SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 8-K
CURRENT REPORT
Pursuant to Section 10 or 15(d) of the
Securities Exchange Act of 1934
SEPTEMBER 16, 1996
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Date of Report (date of earliest event reported)
NETWORK LONG DISTANCE, INC.
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(Exact Name of Registrant as Specified in its Charter)
DELAWARE 0-23172 72-1122018
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(State or Other (Commission (IRS Employer Iden-
Jurisdiction of File Number) tification Number)
Incorporation)
525 FLORIDA STREET
BATON ROUGE, LOUISIANA 70801
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(Address of Principal Executive Offices
Including Zip Code)
(504) 343-3125
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(Registrant's telephone number,
including area code)
Page 1 of 5.
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Item 1. Changes in Control of Registrant
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N/A
Item 2. Acquisition or Disposition of Assets
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On September 16, 1996, the Registrant entered into a letter of
intent with United Wats, Inc. ("UWI"). The letter of intent
provides that the Registrant will acquire all of the issued and
outstanding shares of UWI common stock in exchange for a to be
determined number of shares of the Registrant's "restricted"
Common Stock. The number of shares yet to be issued to UWI will
be based on UWI's net toll usage from October 1, 1996 through
November 14, 1996 on the MCI network and from September 15, 1996
through October 31, 1996 on the Sprint network divided by the
average trading price of the Registrant's Common Stock for a
thirty (30) day period ending three (3) days prior to closing.
The letter of intent also provides, if the acquisition is
consummated, the Registrant will enter into employment agreements
with the five principal shareholders of UWI and UWI will appoint
one (1) member to the Registrant's Board of Directors, the terms
of which have yet to be negotiated. Both parties have agreed to
provide each other all requested materials and documents for
their respective due diligence. The acquisition is intended by the
parties to be treated from an accounting standpoint as a pooling
interests.
UWI is headquartered in the Kansas City metropolitan area and is an
inter-exchange long distance carrier providing national and
international direct dial (1+), toll-free (1-800), travel card
and ancillary telecommunications services to high-usage business
and commercial customers. UWI is primarily a reseller of Sprint
and MCI telecommunications services, two of the largest companies
in the long distance industry.
The Registrant believes the business combination of the Registrant
and UWI will be advantageous to the Registrant because it would add
additional product line diversity and provide general and
administrative cost reductions available as a result of combining the
operations of the two companies. Also attractive to the Registrant
is the addition of the Sprint and MCI product line to the
Registrant's existing contracts with WilTel ("LDDS/WorldCom") and
AllNet ("Frontier").
No material relationship between the Registrant, its officers and
directors and UWI and its officers, directors or affiliates
presently exists. The shares of Common Stock which will be
issued by the Registrant to acquire the outstanding shares of UWI
will be from the Registrant's authorized but unissued Common
Stock.
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Item 3. Bankruptcy or Receivership
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N/A
Item 4. Changes in Registrant's Certifying Accountants
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N/A
Item 5. Other Events
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N/A
Item 6. Resignations of Registrant's Directors
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N/A
Item 7. Financial Statements and Exhibits
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(a) and (b) The pro forma financial information and audited
financial statements required by this Item will
be filed as an amendment to this Report no later
than sixty (60) days from the date of this
Report.
(c) Exhibits: Filed herewith pursuant to Reg. S-K Item 601
is the following exhibit.
Exhibit No. Page Description
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1 5 Letter of Intent between the Registrant and
United Wats, Inc., dated September 16, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
NETWORK LONG DISTANCE, INC.
Dated: September 23, 1996 By: /s/ MARC I. BECKER
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Marc I. Becker,
Executive Vice President
NETWORK LONG DISTANCE, INC.
525 Florida Street
Baton Rouge, Louisiana 70801
September 16, 1996
Mr. Tim A. Barton, President
United Wats, Inc.
7000 Squibb, Suite 310
Mission, KS 66202
Re: LETTER OF INTENT
Dear Tim:
Network Long Distance, Inc. ("Network") hereby submits this Letter of
Intent to United Wats, Inc.("UWI") which shall serve as an outline of the
terms and conditions under which Network proposes to enter into a merger
of the companies. If all necessary due diligence regarding the Merger is
completed to the Parties satisfaction, Network proposes that the parties
reduce their agreement to writing in the form of a separate purchase
agreement (the "Formal Agreement(s)") and that the closing of the
transaction contemplated herein (the "Closing") take place at Network's
corporate headquarters, 525 Florida Street, Baton Rouge, Louisiana, 70801
on a mutually agreeable date and time.
1. THE MERGER. Network proposes to enter into a transaction with
UWI (the "Merger"), whereby the combination of the two companies
will occur through an exchange of stock. There can be no substantial
adverse change to either the assets or liabilities of either company
in contemplation of this transaction. Pooling will be the accounting
treatment for this transaction.
2. DEFINITIONS.
a. QUALIFIED CUSTOMER ACCOUNTS: End user long distance
telecommunications customer accounts of UWI which, unless
mutually agreed to by both parties, may not be (1)
affiliated with Seller in any way or (2) comprised, in whole
or in part, of any outstanding balance(s) which is/are more
than sixty (60) days past due.
b. NET TOLL USAGE: Toll usage for the Qualified Customer
Accounts as measured using a mutually agreed to billing
period (the "Measurement Period"), net of any discounts and
minus other appropriate deductions, including but not
limited to taxes, pass-through charges to customers,
credits and chargebacks.
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c. MEASUREMENT PERIOD: shall mean the period commencing
October 1, 1996 and ending November 14, 1996 for Net Toll
Usage derived on the MCI network and the period commencing
September 15, 1996 and ending October 31, 1996 for Net Toll
Usage derived on the Sprint network.
3. PURCHASE PRICE. At the Closing, Network shall pay total
consideration equal to Net Toll Usage multiplied by a multiple of
12.5 plus, $675,000 for the express shipping business which
operates as DeskTop Shipping. (the "Purchase Price").
a. One hundred percent (100%) of the Purchase Price shall be
paid in the form of shares of Network common stock which are
restricted from transfer pursuant to Rule 144 of the
Securities Exchange Commission (the "Restricted Stock").
b. The number of shares of Network common stock to be delivered
in the Merger will be equal to the Purchase Price divided by
the Average Trade Price of the Network common stock for the
period of 30 consecutive trading days ending three days
prior to the Closing (the "30 Day Average Trade
Price"). The Average Trade Price on each day shall be the
average of the closing bid and asked price for that day as
published in the Wall Street Journal. However, in no event will
the price of the stock used to determine the number of shares to
be issued be above $10.75 ( the "cap" ) or below $9.75 ( the
"collar" ).
c. The Restricted Stock shall be paid to the shareholders of UWI
(the "Selling Shareholders"), in accordance with their
pro rata ownership interests, in exchange for all issued and
outstanding shares of UWI Capital Stock.
d. Network agrees to file a registration statement no later
than seventy-five (75) days following the Closing or within
the shortest time frame allowed under pooling and SEC
requirements.
4. EMPLOYMENT AGREEMENTS. Network will negotiate individually and
separately with each of the five (5) principal shareholders and
enter into employment agreements with each party.
5. DUE DILIGENCE. Both parties shall provide all materials and
documents reasonably requested by their respective legal and
financial advisors including the required audited financial
statements between the date of this Letter of Intent and the date on
which the Formal Agreement is executed (the "Due Diligence Period").
6. PUBLIC ANNOUNCEMENT. The signing and contents of this Letter of
Intent shall
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remain strictly confidential. Notwithstanding the foregoing, Network
may, in its sole discretion or if necessitated by applicable
securities laws, publicly announce the signing and contents of this
Letter of Intent.
7. OTHER NEGOTIATIONS. It is the intent of both parties to close
the transaction as contemplated herein. Therefore, UWI may not
open or continue negotiations with any other person, firm, or
entity ("Third Party") so long as this Letter of Intent is in
effect. In the event the Formal Agreement is not executed by the
parties on or before December 31, 1996, this Letter of Intent
shall no longer be in effect.
8. NONCOMPETES. UWI and the owners of UWI shall execute noncompetition
agreements which shall, for a period of three (3) years from the
closing of this transaction: (a) preclude them from soliciting,
selling or otherwise marketing to the current Customer Accounts of
either company or Accounts which become Customers of the combined
company unless such activities are authorized; and (b) obligate them
to indemnify Network with respect to all of the foregoing covenants.
9. COUNTERPARTS. This Letter of Intent may be signed in
counterparts, each of which, when taken together, shall comprise
an original.
10. ASSIGNABILITY. This Letter of Intent may be assigned by either
party to one or more of their subsidiaries, whether currently
existing or to be established in the future.
11. INDUSTRY TERMS. All terms and phrases unique to the
telecommunications industry and used within this Letter of Intent
shall be defined in accordance with the everyday meaning assigned
to the terms within the industry.
12. POOLING CONFLICTS. Should any of the terms and conditions
proposed herein jeopardize the pooling accounting treatment,
then those items will be adjusted in order to meet the pooling
requirements. If the adjustments made in order to meet the
pooling requirements materially alter the terms and conditions of
this agreement, or if this transaction cannot be consummated
under the pooling accounting treatment either party, at its sole
discretion, may void this Letter of Intent, releasing the parties
from all obligations contained herein.
13. BOARD OF DIRECTORS. Network agrees to provide for one seat on
the Board of Directors of Network Long Distance and one advisory
board seat (non-voting) on the Board of Network Long Distance.
The board position will hold office until the annual meeting of
shareholders in the year 1998, and will be nominated for re-
election at such meeting.
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If a verbal or written response or execution of this Letter of Intent
is not received by Network on or before September 25, 1996 this proposal
shall expire.
NETWORK LONG DISTANCE, INC. ACCEPTED AND AGREED TO:
UNITED WATS, INC.
By: /s/ RON C. LEVITT By: /s/ TIM A. BARTON
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Name: Ron C. Levitt Name: Tim A. Barton
Title: Vice President/Treasurer ---------------------
Title: President
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