EXHIBIT A
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STOCK EXCHANGE AGREEMENT
(WITH EXHIBITS AND AMENDMENTS)
STOCK EXCHANGE AGREEMENT
THIS STOCK EXCHANGE AGREEMENT (this "Agreement") made this 29th day of April,
1997, is by and between Matrix Telecom, Inc. ("Matrix") and AvTel
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Communications, Inc. ("Avtel").
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1. STOCK EXCHANGE
At Closing (as hereinafter defined), the stockholders of Matrix listed on
Schedule I (the "Stockholders") will deliver to Avtel 3,484,260 properly
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endorsed, unencumbered Matrix common shares (the "Stock"), representing
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100% of the outstanding Matrix common stock, in exchange for 34,590,049
shares of common stock of Avtel (such numbers to be adjusted to give
effect to the Merger and Reverse Stock Split (defined below)), which will
not be registered under the Securities Act of 1933, as amended.
2. EXCHANGE STATEMENT
Prior to the Closing, Matrix shall deliver to Avtel a duly executed
EXCHANGE STATEMENT from each Stockholder in the form attached hereto as
Exhibit A (each, an "Exchange Statement").
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3. MATRIX NON-QUALIFIED STOCK OPTIONS
At Closing, Matrix will cancel all non-qualified stock options (covering
9,000 Matrix shares) that it has granted and that remain outstanding as
of the date hereof, and Avtel will issue to the beneficiaries thereof,
89,348 Avtel non-qualified stock options (such numbers to be adjusted to
give effect to the Merger and Reverse Stock Split (defined below)) having
the same exercise period and exercise prices as currently apply to such
Matrix options all as set forth on Schedule II.
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4. REGISTRATION RIGHTS AND LOCK-UP AGREEMENTS
At Closing, Avtel and Matrix, on behalf of the Stockholders, shall enter
into a REGISTRATION RIGHTS AND LOCK-UP AGREEMENT in the form set forth on
Exhibit B.
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5. MATRIX OPERATIONS; INVESTMENT PURPOSES
Avtel will own Matrix and operate its business in the ordinary course and
has no intention of disposing of significant assets.
6. POOLING OF INTERESTS
The parties intend that the transaction contemplated hereby will be
treated as a pooling of interests and agree to abide by the restrictions
contained in Accounting Series Release 135 ("ASR 135"). In this
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connection, no Stockholder will be allowed to sell any Avtel shares prior
to release of Avtel and Matrix combined earnings covering a period of
combined earnings of not less than 30 days in accordance with ASR 135.
7. INCOME TAX TREATMENT
The parties intend that the transaction will be treated as a tax-free
reorganization under IRC Section 368(a)(1)(B) and will take no actions
that will violate applicable requirements.
8. AVTEL SHAREHOLDERS' MEETING
Avtel shall, in accordance with applicable law, as soon as practicable:
(a) duly call, give notice of, convene and hold a special meeting of
its stockholders (the "Stockholders' Meeting") for the purpose of
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considering and taking action upon this Agreement;
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(b) subject to the fiduciary duties of the Board of Directors of
Avtel under applicable law, include in a proxy statement (the
"Proxy Statement") to be distributed to its stockholders the
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recommendation of the Board of Directors of Avtel that the
stockholders of Avtel vote in favor of the approval and adoption
of this Agreement and the transactions contemplated hereby;
(c) provide Matrix with copies of the proposed Proxy Statement and a
reasonable opportunity to review and comment upon such Proxy
Statement before it is mailed to Avtel's shareholders; and
(d) use its best efforts to (i) obtain and furnish the information
required to be included by it in the Proxy Statement and respond
promptly to any comments made by the Securities and Exchange
Commission with respect to the Proxy Statement and any
preliminary version thereof and cause the Proxy Statement to be
mailed to its stockholders at the earliest practicable time and
(ii) obtain the necessary approvals by its stockholders of this
Agreement and the transactions contemplated hereby.
9. AVTEL MERGER; REVERSE STOCK SPLIT
(a) Prior to the Closing hereunder, Avtel shall merge (the "Merger")
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with and into a Delaware corporation, whereupon the separate
corporate existence of Avtel shall cease and such Delaware
corporation (hereinafter, "Newco") shall continue as the
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surviving corporation. The Merger shall have the effects set
forth under the laws of the State of Delaware. Without limiting
the generality of the foregoing, and subject thereto, all the
properties, rights, privileges, powers and franchises of Avtel
shall vest in Newco, and all debts, liabilities and duties of
Avtel shall become the debts, liabilities and duties of Newco.
The certificate of incorporation and bylaws of Newco shall be
the certificate of incorporation and bylaws of the pre-existing
Delaware corporation, substantially in the form agreed to prior
to the Merger by Matrix and Avtel and approved by the
shareholders of Avtel at the Stockholder's Meeting. Subject to
clause (b) below, at the effective time of the Merger, by virtue
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of the Merger and without any action on the part of Avtel or
Newco or the stockholders of Avtel, each share of common stock
and preferred stock and each option of Avtel issued and
outstanding immediately prior to the effective time of the
Merger shall by virtue of the Merger be canceled and
extinguished and be converted into the right to receive one
share of the common stock or preferred stock or an option to
acquire one share of common stock of Avtel, as applicable, of
Newco.
(b) Subject to the approval of Avtel's stockholders at the
Stockholders' Meeting, prior to the Closing, Avtel shall either
(i) effect a reverse stock split pursuant to which each share of
Avtel common stock and preferred stock and each option granted
by Avtel to acquire Avtel common stock shall be converted into
the right to receive such lesser amount of Avtel common stock,
preferred stock or an option to acquire a lesser amount of Avtel
common stock, as applicable, as Avtel and Matrix shall agree or,
(ii) reduce the number of common stock, preferred stock or
options to acquire Newco common stock that will be issued to
Avtel stockholders in the Merger to such lesser number of shares
of common stock, preferred stock or options to acquire Newco
common stock as Avtel and Matrix shall agree (the adjustment
contemplated by clauses (i) or (ii) being referred to herein as
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the "Reverse Stock Split"). At such time as Avtel and Matrix
shall agree upon the details of the Reverse Stock Split, Avtel
and Matrix shall amend this Agreement to adjust the number of
shares of Avtel common stock issuable to the stockholders of
Matrix pursuant to this Section 1 and the number of shares of
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Avtel common stock for which Avtel is required to grant options
to holders of Matrix options pursuant to Section 3, in each
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case, in a manner which is directly proportional to the
adjustments made to the Avtel common stock and options to
acquire Avtel common stock pursuant to the Reserve Stock Split.
10. AVTEL TO SUPPLY INFORMATION
Until the Closing Date (as hereinafter defined), Avtel shall give Matrix
full access during normal business hours, without unreasonable
interference with business operations, to all of its the facilities,
properties, books, contracts, commitments and records and shall make its
officers and employees available to Matrix,
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as Matrix shall from time to time reasonably request. Matrix and its
representatives will be furnished all information concerning Avtel that
Matrix reasonably requests.
11. MATRIX TO SUPPLY INFORMATION
Until the Closing Date, Matrix shall give Avtel full access during normal
business hours, without unreasonable interference with business
operations, to all of its the facilities, properties, books, contracts,
commitments and records and shall make its officers and employees
available to Avtel, as Avtel shall from time to time reasonably request.
Avtel and its representatives will be furnished all information
concerning Matrix that Avtel reasonably requests. Matrix shall provide
to Avtel such information as may be required by the Proxy Statement which
information shall be true and accurate in all material respects.
12. BRIDGE LOAN
Matrix agrees that following the execution of this Agreement, Matrix will
make a bridge loan available to Avtel in the maximum principal amount of
$500,000 on the following terms:
(a) Up to $250,000 may be drawn by Avtel any time after the execution
of this Agreement and prior to the earlier to occur of (i) August
31, 1997 or (ii) the termination of this Agreement.
(b) Up to an additional $250,000 may be drawn by Avtel at any time on
or after July 1, 1997 and prior to the earlier to occur of (i)
August 31, 1997 or (ii) the termination of this Agreement.
(c) Disbursements shall be made on five days' written notice to
Matrix. No disbursements shall be made after the termination of
this Agreement.
(d) The loan shall be recourse and shall bear interest at the rate of
8% per annum through August 31, 1997, and thereafter at a rate of
12% until maturity and, after maturity at a rate of 15%, in all
cases subject to reduction to comply with applicable usury laws.
Interest shall be payable monthly in arrears, based on a 360-day
year, and all principal and accrued interest shall be due and
payable on or before the earlier of (i) 180 days after the
termination of this Agreement or (ii) December 1, 1997.
(e) Avtel shall pay all expenses of documenting the loan, including
any necessary California usury permit, if any.
13. MATRIX REPRESENTATIONS
Matrix represents to Avtel as follows:
(a) Schedule I is a complete and accurate list of all of the shares of
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Matrix common stock owned by each of the Stockholders. Schedule II
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is a complete and accurate list of all Matrix options issued and
outstanding.
(b) Matrix is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas with all requisite
corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted.
(c) Matrix has full power and authority to enter into this Agreement and
to carry out the transactions contemplated hereby, and this
Agreement has been duly and validly executed and delivered by Matrix
and constitutes the legal, valid and binding obligation of Matrix,
enforceable in accordance with its terms. The execution, delivery
and performance of this Agreement and all other transactions
contemplated hereby will not cause any material default or breach in
any contract, loan agreement or other instrument to which Matrix is
a party or violate any law or decree or judgment of any government
or governmental agency having jurisdiction over Matrix.
(d) Matrix's authorized capital stock consists of 10,000,000 shares of
common stock, no par value, of which 3,484,260 shares are issued and
outstanding. Schedule II is a list of all Matrix stock options
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existing as of the date hereof together with a list of all stock
options that Matrix has agreed to issue but has not yet issued.
(e) The financial statements of Matrix listed on Schedule III fairly
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present in all material respects Matrix's financial position and
assets and its results of operation and changes in financial
position with respect to the respective dates thereof and the
periods covered thereby, in conformity with the United States
generally accepted accounting principles at the time in effect
("GAAP"), and Matrix's past accounting practices, consistently
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applied during such periods, and such financial statements,
including the notes thereto, make full and adequate disclosure of,
and provision for, all of Matrix's material obligations and
liabilities as of the date thereof, whether accrued, absolute,
contingent or otherwise, to the extent required by GAAP. Since the
date of the last of such financial statements, there have been no
material adverse changes to the business or condition of Matrix that
have not been disclosed to Avtel.
(f) Schedule IV contains a list of all material contracts between Matrix
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and any of its officers, directors or shareholders, true, correct
and complete copies of which have been furnished to Avtel.
(g) Schedule V contains a true, correct and complete list of all of
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Matrix's employee benefit plans and a list of each employee of
Matrix as of the date hereof, his/her current position, annual
salary and current bonus entitlement.
(h) Except as set forth in Schedule VI, Matrix is not a party to and has
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not been threatened with any legal action, governmental
investigation or proceeding or any other material claim or
proceeding, including, without limitation, any tax audit.
(i) Matrix has provided Avtel copies of the prior three year's federal
and state income tax returns and represents that it believes such
returns fairly reflect Matrix's tax obligations for such periods and
that no adjustments for such periods have been proposed. All
federal, state, local and foreign tax returns required to be filed
by or with respect to Matrix through the Closing Date have been or
will be accurately prepared, and have been or will be duly and
timely filed, and all taxes, interest, penalties, assessments and/or
deficiencies due with respect to any taxable period ending on or
before the Closing Date have been or will be timely paid, or
adequate provision for the payment thereof has been or will be made
on Matrix's financial statements or books of account.
(j) Except as disclosed on Schedule VII, no notice to, filing with,
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authorization of, exemption by, or consent of any person, entity or
public or governmental authority is required in order for Matrix to
consummate the transactions contemplated hereby.
14. AVTEL REPRESENTATIONS
Avtel represents to Matrix as follows:
(a) Avtel is a corporation duly organized, validly existing and in good
standing under the laws of the State of Utah with all requisite
corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted.
(b) Avtel has full power and authority to enter into this Agreement and
to carry out the transactions contemplated hereby, and this
Agreement has been duly and validly executed and delivered by Avtel,
and constitutes the legal, valid and binding obligation of Avtel,
enforceable in accordance with its terms. The execution, delivery
and performance of this Agreement and all other transactions
contemplated hereby will not cause any material default or breach in
any contract, loan agreement or other instrument to which Avtel is a
party or violate any law or decree or judgement of any government or
governmental agency having jurisdiction over Avtel.
(c) Avtel's authorized capital stock consists of 50,000,000 shares of
common stock, $.001 par value, per share, of which 7,135,807 shares
are issued and outstanding and 5,000,000 shares of preferred stock
of which 1,000,000 shares designated, $1.00 par value Series A
Convertible Preferred Stock are issued and outstanding. All such
shares were held as of April 9, 1997 as set forth on Schedule VIII.
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All of the issued shares of the capital stock of Avtel have been
duly and validly authorized and issued, are fully paid and non-
assessable. The shares of common stock to be delivered by Avtel to
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the Stockholders pursuant to this Agreement have been duly and
validly authorized and, when issued and delivered as provided
herein, will be duly and validly issued and fully paid and non-
assessable. Schedule IX is a list of all Avtel stock options
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existing as of the date hereof, together with a list of all stock
options Avtel has agreed to issue but has not yet issued, and Avtel
has not entered into any agreement to issue additional stock options
except as disclosed on Schedule IX.
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(d) The financial statements of Avtel listed on Schedule X fairly
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present in all material respects Avtel's financial position and
assets and its results of operation and changes in financial
position with respect to the respective dates thereof and the
periods covered thereby, in conformity with GAAP and Avtel's past
accounting practices, consistently applied during such periods, and
such financial statements, including the notes thereto, make full
and adequate disclosure of, and provision for, all of Avtel's
material obligations and liabilities as of the date thereof, whether
accrued, absolute, contingent or otherwise, to the extent required
by GAAP. Since the date of the last of such financial statements,
there have been no material adverse changes to the business or
condition of Avtel that have not been disclosed to Matrix.
(e) Schedule XI contains a list of all material contracts between Avtel
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and any of its officers, directors or shareholders, true, correct
and complete copies of which have been furnished to Matrix.
(f) Schedule XII contains a true, correct and complete list of all of
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Avtel's employee benefit plans and a list of each employee of Avtel
and its subsidiaries as of the date hereof, his/her current
position, annual salary (and proposed adjustments thereto for the
next 6 months) and current bonus entitlement.
(g) Except as set forth in Schedule XIII, Avtel is not a party to and
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has not been threatened with any legal action, governmental
investigation or proceeding or any other material claim or
proceeding, including, without limitation, any tax audit.
(h) Avtel has provided Matrix copies of the prior three year's federal
and state income tax returns and represents that it believes such
returns fairly reflect Avtel's tax obligations for such periods and
that no adjustments for such periods have been proposed. All
federal, state, local and foreign tax returns required to be filed
by or with respect to Avtel from January 1, 1993 through the Closing
Date have been or will be accurately prepared, and have been or will
be duly and timely filed, and all taxes, interest, penalties,
assessments and/or deficiencies due with respect to any taxable
period ending on or before the Closing Date have been or will be
timely paid, or adequate provision for the payment thereof has been
or will be made on Avtel's financial statements or books of account.
(i) Except as disclosed on Schedule XIV, no notice to, filing with,
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authorization of, exemption by, or consent of any person, entity or
public or governmental authority is required in order for Avtel to
consummate the transactions contemplated hereby.
15. CONDITIONS PRECEDENT TO OBLIGATIONS OF MATRIX
(a) Avtel's representations and warranties contained herein shall be
true in all material respects on and as of the date of this
Agreement and shall also be true in all material respects (except
for such changes as are contemplated by the terms of this Agreement)
on and as of the Closing Date with the same force and effect as
though made by Avtel on and as of the Closing Date.
(b) Avtel shall, in all material respects, have performed all
obligations and agreements and complied with all covenants contained
in this Agreement, to be performed and complied with by it on or
prior to the Closing Date; and Avtel shall have delivered to Matrix
a certificate, dated as of the Closing Date, certifying as to its
compliance with Section 15(a) and Section 15(b).
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(c) The Registration Rights Agreement shall have been executed by the
Avtel and delivered to Matrix.
(d) The shareholders of Avtel shall have approved this Agreement and the
transactions contemplated hereby.
(e) Any and all governmental and other consents required in connection
with this Agreement shall have been obtained.
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(f) Each Stockholder shall have executed an Exchange Statement.
16. CONDITIONS PRECEDENT TO OBLIGATIONS OF AVTEL
(a) Matrix's representations and warranties contained herein shall be
true in all material respects on and as of the date of this
Agreement and shall also be true in all material respects (except
for such changes as are contemplated by the terms of this Agreement)
on and as of the Closing Date with the same force and effect as
though made by Matrix on and as of the Closing Date.
(b) Matrix shall, in all material respects, have performed all
obligations and agreements and complied with all covenants contained
in this Agreement to be performed and complied with by it on or
prior to the Closing Date and Matrix shall have delivered to Avtel a
certificate, dated as of the Closing Date, certifying as to its
compliance with Section 16(a) and Section 16(b).
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(c) The Registration Rights Agreement shall have been executed by Matrix
and the Exchange Statements shall have ben executed by the
Stockholders and such documents shall have been delivered to Avtel.
(d) The shareholders of Avtel shall have approved this Agreement and the
transactions contemplated hereby.
(e) Any and all governmental consents required in connection with this
Agreement shall have been obtained.
17. CLOSING
The Closing (the "Closing") shall take place at such place as Matrix and
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Avtel shall agree on the date that is three business days after the
conditions referred to in clauses (d) and (e) of paragraphs 15 and 16
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shall have been obtained or on such later date to which the parties
hereto otherwise shall agree (such date being the "Closing Date").
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18. SURVIVAL
The covenants, agreements, representations or warranties of the parties
hereto contained in this Agreement or in any certificate or other writing
delivered pursuant to, or in connection with, this Agreement shall
survive one year from the Closing Date.
19. TERMINATION
This Agreement may be terminated at any time on or prior to the Closing
Date:(i) with the mutual consent of Avtel and Matrix or (ii) by Avtel or
Matrix, if the Closing shall not have taken place on or before July 1,
1997, or such later date as may be mutually approved in writing by Avtel
or Matrix. This Agreement shall terminate automatically if the
shareholders of Avtel do not approve this Agreement or any of the
transactions contemplated hereby.
20. MISCELLANEOUS
(a) This Agreement shall be governed by the laws of the State of Texas,
without regard to the conflict of law rules of such state.
(b) This Agreement may be amended, modified or supplemented but only in
writing signed by all of the parties hereto.
(c) All notices, requests, demands and other communications required or
permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered by hand, or by confirmed facsimile
transmission, or on two business days following delivery to a
commercial overnight air courier service, or five days after being
mailed, first class postage prepaid, return receipt requested.
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If to Matrix, addressed as follows:
5215 North O'Connor Blvd.
Suite 300
Irving, Texas 75039
Attention: Ronald W. Howard
Facsimile: (972) 506-3266
with a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: David A. Carpenter
Facsimile: (312) 701-7711
If to Avtel, addressed as follows:
130 Cremona Drive, Suite C
Santa Barbara, California 93117
Attention: Anthony Papa
Facsimile: (805) 685-9685
with a copy to:
Price, Postel & Parma LLP
200 E. Carrillo Street, Suite 400
Santa Barbara, California 93101
Attention: Raymond LeBlanc
Facsimile: (805) 882-9869
or to such other individual or address as a party hereto may designate
for itself by notice given as herein provided.
(d) The failure of a party hereto at any time or times to require performance
of any provision hereof shall in no manner affect its right at a later
time to enforce the same. No waiver by a party of any condition or of any
breach of any term, covenant, representation or warranty contained in
this Agreement shall be effective unless in writing, and no waiver in any
one or more instances shall be deemed to be a further or continuing
waiver of any such condition or breach in other instances or a waiver of
any other condition or breach of any other term, covenant, representation
or warranty.
(e) This Agreement may be executed simultaneously in counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
(f) The Stockholders shall be deemed to be third party beneficiaries of the
rights of Matrix hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the date first above written by their duly authorized
representatives.
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MATRIX TELECOM, INC. AVTEL COMMUNICATIONS, INC.
By:_____________________________ By:_____________________________
________________________________ ________________________________
(Print Name) (Print Name)
Its:_____________________________ Its:_____________________________
(duly authorized) (duly authorized)
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EXHIBIT A
FORM OF EXCHANGE STATEMENT
The undersigned understands that the common stock of AvTel Communications,
Inc. ("Avtel") to be issued to the undersigned as consideration for shares of
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common stock of Matrix Telecom, Inc. ("Matrix") pursuant to that certain Stock
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Exchange Agreement (the "Stock Exchange Agreement") entered into as of April 29,
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1997 between Avtel and Matrix will not be registered under the Securities Act of
1933, as amended (the "1933 Act"), or any applicable state securities laws, but
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rather is being issued pursuant to the "private placement" exemption from
registration provided by Section 4(2) under the 1933 Act and certain analogous
state exemptions. In connection with the offer and sale of the Avtel shares to
the undersigned pursuant to the Stock Exchange Agreement, the undersigned hereby
represents and warrants as follows:
(a) The undersigned (i) has such knowledge and experience in financial and
business matters that the undersigned is capable of evaluating the merits and
risks of the prospective investment in Avtel shares and (ii) is capable of
assuming the risk of the loss of the entire investment in connection therewith.
(b) The undersigned is not purchasing the shares of Avtel pursuant to the Stock
Exchange Agreement as a result of any general solicitation or general
advertising, including advertisements, articles, notices or other communications
published in any newspaper, magazine or similar media or broadcast over radio or
television, or any seminar or meeting whose attendees have been invited by
general solicitation or general advertising.
(c) The Avtel shares being purchased by the undersigned are acquired for the
undersigned's own account for investment and not with a view toward subdivision,
resale or redistribution thereof in a manner prohibited under the 1933 Act or
under the securities laws of any state, and the undersigned does not presently
have any reason to anticipate any change in the undersigned's circumstances or
other particular occasion or event that would create a need to sell such shares.
The undersigned has no contract, undertaking, agreement, understanding or
arrangement with any person to sell, transfer or pledge to any person any part
or all of the Avtel shares the undersigned is purchasing or any interest
therein, and the undersigned has no present plans to enter into the same.
(d) The undersigned received the annual report on Form 10-K filed by Avtel with
respect to its most recently completed fiscal year (and the related proxy
statement for Avtel's 1997 Annual Stockholder's Meeting) and all other documents
filed by Avtel with the Securities Exchange Commission since the date of such
Annual Report. The undersigned has understood such materials and has had an
opportunity to ask questions and receive answers about the terms and conditions
of the offering and sale of Avtel stock under the Stock Exchange Agreement, and
has received all information that the undersigned has requested from Avtel
concerning Avtel and the transactions contemplated by the Stock Exchange
Agreement.
(e) The undersigned has not relied, in connection with this transaction, upon
any statements, representations, warranties or agreements other than those set
forth in the documents referred to in clause (d) above and the Stock Exchange
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Agreement.
(f) The undersigned understands that the shares of Avtel stock being purchased
by the undersigned pursuant to the Stock Exchange Agreement will bear the
following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE TRANSFERRED
WITHOUT SUCH REGISTRATION EXCEPT PURSUANT TO TRANSACTIONS EXEMPT FROM THE
REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE STATE
SECURITIES LAWS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
(g) In connection with an intended exchange of the shares of Matrix common stock
held by the undersigned for shares of Avtel common stock, the undersigned hereby
directs that all Matrix shares held by the undersigned be exchanged at the
Closing (as defined in the Stock Exchange Agreement) for Avtel shares in the
manner contemplated by the Stock Exchange Agreement. The officers of Matrix are
hereby authorized to take all action on behalf of the undersigned and to act as
attorney-in-fact, with full power of substitution, for the undersigned in
connection with the consummation of the transactions contemplated
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by the Stock Exchange Agreement, including, without limitation, the execution of
the Registration Rights Agreement (as defined therein). All Avtel shares
received are to be registered in the same name as the Matrix shares held by the
undersigned.
(h) The undersigned hereby represents and warrants that the undersigned has full
power to direct the exchange of the Matrix shares as set forth above and that
the shares of Matrix common stock to be exchanged by the undersigned are free
and clear of any liens or encumbrances.
(i) The undersigned understands that a false statement herein may be a violation
of law and could result in a claim for damages against the undersigned.
Signature________________________________
Print Name______________________________
Date:___________________________________
No. of Matrix Shares Held:_________
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EXHIBIT B
FORM OF REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AND LOCK-UP AGREEMENT (this "Agreement") is made and
entered into as of __________, 1997, by and between Avtel Communications,
Inc. (the "Company") and Matrix Telecom, Inc. ("Matrix") on behalf of the
Persons listed on Schedule A attached hereto, including their successors,
assigns and transferees (herein referred to collectively as the "Holders" and
individually as a "Holder").
WHEREAS, on the date hereof each Holder is or will become the owner of Common
Stock (as defined below) of the Company in connection with that certain Stock
Exchange Agreement, dated April 29, 1997 (the "Stock Exchange Agreement")
between the Company and Matrix; and
WHEREAS, in connection with the Stock Exchange Agreement, the Holders have
agreed to enter into the Lock-Ups (as defined below) as provided in Section 2
below; and
WHEREAS, as a condition to the closing of the Stock Exchange Agreement, the
Company has agreed to grant the Holders the registration rights provided for
in Sections 3 and 4 below;
NOW, THEREFORE, the parties hereto, in consideration of the foregoing, the
mutual covenants and agreements hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, agree as follows:
1. Definitions.
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As used in this Agreement, the following capitalized defined terms shall have
the following meanings:
"Closing Price" of the Common Stock for any given day shall mean (i) if the
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Common Stock is listed or admitted to trading on a national securities
exchange, the reported last sale price of the Common Stock, regular way, on
such day or, in case no such sale takes place on such day, the average of the
reported closing bid and asked prices, regular way, on such national
securities exchange on such day or (ii) if the Common Stock is not listed or
admitted to trading on any national securities exchange but is quoted by the
Nasdaq SmallCap Market or the Nasdaq National Market of the Nasdaq Stock
Market, Inc. ("NASDAQ"), the last reported sales price per share, regular
way, on such day or, in case no such sale takes place on such day, or the
last reported sales price is not quoted by NASDAQ, the average of the
reported closing bid and asked prices, regular way, on such day.
"Common Stock" shall mean the Common Stock, par value $.01, per share, of the
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Company.
"Company" shall mean Avtel Communications, Inc., a Delaware Corporation, and
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its successors.
"Dispose of" shall have the meaning provided in Section 2(a).
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"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
------------
from time to time.
"Holder" or "Holders" shall mean the persons listed on Schedule A attached
------ -------
hereto, including their successors, assigns and transferees.
"Lock-ups" shall mean the restrictions on transfer to which the Holders are
--------
subject pursuant to Section 2(a).
"Lock-up Period" shall mean the applicable time periods to which the Holders
--------------
have agreed to the Lock-ups.
"Person" shall mean an individual, partnership, corporation, trust,
------
unincorporated organization or other legal entity or a government or agency
or political subdivision thereof.
"Registrable Securities" shall mean the Shares, excluding (i) Shares that
----------------------
have been disposed of under the Shelf Registration Statement or any other
effective registration statement, (ii) Shares sold or otherwise transferred
pursuant to Rule 144 under the Securities Act, (iii) Shares that are held by
Holders who are not
A-11
affiliates of the Company that are or become eligible for sale pursuant to
Rule 144(k) under the Securities Act, and (iv) Shares held by each Holder who
is an affiliate of the Company if all of such Shares are or become eligible
for sale pursuant to Rule 144 under the Securities Act and could be sold in
one transaction in accordance with the volume limitations contained in Rule
144(e)(1)(i) under the Securities Act.
"Registration Expenses" shall mean any and all expenses incident to
---------------------
performance of or compliance with this Agreement, including, without
limitation: (i) all applicable registration and filing fees imposed by the
SEC, or the National Association of Securities Dealers, Inc. ("NASD"), (ii)
all fees and expenses incurred in connection with compliance with state
securities or "blue sky" laws (including reasonable fees and disbursements of
counsel in connection with qualification of any of the Registrable Securities
under any state securities or blue sky laws and the preparation of a blue sky
memorandum) and compliance with the rules of the NASD, (iii) all expenses of
any Persons in preparing or assisting in preparing, word processing, printing
and distributing the Shelf Registration Statement, any Prospectus,
certificates and other documents relating to the performance of and
compliance with this Agreement, (iv) all fees and expenses incurred in
connection with the listing, if any, of any of the Registrable Securities on
any securities exchange or exchanges pursuant to Section 4(l) hereof, and (v)
the fees and disbursements of counsel for the Company and of the independent
public accountants of the Company, including the expenses of any special
audits or "cold comfort" letters required by or incident to such performance
and compliance. Registration Expenses shall specifically exclude underwriting
discounts and commissions, the fees and disbursements of counsel representing
a selling Holder or any underwriter or agent acting on behalf of a Holder,
and transfer taxes, if any, relating to the sale or disposition of
Registrable Securities by a selling Holder, all of which shall be borne by
such Holder in all cases.
"Registration Notice" shall have the meaning set forth in Section 4(b)
-------------------
hereof.
"Registration Statement" shall mean a registration statement, including a
----------------------
Shelf Registration Statement, of the Company that covers all of the
Registrable Securities and all amendments (including post-effective
amendments) to such registration statement, and all exhibits thereto and
materials incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
---
"Securities Act" shall mean the Securities Act of 1933, as amended from time
--------------
to time.
"Shares" shall mean the Common Stock issued to the Holders pursuant to the
------
Stock Exchange Agreement.
"Shelf Registration Statement" shall mean a Registration Statement covering
----------------------------
the Registrable Securities filed pursuant to Rule 415 under the Securities
Act, or any similar rule established by the SEC.
"Stock Exchange Agreement" shall have the meaning set forth in the recitals.
------------------------
2. Lock-up Agreement.
-----------------
(a) Each of the Holders identified in Schedule B hereby agrees that, from
the date hereof until two years following the closing of the sale of Common
Stock to the Holder pursuant to the Stock Exchange Agreement, without the
prior written consent of the Company, such Holder will not offer, pledge,
sell, contract to sell, grant any options for the sale of or otherwise
dispose of, directly or indirectly (collectively, "Dispose of"), any Shares.
(b) All other Holders hereby agree that, from the date hereof until the date
on which the Company releases a press release announcing earnings on a
consolidated basis, including the operations of Matrix, covering a period of
combined earnings of not less than 30 days, without the prior written consent
of the Company, such Holders will not Dispose of any Shares.
3. Shelf Registration Under the Securities Act.
-------------------------------------------
(a) Filing of Shelf Registration Statement. Following the date hereof, the
--------------------------------------
Company shall use its best efforts to become listed on the Nasdaq SmallCap
Market or the Nasdaq National Market of NASDAQ whereupon it shall file, a
Shelf Registration Statement providing for the sale by the Holders of all of
the Registrable Securities in accordance with the terms hereof and will use
its reasonable efforts to cause such
A-12
Shelf Registration Statement to be declared effective by the SEC as soon
thereafter as is practicable. The Company agrees to use its reasonable
efforts to keep the Shelf Registration Statement with respect to the
Registrable Securities continuously effective for a period expiring on the
earlier of (i) the date on which all of the Registrable Securities covered by
the Shelf Registration Statement have been sold pursuant thereto and (ii) the
date on which (A) all Shares held by Holders who are not affiliates of the
Company, in the opinion of counsel for the Company are eligible for sale
pursuant to Rule 144(k) under the Securities Act and (B) all Shares held by
each Holder who is an affiliate of the Company, in the opinion of counsel for
the Company are eligible for sale pursuant to Rule 144 under the Securities
Act and could be sold in one transaction in accordance with the volume
limitations contained in Rule 144(e)(1)(i) under the Securities Act.
(b) Demand Rights. Notwithstanding clause (a) above and subject to the
-------------
restrictions on disposition included in Section 2, if the Company is unable
to become listed on the Nasdaq SmallCap Market or the Nasdaq National Market
within six months of the date hereof, or is otherwise unable to qualify for
use of a Shelf Registration Statement, on the date which is six months from
the date hereof, the Company shall, upon receipt of a notice (a "Registration
Notice") given at least 14 days prior to the six-month anniversary hereof,
file on behalf of all Holders from whom it shall have received a Registration
Notice, and use its best efforts to cause to become effective as soon as
practical thereafter, a Registration Statement registering the offering and
sale of the Registrable Securities which the Company has been requested to
register by such Holders. In addition, subject to the restrictions on
disposition included in Section 2 and on a maximum of two separate occasions
(and if the Company at such time does not have an effective Shelf
Registration Statement covering the Registerable Securities), at any time
after the six month anniversary of the date hereof that the Company shall
receive a Registration Notice from Holders holding Shares representing in
excess of 25% of the Shares, it shall file, and use its best efforts to cause
to become effective as soon as practical thereafter, a Registration Statement
registering the offering and sale of the Registrable Securities held by such
Holder (and those of any other Holder, subject to Section 2, who requests to
have its Shares included in such Registration Statement). The Company shall
promptly following receipt of a Registration Notice pursuant to the last
sentence hereof notify the Holders of all other Registrable Securities and,
upon request of such Holders, allow such Holders to include their Registrable
Securities in the aforementioned Registration Statement. Notwithstanding the
above, (i) if a request for registration pursuant to this Section 2(b) is
made within 30 days prior to the conclusion of the Company's fiscal year, or
within 40 days after the end of the Company's fiscal year, the Company shall
not be required to file a registration statement until such time as the
Company receives its audited financial statements for such fiscal year, and
(ii) the Company shall be entitled to postpone for a reasonable period of
time (not to exceed 90 days, which may not thereafter be extended) the filing
of any registration statement otherwise required to be prepared and filed by
it pursuant to this Section 2(b) if (x) the Company is in possession of
material information that has not been disclosed to the public and the
Company deems it advisable not to disclose such information in the
registration statement or (y) the board of directors of the Company shall
determine in good faith that such offering will interfere with a pending or
contemplated financing, merger, acquisition, sale of assets, recapitalization
or other similar corporate action of the Company, and in the case of clause
(x) or (y) above, the Company shall have furnished to the Holder or Holders
of Registrable Securities requesting such registration an officers'
certificate to that effect.
(c) Expenses. The Company shall pay all Registration Expenses in
--------
connection with the registration pursuant to Sections 3(a) or 3(b). The
Company shall not be liable for any underwriting discounts and commissions,
the fees and disbursements of counsel representing such Holder or any
underwriter or agent acting on behalf of a Holder, and transfer taxes, if
any, relating to the sale or disposition of such Holder's Registrable
Securities pursuant to the Registration Statement or Rule 144 under the
Securities Act.
(d) Inclusion in Registration Statement. Any Holder who does not provide
-----------------------------------
the information reasonably requested by the Company in connection with any
Registration Statement filed hereunder by the Company as promptly as
practicable after receipt of such request, but in no event later than ten
(10) days thereafter, shall not be entitled to have its Registrable
Securities included in any Registration Statement filed by the Company
pursuant to this Agreement.
4. Registration Procedures.
-----------------------
In connection with the obligations of the Company with respect to the
Registration Statements contemplated by Section 3 hereof, the Company shall:
A-13
(a) prepare and file with the SEC, within the time period set forth in
Section 3 hereof, the Registration Statements, which Registration Statements
shall (i) be available for the sale of the Registrable Securities in
accordance with the intended method or methods of distribution by the selling
Holders thereof and (ii) comply as to form in all material respects with the
requirements of the applicable form and include all financial statements
required by the SEC to be filed therewith;
(b) furnish to each Holder of Registrable Securities that has delivered a
Registration Notice to the Company or otherwise is entitled to have its
Registrable Securities included in a Registration Statement, without charge,
as many copies of each Prospectus and any amendment or supplement thereto in
order to facilitate the public sale or other disposition of the Registrable
Securities; the Company consents to the use of the Prospectus and any
amendment or supplement thereto by each such Holder of Registrable Securities
in connection with the offering and sale of the Registrable Securities
covered by the Prospectus or amendment or supplement thereto;
(c) use its reasonable efforts to register or qualify the Registrable
Securities by the time any Registration Statement is declared effective by
the SEC under all applicable state securities or blue sky laws of such
jurisdictions in the United States and its territories and possessions as any
Holder of Registrable Securities covered by the Registration Statement shall
reasonably request in writing, keep each such registration or qualification
effective during the period such Registration Statement is required to be
kept effective or during the period offers or sales are being made by a
Holder that has delivered a Registration Notice to the Company, whichever is
shorter; provided, however, that in connection therewith, the Company shall
-------- -------
not be required to (i) qualify as a foreign corporation to do business or to
register as a broker or dealer in any such jurisdiction where it would not
otherwise be required to qualify or register but for this Section 4(c), (ii)
subject itself to taxation in any such jurisdiction, or (iii) file a general
consent to service of process in any such jurisdiction;
(d) furnish to each Holder of Registrable Securities that has delivered a
Registration Notice to the Company or is otherwise entitled to have its
Registrable Securities included in a Registration Statement, without charge,
at least one conformed copy of the Registration Statement and any post-
effective amendment thereto (without documents incorporated therein by
reference or exhibits thereto, unless requested);
(e) cooperate with the selling Holders of Registrable Securities to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any Securities Act legend;
and enable certificates for such Registrable Securities to be issued for such
numbers of shares and registered in such names as the selling Holders may
reasonably request at least two business days prior to any sale of
Registrable Securities;
(f) make available for inspection by the Holders of Registrable Securities
that have provided a Registration Notice to the Company and any counsel,
accountants or other representatives retained by such Holders all financial
and other records, pertinent corporate documents and properties of the
Company and cause the officers, directors and employees of the Company to
supply all such records, documents or information reasonably requested by
such Holders, counsel, accountants or representatives in connection with the
Registration Statement; provided, however, that such records, documents or
-------- -------
information which the Company determines in good faith to be confidential and
notifies such Holders, counsel, accountants or representatives in writing
that such records, documents or information are confidential shall not be
disclosed by such Holders, counsel, accountants or representatives unless (i)
such disclosure is ordered pursuant to a subpoena or other order from a court
of competent jurisdiction, or (ii) such records, documents or information
become generally available to the public other than through a breach of this
Agreement;
(g) use its reasonable efforts to cause all Registrable Securities to be
listed on any securities exchange or automated quotation or other trading
system on which similar securities issued by the Company are then listed or
traded;
The Company may require each Holder of Registrable Securities to furnish to
the Company in writing such information regarding the proposed distribution
by such Holder of such Registrable Securities as the Company may from time to
time reasonably request in writing.
5. Repurchase by Company of Shares Subject to Registration Notice. Upon receipt
--------------------------------------------------------------
by the Company of a Registration Notice, the Company may, but shall not be
obligated to, purchase from such Holder all, but
A-14
not less than all, of the Shares which are the subject of such Registration
Notice at a price per share equal to the average of the Closing Prices of the
Common Stock for the twenty trading days immediately preceding the date of
the Registration Notice. In the event the Company elects to purchase the
Shares which are the subject of a Registration Notice, the Company shall
notify the Holder of such Shares within five business days of the date of
receipt of the Registration Notice by the Company, which notice shall
indicate: (i) that the Company will purchase the Shares which are the subject
of the Registration Notice, (ii) the price per share, calculated in
accordance with the preceding sentence, which the Company will pay to such
Holder and (iii) the date upon which the Company shall repurchase such
Shares, which date shall not be later than the tenth business day after
receipt of the Registration Notice relating to such Shares.
6. Indemnification.
---------------
(a) Indemnification by the Company. The Company agrees to indemnify and
------------------------------
hold harmless each Holder and its officers and directors and each Person, if
any, who controls any Holder within the meaning of Section 15 of the
Securities Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to which such Holder, officer, director or
controlling Person may become subject under the Securities Act or otherwise
(A) that arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement
or any amendment thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading or (B) that arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in any Prospectus or any amendment or supplement thereto, or the
omission or alleged omission to state therein a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or alleged untrue statement
or any omission or alleged omission, if such settlement is effected with the
written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred (including
reasonable fees and disbursements of counsel), reasonably incurred in
investigating, preparing or defending against any litigation, or
investigation or proceeding by any governmental agency or body, commenced or
threatened, in each case whether or not a party, or any claim whatsoever
based upon any such untrue statement or alleged untrue statement or omission
or alleged omission, to the extent that any such expense is not paid under
subparagraph (i) or (ii) above;
provided, however, that the indemnity provided pursuant to this Section 6(a)
- -------- -------
shall not apply to any Holder with respect to any loss, liability, claim,
damage or expense that arise out of or are based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in reliance
upon and in conformity with written information furnished to the Company by
such Holder expressly for use in a Registration Statement or any amendment
thereto or the Prospectus or any amendment or supplement thereto.
(b) Indemnification by Holders. Each Holder severally agrees to indemnify
--------------------------
and hold harmless the Company and the other selling Holders, and each of
their respective directors and officers (including each director and officer
of the Company who signed the Registration Statement), and each Person, if
any, who controls the Company or any other selling Holder within the meaning
of Section 15 of the Securities Act, to the same extent as the indemnity
contained in Section 6(a) hereof, but only insofar as such loss, liability,
claim, damage or expense arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in the Shelf
Registration Statement or any amendment thereto or the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with
written information furnished to the Company by such selling Holder expressly
for use therein.
(c) Indemnification Proceedings. Any Person entitled to indemnification
---------------------------
hereunder will (i) give prompt notice to the indemnifying party of any claim
with respect to which it seeks indemnification and (ii) permit such
indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party; provided, however, that any
Person entitled to indemnification hereunder shall have the
A-15
right to employ separate counsel and to participate in the defense of such
claim, but the fees and expenses of such counsel shall be at the expense of
such Person and not of the indemnifying party unless (x) the indemnifying
party has agreed to pay such fees or expenses, or (y) the indemnifying party
shall have failed to assume the defense of such claim or employ counsel
reasonably satisfactory to such Person, or (z) in the reasonable judgment of
the Person to be indemnified, a conflict of interest may exist between such
Person and the indemnifying party with respect to such claims (in which case,
if the Person notifies the indemnifying party in writing that such Person
elects to employ separate counsel at the expense of the indemnifying party,
the indemnifying party shall not have the right to assume the defense of such
claim on behalf of such Person). If such defense is not assumed by the
indemnifying party, the indemnifying party will not be subject to any
liability for any settlement made without its consent (but such consent will
not be unreasonably withheld). No indemnified party will be required to
consent to entry of any judgement or enter into any settlement which does not
include as an unconditional term thereof the giving by all claimants or
plaintiffs to such indemnified party of a release from all liability in
respect to such claim.
7. Rule 144 Sales.
--------------
(a) Compliance. The Company covenants that, so long as it is subject to the
----------
reporting requirements of the Exchange Act, it will file the reports required
to be filed by it under the Exchange Act so as to enable any Holder to sell
Registrable Securities pursuant to Rule 144 under the Securities Act.
(b) Cooperation with Holders. In connection with any sale, transfer or
------------------------
other disposition by any Holder of any Registrable Securities pursuant to
Rule 144 under the Securities Act, the Company shall cooperate with such
Holder to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold and not bearing any Securities
Act legend, and enable certificates for such Registrable Securities to be for
such number of shares and registered in such names as the selling Holders may
reasonably request at least two business days prior to any sale of
Registrable Securities. The Company's obligation set forth in the previous
sentence shall be subject to the delivery, if reasonably requested by the
Company or its transfer agent, by counsel to such Holder, in form and
substance reasonably satisfactory to the Company and its transfer agent, of
an opinion that such Securities Act legend need not appear on such
certificate.
8. Miscellaneous.
-------------
(a) Amendments and Waivers. The provisions of this Agreement, including
----------------------
the provisions of this sentence, may not be amended, modified, supplemented
or waived, nor may consent to departures therefrom be given, without the
written consent of the Company and the Holders of a majority of the
outstanding Registrable Securities. Notice of any such amendment,
modification, supplement, waiver or consent adopted in accordance with this
Section 8(a) shall be provided by the Company to each Holder of Registrable
Securities at least thirty (30) days prior to the effective date of such
amendment, modification, supplement, waiver or consent.
(b) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery, (i) if to a Holder, at such Holder's registered address appearing
on the share register of the Company or (ii) if to the Company, at its
corporate headquarters, Attention: President.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; or at
the time delivered if delivered by an air courier guaranteeing overnight
delivery.
(c) Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders.
(d) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
A-16
(e) Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware without giving
effect to the conflicts of law provisions thereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above
AVTEL COMMUNICATIONS, INC.
By:____________________________
Name:__________________________
Title:_________________________
MATRIX TELECOM, INC.
On behalf of all Holders
By:____________________________
Name:__________________________
Title:_________________________
A-17
Schedule A
----------
HOLDERS
BestConnections
UGA
James Jensen
Jami Jensen
Jeff Jensen
Janet Jensen
Julie Jensen
UA Plus
Howard Neckowitz
Ron Jensen
Ray Waters
Gary Friedman
E. Scott Crist
Gail Granton
Chuck Taylor
Ron Anderson
Joe Renteria
Virginia Baker
Tom Cargal
Greg Reid
Greg Reid (in Trust)
Cole Dawson
Vernon Woelke
A-18
Schedule B
----------
Holders Subject to a Two Year Lock-up
UGA
Ronald L. Jensen
James Jensen
Jami Jensen
Jeff Jensen
Janet Jensen
Julie Jensen
UA Plus
A-19
AMENDMENT TO STOCK EXCHANGE AGREEMENT
-------------------------------------
This Amendment to Stock Exchange Agreement, dated August 25, 1997 is by and
between Matrix Telecom, Inc. ("Matrix") and AvTel Communications, Inc.
("AvTel").
W I T N E S S E T H
-------------------
WHEREAS, Matrix and AvTel have entered into that certain Stock Exchange
Agreement, dated April 29, 1997 (the "Stock Exchange Agreement") which provided
for, among other things, the exchange by the stockholders of Matrix of all of
the issued and outstanding capital stock and options of Matrix for capital stock
and options of AvTel;
WHEREAS, by letter agreement, dated July 28, 1997 (the "Letter Agreement") the
date by which completion of the transactions by the Stock Exchange Agreement is
required to be completed was extended through November 30, 1997; and
WHEREAS, as contemplated by Paragraph 9(b) of the Stock Exchange Agreement,
--------------
AvTel and Matrix have agreed to effect the Reverse Stock Split (as defined in
the Stock Exchange Agreement) by the conversion of each share of AvTel common
stock into the right to receive 1/4 of a share of common stock of Newco (thereby
effecting a four to one reverse stock split) pursuant to the terms of the Merger
(as defined in the Stock Exchange Agreement);
WHEREAS, since the date of the Stock Exchange Agreement, Matrix has acquired all
of the issued and outstanding capital stock of Best Connections, Inc. in
exchange for 376,727 shares of Matrix common stock;
NOW THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
9. Defined Terms. Capitalized terms used herein, unless otherwise defined or
-------------
the context requires otherwise, are used herein as defined in the Stock Exchange
Agreement.
10. Amendment to Paragraph 1. Paragraph 1 of the Stock Exchange Agreement is
------------------------ -----------
hereby amended to read in its entirety as follows:
"At Closing (as hereinafter defined), the stockholders of Matrix listed on
Schedule I (the "Stockholders") will deliver to AvTel 3,860,987 properly
- ----------
endorsed, unencumbered shares of Matrix common stock, representing 100% of the
outstanding Matrix common stock, in exchange for 9,582,514 shares of common
stock of AvTel, after giving effect to the Merger and Reverse Stock Split
(defined below), which will not be registered under the Securities Act of 1933,
as amended."
11. Amendment to Paragraph 2. Paragraph 2 of the Stock Exchange Agreement is
------------------------ -----------
hereby amended by adding the following sentence at the end of the paragraph:
"Prior to the Closing, Matrix shall deliver to AvTel a duly executed
Exchange Statement from each holder of a non-qualified stock option of Matrix in
the form attached as Exhibit B."
---------
12. Amendment to Paragraph 3. Paragraph 3 of the Stock Exchange Agreement is
------------------------ -----------
hereby amended to read in its entirety as follows:
"At Closing, Matrix will cancel all non-qualified stock options (covering
9,000 Matrix shares) that it has granted and that remain outstanding as of the
date hereof, and AvTel will issue to the beneficiaries thereof, 22, 338 AvTel
non-qualified stock options, after giving effect to the Merger and Reverse Stock
Split, having the exercise period and exercise price set forth in Exhibit B
---------
hereto."
13. Amendment to Paragraph 6. Paragraph 6 of the Stock Exchange Agreement,
------------------------ -----------
including the heading thereto, is hereby deleted and replaced entirely by the
following:
"[INTENTIONALLY OMITTED.]"
A-20
14. Amendment to Paragraph 9(a). The last sentence of Paragraph 9(a) of the
--------------------------- --------------
Stock Exchange Agreement is hereby amended to read in its entirety as follows:
"At the effective time of the Merger, by virtue of the Merger, and without
any action on the part of AvTel or Newco or the stockholders of Newco, each
share of common stock and preferred stock, and each option of AvTel issued and
outstanding immediately prior to the effective time of the Merger shall by
virtue of the Merger be canceled and extinguished and be converted into the
right to receive one quarter of a share of common stock or preferred stock or an
option to acquire one quarter of a share of common stock, as applicable, of
Newco; provided, however, that Newco shall not be required to issue any
-------- -------
fractional shares of common stock or preferred stock but instead shall be
entitled to purchase any fractional shares resulting from the Merger at the fair
market value thereof. This 1/4 to 1 conversion of shares is referred to herein
as the "Reverse Stock Split."
15. Amendment to Paragraph 9(b). Paragraph 9(b) of the Stock Exchange
--------------------------- --------------
Agreement shall be deleted in its entirety.
16. Amendments to Paragraph 12.
--------------------------
(a) The $500,000 amount set forth in the first sentence of Paragraph 12 is
------------
hereby deleted and replaced with $750,000.
(b) The following clause is hereby inserted after clause (b) of Paragraph
---------- ---------
12 and clauses (c), (d) and (e) of Paragraph 12 are hereby renumbered to be
- -- ---------- --- --- ------------
clauses (d), (e) and (f), respectively:
- ----------- --- ---
"(c) up to an additional $250,000 may be drawn by AvTel at any time on or
after July 1, 1997 and prior to the earlier of (i) September 30, 1997, or (ii)
the termination of this Agreement."
(c) The date "August 31, 1997" set forth in the first sentence of clause
------
(d) of Paragraph 12 of the Stock Exchange Agreement (which after giving effect
- --- ------------
to this Amendment will become clause (e)) is hereby deleted and replaced with
----------
the date "October 31, 1997."
17. Amendment to Paragraph 15. Clause (f) of Paragraph 15 of the Stock
------------------------- ---------- ------------
Exchange Agreement is hereby amended to read in its entirety as follows:
"Stockholders holding at least 90% of the issued and outstanding common
stock of Matrix shall have executed and delivered to Matrix an Exchange
Statement."
18. Amendment to Paragraph 19. The date "July 1, 1997" set forth in the first
-------------------------
sentence of Paragraph 19 is hereby deleted and replaced with the date "November
------------
30, 1997", consistent with the terms of the Letter Agreement.
19. Amendment to Schedules. Schedules I, II, and VII of the Stock Exchange
---------------------- ----------- -- ---
Agreement are hereby deleted and replaced with Schedules I, II, and VII attached
----------- -- ---
hereto.
20. Amendment to Registration Rights Agreement. The Registration Rights
------------------------------------------
Agreement included as Exhibit B to the Stock Exchange Agreement (Exhibit C after
--------- ---------
giving effect to this Agreement) is hereby amended by deleting Section 2(b)
thereof.
21. Amendment to Exhibits. Any references in the Stock Exchange Agreement to
---------------------
Exhibit B are hereby amended to refer to Exhibit C to the Stock Exchange
- --------- ---------
Agreement and the Registration Rights Agreement previously included as Exhibit B
---------
to the Stock Exchange Agreement is hereby amended to become Exhibit C thereto.
---------
Exhibit B to the Stock Exchange Agreement shall read entirely as set forth in
- ---------
Exhibit B attached hereto.
- ---------
22. Effectiveness of Amendment. This Amendment shall become effective upon
--------------------------
the execution hereof by each of the parties hereto. Except as amended hereby,
the Stock Exchange Agreement shall remain in full force and effect.
23. Counterparts. This Amendment may be executed simultaneously in
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
on the dated first above written by their duly authorized representatives.
MATRIX TELECOM, INC. AVTEL COMMUNICATIONS, INC.
By:____________________ By:___________________________
Title:_________________ Title:________________________
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EXHIBIT B
FORM OF OPTION EXCHANGE STATEMENT
The undersigned understands that the option or options to acquire common stock
of AvTel Communications, Inc. ("Avtel") to be issued to the undersigned as
-----
consideration for options to acquire shares of common stock of Matrix Telecom,
Inc. ("Matrix") pursuant to that certain Stock Exchange Agreement (the "Stock
------ -----
Exchange Agreement") entered into as of April 29, 1997 between Avtel and Matrix
- ------------------
will not be registered under the Securities Act of 1933, as amended (the "1933
----
Act"), or any applicable state securities laws, but rather are being issued
- ---
pursuant to the "private placement" exemption from registration provided by
Section 4(2) under the 1933 Act and certain analogous state exemptions. In
connection with the offer and sale of the Avtel options to the undersigned
pursuant to the Stock Exchange Agreement, the undersigned hereby represents and
warrants as follows:
(a) The undersigned (i) has such knowledge and experience in financial and
business matters that the undersigned is capable of evaluating the merits and
risks of the prospective investment in Avtel options and the resulting Avtel
shares to be issued upon the exercise of the options and (ii) is capable of
assuming the risk of the loss of the entire investment in connection therewith.
(b) The undersigned is not acquiring the Avtel options pursuant to the
Stock Exchange Agreement as a result of any general solicitation or general
advertising, including advertisements, articles, notices or other communications
published in any newspaper, magazine or similar media or broadcast over radio or
television, or any seminar or meeting whose attendees have been invited by
general solicitation or general advertising.
(c) The Avtel options being acquired by the undersigned are acquired for
the undersigned's own account for investment and not with a view toward
subdivision, resale or redistribution thereof in a manner prohibited under the
1933 Act or under the securities laws of any state, and the undersigned does not
presently have any reason to anticipate any change in the undersigned's
circumstances or other particular occasion or event that would create a need to
sell such options. The undersigned has no contract, undertaking, agreement,
understanding or arrangement with any person to sell, transfer or pledge to any
person any part or all of the Avtel options the undersigned is acquiring or any
interest therein, and the undersigned has no present plans to enter into the
same.
(d) The undersigned received the annual report on Form 10-K filed by Avtel
with respect to its most recently completed fiscal year (and the related proxy
statement for Avtel's 1997 Annual Stockholder's Meeting) and all other documents
filed by Avtel with the Securities Exchange Commission since the date of such
Annual Report. The undersigned has understood such materials and has had an
opportunity to ask questions and receive answers about the terms and conditions
of the offering and the issuance of Avtel options under the Stock Exchange
Agreement, and has received all information that the undersigned has requested
from Avtel concerning Avtel and the transactions contemplated by the Stock
Exchange Agreement.
(e) The undersigned has not relied, in connection with this transaction,
upon any statements, representations, warranties or agreements other than those
set forth in the documents referred to in clause (d) above and the Stock
----------
Exchange Agreement.
(f) In connection with an intended exchange of the options to acquire shares of
Matrix common stock held by the undersigned for options to acquire shares of
Avtel common stock, the undersigned hereby directs that all Matrix options held
by the undersigned be exchanged at the Closing (as defined in the Stock Exchange
Agreement) for Avtel options in the manner contemplated by the Stock Exchange
Agreement. The officers of Matrix are hereby authorized to take all action on
behalf of the undersigned and to act as attorney-in-fact, with full power of
substitution, for the undersigned in connection with the consummation of the
transactions contemplated by the Stock Exchange Agreement. All Avtel options
received are to be registered in the same name as the Matrix options held by the
undersigned.
(g) The undersigned hereby represents and warrants that the undersigned has
full power to direct the exchange of the Matrix options as set forth above and
that the options to acquire shares of Matrix common stock to be exchanged by the
undersigned are free and clear of any liens or encumbrances.
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(h) The undersigned understands that a false statement herein may be a
violation of law and could result in a claim for damages against the
undersigned.
(i) The undersigned understands and agrees that the undersigned shall receive
the number of options to acquire Avtel shares listed below, that the exercise
price of such options shall be $2.24 per share, that all such options shall be
fully vested when issued and that the options shall expire at the close of
business on December 31, 2002 unless they shall have been exercised by the
undersigned on or before such date.
Signature________________________________
Print Name______________________________
Date:___________________________________
No. of Matrix Options Held:_________
No. of Avtel Options to be acquired:_________
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