<PAGE>
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) April 30, 1997
----------------------
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
-----------------------------
================================================================================
(Former Name or Former Address, if changed since last report)
1
<PAGE>
Information to be Included in the Report
ITEM 5. OTHER EVENTS
------------
On April 29, 1997, the Registrant entered into a Stock Exchange
Agreement (the "Exchange Agreement") with Matrix Telecom, Inc., a Texas
corporation ("Matrix") subject to the conditions described below. Pursuant to
the Exchange Agreement, persons or entities who collectively own 100% of 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 an aggregate of 34,590,049 of
the Registrant's $.001 par value common stock. As a result of the transaction,
the Matrix Stockholders will, after giving effect to the exchange, acquire and
hold approximately 79% of the issued and outstanding common stock of the
Registrant on a fully diluted basis.
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
Stock Exchange Agreement and reincorporating the Registrant in the state of
Delaware pursuant to a merger with and into a newly formed Delaware corporation.
The reincorporation merger is also subject to approval of the Registrant's share
holders. The Stock Exchange Agreement also provides for the Registrant to
effect either a reverse stock split prior to the reincorporation merger or
reduce the number of the Registrant's common stock (or other securities
convertible into such common stock) that will be issued to the Registrant's
shareholders in the reincorporation merger to such lesser number of common stock
(or such other securities) as the Registrant and Matrix shall agree.
The Stock Purchase Agreement provides, among other things, for Matrix
to provide to the Registrant an unsecured loan in the maximum aggregate amount
of $500,000, that the transaction is to be treated as a pooling of interest for
financial reporting purposes and that it is intended to be a tax free
reorganization.
Matrix, a domestic and international long distance telephone company
with operations in Dallas, Texas, will continue under the management direction
of its President, Raymond Waters. Anthony E. Papa, President and Chief Executive
Officer of AvTel, and James P. Pisani, AvTel's Executive Vice President and
Chief Operating Officer, will continue in these positions as executive
management of the combined companies.
2
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
---------------------------------
C. EXHIBITS. Page Number
In Sequential
Numbering
System
Item 2. Stock Exchange Agreement, dated as of April 29, 4-20
1997, by and between AvTel Communications, ---------
Inc. and Matrix Telecom, Inc.
Item 20 - Press Release dated April 30, 1997 20-21
---------
Item 27 - Financial Data Schedules. None
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: May 19 1997
---------------------------- ---,
Anthony E. Papa
President and Chief Executive Officer
By: /s/ James P. Pisani Date: May 19 1997
---------------------------- ---,
James P. Pisani
Executive Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officers)
3
<PAGE>
EXHIBIT 2
STOCK EXCHANGE AGREEMENT
THIS STOCK EXCHANGE AGREEMENT (this "Agreement") made this 29th day of April,
1997, is by and between Matrix Telecom, Inc. ("Matrix") and AvTel
------
Communications, Inc. ("Avtel").
-----
1. STOCK EXCHANGE
At Closing (as hereinafter defined), the stockholders of Matrix listed on
Schedule I (the "Stockholders") will deliver to Avtel 3,484,260 properly
---------- ------------
endorsed, unencumbered Matrix common shares (the "Stock"), representing
-----
100% of the outstanding Matrix common stock, in exchange for 34,590,049
shares of common stock of Avtel (such numbers to be adjusted to give effect
to the Merger and Reverse Stock Split (defined below)), which will not be
registered under the Securities Act of 1933, as amended.
2. EXCHANGE STATEMENT
Prior to the Closing, Matrix shall deliver to Avtel a duly executed
EXCHANGE STATEMENT from each Stockholder in the form attached hereto as
Exhibit A (each, an "Exchange Statement").
--------- ------------------
3. MATRIX NON-QUALIFIED STOCK OPTIONS
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, 89,348
Avtel non-qualified stock options (such numbers to be adjusted to give
effect to the Merger and Reverse Stock Split (defined below)) having the
same exercise period and exercise prices as currently apply to such Matrix
options all as set forth on Schedule II.
-----------
4. REGISTRATION RIGHTS AND LOCK-UP AGREEMENTS
At Closing, Avtel and Matrix, on behalf of the Stockholders, shall enter
into a REGISTRATION RIGHTS AND LOCK-UP AGREEMENT in the form set forth on
Exhibit B.
---------
5. MATRIX OPERATIONS; INVESTMENT PURPOSES
Avtel will own Matrix and operate its business in the ordinary course and
has no intention of disposing of significant assets.
4
<PAGE>
6. POOLING OF INTERESTS
The parties intend that the transaction contemplated hereby will be treated
as a pooling of interests and agree to abide by the restrictions contained
in Accounting Series Release 135 ("ASR 135"). In this connection, no
-------
Stockholder will be allowed to sell any Avtel shares prior to release of
Avtel and Matrix combined earnings covering a period of combined earnings
of not less than 30 days in accordance with ASR 135.
7. INCOME TAX TREATMENT
The parties intend that the transaction will be treated as a tax-free
reorganization under IRC Section 368(a)(1)(B) and will take no actions that
will violate applicable requirements.
8. AVTEL SHAREHOLDERS' MEETING
Avtel shall, in accordance with applicable law, as soon as practicable:
(a) duly call, give notice of, convene and hold a special meeting
of its stockholders (the "Stockholders' Meeting") for the
---------------------
purpose of considering and taking action upon this Agreement;
(b) subject to the fiduciary duties of the Board of Directors of
Avtel under applicable law, include in a proxy statement (the
"Proxy Statement") to be distributed to its stockholders the
---------------
recommendation of the Board of Directors of Avtel that the
stockholders of Avtel vote in favor of the approval and
adoption of this Agreement and the transactions contemplated
hereby;
(c) provide Matrix with copies of the proposed Proxy Statement and
a reasonable opportunity to review and comment upon such Proxy
Statement before it is mailed to Avtel's shareholders; and
(d) use its best efforts to (i) obtain and furnish the information
required to be included by it in the Proxy Statement and
respond promptly to any comments made by the Securities and
Exchange Commission with respect to the Proxy Statement and any
preliminary version thereof and cause the Proxy Statement to be
mailed to its stockholders at the earliest practicable time and
(ii) obtain the necessary approvals by its stockholders of this
Agreement and the transactions contemplated hereby.
5
<PAGE>
9. AVTEL MERGER; REVERSE STOCK SPLIT
(a) Prior to the Closing hereunder, Avtel shall merge (the "Merger") with
------
and into a Delaware corporation, whereupon the separate corporate
existence of Avtel shall cease and such Delaware corporation
(hereinafter, "Newco") shall continue as the surviving corporation.
-----
The Merger shall have the effects set forth under the laws of the
State of Delaware. Without limiting the generality of the foregoing,
and subject thereto, all the properties, rights, privileges, powers
and franchises of Avtel shall vest in Newco, and all debts,
liabilities and duties of Avtel shall become the debts, liabilities
and duties of Newco. The certificate of incorporation and bylaws of
Newco shall be the certificate of incorporation and bylaws of the pre-
existing Delaware corporation, substantially in the form agreed to
prior to the Merger by Matrix and Avtel and approved by the
shareholders of Avtel at the Stockholder's Meeting. Subject to clause
------
(b) below, 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 Avtel, 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 share of the common stock or preferred stock or an option to
acquire one share of common stock of Avtel, as applicable, of Newco.
(b) Subject to the approval of Avtel's stockholders at the Stockholders'
Meeting, prior to the Closing, Avtel shall either (i) effect a reverse
stock split pursuant to which each share of Avtel common stock and
preferred stock and each option granted by Avtel to acquire Avtel
common stock shall be converted into the right to receive such lesser
amount of Avtel common stock, preferred stock or an option to acquire
a lesser amount of Avtel common stock, as applicable, as Avtel and
Matrix shall agree or, (ii) reduce the number of common stock,
preferred stock or options to acquire Newco common stock that will be
issued to Avtel stockholders in the Merger to such lesser number of
shares of common stock, preferred stock or options to acquire Newco
common stock as Avtel and Matrix shall agree (the adjustment
contemplated by clauses (i) or (ii) being referred to herein as
---------- - --
the "Reverse Stock Split"). At such time as Avtel and Matrix shall
agree upon the details of the Reverse Stock Split, Avtel and Matrix
shall amend this Agreement to adjust the number of shares of Avtel
common stock issuable to the stockholders of Matrix pursuant to this
Section 1 and the number of shares of Avtel common stock for
---------
which Avtel is required to grant options to holders of Matrix options
pursuant to Section 3, in each case, in a manner which is
---------
directely proportional to the adjustments made to the Avtel common
stock and options to acquire Avtel common stock pursuant to the
Reserve Stock Split.
6
<PAGE>
10. AVTEL TO SUPPLY INFORMATION
Until the Closing Date (as hereinafter defined), Avtel shall give Matrix
full access during normal business hours, without unreasonable interference
with business operations, to all of its the facilities, properties, books,
contracts, commitments and records and shall make its officers and
employees available to Matrix, as Matrix shall from time to time reasonably
request. Matrix and its representatives will be furnished all information
concerning Avtel that Matrix reasonably requests.
11. MATRIX TO SUPPLY INFORMATION
Until the Closing Date, Matrix shall give Avtel full access during normal
business hours, without unreasonable interference with business operations,
to all of its the facilities, properties, books, contracts, commitments and
records and shall make its officers and employees available to Avtel, as
Avtel shall from time to time reasonably request. Avtel and its
representatives will be furnished all information concerning Matrix that
Avtel reasonably requests. Matrix shall provide to Avtel such information
as may be required by the Proxy Statement which information shall be true
and accurate in all material respects.
12. BRIDGE LOAN
Matrix agrees that following the execution of this Agreement, Matrix will
make a bridge loan available to Avtel in the maximum principal amount of
$500,000 on the following terms:
(a) Up to $250,000 may be drawn by Avtel any time after the execution
of this Agreement and prior to the earlier to occur of (i) August
31, 1997 or (ii) the termination of this Agreement.
(b) 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 to occur of (i)
August 31, 1997 or (ii) the termination of this Agreement.
(c) Disbursements shall be made on five days' written notice to
Matrix. No disbursements shall be made after the termination of
this Agreement.
(d) The loan shall be recourse and shall bear interest at the rate of
8% per annum through August 31, 1997, and thereafter at a rate of
12% until maturity and, after maturity at a rate of 15%, in all
cases subject to reduction to comply with applicable usury laws.
Interest shall be payable monthly in arrears, based on a 360-day
year, and all principal and accrued
7
<PAGE>
interest shall be due and payable on or before the earlier of (i)
180 days after the termination of this Agreement or (ii) December
1, 1997.
(e) Avtel shall pay all expenses of documenting the loan, including
any necessary California usury permit, if any.
13. MATRIX REPRESENTATIONS
Matrix represents to Avtel as follows:
(a) Schedule I is a complete and accurate list of all of the shares of
----------
Matrix common stock owned by each of the Stockholders. Schedule II
-----------
is a complete and accurate list of all Matrix options issued and
outstanding.
(b) Matrix is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas with all requisite
corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted.
(c) Matrix has full power and authority to enter into this Agreement and
to carry out the transactions contemplated hereby, and this Agreement
has been duly and validly executed and delivered by Matrix and
constitutes the legal, valid and binding obligation of Matrix,
enforceable in accordance with its terms. The execution, delivery and
performance of this Agreement and all other transactions contemplated
hereby will not cause any material default or breach in any contract,
loan agreement or other instrument to which Matrix is a party or
violate any law or decree or judgment of any government or
governmental agency having jurisdiction over Matrix.
(d) Matrix's authorized capital stock consists of 10,000,000 shares of
common stock, no par value, of which 3,484,260 shares are issued and
outstanding. Schedule II is a list of all Matrix stock options
-----------
existing as of the date hereof together with a list of all
stock options that Matrix has agreed to issue but has not yet issued.
(e) The financial statements of Matrix listed on Schedule III fairly
------------
present in all material respects Matrix's financial position and
assets and its results of operation and changes in financial position
with respect to the respective dates thereof and the periods covered
thereby, in conformity with the United States generally accepted
accounting principles at the time in effect ("GAAP"), and Matrix's
----
past accounting practices, consistently applied during such periods,
and such financial statements, including the notes thereto, make full
and adequate disclosure of, and provision for, all of Matrix's
material obligations and liabilities as of the date thereof, whether
accrued, absolute, contingent or otherwise, to the extent required
8
<PAGE>
by GAAP. Since the date of the last of such financial statements,
there have been no material adverse changes to the business or
condition of Matrix that have not been disclosed to Avtel.
(f) Schedule IV contains a list of all material contracts between Matrix
-----------
and any of its officers, directors or shareholders, true, correct and
complete copies of which have been furnished to Avtel.
(g) Schedule V contains a true, correct and complete list of all of
----------
Matrix's employee benefit plans and a list of each employee of Matrix
as of the date hereof, his/her current position, annual salary and
current bonus entitlement.
(h) Except as set forth in Schedule VI, Matrix is not a party to and has
-----------
not been threatened with any legal action, governmental investigation
or proceeding or any other material claim or proceeding, including,
without limitation, any tax audit.
(i) Matrix has provided Avtel copies of the prior three year's federal
and state income tax returns and represents that it believes such
returns fairly reflect Matrix's tax obligations for such periods and
that no adjustments for such periods have been proposed. All federal,
state, local and foreign tax returns required to be filed by or with
respect to Matrix through the Closing Date have been or will be
accurately prepared, and have been or will be duly and timely filed,
and all taxes, interest, penalties, assessments and/or deficiencies
due with respect to any taxable period ending on or before the
Closing Date have been or will be timely paid, or adequate provision
for the payment thereof has been or will be made on Matrix's
financial statements or books of account.
(j) Except as disclosed on Schedule VII, no notice to, filing with,
------------
authorization of, exemption by, or consent of any person, entity or
public or governmental authority is required in order for Matrix to
consummate the transactions contemplated hereby.
14. AVTEL REPRESENTATIONS
Avtel represents to Matrix as follows:
(a) Avtel is a corporation duly organized, validly existing and in good
standing under the laws of the State of Utah with all requisite
corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted.
(b) Avtel has full power and authority to enter into this Agreement and
to carry out the transactions contemplated hereby, and this Agreement
has been duly and
9
<PAGE>
validly executed and delivered by Avtel, and constitutes the legal,
valid and binding obligation of Avtel, enforceable in accordance with
its terms. The execution, delivery and performance of this Agreement
and all other transactions contemplated hereby will not cause any
material default or breach in any contract, loan agreement or other
instrument to which Avtel is a party or violate any law or decree or
judgement of any government or governmental agency having
jurisdiction over Avtel.
(c) Avtel's authorized capital stock consists of 50,000,000 shares of
common stock, $.001 par value, per share, of which 7,135,807 shares
are issued and outstanding and 5,000,000 shares of preferred stock of
which 1,000,000 shares designated, $1.00 par value Series A
Convertible Preferred Stock are issued and outstanding. All such
shares were held as of April 9, 1997 as set forth on Schedule VIII.
-------------
All of the issued shares of the capital stock of Avtel
have been duly and validly authorized and issued, are fully paid and
non-assessable. The shares of common stock to be delivered by Avtel
to the Stockholders pursuant to this Agreement have been duly and
validly authorized and, when issued and delivered as provided herein,
will be duly and validly issued and fully paid and non-assessable.
Schedule IX is a list of all Avtel stock options existing
-----------
as of the date hereof, together with a list of all stock options
Avtel has agreed to issue but has not yet issued, and Avtel has not
entered into any agreement to issue additional stock options except
as disclosed on Schedule IX.
-----------
(d) The financial statements of Avtel listed on Schedule X fairly present
----------
in all material respects Avtel's financial position and assets and
its results of operation and changes in financial position with
respect to the respective dates thereof and the periods covered
thereby, in conformity with GAAP and Avtel's past accounting
practices, consistently applied during such periods, and such
financial statements, including the notes thereto, make full and
adequate disclosure of, and provision for, all of Avtel's material
obligations and liabilities as of the date thereof, whether accrued,
absolute, contingent or otherwise, to the extent required by GAAP.
Since the date of the last of such financial statements, there have
been no material adverse changes to the business or condition of
Avtel that have not been disclosed to Matrix.
(e) Schedule XI contains a list of all material contracts between Avtel
-----------
and any of its officers, directors or shareholders, true,
correct and complete copies of which have been furnished to Matrix.
(f) Schedule XII contains a true, correct and complete list of all of
------------
Avtel's employee benefit plans and a list of each employee of Avtel
and its subsidiaries as of the date hereof, his/her current position,
annual salary (and proposed adjustments thereto for the next 6
months) and current bonus entitlement.
10
<PAGE>
(g) Except as set forth in Schedule XIII, Avtel is not a party to and has
-------------
not been threatened with any legal action, governmental investigation
or proceeding or any other material claim or proceeding, including,
without limitation, any tax audit.
(h) Avtel has provided Matrix copies of the prior three year's federal
and state income tax returns and represents that it believes such
returns fairly reflect Avtel's tax obligations for such periods and
that no adjustments for such periods have been proposed. All federal,
state, local and foreign tax returns required to be filed by or with
respect to Avtel from January 1, 1993 through the Closing Date have
been or will be accurately prepared, and have been or will be duly
and timely filed, and all taxes, interest, penalties, assessments
and/or deficiencies due with respect to any taxable period ending on
or before the Closing Date have been or will be timely paid, or
adequate provision for the payment thereof has been or will be made
on Avtel's financial statements or books of account.
(i) Except as disclosed on Schedule XIV, no notice to, filing with,
------------
authorization of, exemption by, or consent of any person, entity or
public or governmental authority is required in order for Avtel to
consummate the transactions contemplated hereby.
15. CONDITIONS PRECEDENT TO OBLIGATIONS OF MATRIX
(a) Avtel's representations and warranties contained herein shall be true
in all material respects on and as of the date of this Agreement and
shall also be true in all material respects (except for such changes
as are contemplated by the terms of this Agreement) on and as of the
Closing Date with the same force and effect as though made by Avtel
on and as of the Closing Date.
(b) Avtel shall, in all material respects, have performed all obligations
and agreements and complied with all covenants contained in this
Agreement, to be performed and complied with by it on or prior to the
Closing Date; and Avtel shall have delivered to Matrix a certificate,
dated as of the Closing Date, certifying as to its compliance with
Section 15(a) and Section 15(b).
------------- -------------
(c) The Registration Rights Agreement shall have been executed by the
Avtel and delivered to Matrix.
(d) The shareholders of Avtel shall have approved this Agreement and the
transactions contemplated hereby.
(e) Any and all governmental and other consents required in connection
with this Agreement shall have been obtained.
11
<PAGE>
(f) Each Stockholder shall have executed an Exchange Statement.
16. CONDITIONS PRECEDENT TO OBLIGATIONS OF AVTEL
(a) Matrix's representations and warranties contained herein shall be
true in all material respects on and as of the date of this Agreement
and shall also be true in all material respects (except for such
changes as are contemplated by the terms of this Agreement) on and as
of the Closing Date with the same force and effect as though made by
Matrix on and as of the Closing Date.
(b) Matrix shall, in all material respects, have performed all
obligations and agreements and complied with all covenants contained
in this Agreement to be performed and complied with by it on or prior
to the Closing Date and Matrix shall have delivered to Avtel a
certificate, dated as of the Closing Date, certifying as to its
compliance with Section 16(a) Section 16(b).
------------- -------------
(c) The Registration Rights Agreement shall have been executed by Matrix
and the Exchange Statements shall have been executed by the
Stockholders and such documents shall have been delivered to Avtel.
(d) The shareholders of Avtel shall have approved this Agreement and the
transactions contemplated hereby.
(e) Any and all governmental consents required in connection with this
Agreement shall have been obtained.
17. CLOSING
The Closing (the "Closing") shall take place at such place as Matrix and
-------
Avtel shall agree on the date that is three business days after the
conditions referred to in clauses (d) and (e) of paragraphs 15 and 16 shall
----------- --- ------------- --
have been obtained or on such later date to which the parties hereto
otherwise shall agree (such date being the "Closing Date").
------------
18. SURVIVAL
The covenants, agreements, representations or warranties of the parties
hereto contained in this Agreement or in any certificate or other writing
delivered pursuant to, or in connection with, this Agreement shall survive
one year from the Closing Date.
19. TERMINATION
12
<PAGE>
This Agreement may be terminated at any time on or prior to the Closing
Date:(i) with the mutual consent of Avtel and Matrix or (ii) by Avtel or
Matrix, if the Closing shall not have taken place on or before July 1,
1997, or such later date as may be mutually approved in writing by Avtel or
Matrix. This Agreement shall terminate automatically if the shareholders
of Avtel do not approve this Agreement or any of the transactions
contemplated hereby.
20. MISCELLANEOUS
(a) This Agreement shall be governed by the laws of the State of Texas,
without regard to the conflict of law rules of such state.
(b) This Agreement may be amended, modified or supplemented but only in
writing signed by all of the parties hereto.
(c) All notices, requests, demands and other communications required or
permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered by hand, or by confirmed facsimile
transmission, or on two business days following delivery to a
commercial overnight air courier service, or five days after being
mailed, first class postage prepaid, return receipt requested.
If to Matrix, addressed as follows:
5215 North O'Connor Blvd.
Suite 300
Irving, Texas 75039
Attention: Ronald W. Howard
Facsimile: (972) 506-3266
with a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: David A. Carpenter
Facsimile: (312) 701-7711
13
<PAGE>
If to Avtel, addressed as follows:
130 Cremona Drive, Suite C
Santa Barbara, California 93117
Attention: Anthony Papa
Facsimile: (805) 685-9685
with a copy to:
Price, Postel & Parma LLP
200 E. Carrillo Street, Suite 400
Santa Barbara, California 93101
Attention: Raymond LeBlanc
Facsimile: (805) 882-9869
or to such other individual or address as a party hereto may designate
for itself by notice given as herein provided.
(d) The failure of a party hereto at any time or times to require
performance of any provision hereof shall in no manner affect its
right at a later time to enforce the same. No waiver by a party of any
condition or of any breach of any term, covenant, representation or
warranty contained in this Agreement shall be effective unless in
writing, and no waiver in any one or more instances shall be deemed to
be a further or continuing waiver of any such condition or breach in
other instances or a waiver of any other condition or breach of any
other term, covenant, representation or warranty.
(e) This Agreement may be executed simultaneously in counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
(f) The Stockholders shall be deemed to be third party beneficiaries of
the rights of Matrix hereunder.
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the date first above written by their duly authorized
representatives.
MATRIX TELECOM, INC. AVTEL COMMUNICATIONS, INC.
By:_____________________________ By:_____________________________
________________________________ ________________________________
(Print Name) (Print Name)
Its:_____________________________ Its:_____________________________
(duly authorized) (duly authorized)
15
<PAGE>
EXHIBIT A
FORM OF EXCHANGE STATEMENT
The undersigned understands that the common stock of AvTel Communications,
Inc. ("Avtel") to be issued to the undersigned as consideration for 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 is 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 shares 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 shares and (ii) is capable of
assuming the risk of the loss of the entire investment in connection therewith.
(b) The undersigned is not purchasing the shares of Avtel 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 shares being purchased 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 shares. 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 shares the undersigned is purchasing or any
interest therein, and the undersigned has no present plans to enter into the
same.
(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 sale of Avtel stock under the Stock Exchange Agreement, and
16
<PAGE>
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) The undersigned understands that the shares of Avtel stock being
purchased by the undersigned pursuant to the Stock Exchange Agreement will bear
the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE
TRANSFERRED WITHOUT SUCH REGISTRATION EXCEPT PURSUANT TO TRANSACTIONS
EXEMPT FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT OF 1933
AND APPLICABLE STATE SECURITIES LAWS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
(g) In connection with an intended exchange of the shares of Matrix common
stock held by the undersigned for shares of Avtel common stock, the undersigned
hereby directs that all Matrix shares held by the undersigned be exchanged at
the Closing (as defined in the Stock Exchange Agreement) for Avtel shares 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, including, without limitation, the execution of the
Registration Rights Agreement (as defined therein). All Avtel shares received
are to be registered in the same name as the Matrix shares held by the
undersigned.
(h) The undersigned hereby represents and warrants that the undersigned has
full power to direct the exchange of the Matrix shares as set forth above and
that the shares of Matrix common stock to be exchanged by the undersigned are
free and clear of any liens or encumbrances.
17
<PAGE>
(i) 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.
Signature________________________________
Print Name______________________________
Date:___________________________________
No. of Matrix Shares Held:_________
18
<PAGE>
EXHIBIT B
FORM OF REGISTRATION RIGHTS AGREEMENT
19
<PAGE>
EXHIBIT 20
FOR IMMEDIATE RELEASE FOR FURTHER INFORMATION CONTACT:
- --------------------- --------------------------------
Mary McCarthy, OPUS Group
(310) 440-8600
e-mail: [email protected]
AVTEL AND MATRIX SIGN DEFINITIVE AGREEMENT CREATING A BROAD-BASED, SINGLE-SOURCE
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS CARRIER
--------------------------
EXPANDED PORTFOLIO OF TRADITIONAL TELECOMMUNICATIONS SERVICES CROSS-MARKETED
WITH ADVANCED DATA NETWORKING BUSINESS SERVICES TO BE OFFERED
Santa Barbara, California, April 30, 1997---AvTel Communications, Inc.
(OTC: AVCO) today announced the execution of a definitive agreement to acquire
100% of Matrix Telecommunications, Inc., a domestic and international long
distance telephone company with a customer base of more than 250,000. All of the
outstanding shares of privately-held Matrix will be exchanged for 34,590,049
shares of newly-issued AvTel common stock, representing approximately 79% of the
outstanding capital stock of AvTel on a fully-diluted basis. Simultaneous with
the closing of the acquisition, AvTel expects to effect a reverse stock split of
its common shares, the ratio for which has not been finalized. The transaction
is subject to approvals by the shareholders of AvTel and Matrix.
Upon completion of the transaction, Matrix will become a wholly-owned
subsidiary of AvTel. Headquarters for the combined companies will remain at
AvTel's location in Santa Barbara, California and Matrix operations will
continue to be located in Ft. Worth, Texas. Management will remain in place at
both companies, with Anthony E. Papa continuing as Chairman of the Board and
Chief Executive Officer, and James P. Pisani continuing as Executive Vice
President and Chief Operating Officer. Raymond Waters will continue as President
of Matrix.
Mr. Papa commented: "This acquisition substantially expands our product
offerings and back office capabilities, enabling both companies to cross-market
an expanded portfolio of voice, data and video services to corporations and
individuals. Customers will now receive value-added service benefits from
Matrix's advanced call center operation and flexible billing capabilities."
-MORE-
20
<PAGE>
AVTEL AND MATRIX SIGN DEFINITIVE AGREEMENT
- -2-
Mr. Papa added: "We will cross-sell Matrix's telecommunication services
with AvTel's integrated portfolio of data, voice and video network services to
corporate customers, forming a variety of robust internetworking solutions for
small- to mid-sized businesses. We also expect to increase Matrix's sales and
marketing activities, and to expand its network infrastructure."
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 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.
###########
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.
####
21
