As filed with the Securities and Exchange Commission on May 22, 1998
File No. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
AVTEL COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 87-0378021
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
501 Bath Street 93101
Santa Barbara, California (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code:
(805) 884-6300
Amended and Restated
1997 Option Plan
(New Best Connections, Inc.)
(Full title of the Plan)
James P. Pisani, President and Secretary
501 Bath Street
Santa Barbara, California 93101
(805) 884-6300
(Agent for Service)
---------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=========================================================================================================================
Proposed Proposed
Maximum Maximum
Title of Securities to be Amount to be Offering Price Aggregate Amount of
Registered Registered Per Share(1) Offering Price(1) Registration Fee
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share 1,292,000 Shares $1.50 $1,938,000 $572
=========================================================================================================================
</TABLE>
(1) Fee calculated on the basis of the maximum number of shares
issuable under the plan and the exercise price of the options, as
provided in Rule 457(h).
<PAGE>
Part II
INFORMATION REQUIRED IN
THE REGISTRATION STATEMENT
Item 3. Incorporation of documents by reference.
The following documents, which have heretofore been filed by AvTel
Communications, Inc. ("AvTel" or "Registrant") with the Securities and
Exchange Commission (the "SEC"), are incorporated by reference herein and
shall be deemed to be a part hereof:
(a) Form 10-K for the year ended December 31, 1997 (File No. 0-27580);
(b) Form 10-Q for the quarter ended March 31, 1998 (File No. 0-27580);
(c) Form 8-K filed December 9, 1997 as amended on March 13, 1998
(File No. 0-27580); and
(d) The description of AvTel's shares of Common Stock
contained in AvTel's registration statement on Form
10-SB, as amended, initially filed with the SEC on
January 16, 1996 (File No. 0-27580).
All documents subsequently filed by AvTel pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), prior to the filing of a post-effective amendment which
indicates that all securities offered have been sold or which deregisters
all securities then remaining unsold, shall be deemed to be incorporated
herein by reference and shall be deemed a part hereof from the date of
filing of such documents.
Item 4. Description of Securities.
Not applicable.
Item 5. Interests of Named Experts and Counsel.
Not applicable.
Item 6. Indemnification of Directors and Officers.
Article VIII of the Registrant's Certificate of Incorporation
("Article VIII") is consistent with Section 102(b)(7) of the Delaware
General Corporation Law (the "DGCL"), which generally permits a company to
include a provision limiting the personal liability of a director in the
company's certificate of incorporation. With limitations, Article VIII
eliminates the personal liability of the Registrant's directors to the
Registrant or its stockholders for monetary damages for breach of fiduciary
duty as a director. However, Article VIII does not eliminate director
liability (i) for breaches of the duty of loyalty to the Registrant and its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law. (iii) for
transactions from which a director derives improper personal benefit and
(iv) under Section 174 of the DGCL ("Section 174"). Section 174 makes
directors personally liable for unlawful dividends and stock repurchases or
redemptions and expressly sets forth a negligence standard with respect to
such liability. Article VIII provides further that a director shall not be
personally liable to the Registrant or its stockholders to such further
extent as permitted by any law subsequently enacted, including any
subsequent amendment to the DGCL. While Article VIII protects the directors
from awards for monetary damages for breaches of their duty of care, it
does not eliminate their duty of care.
II-1
<PAGE>
Under Section 145 of the DGCL, directors and officers, as well as
other employees and individuals, may be indemnified against expenses
(including attorneys' fees), judgments, fines, amounts paid in settlement
in connection with specified actions, suits, or proceedings, whether civil,
criminal, administrative, or investigative (other than an action by or in
the right of the corporation--a "derivative action") if they acted in good
faith and in a manner they reasonably believed to be in, or not opposed to,
the best interests of the corporation, and, with respect to criminal
actions or proceedings, had no reasonable cause to believe their conduct
was unlawful. A similar standard of care is applicable in the case of
derivative actions, except that indemnification only extends to expenses
(including attorneys' fees) incurred in connection with the defense or
settlement of such an action, and the DGCL requires court approval before
there can be any indemnification where the person seeking indemnification
has been found liable to the corporation.
With certain limitations, Article VI of the Registrant's By-Laws
("Article VI") provides for indemnification of any of the Registrant's
current and former officers and directors against expenses, liabilities or
other matter to the fullest extent permitted by Section 145.
Indemnification rights under Article VI are non-exclusive. In the event of
an officer's or director's death, such person's indemnification rights
shall extend to his or her heirs and legal representatives. Article VI
provides that the Registrant shall indemnify its directors and officers
(and, in the discretion of the Board, employees of the Registrant or
persons serving at the request of the Registrant in any other capacity for
or on behalf of the Registrant) to the full extent permitted by law against
any liability or expense actually and reasonably incurred. Article VI
provides further that the Registrant shall advance expenses incurred by an
officer or director in defending a civil or criminal action, suit or
proceeding upon receipt of an undertaking by or on behalf of such officer
or director to repay such amount if it shall ultimately be determined that
such officer or director is not entitled to be indemnified.
Item 7. Exemption from Registration Claimed.
Not applicable.
Item 8. Exhibits.
See Index to Exhibits.
Item 9. Undertakings.
A. Rule 415 Offering.
-----------------
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are
being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of
the registration statement (or the most
recent post-effective amendment thereof)
which, individually or in the aggregate,
represent a fundamental change in the
information set forth in the registration
statement;
II-2
<PAGE>
(iii) To include any material information with
respect to the plan of distribution not
previously disclosed in the registration
statement or any material change to such
information in the registration statement;
Provided, however, that paragraphs
(A)(1)(i) and (A)(1)(ii) do not apply if
the registration statement is on Form S-3
or Form S-8, and the information required
to be included in a post-effective
amendment by those paragraphs is contained
in periodic reports filed by the registrant
pursuant to section 13 or section 15(d) of
the Exchange Act that are incorporated by
reference in the registration statement.
2. That, for the purpose of determining any liability
under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
registration statement relating to the securities
offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide
offering thereof.
3. To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of
the offering.
B. Filings Incorporating Subsequent Exchange Act Documents by Reference.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to section 13(a) or section 15(d)
of the Exchange Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to section 15(d) of the Exchange Act)
that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
C. Indemnification of Directors and Officers.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions of the registrant's charter or
by-laws or otherwise, the registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of
such issue.
II-3
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors and
officers of AvTel Communications, Inc., hereby constitutes and appoints
Anthony E. Papa and James P. Pisani, his true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for him and
in his name, place and stead, in any and all capacities, with full power to
act alone, to sign any and all amendments (including post-effective
amendments) to this registration statement, and to file the same, with all
exhibits thereto, and any and all documents in connection therewith, with
the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to
do and perform any and all acts and things requisite and necessary to be
done in and about the premises, as fully and to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, or his substitute or
nominee, may lawfully do or cause to be done by virtue hereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-8 and has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Santa Barbara, State of
California, on May 20, 1998.
AVTEL COMMUNICATIONS, INC.
By/s/ Anthony E. Papa
--------------------------------------------
name: Anthony E. Papa
title: Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Anthony E. Papa Chairman of the Board and Chief
- ---------------------------------- Executive Office (Principal Executive
Anthony E. Papa Officer)
/s/ James P. Pisani President, Chief Operating Officer, May 20, 1998
- ---------------------------------- Chief Financial Officer and Director
James P. Pisani (Principal Financial Officer)
/s/ Virginia A. Baker Controller and Chief Accounting Officer May 20, 1998
- ---------------------------------- (Principal Accounting Officer)
Virginia A. Baker
/s/ John E. Allen Director May 20, 1998
- ----------------------------------
John E. Allen
/s/ Jeffrey J. Jensen Director May 20, 1998
- -----------------------------------
Jeffrey J. Jensen
/s/ Gregory T. Mutz Director May 20, 1998
- -----------------------------------
Gregory T. Mutz
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description of Document
- ------- -----------------------
3.1 Certificate of Incorporation (incorporated by reference to
Exhibit 3.1 to AvTel's Annual Report on Form 10-KSB for the
year ended September 30, 1997 (File No. 0-27580)(the "Form
10-KSB"))
3.2 Bylaws (incorporated by reference to Exhibit 3.2 to the Form 10-KSB)
4.1 Form of stock certificate for shares of Common Stock.
4.2 Amended and Restated 1997 Option Plan (New Best Connections, Inc.).
5 Opinion of Mayer, Brown & Platt
23.1 Consent of KPMG Peat Marwick LLP
24 Power of Attorney (included on page II-4)
Exhibit 4.1
Common Stock Common Stock
AvTel
COMMUNICATIONS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
SEE REVERSE FOR
CUSIP 054529 201 CERTAIN DESCRIPTIONS
This certifies that:
Is the record holder of
FULLY PAID AUTHORIZED SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE, OF
AVTEL COMMUNICATIONS, INC.
transferable only on the books of the Company by the holder hereof in
person or by duly authorized attorney, upon the surrender of this
Certificate duly endorsed. This Certificate is not valid until
countersigned by the Transfer Agent and Registrar
IN WITNESS WHEREOF the Corporation has caused this Certificate to be
signed in facsimile by its duly authorized officers and a facsimile of its
corporate seal to be impressed hereon.
Dated:
SECRETARY PRESIDENT
<PAGE>
The following abbreviations, when used in the inscription on the
face of this certificate shall be construed as though they were written out
in full according to applicable laws or regulations
TEN COM -as tenants in common UNIF GIFT MIN ACT- ....Custodian.....
(Cust) (Minor)
TEN ENT -as tenants by the entireties under Uniform Gifts
to Minors
JT TEN -as joint tenants with rights Act................
of survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not on the above list.
For Value received ______hereby sell, assign and transfer unto
PLEASE INPUT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF RECIPIENT______________________________________________
NAME AND ADDRESS OF TRANSFEREE SHOULD BE
PRINTED OR TYPEWRITTEN ______________________________________________________
____________________________________________________________________. Shares
represented by the within Certificate, and do hereby irrevocably constitute
and appoint _________________________________________________________________
__________________________________________________________________ , Attorney
to transfer the said Shares on the books of the within named Corporation,
with full power of substitution in the premises.
Dated _____________________________ 19___________
______________________________________
SIGNATURE
Signature Guaranteed.
By ____________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION, [BANKS, BROKERAGES, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS] WITH MEMBERSHIP IN
AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM
PURSUANT TO SEC RULE 17Ad-15.
Exhibit 4.2
NEW BEST CONNECTIONS, INC.
AMENDED AND RESTATED
1997 OPTION PLAN
(NON-QUALIFIED)
1. BACKGROUND. This Amended and Restated 1997 Option Plan (the
"Plan") is adopted in the context of the following:
1.1 Adoption of Original Plan. BestConnections, LLC, a Texas
limited liability company ("Best LLC") originally adopted the 1997 Option
Plan (the "Original Plan") on February 17, 1997.
1.1.1 The purposes of the Original Plan were to aid Best
LLC in securing and retaining individual independent contractors who
contracted, directly or indirectly, with Best LLC to market the products
and services (the "Products") that Best LLC sells for Matrix Telecom, Inc.,
a Texas corporation ("Matrix"), and to reward such individuals for their
past contributions to the success and growth of Best LLC and related
entities, including Matrix.
1.1.2 This purpose was to be accomplished by the grant to
such individuals of options to purchase shares of Matrix's common stock
then owned by Best LLC. Such shares of Matrix's common stock were part of a
bloc of such shares that had been contributed to Best LLC by shareholders
of Matrix, which contribution was expressly conditioned on Best LLC's
agreement that such shares would be subject to options as contemplated by
the Original Plan. Best LLC communicated the initial option grants under
the Original Plan to members of its field force of sales agents prior to
and during June 1997, at which time it committed itself to the award of
such options.
1.2 Kickoff Program Options. In June 1997, as a result of the
agreement with the contributing Matrix shareholders, Best LLC committed to
award additional options to purchase shares of Matrix common stock to the
participants in the Original Plan to increase the incentives provided by
the Original Plan (the "Kickoff Program").
1.3 Merger into the Company. Subsequent to the adoption of the
Original Plan and the Kickoff Program, Best LLC merged with and into New
Best Connections, Inc., a Texas corporation (the "Company"). As a result of
this merger, the Company succeeded to the obligations of Best LLC under the
Original Plan, the Kickoff Program and the agreement with the Matrix
shareholders.
1.4 Acquisition by Matrix. Effective July 1, 1997, all of the
outstanding stock in the Company was acquired by Matrix pursuant to a
share-for-share exchange, and the Company became a wholly-owned subsidiary
of Matrix. Concurrently with such acquisition, the Company made certain
modifications to the Original Plan.
-1-
<PAGE>
1.5 Share Exchange with AvTel. On April 29, 1997, Matrix entered
into a Stock Exchange Agreement with AvTel Communications, Inc., a Utah
corporation ("AvTel"), pursuant to which Matrix was to be acquired by AvTel
by means of an exchange of all outstanding Matrix common stock for
newly-issued shares of AvTel common stock (the "Share Exchange"). Prior to
the closing of the Share Exchange, AvTel became a Delaware corporation by
means of a reincorporation merger and effected a de facto one-for-four
reverse stock split of its outstanding shares as part of such
reincorporation. The Share Exchange was consummated on December 1, 1997, at
which time all of the shares of Matrix common stock held by the Company
subject to options granted or committed under the Original Plan, the
Kickoff Program and the agreement with the Matrix shareholders were
converted into shares of AvTel's Common Stock, par value $.01 per share
(hereinafter, the "Common Stock"). All references in this Plan to numbers
of shares (and per share option prices) with respect to the Common Stock
have been adjusted to reflect all of the foregoing events.
1.6 Amendment and Restatement. The Company wishes to amend and
restate the Original Plan in order to consolidate the Kickoff Program, to
document changes made to the Original Plan effective in July 1997, and to
clarify some of the terms of the Original Plan.
2. PURPOSE OF THE PLAN.
2.1 Creation of Sales Incentives; Past Performance. The purposes
of the Plan are (i) to aid the Company in securing and retaining individual
independent contractors who contract, directly or indirectly, with the
Company or any Parent or Subsidiary of the Company (as those terms are
defined below) to market, or assist in the marketing of, the Products sold
for Matrix as part of the Company's field force of sales agents (such field
force, as constituted from time to time, sometimes being referred to
collectively herein as the "Field Force"), (ii) to reward members of the
Field Force for their past contributions to the success and growth of the
Company and related entities, including Matrix, and (iii) to comply with
the obligation to award options to members of the Field Force pursuant to
Best LLC's agreement with the former Matrix shareholders. For the purposes
of the Plan, the terms "Subsidiary" and "Parent" shall mean any present or
future corporation which would be a "subsidiary corporation" or a "parent
corporation," respectively, of the Company, as those terms are defined in
Section 424 of the Internal Revenue Code of 1986, as amended (the "Code").
2.2 Nature of Awards. The Plan provides for the grant of options
to purchase shares of the Common Stock held by the Company to selected
optionees. Options granted under the Plan are not intended to qualify as
"incentive stock options", as that term is defined in Section 422 of the
Code.
3. ADMINISTRATION.
3.1 Board of Directors. The Plan shall be administered by the
Board of Directors of the Company (the "Board") or by a Committee as
defined in Section 3.2. The interpretation and construction by the Board or
the Committee of any provision of the Plan, or of any agreement or
-2-
<PAGE>
option issued or executed under or pursuant to the Plan, shall be final and
binding upon the individuals receiving options under this Plan. No member
of the Board or the Committee shall be liable for any action or
determination undertaken or made in good faith with respect to the Plan or
any agreement or option issued or executed under or pursuant to the Plan.
3.2 Committee of the Board. The Board may, in its sole and
absolute discretion, delegate any or all of its duties and authority with
respect to the Plan to a committee of at least two Directors of the Company
(the "Committee") to be appointed by and to serve at the pleasure of the
Board. Once appointed, the Committee shall continue to serve until
otherwise directed by the Board. From time to time, the Board may increase
or decrease the size of the Committee, add additional members to, remove
members (with or without cause) from, appoint new members in substitution
therefor, and fill vacancies, however caused, in the Committee. The
Committee shall act pursuant to a vote of the majority of its members,
whether present in person or by telephonic means at a meeting of the
Committee, or by the unanimous written consent of its members, and minutes
shall be kept of all of its meetings and copies thereof shall be provided
to the Board. Subject to the limitations prescribed by the Plan and the
Board, the Committee may establish and follow such rules and regulations
for the conduct of its business as it may determine to be advisable. Any
decision or selection reduced to writing and signed by the Chairman of the
Committee on behalf of all of the members of the Committee reflecting its
decision shall be fully effective.
3.3 Administrative Powers. Subject to the provisions of the Plan,
the Board or the Committee, as the case may be (the "Administrator"), shall
have authority to take the following actions:
3.3.1 to construe and interpret the Plan and apply its
provisions;
3.3.2 to promulgate, amend and rescind rules and
regulations relating to the administration of the Plan;
3.3.3 to authorize any person to execute, on behalf of
the Company, any instrument required to carry out the purposes of the Plan;
3.3.4 to make all determinations with respect to the
grant, exercise, terms and termination of options under the Plan, subject
to the terms hereof;
3.3.5 to amend any outstanding option, subject to
applicable legal restrictions and to the consent of the other party to such
agreement; and
3.3.6 to make any and all other determinations which they
determine to be necessary or advisable for administration of the Plan.
-3-
<PAGE>
4. ELIGIBILITY.
4.1 General Rule. Any person who is a member of the Field Force
shall be eligible to receive options granted under the Plan and may hold
more than one option.
4.2 Limitation. Notwithstanding the provisions of Section 4.1, no
person shall be eligible to receive an option granted under the Plan if, at
the time the option is granted, he or she is a director of the Company, any
Subsidiary or Parent.
5. SHARES SUBJECT TO THE PLAN.
The stock subject to any option granted under the Plan shall be
the shares of the Common Stock (the "Shares") held by the Company. Subject
to adjustment as set forth herein, the total number of Shares which may be
sold under the Plan upon exercise of options shall not exceed 1,292,000
Shares. This shall include 1,200,000 Shares (the "Field Force Shares") that
may be sold upon exercise of options set forth in Section 6 and 92,000
Shares (the "Kickoff Shares") that may be sold upon exercise of options set
forth in Section 7). Each time any of the events set forth in Section 8.7
of the Plan occurs, the number of Shares purchasable under the Plan shall
be adjusted in the same manner as the number of Shares subject to any
outstanding option would be adjusted under the provisions of Section 8.7 of
the Plan.
6. FIELD FORCE OPTIONS.
6.1 Initial Options. The Administrator shall select members of the
Field Force who may receive options to purchase Field Force Shares. The
Administrator shall specify with respect to each such participant the
maximum number of options that such participant shall be eligible to earn
under this Section 6 ("Initial Options") subject to Section 6.2.5, and
shall notify each such participant of the number of his or her Initial
Options. The maximum aggregate number of Initial Options shall not exceed
2,000,000. Initial Options do not constitute an offer to sell or a
solicitation of an offer to buy Shares, and are not exercisable for Shares.
6.2 Exercisable Options. A participant will receive options that
are exercisable for Field Force Shares in accordance with the Plan
("Exercisable Options") up to the number of his or her Initial Options
based upon the Qualified Billing (as defined below) generated for Matrix by
the long distance telephone customers signed-up by such participant. A
participant's Qualified Billing will be the aggregate for all customers
signed-up for Matrix Products by such participant of (i) the actual monthly
billing of each customer multiplied by (ii) a Qualifying Percentage (as set
forth below) which varies by the size of the customer's bill. A participant
may not receive any Exercisable Options after his or her Termination Date
(as defined in Section 8.4).
-4-
<PAGE>
6.2.1 The Qualifying Percentage shall be as follows:
Amount of Bill Qualifying Percentage
$ 0.00 - 9.99 0%
10.00 - 49.99 40%
50.00 - 99.99 60%
100.00 - 199.99 80%
200.00 + 100%
6.2.2 Provided that the total of a participant's
customers' Qualified Billing for a given month is at least equal to the
minimum Qualified Billing required by the participant's hierarchy level (as
set forth below in Table 6.2.2(a)), the Qualified Billings will be divided
by a conversion factor to determine the number of Exercisable Options
generated from the month's billings (as set forth below in Table 6.2.2(b)).
Table 6.2.2
Minimum Qualified Billings Necessary to
Qualify for Exercisable Options
-------------------------------
Agent & Senior Agent Level $ 75.00
Silver Leaders 300.00
Gold Leaders 500.00
Platinum Leaders 2,500.00
Table 6.2.2(b)
Conversion Factor*
-----------------
Amount of Qualified Billing
for one Exercisable Option
Agent/Senior Agent Level $ 15.00
District Level 60.00
Division Level 100.00
Region Level 200.00
Agency Level 700.00
-5-
<PAGE>
* No Exercisable Options will be available from a month's Qualified
Billings if the minimum Qualified Billing described in Table
6.2.2(a) above is not achieved in that month.
6.2.3 The number of Exercisable Options calculated for
each month in a Qualifying Period (as defined below) will be totaled to
determine the number of Exercisable Options which may be offered to the
participant at the end of the Qualifying Period. The Company will then
notify the participant of the total Exercisable Options resulting from the
Qualifying Period. No participant shall have Exercisable Options with
respect to any Qualifying Period unless and until such notification is
received from the Company. Once the inception to date Exercisable Options
available to the participant equals the amount of such participant's
Initial Options, the participant will cease to qualify for any additional
Exercisable Options, except as set forth in Section 6.2.5. In no event will
more than 1,200,000 Exercisable Options be granted under this Section 6.
6.2.4 Each of the following time periods shall constitute
a separate Qualifying Period:
January 1, 1997 to September 30, 1997
October 1, 1997 to March 31, 1998
April 1, 1998 to September 30, 1998
October 1, 1998 to March 31, 1999
April 1, 1999 to September 30, 1999
October 1, 1999 to December 31, 1999
6.2.5 At the end of the last Qualifying Period, if the
total number of Exercisable Options (including both those that are
outstanding on that date and those that have been exercised prior to that
date) is less than 1,200,000, then the difference (the "Excess Options")
shall become Exercisable Options on that date and shall be distributed to
participants in accordance with this Section. The Company shall determine
the 50 participants in the Plan who continue to be members of the Field
Force and who have achieved the highest number of Exercisable Options over
the period beginning on January 1, 1997 and ending on December 31, 1999.
The Excess Options shall be distributed among such participants pro rata
based on the number of Exercisable Options otherwise earned by each during
such period. As a result, no later than December 31, 1999, the Company
shall have awarded 1,200,000 Exercisable Options under this Section 6.
6.2.6 When the total aggregate number of Exercisable
Options (including any which have been exercised) reaches 1,200,000, the
portion of each specification of Initial Options which has not yet
qualified to become Exercisable Options shall be immediately canceled, and
the holder thereof will not be entitled to receive any compensation of any
kind in respect of such cancellation. All Initial Options shall be
canceled, without compensation of any kind to the holder thereof, to the
extent that they have not become Exercisable Options by the end of the
final Qualifying Period.
6.3 When Exercisable Options May be Exercised for Field Force
Shares. Exercisable Options may only be exercised for Field Force Shares in
accordance with all the terms of this Plan including, without limitation,
Section 8.4.
-6-
<PAGE>
7. KICKOFF OPTIONS.
7.1 Distribution of Kickoff Options. The Administrator shall
select members of the Field Force who may receive options to purchase
Kickoff Shares ("Kickoff Options"). The Administrator shall specify with
respect to each such participant the number of Kickoff Options awarded such
participant and shall notify each such participant of the number of his or
her Kickoff Options.
7.2 Vesting of Kickoff Options. At the end of each of the first
five Qualifying Periods, twenty percent (20%) of each participant's Kickoff
Options shall become exercisable, subject to all the term of this Plan
including, without limitation, Section 8.4.
7.3 Reallocation of Kickoff Options. At the end of the last
Qualifying Period, if the total number of exercisable Kickoff Options
(including both those that are outstanding on that date and those that have
been exercised prior to that date) is less than 92,000, then the difference
shall be distributed as fully exercisable Kickoff Options on that date
among the participants who have been awarded Kickoff Options and who
continue to be members of the Field Force. Such distribution shall be pro
rata based on the number of Kickoff Options which each such participant has
received under this Plan. As a result, no later than December 31, 1999, the
Company shall have awarded 92,000 exercisable Kickoff Options under this
Section 7.
8. PROVISIONS APPLICABLE TO ALL OPTIONS.
The following provisions shall apply to Exercisable Options to
purchase Field Force Shares and to options to purchase Kickoff Shares.
8.1 Option Agreement. Each option shall be evidenced by an option
agreement between the participant and the Company in the form from time to
time adopted by the Administrator and containing such terms and conditions
which the Administrator deems appropriate; provided such terms and
conditions are not inconsistent with the Plan. The provisions of the
various option agreements entered into under the Plan need not be
identical.
8.2 Exercise Price. Each option agreement shall state the price at
which the Shares subject to the option may be purchased, which price shall
be $1.50 per share, subject to adjustment pursuant to Section 8.7 (the
"Exercise Price").
8.3 Method of Exercise. When otherwise exercisable under this
Plan, an option may be exercised by giving written notice to the Company
specifying the number of Shares to be purchased and accompanied by a check
payable to the Company in an amount equal to the Exercise Price, multiplied
by the number of the Shares to be purchased. No participant shall have any
rights to dividends or any voting or other rights of a stockholder with
respect to any Shares covered by an option until he has given written
notice of exercise of his option, and paid in full for such Shares.
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<PAGE>
8.4 Time of Exercise. Options that are otherwise exercisable under
Section 6 or Section 7 will be exercisable, if at all, only from the
Initial Exercise Date (as defined below) applicable thereto until the
Expiration Date (as defined below) applicable thereto. No option granted
hereunder, or any portion thereof, shall be exercisable after its
Expiration Date.
8.4.1 The "Initial Exercise Date" applicable to any
option is the date on which the offer and sale of the Shares covered by
such option shall have been first registered and qualified under the
Securities Act of 1933, as amended (the "Securities Act") and any
applicable state securities or "blue sky" laws and any and all other legal
requirements in connection with such sale have been met.
8.4.2 The "Expiration Date" of an option shall be the
earlier of the following: (i) that date which is two years after the
Initial Exercise Date applicable to the option; and (ii) that date which is
sixty (60) days after the later of (x) the Termination Date (as defined
below) of the holder of the option, or (y) the Initial Exercise Date with
respect to such option. The Termination Date of a holder of an option shall
be that date on which the holder's direct or indirect contractual
relationship with the Company is terminated for any reason (other than the
death of the holder).
8.5 Transfer of Option. No option awarded under this Plan may be
transferred in any manner other than by will or by the laws of decent or
distribution and may be exercised during the lifetime of the holder only by
the holder. In the event of the death of the holder prior to the Expiration
Date of an option, the option may be exercised at any time within sixty
(60) days following the date of death (but in no event later than the
Expiration Date of the option) by the holder's estate or by a person who
acquired the right to exercise the option by bequest or inheritance, but
only to the extent that the right to exercise had accrued at the date of
death. The terms of any option shall be binding upon the executors,
administrators, heirs and successors of the holder.
8.6 Securities Law Compliance. Anything in this Plan to the
contrary notwithstanding, no option awarded hereunder shall be exercisable
until the issuance and sale of the Shares acquired by an optionee pursuant
to the exercise of such option is registered under the Securities Act or
any similar subsequent legislation, and any then applicable requirements of
state or federal laws and regulatory agencies shall have been fully
complied with to the satisfaction of the Company and its counsel.
8.7 Stock Splits, Etc. Each option agreement shall provide that:
8.7.1 If the outstanding Common Stock shall be subdivided
into a greater number of shares, or a dividend in Common Stock or other
securities of the Company convertible into or exchangeable for the Common
Stock (in which latter event the number of Shares issuable upon the
conversion or exchange of such securities shall be deemed to have been
distributed) shall be paid in respect of the Common Stock, the Exercise
Price of any outstanding option in effect immediately prior to such
subdivision or at the record date of such dividend shall, simultaneously
with the effectiveness of such subdivision or immediately after the record
date of such dividend, be proportionately reduced, and conversely, if the
outstanding Common Stock shall be combined into a small number of shares,
the Exercise Price of any outstanding option in effect immediately prior to
such combination shall, simultaneously with the effectiveness of such
combination, be proportionately increased.
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<PAGE>
8.7.2 In the event AvTel at any time, or from time to
time, shall make or issue, or fix a record date for the determination of
holders of shares entitled to receive, a dividend or other distribution
payable in securities of AvTel other than Common Stock or securities
convertible into or exchangeable for Common Stock then and in each such
event, provision shall be made so that the holders of options shall receive
upon exercise thereof, in addition to the number of Shares receivable
thereupon, the amount of securities of AvTel which they would have received
had their option been exercised on the date of such event and had
thereafter, during the period from the date of such event to and including
the date of exercise, retained such securities receivable by them as
aforesaid during such period, giving application to all adjustments called
for during such period under this Section 8.7 with respect to the rights of
the holders of options.
8.7.3 When any adjustment is required to be made in the
Exercise Price, the number of Shares purchasable upon the exercise of any
outstanding option shall be adjusted to that number of Shares determined by
(a) multiplying an amount equal to the number of Shares purchasable upon
the exercise of the option immediately prior to such adjustment by the
Exercise Price in effect immediately prior to such adjustment, and then (b)
dividing that product by the Exercise Price in effect immediately after
such adjustment.
8.7.4 No adjustment under this Section 8.7 shall be
required unless such adjustment would require an increase or decrease of at
least 1 % in the Exercise Price or the number of Shares covered by the
option; provided, however, that any adjustments which by reason of this
Section 8.7.4 are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under
this Section 8.7 shall be made to the nearest whole Share or other share of
capital stock, as applicable.
8.8 Reorganizations. In the event that AvTel is a party to a
merger or other reorganization, all options shall be subject to the terms
specified in the relevant agreement of merger or reorganization; provided
that any options which are then fully exercisable under the terms of this
Plan shall be subject to the terms specified in the relevant agreement of
merger or reorganization if, and only if, such agreement provides for one
or more of the following: (i) the assumption of such options by the
surviving corporation or its parent, with appropriate adjustments to the
Exercise Price and the securities to be received upon exercise, (ii) the
continuation of such options by AvTel or the Company, with appropriate
adjustments to the Exercise Price and the securities to be received upon
exercise, (iii) accelerated expiration of such options, subject to at least
thirty days prior written notice to the affected participants, or (iv)
settlement in cash by a payment equal to the excess, if any, of the merger
or reorganization price per share over the Exercise Price.
8.9 Dissolution or Liquidation. A dissolution or liquidation of
AvTel shall cause each outstanding option to terminate unless theretofore
exercised.
8.10 Adjustments by Administrator. To the extent that the
foregoing adjustments relate to stock or securities of AvTel, such
adjustments shall be made by the Administrator after consultation with
AvTel, whose determination in that respect shall be final, binding and
conclusive.
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<PAGE>
8.11 No Limitation on AvTel. The grant of an option pursuant to
the Plan shall not affect in any way the rights or power of AvTel to make
adjustments, reclassification, reorganizations or changes of its capital or
business structure or to merge, consolidate, dissolve or liquidate, or to
sell or transfer all or any part of its business or assets.
8.12 Assumption by AvTel. The Company's rights and obligations
under the Plan may be assumed at any time by AvTel without the consent of
any participant or optionee. Whether or not it assumes the Company's rights
and obligations under this Plan, AvTel may fulfill the Company's
obligations to sell Shares hereunder by issuing new shares of the Common
Stock to optionees upon exercise of their options.
9. RIGHTS AS A SHAREHOLDER
No optionee or transferee of an option shall have any rights as a
shareholder with respect to any of the Shares subject to the option until
the date of issuance of a stock certificate for such Shares. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distribution or other rights for which the
record date is prior to the date such stock certificate is issued, except
as provided in Section 8.7.
10. AMENDMENTS TO THE PLAN.
The Plan may be amended or discontinued at any time or from time
to time by the Board; provided that any amendment which impairs the rights
of any holder of an option that has become exercisable under the terms of
the Plan may not be made without the consent of such holder.
11. EFFECTIVE DATE.
This Plan shall be effective as of July 1, 1997.
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[MAYER, BROWN & PLATT LETTERHEAD]
Exhibit 5
EDWARD J. SCHNEIDMAN
Direct Dial (312) 701-7348
Direct Fax (312) 706-8200
[email protected]
May 20, 1998
The Board of Directors
AvTel Communications, Inc.
501 Bath Street
Santa Barbara, California 93101
Ladies and Gentlemen:
We have acted as special counsel to AvTel Communications, Inc., a
Delaware corporation (the "Company"), in connection with the proceedings
(the "Company Proceedings") taken and to be taken relating to the
registration by the Company of an aggregate of 1,292,000 shares of common
stock (the "Shares") of the Company, $.01 par value per share, with the
Securities and Exchange Commission (the "SEC") in connection with the
Amended and Restated 1997 Option Plan (New Best Connection, Inc.) (the
"Plan"). We have also participated in the preparation and filing with the
SEC under the Securities Act of 1933, as amended, of a registration
statement on Form S-8 (the "Registration Statement"), relating to such
Shares.
As special counsel to the Company, we have examined originals or
copies certified to our satisfaction of the Company's Certificate of
Incorporation and Bylaws, resolutions of the Board of Directors, and such
other Company records, instruments, certificates and documents and such
questions of law as we considered necessary or appropriate to enable us to
express this opinion. As to certain facts material to our opinion, we have
relied, to the extent we deem such reliance proper, upon certificates of
public officials and officers of the Company. In rendering this opinion, we
have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals and the conformity to authentic
original documents of photostatic copies.
Based upon and subject to the foregoing and to the assumptions,
limitations and conditions set forth herein, we are of the opinion that,
upon completion of the Company Proceedings, the Shares will have been duly
authorized for issuance, and when the Shares are
<PAGE>
The Board of Directors
AvTel Communications, Inc.
May 20, 1998
Page 2
issued and delivered in accordance with the Company Proceedings and the
Plan, the Shares will be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to
the Registration Statement.
Very truly yours,
/s/ Mayer, Brown & Platt
MAYER, BROWN & PLATT
Exhibit 23.1
Independent Auditors' Consent
The Board of Directors
AvTel Communications, Inc.
We consent to incorporation by reference herein of our report on the
consolidated balance sheets of AvTel Communications, Inc. and subsidiaries
as of December 31, 1997 and 1996, and the related consolidated statements
of operations, stockholders' equity, and cash flows and related schedule,
for each of the years in the three-year period ended December 31, 1997,
which report appears in the annual report on Form 10-K of AvTel
Communications, Inc. for the fiscal year ended December 31, 1997.
/s/ KPMG PEAT MARWICK LLP
Dallas, Texas
May 21, 1998
