UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
Under the Securities Exchange Act of 1934
(Amendment No. 1) *
AvTel Communications, Inc.
(Name of Issuer)
Common Stock, $.01 par value
(Title of Class of Securities)
054529 20 1
(CUSIP Number)
Thomas N. Harding, Esq.
SEED, MACKALL & COLE LLP
1332 Anacapa Street, Suite 200
Santa Barbara, CA 93101
(805) 963-0669
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
January 4, 1999
(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 Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
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).
CUSIP No. 054529 20 1
1) Name of Reporting Person I. R. S. Identification Nos. of Above Person
(Entities only): Anthony E. Papa
2) Check the Appropriate Box if a Member of a Group (See Instructions):
(a)
(b)
3) SEC Use Only:
4) Source of Funds (See Instructions): PF
5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d)
or 2(e): [ ]
6) Citizenship or Place of Organization: United States of America
Number of Shares 7) Sole Voting Power: 778,588
Beneficially Owned 8) Shared Voting Power: 0
by Each Reporting 9) Sole Dispositive Power: 778,588
Person With 10) Shared Dispositive Power: 0
11) Aggregate Amount Beneficially Owned by Reporting Person: 778,588
12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions): [ ]
13) Percent of Class Represented by Amount in Row (11): 7.5%
14) Type of Reporting Person (See Instructions): IN
SCHEDULE 13D
ANTHONY E. PAPA
1. Security and Issuer.
This statement relates to the Common Stock, $.01 par value (the "Common
Stock") of AvTel Communications, Inc., a Delaware corporation ("AvTel").
The principal executive offices of AvTel are located at 501 Bath Street,
Santa Barbara, California 93101.
2. Identity and Background.
1. Name: Anthony E. Papa
2. Business Address: 501 Bath Street, Santa Barbara, CA 93101
3. Principal Occupation and Address: Chairman of the Board of Directors
and Chief Executive Officer AvTel Communications, Inc. 501 Bath Street
Santa Barbara, CA 93101
4. Criminal Proceedings: None
5. Civil/Administrative Proceedings: None
6. Citizenship: United States of America
3. Source and Amount of Funds or Other Consideration.
Prior to the transaction covered by this Amendment, Mr. Papa owned 528,588
shares of Common Stock of AvTel, including 15,625 shares which Mr. Papa had
the right to acquire within 60 days pursuant to outstanding employee stock
options. On January 4, 1999, Mr. Papa purchased 250,000 shares of AvTel
Common Stock from Ronald L. Jensen in a private transaction for a total
purchase price of $562,500. He acquired his shares through the use of
personal funds. Mr. Papa borrowed the funds used to purchase such shares
from Mr. Jensen, and executed five separate full recourse promissory notes
of $112,500 each in favor of Mr. Jensen. Each promissory note is secured by
other shares in AvTel already owned by Mr. Papa. Mr. Papa's acquisition
brought his total holdings of AvTel Common Stock to 778,588 shares,
including shares he has a right to acquire within 60 days.
4. Purpose of Transaction.
Mr. Papa acquired the 250,000 shares from Mr. Jensen for investment
purposes.
7. None.
8. None.
9. None.
10. None.
11. None.
12. None.
13. None.
14. None.
15. None.
16. None.
5. Interest in Securities of the Issuer.
17. Mr. Papa beneficially owns 778,588 shares of the Common Stock (7.5% of
all of the outstanding shares of the Common Stock). This includes
15,625 shares which Mr. Papa has the right to acquire within 60 days
pursuant to outstanding employee stock options.
18. Mr. Papa has the sole power to vote and the sole power to direct the
disposition of the shares of the Common Stock referred to in Item 5a.
19. None, other than the purchase described in this Amendment. 20. None.
21. Not Applicable.
6. Contracts, Arrangements, Understandings or Relationships with Respect to
Securities of the Issuer.
As noted above, Mr. Papa borrowed from Mr. Jensen the entire purchase price
of $562,500 with respect to the purchase of 250,000 shares of AvTel Common
Stock on January 4, 1999. These borrowings are evidenced by five identical
full recourse promissory notes in favor of Mr. Jensen. Each such promissory
note is secured by a pledge of 50,000 shares of AvTel Common Stock already
held by Mr. Papa. The forms of the promissory notes and stock pledge
agreements are attached to this Amendment as Exhibits. Each note bears
interest at the rate of six percent (6%) per annum with interest payable
quarterly in arrears. All of the principal amount of each note is due and
payable on December 31, 2003. Each such note may be prepaid by Mr. Papa
without penalty or premium in advance of the maturity date. Each stock
pledge agreement permits Mr. Papa to vote these shares of common stock
pledged and to receive dividends upon such shares, unless and until an
event of default occurs under such stock pledge agreement or the related
promissory note. Each note and stock pledge agreement contains standard
default and similar provisions.
The shares sold to Mr. Papa by Mr. Jensen are subject to a Registration
Rights and Lockup Agreement dated December 1, 1997, between AvTel and
Matrix Telecom, Inc. on behalf of its shareholders, including Mr. Jensen
(the "Registration Rights and Lockup Agreement"). The Registration Rights
and Lockup Agreement provides that, without the prior written consent of
AvTel, the holder of such shares will not offer, pledge, sell, contract to
sell, grant any options for the sale of or otherwise dispose of, directly
or indirectly, any of such shares. Mr. Papa received such shares from Mr.
Jensen subject to such restrictions set forth in the Registration Rights
and Lockup Agreement. The Registration Rights and Lockup Agreement also
accords certain shelf registration rights to such shares after the end of
the restriction period.
7. Material to be Filed as Exhibits.
A. Promissory Note of Anthony E. Papa dated January 4, 1999 in favor of
Ronald L. Jensen in the principal amount of $50,000. Four other
promissory notes, identical in form and substance to this promissory
note, have not been attached.
B. Form of Stock Pledge Agreement dated January 4, 1999, between Anthony
E. Papa and Ronald L. Jensen. Four other stock pledge agreements,
identical in form and substance to this stock pledge agreement, have
not been attached.
C. Registration Rights and Lockup Agreement dated December 1, 1997,
between AvTel Communications, Inc. and Matrix Telecom, Inc., on behalf
of its shareholders (including Ronald L. Jensen). (Incorporated by
reference to Exhibit 4 to AvTel's Current Report on Form 8-K dated
December 1, 1997.)
Signature
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Statement is true, complete and correct.
Dated: February 1, 1999. /s/ ANTHONY E. PAPA
Anthony E. Papa
Attention: Intentional misstatements or omissions of fact constitute federal
criminal violations (See 18 U.S.C. 1001).
<PAGE>
EXHIBIT 7A
PROMISSORY NOTE
$ 112,500.00 January 4, 1999
FOR VALUE RECEIVED, the undersigned, Anthony E. Papa, an individual ("Payor"),
promises to pay to the order of Ronald L. Jensen, an individual ("Payee"), on
December 31, 2003, or, earlier if accelerated as provided below, (the earlier of
such dates, the "Maturity Date"), the principal sum of $ 112,500.00 and any
accrued interest on this Note.
This Note evidences an obligation in connection with a loan made by Payee to
Payor. The obligation under this Note shall be secured by the pledge of 50,000
share of common stock of AvTel Communications, Inc., a Delaware corporation (the
"Collateral"), pursuant to a security agreement (the "Security Agreement") of
even date herewith between Payor, as Borrower, and Payee, as Lender.
The unpaid principal amount of this Note from time to time outstanding shall
bear interest at 6% per annum (based upon a 365/366-day year). The loan shall be
repaid on the Maturity Date. During the term of the note, interest only shall be
payable quarterly in arrears commencing March 31, 1999 and continuing each June
30, September 30, December 31 and March 31 thereafter until paid in full. The
first payment due March 31, 1999 shall consist of interest from the date hereof.
After maturity (whether by acceleration or otherwise), accrued interest and the
unpaid principal amount of this Note outstanding shall be payable on demand.
This Note and the obligations set forth herein shall be with full personal
recourse to all of the assets of Payor and shall not be limited to the
Collateral pledged under the Security Agreement.
The Maturity Date may be extended for such period as the parties may mutually
agree in writing.
Payor may voluntarily prepay all or any portion of the unpaid principal amount
of this Note from time to time outstanding without premium or penalty.
All payments of principal and interest on this Note shall be payable in lawful
currency of the United States of America at 4001 McEwen Drive, Suite 200,
Dallas, Texas 75244 or such other place as Payee shall designate to Payor in
writing, in cash or by check. If payment hereunder falls due on a day which is
either a Saturday, Sunday or any other day on which banks in Dallas, Texas are
not generally open for business to the public (i.e., not a "Business Day"), then
such due date shall be extended to the immediately succeeding Business Day.
Payor agrees that if any of the following events of default (each an "Event of
Default") shall occur and be continuing:
(i) failure to make a payment of principal or interest on this Note
within 10 days after the date on which the Payee gives Payor
written notice of a failure to make a payment when due of such
principal or interest on this Note;
(ii) default in the performance or observance of any other material
agreements of Payor contained herein or in the Security Agreement
and a failure to cure such default within 30 days after Payee
gives Payor written notice of such default, or
(iii) the institution of any bankruptcy, insolvency, receivership or
similar proceeding relating to Payor or his assets;
then Payee may declare by written notice to Payor that this Note and all unpaid
principal of and interest on this Note and all accrued costs, expenses and other
amounts payable under this Note are immediately due and payable, effective upon
Payor's receipt of such notice.
All notices hereunder shall be in writing (including, without limitation,
confirmed facsimile transmission) and shall be sent to Payor or Payee, as
appropriate, at such party's address shown on the signature page of the Security
Agreement, or at such other address as such party may, by written notice
received by the other party hereto, have designated as its address for such
purpose. Notices sent by facsimile transmission shall be deemed to have been
given when confirmed as sent; notices sent by mail shall be deemed to have been
given five days after the date mailed by registered or certified mail, postage
prepaid; and notices sent by hand delivery or courier service shall be deemed to
have been given when received.
This Note has been made and delivered at Dallas, Texas and shall be construed in
accordance with and governed by the internal laws of the State of Texas without
regard to its choice of law rules. Wherever possible, each provision of this
Note shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Note shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the least
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Note.
IN WITNESS WHEREOF, Payor has caused this Note to be executed as of the day and
year first above written.
/s/ ANTHONY E. PAPA
Print Name: Anthony E. Papa
<PAGE>
EXHIBIT 7B
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of January 4, 1998, between Anthony E. Papa,
an individual (herein called the "Borrower"), and Ronald L. Jensen, an
individual (herein called the "Lender"), is entered into in connection with a
loan made by Lender to Borrower, which loan is evidenced by a promissory note,
dated of even date herewith, made by Borrower as Payor and payable to Lender as
Payee in the Principal amount of $ 112,500 (the "Note").
W I T N E S S E T H:
WHEREAS, Borrower is purchasing from Lender 50,000 shares of common stock of
AvTel Communications, Inc., a Delaware Corporation (the "Purchased Shares");
WHEREAS, Borrower is receiving a loan from Lender, evidenced by the Note, for
the purpose of purchasing the Purchased Shares; and
WHEREAS, the Borrower desires to execute and deliver this Agreement in order to
grant and confirm the security interest of Lender in those shares of common
stock currently owned by Borrower identified on Schedule 1 which is attached
hereto and made a part hereof (the "Pledged Shares") and other Collateral (as
defined below);
NOW, THEREFORE, in consideration of the premises and for other consideration,
the sufficiency of which is hereby acknowledged, Borrower agrees with Lender
that:
SECTION 1 Pledge and Security Interest. To secure the due and punctual payment
of the Obligations (as hereinafter defined), Borrower hereby pledges,
hypothecates, assigns, transfers, sets over and delivers unto Lender, and hereby
grants to the Lender a security interest in, the following:
(i) the Pledged Shares and the certificates representing the Pledged
Shares, and all cash, securities, dividends, rights and other
property at any time and from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all
of the Pledged Shares; and
(ii) all other property hereafter delivered to the Lender in
substitution for or in addition to any of the foregoing, all
certificates and instruments representing or evidencing such
property and all cash, securities, interest, dividends, rights and
other property at any time and from time to time received,
receivable or otherwise distributed in respect of or in exchange
for any or all thereof;
(all such Pledged Shares, additional shares, certificates, notes, instruments,
cash, securities, interest, dividends, rights and other property being herein
collectively called the "Collateral");
TO HAVE AND TO HOLD the Collateral, together with all rights, titles, interests,
privileges and preferences appertaining or incidental thereto, unto Lender, his
successors and assigns, forever, subject, however, to the terms, covenants and
conditions hereafter set forth.
SECTION 2 Warranties, Delivery of Collateral and Further Assurances.
(a) Borrower warrants to Lender that Borrower is, or at the time of
any future delivery, pledge, assignment or transfer will be, the
lawful owner of the Collateral, free of all claims and liens other
than the security interest hereunder, with full right to deliver,
pledge, assign and transfer the Collateral to Lender as Collateral
hereunder.
(b) Simultaneously with the execution and delivery of this Agreement,
Borrower will deliver to Lender the Pledged Shares and other
Collateral and all certificates, instruments and other documents
evidencing or representing the Pledged Shares and other
Collateral.
(c) Immediately upon receipt of any Collateral, Borrower will deliver
to Lender all such Collateral and all certificates, instruments
and other documents evidencing or representing such Collateral.
(d) Borrower will perform all additional acts and execute all other
documents reasonably requested by Lender at any time to further
evidence, perfect, maintain and enforce Lender's security interest
in the Collateral.
(e) Borrower agrees not to sell, assign, exchange, pledge or otherwise
transfer or encumber any of its right in and to any of the
Collateral.
SECTION 3 Care of Collateral. Lender shall be deemed to have exercised
reasonable care with respect to the interest of Borrower in the custody and
preservation of the Collateral if it takes such action for that purpose as
Borrower shall reasonably request in writing. Failure of Lender to comply with
any such reasonable request shall be deemed a failure to exercise reasonable
care, and failure of Lender to preserve or protect any rights with respect to
the Collateral against prior parties, or to do any act with respect to
preservation of the Collateral reasonably requested by Borrower, shall be deemed
a failure to exercise reasonable care in the custody or preservation of the
Collateral.
SECTION 4 Certain Rights Regarding Collateral.
(a) Lender may from time to time, whether before or after any of the
Obligations shall become due and payable, with prior written notice to
Borrower, take all or any of the following actions: (i) notify the
parties obligated on any of the Collateral to make payment to Lender
of any amounts due or to become due thereunder, (ii) enforce
collection of any of the Collateral by suit or otherwise, and
surrender, release or exchange all or any part thereof, or compromise
or extend or renew for any period (whether or not longer than the
original period) any obligations of any nature of any party with
respect thereto, and (iii) take control of any proceeds of the
Collateral.
(b) Lender, furthermore, from time to time, whether before or after any of
the Obligations shall become due and payable, with prior written
notice to Borrower, may take all or any of the following actions: (i)
extend or renew for any period (whether or not longer than the
original period) or exchange any of the Obligations or release or
compromise any obligation of any nature of any party with respect
thereto, (ii) surrender, release or exchange all or any part of any
property, in addition to the Collateral, securing any of the
Obligations, or compromise or extend or renew for any period (whether
or not longer than the original period) any obligations of any nature
of any party with respect to any such property, and (iii) resort to
the Collateral for payment of any of the Obligations whether or not it
shall have resorted to any other property securing the Obligations or
shall have proceeded against any party primarily or secondarily liable
on any of the Obligations.
SECTION 5 Dividends, Etc.
(a) So long as no Default (as hereinafter defined), or an event which with
the giving of notice or the lapse of time or both would constitute a
Default, shall have occurred and be continuing, Borrower shall be
entitled to receive any and all cash distributions, whether ordinary
income, capital gain or return of capital, on the Pledged Shares,
which he is otherwise entitled to receive; provided, however, that any
and all stock and/or liquidating dividends and distributions made on
or in respect of the Pledged Shares, whether resulting from a
subdivision, combination or reclassification of the outstanding
capital stock of any issuer thereof or received in exchange for the
Pledged Shares or any part thereof or as a result of any merger,
consolidation, acquisition or other exchange of assets to which any
issuer may be a party or otherwise, and any and all cash and other
property received in exchange for any Collateral shall be and become
part of the Collateral pledged hereunder and, if received by Borrower,
shall forthwith be delivered to Lender or its designated nominee
(accompanied, if appropriate, by proper instruments of assignment
and/or stock power executed by Borrower in accordance with Lender's
instructions) to be held subject to the terms of this Agreement.
(b) Upon the occurrence and during the continuance of a Default, or any
event which with the giving of notice or lapse of time or both would
constitute a Default, all rights of Borrower pursuant to Section 5(a)
shall cease and Lender shall have the sole and exclusive right and
authority to receive and apply to payment of the Obligations the
dividends which Borrower otherwise would be authorized to retain
pursuant to Section 5(a) hereof.
SECTION 6 Default.
(a) The occurrence of any of the following shall constitute a default (a
"Default") hereunder: nonpayment, when due, whether by acceleration or
otherwise but after the expiration of all applicable notice and cure
periods, of any amount payable on any of the Obligations; an "Event of
Default" (as defined in the Note) has occurred and is continuing; any
representation of Borrower contained herein or given pursuant hereto
shall be untrue in any material respect; or Borrower shall default in
any material agreement contained herein. Upon a Default, (i) Lender
may exercise from time to time any rights and remedies available to it
under the Uniform Commercial Code as in effect from time to time in
Texas or otherwise available to it, and (ii) Lender may, with prior
written notice, appropriate and apply toward the payment of such of
the Obligations, and in such order or application, as Lender may from
time to time elect, any balances, credits, deposits, accounts or
moneys of Borrower. If any additional notification of intended
disposition of any of the Collateral is required by law, then such
notification, if mailed, shall be deemed reasonably and properly given
if mailed at least five days before such disposition, postage prepaid,
addressed to Borrower, either at the address shown on the signature
page hereof, or at such other address as Borrower may, by written
notice received by Lender, have designated as its address for notices.
Any proceeds of any disposition of Collateral may be applied by Lender
toward the payment of such of the Obligations and in such order of
application, as Lender may from time to time elect. No delay on the
part of Lender in the exercise of any right or remedy shall operate as
a waiver thereof, and no single or partial exercise by Lender of any
right or remedy shall preclude other or further exercise thereof or
the exercise of any other right or remedy. No action of Lender
permitted hereunder shall impair or affect the rights of Lender in and
to the Collateral.
(b) Borrower agrees that in any sale of any of the Collateral whenever a
Default hereunder shall have occurred and be continuing, Lender is
hereby authorized to comply with any limitation or restriction in
connection with such sale as it may be advised by counsel is necessary
in order to avoid any violation of applicable law, or in order to
obtain any required approval of the sale or of the purchaser by any
governmental regulatory authority or official, and Borrower further
agrees that such compliance shall not result in such sale being
considered or deemed not to have been made in a commercially
reasonable manner, nor shall Lender be liable nor accountable to
Borrower for any discount allowed by reason of the fact that such
Collateral is sold in compliance with any such limitation or
restriction.
SECTION 7 Application of Proceeds of Sale or Cash Held as Collateral. The
proceeds of sale of Collateral sold pursuant to Section 6 hereof and/or, after
Default, any cash held as Collateral hereunder, shall be applied by Lender as
follows:
FIRST: to the payment of any amounts due under the Note or under this
Agreement other than interest or principal, next to payment of interest
accrued and unpaid on the Note to and including the date of such
application and then to the payment or prepayment of principal of the Note;
and
SECOND: the balance, if any, of such proceeds shall be paid to Borrower,
his heirs, successors and assigns, or as a court of competent jurisdiction
may direct.
SECTION 8 Authority of Lender. Lender shall have and be entitled to exercise all
such powers hereunder as are specifically delegated to Lender by the terms
hereof, together with such powers as are incidental thereto. Lender may execute
any of its duties hereunder by or through agents or employees and shall be
entitled to retain counsel and to act in reliance upon the advice of such
counsel concerning all matters pertaining to its duties hereunder. Lender shall
not be liable for any action taken or omitted to be taken by him hereunder or in
connection herewith, except for his own gross negligence or misconduct.
SECTION 9 Termination. This Agreement shall terminate when all Obligations of
Borrower hereunder have been fully paid and performed, at which time Lender
shall reassign and redeliver (or cause to be reassigned and redelivered) to
Borrower, or to such person or persons as Borrower shall designate, against
receipt, the Collateral, together with appropriate instruments of reassignment
and release. Any such reassignment shall be without recourse upon or warranty by
Lender.
SECTION 10 Notices. All notices hereunder shall be in writing (including,
without limitation, confirmed facsimile transmission) and shall be sent to
Borrower or Lender, as appropriate, at such party's address shown on the
signature page hereof, or at such other address as such party may, by written
notice received by the other party hereto, have designated as its address for
such purpose. Notices sent by facsimile transmission shall be deemed to have
been given when confirmed as sent; notices sent by mail shall be deemed to have
been given five days after the date mailed by registered or certified mail,
postage prepaid; and notices sent by hand delivery or courier service shall be
deemed to have been given when received.
SECTION 11 Complete Agreement. This Agreement and the Note contain the complete
agreement between the parties and supersede any prior understandings, agreements
or representations by or between the parties, written or oral, related to the
subject matter hereof.
SECTION 12 Binding Agreement; Assignment. This Agreement, and the terms,
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the parties hereto, and their respective successors and the assigns.
SECTION 13 Miscellaneous. Neither this Agreement nor any provision hereof may be
amended, modified, waived, discharged or terminated orally nor may any of the
Collateral be released or the security interest created hereby extended, except
by an instrument in writing duly signed by or on behalf of the parties hereto.
The Section headings used herein are for convenience of reference only and shall
not define or limit the provisions of this Agreement.
SECTION 14 Governing Law; Interpretation. This Agreement has been made and
delivered at Dallas, Texas and shall be construed in accordance with and
governed by the laws of the State of Texas without regard to its choice of law
rules. Wherever possible, each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement shall be prohibited by or invalid under applicable
law, such provision shall be ineffective to the least extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.
BORROWER: Anthony E. Papa
(Print Name)
Address: 68 Alameda Padre Serra /s/ ANTHONY E. PAPA
Santa Barbara, CA 93103 (Borrower's Signature)
LENDER: Ronald L. Jensen
Address: c/o UICI
4001 McEwen Drive
Suite 200
Dallas, Tx. 75244 RONALD L. JENSEN
(Lender's Signature)
<PAGE>
Schedule 1 to
Security Agreement
The Pledged Shares shall consist of the following:
Name of Issuer Certificate ## of Shares
AvTel Communications, Inc. AVT 3541 50,000
