EXHIBIT 2.1
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT ("AGREEMENT") entered into as of 12:01 a.m.
February 1, 1997 ("Effective Date"), is entered into by and among Hi, Tiger,
Inc., a Utah corporation (the "Company" or "HTI"), AvTel Communications, Inc., a
Utah corporation and the holder of all the issued and outstanding capital stock
of the Company ("AvTel"), WestNet Communications, Inc., a California corporation
("WNC"), the B Shareholders and the A Shareholders, as those terms are defined
herein (the B and A Shareholders being listed in Exhibit B attached hereto and
referred to, collectively, as the "Shareholders" and, individually, a
"Shareholder").
RECITALS
A. The respective boards of directors of HTI and of WNC, and the Shareholders,
as the holders of one hundred percent (100%) of the issued and outstanding
common stock of WNC, have approved the acquisition by the Company from the
Shareholders of all of the issued and outstanding capital stock of WNC upon
the terms and subject to the conditions set forth in this Agreement; and
B. Based upon the representations, warranties, covenants and agreements
contained herein, the parties have agreed that WNC will be acquired by HTI
and WNC will become a wholly owned subsidiary of the Company.
NOW, THEREFORE, in consideration of the agreements, representations,
warranties and covenants herein contained, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS. Capitalized terms not otherwise defined herein shall have
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the following meanings.
AFFILIATE - with respect to any Person, any other Person
("Controlling Person") that, directly or indirectly, controls such
Person and any other Person that is directly or indirectly controlled
by such Controlling Person. For purposes hereof, the term "control"
shall mean the possession of voting power in the form of ownership of
stock or other participation interests, other than upon events of
default, sufficient to change or replace fifty percent (50%) or more
of the board of directors or other management authority of such
Person.
AVTEL SHARES - an aggregate of 35,000 shares of $.001 par value
common stock of AvTel ("Common Stock").
EFFECTIVE DATE BALANCE SHEET - the meaning set forth in Section 2.6(a)
hereof
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CLOSING - the meaning set forth in Section 2.2
CLOSING DATE - the meaning set forth in Section 2.2
COMMISSION - the Securities and Exchange Commission of the United
States
COMPANY NOTE(S) - the Company's secured promissory notes, in
substantially the form of EXHIBIT A attached hereto in the aggregate
principal amount of $157,000.
B SHAREHOLDERS - the Persons listed in Part 1 of EXHIBIT B attached,
each of whom own, as of the Effective Date, the number of shares shown
adjacent to their respective names in such Exhibit.
SHAREHOLDERS' PROPORTIONATE INTEREST - a fraction, the numerator of
which is the total number of WNC Shares held by a Shareholder as
reflected in EXHIBIT B and the denominator of which is the total
number of WNC Shares held by all Shareholders.
FINANCIAL STATEMENTS - the meaning set forth in Section 3.3
INTELLECTUAL PROPERTY - the meaning set forth in Section 3.19
ISI - Xxxxxx Color Photo Lab Corporation dba Image Source, Inc., a
California corporation whose principal shareholders are Xxxxxxxx X.
Padova, Xxxxxx X. Xxxxxxxx and Xxxxx Xxxxx.
KNOWLEDGE - With respect to WNC, the actual present knowledge of each
Shareholder and any of the officers and directors of WNC and shall
include WNC's or any of such Shareholder's, director's or officer's
(a) possession or review of a written document or material or (b)
awareness or knowledge of oral or written information at the time of
the Effective Date and at the Closing. With respect to HTI and AvTel,
except as provided in Section 4.3 hereof, the actual present knowledge
of any of the officers, directors, agents, consultants, attorneys,
accountants, or other advisors of either of said companies ("agents")
and shall include such agents' (a) possession or review of a written
document or material and/or (b) awareness or knowledge of oral or
written information at the time of the execution of this Agreement and
at the Closing.
LIENS - any liens, charges, security interests, pledges, mortgages,
charges, rights, claims or encumbrances of others, including any
rights of others to royalties or other similar payments, and any
restraints on transfer
MATERIAL ADVERSE EFFECT - with respect to any Person, a material
adverse effect on the business, prospects, results of operations,
financial condition or assets of such Person and its Subsidiaries, if
any, taken as a whole
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NON-COMPETITION AGREEMENT - the non-competition agreement in
substantially the form of that attached as EXHIBIT C
A SHAREHOLDERS - the Persons listed in Part 2 of EXHIBIT B attached
hereto, each of whom own, as of the Effective Date, the number of
shares shown adjacent to their respective names in such Exhibit
PERSON - an individual, corporation, partnership, joint venture,
trust, governmental agency or other similar legal entity
PLEDGE AGREEMENT - the Pledge and Security Agreement in substantially
the form of that attached as EXHIBIT D.
PLEDGED STOCK - an aggregate of 20,000 shares of WNC Shares which are
to be held as security for payment of the Company's Notes pursuant to
the PLEDGE AGREEMENT.
REFUSAL RIGHTS NOTICE - the notice referred to in Section 5.6(b)
hereof, in substantially the form attached as EXHIBIT E.
WNC DISCLOSURE SCHEDULE - the meaning given such term in Article III
SECURITIES ACT - the Securities Act of 1933, as amended, and the rules
and regulations
SHAREHOLDER DEBT - the loan and other repayment obligations owed by
WNC to certain Shareholders as described in item 3.16 of the WNC
Disclosure Schedule
SHAREHOLDER OBLIGATIONS - any direct or indirect debt payment,
repayment or other obligations of WNC, whether absolute, contingent or
otherwise, as to which any Shareholder has assumed or acquired any
direct or indirect, joint or several, obligation, whether absolute,
contingent or otherwise, to pay, satisfy, perform or discharge, in
whole or in part and whether in the form of a surety, guarantee, as a
co-xxxxxx or otherwise.
SUBSIDIARY - with respect to any entity, any corporation of which
securities or other ownership interests having ordinary voting power
to elect a majority of the board of directors or other Persons
performing similar functions are directly or indirectly owned by such
entity
TAX and TAXES - the meaning given such terms in Section 3.20
TRADING DAY - any day on which trading occurs on the National
Association of Securities Dealers Automated Quotations System.
WNC SHARES - the meaning given such term in Section 2.1
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ARTICLE II
THE ACQUISITION
2.1 THE ACQUISITION. On the Closing Date and subject to and upon the terms of
this Agreement, the Company shall acquire and purchase from the
Shareholders and the Shareholders shall sell, transfer and convey to the
Company an aggregate of 20,000 shares of the issued and outstanding capital
stock of WNC (the "WNC Shares"), constituting, after giving effect to the
transactions contemplated by this Agreement, one hundred percent (100%) of
the issued and outstanding capital stock of WNC. Immediately following the
acquisition, WNC shall be a wholly owned Subsidiary of HTI.
2.2 CLOSING. The Closing of the acquisition shall take place at 2:00 p.m.,
California time, at the offices of Price, Xxxxxx & Parma, LLP, 000 Xxxx
Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxx Xxxxxxx, Xxxxxxxxxx, 00000, on or before
February 21, 1997 (the "Closing Date") unless another time, date or place
is agreed to in writing by the parties hereto.
2.3 PURCHASE CONSIDERATION. In exchange for and as consideration for the
transfer and sale of the WNC Shares and payment in full of the Shareholder
Debt, the Company will pay consideration as follows:
(a) CASH PAYABLE AND COMPANY NOTE(S) DELIVERABLE. Subject to the
provisions of Section 2.6 hereof, at the Closing: (i) the Company will
pay to all Shareholders an aggregate amount of $80,000 cash; and (ii)
the Company will deliver to the Shareholders the Company Notes in an
aggregate principal amount of $157,000, payable in installments of
principal of $71,673.91 on October 15, 1997 and $85,326.09 on February
15, 1998. Sixty (60) days after the Closing the Company will pay to
the Shareholders an aggregate of $20,000 cash (the "Deferred Payment")
by Cashier's Check in U.S. Funds drawn on a bank with branches in
Ventura County and payable to Xxxxxxxxxx X. Xxxxxx, Client's Trust
Account. As a result, each Shareholder shall be entitled to receive
cash and Company Notes in the following amounts:
B SHAREHOLDERS
Cash at Cash 60 Aggregate
Closing days Post Closing of Company Note
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ISI $25,200 $6,000 $26,400
Xxxxxxxx X. Padova 8,400 2,000 16,300
Xxxxxx X. Xxxxxxxx 8,400 2,000 16,300
and Xxxxxxxxxx X. Xxxxxx
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A SHAREHOLDERS
Cash at Cash 60 days Aggregate
Closing days Post Closing of Company Note
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Xxxxxxxx Xxxxxxx 12,600 3,000 28,200
Xxxxx X. Xxxxxxxx 4,400 2,000 22,800
Xxxxxx X. and Xxxx Xxxxxxxx 16,800 4,000 37,600
Xxxx X. Xxxxxx 4,200 1,000 9,400
(b) DELIVERY OF AVTEL SHARES TO THE B SHAREHOLDERS. At the Closing, the
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Company will cause AvTel to issue to the B Shareholders the AvTel
Shares as follows:
B SHAREHOLDER NO. OF SHARES
ISI 30,000
T. Padova 2,500
X. Xxxxxxxx 2,500
2.4 OTHER APPROVALS, DISSENTER RIGHTS,. As a condition to this Agreement and
to the consummation of the transactions contemplated herein, prior to the
Closing: (a) the board of directors and Shareholders of WNC shall have
unanimously adopted and approved this Agreement and the transactions
contemplated hereunder; (b) the Company shall have received all consents,
waivers and releases from such Persons, including but not limited to the
lessors of the real property described in Section 3.23 hereof, and on such
reasonable terms as the parties shall agree to in advance, and (c) no
Shareholder shall have exercised or given notice of any intention to
exercise any dissenter rights under Section 1300, et seq of the California
General Corporation Law.
2.5 CLOSING EVENTS.
(a) DELIVERIES BY WNC AND SHAREHOLDERS. WNC and Shareholders shall, as to
item (i) below, permit HTI to obtain, and, as to all other items, or
cause to be delivered to HTI, at the Closing all the following:
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(i) Certificates of good standing from the appropriate authorities,
issued as of a date within thirty (30) days prior to the Closing
Date, certifying that WNC is in good standing as a corporation in
the state of California, such document to be obtained by HTI;
(ii) Incumbency certificates dated the Closing Date with respect to
the respective officers of WNC executing this Agreement and any
other document delivered pursuant hereto on behalf of WNC, a form
of which has been provided in advance by HTI;
(iii) Copies of the resolutions of WNC's board of directors and
Shareholders approving this Agreement and authorizing the
execution and performance of this Agreement and the contemplated
transactions, certified by the secretary or an assistant
secretary (or other comparable officer) of WNC as of the Closing
Date;
(iv) The certificates contemplated by Sections 6.1 and 6.2, duly
executed by the chief executive officer and principal accounting
and financial officer of WNC.
(v) Stock certificate(s) representing the WNC Shares, endorsed in
blank or accompanied by duly executed assignment documents, and
instructions directing the cancellation hereof, including one or
more certificates representing the Pledged Stock, reflecting an
aggregate of shares of WNC's common stock registered in the name
of the Company;
(vi) Resignations, in writing, of all officers and directors of WNC;
(vii) Promissory Notes representing the Shareholder Debt marked
"Paid. in Full" and manually signed by the named payee;
(viii) Fully executed copies of the Non-Competition Agreements signed by
each Shareholder; and
(ix) The lessor consents, amendments and other documents contemplated
by Section 2.4 and 5.6(a)
In addition to the above deliveries, WNC and Shareholders shall take all
steps and actions and execute and deliver such other certifications and
documents as HTI may reasonably request or as may otherwise be necessary
to consummate the transactions contemplated hereby.
(b) DELIVERIES BY HTI. Subject to fulfillment or waiver of the conditions
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set forth in Articles V and VI, HTI shall deliver or cause to be
delivered at Closing the following:
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(i) Certificates of good standing from the appropriate authorities,
issued as of a date within thirty (30) days prior to the Closing
Date certifying that HTI is in good standing as a corporation in
the state of Utah;
(ii) Incumbency and specimen signature certificates dated the Closing
Date with respect to the officers of HTI executing this
Agreement and any other document delivered pursuant hereto on
behalf of HTI;
(iii) Copies of resolutions of the board of directors of HTI
authorizing the execution and performance of this Agreement and
the transactions contemplated hereunder, certified by the
secretary or an assistant secretary of HTI as of the Closing
Date;
(iv) Cashier's checks in U.S. dollars, drawn on a California bank and
payable to the respective Shareholders in the amounts determined
in accordance with Section 2.3 (a) hereof;
(v) Fully executed Company Notes payable to the respective
Shareholders in the amounts determined in accordance with Section
2.3 (a) hereof;
(vi) Stock certificates representing the AvTel Shares registered in
the names of the respective B Shareholders in the amounts
determined in accordance with Section 2.3 (b) hereof; and
(vii) The Pledged Stock and the fully executed Pledge and Security
Agreement.
(viii) A certificate dated the Closing Date executed by officers of
HTI and AvTel certifying that HTI and AvTel have received all
documentation required and requested of WNC and the Shareholders
pursuant to this Agreement and the agreements contemplated
hereby.
(ix) Fully executed UCC - 1 financing statements relating to the
Collateral referred to in the Pledge Agreement.
In addition to the above deliveries, HTI and AvTel shall take all steps and
actions as WNC or Shareholders may reasonably request and execute and
deliver such other certificates and documents as may otherwise be necessary
to consummate the transactions contemplated hereby.
2.6 ADJUSTMENT TO PURCHASE CONSIDERATION. The amount payable by the Company as
the Deferred Payment and under the Company Notes pursuant to Section 2.3(a)
hereof shall be subject to adjustment in accordance with this Section 2.6.
(a) POST CLOSING AUDIT. On or about March 1, 1997, the Company shall,
with the assistance and cooperation of WNC's accountant, Xx. Xxxxxx
Xxxxxxxxx (provided such accountant undertakes this engagement
diligently and in a timely manner), conduct a Post Closing Audit for
the purpose of, among other things,
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preparing a balance sheet of WNC as of the Effective Date (The
Effective Date" Balance Sheet"). The Effective Date Balance Sheet
shall be prepared from the internal books and records of WNC in a
manner consistent with WNC's previous practices. A copy of such
Effective Date Balance Sheet will be furnished to each Shareholder as
promptly as practical following its completion.
(b) TOTAL AVAILABLE CASH ADJUSTMENTS. If the Total Available Cash as of
the Effective Date as shown on the Effective Date Balance Sheet
prepared in accordance with Subsection 2.6(a) above (consisting of the
sum of the (i) total aggregate amount of cash, plus (ii) the accounts
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receivable, minus twenty percent (20%) of said accounts receivable and
minus any receivable account with a due date in excess of 90 days,
minus (iii) accounts payable and accrued payroll expenses as at and
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through January 31, 1997), exceeds $65,000, the excess, if any, shall
be paid to the Shareholders as follows:
TOTAL AVAILABLE AMOUNT OF EXCESS
CASH PAYABLE TO
SHAREHOLDERS
$65,001 - $95,000 100% of amount over $65,000
$95,001 and over 100% of amount over $65,000 up to
$95,000 plus 50% of amount over
$95,000
The amount of such excess payable to each Shareholder shall be
determined prorata on the basis of such Shareholder's Proportionate
Interest. The Shareholders shall not be entitled to any adjustment in
the purchase consideration pursuant to this Section 2.6(b) if the
Total Available Cash is less than $65,000. Any additional payment due
the Shareholders pursuant to this Section 2.6(b) shall be due and
payable, without interest, at the same time as the Deferred Payments
as described in Section 2.3(a) hereof.
(c) MARKET ADJUSTMENT. For purposes hereof, the term "Market Price"
shall be the average mean between the bid and ask prices of AvTel's
Common Stock as reported on the NASD Bulletin Board trading system
over the period of ten (10) Trading Days immediately following the
Closing Date. In the event the Market Price is less than $1.00 per
share, the Company will pay to the B Shareholders an additional amount
(the "Market Adjustment") determined by multiplying the difference
between the Market Price and $1.00 by 35,000. Each B Shareholder shall
be entitled to receive an amount determined by multiplying the
aggregate Market Adjustment by such B Shareholder's Proportionate
Interest. If no more than $1,000, in the aggregate, the Market
Adjustment shall be paid in a lump sum as a Deferred Payment to the B
Stockholders on the basis of such B Stockholder's Proportionate
Interest sixty (60) days after Closing. Otherwise, the payment of
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the Market Adjustment shall be made pursuant to promissory notes in
the same tenor as the Company Notes in two equal installments on
October 15, 1997 and February 15, 1998, respectively. Such fully
executed promissory notes shall be delivered to the B Shareholders by
HTI not later than twenty (20) days following the Closing Date.
ARTICLE III
REPRESENTATIONS, COVENANTS AND WARRANTIES OF
WNC AND THE SHAREHOLDERS
In this Agreement, any reference to any event, change, condition or effect
being "material" with respect to any entity or group of entities means any
material event, change, condition or effect related to the condition (financial
or otherwise), properties, assets (including intangible assets), liabilities,
business operations, results of operations or prospects of such entity or group
of entities. In this Agreement, any reference to a "Material Adverse Effect" or
"Material Adverse Change" with respect to any entity or group of entities means
any event, change or effect that is materially adverse to the condition
(financial or otherwise), properties, assets, liabilities, business, operations,
results of operations or prospects of such entity and its subsidiaries, taken as
a whole. As an inducement to, and to obtain the reliance of HTI and AvTel,
except as set forth in a disclosure schedule dated as of the date hereof and
delivered by WNC and the Shareholders to HTI (the "WNC Disclosure Schedule") WNC
and the Shareholders jointly and severally represent and warrant as of the date
hereof and as of the Closing Date, that to the best of their information,
Knowledge and belief :
3.1 ORGANIZATION. WNC is, and will be on the Closing Date, a corporation duly
organized, validly existing, and in good standing under the laws of the
state of California and has the corporate power and is and will be duly
authorized, qualified, franchised, and licensed under all applicable laws,
regulations, ordinance, and orders of public authorities to own all of its
properties and assets and to carry on its business in all material respects
as it is now being conducted, and there are no other jurisdictions in which
it is not so qualified in which the character and location of the assets
owned by it or the nature of the material business transacted by it
requires qualification, except where failure to do so would not have a
Material Adverse Effect. This Agreement and the other agreements
contemplated herein have been duly executed and delivered by the
Shareholders and WNC, as the case may be, have been authorized by all
necessary corporate and other action of the Shareholders and WNC and
constitute the legal, valid and binding obligations of each of the
Shareholders and WNC, enforceable against each such party in accordance
with their terms, as applicable, except as enforcement may be limited by
equitable principles or bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to creditors' rights generally.
3.2 CAPITALIZATION. The authorized capitalization of WNC consists of 100,000
shares of common stock, no par value (the "WNC Stock"), of which 20,000 WNC
Shares are issued and outstanding, consisting of 20,000 shares registered
in the names of the Shareholders as set forth in EXHIBIT B. All issued and
outstanding shares of WNC Stock
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are duly authorized, legally issued, fully paid, and nonassessable, are not
subject to any preemptive or other right of any Person created by statute,
the Articles of Incorporation or Bylaws of WNC and are free of any Liens.
There are no dividends or other amounts due or payable with respect to any
of the WNC Shares. WNC does not presently own, directly or indirectly, any
interest in any subsidiary or in any other corporation, association, joint
venture or other business entity. WNC is not subject to any material
liabilities or obligations of any nature whatsoever resulting from the
conversion of any predecessor entities into WNC. The issuance of the WNC
Shares to the Shareholders complied in all material respects with all
applicable provisions of the Securities Act and the California Corporate
Securities Law and all similar laws of other states in which any
Shareholder resides.
3.3 FINANCIAL STATEMENTS.
(a) The financial statements of WNC, including the notes thereto and
consisting of the unaudited Statement of Assets, Liabilities & Equity
- Modified Cash Basis of WNC (the "WNC Balance Sheets"), as of
December 31, 1996 (the "Balance Sheet Date"), and the related
unaudited Statements of Revenues and Expenses - Modified Cash Basis
for the one and three Month Periods ended December 31, 1996 (the
"Statements of Operations") (collectively the "Financial Statements")
present fairly the results of operations and financial position of WNC
for the periods and as of the dates indicated, based on the modified
cash basis accounting principles umder which they were prepared.
True and correct copies of such Financial Statements are set forth in
the WNC Disclosure Schedule. The internal books and records of WNC
from which such Financial Statements were prepared do not contain any
information which is false or misleading in any material respect,
based on the modified cash basis accounting principles under which
they were prepared. Such Financial Statements are complete and
accurate in all material respects.
(b) WNC did not have, as of the Balance Sheet Date except as and to the
extent reflected or reserved against therein, any liabilities or
obligations (absolute, contingent or otherwise) which should be
reflected in a balance sheet or the notes thereto prepared in
accordance with the modified cash basis accounting principles under
which they were prepared. All assets, properties, equipment and
rights, real or personal, tangible or intangible ("Assets") reflected
in the WNC Balance Sheets including the Collateral as that term is
defined in the Pledge Agreement, present fairly the Assets of WNC in
accordance with the modified cash basis accounting principles under
which they were prepared and WNC owns good and marketable title to all
such Assets free and clear of any Liens. The accounts receivables
reflected in the WNC Balance Sheets arose in the ordinary course of
WNC's business. The Statements of Operations present fairly the
consolidated financial position and results of operations of WNC as of
their respective dates and for the respective periods covered thereby,
based on the modified cash basis accounting principles under which
they were prepared.
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(3) The books and records, financial and otherwise, of WNC and its
subsidiaries are in all material respects complete and correct and have
been maintained in accordance with modified cash basis accounting
principles so as to accurately and fairly reflect the transactions and
dispositions of the assets and liabilities, actual, contingent or
otherwise, of WNC, based on said modified cash basis accounting system.
3.4 INFORMATION. The information concerning WNC and the Shareholders set forth
or otherwise provided or furnished in connection with the negotiation,
preparation and execution of this Agreement and the transactions
contemplated hereby including the WNC Disclosure Schedule and the
representations and warranties contained herein, is complete and accurate
in all material respects and did not and does not contain any untrue
statement of a material fact or omit to state a material fact required to
make the statements made not misleading. True and correct copies of each
of the written contracts, agreements and leases listed in the WNC
Disclosure Schedule have been delivered to the Company on or prior to the
Closing Date and there are no amendments, revisions or changes, oral or in
writing, to any of the foregoing.
3.5 OPTIONS; EQUITY INTERESTS. Except as set forth in the WNC Disclosure
Schedule, there are no existing options, warrants, calls, rights,
agreements or commitments of any character relating to the authorized and
unissued capital stock of or equity participation in WNC ("Equity
Interest") and no Person has such an Equity Interest . Neither WNC nor any
Shareholders are a party to or obligated under any agreement, contract,
understanding, commitment or arrangement, expressed or implied, oral or in
writing obligating them, jointly or severally, to either (a) issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered,
sold, repurchased or redeemed, any WNC Shares or (b) grant, extend,
accelerate the vesting of, change the price of, or otherwise amend or enter
into any such Equity Interest.
3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the Balance Sheet Date:
(a) WNC has conducted its business in the ordinary course and there has
not been (i) any material change, event or condition in the
business, operations, properties, level of inventory, assets, or
condition of WNC or (ii) any damage, destruction, or loss that has
resulted in or might reasonably expect to result in a Material Adverse
Affect;
(b) WNC has not except in the ordinary course of business and except, as
to Clause (i) hereof, as to an amendment to its bylaws, which
amendment has been unanimously approved by the Shareholders for the
purpose of removing certain rights of first refusal among WNC and the
Shareholders (a copy of which has been provided to the Company), (i)
amended its articles of incorporation or bylaws; (ii) declared, set
aside, made, or agreed to declare, or make any dividends or
distributions of any assets of any kind whatsoever or purchased or
redeemed, or agreed to purchase or redeem, any of its capital stock;
(iii) waived any material rights; (iv) made any material change in
management, operations, or accounting;
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(v) entered into any other material transactions; (vi) made any
accrual or arrangement for or payment of kind or any severance or
termination pay to any present or former officer, director or
employee; (vii) increased the rate of compensation payable or to
become payable by it to any of its officers, directors or employees;
(viii) made any increase in any profit-sharing, bonus, or other
employee benefit plan; or (ix) made any representation, agreement,
promise or commitment of any nature whatsoever, expressed or implied,
on behalf of the Company or AvTel, with respect to any of the matters
referred in the preceding clauses (i) through (viii).
(c) Neither WNC nor any Shareholders has (i) granted or agreed to grant
any options, warrants, calls, commitments or other rights for the
AvTel Shares, the WNC Shares or any of the capital stock of either the
Company or AvTel; (ii) borrowed or agreed to borrow any funds or
incurred, or become subject to, any debt, obligation or liability
(absolute or contingent) except liabilities incurred in the ordinary
course of business; (iii) loaned or advanced funds or granted
extensions of credit (or agreed to do any of the foregoing) to any
Person or guaranteed, directly or indirectly, in any manner
whatsoever, the payment or performance obligations, in whole or in
part, of any other Person; (iv) paid or prepaid any material
obligation or liability (absolute or contingent) other than current
liabilities reflected on or shown on the WNC Balance Sheets included
in the Financial Statements; (v) except in the ordinary course of
business, accelerated or demanded early or advance payment or
prepayment under any accounts receivable or other customer accounts;
(vi) sold or transferred, or agreed to sell or transfer, any material
assets, properties, or rights or canceled, or agreed to cancel, any
debts or claims; (vii) made or permitted any amendment or termination
of any material contract, agreement, or license to which WNC is a
party; (viii) issued, delivered, or agreed to issue or deliver any
stock, bonds, or other corporate securities including debentures
(whether authorized and unissued or held as treasury stock); (ix)
entered into, amended, modified or changed any Affiliate Transaction
(as defined herein) or paid, discharged, released, waived,
transferred, assigned, canceled or terminated any rights, duties
liabilities or obligations under any Affiliate Transaction; or (x)
made any representations, agreements, promises or commitments of any
nature whatsoever, expressed or implied, on behalf of the Company or
AvTel, with respect to any of the matters referred to in clauses (i)
through (xi) of subparagraph (b) above or in the preceeding clauses
(i) through (ix) of this subparagraph (c).
(d) Neither WNC nor any Shareholders have, become subject to any law or
regulation which materially and adversely affects, or in the future
may adversely affect, the business, operations, properties, assets, or
condition of WNC.
3.7 TITLE. WNC has good and marketable title to all of its properties,
inventory, interests in properties, Intellectual Property and Assets
(including Collateral as defined in the Pledge Agreement) in each case,
free and clear of all Liens. Each Shareholder has good and
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marketable title to its/his/her respective WNC Shares as reflected in
EXHIBIT B, free and clear of all Liens.
3.8 LITIGATION. There are no actions, suits, or administrative or other
proceedings pending, threatened, by or against WNC or any Shareholder or
affecting any of them or their respective properties, at law or in equity,
before any court or other governmental agency or instrumentality, domestic
or foreign, or before any arbitrator of any kind. There is no judgment,
decree or order that could prevent, enjoin, alter or materially delay any
of the transactions contemplated by this Agreement, or that could
reasonably be expected to have a Material Adverse Effect on WNC.
3.9 CONTRACTS. Except as set forth in the WNC Disclosure Schedule, there are
no material contracts, agreements, franchises, leases, license agreements,
or other commitments to which WNC is a party or by which any of its
properties are bound. All contracts, agreements, franchises, license
agreements, and other commitments to which WNC is a party or by which it is
bound and which are material to its operations or financial condition are
valid and enforceable. Neither WNC nor any Shareholder is a party to or
bound by any material contract, agreement, lease, other commitment or
instrument or any judgment, order, injunction, decree, or award which
materially and adversely affects, or in the future may materially and
adversely affect, the business, operations, properties, assets, or
condition of WNC. Neither WNC nor any Shareholder is a party to any
contract, agreement, understanding, arrangement or commitment, oral or in
writing, expressed or implied (a) regarding or relating to the employment
of any officer, director, or employee which is not terminable on 30 days
(or less) notice; (b) relating to the borrowing of money; or (c) any
guarantee of any obligation for the borrowing of money or otherwise.
3.10 MATERIAL CONTRACT DEFAULTS. Neither WNC nor any Shareholder is in default
under the terms of any contract, agreement, lease, or other commitment
which is material to the business, operations, properties, Assets, or
condition, financial or otherwise, of WNC, and, there is no event of
default or other event which, with notice or lapse of time or both, would
constitute a default under any such contract, agreement, lease, or other
commitment.
3.11 NO CONFLICT WITH OTHER INSTRUMENTS. The execution of this Agreement and
the consummation of the transactions contemplated by this Agreement will
not violate any provision of WNC's Articles of Incorporation or Bylaws and
will not result in the breach of any term or provision of, or constitute an
event of default under, any indenture, mortgage, deed of trust, or other
contract, agreement, lease or instrument, expressed or implied, oral or in
writing, to which WNC or any Shareholder is a party or to its his or her
properties, Assets or operations are subject.
13
3.12 GOVERNMENTAL AUTHORIZATIONS. WNC has obtained all licenses, franchises,
permits, and other governmental authorizations that are legally required to
enable WNC to conduct its businesses as conducted on the date of this
Agreement and as of the Closing Date.
3.13 COMPLIANCE WITH LAWS AND REGULATIONS. WNC has complied, in all material
respects, with, and is not in material violation of, and has not received
any notices of violation with respect to all applicable statutes and
regulations of any federal, state, or other governmental entity, including,
with respect to the WNC Shares, all applicable securities statutes and
regulations.
3.14 INSURANCE. WNC has policies of insurance and bonds of the type and in the
amounts customarily carried by Persons conducting businesses or owning
assets similar to those of WNC. All of the insurable properties of WNC are
insured for full replacement value (subject to reasonable deductibles)
against losses due to fire and other casualty, with extended coverage, and
other risks customarily insured against, by persons operating similar
properties. Such policies will be outstanding and in full force at the
Closing Date. There is no material claim pending under any of these
policies or bonds and all premiums due and payable under all such policies
and bonds have been paid.
3.15 EMPLOYEE, OTHER RELATIONS. The WNC Disclosure Schedule sets forth a
complete list of all Persons who (a) are, as of the date hereof, employed
by WNC, or engaged by WNC as consultants or independent contractors under
arrangements when services in excess of 20 hours in any week have been
performed and (b) have been, at any time during the two (2) years preceding
such date, employed by WNC or engaged by WNC as consultants or independent
contractors under arrangements when services in excess of 20 hours in any
week have been performed (the "WNC Employees"). WNC has complied in all
material respects with all applicable laws, rules and regulations that
relate to prices, wages, hours, harassment, disabled access, and
discrimination in employment and collective bargaining and to the operation
of its business and has duly paid or accrued and is not liable for any
arrears of wages or any payroll and other taxes or penalties for failure to
comply with any of the foregoing. There have not been and are no written
employment agreements in place or currently in effect for any of the WNC
Employees and all such WNC Employees have been and are engaged as "at will"
employees. No representations, warranties, commitments or understandings
of any nature whatsoever, oral or in writing, expressed or implied, have
been made, offered or entered into by WNC or any of its officers or
directors or by any Shareholder to or with any Person on behalf of the
Company or AvTel, or that might reasonably be expected to be on behalf of
or attributable to the Company or AvTel, with respect to the terms or
conditions of either this Agreement and the transactions contemplated
herein or any employment relationship between such Person and either the
Company or AvTel and any of their affiliates, including but not limited to
duration, wages, salaries, bonuses, stock options, benefits or other
matters relating to any such employment relationship.
3.16 AFFILIATE TRANSACTIONS. Except for the payment obligations owed by WNC to
certain Shareholders as set forth in the Shareholder Debt (item 3.16 of the
WNC Disclosure
14
Schedule), WNC is not indebted to any Shareholder or to any director,
officer, Affiliate, employee or agent of WNC or any of its Subsidiaries
(except for amounts due WNC Employees as normal salaries pursuant to salary
and compensation arrangements which have not been increased since November
1, 1996) and no such Person is either a party to or bound by a Shareholder
Obligation or indebted to WNC or any of its subsidiaries, and there have
been no other transactions of the following type or nature: (a) perquisites
or other personnel benefits, (b) deferred compensation arrangements or
agreements, (c) amounts reimbursed, paid or payable for the payment of
taxes, or (d) employment, severance or other similar contracts including
any plans or arrangements for any compensation or remuneration payable upon
or in connection with any retirement, resignation, or termination of such
Person's employment with WNC or any change in control of WNC ("Affiliate
Transactions").
3.17 BROKERS' AND FINDERS' FEES. Neither WNC nor any Shareholder has incurred,
nor will incur, directly or indirectly, any liability for brokerage or
finders' fees or agents' commissions or investment bankers' fees or any
similar charges in connection with this Agreement or any transaction
contemplated hereby.
3.18 BOARD APPROVAL. The Board of Directors of WNC has unanimously approved
this Agreement and determined that the Agreement is in the best interests
of WNC.
3.19 INTELLECTUAL PROPERTY. WNC is not a party to and is not bound by any
agreements or understandings with any of the Shareholders or any employees
or consultants of WNC whereby any of such Persons owns any interest or
right in any computer software, passwords, codes, data, documentation,
improvements, trade and commercial secrets, or confidential or proprietary
information ("Intellectual Property") used by WNC in its business as
presently conducted by it or as expected to be conducted by it immediately
following the Closing. WNC is not a party to and is not bound by any
agreements or understandings with any Person whereby such Person has been
granted any rights to use or disclose Intellectual Property. WNC's use of
the Intellectual Property does not infringe on any patent or copyright
interests of any third party, and no disclosure or use of any Intellectual
Property has been made by any Shareholder, employee or consultant in any
manner that would impair or lessen the value thereof to WNC.
3.20 TAXES. The Financial Statements properly and accurately reflect all
accruals for all taxes, assessments or charges of a governmental nature,
whether state, federal, local or otherwise, and whether in the nature of
income, payroll, sales, value-added, ad-valorem, property or otherwise
("Taxes"). Neither WNC nor any Shareholder has any Tax deficiency or claim
outstanding or assessed against it/him/her, or, proposed against it, and
there is no basis for any such deficiency or claim, which is reasonably
likely to result in the imposition of any Lien, claim or encumbrance on the
business assets or properties of WNC. All Tax and information returns and
reports required to be filed by WNC have been duly and timely filed and all
Taxes which were required to be paid have been paid.
3.21 NO TERMINATION OF BUSINESS RELATIONSHIP. None of the entities with which
WNC has a material business relationship or any other present, material
customer of WNC has given
15
notice or other indication of any intention to cancel, amend, change or
otherwise terminate or modify a material business relationship with WNC and
neither the Shareholders nor WNC are aware of any event (including, without
limitation, the transactions contemplated hereby) which would precipitate
the cancellation or termination of, or entitle any such entity or customer
to terminate, such material business relationship.
3.22 CONSENTS OF NON-GOVERNMENTAL THIRD PARTIES; THIRD PARTY INTERESTS. No
consent, waiver or approval of any non-governmental third parties is
necessary for the consummation by WNC and the Shareholders of the
transactions contemplated hereby. Neither the Shareholders nor WNC are
bound by any oral or written agreement with any third party to sell the WNC
Shares or any interest therein, including any agreement with respect to any
merger, consolidation or sale of all, or substantially all, the assets of
WNC or otherwise.
3.23 PROPERTIES. WNC does not own or hold title to any real property. With
respect to the property and assets it leases, WNC is in compliance in all
material respects with such leases and holds a valid leasehold interest in
such property and assets free of any liens or encumbrances of any kind
whatsoever. The WNC Disclosure Schedule sets forth a complete and accurate
description of all rental contracts or lease agreements, written or oral,
and all amendments thereto ("Lease") under which WNC occupies, rents,
leases or use whether as a lessee, lessor, tenant, sublessor or sublessee
any real property. Neither WNC nor any other Person who is a party to or
bound by such Lease is in default thereunder.
3.24 [INTENTIONALLY OMITTED]
3.25 POWERS OF ATTORNEY; BANK ACCOUNTS. The WNC Disclosure Schedule lists (a)
the names and addresses of all persons holding a power of attorney on
behalf of WNC and (b) the names and addresses of all banks or other
financial institutions in which WNC has an account, deposit, or safe-
deposit box, with the number and a description of the account and the names
of all persons authorized to draw on such accounts or deposits or to have
access to such boxes.
3.26 ENVIRONMENTAL MATTERS.
(a) For the purposes of this Agreement, the term "Environmental Laws"
shall mean all federal, state and local environmental protection,
occupational health and safety or similar laws, ordinances,
restrictions, licenses, rules, regulations and permit conditions,
including, without limitation, the Federal Water Pollution Control
Act, Resource conservation & Recovery Act, Clean Air Act,
Comprehensive Environmental Response, Compensation and Liability Act,
Emergency Planning and Community Right-to-Know, Occupational Safety
and Health Act and other federal, state or local laws of similar
effect, each as amended, and the term "Hazardous Materials" shall mean
any hazardous or toxic
16
substances, wastes or materials, defined as such or governed by any
applicable Environmental Law, including, without limitation,
petroleum, solvents, metals, and Polychlorinated Biphenyls (PCBs).
(b) (i) The Shareholders and WNC have not received any notices,
directives, violation reports, actions or claims from or by (1) any
federal, state or local governmental agency concerning WNC and any
Environmental laws; or (2) any Person alleging that, in connection
with Hazardous Materials, conditions at any real properties leased by
WNC have resulted in or caused or threatened to result in or cause
injury or death to any person or damages to any property, including,
without limitation, damage to natural resources, and the Shareholders
are not aware that any such notices, directives, violation reports,
actions, claims, assessments or allegations exist; (ii) WNC does not
currently lease, operate or own any real properties that are listed or
are threatened to be listed on, nor has WNC disposed of its wastes at
any property listed on, a "Superfund" List or with respect to which
there is any pending proceeding or investigation under any
Environmental Law, and the Shareholders are not aware that any such
proceeding or investigation is threatened; (iii) throughout the period
of operation of any real properties by WNC, WNC has operated and
continues to operate such real properties in compliance with all
Environmental Laws; (iv) the Shareholders are not aware that any
underground storage tanks either are or have been located at of such
real properties; (v) there has been no spill, discharge, release,
contamination or cleanup of or by any Hazardous materials used,
generated, treated, stored, disposed of or handled by WNC at such real
properties which would give rise to any liability under any
Environmental Laws and the Shareholders are not aware that any spill,
discharge or release or contamination or cleanup of or by Hazardous
Materials has occurred on or to such real properties by any third
party; (vi) WNC has not used, generated, treated, stored, disposed of,
handled, transported or released any Hazardous Material in a manner
which would give rise to any liability under any Environmental Laws;
(vii) the Shareholders and WNC are not aware of any facts, events, or
conditions (including, without limitation, the generation, treatment,
transport, storage, emission, disposal, release or other placement,
deposit or location of any substance) which materially interfere with
or prevent continued compliance by WNC with, or give rise to any
present or potential liability (including with respect to past
activities of WNC) under any Environmental Laws; and (viii) WNC has
not released any other person from any claim under any Environmental
Law nor waived any rights or defenses concerning any environmental
conditions.
3.27 DISCLAIMER THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS ARTICLE
III ARE MADE ON THE BASIS OF WNC'S AND THE SHAREHOLDERS' KNOWLEDGE,
INFORMATION AND BELIEF AND ARE THE ONLY REPRESENTATIONS AND WARRANTIES MADE
BY OR ON BEHALF OF WNC AND THE SHAREHOLDERS AND NO OTHER REPRESENTATIONS OR
WARRANTIES, EXPRESSED, IMPLIED OR STATUTORY HAVE BEEN MADE BY OR ON BEHALF
OF WNC AND THE SHAREHOLDERS WITH RESPECT TO THIS
17
AGREEMENT, OR THE OTHER AGREEMENTS AND TRANSACTIONS CONTEMPLATED HEREIN AND
THEREIN OR WITH RESPECT TO WNC OR ITS BUSINESS, FINANCIAL CONDITION,
PROSPECTS, TECHNOLOGY OR OTHERWISE.
ARTICLE IV
REPRESENTATIONS, COVENANTS AND WARRANTIES
OF THE COMPANY AND AVTEL
As an inducement to, and to obtain the reliance of, WNC and the
Shareholders, HTI and AvTel jointly and severally represent and warrant as
follows:
4.1 ORGANIZATION. Each of HTI and AvTel is and will be on the Closing Date a
corporation duly organized, validly existing, and in good standing under
the laws of the State of Utah and each has the corporate power to own all
of its respective properties and assets and to carry on its business in all
material respects as it is now being conducted, and there are no other
jurisdictions in which it is not so qualified in which the character and
location of the assets owned by it or the nature of the material business
transacted by it requires qualification, except where failure to do so
would not have a Material Adverse Affect on its business, operations,
properties, assets, or condition of HTI. The AvTel Shares, when, if and as
issued pursuant to this Agreement will be duly authorized, fully paid and
nonassessable.
4.2 APPROVAL OF AGREEMENTS. Each of HTI and AvTel has all requisite corporate
power and authority to execute and deliver this Agreement and to consummate
the transactions herein contemplated. The execution, delivery, and
performance of this Agreement by each of HTI and AvTel has been duly
authorized by all necessary corporate action on the part of each. This
Agreement has been duly authorized, executed, and delivered by each of HTI
and AvTel and is the legal, valid, and binding obligation of each
enforceable in accordance with its terms except as such enforcement may be
limited by bankruptcy, insolvency, or other laws affecting enforcement of
creditor's rights generally and by general principles of equity.
4.3 SECURITIES EXCHANGE ACT OF 1934. To the actual knowledge of the officers
of AvTel and HTI, neither AvTel nor HTI has employed any manipulative
device in connection with the issuance of the AvTel Shares as contemplated
herein.
18
4.4 CONSENTS/APPROVALS/CONFLICT. Except for compliance with applicable federal
and state securities laws, to the Knowledge of HTI and AvTel, no consent,
approval, authorization or order of any court or governmental agency or
other body is required either for HTI or AvTel to enter into this
Agreement. To the Knowledge of HTI and AvTel, and based on the
representations, warranties and covenants of WNC and the Shareholders in
Section 5.3 herein, the execution, delivery, consummation or performance of
this Agreement does not conflict with any existing law, rule, regulation or
any decree of any court or governmental agency to which HTI or AvTel is
subject and, except as contemplated by the Pledge Agreement, will not
result in the creation of any Lien on the WNC Stock.
4.5 INVESTMENT INTENT. HTI is acquiring the WNC Shares for its own account for
investment and not with a view to, or for sale or other disposition in
connection with, any distribution of all or any part thereof, except (a) in
an offering covered by a registration statement filed with the Commission
under the Securities Act covering the WNC Shares or (b) pursuant to an
applicable exemption under the Securities Act.
4.6 DISCLOSURE OF INFORMATION. HTI and AvTel acknowledge that they or their
representatives have been furnished with sufficient information regarding
WNC and its business, assets, results of operations and financial condition
to allow HTI and AvTel to make an informed decision regarding an investment
in the WNC Shares. HTI and AvTel further acknowledge that they have had an
opportunity to conduct extensive "due diligence", including, but not
limited to, on-site inspection and auditing of books, records, (including,
but not limited to, Articles of Incorporation, Bylaws, Shareholder and
Board of Director Minutes, Stock Register and Stock Certificates,
Shareholder Agreements and communication with the California Department of
Corporations), contracts, leases, company forms, tangible and non-tangible
assets, and have been furnished by WNC and the Shareholders with all
documentation requested by HTI and AvTel and by their representatives. HTI
and AvTel further represent that they have had an opportunity to ask
questions of and receive answers from the WNC personnel regarding WNC and
its business, assets, results of operation and financial condition.
4.7 INVESTMENT EXPERIENCE. HTI and AvTel acknowledge that they are able to
fend for themselves, can bear the economic risk of their investment in the
WNC Shares and have such knowledge and experience in financial and business
matters that they are capable of evaluating the merits and risks of an
investment in the WNC Shares.
4.8 RESTRICTED SECURITIES. HTI and AvTel understand that the WNC Shares will
not have been registered pursuant to the Securities Act or any applicable
state securities laws, that the WNC Shares will be characterized as
"restricted securities" under federal securities laws and that, under such
laws and applicable regulations, the WNC Shares cannot be sold or otherwise
disposed of without registration under the Securities Act or an exemption
therefrom. In this connection, HTI and AvTel represent that they are
familiar with Rules 144 and 147 promulgated under the Securities Act, as
currently in effect, and understand the resale limitations imposed thereby
and by the Securities Act.
19
HTI and AvTel further represent and understand that the WNC Shares have not
been registered under the California Corporate Securities Law of 1968, as
amended (the "California Law") and was originally sold in reliance upon an
exemption from registration provided by Section 25102(f) of the California
Law. The California Law provides that such securities may not be resold or
transferred in the State of California without registration under the
California Law or pursuant to an exemption from such registration
requirement.
Further, the certificates representing the WNC Shares shall conspicuously
set forth on the face or back thereof a legend in substantially the
following form:
THIS SECURITY HAS NOT BEEN REGISTERED OR QUALIFIED PURSUANT TO THE
SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF CALIFORNIA OR ANY
OTHER STATE AND MAYBE OFFERED AND SOLD ONLY IF REGISTERED AND
QUALIFIED UNDER THE RELEVANT PROVISIONS OF FEDERAL AND STATE
SECURITIES LAWS OR IF AN EXEMPTION FROM SUCH REGISTRATION OR
QUALIFICATION IS APPLICABLE.
4.9 RESTRICTIONS ON FURTHER SALE OF WNC SECURITIES. HTI and AvTel represent,
warrant, and agree that, until HTI and AvTel's obligations under the
Deferred Payments and Company Notes(s) have been fully paid, canceled or
discharged, or until the Pledged Stock (as defined in the Pledge Agreement)
is released pursuant to Section 4.2 of the Pledge Agreement, whichever
first occurs, they will not cause WNC to issue, or to grant options,
warrants, rights, agreements or commitments of any character relating to
the authorized, issued or unissued capital stock of WNC, nor to authorize
or issue any new classes of stock of WNC.
4.10 DISCLAIMER. THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS ARTICLE
IV ARE THE ONLY REPRESENTATIONS AND WARRANTIES MADE BY OR ON BEHALF OF HTI
OR AVTEL AND NO OTHER REPRESENTATIONS OR WARRANTIES, EXPRESSED, IMPLIED OR
STATUTORY HAVE BEEN MADE BY OR ON BEHALF OF HTI OR AVTEL, ITS OFFICERS,
DIRECTORS, AGENTS, REPRESENTATIVES OR SHAREHOLDERS WITH RESPECT TO THIS
AGREEMENT, OR THE OTHER AGREEMENTS AND TRANSACTIONS CONTEMPLATED HEREIN AND
THEREIN OR WITH RESPECT TO HTI OR ITS BUSINESS, FINANCIAL CONDITION,
PROSPECTS, TECHNOLOGY OR OTHERWISE.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 [INTENTIONALLY OMITTED]
-----------------------
20
5.2 [INTENTIONALLY OMITTED]
-----------------------
5.3 SECURITIES LAWS MATTERS - AVTEL SHARES. The consummation of this Agreement
and the transactions contemplated herein, including the issuance of the
AvTel Shares, constitutes the offer and sale of securities under the
Securities Act and applicable state statutes. Such transactions shall be
consummated in reliance on exemptions from the registration and prospectus
delivery requirements of such statutes which depend, among other items, on
the circumstances under which such securities are acquired.
(a) In order to provide documentation for reliance upon exemptions from
the registration and prospectus delivery requirements for such
transactions, WNC and each B Shareholder acknowledge and concur in the
following representations and warranties:
(i) WNC and each B Shareholder acknowledges that neither the
Commission nor the securities commission of any state or other
federal agency has made any determination as to the merits of
acquiring the AvTel Shares and that this transaction involves
certain risks.
(ii) WNC and each B Shareholder has such knowledge and experience in
business and financial matters that they are capable of
evaluating alone or together, with a "purchase representative"
(as that term is defined in Rule 501(h) promulgated under the
Securities Act), AvTel, its business operations and the merits
and risks of acquiring AvTel Shares.
(iii) All information which WNC and each B Shareholder has provided
to HTI, AvTel or their respective agents or representatives
concerning their suitability and intent to hold the AvTel
Shares following the transactions contemplated hereby is
complete, accurate and correct.
(iv) Neither WNC nor any B Shareholder has offered or sold any AvTel
Shares or other securities of AvTel or interest in this
Agreement and have no present intention of dividing the AvTel
Shares to be received or the rights under this Agreement with
others or of reselling or otherwise disposing of any portion of
such stock or rights, either currently or after the passage of
a fixed or determinable period of time or on the occurrence or
nonoccurrence of any predetermined event or circumstance.
(v) WNC and each B Shareholder understand that the AvTel Shares
have not been registered, but are being acquired by reason of a
specific exemption under the Securities Act as well as under
certain state statutes for transactions by an issuer not
involving any public offering and that any disposition of the
subject AvTel Shares may, under certain circumstances, be
inconsistent with this exemption and may make the undersigned
an "underwriter" within the meaning of the Securities Act. It
is understood that the definition of "underwriter" focuses upon
the concept of
21
"distribution" and that any subsequent disposition of the
subject AvTel Shares can only be effected in transactions which
are not considered distributions. Generally, the term
"distribution" is considered synonymous with "public offering"
or any other offer or sale involving general solicitation or
general advertising. Under present law, in determining whether
a distribution occurs when securities are sold into the public
market, under certain circumstances one must consider the
availability of public information regarding the issuer, a
holding period for the securities sufficient to assure that the
persons desiring to sell the securities without registration
first bear the economic risk of their investment, and a
limitation on the number of securities which the stockholder is
permitted to sell and on the manner of sale, thereby reducing
the potential impact of the sale on the trading markets. These
criteria are set forth specifically in Rule 144 promulgated
under the Securities Act, which allows sales of securities in
reliance upon Rule 144 only in limited amounts in accordance
with the terms and conditions of that rule, after two years
after the date the AvTel Shares are acquired, as calculated in
accordance with Rule 144(d). After three years from the date
the AvTel Shares acquired are fully paid for, as calculated in
accordance with Rule 144(d), they can generally be sold without
meeting those conditions, provided the holder is not (and has
not been for the preceding three months) an affiliate of the
issuer.
(vi) Each B Shareholder acknowledges that the AvTel Shares must be
held and may not be sold, transferred, or otherwise disposed of
for value unless they are subsequently registered under the
Securities Act or an exemption from such registration is
available. Neither HTI nor AvTel is under any obligation to
register the AvTel Shares under the Securities Act, except as
may be expressly agreed to by it in writing. If Rule 144 is
available (and no assurance is given that it will be except as
expressly set forth in this Agreement), after two years and
prior to three years following the date the Shares are fully
paid for, only routine sales of AvTel Shares in limited amounts
can be made in reliance upon Rule 144 in accordance with the
terms and conditions of that rule. Neither HTI nor AvTel is
under any obligation to make Rule 144 available, and in the
event Rule 144 is not available, compliance with Regulation A
or some other disclosure exemption may be required before
Shareholders can sell, transfer, or otherwise dispose of such
AvTel Shares without registration under the Securities Act.
AvTel's registrar and transfer agent will maintain a stop
transfer order against the registration or transfer of the
AvTel Shares and the certificate representing the AvTel Shares
will bear a legend in substantially the following form so
restricting the sale of such securities:
22
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") AND ARE "RESTRICTED SECURITIES" WITHIN THE
MEANING OF RULE 144 PROMULGATED UNDER THE SECURITIES ACT. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT, FOR THE ACCOUNT
OF THE REGISTERED HOLDER, AND MAY NOT BE SOLD OR TRANSFERRED
WITHOUT COMPLYING WITH RULE 144 IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION OR OTHER COMPLIANCE UNDER THE SECURITIES ACT.
(vii) AvTel may refuse to register further transfers, or resales of
the AvTel Shares in the absence of compliance with Rule 144
unless the B Shareholders furnish the issuer with a "no-action"
or interpretive letter from the Commission or an opinion of
counsel reasonably acceptable to AvTel stating that the
transfer is proper. Further, unless such letter or opinion
states that the AvTel Shares are free of any restrictions under
the Securities Act, AvTel may refuse to transfer the AvTel
Shares to any transferee who does not furnish in writing to it
the same representations and agree to the same conditions with
respect to such AvTel Shares as set forth herein. AvTel may
also refuse to transfer the AvTel Shares if any circumstances
are present reasonably indicating that the transferee's
representations are not accurate.
(b) In connection with the transactions contemplated by this Agreement,
AvTel, HTI, WNC and the B Shareholders shall each file, with the
assistance of the other and their respective legal counsel, such
notices, applications, reports, or other instruments as may be deemed
by AvTel to be necessary or appropriate in an effort to document
reliance on such exemptions, including a notice on Form D to be filed
with the Commission, and the appropriate regulatory authority in
California unless an exemption requiring no filing is available in
such jurisdiction, all to the extent and in the manner as may be
deemed by such parties to be appropriate.
(c) In order to more fully document reliance on the exemptions as
provided herein, WNC and the B Shareholders shall execute and deliver
to HTI and AvTel, at or prior to the Closing, such further letters of
representation, acknowledgment, suitability, or the like, as AvTel and
its counsel may reasonably request in connection with reliance on
exemptions from registration under such securities laws.
23
(d) WNC and the B Shareholders acknowledge that the basis for relying on
exemptions from registration or qualifications are factual, depending
on the conduct of the various parties, and that no legal opinion or
other assurance will be required or given to the effect that the
transactions contemplated hereby are in fact exempt from registration
or qualification.
(e) WNC AND EACH B SHAREHOLDER ACKNOWLEDGE THAT THE AVTEL SHARES INVOLVE A
NUMBER OF RISKS AND THAT, PRIOR TO THE CLOSING THEY HAVE RECEIVED AND
CONSIDERED ALL THE INFORMATION CONTAINED IN THE FOLLOWING MATERIALS:
(i) AVTEL COMMUNICATIONS, INC. CONFIDENTIAL MEMORANDUM DATED JANUARY
31, 1997; (ii) AVTEL'S COMBINED FORM OF NOTICE OF ANNUAL MEETING,
PROXY STATEMENT AND PROXY RELATING TO THE ANNUAL MEETING OF AVTEL'S
SHAREHOLDERS ON FEBRUARY 27, 1997; (iv) AVTEL'S REPORT ON FORM 10-KSB
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996.
5.4 [INTENTIONALLY OMITTED]
-----------------------
5.5 DISCHARGE OF OBLIGATIONS AND RELEASE. Each of the Shareholders
acknowledges and agrees that the Purchase Consideration provided herein and
the agreements and covenants of the Company set forth herein constitutes a
full, complete and final payment, satisfaction and discharge of any and all
contracts, agreements, arrangements, plans, debts, claims, obligations or
liabilities, whether due or to become due and whether actual, contingent or
otherwise, whether written or oral, expressed or implied, with or involving
WNC in connection with, arising from or relating, in any manner whatsoever,
to any agreement, representation, warranty, covenant, understanding,
obligation, covenant or contract, expressed or implied, written or oral,
between the Shareholder and WNC, relating in any manner whatsoever to all
employment, director, debt, loan, financing, sales, distribution,
marketing, advertising, promotion, finder, representative, professional,
consulting, advisory or other similar agreements of whatsoever nature to
which WNC is a party or by which it is bound, directly or indirectly,
contingently or otherwise ("WNC Agreements"). Each Shareholder, on behalf
of itself and each of its heirs, representatives and successors in interest
(herein "Releasors") hereby releases and forever discharges WNC from (a)
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 and other costs and expenses
related thereto), at law or in equity, whether known or unknown, payment or
performance obligations, duties or liabilities of whatsoever nature
(including, but not limited to, finders', advisory or other fees, payments
or other forms of remuneration or compensation) which such Releasors ever
had, now have or may in the future have relating to or arising from the WNC
Agreements. Each Releasor hereby further agrees and acknowledges that this
release extends to all rights granted such Releasors under any state or
federal law or regulation limiting the effect of such release, including,
without limitation, the provisions of (S)1542
24
of the California Civil Code, WHICH ARE HEREBY EXPRESSLY WAIVED. Said
(S)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
Thus, notwithstanding the provisions of (S)1542, and for the purpose of
implementing a full and complete release and discharge of all claims, such
Releasor expressly acknowledges that the release provided by such Releasor
pursuant to this Section 5.5 is intended to include in its effect, without
limitation, all claims which such Releasor does not know or suspect to
exist in its favor at the time of execution hereof, and that such release
contemplates the extinguishment of any such claims.
5.6 SPECIAL COVENANTS REGARDING SANTA XXXXXXX LEASE AND COMPANY NOTES. WNC and
the Shareholders jointly and severally represent, warrant, covenant and
agree as follows:
(a) Prior to the Closing, WNC shall have entered into an amendment
agreement with respect to that certain Lease dated May 8, 1995 between
WNC and The Xxxxxx Family Trust, Lessor, for the property located at 0
Xxxx Xxxxxxxx, Xxxxx Xxxxxxx, Xxxxxxxxxx ("Santa Xxxxxxx Lease") to
the effect that the term of said Santa Xxxxxxx Lease shall terminate
and expire on July 31, 1997. Such amendment (herein the "Lease
Amendment") shall also provide that the maximum liability of the
Lessee, WNC, with respect to such termination shall be a requirement
to pay the Lessor the sum of $8,000.00. A true and correct copy of
such Lease Amendment, duly executed by WNC and the Lessor shall have
been furnished to the Company prior to the Closing.
(b) If any time after the Closing any of the Shareholders wish to sell,
assign or transfer to any third party (herein a "Note Purchaser") any
right title or interest in one or more of the Company Notes or if any
Shareholder receives an offer from a Note Purchaser to acquire or
purchase any one or more Company Notes, provided HTI is not in default
with respect to payment to such Shareholder with respect to a Company
Note, such Shareholder shall not purchase, transfer, assign or convey
any Company Note or any interest therein without complying with the
following provisions:
(1) The Shareholder desiring to sell, transfer or assign any Company
Note or receiving an offer for it to acquire any interest in the
Company Note shall give immediate written notice ("Refusal Rights
Notice") of such transaction to AvTel and HTI, such notice to
include the name of the proposed Note Purchaser and full and
complete details with respect to the
25
price and other terms applicable to the proposed purchase or
acquisition of the Company Note. HTI and AvTel agree that, after
receipt of the notice described in subclause (1), the only
contact either HTI or AvTel or their agents may initiate with
such proposed Note Purchaser shall be to send a copy of such
notice to such proposed Note Purchaser with a one sentence letter
reading as follows: "Kindly verify that the information provided
on the enclosed Refusal Rights Notice is accurate by returning
this letter in the enclosed stamped, self-addressed envelope with
either the notation "Correct" or "Incorrect." If a letter,
verifying such information and signed by the proposed Note
Purchaser accompanies the Refusal Rights Notice sent by the
Shareholder, then no contact with the proposed Note Purchaser
shall be made by HTI, AvTel or any agent of either of said
companies. Any violation of this provision by HTI or AvTel shall
entitle the Shareholder giving notice of the sale, transfer or
assignment, upon written notice given within five (5) business
days after becoming aware of such violation to accelerate the due
date of the subject Note, and such Note shall be due and payable
in full within thirty (30) days following receipt of such notice
of violation.
(2) The Refusal Rights Notice shall be delivered by Certified Mail,
Return Receipt Requested, and the Shareholder giving such Refusal
Rights Notice shall not, for a period of 20 days following
receipt of the Refusal Rights Notice by AvTel, sell, transfer,
assign or convey any interest in the Company Note which is the
subject of such Refusal Rights Notice, (such period being
referred to herein as the "Purchase Period");
(3) HTI and AvTel are each hereby granted a right of first refusal to
purchase the Company Note on the same terms and conditions as set
forth in the Refusal Rights Notice, such purchase rights shall be
exercisable by notice (the "Purchase Notice") given by HTI or
AvTel to the Shareholder at any time within such Purchase Period
and payment in full thereof shall be made by HTI or AvTel, as the
case may be to the Shareholder not later than ten days following
the expiration of the Purchase Period and such Shareholder hereby
covenants, promises and agrees to transfer, assign, set over and
deliver and convey to HTI or AvTel, as the case may be, all
right, title and interest in the Company Note which is subject to
such Refusal Rights Notice upon receipt of the purchase price
from HTI or AvTel as the case may be.
ARTICLE VI
[INTENTIONALLY OMITTED]
26
ARTICLE VII
MISCELLANEOUS
7.1 NO REPRESENTATION REGARDING TAX TREATMENT; LEGAL REPRESENTATION. No
representation or warranty is being made by any party to any other
party regarding the treatment of this transaction for federal or state
tax purposes. Each party has relied exclusively on its own accounting,
tax, legal and other advisors regarding the treatment of this
transaction for federal and state income taxes and no representation,
warranty, or assurance from any other party or such other party's
legal, accounting, or other advisor has been made. HTI has been
represented by the law firm of Price, Xxxxxx & Parma LLP as its
separate counsel in connection with this Agreement and the
transactions contemplated herein. The Shareholders have been
represented by Xxxxxxxxxx X. Xxxxxx, Esq. as to their separate counsel
in connection with this Agreement and the transactions contemplated
herein. WNC has had the opportunity to be represented by separate
legal counsel.
7.2 GOVERNING LAW VENUE. This Agreement shall be construed and enforced
in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Agreement shall be
governed by, with the laws of the state of California, without giving
effect to the provisions thereof regarding conflicts of laws. Except
as limited by the provisions of Section 8.3 herein (Dispute and
Arbitration), the parties specifically agree to submit to the
jurisdiction of the courts of Ventura County, California.
7.3 NOTICES. All notices, demands, requests, or other communications
required or authorized hereunder (except for the Refusal Rights Notice
which shall be furnished in the manner described in Section 5.5(b)
hereof) 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 HTI or AvTel: AVTEL COMMUNICATIONS, INC.
Attn.: Xxxxx X. Xxxxxx
000 Xxxxxxx Xxxxx
Xxxxxx, XX 00000
Telecopier No. 805\685-9685
With a copy to: Xxxxxxx X. Xx Xxxxx, Esq.
Price, Xxxxxx & Parma, LLP
000 Xxxx Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxxx, XX 00000
Telecopier No.: (000) 000-0000
27
If to Shareholders: The addresses listed in
Exhibit B attached hereto.
With a copy to: Xxxxxxxxxx X. Xxxxxx, Esq.
Attorney at Law
000 Xxxx Xxxxxx
Xxxxxxx, XX 00000
Telecopier No.: (000) 000-0000
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.
7.4 ATTORNEYS' FEES. Except as otherwise provided in this Agreement and,
specifically, as limited by the provisions of Article VIII
("Indemnification"), 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 non-prevailing party or parties shall
reimburse the prevailing party or parties for all costs, including
reasonable attorneys' fees, incurred in connection therewith and in
enforcing or collecting any judgment rendered therein.
7.5 THIRD-PARTY BENEFICIARIES. This contract is solely among HTI, the
Shareholders, WNC, and AvTel and except as otherwise 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.
7.6 ENTIRE AGREEMENT. This Agreement and the agreements contemplated
herein represent 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, and the agreements contemplated herein,
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.
7.7 COUNTERPARTS. 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.
7.8 AMENDMENT OR WAIVER. Except as otherwise provided in this Agreement
and, specifically, as limited by the provisions of Article VIII
("Indemnification") every right and remedy provided herein shall be
cumulative with every other right and
28
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.
7.9 PRESS RELEASES AND ANNOUNCEMENTS. No party hereto shall issue any
press release or announcement relating to the subject matter of this
Agreement prior to the Closing without the prior written approval of
the other party; provided, however, that any party may make any public
disclosure it believes in good faith, after receiving the advice of
counsel, is required by law or regulation (in which case the
disclosing party will advise the other parties prior to making the
disclosure).
7.10 SPOUSAL CONSENT. By executing the spousal consents provided below,
the undersigned, being Shareholders' spouses who are not named in the
Agreement, verify that they have read the foregoing Agreement in its
entirety and, in consideration of the premises, hereby express their
acceptance of the same and agree to abide by its provisions. Each such
spouse clearly understands and agrees to be bound by the provisions of
the foregoing Agreement. This instrument is not a transfer or release
of any rights which such spouse may have in any of the community
property of his/her marriage. The signing of this Agreement by such
spouse is for the purpose of showing his/her consent and approval of
the foregoing Agreement and all of the terms and provisions thereof,
and his/her agreement to be bound hereby.
7.11 SERVICE OF PROCESS. Process in any action or proceeding referred to in
paragraph 8.4 or any other judicial proceeding may be served on the
undersigned anywhere in the world, whether within or without the State
of California.
ARTICLE VIII
INDEMNIFICATION
8.1 SURVIVAL. The representations, warranties, covenants and agreements
of WNC and the Shareholders and of HTI and AvTel shall survive the
Closing. Notwithstanding the foregoing, by signing this Agreement, HTI
and AvTel acknowledge receipt of all "due diligence" materials they
have requested from WNC and the Shareholders, including, but not
limited to, that information set forth in Exhibit F and HTI and AvTel
acknowledge and agree that WNC and the Shareholders have afforded HTI
and AvTel's officers and authorized representatives full access to the
properties, books, and records of WNC (collectively, including due
diligence materials, "WNC Information") and that HTI and AvTel have
had full and adequate opportunity to make such investigations as they
have desired into the WNC Information, including, but not limited to,
financial and operating data and records of the business and
properties of WNC. As a result, HTI and AvTel agree that, except for
(1) fraud or intentional misrepresentations of WNC and the
Shareholders and (2) claims by
29
Persons who are not party(ies) to this Agreement nor related to a
party to this Agreement ("third party Claims") and which third party
Claims were outside the Knowledge of WNC and the Shareholders at the
time of Closing, HTI and AvTel assume the risk of any adverse
conditions, whether Material or otherwise, of which they were aware or
should reasonably have been aware as the result of their Knowledge
and/or investigation of the WNC Information.
8.2 The parties agree that the representations, warranties, covenants and
agreements of WNC and the Shareholders,which are made on the basis of
WNC's and the Shareholders' Knowledge, information and belief, and set
forth in Article III hereof and referenced in Section 8.1 hereof, have
been included to protect HTI and AvTel only from the following:
(1) fraud or intentional misrepresentions of WNC and the
Shareholders; and
(2) third party Claims, based on an event occurring prior to the
Closing, of which neither WNC nor the Shareholders were aware at
the Closing.
Based on that understanding, WNC and the Shareholders hereby agree to
indemnify and to hold HTI and AvTel harmless from and against:
(1) any Material Adverse Effect based on fraud or intentional
misrepresentations by WNC and the Shareholders as to the
representations, covenants and warranties set forth in Article
III hereof ("Material Adverse Effect") and
(2) any and all actual causes of action, suits, and claims
(individually a "Claim" and together "Claims") brought by any
third party against HTI or AvTel for damages, assessments,
losses, liabilities, costs and expenses (including legal and
accounting fees and costs of defense) (collectively, "Damages")
which arise out of any third party Claim(s) based on an event
occuring prior to Closing of which neither WNC or any of the
Shareholders had any knowledge, information or belief; provided,
however:
(1) HTI and AvTel shall promptly notify the Shareholders of any
Claim(s) and/or Material Adverse Effect(s) and shall provide the
Shareholders with an opportunity to participate, at their
expense, in the resolution of such Claim and/or Material Adverse
Effect; further provided:
(2) that the entitlement of HTI and AvTel to indemnification from WNC
and the Shareholders with respect to this Section 8.2 shall be
effective only to the extent that the aggregate amount of
Material Adverse Effect and/or Damages exceeds $10,000, in which
event HTI and AvTel shall be entitled
30
to make a claim for all such Material Adverse Effect and/or
Damages including the initial $10,000; further provided,
(3) that neither AvTel nor HTI shall have any indemnity rights
whatsoever, whether under this Section 8.2 or otherwise, with
respect to any Material Adverse Effect or Claim of which the
Shareholders are first notified after one (1) year following the
Closing Date; further provided,
(4) that in no event will any Shareholder's maximum liability for
indemnification pursuant to this Agreement or pursuant to any
cause of action arising by right of any statutory or common law
right or remedy of HTI or AvTel, including, but not limited to,
fraud and/or intentional misrepresentation, exceed such
Shareholder's Proportionate Interest in the total aggregate
amount of consideration paid or payable hereunder in cash, under
the Company Notes (either as principal, as accured interest or
otherwise) and in the form of the AvTel Shares (measured on the
basis of the total value of the AvTel Shares as determined on the
basis of the Market Price, as that term is defined in Section
2.7(c) herein);
(5) that HTI and AvTel must follow the Dispute and Arbitration
provisions of Section 8.4 hereof with respect to any recovery
whatsoever from WNC and/or the Shareholders.
8.3 The indemnification provisions set forth in Section 8.2 herein provide
the sole remedy of HTI and AvTel, for any claims whatsoever, against
WNC or any Shareholder relating to this Agreement, including, but not
limited to, fraud and intentional misrepresentation.
8.4 DISPUTE AND ARBITRATION. Should any dispute arise in connection with
any of the provisions of this Agreement, the parties shall undertake
reasonable efforts to engage in non-binding mediation and negotiation
of such dispute through their respective representatives and, in
connection therewith, shall meet both telephonically and in person,
before proceeding to Arbitration.
The mediation and negotiation phase of this provision shall be
initiated by a letter from one of the parties to another party or
parties setting forth the nature of the dispute.
The parties shall, within ten (10) days after receipt of said letter
by the opposing party(ies), set a place to meet and confer. Any party
may bring a mediator to such meeting, or the parties may agree to a
single mediator.
If, within seven (7) days after the initial meeting, the matter has
not been resolved, any party may elect to proceed to the arbitration
phase of this dispute resolution provision. However, until the first
day of arbitration hearings has actually begun,
31
the parties shall continue to attempt to negotiate and mediate a
resolution of the dispute.
Any such Arbitration shall be conducted in accordance with the
California Arbitration Act, Code of Civil Procedure (S)(S)1280 et seq.
and Rules of the American Arbitration Association as then in effect
and judgment upon an award rendered in such Arbitration shall be
entered in any court having jurisdiction thereof. Any such
Arbitration shall be conducted in Ventura, California, unless the
parties agree to a different location. Each of the parties to such
Arbitration proceeding shall be entitled to take depositions and to
obtain discovery regarding the subject matter of the Arbitration and,
to that end, may use and exercise all the same rights, remedies and
procedures and shall be subject to all the same duties, liabilities
and obligations in the Arbitration as if the Arbitration were pending
as a civil action before the Superior Court of the State of
California. In the event that the matter is heard by only one
arbitrator, such arbitrator shall be a member of the State Bar of
California. Subject to the maximum limit of liability for any
Shareholder as set forth in Section 8.2 herein, the non-prevailing
party or parties shall reimburse the prevailing party or parties for
all costs, including reasonable attorneys' fees, incurred in
connection therewith and in enforcing or collecting any resulting
judgment and award.
[Signature Page Follows]
32
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the Effective Date provided herein.
AVTEL COMMUNICATIONS, INC. HI, TIGER INC.
a Utah corporation
-------------------------- --------------------------
By: Xxxxxxx X. Xxxx By: Xxxxx X. Xxxxxx
President and Chief Its: Executive Vice President
Executive Officer
WESTNET COMMUNICATIONS, INC
A California Corporation
--------------------------
By: Xxxxxx X. Xxxxxxxx
Its: Chief Financial Officer
SHAREHOLDERS
Xxxxxxxx X. Padova Xxxxxx X. Xxxxxxxx
-------------------------- --------------------------
Xxxxxx Color Photo Lab, Inc. Xxxxxxxxxx X. Xxxxxx
dba Image Source, Inc.
By:
----------------------- --------------------------
Xxxxxxxx X. Padova, President
Xxxxxxxx Xxxxxxx Xxxxxxx Xxxxx X. Xxxxxxxx
-------------------------- --------------------------
Xxxx X. Xxxxxx Xxxxxx X. Xxxxxxxx
-------------------------- --------------------------
Xxxx Xxxxxxxx
--------------------------
33
SPOUSAL CONSENTS
----------------
(Section 7.10 of the Agreement is here repeated in its entirety for
the convenience of the Shareholders' Spouses):
7.10 SPOUSAL CONSENT. By executing the spousal consents provided below,
the undersigned, being the spouses of the Shareholders who are not
named in the Agreement, verify that they have read the foregoing
Agreement in its entirety and, in consideration of the premises,
hereby express their acceptance of the same and agree to abide by its
provisions. Each such spouse clearly understands and agrees to be
bound by the provisions of the foregoing Agreement. This instrument is
not a transfer or release of any rights which such spouse may have in
any of the community property of his/her marriage. The signing of this
Agreement by such spouse is for the purpose of showing his/her consent
and approval of the foregoing Agreement and all of the terms and
provisions thereof, and his/her agreement to be bound hereby.
---------------------------------- ----------------------------------
---------------------------------- ----------------------------------
---------------------------------- ----------------------------------
34
WNC DISCLOSURE SCHEDULE
This WNC DISCLOSURE SCHEDULE dated as of February 1, 1997 (the "Disclosure
Schedule") is made in connection with that certain Stock Purchase Agreement
effective February 1, 1997 ("Acquisition Agreement"), by and among Hi, Tiger,
Inc., a Utah corporation ("HTI" or the "Company"), AvTel Communications, Inc., a
Utah corporation ("AvTel"), WestNet Communications, Inc., a California
corporation ("WNC"), and Xxxxxx Color Photo Lab Corporation, dba "The Image
Source", Xxxxxx X. Xxxxxxxx and Xxxx Xxxxxxxx, Xxxxxxxx Xxxxxxx, Xxxxxxxx X.
Padova, Xxxxxx X. Xxxxxxxx and Xxxxxxxxxx X. Xxxxxx, Xxxxx X. Xxxxxxxx and Xxxx
X. Xxxxxx ("Shareholders"). Unless otherwise provided, capitalized terms used
herein shall have the same meanings as are ascribed to them in the Acquisition
Agreement. The section references contained in this Disclosure Schedule
correspond to the sections under Article III of the Acquisition Agreement.
3.2 Disclosure regarding representation as to WNC's capital structure:
One thousand (1,000) shares of WNC shares were issued to Xxx Xxxxxxxx,
a Shareholder, in February, 1996, pursuant to a decision of the Board of
Directors of WNC and represents payment for past services rendered by Xx.
Xxxxxxxx to WNC and satisfaction of certain other agreements. A Unanimous
Written Consent of Directors, effective February 28, 1996, has been
executed by all Directors and provided to HTI and AvTel's representatives.
3.3 The Financial Statements referenced in Section 3.3(a) are attached.
3.5 Prior to December 9, 1996, the date of the Letter of Intent, the
Shareholders had engaged in negotiations with other entities (whose
identities have not been provided to AvTel or HTI) regarding the sale of
WNC. Those negotiations were terminated, no agreement or understanding,
oral or written, was entered into or is in effect between or among such
other entities and the Shareholders or WNC regarding any sale, divestiture
or other form of acquisition of WNC.
3.9 MATERIAL CONTRACTS, ETC.
(a) WNC is a party to a lease agreement dated May 8, 1995, with Xxxxxx
Family Trust as Lessor, for the lease of office space at 0 Xxxx
Xxxxxxxx, Xxxxx Xxxxxxx, Xxxxxxxxxx, as amended by an Amendment to
Lease signed on behalf of WNC on February 19, 1997, copies of which
have been furnished to AvTel and HTI.
(b) WNC is a sublessee of space at 0000 Xxxxxxxxx Xxxxxx, Xxxxx X, Xxxxxxx,
Xxxxxxxxxx, as confirmed in a letter (undated) and a letter, dated
February 21, 1997, each signed by Xxxxxx Xxxxxxxx on behalf of WNC and
on behalf of the Sublessor, ISI, copies attached.
(c) WNC is the assignee of Xxxxxx Xxxxxxxx, a WNC Affiliate, as Tenant,
under a Commercial Lease dated November 15, 1995, with Simi Plaza,
Inc., Landlord, for
35
space located at 0000 Xxxxxx Xxxx, Xx. 000, Xxxx Xxxxxx, Xxxxxxxxxx.
The assignment is created under the Addendum to Rental Agreement and/or
Lease executed by WNC on February 19, 1997, copy attached.
(d) See Schedule of Obligations and Payments (attached).
3.15 WNC EMPLOYEES, ETC.
OUTSIDE PROFESSIONAL CONSULTANTS: Xxxxxxxxxx X. Xxxxxx, Esq.; Xxxxxx
Xxxxxxxxx, Cagianut and Xxxxxxxxx, CPAs; Xxxxxx Sunken, CPA (no written
agreements exist with any of these professionals and the arrangements with
them can be terminated at any time by WNC without liability to WNC, except
for payment of invoices for outstanding fees and out of pocket
expenses);Consulting Agreement/Retainer dated December 1, 1996, between WNC
and West Marketing Enterprises ("Consultant"), copy provided to HTI.
EMPLOYEES:
(a) The following persons have executed memos dated February 1, 1997
concerning their employment with WNC (copies attached): Xxxxxxxx X.
Xxxx, Xxxxx Xxx Xxxxxx, Xxxxx Xxxxxxx, Xxxxx Xxxxxx Posche, Xxxxxxx X.
Xxxxxx, Xxxxxx Xxxxx Xxxxxxx XX, Xxxxx Xxxxxxx Xxxx, Xxxxx Xxxxxxx
Xxxxxxxx, Xxxx Xxxxxx Xxxxxxx.
(b) Other employees (* indicates former employees)
NAME HIRE DATE RATE OF PAY
------------------- --------- ------------
Xxxxxxxx X. Xxxxxxx 05/15/95 $2,000/Mo.
Xxxxx X. Xxxxxxx* 05/28/95 $12.6923/Hr.
Xxxxxx X. Xxxxxx* 10/09/95 $10.00/Hr.
Xxxxxx X. Xxxxxxx* 11/16/95 $10.00/Hr.
Xxxxx X. Xxxxx* 12/29/95 $10.96/Hr.
Xxxx X. Xxxxxxx* 01/25/96 $10.00/Hr.
Xxxxxxx Xxxxxx* 01/25/96 $10.00/Hr.
Xxxx Xxxxxxx* 01/25/96 $10.00/Hr.
Xxxx Xxxxxxxx* 01/01/96 $3,000/Mo.
Xxxxxx X. Xxxxxxxx* 02/01/96 $3,000/Mo.
Xxxxx X. Xxxxxxxx 04/01/96 $2,000/Mo.
Xxxxxx Xxxxxxxx 05/01/96 $2,000/Mo.
3.16 Promissory Notes bearing interest at seven percent (7%), issued by WNC,
each dated June 8, 1995, payable to the following persons in the original
principal amounts indicated (copies provided to the Company):
36
NAME ORIGINAL PRINCIPAL AMOUNT
---- -------------------------
ISI $24,000
Xxxxxxxx X. Xxxxxxxx $12,000
Xxxxxx X. and Xxxx Xxxxxxxx $16,000
Xxxxxxxx X. Padova $ 8,000
Xxxxxx X. Xxxxxxxx and
Xxxxxxxxxx X. Xxxxxx $ 8,000
Xxxxx X. Xxxxxxxx $ 4,000
Xxxx X. Xxxxxx $ 4,000
Copies of the Notes evidencing the Shareholders Debt owed by WNC have been
separately provided to HTI and AvTel in the "Due Diligence" materials.
3.23 See leases described in (a), (b) and (c) of Item 3.9 above.
3.25 Persons who hold powers of attorney on behalf of WNC and the names,
addresses of the banks and financial institutions in which WNC has any
accounts.
BANK ACCOUNTS NAMES OF AUTHORIZED SIGNATORIES
------------- -------------------------------
Santa Xxxxxxx Bank & Trust Xxxxx X. Xxxxxxxx
000 Xxxxx Xxxxx Xxxx Xxxxxxxx X. Xxxxxx
Xxxxxxx, XX 00000 Xxxxxx X. Xxxxxxxx
Account No. 593 00000000
37
EXHIBIT A
=========
SECURED PROMISSORY NOTE
$
----------------
Santa Barbara, CA February __, 1997
FOR VALUE RECEIVED, the undersigned, Hi, Tiger, Inc., a Utah
corporation ("Company") promises to pay to the order of
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
("Holder") at
----------------------------------------
--------------------------------------------------------------------------------
, California (or at such other place as
-------------------------------------
Holder shall notify the Company in writing) the principal amount of
--------------------------------------------------------------------------------
Dollars ($ .00) and to pay interest on the unpaid principal
---- ---------------
balance hereunder from the date hereof at the rate of seven percent (7%) per
annum.
The principal shall be due and payable in two installments of
principal of $ and $ with the first installment due
----------- ----------------
on October 15, 1997 and the second on February 15, 1998. Interest shall be due
at the same time as principal.
This Note may be prepaid, without premium or penalty, in whole or in
part, at any time with accrued interest to the date of such prepayment on the
amount prepaid. Any partial prepayment shall be credited and applied first to
accrued but unpaid interest and the balance to principal and the interest shall
cease to accrue on the amount of principal so prepaid.
Interest payable hereunder shall be calculated on the basis of actual
days elapsed (including the date on which such interest begins to accrue but
excluding the date on which payment the principal is made) and on the basis of a
360-day, 12 month year. Interest not paid when due shall thereafter bear like
interest as the principal. All payments under this Note shall be made in lawful
currency of the United States of America in immediately available funds on the
date of payment.
This Note is made and delivered pursuant to that certain Stock
Purchase Agreement (the "Acquisition Agreement") effective February 1, 1997 by
and among the Company, the Holder as one of the Shareholders (as that term is
defined in the Agreement) and WestNet Communications, Inc. Capitalized terms
defined used in this Note and not otherwise used in this Note shall have the
meanings defined in the Acquisition Agreement. This is one of the Company
Note(s) referred to in the Acquisition Agreement.
THIS NOTE IS SUBJECT TO THE TERMS AND CONDITIONS OF THE ACQUISITION
AGREEMENT, INCLUDING BUT NOT LIMITED TO THE CHOICE OF LAW AND VENUE
PROVISIONS. THOSE TERMS WHICH RESTRICT THE RIGHT OF THE HOLDER TO ASSIGN,
SELL, TRANSFER OR CONVEY TO ANY THIRD PARTY ANY RIGHT, TITLE OR INTEREST IN
THIS NOTE WITHOUT COMPLYING WITH THE NOTICE PROVISIONS AND FIRST REFUSAL
RIGHTS SET FORTH IN THE AGREEMENT.
THIS NOTE IS SECURED BY A PLEDGE AND SECURITY AGREEMENT, OF EVEN DATE
HEREWITH.
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed the day near first above written.
HI, TIGER, INC., A UTAH CORPORATION
---------------------------------------
By: Xxxxx X. Xxxxxx
Its: Executive Vice President
39
EXHIBIT B
=========
SHAREHOLDER LIST
NO. OF WNC
NAME AND SSN/EIN ADDRESS SHARES OWNED
---------------- ------- -------------
B SHAREHOLDERS
--------------
Xxxxxxxx X. Padova 000 Xxxxxxx Xxxxx 2,000
###-##-#### Xxxxxxx, XX 00000
Xxxxxx X. Xxxxxxxx 0000 Xxxxxxxxxxx Xxxx 2,000
###-##-#### Xxxxxx, XX 00000
and Xxxxxxxxxx X. Xxxxxx 0000 Xxxxxxxxxxx Xxxx Xxxxxx, XX
00000
Xxxxxx Color Photo Lab 0000 Xxxxxxxxx Xxxx 6,000
Inc., dba Suite 111
Image Source, Inc., a Xxxxxxx, XX 00000
corporation
A SHAREHOLDERS
--------------
Xxxxxx X. Xxxxxxxx X.X. Xxx 000 4,000
and Xxxx Xxxxxxxx Xxxx, XX. 00000.
Xxxxx X. Xxxxxxxx X.X. Xxx 0000 2,000
Xxxxxx, XX 00000
Xxxxxxxx Xxxxxxx Jonsson 0000 Xxxxxxxxx Xx. #0 0,000
Xxxxx Xxxxxxx, XX 00000
Xxxx X. Xxxxxx 0000 Xxx Xxxxxxx Xx. 1,000
Xxxxx Xxxxxxx, XX 00000
40
EXHIBIT C
=========
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT ("AGREEMENT") is entered into this ____ day
----
of February, 1997, by and among WESTNET COMMUNICATIONS, INC., A CALIFORNIA
CORPORATION ("AVTEL"), HI, TIGER, INC., a Utah corporation (the "COMPANY") and
(the "SHAREHOLDER").
-------------
RECITALS
A. WNC, the Company, Shareholder, AvTel Communications, Inc., a Utah
corporation ("AvTel") and certain other Persons have entered into that
certain Stock Purchase Agreement effective February 1, 1997 (the
"ACQUISITION AGREEMENT");
B. The Acquisition Agreement contemplates that the Company will, after giving
effect to the transactions contemplated by the Acquisition Agreement,
acquire 100% of the issued and outstanding common stock of WNC from
Shareholder and certain other Persons; and
C. As a material inducement for the Company and WNC entering into the
Acquisition Agreement, the Shareholder has agreed not to compete with the
Company, and to make certain other covenants with respect to the protection
of confidential information.
NOW, THEREFORE, in consideration of the Company, AvTel and WNC entering
into the Acquisition Agreement and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
1. DEFINITIONS. Capitalized terms not otherwise defined herein shall have the
-----------
same meanings as are ascribed to them in the Acquisition Agreement.
2. NON-COMPETITION. The Shareholder agrees that for a period (the "NON-
---------------
COMPETITION PERIOD") commencing on the date hereof and expiring two (2)
years thence, and so long as the Company is not in default under the
Company Note issued to Shareholder pursuant to the Acquisition Agreement,
the Shareholder shall not own or engage in, either directly or indirectly,
as an officer, director, partner, sole proprietor or stockholder, any
business that is engaged in the business of providing internet services or
such other business in which WNC is or has been engaged at or prior to the
date hereof (the "COMPETITIVE ACTIVITIES") within the geographic
territories of Santa Xxxxxxx and Ventura Counties. Nothing herein shall
prevent the Shareholder from either (a) owning less than one percent (1%)
of the issued and outstanding capital stock of a company whose stock is
publicly traded and which is materially engaged in any Competitive
Activities, (b) accepting employment with any Person engaged in the
business of providing internet services.
41
3. NON-SOLICITATION. During the Non-Competition Period, the Shareholder shall
----------------
not, directly or indirectly, individually or on behalf of any Person
solicit, aid or induce (a) any employee of WNC or any of its Affiliates to
leave WNC or any such Affiliate, as the case may be, in order to accept
employment with or render services for the Shareholder or such Person, or
(b) any customer, client, vendor, supplier, distributor or sales
representative of WNC (or similar Persons engaged in business with WNC) to
discontinue the relationship or reduce the amount of business done with WNC
or any of its Affiliates.
4. CONFIDENTIALLY. The Shareholder acknowledges that by virtue of its
---------------
previous involvement with WNC, either in a capacity as a shareholder,
officer, director or employee of WNC, Shareholder has been in the
possession of Confidential Information. As used herein, the term
Confidential Information means information relating to WNC's business,
technology, trade, commercial or industrial practices and includes (a)
computer software programs, information and networks, including codes,
procedures, protocols, passwords or other similar devices or arrangements
for accessing or using (by manual, electronic, telecommunication or other
means) WNC's computers, data processing, electronic mail, voice mail or
other telecommunication systems or networks; (b) production and assembly
processes and methods, marketing techniques and strategies, mailing and
customer lists, price lists and pricing policies, quoting procedures,
financial information, customer names and lists, customer site
information, vendor names and lists, new product and service development
plans and strategies; (c) information regarding the general and specific
skills, experience, backgrounds, salaries, compensation, performance
evaluations and other information concerning the officers and employees of
WNC; (d) discoveries, concepts, ideas, whether or not patentable or
protectable by copyright, including technical information on products or
services, techniques, trade secrets, "know-how", source codes, object
codes; and (e) other materials or information related to the business or
activities of the Company which are not generally known to others engaged
in similar business or activities as that of WNC. Shareholder hereby
agrees that he has not previously disclosed Confidential Information to any
Person in any manner which would injure or jeopardize the confidential and
proprietary nature of such Confidential Information. Shareholder further
agrees that he will preserve in confidence that he will not use or disclose
any Confidential Information without the prior express written consent of
WNC. Shareholder further represents and warrants that all notes,
memoranda, reports, drawings, blueprints, manuals, materials, data and
other records of every kind, and whether restored or reflected unwritten,
magnetic, optical or other media relating to the Confidential Information
are and shall remain the property WNC and that all of such notes,
memoranda, reports and alike have, on or before the date hereof, been
surrendered by the Shareholder to WNC.
5. REMEDIES. The parties hereto recognize that WNC and the Company will
--------
suffer irreparable injury in the event of a breach of the terms of this
Agreement by the Shareholder. In the event of a breach of the terms of
this Agreement by the Shareholder, either WNC or the Company, shall be
entitled, in addition to any other remedies and damages available in equity
or at law, and without proof of monetary or damage, to a
42
temporary and/or permanent injunction, with such surety or other bond or
other form of security as may be required under the Code of Civil Procedure
to restrain the violation of this Agreement by the Shareholder, and any
persons acting for or in concert with him/it.
6. SEVERABILITY. Whenever 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 is held to be invalid or
prohibited under applicable law, such provision shall be ineffective only
to the extent of such invalidity or prohibition, without invalidating the
remainder of this Agreement; provided, however, if any provision hereof is
deemed unenforceable because of its scope in terms of geographical area,
time or business activities, the parties hereto agree that the same may be
enforceable to the fullest extent permissible under applicable law and
public policy.
8. SUCCESSORS AND ASSIGNS. All covenants and agreements contained in this
----------------------
Agreement by or on behalf of either party hereto shall bind and inure to
the benefit of the parties hereto and their heirs, legal representatives,
successors and assigns whether so expressed or not.
9. GOVERNING LAW. This Agreement shall be construed and enforced in
-------------
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Agreement shall be governed by, the
laws of the State of California without giving effect to the provisions
thereof regarding conflicts of laws.
10. NOTICES. 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 HTI or WNC: WESTNET COMMUNICATIONS, INC.
c/o AVTEL COMMUNICATIONS, INC.
and HI, TIGER, INC.
Attn.: Xxxxx X. Xxxxxx
000 Xxxxxxx Xxxxx, Xxxxx X
Xxxxxx, XX 00000
Telecopier No. (000)000-0000
With a copy to: Xxxxxxx X. Xx Xxxxx, Esq.
Price, Xxxxxx & Parma, LLP
000 Xxxx Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxxx, XX 00000
Telecopier No.: (000) 000-0000
43
If to Shareholder:
------------------
------------------
------------------
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.
10. DESCRIPTIVE HEADINGS; INTERPRETATION. The descriptive headings of this
------------------------------------
Agreement are inserted for convenience only and do not constitute a part of
this Agreement.
11. COUNTERPARTS. This Agreement may be executed simultaneously in two or more
------------
counterparts, any one of which need not contain the signatures of more than
one party, but all such counterparts taken together shall constitute one
and the same Agreement.
12. ENTIRE AGREEMENT. Except as expressly set forth herein, this Agreement and
----------------
the agreements referenced herein embody the complete agreement and
understanding between the parties and supersede any prior understandings,
agreements or representations by or between the parties, written or oral,
which may have related to the subject matter hereof in any way.
13. AMENDMENTS AND WAIVERS. No modification, amendment or waiver of any
----------------------
provisions of this Agreement shall be effective unless approved in writing
by each of the parties hereto. The WNC's or Company's failure at any time
to enforce any of the provisions of this Agreement shall in no way be
construed as a waiver of such provisions and will not affect the right of
WNC or the Company or AvTel to enforce each and every provision hereof in
accordance with its terms.
14. ATTORNEYS' 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 prevailing party or parties shall reimburse the non-
prevailing party or parties for all costs, including reasonable attorneys'
fees, incurred in connection therewith and in enforcing or collecting any
judgment rendered therein.
15. SPOUSAL CONSENT. The undersigned, being the spouse of the Shareholder has
---------------
read the foregoing Agreement in its entirety and in consideration of the
premises, hereby express my acceptance of the same and agrees to abide by
its provisions. I clearly understand and agree to be bound by the
provisions of the foregoing Agreement. This instrument is not a transfer or
release of any rights which I may have in any of the community property of
my marriage. The signing of this Agreement by me is for the purpose of
showing my consent and approval of the foregoing Agreement and all of the
terms and provisions thereof, and my agreement to be bound hereby.
44
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
AVTEL COMMUNICATIONS, INC. HI, TIGER INC.
A Utah Corporation A Utah Corporation
By By
-------------------------------- --------------------------------
Xxxxxxx X. Xxxx Xxxxxxx X. Xxxx
President & Chief Executive Officer President & Chief Executive Officer
-----------------------------------
Shareholder:
---------------------
-----------------------------------
Shareholder's Spouse
45
EXHIBIT D
=========
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT dated February 21, 1997, as amended,
--
modified or supplemented, from time to time ("Pledge Agreement") is entered into
by and among: (a) Hi Tiger, Inc., a Utah Corporation ("Pledgor"); (b) Xxxxxxxx
X. Padova,Xxxxxx X. Xxxxxxxx, Xxxxxxxxxx X. Xxxxxx, Xxxxxx Color Photo Lab
Corporation, dba Image Source, Inc., Xxxx X. Xxxxxx, Xxxxx X. Xxxxxxxx, Xxxxxxxx
Xxxxxxx Jonsson, Xxxx Xxxxxxxx and Xxxxxx X. Xxxxxxxx (collectively "Pledgees"
and, individually, a "Pledgee") and (c) the Pledgee Agent appointed pursuant to
Section 7.
RECITALS
A. Pledgees have sold to Pledgor all the issued and outstanding capital stock
(the "WNC Shares") of WestNet Communications, Inc. ("WNC") pursuant to the
Stock Purchase Agreement dated of even date herewith (the "Acquisition
Agreement").
B. Part of the consideration paid by Pledgor for the WNC Shares is in the form
of certain Deferred Payments and certain secured promissory note(s) of the
Company (the "Company Note(s)"), provided to Pledgees under the terms of
the Agreement. The Company Note(s) are payable to Pledgees and are to be
secured by the Pledged Stock and the Collateral (as hereinafter defined)
pursuant to the provisions of this Pledge Agreement.
C. To induce Pledgees to accept the Deferred Payments and Company Note(s) and
in consideration of such acceptance, Pledgor agrees to pledge the Pledged
Stock to secure, without recourse, Pledgor's obligations under this Pledge
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained in this Pledge Agreement, the parties agree as follows:
AGREEMENT
1. DEFINITIONS Capitalized terms used but not defined in this Pledge
-----------
Agreement shall have the meanings ascribed to them in the Acquisition Agreement.
The following capitalized terms shall have the meanings set forth adjacent
thereto unless the context clearly indicates otherwise:
"Event of Default" Any act or occurrence specified as Event of Default in
Section 5 hereof.
46
"Pledged Stock" - 20,000 shares of WNC common stock represented by
certificates number 10 through 16, inclusive,
registered in the Pledgor's name together with all
stock, rights, rights to subscribe, liquidating
dividends, new securities, securities representing
split-shares, or other property received, receivable or
otherwise distributed in exchange for any or all of the
foregoing and the certificates representing same.
"Pledged Stock" shall not include cash or stock
dividends received, receivable or otherwise distributed
in respect of the forgoing. Such dividends shall remain
payable to the Pledgor.
"Collateral" shall mean the Equipment but shall not include any
----------
improvements, additions, modifications or accessories to the Equipment.
"Equipment" The machinery, tools, furniture, furnishings, business
---------
fixtures and other equipment listed in Schedule 1 attached hereto.
2. SECURITY FOR THE PLEDGOR'S OBLIGATIONS; NO RECOURSE. This Pledge Agreement
is for the Pledgees' benefit solely to secure the payment obligations under
the Company Note(s). All such obligations shall collectively be called
"Obligations". Anything to the contrary in this Pledge Agreement
notwithstanding, Pledgor makes no representation, warranty or covenant as
to the present or future value of the Pledged Stock or the Collateral and,
in the event that the security interest in the Pledged Stock and the
Collateral is insufficient to secure the full payment of the Obligations,
Pledgees shall have no recourse against Pledgor pursuant to the terms of
this Pledge Agreement. In such event, however, Pledgees shall have
whatever deficiency rights are available to them as secured parties under
the California Commercial Code, including, but not limited to, the right to
bring litigation under said Company Notes.
3. PLEDGE OF SECURITIES, GRANT OF SECURITY INTEREST. To secure the
Obligations and for the purposes set forth in Section 2, Pledgor hereby:
(a) pledges and deposits with Pledgee Agent all of the Pledged Stock, to be
held by Pledgee Agent upon the terms and conditions set forth in this
Pledge Agreement; and (b) grants, assigns and transfers to the Pledgee
Agent a continuing security interest in all of the Collateral. Pledgor
agrees at any time and from time to time, upon the written request of
Pledgee Agent, to promptly and duly execute and deliver any and all such
further pledge agreements, stock powers, instruments and documents and take
such further action as Pledgee Agent may reasonably request in order for
Pledgees to obtain the full benefits of the rights and powers granted
herein. Pledgor further agrees that until the obligations under the
Deferred Payments and Company Notes have been fully paid, canceled or
discharged, or until the Pledged Stock is released pursuant to Section 4.2
of this Pledge Agreement, whichever first occurs, it will not issue, or
grant options, warrants, rights,
47
agreements or commitments of any character relating to the authorized,
issued or unissued capital stock of WNC, nor authorize or issue any new
classes of stock of WNC.
4. VOTING, USE OF COLLATERAL RELEASE
4.1 VOTING OF PLEDGED STOCK AND USE OF COLLATERAL. Unless and until an
Event of Default shall have occurred and be continuing, Pledgor shall
have the sole and exclusive authority, power and right: (a) to vote
any and all Pledged Stock, (b) to give consents, waivers or
ratifications in respect thereof, (c) to exercise all rights of a
stockholder with respect to the Pledged Stock pursuant to the Articles
of Incorporation and Bylaws of WNC or under the California General
Corporation law and (d) the exclusive right and authority to possess,
use, enjoy and operate the Collateral. All such rights of Pledgor to
vote and to give consents, waivers and ramifications shall cease, and
Section 6 hereof shall become applicable, in case an Event of Default
shall occur and is not remedied by Pledgor within thirty (30) days
after Pledgee Agent notifies Pledgor of the Event of Default.
Notwithstanding the foregoing: (1) the Pledgor will not relocate the
Collateral outside the Counties of Santa Xxxxxxx and Ventura,
California except on a temporary basis for repairs and maintenance,
and (2) the Pledgor will use and operate the Collateral only in the
conduct of segregated POP-ISP operations in a manner consistent with
that conducted immediately prior to the Closing. Further, Pledgor
shall not relocate any Collateral to any other state outside the state
of California without providing Pledgee Agent with fully executed UCC-
1 Financing Statements relating to said Collateral for filing in such
other state at least thirty (30) days before relocating such
collateral.
4.2 RELEASE OF SECURITY INTEREST. The Pledgees and Pledgee Agent covenant
and agree that the security interest, lien and all other claims on or
with respect to the Pledged Stock shall automatically terminate and be
released upon payment in full to all Shareholders of the first
installment due under said Company Notes. At such time and
immediately following receipt of a written request of the Pledgor, the
Pledgor shall deliver or cause to be delivered to Pledgor, such
instruments as are reasonably necessary, in the opinion of Pledgor's
counsel, to confirm the release of Pledged Stock from the lien of this
Pledge Agreement and shall terminate its security interest and pledge
with respect thereto.
5. EVENTS OF DEFAULT. The occurrence of any of the following events is
an "Event of Default":
(a) EVENT OF DEFAULT UNDER DEFERRED PAYMENTS AND COMPANY NOTE(S). The
Company shall fail to pay any installment of principal or interest
due under any of the Deferred Payments or the Company Note(s)
within 15 days after the date such amount was due and payable;
48
(b) INVOLUNTARY PROCEEDINGS. Without the application or consent of
Pledgor any bankruptcy, insolvency, or similar proceeding under
the laws of any jurisdiction is instituted against WNC, Av-Tel or
Pledgor and remains unstayed or undismissed for a period of ninety
(90) days; or
(c) VOLUNTARY PROCEEDINGS. Pledgor institutes (by petition,
application or otherwise) or consents to any bankruptcy,
insolvency, or similar proceedings under the laws of any
jurisdiction.
(d) OTHER. Pledgor violates the provisions of the last sentence of
Section 3 of this Pledge Agreement.
6. REMEDIES IN CASE OF EVENT OF DEFAULT. If an Event of Default occurs,
Pledgees, acting solely and exclusively by and through the Pledgee Agent,
may exercise all the rights, power and remedies (whether vested in them by
this Pledge Agreement, the Company Note, or by law) for the protection and
enforcement or their rights in respect of the Pledged Stock (subject to
Section 7.3 hereof) and the Collateral and Pledgee may, subject to the
foregoing, without limitation exercise the following rights:
6.1 TRANSFER OF PLEDGED STOCK. To transfer or cause to be transferred on
the stock ledgers and other records of Pledgor and of WNC all or any
part of the Pledged Stock into Pledgee's name(s) or the name(s) of
their nominee or nominees and, in connection therewith, to furnish
such instructions and notices in writing to the Secretary of the
Pledgor and of WNC as may be reasonable and appropriate;
6.2 VOTING RIGHTS. To vote all or any part of the Pledged Stock (whether
or not transferred into the name of the Pledgees and give all
consents, waivers and ramifications in respect of the Pledged Stock
and otherwise act with respect thereto as though it were the outright
owner thereof.
6.3 SALE OF PLEDGED STOCK OR COLLATERAL. At any time or from time to time
to sell, assign and deliver, or grant options to purchase, all or any
part of the Pledged Stock, or the Collateral, or any interest therein,
at public or private sale, for cash, on credit or for future delivery,
at such time or times and at such price or prices and upon such other
terms as may be commercially reasonable. Pledgee may be the purchaser
of any or all of the Pledged Stock or the Collateral, at any such sale
and shall be entitled, for the purpose of bidding and making
settlement or payment of the purchase price for all or any portion of
the Pledged Stock or the Collateral sold at any such public sale, to
use and apply any of the Obligations owed to Pledgees as a credit on
account of the purchase price of any Pledged Stock or Collateral
payable by Pledgees at such sale. Each purchaser at any such sale
shall hold the property sold absolutely free from any claim or right
on the part of Pledgor, and Pledgor hereby waives (to the extent
permitted by law) all rights of redemption, stay and/or appraisal that
it now has or may at any time in the future have enacted. Pledgor
agrees that sixty (60) days' notice to Pledgor (given by any of the
methods set forth in Section 11) of the time and place of any public
sale or
49
the time on or after which a private sale was to be made shall
constitute reasonable notification. Pledgees shall not be obligated
to make any sale of the Pledged Stock or the Collateral regardless of
notice of sale having been given. Pledgees may adjourn any public or
private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned;
7. APPOINTMENT AND DUTIES OF PLEDGEE AGENT. Pledgees nominate Xxxxxxxxxx X.
Xxxxxx as the "Pledgee Agent" for the purpose of enforcing any and all
rights, obligations and remedies of Sellers under this Agreement. The
purpose of the Pledgee Agent is to allow Pledgees to ensure that their
individual rights are being uniformly enforced, that they remain informed
of each other individual Pledgee's actions regarding their security, and to
allow Pledgor to ensure that any and all communications from the Pledgees
or any and all responses to the Pledgees are uniformly transmitted and
received, and that any actions taken by the Pledgees binds them
collectively if such actions are the result of events which affect more
than one Pledgee, and any actions taken by Pledgor are accepted or rejected
by Pledgees collectively insofar as such actions affect more than one
Pledgee, and prevents Pledgor from being required to resolve conflicting
claims from the Pledgees in their individual capacity in those instances in
which more than one Pledgee is affected.
7.1 POWER OF ATTORNEY. By executing this document, Pledgees jointly and
severally appoint the Pledgee Agent as their attorney in fact to act
in their place for the purposes of this Agreement. Pledgees further
grant the Pledgee Agent full authority to act in any manner both
proper and necessary to the exercise of the foregoing powers, and to
ratify every act that the Pledgee Agent may lawfully perform in
exercising those powers. The Pledgee Agent shall have all the powers
and duties of the Pledgees, including without limitation the power to
enforce or forebear from enforcing any remedy under this agreement.
7.2 PLEDGEES' RELINQUISH RIGHT TO ENFORCE PLEDGE AGREEMENT IN THEIR
INDIVIDUAL CAPACITY. Pledgees hereby covenant not to enforce, or,
threaten to enforce, xxx or threaten to xxx for the enforcement of any
rights or remedies under this Agreement or as provided by law or
equity, except by and through the Pledgee Agent. Pledgees hereby
agree that (a) Pledgor is not required to respond to the Pledgees or
act in any way regarding any or all of the Pledgees except through the
Pledgee Agent, (b) Pledgees' rights may only be enforced through the
Pledgee Agent, and (c) Pledgees are prohibited from individually
enforcing their rights against Pledgor, the Collateral or, except as
provided in Section 7.3, the Pledged Stock. Pledgees' actions under
this Agreement must be performed by the Pledgee Agent to be valid.
Pledgees agree that if the Pledgee Agent position becomes vacant,
Pledgor will not be obligated to officially communicate with, respond
to, or defend itself from Pledgees in their individual capacities, and
Pledgor will not be required to perform any act under this Agreement
regarding
50
the rights of any and all of the individual Pledgees until a successor
pledgee agent is appointed as provided in section 7.7.
Any notice required under this Agreement must be received by Pledgor
from the Pledgee Agent to be validly received, and receipt of notice
by the Pledgee Agent shall be deemed a valid receipt of notice by the
Pledgees.
7.3 PLEDGEE AGENT ACTIONS. Pledgees shall determine amongst themselves
the proper methods for authorizing a Pledgee Agent action provided,
however, that, in the event of a payment default under any Company
Note, the Pledgee to whom such Company Note is payable shall have the
exclusive right, without reference to the determinations of any other
Pledgee to direct and authorize the Pledgee Agent to exercise the
remedies set forth in Section 6 hereof as to the number of shares of
Pledged Stock which is determined by multiplying 20,000 by such
Pledgee's Shareholder's Proportionate Interest. Pledgor shall not be
obligated to verify or determine the authority of the Pledgee Agent
regarding any notice, demand, request, direction or other document
from the Pledgee Agent, and Pledgor shall not be liable to any party
for damages, losses, or expenses for any action taken or omitted in
reliance upon any notice, demand, request, direction or other document
from the Pledgee Agent that the Pledgor shall in good faith believe to
be genuine and ordered or permitted by the Pledgees.
7.4 LIABILITY OF THE PLEDGEE AGENT. In performing any duties under this
Agreement, the Pledgee Agent shall not be liable to any Pledgee for
damages, losses, or expenses, except for gross negligence or willful
misconduct on the part of the Pledgee Agent. The Pledgee Agent shall
not incur any liability for (a) any act or failure to act made or
omitted in good faith, or (b) any action taken or omitted in reliance
upon any notice, certificate, instrument, demand, request, direction
or other document, including any written statement or affidavit
provided for in this Agreement, that the Pledgee Agent shall in good
faith believe to be genuine, nor will the Pledgee Agent be liable or
responsible for forgeries, fraud, impersonations, or determining the
scope of any representative's authority. In addition, the Pledgee
Agent may consult with legal counsel in connection with the Pledgee
Agent's duties under this Agreement and shall be fully protected in
any act taken, suffered, or permitted by it in good faith in
accordance with the advice of counsel. The Pledgee Agent is not
responsible for determining or verifying the authority of any person
acting or purporting to act on behalf of any party to this Agreement.
7.5 FEES AND EXPENSES. It is understood that the fees and usual charges
agreed upon for services of the Pledgee Agent, which fees and usual
charges shall be borne by the Pledgees, are considered compensation
for ordinary services as contemplated by this Agreement. In the event
that the conditions of this Agreement are not promptly fulfilled, or
if the parties request a substantial modification of its terms, or if
any controversy arises, or if the Pledgee Agent is made a party to, or
intervenes in, any litigation pertaining to this Agreement or its
subject matter, the
51
Pledgee Agent shall be reasonably compensated for such extraordinary
services and reimbursed for all costs, attorneys' fees, including
allocated costs of in-house counsel, and expenses occasioned by such
default, delay, controversy or litigation and the Pledgee Agent shall
have the right to retain all documents and/or things of value at any
time held by the Pledgee Agent until such compensation, fees, costs,
and expenses are paid. The Pledgees promise to pay those sums upon
demand.
7.6 INDEMNIFICATION OF THE PLEDGEE AGENT. Pledgees agree to indemnify and
hold the Pledgee Agent harmless against any and all losses, claims,
damages, liabilities, and expenses, including reasonable cost of
investigation, counsel fees, and disbursements that may be imposed on
the Pledgee Agent or incurred by the Pledgee Agent in connection with
or arising out of the performance of its duties under this Agreement,
including but not limited to any litigation arising from this
Agreement or involving its subject matter.
7.7 RESIGNATION OF THE PLEDGEE AGENT. The Pledgee Agent may resign at
any time upon giving at least 30 days written notice to the parties;
provided, however, that no such resignation shall become effective
until the expiration of the 30 days' notice or until the appointment
of a successor pledgee agent, whichever is earlier. The appointment
of a successor pledgee agent shall be accomplished as follows: (a)
the Pledgees shall use their best efforts to appoint a successor
pledgee agent within 30 days; (b) the successor pledgee agent shall be
appointed by an affirmative vote by the holders of an aggregate of
two-thirds of the aggregate unpaid principal amounts due under the
Company Note(s); (c) the Pledgees shall give prompt written notice to
the Company of the appointment of a successor pledgee agent; and (d)
this Agreement shall be amended in writing to make the successor
pledgee agent a party hereto. If the Pledgees fail to agree upon and
appoint, pursuant to this Section 7.7, an appropriate successor
pledgee agent within thirty days, their rights under this Agreement,
by virtue of the vacancy in the Pledgee Agent position, will become
unenforceable until a successor pledgee agent is appointed. Pledgor
will not be obligated to act at the request of any or all of the
individual Pledgees when there is a vacancy in the position of pledgee
agent.
The successor pledgee agent shall execute and deliver an instrument
accepting such appointment to the Pledgor, and it shall, without
further acts, be vested with all the rights, powers and duties of the
predecessor pledgee agent as if originally named pledgee agent. Upon
the effective appointment of a successor pledgee agent, or 30 days
after the Pledgee Agent's notice of resignation to the Pledgees,
whichever is earlier, the Pledgee Agent shall be discharged from any
further duties and liability under this Agreement.
7.8 LIMITATIONS OF DUTIES. The Pledgee Agent shall have no duties or
obligations except those expressly set forth herein and no implied
covenants or obligations shall be read into this Agreement. If in one
or more instances the Pledgee Agent
52
takes any action or assumes any responsibility not specifically
delegated to it, neither the taking of such action or the assumption
of such responsibility shall be deemed to be an express or implied
undertaking on the part of the Pledgee Agent that it will take the
same or similar action or assume the same or similar responsibility in
any other instance.
8. REMEDIES CUMULATIVE. Each right, power and remedy of Pledgees provided
for in this Pledge Agreement or the Company Note(s) or now or hereafter
existing at law or in equity or by statute shall, subject to the terms
hereof, be cumulative and concurrent and shall be in addition to every
other such right, power or remedy.
9. APPLICATION OF PROCEEDS. All moneys collected by or on behalf of Pledgees
upon any sale or other disposition of the Pledged Stock or the Collateral,
together with all other moneys received by or on behalf of Pledgees
hereunder, shall be applied to the payment of all reasonable costs and
expenses incurred by Pledgees in connection with such sale, the delivery of
the Pledged Stock or the Collateral or the collection of any such moneys
(including, without limitation, attorneys' fees and expenses), and the
balance of such moneys shall be held by Pledgees and applied by them,
through the Pledgee Agent to satisfy the Obligations. Pledgor shall be
entitled to any surplus resulting from the sale or other disposition of
Pledged Stock or the Collateral.
10. PURCHASERS OF COLLATERAL. Upon any sale of Pledged Stock or the
Collateral by or on behalf of Pledgees hereunder (whether by virtue of the
power of sale herein granted, pursuant to judicial process or otherwise),
the receipt of Pledgees or the officer making the sale shall be a
sufficient discharge to the purchaser or purchasers of the Pledged Stock or
the Collateral so sold, and such purchaser or purchasers shall not be
obligated to see to the application of any part of the purchase money paid
over to the Pledgees or such officer or be answerable in any way for the
misapplication or non-application thereof.
11. TERMINATION; RELEASE. Subject to Section 4.2 hereof, this Pledge
Agreement shall terminate upon the satisfaction or payment in full of the
indebtedness represented thereby. At such time, Pledgees will execute and
deliver to Pledgor a proper instrument or instruments acknowledging the
satisfaction and termination of this Pledge Agreement, and will duly
assign, transfer and deliver to Pledgor such of the Pledged Stock or
Collateral as may be in the possession of the Pledgee Agent and as has not
theretofore been sold or otherwise applied or released pursuant to this
Pledge Agreement.
12. NOTICES. Any notice or communication required or permitted by this Pledge
Agreement shall be deemed sufficiently given if in writing and, if
delivered personally, when it is delivered or, if delivered in another
manner, the earlier of when it is actually received by the party to whom it
is directed, or when the period set forth below expires (whether or not it
is actually received):
(a) if transmitted by facsimile transmission, two hours after (i)
transmission to the party's facsimile number set
53
forth below, with the party's name and address set forth below clearly
shown on the page first transmitted, and (ii) receipt by the
transmitting party of written confirmation of successful transmission,
which confirmation may be produced by the transmitting party's
equipment;
(b) if deposited with the U.S. Postal Service, postage prepaid, and
addressed to the party to receive it as set forth below, (i) 48 hours
after such deposit as registered or certified mail if addressed to a
location in the U.S.A., or (ii) ten days after such deposit as
registered or certified airmail if addressed to a location outside of
the U.S.A.; or
(c) if accepted by Federal Express or a similar delivery service in
general usage for delivery to the address of the party to receive it
as set forth below, 24 hours after the delivery time promised by the
delivery service.
If to the Pledgor:
Hi Tiger, Inc.
c/o AvTel Holdings, Inc.
000 Xxxxxxx Xxxxx
Xxxxx Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxx X. Xx Xxxxx, Esq.
Price, Xxxxxx & Parma LLP
000 X. Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
If to the Pledgees:
To the addresses listed in EXHIBIT B to the Acquisition Agreement
If to Pledgee Agent
Xxxxxxxxxx X. Xxxxxx, Esq.
000 Xxxx Xxxxxx
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
A party may change its address or facsimile number or the address or
facsimile number to which copies shall be sent by giving notice of the
change to each other party. The new address and facsimile number
shall become effective for purposes of this Pledge Agreement five days
after notice of the new address and facsimile number, as the case may
be, is given.
54
13. HEADINGS. Section and other headings contained in this Pledge Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Pledge Agreement.
14. PROMPT ACTION. Time is of the essence with respect to each provision of
this Pledge Agreement.
15. GENDER AND NUMBER. At each place in this Pledge Agreement where the
context so required, the masculine gender includes the feminine and neuter
and the singular includes the plural and vice versa.
16. HOLIDAYS. If any date on which action is to be taken under this Pledge
Agreement occurs, or if any period during which action is to be taken under
this Pledge Agreement ends, on a Saturday, Sunday, or a holiday, the date
or period shall be extended to the next succeeding day which is not a
Saturday.
17. SURVIVAL OF WARRANTIES. All agreements, representations and warranties
made in this Pledge Agreement shall survive the execution and delivery of
this Pledge Agreement and shall continue until any and all Obligations have
been paid and performed in full.
18. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Agreement shall be governed by, with
the laws of the state of California, without giving effect to the
provisions thereof regarding conflicts of laws. The parties specifically
agree to submit to the jurisdiction of, and consent to venue before the
courts of Ventura County, California. Process in any action or proceeding
relating to this Pledge Agreement may be served on the undersigned anywhere
in the world whether within or outside the State of California.
19. BINDING EFFECT. The provisions of this Pledge Agreement shall bind and
inure to the benefit of the parties and their respective heirs, successors
and permitted assigns.
20. COUNTERPARTS. This Pledge Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute a single agreement.
21. AMENDMENT AND WAIVER. This Pledge Agreement may be amended, modified or
supplemented only by a writing executed by each of the parties. Any party
may, in writing, waive any provision of this Pledge Agreement to the extent
such provision is for the benefit of the waiving party. No action taken
pursuant to this Pledge Agreement, including any investigation by or on
behalf of any party, shall be deemed to constitute a waiver by that party
of its or any other party's compliance with any representations or
warranties or with any provisions of this Pledge Agreement. No waiver by
any party of a breach of any provision of this Pledge Agreement shall be
construed as a waiver of any
55
subsequent or different breach, and no forbearance by a party to seek a
remedy for noncompliance or breach by another party shall be construed as a
waiver of any right or remedy with respect to such noncompliance or breach.
22. SEVERABILITY. The invalidity or unenforceability of any particular
provision of this Pledge Agreement shall not affect the other provisions,
and this Pledge Agreement shall be construed in all respects as if any
invalid or unenforceable provision were omitted.
23. ATTORNEYS' 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 prevailing party or parties shall reimburse the non-
prevailing party or parties for all costs, including reasonable attorneys'
fees, incurred in connection therewith and in enforcing or collecting any
judgment rendered therein.
[Signature Page Follows]
56
IN WITNESS WHEREOF, the parties have executed this Pledge Agreement as of
the day and year first above written.
HI TIGER, INC., a Utah corporation
("Pledgor")
By:
---------------------------
Its:
--------------------------
Xxxxxxxxxx X. Xxxxxx
("Pledgee Agent")
------------------------------
------------------------------
PLEDGEES:
------------------------------
Xxxxxx X. Xxxxxxxx
Chritiana G. Xxxxxx
XXXXXX COLOR PHOTO LAB, INC. dba
IMAGE SOURCE, INC.
By:
---------------------------
Xxxxxxxx X. Padova, President
------------------------------
Xxxx X. Xxxxxx
------------------------------ ------------------------------
Xxxxx X. Xxxxxxxx Xxxxxxxx X. Padova
------------------------------
Xxxxxxxx Xxxxxxx Jonsson
------------------------------
Xxxxxx X. Xxxxxxxx
Xxxx Xxxxxxxx
57
58
EXHIBIT E
=========
REFUSAL RIGHTS NOTICE
Certified Mail/Return Receipt Requested
TO: AvTel Communications, Inc. Dated:
000 Xxxxxxx Xxxxx, Xxxxx X ------------------------
Xxxxx Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx
Executive Vice President & Chief Operating Officer
Re: Stock Purchase Agreement dated February , 1997 by and among WestNet
---
Communications, Inc. ("WNC"), Hi, Tiger, Inc. ("HTI"), AvTel
Communications, Inc. ("AvTel") and the Shareholders (the "Agreement")
Ladies & Gentlemen:
This Refusal Rights Notice is furnished pursuant to Section 5.5(b ) of the
Agreement. Capitalized terms used in this Notice have the same meanings ascribed
to them in the Agreement. The undersigned represents and certifies that
he/she/it has received a bona fide offer from a Note Purchaser to purchase a
Company Note issued in the name of the undersigned in connection with the
Agreement in the original principal amount of $ . The undersigned
----------
further represents as follows:
1. The name and address of the Note Purchaser are:
------------------------------
------------------------------
------------------------------
2. The date of the offer to purchase the Company Note is .
--------------------
3. The full and complete details of the price and other terms of the offer
are:
(a) Total consideration to be paid for the Company Note is $
-------------
(b) The terms of payment (all cash, exchange of notes or other securities,
time of payment, etc.) are as follows:
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
Very truly yours,
-------------------------------
59
