<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) NOVEMBER 30, 1999
NETLOJIX COMMUNICATIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION)
0-27580 87-0378021
(COMMISSION FILE NUMBER) (I.R.S. EMPLOYER IDENTIFICATION NO.)
501 BATH STREET, SANTA BARBARA, CALIFORNIA 93101
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(805) 884-6300
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Effective November 30, 1999, NetLojix Communications, Inc., formerly
known as AvTel Communications, Inc. ("NetLojix" or the "Registrant") sold all
of the capital stock of its wholly-owned subsidiary, Matrix Telecom, Inc.
("Matrix") to Matrix Acquisition Holdings Corp. (the "Buyer"), a wholly-owned
subsidiary of Platinum Equity Holdings, LLC ("Platinum"). The sale of the
Matrix stock (the "Sale") was effected pursuant to that certain Stock
Purchase Agreement dated August 31, 1999, as amended (the "Stock Purchase
Agreement"), among NetLojix, Matrix and Energy TRACS Acquisition Corp.
("ETAC"). On September 1, 1999, ETAC assigned its rights, duties and
obligations under the Stock Purchase Agreement to the Buyer.
TERMS OF THE SALE
NetLojix sold to the Buyer all of the capital stock of Matrix. No
other assets of NetLojix were sold. NetLojix will retain certain business
customers of Matrix, which will be transferred from Matrix to another
subsidiary of NetLojix (NetLojix Telecom, Inc.) upon receipt of certain
regulatory approvals by that subsidiary.
PURCHASE PRICE.
The purchase price for the Matrix stock (the "Purchase Price") may
be valued at up to $7,052,529. There are four major components to the
Purchase Price. First, NetLojix has received a credit against charges
incurred for long distance wholesale telephone traffic pursuant to its
service contract with Matrix (the "Long Distance Credit"). Second, the
parties have eliminated $4,190,058 in intercompany indebtedness owed to
Matrix by NetLojix. Third, NetLojix retains federal income tax refunds paid
to or due Matrix in the total amount of $1,248,139. Fourth, NetLojix will
receive $50 for each additional Internet service customer added to Matrix's
aggregate customer base, net of one-half of the customers lost from such
base, within six months after August 31, 1999, up to an aggregate of $1
million (the "ISP Payment"). In addition, NetLojix received an indemnity
against certain claims or liabilities arising under its secured credit
facility.
LONG DISTANCE CREDIT. NetLojix has an agreement with Matrix under
which it receives wholesale long distance services at rates equal to Matrix's
current wholesale cost. These rates will increase or decrease based upon
subsequent increases or decreases in Matrix's wholesale cost. Under the Stock
Purchase Agreement, as amended, the initial amount of the Long Distance
Credit was $2,039,057. However, the amount of the Purchase Price was subject
to reduction based upon a comparison of Matrix's adjusted stockholder's
equity on August 31, 1999, compared to such adjusted stockholder's equity on
May 31, 1999. NetLojix has calculated that this adjustment will result in a
reduction of the Purchase Price by $1,424,725. The Buyer is currently
reviewing NetLojix's calculation of this adjustment and has until December
15, 1999, to object to such calculation. If the Buyer does so object, and the
parties are unable to resolve the matter, the calculation will be submitted
to an independent firm of accountants chosen by the
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parties for final resolution. Accordingly, the amount of the Long Distance
Credit will not be more than $614,332, and may be less.
NetLojix used $225,000 of the Long Distance Credit during the period
commencing on September 1, 1999 and ending on November 30, 1999. After
November 30, 1999, the amount of the Long Distance Credit used may not exceed
$100,000 per month. NetLojix intends to use this Long Distance Credit to
offset its costs for long distance service which it will continue to provide
to its business customers. NetLojix is not obligated to continue to purchase
long distance services from Matrix.
INTERCOMPANY INDEBTEDNESS AND TAX REFUND. At August 31, 1999,
NetLojix owed Matrix $4,190,058 for telecommunications and other services
provided. This indebtedness was eliminated upon the closing of the Sale. At
August 31, 1999 Matrix had a Federal income tax refund due to Matrix in the
amount of $1,248,139 relating to taxes paid in prior years. This amount has
been transferred to, and will be retained by, NetLojix. Subsequent to August
31, 1999 NetLojix received full payment of the refund.
ISP PAYMENT. The Buyer will pay NetLojix $50 for each Internet
service customer added to Matrix's aggregate customer base, less one-half of
the customers lost, between August 31, 1999 and February 29, 2000, up to a
maximum of $1 million. The ISP payment, if any, will be paid on March 31,
2000.
COAST BUSINESS CREDIT INDEMNITY.
The Buyer has agreed to indemnify NetLojix from any claims, damages
or liabilities arising out of NetLojix's secured credit agreement with Coast
Business Credit in an amount not to exceed $2,750,000 plus any amount drawn
on such facility by Matrix after August 31, 1999. Substantially all of this
indebtedness is related to the business of Matrix.
NONCOMPETITION AGREEMENT.
NetLojix has agreed not to engage in the provision of residential
long distance telephone services within the United States prior to August 31,
2002. NetLojix may continue to provide long distance service to its business
customers. The noncompetition covenant will not prohibit NetLojix from
acquiring a business that provides residential long distance telephone
services in the United States if such services constitute less than 35% of
the value of the acquired business and NetLojix fully divests itself of such
services within six months after the date of acquisition. NetLojix may not
implement any new marketing programs with respect to such services. For a
similar time period, NetLojix may not, directly or indirectly, solicit the
employment of or hire certain of the employees of Matrix.
GUARANTY OF PLATINUM.
As part of the execution of the Stock Purchase Agreement, Platinum
signed a guaranty pursuant to which it guarantees the obligations of Buyer
under those provisions of the Stock
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Purchase Agreement which require, or may require, Buyer to make payments to
NetLojix. These include the obligations of Buyer to (i) pay the Purchase
Price, (ii) to indemnify NetLojix with respect to Coast Business Credit, and
(iii) to indemnify NetLojix for breaches of its representations, warranties
and covenants under the Stock Purchase Agreement.
OPERATION OF REMAINING BUSINESS
NetLojix will continue to operate its remaining businesses after the
closing of the Sale. Its newly-formed subsidiary, NetLojix Telecom, Inc., has
applied for Section 214 operating authority from the Federal Communications
Commission and necessary approvals from the various state authorities to
provide telecommunication services after the closing. This will enable
NetLojix to continue to provide long distance services to its business
customers. Accordingly, the Stock Purchase Agreement provides that, upon
receipt of such regulatory approvals, the Buyer will transfer to NetLojix the
existing business customers of Matrix.
ITEM 5. OTHER EVENTS.
SALES OF COMMON STOCK UNDER EQUITY LINE AGREEMENT
As previously reported, on April 23, 1999, NetLojix entered into an
equity line agreement (the "Equity Line Agreement") with Cambois Finance,
Inc. ("Cambois"), through which it may sell or "put" NetLojix common stock to
Cambois subject to the satisfaction of several conditions. The Equity Line
Agreement provides for Cambois to purchase up to $13,500,000 of NetLojix
common stock, subject to NetLojix filing and maintaining an effective
registration statement, trading price and volume minimums, and limits on the
amount and frequency on sales of common stock under the line. NetLojix filed
the registration statement, which was declared effective by the Securities
and Exchange Commission on August 25, 1999. After an initial put of $250,000
on September 13, 1999, NetLojix's stock price subsequently declined below the
minimum threshold of $2.25 per share required in the Equity Line Agreement.
Since November 19, 1999, NetLojix has made puts to Cambois under the
Equity Line Agreement pursuant to which NetLojix has received a total of
$1,750,000 in proceeds. NetLojix has issued a total of 962,204 shares of its
Common Stock in connection with these puts.
CONVERSION OF SERIES B CONVERTIBLE PREFERRED STOCK
As previously reported, on April 13, 1999, NetLojix sold 1,500
shares of its newly- designated Series B Convertible Preferred Stock to AMRO
International, S.A., Austinvest Anstalt Balzers and Esquire Trade & Finance
Inc. for $1,500,000. The Series B Convertible Preferred Stock had a
liquidation preference of $1,000 per share. The Series B Convertible
Preferred Stock was convertible into common stock at the option of the Series
B investors at any time. The number of shares of common stock to be received
by a Series B investor upon conversion equaled the liquidation preference of
the amount converted, divided by the
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conversion price. The conversion price was be the lesser of (1) $6.875 and
(2) 89% of the lowest closing bid price for the common stock on The Nasdaq
SmallCap Market during the five days immediately preceding the date of
conversion. As of September 30, 1999, 520 shares of the Series B Convertible
Preferred Stock had been converted.
Since September 30, 1999, the remaining 980 shares of the Series B
Convertible Preferred Stock have been converted into a total of 648,524
shares of NetLojix Common Stock. As a result, as of the date of this Report,
no shares of the Series B Convertible Preferred Stock are outstanding.
LISTING ON THE NASDAQ SMALLCAP MARKET
As previously reported, on November 9, 1999 NetLojix filed notice
with The Nasdaq Stock Market Inc. of its intent to appeal a decision made by
the Nasdaq staff to delist NetLojix from The Nasdaq SmallCap Stock Market. A
hearing was set for December 9, 1999 before a Nasdaq Listing Qualifications
Panel. Based on the closing of the Matrix Sale and the sale of additional
Common Stock under the Equity Line Agreement, NetLojix believes that it now
meets the minimum requirements for continued listing on The Nasdaq SmallCap
Market.
Nasdaq has requested that NetLojix make a public filing with the
Securities and Exchange Commission that includes an unaudited pro forma
condensed consolidated balance sheet as of October 31, 1999 evidencing
compliance, on a pro forma basis, with the requirement that NetLojix have at
least $2 million in net tangible assets. Set forth below is NetLojix's
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of October 31,
1999 which NetLojix believes satisfies this requirement.
There is no assurance, however, that Nasdaq will not differ with
NetLojix or impose subsequent or additional requirements. If NetLojix is
unable to meet any requirement, the Common Stock likely would be transferred
to the OTC Bulletin Board. Such an event could impair the liquidity of the
Common Stock and make future financings or acquisitions by the Company more
difficult.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
The following Unaudited Pro Forma Condensed Consolidated Balance
Sheet gives effect to (i) the sale of all of the issued and outstanding stock
of Matrix to the Buyer, and (ii) the issuance of a total of 962,204 shares of
Common Stock for proceeds of $1,750,000. The Unaudited Pro Forma Condensed
Consolidated Balance Sheet should be read in conjunction with the historical
financial statements of NetLojix and accompanying notes. This pro forma
information is presented for illustration purposes only and is not
necessarily indicative of the results which actually would have been achieved
if the Matrix sale had been effected on the pro forma date, nor is it
necessarily indicative of future results.
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The Unaudited Pro Forma Condensed Consolidated Balance Sheet at October
31, 1999 assumes that all of the transaction described in the preceding
paragraph were effected on that date.
NETLOJIX COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
October 31, 1999
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Historical Adjustments Balance Sheet
------------ ------------ -------------
Assets
------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 485,212 1,750,000 (B) 2,235,212
Accounts receivable, net 1,644,448 155,474 (A) 1,799,922
Due from affiliates 777,885 777,885
Federal and state income tax receivable 210,754 210,754
Other current assets 550,538 414,332 (A) 964,870
------------ ------------ -------------
Total current assets 3,668,837 2,319,806 5,988,643
Property and equipment, net 945,427 945,427
Goodwill, net 4,109,243 4,109,243
Other assets, net 986,746 986,746
------------ ------------ -------------
Total assets $ 9,710,253 2,319,806 12,030,059
============ ============ =============
Liabilities and Stockholders' Equity
- ------------------------------------
CURRENT LIABILITIES
Accounts payable and other accrued expenses $ 1,890,975 382,966 (A) 2,273,941
Accrued network services costs 745,851 (225,000)(A) 520,851
Sales and excise tax payable 160,294 160,294
Due to affiliates -- --
Liabilities of discontinued operations, net 5,624,530 (5,624,530)(A) --
Other current liabilities 1,309,078 1,309,078
------------ ------------ -------------
Total current liabilities 9,730,728 (5,466,564) 4,264,164
Long-term borrowings 475,996 475,996
Common stock subject to put option 112,577 112,577
Long-term obligations under capital leases -- --
------------ ------------ -------------
Total liabilities 10,319,301 (5,466,564) 4,852,737
------------ ------------ -------------
STOCKHOLDERS' EQUITY
Preferred stock, authorized 750,000 shares, $0.01 par value -- --
Series A convertible preferred stock, authorized 250,000 shares,
$0.01 par value, cumulative as to 8% dividends, 147,700 shares
issued and outstanding. (Liquidation preference of $704,032
including dividends in arrears.) 1,477 1,477
Series B convertible preferred stock, authorized 1,500 shares,
$0.01 par value, annual dividends of $30 per share, 920 shares
issued and outstanding. (Liquidation preference of $920,000.) 9 9
Common stock, authorized 20,000,000 shares, $0.01 par value,
issued 10,971,865 shares at October 31, 1999 108,968 9,622 (B) 118,590
Additional paid in capital 21,742,706 1,996,510 (A,B) 23,739,216
Accumulated deficit (22,462,097) 5,780,238 (A) (16,681,859)
Treasury stock, $0.01 par value, 11,075 shares (111) (111)
------------ ------------ -------------
Total stockholders' equity (609,048) 7,786,370 7,177,322
Commitments and contingencies
------------ ------------ -------------
Total liabilities and stockholders' equity $ 9,710,253 2,319,806 12,030,059
============ ============ =============
</TABLE>
Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
(A) To record a gain on disposition of Matrix.
(B) To record the sale of 962,204 shares of common stock and the
corresponding proceeds of $1,750,000.
6
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ITEM 7: FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(b) PRO FORMA FINANCIAL INFORMATION.
Registrant hereby files the following pro forma financial
information reflecting the Sale of Matrix by Registrant:
(i) Introduction
(ii) Unaudited Pro Forma Condensed Consolidated Balance Sheet at
September 30, 1999
(iii) Unaudited Pro Forma Condensed Consolidated Statements of
Operations for the nine months ended September 30, 1999.
(iv) Unaudited Pro Forma Condensed Combined Statement of
Operations for the year ended December 31, 1998.
(v) Notes to unaudited pro forma condensed financial
information.
This pro forma financial information appears immediately after the signature
page of this report.
(c) EXHIBITS.
2.1 Stock Purchase Agreement dated August 31, 1999, among AvTel
Communications, Inc., Matrix Telecom, Inc. and Energy TRACS Acquisition
Corp. (Incorporated by reference to Exhibit 2.1 to Registrant's Current
Report on Form 8-K dated September 8, 1999).
2.2 First Amendment to Stock Purchase Agreement dated as of September 16,
1999, among NetLojix Communications, Matrix Telecom, Inc. and Matrix
Acquisition Holdings Corp.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NETLOJIX COMMUNICATIONS, INC.
Dated: December 8, 1999 By: /s/ ANTHONY E. PAPA
----------------
Anthony E. Papa
Chairman and Chief Executive
Officer
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
The following unaudited pro forma financial statements give effect
to the sale of all of the issued and outstanding stock of Matrix to the
Buyer. The unaudited pro forma financial statements should be read in
conjunction with the historical financial statements of NetLojix and
accompanying notes. This pro forma information is presented for illustration
purposes only and is not necessarily indicative of the results which actually
would have been achieved if the Matrix sale had been effected on the pro
forma dates, nor is it necessarily indicative of future results.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet at
September 30, 1999 assumes that the Matrix sale was effected on that date.
The Unaudited Pro Forma Condensed Consolidated Statements of Operations for
the year ended December 31, 1998 and for the nine months ended September 30,
1999 assume the sale occurred January 1, 1998.
NETLOJIX COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 1999
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Historical Adjustments Balance Sheet
------------ ------------ -------------
Assets
--------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 355,216 355,216
Accounts receivable, net 1,835,835 (203,900)(a) 1,631,935
Due from affiliates 733,789 (313,095)(a) 420,694
Federal and state income tax receivable 246,047 246,047
Other current assets 467,096 488,872(a) 955,968
------------ ------------ -------------
Total current assets 3,637,983 (28,123) 3,609,860
Property and equipment, net 888,090 888,090
Goodwill, net 4,133,267 4,133,267
Other assets, net 1,014,052 1,014,052
------------ ------------ -------------
Total assets $ 9,673,392 (28,123) 9,645,269
============ ============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Accounts payable and other accrued expenses $ 1,465,220 436,465(a) 1,901,685
Accrued network services costs 2,005,137 (1,799,396)(a) 205,741
Sales and excise tax payable 198,126 198,126
Due to affiliates -- --
Liabilities on discontinued operations, net 4,701,562 (4,701,562)(a) --
Other current liabilities 1,348,720 1,348,720
------------ ------------ -------------
Total current liabilities 9,718,765 (6,064,493) 3,654,272
Long-term borrowings 98,354 98,354
Common stock subject to put option 112,577 112,577
Long-term obligations under capital leases -- --
------------ ------------ -------------
Total liabilities 9,929,696 (6,064,493) 3,865,203
------------ ------------ -------------
STOCKHOLDERS' EQUITY
Preferred stock, authorized 750,000 shares, $0.01 par value -- --
Series A convertible preferred stock, authorized 250,000 shares,
$0.01 par value, cumulative as to 8% dividends, 147,700 shares
issued and outstanding. (Liquidation preference of $704,032
including dividends in arrears.) 1,477 1,477
Series B convertible preferred stock, authorized 1,500 shares,
$0.01 par value, annual dividends of $30 per share, 980 shares
issued and outstanding. (Liquidation preference of $980,000.) 10 10
Common stock, authorized 20,000,000 shares, $0.01 par value,
issued 10,867,440 and 10,409,473 shares at September 30, 1999
and December 31, 1998, respectively 107,924 107,924
Additional paid in capital 21,631,122 256,132(a) 21,887,254
Accumulated deficit (21,996,726) 5,780,238(a) (16,216,488)
Treasury stock, $0.01 par value, 11,075 shares at September 30,
1999 and none at December 31, 1998 (111) (111)
------------ ------------ -------------
Total stockholders' equity (256,304) 6,036,370 5,780,066
Commitments and contingencies
------------ ------------ -------------
Total liabilities and stockholders' equity $ 9,673,392 (28,123) 9,645,269
============ ============ =============
</TABLE>
(a) To record the sale of Matrix.
9
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NETLOJIX COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
December 31, 1998 September 30, 1999
----------------- ------------------
Historical Historical
As Restated Adjustments Proforma As Restated Adjustments Proforma
------------- ------------- ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES $ 9,887,729 9,887,729 12,161,481 12,161,481
COST OF REVENUES 5,668,958 5,668,958 6,704,199 6,704,199
----------------------------- ----------- -------------------------- ----------
GROSS MARGIN 4,218,771 - 4,218,771 5,457,282 - 5,457,282
Operating expenses
Selling, general and administrative 6,701,289 6,701,289 8,310,933 8,310,933
Depreciation and amortization 611,911 611,911 766,425 766,425
----------------------------- ----------- -------------------------- ----------
Total operating expenses 7,313,200 - 7,313,200 9,077,358 - 9,077,358
----------------------------- ----------- -------------------------- ----------
OPERATING LOSS (3,094,429) - (3,094,429) (3,620,076) - (3,620,076)
Interest expense (31,178) (31,178) (97,600) - (97,600)
Other income (expense), net 92,337 92,337 9,621 9,621
----------------------------- ----------- -------------------------- ----------
Loss before income taxes and
discontinued operations (3,033,270) - (3,033,270) (3,708,055) - (3,708,055)
Income tax benefit - - - - -
----------------------------- ----------- -------------------------- ----------
Net loss before discontinued operations $ (3,033,270) - (3,033,270) (3,708,055) - (3,708,055)
Discontinued operations
Loss on operations (2,769,048) 2,769,048 (a) - (3,009,460) 3,009,460 (a) -
----------------------------- ----------- -------------------------- ----------
NET LOSS $ (5,802,318) 2,769,048 (3,033,270) (6,717,515) 3,009,460 (3,708,055)
============================= =========== ========================== ===========
</TABLE>
Notes to Unaudited Pro Forma Condensed Consolidated Statements of Operations
The Unaudited Condensed Consolidated statements of operations have been
restated to give effect to the decision be the Company to exit the
residential long distance line of business. Consequently all operations
of the Company' residential long distance businesses are reflected as
discontinued operations.
The Company expects to recognize a gain of approximately $5.8 million
upon closing of the sale which is not included in the pro forma
statements of operations.
(a) To reverse equity in net loss of discontuinued operations associated with
Matrix.
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EXHIBIT 2.2
FIRST AMENDMENT
TO
STOCK PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT (this "Amendment")
is entered into as of September 16, 1999, between NetLojix Communications,
Inc., a Delaware corporation (the "Seller"), Matrix Acquisition Holdings
Corp., a Delaware corporation (the "Buyer"), and Matrix Telecom, Inc., a
Texas corporation (the "Company").
BACKGROUND
A. The Seller, the Company and Energy TRACS Acquisition Corp., a
Delaware corporation ("ETAC") have entered into that certain Stock Purchase
Agreement dated August 31, 1999 (the "Stock Purchase Agreement") pursuant to
which ETAC was to acquire all of the common stock of the Company.
B. Pursuant to Section 12.4 of the Stock Purchase Agreement, ETAC
assigned its rights, duties and obligations under the Stock Purchase
Agreement to the Buyer on August 31, 1999.
C. On September 15, 1999, the Seller changed its corporate name from
"AvTel Communications, Inc." to "NetLojix Communications, Inc."
D. The parties hereto have determined to amend the Stock Purchase
Agreement as set forth herein.
AGREEMENT
NOW, THEREFORE, the Buyer, the Seller and the Company, in
consideration of the mutual promises hereinafter set forth, and intending to
be legally bound, do hereby promise and agree as follows:
1. AMENDMENT OF SECTION 1.2(a)
Section 1.2(a) is hereby amended to read in its entirety as
follows:
"(a) A credit in favor of the Seller (the "Credit") in the
aggregate amount of Two Million Thirty-Nine Thousand Fifty-Seven Dollars
($2,039,057) against amounts that become due after the date hereof for long
distance wholesale traffic to be provided by the Company to the Seller (the
"Long Distance Services") pursuant to a rebiller service contract between the
Company and the Seller of even date herewith; provided, however, that the
amount of the Credit taken by the Seller will not exceed Two Hundred
Twenty-Five Thousand Dollars
<PAGE>
($225,000) for the period commencing on September 1, 1999 and ending on
November 30, 1999, and will not exceed One Hundred Thousand Dollars
($100,000) per month for a period not to exceed twenty-five (25) months
thereafter."
2. DELETION OF SECTION 2.1(k).
Section 2.1(k) is hereby deleted in its entirety.
3. PAYMENT OF CERTAIN ACCOUNTS PAYABLE.
The Seller hereby agrees to pay currently those accounts
payable of the Company set forth on Exhibit A attached hereto and
incorporated herein by this reference.
4. NO OTHER MODIFICATION.
Except as specifically amended hereby, the Stock Purchase
Agreement shall continue unchanged and in full force and effect. All of the
provisions contained in Section 12 of the Stock Purchase Agreement shall
apply to this Amendment.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day, month and year first above written.
SELLER
NETLOJIX COMMUNICATIONS, INC.
By: /s/ ANTHONY E. PAPA
--------------------------
Name: Anthony E. Papa
Title: Chief Executive Officer
BUYER
MATRIX ACQUISITION HOLDINGS
CORP.
By: /s/ WILLIAM M. FOLTZ, JR.
--------------------------
Name: William M. Foltz, Jr.
Title: Vice President
COMPANY
MATRIX TELECOM, INC.
By: /s/ ANTHONY E. PAPA
--------------------------
Name: Anthony E. Papa
Title: Chief Executive Officer
<PAGE>
GUARANTY OF PLATINUM EQUITY HOLDINGS, LLC
Platinum Equity Holdings, LLC hereby guarantees the obligations of
the Buyer (including any assignee of the Buyer) under SECTION 1 hereof and
agrees that it will not cause the Buyer to take any actions that would cause
the Buyer to violate the terms of SECTION 1.
By: /s/ WILLIAM C. BRICKING
--------------------------
Name: William C. Bricking
Title: Vice President, Operations
