AvTel
Communications, Inc.
December 13, 1996
Mr. Xxxxx Xxxxxx
0000 Xxxxxxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Re: AvTel Communications, Inc., a Utah corporation (the "Company")
Dear Xxxxx:
This letter will serve as a letter agreement by and among you, the
Company, Xxxxxxx X. Xxxx and Xxxxx X. Xxxxxx with respect to the following:
1.Letter Agreement dated August 1, 1996 (the "Letter Agreement") between you
and AvTel Holdings, Inc., a California corporation, formerly called AvTel
Communications, Inc. ("AHI");
2.Assumption and Rights Agreement between you and the Company dated October
23, 1996 ("Assumption Agreement"); and
3.That certain Shareholders Agreement by and among you, the Company, Xxxxxxx
X. Xxxx ("Papa"), Xxxxx X. Xxxxxx ("Xxxxxx"), Xxxx X. Xxxxx ("Xxxxx") and Tree
of Stars, Inc. ("XXXX") (the "Shareholders' Agreement")
Background Facts
Pursuant to the Letter Agreement, you have been issued an aggregate of
1,063,128 shares (the "Shares") of the Company's $.001 par value common stock
("Common Stock")
Pursuant to the Assumption Agreement: (a) the Company assumed and
agreed to perform the duties and obligations of AHI under the Letter
Agreement, as amended, and (b) the Company and Messrs. Papa and Xxxxxx
acquired certain rights (the "Option") to purchase all or any part of the
Shares.
Effective as of or prior to the date hereof, Messrs. Papa and Xxxxxx
have acquired rights under the Option to acquire, as to each of them, 431,564
of the Shares.
000 Xxxxxxx Xxxxx - Xxxxxx, XX - 00000 - Phone: (000) 000-0000 - Fax: (805)
000-0000
Pursuant to the Assumption and Shareholders' Agreements,
respectively, you acquired: (a) certain so-called "registration rights"
with respect to the Shares, and (b) certain rights of first refusal with
respect to shares of the Company's common stock owned, directly or indirectly,
by Begum and XXXX (the "First Refusal Rights").
You have not signed and returned the Employment Agreement (as that
term is defined in the Letter Agreement) to the Company on or before December
1, 1996, and have advised the Company's Board of Directors that you do not
intend to accept the Employment Agreement or otherwise to become employed by
the Company.
Based on the foregoing, you and the Company have agreed to enter into
this Letter Agreement with respect to various matters involving the Letter
Agreement, the Assumption Agreement and the Shareholders' Agreement.
Agreement
In consideration of the mutual covenants, agreements and promises
contained herein, you and the Company agree as follows:
1.Termination of Employment Offer. Any and all offers by the Company or any
of its officer, directors and employees to employ you, including, but not
necessarily limited to, those offers set forth or referred to in the Letter
Agreement, are hereby completely and irrevocably terminated, revoked and
withdrawn.
2.Partial Option Termination. The Option is partially terminated in that (a)
an aggregate of 863,128 Shares remain subject to the Option (exercisable by
Papa and Xxxxxx) and (b) the remaining 200,000 Shares (the "Reserved Shares")
are, as of the date hereof, released from the Option.
3.Exercise of Option, Delivery and Issuance of Stock Certificates. You
acknowledge that the execution of this Letter Agreement by Xxxxxx and Papa
constitutes notice of exercise of the Option assigned to the each of them.
Accordingly, promptly following execution and delivery of this Letter
Agreement and the other agreements contemplated herein, you will furnish, or
cause to be furnished, to the Company the stock certificate representing the
Shares previously issued to you, together with a properly endorsed stock power
whereupon such stock certificate will be canceled on the corporation's record
and the Company will issue or cause to be issued new stock certificates as
follows:
(a)a Reserved Stock Certificate representing 200,000 shares of Common
Stock registered in your name; and
(b)two stock certificates, each in the amount of 431,564 shares of Common
Stock, registered in the names of Papa and Xxxxxx, respectively.
Mr. Xxxxx Xxxxxx
Letter Agreement
Page 3
All such stock certificates shall bear the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN
STATES. THESE SECURITIES ARE SUBJECT TO CERTAIN RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM.
Except as set forth herein, all of the terms and conditions of Section 1 of
the Letter Agreement with respect to the option remain in full force and
effect, have not been modified or changed in any manner whatsoever.
4.Securities Laws Matters. You confirm that you have been informed that the
Reserved Shares are restricted securities under the Securities Act of 1993, as
amended, they may not be resold or transferred unless first registered under
the Federal Securities Laws or unless an exemption from such registration is
available and the issuance of such Reserved Shares to you may be subject to
your providing written representations to the Company, as determined by it and
its counsel, to assure compliance with such laws. You further acknowledge
that you are prepared to hold the Reserved Shares for an indefinite period and
that you are aware that Rule 144 promulgated by the Securities and Exchange
Commission is not presently available to exempt the resale of Shares from the
registration requirements of the 1933 Act. In order to reflect these
restrictions, the stock certificates for the Reserved Shares shall be endorsed
with such restrictive legends as are considered necessary or appropriate by
the Company.
5.Shareholder and Assumption Agreements. You hereby assign, transfer, convey
and set over to the Company all of your right, title and interests under the
Shareholder Agreement, including, but not necessarily limited to, all of your
right, title and interest to exercise any Rights of First Refusal with respect
to shares of common stock held by Begum and XXXX, directly or indirectly,
beneficially or of record. You shall continue to have, as to the Reserved
Shares, the piggyback registration rights set forth in and subject to the
terms of the Assumption Agreement.
6.Service as Director. You agree to continue to serve as a member of the
Board of Directors of the Company, at the pleasure of the Company's
shareholders. You will also be entitled to be reimbursed for reasonable
travel and other related costs and expenses incurred by you in connection with
attending such meetings. You will be expected to dutifully and faithfully
perform your obligations as a member of the Board of Directors of the Company
and to comply with customary and usual obligations of a director of a publicly
traded company.
7.Confidentiality. You acknowledge and agree that during the course of and
incident to your affiliation and relationship with the Company as a member of
the Board of Directors, the Company has provided and will provide to you, that
you will be exposed to or have access to, Confidential Information (as defined
herein). For purposes hereof, "Confidential Information" shall mean all
proprietary and confidential information concerning or relating to the
business, products, prospects, properties and operations of AvTel and its
subsidiaries, including, without limitation, customer and supplier lists,
know-how, trade secrets, business and discoveries, improvements, models,
strategies, forecasts, projections, budgets, financial information, price
lists, costs, computer programs, source and object codes, algorithms, data,
logic flow diagrams and other original works of authorship, executive and
employee information and data (including salaries, performance history, skills
and experience), capital formation and financing plans and strategies, merger,
acquisition and strategic alliance transactions, licensing and other similar
plans and objectives including any information received from third parties and
held in confidence by AvTel or its subsidiaries. You will hold the
Confidential Information in the strictest confidence, will not disclose or
make use of (directly or indirectly) any Confidential Information or any
portion thereof to or on behalf of any third party, except as required in the
performance of your duties and obligations as a member of the Board of
Directors of the Company.
8.Release. You acknowledge and agree that duties and obligations and
entitlements provided to you herein by the Company, including, but not
necessarily limited to the issuance by the Company to you of the Reserved
Stock and the Warrants constitute a full, complete and final payment,
satisfaction and discharge of any and all debts, obligations or liabilities,
expressed or implied, absolute or contingent, involving the Company or any of
its Affiliates in connection with, arising from or relating to the Letter
Agreement, the Employment Agreement, the Assumption and Rights Agreement and
the Shareholders Agreement and all representations, warranties, covenants and
understandings contemplated thereunder ("Company Agreements"). On behalf of
yourself and each of your successors and assigns, you hereby release and
forever discharge the Company and its present and former affiliates, officers,
directors, trustees, controlling persons, employees and agents ("Released
Parties") from each and every right, claim, debt, demand, loss, action, cause
of action, damage, penalty, suit and proceedings of every kind (including
without limitation any claims for attorneys' fees, costs and expenses relating
thereto) at law or in equity, whether known or unknown (collectively,
"Claims") of, from and against any and all other payments or performance
obligations, duties or liabilities of whatsoever nature (including, but not
limited to, brokers', finders', advisory or other fees, payments, commissions
or other forms of remuneration or compensation) which you ever had, now have
or may in the future have relating to the Company transactions. You further
agree and acknowledge that this release extends to all rights you may have
under any state or federal law or regulation limiting the effect of such
release, including, without limitation, the provisions of §1542 in the
California Civil Code, which are hereby expressly waived. Said §1542 of
the California Civil Code reads as follows:
"a general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor."
9.General Provisions.
9.1No Representation Regarding Tax Treatment. No representation or
warranty is being made by any party to any other regarding the treatment of
the transactions contemplated by this Letter Agreement for federal or state
income taxation. Each party has relied exclusively on its own legal,
accounting, and other tax adviser regarding the treatment of this transaction
for federal and state income taxes and on no representation, warranty, or
assurance from any other party or such other party's legal, accounting, or
other adviser.
9.2Governing Law. This Agreement shall be governed by, enforced and construed
under and in accordance with the laws of the United States of America and,
with respect to matters of state law, with the laws of the state of Utah.
9.3Notices. All notices, demands, requests, or other communications
required or authorized hereunder shall be deemed given sufficiently if in
writing and if personally delivered; if sent by facsimile transmission,
confirmed with a written copy thereof sent by overnight express delivery; if
sent by registered mail or certified mail, return receipt requested and
postage prepaid; or if sent by overnight express delivery:
If to AvTel, to: AVTEL COMMUNICATIONS, INC..
Attn.: Xxxxx X. Xxxxxx
000 Xxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxx 00000
Telecopy No.: (000) 000-0000
With a copy to: Xxxxxxx X. Xx Xxxxx
PRICE, XXXXXX & PARMA
000 Xxxx Xxxxxxxx Xxxxxx
Xxxxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Telecopy No.: (000) 000-0000
If to Xxxxx Xxxxxx: Mr. Xxxxx Xxxxxx
0000 Xxxxxxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
or such other addresses and facsimile numbers as shall be furnished by any
party in the manner for giving notices hereunder, and any such notice, demand,
request, or other communication shall be deemed to have been given as of the
date so delivered or sent by facsimile transmission, three days after the date
so mailed, or one day after the date so sent by overnight delivery.
9.4Attorneys' Fees. In the event that any party institutes any action or
suit to enforce this Agreement or to secure relief from any default hereunder
or breach hereof, the breaching party or parties shall reimburse the
non-breaching party or parties for all costs, including reasonable attorneys'
fees, incurred in connection therewith and in enforcing or collecting any
judgment rendered therein.
9.5Third-Party Beneficiaries. This contract is solely between the
Company and Xxxxx Xxxxxx, and, except as specifically provided, no director,
officer, stockholder, employee, agent, independent contractor, or any other
person or entity shall be deemed to be a third party beneficiary of this
Agreement.
9.6Entire Agreement. This Agreement represents the entire agreement
between the parties relating to the subject matter hereof. All previous
agreements between the parties, whether written or oral, have been merged
into this Agreement. This Agreement alone fully and completely expresses the
agreement of the parties relating to the subject matter hereof. There are no
other courses of dealing, understandings, agreements, representations, or
warranties, written or oral, except as set forth herein.
9.7Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall be but a single instrument.
9.8Amendment or Waiver. Every right and remedy provided herein shall be
cumulative with every other right and remedy, whether conferred herein, at
law, or in equity, and such remedies may be enforced concurrently, and no
waiver by any party of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then, theretofore, or
thereafter occurring or existing.
00.Xxxxx Representation. You acknowledge and understand that the Company is
represented by Price, Xxxxxx & Parma, LLP and that you are free to seek
separate counsel to advise you independently, with respect to this letter
agreement and any and all agreements contemplated hereunder.
Very truly yours,
AVTEL COMMUNICATIONS, INC.
Xxxxxxx X. Xxxx
President & Chief Executive Officer
Acknowledged and Accepted this ___ day
of December, 1996:
________________________________
Xxxxx X. Xxxxxx
NOTICE OF EXERCISE OF OPTION
The undersigned hereby provide notice of exercise of options to acquire
the number of Shares set forth opposite their names and each hereby tenders
payment in the amount set forth below:
_____________________________ __________ Shares @ $0.00094062 per
Share
Xxxxxxx X. Xxxx Total: $____________
____________________________ __________ Shares @ $0.00094062 per
Share
Xxxxx X. Xxxxxx Total: $____________
