UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule 13D
Under the Securities Exchange Act of 1934
(Amendment No. 1)*
AvTel Communications, Inc.
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(Name of Issuer)
Common Stock, Par Value $.01 Per Share
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(Title of Class of Securities)
054529 20 1
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(CUSIP Number)
Gary Friedman
United Group Association, Inc.
4001 McEwen Drive, Suite 200
Dallas, Texas 75244
(972) 393-8703
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(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
June 1, 1998
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Amended Schedule 13D,
and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the
following box [ ].
Check the following box if a fee is being paid with the statement |X|. (A
fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five percent
of the class of securities described in Item 1; and (2) has filed no
amendment subsequent thereto reporting beneficial ownership of five percent
or less of such class.) (See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
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Amended Schedule 13D
CUSIP NO. 054529 20 1 Page 2 of 13
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Ronald L. Jensen
###-##-####
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
00 --1,463,693 shares of Common Stock of Issuer acquired by Ronald L.
Jensen from the distribution of Common Stock of the Issuer by United Group
Association, Inc. described in Item 3. 731,847 shares of Common Stock
disposed of by Ronald L. Jensen to Gladys Jensen as described in Item 3.
402,064 shares of Common Stock of the Issuer disposed of through Ronald L.
Jensen's donation of shares of UA Plus, Inc. as described in Item 3.
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(D) OR 2(E) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- ------------------------
7 SOLE VOTING POWER
NUMBER OF 954,321
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 0
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER
WITH
954,321
10 SHARED DISPOSITIVE POWER
0
- ------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
954,321
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.3%
14 TYPE OF REPORTING PERSON
IN
<PAGE>
Amended Schedule 13D
CUSIP NO. 054529 20 1 Page 3 of 10
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
United Group Association, Inc.
Taxpayer ID No.: 75-2001810
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
00, Share distribution as described in Item 3.
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(D) OR 2(E) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Texas
- ----------------------
7 SOLE VOTING POWER
NUMBER OF 0
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 0
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER
WITH
0
10 SHARED DISPOSITIVE POWER
- ---------------------- 0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0
14 TYPE OF REPORTING PERSON
CO
<PAGE>
Amended Schedule 13D
CUSIP NO. 054529 20 1 Page 4 of 10
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ITEM 1. Security and Issuer
Security: Common Stock, $.01 par value per share (the "Common Stock")
of AvTel Communications, Inc. (the "Issuer")
Issuer: AvTel Communications, Inc.
130 Cremona Drive
Suite C
Santa Barbara, CA 93117
ITEM 2. Identity and Background
Appendix A contains the information called for by Items 2-6 of
this Amended Schedule 13D for the executive officers and directors
of United Group Association, Inc.
Ronald L. Jensen
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a. Ronald L. Jensen.
b. Mr. Ronald L. Jensen's business address is c/o United
Group Association, Inc., 4001 McEwen Drive, Suite 200,
Dallas, Texas 75244.
c. The principal occupation of Mr. Ronald L. Jensen is as
Chairman of the Board of Directors of UICI, and as
Director and President of United Group Association, Inc.
d. During the last five years, Mr. Ronald L. Jensen has not
been convicted in any criminal proceeding.
e. During the last five years, Mr. Ronald L. Jensen has not
been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result
of which Mr. Ronald L. Jensen was or is subject to a
judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding
any violation with respect to such laws.
f. Mr. Ronald L. Jensen is a citizen of the United States.
United Group Association, Inc.
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a. United Group Association, Inc. is a Texas corporation.
b. The business address of United Group Association, Inc. is 4001
McEwen Drive, Suite 200, Dallas, Texas 75244.
c. The principal business of United Group Association, Inc. is as a
licensed insurance agency.
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Amended Schedule 13D
CUSIP NO. 054529 20 1 Page 4 of 10
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d. During the last five years, United Group Association, Inc. has not
been convicted in any criminal proceeding.
e. During the last five years, United Group Association, Inc. has not
been a party to a civil proceeding of a judicial or administrative
body of competent jurisdiction as a result of which United Group
Association, Inc. was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating
activities subject to, federal, state securities laws or finding
any violations with respect to such laws.
ITEM 3. Source and Amount of Funds or Other Consideration
Ronald L. Jensen
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Ronald L. Jensen acquired direct beneficial ownership of 222,475 shares of
Common Stock of the Issuer in exchange for 89,640 shares of common stock,
par value $.01 per share ("Matrix Common Stock") of Matrix Telecom, Inc.
("Matrix") pursuant to the Stock Exchange Agreement, dated April 29, 1997,
as amended August 25, 1997 (the "Stock Exchange Agreement") described in
further detail under Item 4 of this Amended Schedule 13D.
Ronald L. Jensen acquired direct beneficial ownership of 1,463,693
shares of Common Stock of the Issuer from United Group Association, Inc. as
a part of a distribution of shares. Ronald L. Jensen decided to transfer
731,847 of these shares to his wife, Gladys Jensen, at the time of the
distribution. Pursuant to that decision, United Group Association, Inc.
transferred those shares directly to Gladys Jensen. In addition, Ronald L.
Jensen donated all of his shares of UA Plus, Inc. to the RJ and GJ Jensen
Foundation. UA Plus, Inc. owns 402,064 shares of Common Stock of the
Issuer. These distributions are described in further detail under Item 4 of
the Amended Schedule 13D.
United Group Association, Inc
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United Group Association, Inc. acquired direct beneficial ownership of
1,463,693 shares of Common Stock of the Issuer in exchange for 589,752
shares of Matrix Common Stock pursuant to the Stock Exchange Agreement
described in further detail under Item 4 of this Amended Schedule 13D.
On June 1, 1998, United Group Association, Inc. distributed 731,846
shares of Common Stock of the Issuer to Ronald L. Jensen and 731,847 shares
of Common Stock of the Issuer to Gladys Jensen.
<PAGE>
Amended Schedule 13D
CUSIP NO. 054529 20 1 Page 5 of 10
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ITEM 4. Purpose of Transaction
On December 1, 1997, the Issuer acquired all of the outstanding
shares of Matrix Telecom, Inc. pursuant to the Stock Exchange
Agreement dated April 29, 1997, as amended on August 25, 1997. As
a result of this transaction, each of the former stockholders of
Matrix were issued 2.482 shares of Common Stock of the Issuer for
each share of Matrix Common Stock held by such stockholder.
Each of the reporting persons covered by this Amended Schedule 13D
acquired their shares of Common Stock of the Issuer pursuant to
the Stock Exchange Agreement. Subject to the restrictions on
transfers described in Item 6 hereof, such persons may acquire
additional Common Stock of the Issuer and dispose of their Common
Stock of the Issuer in the future if they determine such
acquisitions or dispositions to be economically advantageous.
Ronald L. Jensen is the President of United Group Association, Inc.
and owns 100% of its Common Stock. As described in Item 3, prior to June 1,
1998, United Group Association, Inc. owned certain shares of the Common
Stock of the Issuer. On June 1, 1998, United Group Association, Inc. made a
distribution of all its shares of Common Stock of the Issuer to Ronald L.
Jensen. Ronald L. Jensen decided to give some of those shares to his wife,
Gladys Jensen. Pursuant to that decision, United Group Association, Inc.
distributed 731,846 shares of Common Stock of the Issuer to Ronald L.
Jensen while Gladys Jensen received 731,847 shares of Common Stock of the
Issuer.
In addition, Ronald L. Jensen is the President and Director of UA
Plus, Inc. and owns 70% of its common stock. On June 1, 1998,
Ronald L. Jensen donated all of his shares of UA Plus, Inc., which
owns 402,064 shares of Common Stock of the Issuer, to the RJ and
GJ Jensen Foundation, a 501(c)(3) entity. Thus, Ronald L. Jensen
has no beneficial ownership and no dispositive power over these
shares of Common Stock of the Issuer.
Other than as described above, or as is otherwise contemplated by
the Stock Exchange Agreement, no reporting person covered by this
Amended Schedule 13D has any plans or proposals that would result in:
(a) the acquisition by any person of additional securities of the
Issuer, or the disposition of securities of the Issuer;
(b) an extraordinary corporate transaction, such as
a merger, reorganization or liquidation,
involving the Issuer or any of its subsidiaries;
(c) a sale or transfer of a material amount of assets of the
Issuer or any of its subsidiaries;
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Amended Schedule 13D
CUSIP NO. 054529 20 1 Page 6 of 10
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(d) any change in the present board of directors or
management of the Issuer, including any plans or
proposals to change the number or term of
directors or to fill any existing vacancies on
the board;
(e) any material change in the present capitalization or
dividend policy of the Issuer;
(f) any other material change in the Issuer's business or
corporate structure;
(g) changes in the Issuer's charter, bylaws or
instruments corresponding thereto or other
actions which may impede the acquisition of
control of the Issuer by any person;
(h) causing a class of securities of the Issuer to
be delisted from a national securities exchange
or to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered
national securities association;
(i) a class of equity securities of the Issuer
becoming eligible for termination of
registration pursuant to Section 12(g)(4) of the
Act; or
(j) any action similar to any of those enumerated above.
<PAGE>
Amended Schedule 13D
CUSIP NO. 054529 20 1 Page 7 of 10
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ITEM 5. Interest in Securities of Issuer
Ronald L. Jensen
a. Mr. Ronald L. Jensen beneficially owns 954,321 shares of Common
Stock of the Issuer. The 954,321 shares of Common Stock of the
Issuer beneficially owned by Mr. Ronald L. Jensen constitute 8.3%
of the outstanding Common Stock of the Issuer.
b. Mr. Ronald L. Jensen has the sole power to vote or to direct the
vote of the 954,321 shares of Common Stock of the Issuer held
directly by Mr. Ronald L. Jensen.
c. Other than the transactions described in Item 4 of this Amended
Schedule 13D, no transactions in the Common Stock of the Issuer
were effected in the past 60 days by Mr. Ronald L. Jensen.
d. No other person has the right to receive or the power to direct
the receipt of dividends from, or the proceeds from the sale of,
the securities beneficially owned by Mr. Ronald L. Jensen.
e. Not applicable.
United Group Association, Inc.
- ------------------------------
a. United Group Association, Inc. does not beneficially own any shares
of Common Stock of the Issuer.
b. Not applicable.
c. Other than the distribution to Ronald L. Jensen and Gladys Jensen
described in Item 4 of this Amended Schedule 13D , no transactions
in the Common Stock of the Issuer were effected in the past 60
days by United Group Association, Inc.
d. Not applicable.
e. On June 1, 1998, United Group Association, Inc. ceased to be a
beneficial owner of more than five percent of the Common Stock of
the Issuer.
<PAGE>
Amended Schedule 13D
CUSIP NO. 054529 20 1 Page 8 of 10
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ITEM 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer
(a) Stock Exchange Agreement
------------------------
The Stock Exchange Agreement sets forth the terms
pursuant to which each of the reporting persons covered
by this Amended Schedule 13D acquired their shares of
Common Stock of the Issuer. A copy of the Stock Exchange
Agreement is attached to this Amended Schedule 13D and
incorporated herein by reference.
(b) Registration Rights Agreement
The Issuer has entered into a Registration Rights and
Lock-up Agreement, dated December 1, 1997 (the
"Registration Rights Agreement"), with Matrix on behalf
of the former stockholders of Matrix. The following
discussion provides only a summary of certain provisions
of the Registration Rights Agreement. A copy of the
Registration Right Agreement is attached to this Amended
Schedule 13D and incorporated herein by reference.
The Registration Rights Agreement requires that the
Issuer use its best efforts (i) to become listed on the
Smallcap Market or National Market of the NASDAQ Stock
Market, Inc., (ii) to file a shelf Registration Statement
providing for the sale by the former stockholders of
Matrix of all securities issued to them pursuant to the
Stock Exchange Agreement and (iii) to cause such
Registration Statement to become effective as soon as
practical thereafter. The Registration Rights Agreement
also grants the former Matrix stockholders the right on
two separate occasions to demand that the Issuer file a
Registration Statement on their behalf covering the
resale of their Common Stock of the Issuer if the Issuer
is unable to qualify for listing on the Smallcap Market
or National Market or is otherwise unable to qualify for
use of a Shelf Registration Statement within six months
of December 1, 1997.
(c) Each of the reporting persons covered by this Amended
Schedule 13D are parties to the Registration
Rights Agreement.
As such, each of the reporting persons covered by this
Amended Schedule 13D has agreed for a period of two years
from December 1, 1997 not to offer, pledge, sell, or
otherwise dispose of any of the shares of Common Stock of
the Issuer issued to such persons pursuant to the Stock
Exchange Agreement.
(d) Other than the contracts described herein, none of the
reporting persons covered by this Amended Schedule 13D
have entered into any contracts, arrangements,
understandings or relationships with any person
pertaining to Common Stock of the Issuer.
<PAGE>
Amended Schedule 13D
CUSIP NO. 054529 20 1 Page 9 of 10
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ITEM 7. Material to be Filed as Exhibits
99.A -- Registration Rights and Lock-Up Agreement, dated as
of December 1, 1997 by and between the Issuer and
Matrix Telecom, Inc.
99.B -- Agreement relating to filing joint Amended Schedule 13D.
99.C -- Stock Exchange Agreement, dated April 29, 1997, between
the Issuer and Matrix Telecom, Inc.
99.D -- Amendment to the Stock Exchange Agreement, dated August
25, 1997 between the Issuer and Matrix Telecom, Inc.
<PAGE>
Amended Schedule 13D
CUSIP NO. 054529 20 1 Page 10 of 10
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DISCLAIMER PURSUANT TO RULE 13d-4
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Because, pursuant to the Registration Rights Agreement, each of
the reporting persons covered by this Amended Schedule 13D agreed to
certain restrictions on transfer of the shares issued to such persons
pursuant to the Stock Exchange Agreement, such persons may be deemed to
constitute a "group" for purposes of Section 13 of the Securities Exchange
Act of 1934 (the "Exchange Act"). Nothing in this statement shall be
construed as an admission that any reporting person identified herein is,
for purposes of Section 13(d) or 13(g) of the Exchange Act, or otherwise,
the beneficial owner of any securities of the Issuer covered by this
Amended Schedule 13D, except for those securities identified as being
beneficially owned by such reporting person herein.
<PAGE>
Amended Schedule 13D
CUSIP NO 054529 20 1 Page 11 of 10
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Signature
After reasonable inquiry and to the best of my knowledge and
belief, I certify as of this 8th day of June, 1998 that the information set
forth in this statement is true, complete and correct. This statement may
be executed in multiple counterparts, each of which shall constitute an
original.
United Group Association, Inc.
By: /s/ Ronald L. Jensen
-------------------------
Name: Ronald L. Jensen
-----------------------
Title: President
----------------------
/s/ Ronald L. Jensen
-----------------------------
Ronald L. Jensen
<PAGE>
APPENDIX A
Capitalized terms used but not defined herein shall have the respective
meanings assigned such terms in the Amended Schedule 13D of AvTel
Communications, Inc. to which this is attached as Appendix A.
(a ) Executive Officers and Directors Of United Group Association, Inc. Set
forth below are the name and positions held of each director and
executive officer of United Group Association, Inc. ("UGA"). References
to persons listed below include persons sharing beneficial ownership of
Common Stock of the Issuer with a director or executive officer. Unless
otherwise noted, the principal occupation or employment of each person
listed below is his or her position with UGA. The address of each person
for purposes of this Amended Schedule 13D is c/o United Group
Association, Inc., 4001 McEwen Drive, Suite 200, Dallas, Texas 75244.
All persons listed below are U.S. citizens. During the last five years,
to the best knowledge of UGA, none of the persons listed below has been
convicted in any criminal proceeding (excluding traffic violations or
similar misdemeanors) or has been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction as a result of
which such person was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation
with respect to such laws.
Ronald L. Jensen
Director and President
Mr. Ronald L. Jensen is one of the reporting persons filing the
joint Amended Schedule 13D to which this Appendix A is attached.
Information regarding Mr. Ronald L. Jensen is presented in such
Amended Schedule 13D.
Gary L. Friedman
Director and Treasurer
Mr. Gary L. Friedman's address for purposes of this Amended
Schedule 13D is c/o United Group Association, 4001 McEwen Drive,
Suite 200, Dallas, Texas 75244. Mr. Gary L. Friedman owns 144,173
shares of Common Stock of the Issuer constituting 1.5% of the
Issuer's issued and outstanding Common Stock. Mr. Gary L.
Friedman has the sole power to vote or to direct the vote and the
sole power to dispose or to direct the disposition of all of such
Common Stock.
A-1
<PAGE>
Jeffrey J. Jensen
Director and Vice-President
Mr. Jeffrey J. Jensen's address for purposes of this Amended
Schedule 13D is c/o United Group Association, 4001 McEwen Drive,
Suite 200, Dallas, Texas 75244.
Cymun Horner
Secretary
Mr. Cymun Horner's address for purposes of this Amended Schedule
13D is c/o United Group Association, 4001 McEwen Drive, Suite 200,
Dallas, Texas 75244.
To the best knowledge of the reporting persons, none of the persons listed
above has any further information to report in response to Items 2-6 of
Amended Schedule 13D.
A-2
<PAGE>
EXHIBIT INDEX
--------------
Exhibit
Number Description
- ------- -----------
99.A -- Registration Rights and Lock-Up
Agreement, dated as of February 15,
1994, by and among Amli Residential
Properties Trust and the Persons listed on
Schedule A thereof (previously filed).
99.B -- Agreement relating to filing joint Amended
Schedule 13D.
99.C -- Stock Exchange Agreement, dated April
29, 1997 between the Issuer and Matrix
Telecom, Inc.
99.D -- Amendment to Stock Exchange
Agreement, dated August 25, 1997
between the Issuer and Matrix Telecom,
Inc.
REGISTRATION RIGHTS AND LOCK-UP AGREEMENT
THIS REGISTRATION RIGHTS AND LOCK-UP AGREEMENT (this "Agreement")
is made and entered into as of November __, 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.
-1-
<PAGE>
"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).
"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
-2-
<PAGE>
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.
"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-
<PAGE>
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 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
Registerable 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
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<PAGE>
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.
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;
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<PAGE>
(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;
(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,
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<PAGE>
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 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
-7-
<PAGE>
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
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<PAGE>
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.
(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 judgement or
enter into any settlement which does not include as an unconditional term
thereof the giving by all claimants or plaintiffs to such indemnified party
of a release from all liability in respect to such claim.
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
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<PAGE>
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
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 knowledged, 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.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above
AVTEL COMMUNICATIONS, INC.
By:___________________________________
Name:_________________________________
Title:________________________________
MATRIX TELECOM, INC.
On behalf of all Holders
By:____________________________________
Name:__________________________________
Title:_________________________________
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<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
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<PAGE>
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
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EXHIBIT B
AGREEMENT OF JOINT FILING
Ronald L. Jensen, United Group Association, Inc., and UA
Plus, Inc. hereby agree that this Statement on Amended Schedule 13D as well
as all future amendments to such Statement, shall be filed jointly on
behalf of each of them. This agreement is intended to satisfy the
requirements of Rule 13d-1(f)(1)(iii) under the Securities Exchange Act of
1934, as amended and may be signed in multiple counterparts, each of which
shall constitute an original.
/s/ Ronald L. Jensen
Date: June 8, 1998 ------------------------
Ronald L. Jensen
Date: June 8, 1998 United Group Association, Inc.
/s/ Ronald L. Jensen
-----------------------------
Ronald L. Jensen
President
A-4
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.
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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.
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<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 directly proportional to the
adjustments made to the Avtel common stock and options
to acquire Avtel common stock pursuant to the Reserve
Stock Split.
10. AVTEL TO SUPPLY INFORMATION
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<PAGE>
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 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.
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<PAGE>
(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 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.
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(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 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
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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.
.
(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.
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(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.
(f) Each Stockholder shall have executed an Exchange Statement.
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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) and Section 16(b).
(c) The Registration Rights Agreement shall have been
executed by Matrix and the Exchange Statements shall have
ben 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
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
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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
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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.
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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)
12
AMENDMENT TO STOCK EXCHANGE AGREEMENT
-------------------------------------
This Amendment to Stock Exchange Agreement, dated August 25, 1997 is
by and between Matrix Telecom, Inc. ("Matrix") and AvTel Communications,
Inc. ("AvTel").
W I T N E S S E T H
WHEREAS, Matrix and AvTel have entered into that certain Stock
Exchange Agreement, dated April 29, 1997 (the "Stock Exchange Agreement")
which provided for, among other things, the exchange by the stockholders of
Matrix of all of the issued and outstanding capital stock and options of
Matrix for capital stock and options of AvTel;
WHEREAS, by letter agreement, dated July 28, 1997 (the "Letter
Agreement") the date by which completion of the transactions by the Stock
Exchange Agreement is required to be completed was extended through
November 30, 1997; and
WHEREAS, as contemplated by Paragraph 9(b) of the Stock Exchange
Agreement, AvTel and Matrix have agreed to effect the Reverse Stock Split
(as defined in the Stock Exchange Agreement) by the conversion of each
share of AvTel common stock into the right to receive 1/4 of a share of
common stock of Newco (thereby effecting a four to one reverse stock split)
pursuant to the terms of the Merger (as defined in the Stock Exchange
Agreement);
WHEREAS, since the date of the Stock Exchange Agreement, Matrix
has acquired all of the issued and outstanding capital stock of Best
Connections, Inc. in exchange for 376,727 shares of Matrix common stock;
NOW THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
1. Defined Terms. Capitalized terms used herein, unless otherwise
defined or the context requires otherwise, are used herein as defined in
the Stock Exchange Agreement.
2. Amendment to Paragraph 1. Paragraph 1 of the Stock Exchange
Agreement is hereby amended to read in its entirety as follows:
"At Closing (as hereinafter defined), the stockholders of
Matrix listed on Schedule I (the "Stockholders") will
deliver to AvTel 3,860,987 properly endorsed,
unencumbered shares of Matrix common stock, representing
100% of the outstanding Matrix common stock, in exchange
for 9,582,514 shares of common stock of AvTel, after
giving effect to the Merger and Reverse Stock Split
(defined below), which will not be registered under the
Securities Act of 1933, as amended."
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3. Amendment to Paragraph 2. Paragraph 2 of the Stock Exchange
Agreement is hereby amended by adding the following sentence at the end of
the paragraph:
"Prior to the Closing, Matrix shall deliver to AvTel a
duly executed Exchange Statement from each holder of a
non-qualified stock option of Matrix in the form attached
as Exhibit B."
4. Amendment to Paragraph 3. Paragraph 3 of the Stock Exchange
Agreement is hereby amended to read in its entirety as follows:
"At Closing, Matrix will cancel all non-qualified stock
options (covering 9,000 Matrix shares) that it has granted and
that remain outstanding as of the date hereof, and AvTel will
issue to the beneficiaries thereof, 22, 338 AvTel non-qualified
stock options, after giving effect to the Merger and Reverse Stock
Split, having the exercise period and exercise price set forth in
Exhibit B hereto."
5. Amendment to Paragraph 6. Paragraph 6 of the Stock Exchange
Agreement, including the heading thereto, is hereby deleted and replaced
entirely by the following:
"[Intentionally Omitted.]"
6. Amendment to Paragraph 9(a). The last sentence of Paragraph
9(a) of the Stock Exchange Agreement is hereby amended to read in its
entirety as follows:
"At the effective time of the Merger, by virtue of the
Merger, and without any action on the part of AvTel or
Newco or the stockholders of Newco, each share of common
stock and preferred stock, and each option of AvTel
issued and outstanding immediately prior to the effective
time of the Merger shall by virtue of the Merger be
canceled and extinguished and be converted into the right
to receive one quarter of a share of common stock or
preferred stock or an option to acquire one quarter of a
share of common stock, as applicable, of Newco; provided,
however, that Newco shall not be required to issue any
fractional shares of common stock or preferred stock but
instead shall be entitled to purchase any fractional
shares resulting from the Merger at the fair market value
thereof. This 1/4 to 1 conversion of shares is referred
to herein as the "Reverse Stock Split."
7. Amendment to Paragraph 9(b). Paragraph 9(b) of the Stock
Exchange Agreement shall be deleted in its entirety.
8. Amendments to Paragraph 12.
(a) The $500,000 amount set forth in the first sentence
of Paragraph 12 is hereby deleted and replaced with $750,000.
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(b) The following clause is hereby inserted after clause
(b) of Paragraph 12 and clauses (c), (d) and (e) of Paragraph 12
are hereby renumbered to be clauses (d), (e) and (f),
respectively:
"(c) up to an additional $250,000 may be drawn by AvTel
at any time on or after July 1, 1997 and prior to the
earlier of (i) September 30, 1997, or (ii) the
termination of this Agreement."
(c) The date "August 31, 1997" set forth in the first
sentence of clause (d) of Paragraph 12 of the Stock Exchange
Agreement (which after giving effect to this Amendment will become
clause (e)) is hereby deleted and replaced with the date "October
31, 1997."
9. Amendment to Paragraph 15. Clause (f) of Paragraph 15 of the
Stock Exchange Agreement is hereby amended to read in its entirety as
follows:
"Stockholders holding at least 90% of the issued and
outstanding common stock of Matrix shall have executed
and delivered to Matrix an Exchange Statement."
10. Amendment to Paragraph 19. The date "July 1, 1997" set forth
in the first sentence of Paragraph 19 is hereby deleted and replaced with
the date "November 30, 1997", consistent with the terms of the Letter
Agreement.
11. Amendment to Schedules. Schedules I, II, and VII of the Stock
Exchange Agreement are hereby deleted and replaced with Schedules I, II,
and VII attached hereto.
12. Amendment to Registration Rights Agreement. The Registration
Rights Agreement included as Exhibit B to the Stock Exchange Agreement
(Exhibit C after giving effect to this Agreement) is hereby amended by
deleting Section 2(b) thereof.
13. Amendment to Exhibits. Any references in the Stock Exchange
Agreement to Exhibit B are hereby amended to refer to Exhibit C to the
Stock Exchange Agreement and the Registration Rights Agreement previously
included as Exhibit B to the Stock Exchange Agreement is hereby amended to
become Exhibit C thereto. Exhibit B to the Stock Exchange Agreement shall
read entirely as set forth in Exhibit B attached hereto.
14. Effectiveness of Amendment. This Amendment shall become
effective upon the execution hereof by each of the parties hereto. Except
as amended hereby, the Stock Exchange Agreement shall remain in full force
and effect.
15. Counterparts. This Amendment may be executed simultaneously in
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one
and the same instrument.
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IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed on the dated first above written by their duly authorized
representatives.
MATRIX TELECOM, INC. AVTEL COMMUNICATIONS, INC.
By:______________________________ By:__________________________________
Title:___________________________ Title:_______________________________
4
