (7
persons)(4) 1,058,250 11.3%
* Represents less than 1%
(1) Beneficial ownership is determined in accordance with the same rules
applied in the preceding table. Assuming completion of the Reincorporation
Merger, the Reverse Stock Split and the Share Exchange, there would have been
11,368,581 shares of the Registrant's Delaware Common Stock outstanding as of
September 30, 1997. However, 1,999,997 of such shares would have been held by
Best subject to the terms of stock option plan for certain sales representatives
of Best. Under Delaware law, these shares may not vote. Accordingly, the
percentages of beneficial ownership shares in this table are based upon
9,368,584 shares of the Registrant's Delaware Common Stock outstanding.
(2) Includes 1,463,693 shares to be held by United Group Association, Inc.,
222,475 shares to be held by Ronald L. Jensen and 402,064 shares to be held by
UA Plus, Inc. UGA is wholly-owned by Mr. Jensen. Mr. Jensen is the majority
shareholder in UA Plus, Inc. Excludes shares held by Mr. Jensen's adult
children, Janet Jensen Krieger, Julie J. Jensen, James J. Jensen, Jami J.
Jensen and Jeffrey J. Jensen, and certain employees of companies associated
with Mr. Jensen, as to all of which Mr. Jensen disclaims beneficial ownership.
(3) Pursuant to the terms of the Registration Rights and Lockup Agreement,
these shares may not be sold for two years after December 1, 1997.
(4) Includes 12,474 shares that may be acquired under options that were
exercisable within 60 days of September 30, 1997.
The Registrant is not aware of any other agreements that could result in
any future change in the control of the Registrant.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Pursuant to the terms of the Exchange Agreement, on December 1, 1997,
all of the issued and outstanding shares of Matrix Common Stock were exchanged
for 9,582,493 shares of the Registrant's Delaware Common Stock (after
adjustment for the Reverse Stock Split discussed above), representing an
exchange ratio of 2.482 shares of the Registrant's Delaware Common Stock to
one share of Matrix Common Stock (the "Exchange Ratio"). The Registrant did
not issue any fractional shares or interests in the Registrant's Delaware
Common Stock in the Share Exchange. With respect to any holder of Matrix
Common Stock otherwise entitled to a fractional share upon exchange thereof,
the Registrant rounded the number of shares of the Registrant's Delaware
Common Stock to be issued to such shareholder to the nearest whole share.
Matrix became a wholly-owned subsidiary of the Registrant as a result of the
Share Exchange.
The Exchange Ratio was negotiated at arms-length by the parties and was
6<PAGE>
based on a number of factors. The Registrant's management considered, among
other things, (a) Matrix's current and prospective business operations,
revenues, profitability, existing infrastructure (including established sales,
billing, accounting and other functions); (b) comparable values ascribed to
other similar enterprises in the same business as that in which Matrix is
engaged (including other enterprises whose financial statements and results
of operation are publicly available); and (c) customary financial valuation
and analysis methods including net book values, multiples of earnings and
revenues and similar valuation techniques. The Registrant utilized a
discounted cash flow analysis using management's internal financial projections
for the next five years to determine its likely value. Management believes
this method of valuation to be fair since the majority of the Registrant's
value was in the future, as a result of management's expected contribution to
the business. Management then valued Matrix based on a multiple of its net
monthly revenue, using a multiple in the range applied in other recent sales
of switchless resellers. Management believed that this valuation methodology
for Matrix was appropriate given that Matrix is a very capable reseller with
a strong back office, but declining revenues and no specific plans nor
projections for the future.
When Matrix acquired Best in July 1997, management revalued Matrix using
the same methodology, but a higher multiple, applied to the pro forma combined
average monthly revenue for Matrix and Best for the six month period ending
June 30, 1997. As a result, the Registrant adjusted the exchange ratio
accordingly when the Exchange Agreement was amended in August 1997.
The 9,582,493 shares issued by the Registrant represent approximately 84%
of the issued and outstanding the Registrant's Delaware Common Stock. Of the
9,582,493 shares issued by the Registrant, 1,999,997 were issued to Best, a
wholly-owned subsidiary of Matrix. These shares are held by Best subject to
options to purchase such shares awarded pursuant to an option plan for
Matrix's outside sales agents. Under Delaware law, these shares may not be
voted or counted in determining a quorum for the purpose of taking any
corporate action so long as they are held by Best. The remaining 7,582,496
shares held by Matrix Stockholders after the Share Exchange represent
approximately 81% of the shares of the Registrant's Delaware Common Stock
outstanding (excluding the shares held by Best). As a result, the Matrix
Stockholders, if acting in concert, will be able to control the election of
Directors of the Registrant and other matters which are subject to a vote of
the shareholders of the Registrant.
Conversion of Stock Options. Matrix had outstanding non-qualified stock
options to purchase 9,000 shares of Matrix Common Stock, all of which were
held by three former employees of Matrix. The exercise price of each of
these options was $5.56 per share. Pursuant to the Exchange Agreement, these
options were converted into options to purchase 22,338 shares of the
Registrant's Delaware Common Stock, at an exercise price of $2.24 per share.
These options are fully vested and exercisable in full by their holders as a
result of the Share Exchange. These options are in addition to the options
to purchase 276,787 shares of the Registrant's Common Stock outstanding as of
September 30, 1997 (after adjustment for the Reverse Stock Split).
Best Option Plan. Best markets Matrix's telephone services through
approximately 6,000 outside sales agents pursuant to distribution
agreements. In February 1997, Best, in cooperation with Matrix, established
its 1997 Stock Option Plan (the "Best Option Plan") in order to benefit and
provide increased
7<PAGE>
incentives to this outside sales force. In connection with the establishment
of the Best Option Plan, shareholders of Matrix transferred 805,840 shares of
Matrix Common Stock to Best. Best has awarded (or committed to award) options
to purchase these shares to members of the outside sales force pursuant to the
terms of the Best Option Plan. In connection with the Share Exchange, these
Matrix shares were converted into 1,999,997 shares of the Registrant's Delaware
Common Stock. Options to purchase the Registrant's Delaware Common Stock
under the Best Option Plan (to the extent they become exercisable) will have an
exercise price of $1.50 per share.
Accounting Treatment. The Share Exchange will be treated for
accounting purposes as a reverse acquisition of the Registrant by Matrix.
After the Share Exchange, the former Matrix Stockholders (excluding Best) own
approximately 81% of the shares of the Registrant's Delaware Common Stock
outstanding (excluding the shares held by Best). The acquisition will be
accounted for using the purchase method and the results of operations of the
Registrant will be recorded by Matrix from the date of acquisition forward.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
1. Dismissal of MacFarlane, Faletti & Co. LLP.
(i) The accounting firm of MacFarlane, Faletti & Co. LLP audited
the financial statements for the period ending September 30, 1996, of AvTel
Holdings, Inc. ("AvTel Holdings"). AvTel Holdings was the predecessor
corporation to the Registrant and is currently a wholly-owned subsidiary of
the Registrant. On December 1, 1997, the Registrant formally dismissed
MacFarlane, Faletti & Co. LLP as the certifying accountant for AvTel Holdings.
(ii) MacFarlane, Faletti & Co. LLP's report on AvTel Holdings's
financial statements did not contain any adverse opinion or a disclaimer of
opinion, nor were they qualified or modified as to uncertainty, audit scope,
or accounting principles. The financial statements for the period ending
September 30, 1996, were the only financial statements of the Registrant or
AvTel Holdings on which MacFarlane, Faletti & Co. LLP reported.
(iii) The decision to dismiss MacFarlane, Faletti & Co. LLP was
approved by the Registrant's Board of Directors effective December 1, 1997.
(iv) There were no disagreements with MacFarlane, Faletti & Co.
LLP on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure during the two most recent fiscal
years, or the subsequent interim periods preceding the dismissal. No events
of the kind set forth in Item 304(a)(l)(iv)(B) of Regulation S-B occurred
during the two most recent fiscal years or any subsequent interim periods
preceding the dismissal.
2. Engagement of KPMG Peat Marwick LLP
(i) On December 1, 1997, the Registrant notified the firm of
KPMG Peat Marwick LLP of its desire to engage KPMG Peat Marwick LLP to audit the
financial statements of the Registrant for the period ending September 30,1997.
KPMG Peat Marwick LLP submitted a letter of engagement to the Registrant,
which was signed on behalf of the Registrant on December 1, 1997.
8<PAGE>
KPMG Peat Marwick LLP acted as certifying accountant for Matrix for the
three years ending December 31, 1996. KPMG Peat Marwick LLP did not provide
written or oral advice to the Registrant that was an important factor
considered by the Registrant in reaching a decision as to the accounting,
auditing or financial
reporting issues relating to these matters.
(ii) During the two most recent fiscal years and the subsequent
interim periods preceding this engagement, the Registrant did not consult KPMG
Peat Marwick LLP regarding the type of audit opinion that might be rendered on
the Registrant's financial statements or any disagreement with, or reportable
event relating to, the Registrant's prior auditors.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
A. FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
The financial statements of Matrix required to be filed consist of (i)
balance sheets as of December 31, 1996 and 1995, (ii) statements of operations
for the years ended December 31, 1996, 1995 and 1994, (iii) statements of
stockholders' equity for the years ended December 31, 1996, 1995 and 1994,
(iv)
statements of cash flows for the years ended December 31, 1996, 1995 and 1994,
(v) balance sheet as of September 30, 1997, (vi) statement of operations for
the nine months ended September 30, 1997 and 1996, (vii) statement of
stockholders' equity for the nine months ended September 30, 1997 and 1996,
and (viii) statement of cash flows for the nine months ended September 30,
1997 and 1996, in each case with the required notes (the "Matrix Financial
Statements"). The Registrant intends to file the required Matrix Financial
Statements under cover of Form 8-K/A as soon as practicable; but not later
than 60 days after the date this report is required to have been filed
B. PRO FORMA FINANCIAL INFORMATION.
The pro forma financial statements required to be filed consist of (i)
unaudited pro forma balance sheet as of September 30, 1997, (ii) unaudited pro
forma condensed combined statement of operations for the nine months ended
September 30, 1997, and (iii)unaudited pro forma condensed combined statement
of operations for the year ended December 31, 1996, in each case with the
required notes (the "Pro Forma Financial Statements"). The Registrant intends
to file
the required Pro Forma Financial Statements under cover of Form 8-K/A as soon as
practicable; but not later than 60 days after the date this report is required
to have been filed.
9<PAGE>
C. EXHIBITS.
Exhibit 2.1 Stock Exchange Agreement, dated as
of April 29, 1997, by and between
the Registrant and Matrix Telecom,
Inc. (Incorporated by reference to Exhibit
2 to Registrant's Current Report on Form
8-K dated April 30, 1997).
Exhibit 2.2 Amendment to Stock Exchange Agreement,
dated as of August 25, 1997, by and between
AvTel Communications, Inc. and Matrix
Telecom, Inc. (Incorporated by reference to
Exhibit 2 to Registrant's Current Report on
Form 8-K dated August 25, 1997).
Exhibit 4 Registration Rights and Lockup Agreement dated
dated December 1, 1997, between the Registrant
and Matrix Telecom, Inc. (on behalf of the Matrix
Stockholders).
Exhibit 16 Letter re Change in Certifying Accountant.
Exhibit 99.1 Press Release dated December 1, 1997
regarding Reincorporation Merger and Reverse
Stock Split.
Exhibit 99.2 Press Release dated December 1, 1997
regarding completion of Share Exchange.
ITEM 8. CHANGE IN FISCAL YEAR.
As a result of the Share Exchange and the resulting acquisition of Matrix
(which uses the calendar year as its fiscal year), the Registrant has
determined to change its fiscal year so that its fiscal year will end on
December 31, rather than September 30. The Registrant made this determination
effective as of the closing of the Share Exchange on December 1, 1997.
The Registrant intends to file its annual report on Form 10-KSB for the
fiscal year ending September 30, 1997, on or before its due date (December 29,
1997). The Registrant will then file a transition report on Form 10-KSB (or
Form 10-K) for the transition period from October 1, 1997 to December 31,
1997.
10<PAGE> 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: December 5, 1997
------------------------- ----------------
Anthony E. Papa
President and Chief Executive Officer
11<PAGE>
EXHIBIT INDEX
Page Number
In Sequential
Numbering
System
Exhibit 2.1 Stock Exchange Agreement, dated as *
of April 29, 1997, by and between
the Registrant and Matrix Telecom,
Inc. (Incorporated by reference to Exhibit
2 to Registrant's Current Report on Form
8-K dated April 30, 1997).
Exhibit 2.2 Amendment to Stock Exchange Agreement, *
dated as of August 25, 1997, by and between
AvTel Communications, Inc. and Matrix
Telecom, Inc. (Incorporated by reference to
Exhibit 2 to Registrant's Current Report on
Form 8-K dated August 25, 1997).
Exhibit 4 Registration Rights and Lockup Agreement dated 13
dated December 1, 1997, between the Registrant
and Matrix Telecom, Inc. (on behalf of the Matrix
Stockholders).
Exhibit 16 Letter re Change in Certifying Accountant. 24
Exhibit 27. Financial Data Schedule. None
Exhibit 99.1 Press Release dated December 1, 1997 26
regarding Reincorporation Merger and Reverse
Stock Split.
Exhibit 99.2 Press Release dated December 1, 1997 27
regarding completion of Share Exchange.
* Incorporated by reference
12
<PAGE> EXHIBIT 4
REGISTRATION RIGHTS AND LOCK-UP AGREEMENT
THIS REGISTRATION RIGHTS AND LOCK-UP AGREEMENT (this "Agreement") is
made and entered into as of December 1, 1997, by and between AvTel
Communications, Inc. (the "Company") and Matrix Telecom, Inc. ("Matrix") on
behalf of the Persons listed on Schedule A attached hereto, including their
successors, assigns and transferees (herein referred to collectively as the
"Holders" and individually as a "Holder").
WHEREAS, on the date hereof each Holder is or will become the owner of
Common Stock (as defined below) of the Company in connection with that certain
Stock Exchange Agreement, dated April 29, 1997, as amended, (the "Stock
Exchange Agreement") between the Company and Matrix; and
WHEREAS, in connection with the Stock Exchange Agreement, the Holders
have agreed to enter into the Lock-Ups (as defined below) as provided in
Section 2 below; and
WHEREAS, as a condition to the closing of the Stock Exchange Agreement,
the Company has agreed to grant the Holders the registration rights provided
for in Sections 3 and 4 below;
NOW, THEREFORE, the parties hereto, in consideration of the foregoing,
the mutual covenants and agreements hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, agree as follows:
1. Definitions.
As used in this Agreement, the following capitalized defined terms shall
have the following meanings:
"Closing Price" of the Common Stock for any given day shall mean (i) if
the Common Stock is listed or admitted to trading on a national securities
exchange, the reported last sale price of the Common Stock, regular way, on
such day or, in case no such sale takes place on such day, the average of the
reported closing bid and asked prices, regular way, on such national
securities exchange on such day or (ii) if the Common Stock is not listed or
admitted to trading on any national securities exchange but is quoted by the
Nasdaq SmallCap Market or the Nasdaq National Market of the Nasdaq Stock
Market, Inc. ("NASDAQ"), the last reported sales price per share, regular way,
on such day or, in case no such sale takes place on such day, or the last
reported sales price is not quoted by NASDAQ, the average of the reported
closing bid and asked prices, regular way, on such day.
"Common Stock" shall mean the Common Stock, par value $.01, per share,
of the Company.
"Company" shall mean AvTel Communications, Inc., a Delaware Corporation,
and its successors.
"Dispose of" shall have the meaning provided in Section 2(a).
13<PAGE>
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Holder" or "Holders" shall mean the persons listed on Schedule A
attached hereto, including their successors, assigns and transferees.
"Lock-ups" shall mean the restrictions on transfer to which the Holders
are subject pursuant to Section 2(a).
"Lock-up Period" shall mean the applicable time periods to which the
Holders have agreed to the Lock-ups.
"Person" shall mean an individual, partnership, corporation, trust,
unincorporated organization or other legal entity or a government or agency or
political subdivision thereof.
"Registrable Securities" shall mean the Shares, excluding (i) Shares
that have been disposed of under the Shelf Registration Statement or any other
effective registration statement, (ii) Shares sold or otherwise transferred
pursuant to Rule 144 under the Securities Act, (iii) Shares that are held by
Holders who are not affiliates of the Company that are or become eligible for
sale pursuant to Rule 144(k) under the Securities Act, and (iv) Shares held by
each Holder who is an affiliate of the Company if all of such Shares are or
become eligible for sale pursuant to Rule 144 under the Securities Act and
could be sold in one transaction in accordance with the volume limitations
contained in Rule 144(e)(1)(i) under the Securities Act.
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance with this Agreement, including, without
limitation: (i) all applicable registration and filing fees imposed by the
SEC, or the National Association of Securities Dealers, Inc. ("NASD"), (ii)
all fees and expenses incurred in connection with compliance with state
securities or "blue sky" laws (including reasonable fees and disbursements of
counsel in connection with qualification of any of the Registrable Securities
under any state securities or blue sky laws and the preparation of a blue sky
memorandum) and compliance with the rules of the NASD, (iii) all expenses of
any Persons in preparing or assisting in preparing, word processing, printing
and distributing the Shelf Registration Statement, any Prospectus,
certificates and other documents relating to the performance of and compliance
with this Agreement, (iv) all fees and expenses incurred in connection with
the listing, if any, of any of the Registrable Securities on any securities
exchange or exchanges pursuant to Section 4(l) hereof, and (v) the fees and
disbursements of counsel for the Company and of the independent public
accountants of the Company, including the expenses of any special audits or
"cold comfort" letters required by or incident to such performance and
compliance. Registration Expenses shall specifically exclude underwriting
discounts and commissions, the fees and disbursements of counsel representing
a selling Holder or any underwriter or agent acting on behalf of a Holder, and
transfer taxes, if any, relating to the sale or disposition of Registrable
Securities by a selling Holder, all of which shall be borne by such Holder in
all cases.
"Registration Notice" shall have the meaning set forth in Section 4(b)
hereof.
14<PAGE>
"Registration Statement" shall mean a registration statement, including
a Shelf Registration Statement, of the Company that covers all of the
Registrable Securities and all amendments (including post-effective
amendments) to such registration statement, and all exhibits thereto and
materials incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended from
time to time.
"Shares" shall mean the Common Stock issued to the Holders pursuant to
the Stock Exchange Agreement.
"Shelf Registration Statement" shall mean a Registration Statement
covering the Registrable Securities filed pursuant to Rule 415 under the
Securities Act, or any similar rule established by the SEC.
"Stock Exchange Agreement" shall have the meaning set forth in the
recitals.
2. Lock-up Agreement. Each of the Holders identified in Schedule B
hereby agrees that, from the date hereof until two years following the closing
of the sale of Common Stock to the Holder pursuant to the Stock Exchange
Agreement, without the prior written consent of the Company, such Holder will
not offer, pledge, sell, contract to sell, grant any options for the sale of
or otherwise dispose of, directly or indirectly (collectively, "Dispose of"),
any Shares.
3. Shelf Registration Under the Securities Act.
(a) Filing of Shelf Registration Statement. Following the date
hereof, the Company shall use its best efforts to become listed on the Nasdaq
SmallCap Market or the Nasdaq National Market of NASDAQ whereupon it shall
file, a Shelf Registration Statement providing for the sale by the Holders of
all of the Registrable Securities in accordance with the terms hereof and will
use its reasonable efforts to cause such Shelf Registration Statement to be
declared effective by the SEC as soon thereafter as is practicable. The
Company agrees to use its reasonable efforts to keep the Shelf Registration
Statement with respect to the Registrable Securities continuously effective
for a period expiring on the earlier of (i) the date on which all of the
Registrable Securities covered by the Shelf Registration Statement have been
sold pursuant thereto and (ii) the date on which (A) all Shares held by
Holders who are not affiliates of the Company, in the opinion of counsel for
the Company are eligible for sale pursuant to Rule 144(k) under the Securities
Act and (B) all Shares held by each Holder who is an affiliate of the Company,
in the opinion of counsel for the Company are eligible for sale pursuant to
Rule 144 under the Securities Act and could be sold in one transaction in
accordance with the volume limitations contained in Rule 144(e)(1)(i) under
the Securities Act.
(b) Demand Rights. Notwithstanding clause (a) above and subject to
the restrictions on disposition included in Section 2, if the Company is
unable to become listed on the Nasdaq SmallCap Market or the Nasdaq National
15<PAGE>
Market within six months of the date hereof, or is otherwise unable to qualify
for use of a Shelf Registration Statement, on the date which is six months
from the date hereof, the Company shall, upon receipt of a notice (a
"Registration Notice") given at least 14 days prior to the six-month
anniversary hereof, file on behalf of all Holders from whom it shall have
received a Registration Notice, and use its best efforts to cause to become
effective as soon as practical thereafter, a Registration Statement
registering the offering and sale of the Registrable Securities which the
Company has been requested to register by such Holders. In addition, subject
to the restrictions on disposition included in Section 2 and on a maximum of
two separate occasions (and if the Company at such time does not have an
effective Shelf Registration Statement covering the Registrable Securities),
at any time after the six month anniversary of the date hereof that the
Company shall receive a Registration Notice from Holders holding Shares
representing in excess of 25% of the Shares, it shall file, and use its best
efforts to cause to become effective as soon as practical thereafter, a
Registration Statement registering the offering and sale of the Registrable
Securities held by such Holder (and those of any other Holder, subject to
Section 2, who requests to have its Shares included in such Registration
Statement). The Company shall promptly following receipt of a Registration
Notice pursuant to the last sentence hereof notify the Holders of all other
Registrable Securities and, upon request of such Holders, allow such Holders
to include their Registrable Securities in the aforementioned Registration
Statement. Notwithstanding the above, (i) if a request for registration
pursuant to this Section 2(b) is made within 30 days prior to the conclusion
of the Company's fiscal year, or within 40 days after the end of the Company's
fiscal year, the Company shall not be required to file a registration
statement until such time as the Company receives its audited financial
statements for such fiscal year, and (ii) the Company shall be entitled to
postpone for a reasonable period of time (not to exceed 90 days, which may not
thereafter be extended) the filing of any registration statement otherwise
required to be prepared and filed by it pursuant to this Section 2(b) if (x)
the Company is in possession of material information that has not been
disclosed to the public and the Company deems it advisable not to disclose
such information in the registration statement or (y) the board of directors
of the Company shall determine in good faith that such offering will interfere
with a pending or contemplated financing, merger, acquisition, sale of assets,
recapitalization or other similar corporate action of the Company, and in the
case of clause (x) or (y) above, the Company shall have furnished to the
Holder or Holders of Registrable Securities requesting such registration an
officers' certificate to that effect.
(c) Expenses. The Company shall pay all Registration Expenses in
connection with the registration pursuant to Sections 3(a) or 3(b). The
Company shall not be liable for any underwriting discounts and commissions,
the fees and disbursements of counsel representing such Holder or any
underwriter or agent acting on behalf of a Holder, and transfer taxes, if any,
relating to the sale or disposition of such Holder's Registrable Securities
pursuant to the Registration Statement or Rule 144 under the Securities Act.
(d) Inclusion in Registration Statement. Any Holder who does not
provide the information reasonably requested by the Company in connection with
any Registration Statement filed hereunder by the Company as promptly as
practicable after receipt of such request, but in no event later than ten (10)
days thereafter, shall not be entitled to have its Registrable Securities
included in any Registration Statement filed by the Company pursuant to this
Agreement.
16<PAGE>
4. Registration Procedures.
In connection with the obligations of the Company with respect to the
Registration Statements contemplated by Section 3 hereof, the Company shall:
(a) prepare and file with the SEC, within the time period set forth in
Section 3 hereof, the Registration Statements, which Registration Statements
shall (i) be available for the sale of the Registrable Securities in
accordance with the intended method or methods of distribution by the selling
Holders thereof and (ii) comply as to form in all material respects with the
requirements of the applicable form and include all financial statements
required by the SEC to be filed therewith;
(b) furnish to each Holder of Registrable Securities that has
delivered a Registration Notice to the Company or otherwise is entitled to
have its Registrable Securities included in a Registration Statement, without
charge, as many copies of each Prospectus and any amendment or supplement
thereto in order to facilitate the public sale or other disposition of the
Registrable Securities; the Company consents to the use of the Prospectus and
any amendment or supplement thereto by each such Holder of Registrable
Securities in connection with the offering and sale of the Registrable
Securities covered by the Prospectus or amendment or supplement thereto;
(c) use its reasonable efforts to register or qualify the Registrable
Securities by the time any Registration Statement is declared effective by the
SEC under all applicable state securities or blue sky laws of such
jurisdictions in the United States and its territories and possessions as any
Holder of Registrable Securities covered by the Registration Statement shall
reasonably request in writing, keep each such registration or qualification
effective during the period such Registration Statement is required to be kept
effective or during the period offers or sales are being made by a Holder that
has delivered a Registration Notice to the Company, whichever is shorter;
provided, however, that in connection therewith, the Company shall not be
required to (i) qualify as a foreign corporation to do business or to register
as a broker or dealer in any such jurisdiction where it would not otherwise be
required to qualify or register but for this Section 4(c), (ii) subject itself
to taxation in any such jurisdiction, or (iii) file a general consent to
service of process in any such jurisdiction;
(d) furnish to each Holder of Registrable Securities that has
delivered a Registration Notice to the Company or is otherwise entitled to
have its Registrable Securities included in a Registration Statement, without
charge, at least one conformed copy of the Registration Statement and any
post-effective amendment thereto (without documents incorporated therein by
reference or exhibits thereto, unless requested);
(e) cooperate with the selling Holders of Registrable Securities to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any Securities Act legend;
and enable certificates for such Registrable Securities to be issued for such
numbers of shares and registered in such names as the selling Holders may
reasonably request at least two business days prior to any sale of Registrable
Securities;
17<PAGE>
(f) make available for inspection by the Holders of Registrable
Securities that have provided a Registration Notice to the Company and any
counsel, accountants or other representatives retained by such Holders all
financial and other records, pertinent corporate documents and properties of
the Company and cause the officers, directors and employees of the Company to
supply all such records, documents or information reasonably requested by such
Holders, counsel, accountants or representatives in connection with the
Registration Statement; provided, however, that such records, documents or
information which the Company determines in good faith to be confidential and
notifies such Holders, counsel, accountants or representatives in writing that
such records, documents or information are confidential shall not be disclosed
by such Holders, counsel, accountants or representatives unless (i) such
disclosure is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction, or (ii) such records, documents or information become
generally available to the public other than through a breach of this
Agreement;
(g) use its reasonable efforts to cause all Registrable Securities to
be listed on any securities exchange or automated quotation or other trading
system on which similar securities issued by the Company are then listed or
traded;
The Company may require each Holder of Registrable Securities to furnish
to the Company in writing such information regarding the proposed distribution
by such Holder of such Registrable Securities as the Company may from time to
time reasonably request in writing.
5. Repurchase by Company of Shares Subject to Registration Notice.
Upon receipt by the Company of a Registration Notice, the Company may, but
shall not be obligated to, purchase from such Holder all, but not less than
all, of the Shares which are the subject of such Registration Notice at a
price per share equal to the average of the Closing Prices of the Common Stock
for the twenty trading days immediately preceding the date of the Registration
Notice. In the event the Company elects to purchase the Shares which are the
subject of a Registration Notice, the Company shall notify the Holder of such
Shares within five business days of the date of receipt of the Registration
Notice by the Company, which notice shall indicate: (i) that the Company will
purchase the Shares which are the subject of the Registration Notice, (ii) the
price per share, calculated in accordance with the preceding sentence, which
the Company will pay to such Holder and (iii) the date upon which the Company
shall repurchase such Shares, which date shall not be later than the tenth
business day after receipt of the Registration Notice relating to such Shares.
6. Indemnification.
(a) Indemnification by the Company. The Company agrees to indemnify
and hold harmless each Holder and its officers and directors and each Person,
if any, who controls any Holder within the meaning of Section 15 of the
Securities Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to which such Holder, officer, director
18<PAGE>
or controlling Person may become subject under the Securities Act or
otherwise (A) that arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in any
Registration Statement or any amendment 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
(B) that arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in any Prospectus or any
amendment or supplement thereto, or the omission or alleged omission to
state therein a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding by
any governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or alleged untrue
statement or any omission or alleged omission, if such settlement is
effected with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including reasonable fees and disbursements of counsel), reasonably
incurred in investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental agency or
body, commenced or threatened, in each case whether or not a party, or
any claim whatsoever based upon any such untrue statement or alleged
untrue statement or omission or alleged omission, to the extent that any
such expense is not paid under subparagraph (i) or (ii) above;
provided, however, that the indemnity provided pursuant to this Section 6(a)
shall not apply to any Holder with respect to any loss, liability, claim,
damage or expense that arise out of or are based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with written information furnished to the Company by such
Holder expressly for use in a Registration Statement or any amendment thereto
or the Prospectus or any amendment or supplement thereto.
(b) Indemnification by Holders. Each Holder severally agrees to
indemnify and hold harmless the Company and the other selling Holders, and
each of their respective directors and officers (including each director and
officer of the Company who signed the Registration Statement), and each
Person, if any, who controls the Company or any other selling Holder within
the meaning of Section 15 of the Securities Act, to the same extent as the
indemnity contained in Section 6(a) hereof, but only insofar as such loss,
liability, claim, damage or expense arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
the Shelf Registration Statement or any amendment thereto or the Prospectus or
any amendment or supplement thereto in reliance upon and in conformity with
written information furnished to the Company by such selling Holder expressly
for use therein.
19<PAGE>
(c) 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 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 failed
to assume 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 be required to consent to entry of any judgment 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.
7. Rule 144 Sales.
(a) Compliance. The Company covenants that, so long as it is subject
to the reporting requirements of the Exchange Act, it will file the reports
required to be filed by it under the Exchange Act so as to enable any Holder
to sell Registrable Securities pursuant to Rule 144 under the Securities Act.
(b) Cooperation with Holders. In connection with any sale, transfer
or other disposition by any Holder of any Registrable Securities pursuant to
Rule 144 under the Securities Act, the Company shall cooperate with such
Holder to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold and not bearing any Securities
Act legend, and enable certificates for such Registrable Securities to be for
such number of shares and registered in such names as the selling Holders may
reasonably request at least two business days prior to any sale of Registrable
Securities. The Company's obligation set forth in the previous sentence shall
be subject to the delivery, if reasonably requested by the Company or its
transfer agent, by counsel to such Holder, in form and substance reasonably
satisfactory to the Company and its transfer agent, of an opinion that such
Securities Act legend need not appear on such certificate.
8. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified,
supplemented or waived, nor may consent to departures therefrom be given,
without the written consent of the Company and the Holders of a majority of
20<PAGE>
the outstanding Registrable Securities. Notice of any such amendment,
modification, supplement, waiver or consent adopted in accordance with this
Section 8(a) shall be provided by the Company to each Holder of Registrable
Securities at least thirty (30) days prior to the effective date of such
amendment, modification, supplement, waiver or consent.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery, (i) if to a Holder, at such Holder's registered address appearing on
the share register of the Company or (ii) if to the Company, at its corporate
headquarters, Attention: President.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; or at
the time delivered if delivered by an air courier guaranteeing overnight
delivery.
(c) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders.
(d) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(e) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without giving
effect to the conflicts of law provisions thereof.
21<PAGE> IN WITNESS WHEREOF, the parties
have executed this Agreement as of the
date first written above
AVTEL COMMUNICATIONS, INC.
By: /s/ JAMES P. PISANI
Name: James P. Pisani
Title: Executive Vice President
MATRIX TELECOM, INC.
On behalf of all Holders
By: /s/ GARY L. FRIEDMAN
Name: Gary L. Friedman
Title: Secretary
22<PAGE> Schedule A
HOLDERS
BestConnections
UGA
James Jensen
Jami Jensen
Jeff Jensen
Janet Jensen
Julie Jensen
UA Plus
Howard Neckowitz
Ron Jensen
Ray Waters
Gary Friedman
E. Scott Crist
Gail Granton
Chuck Taylor
Ron Anderson
Joe Renteria
Virginia Baker
Tom Cargal
Greg Reid
Greg Reid (in Trust)
Cole Dawson
Vernon Woelke
Schedule B
Holders Subject to a Two Year Lock-up
UGA
Ronald L. Jensen
James Jensen
Jami Jensen
Jeff Jensen
Janet Jensen
Julie Jensen
UA Plus
23<PAGE>
EXHIBIT 16
December 4, 1997
Securities and Exchange Commission
450 5th Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
We have read and agree with the comments in Item 4 of Form 8-K of AvTel
Communications, Inc. dated December 1, 1997.
\s\ MacFarlane, Faletti & Co. LLP
Santa Barbara, California
December, 1997
24<PAGE>
December 4, 1997
Mr. Anthony E. Papa
President and Chief Executive Officer
AvTel Communications, Inc.
130 Cremona Drive
Santa Barbara, California 93117
Dear Mr. Papa:
This is to confirm that the client-auditor relationship between AvTel
Holdings, Inc., the predecessor corporation of AvTel Communications, Inc.
(Commission File Number 0-27580) and MacFarlane, Faletti & Co. LLP has ceased.
Sincerely,
\s\ MacFarlane, Faletti & Co. LLP
cc: Office of the Chief Accountant
SECPS Letter File
Securities and Exchange Commission
Mail Stop 9-5
450 Fifth Street, N.W.
Washington, D.C. 20549
25<PAGE>
EXHIBIT 99.1
FOR IMMEDIATE RELEASE For Further Information Contact:
Mary McCarthy, OPUS Group
(310) 440-8600; [email protected]
AVTEL DELAWARE REINCORPORATION AND 1-FOR-4 REVERSE SPLIT EFFECTIVE
Santa Barbara, California, December 1, 1997---AvTel Communications, Inc.
(OTC: AVCO), a single-source provider of integrated data, voice and video
services to businesses and individuals, announced today that the Company's
state of incorporation has been changed from Utah to Delaware, and that a
one-for-four reverse split of AvTel's common shares became effective at the
open of the market today.
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.
26<PAGE>
EXHIBIT 99.2
FOR IMMEDIATE RELEASE For Further Information Contact:
Mary McCarthy, OPUS Group
(310) 440-8600; [email protected]
AVTEL CLOSES ACQUISITION OF MATRIX TELECOM
Santa Barbara, California, December 1, 1997---AvTel Communications, Inc.
(OTC: AVCO), a single-source provider of integrated data, voice and video
services to businesses and individuals, announced today that the Company has
closed the acquisition of MATRIX Telecom, Inc., a privately-held domestic and
international long distance telephone company.
MATRIX Telecom was acquired in a share-for-share exchange. As a result, AvTel
now has 11,422,125 total common shares outstanding. The Company intends to file
for listing on the NASDAQ National Market, the requirements for which it
believes it now meets.
Immediately prior to the closing of the Share Exchange, AvTel directors Frank
Dziuba and Barry A. Peters resigned from the Company's Board of Directors. In
accordance with the Exchange Agreement, three nominees of MATRIX have been
appointed to the AvTel Board. The new directors are: John E. Allen, Vice
Chairman of the Board of AMLI Residential Properties Trust and President of
AMLI Realty Co., a commercial real estate firm which Mr. Allen co-founded in
1980; Ronald W. Howard, an employee of United Group Association, Inc., a
management company, and former Executive Vice President of Associates First
Capital Corporation, a financial services company; and Gregory T. Mutz,
Chairman of the Board of AMLI Residential Properties Trust and Chairman of the
Board of AMLI Realty Co., which he co-founded in 1980. Anthony E. Papa,
Chairman of the Board and Chief Executive Officer of AvTel, and James P.
Pisani, Executive Vice President, Chief Operating Officer and Secretary of
AvTel, comprise the remainder of the Board.
Anthony E. Papa commented: "We welcome the MATRIX shareholders to AvTel.
Together, we represent a new model of telecom service provider. MATRIX, with
annual sales of more than $50 million, a 200,000 customer base and access to
working capital, better positions us to execute our 'next wave' business plan
for the telecom services market. The bundling of services under our model
gives the customer one source, one contact for all communications needs, with a
single bill and significant discounts. We believe that our approach to the
consumer and business markets will create and capture substantial value over
the next few years."
Mr. Papa continued: "Through the acquisition of Matrix we have effectively
shifted our collective core competency from that of a traditional carrier to
one of a communications service provider. Our primary focus is on the delivery
ofincreased bandwidth, most specifically for data applications. Our
relationship with our customer base is the most significant component of our
business model.
27<PAGE>
Understanding their changing telecommunications needs and providing them with
a wide portfolio of services will continue to fortify our relationships. We
have found that fewer customers, large and small, are focused on "big names,"
and that service and a willingness to guide them through long-term networking
decisions have become critical.
"To date, our strategy has provided us with rapid growth. We are able to
deploy most new networking technologies quickly and seamlessly. Looking ahead,
our growth strategy does include additional acquisitions. We believe that
there are significant existing opportunities in both the telephone and data
industries. The potential to cross-leverage additional voice and data services,
and to consolidate operations and billing functions into MATRIX's superb back
office appears highly attractive at the present time."
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. 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.
All statements in this press release other than statements of historical
fact are forward-looking statements that involve substantial risks and
uncertainties. Reference is made to the Company's Annual Report on Form
10-KSB for the year ended September 30, 1996 and to the Company's other
reports filed with the Securities and Exchange Commission for a discussion of
such risks and uncertainties and other factors that may have material effect
on the Company's business.
28
