As filed with the Securities and Exchange Commission on February 14, 1997
SEC Registration No. 333-
=========================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
NETWORK LONG DISTANCE, INC.
-------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
DELAWARE 72-1122018
---------------------------- ------------------
(State or Other Jurisdiction (IRS Employer)
of Incorporation) Identification No.)
525 Florida Street
Baton Rouge, Louisiana 70801
(504) 343-3125
------------------------------------------------------
(Address and Telephone Number of Registrant's Principal
Executive Offices and Principal Place of Business)
Marc I. Becker, Chairman of the Board
525 Florida Street
Baton Rouge, Louisiana 70801
(504) 343-3125
--------------------------------------------------------
(Name, Address and Telephone Number of Agent for Service)
Copies to:
John B. Wills, Esq.
410 Seventeenth Street, Suite 1940
Denver, Colorado 80202
(303) 628-0747
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration
Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. / /
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. / X /
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
CALCULATION OF REGISTRATION FEE
===========================================================================================
Title of Each Amount Proposed Maximum Proposed Maximum Amount of
Class of Securities to be Offering Price Aggregate Offering Registration
to be Registered Registered (1) Price Per Share Price (2) Fee
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$.0001 Par Value 2,528,887 $8.75 $22,127,762 $6,705.38
Common Stock Shares Share
===========================================================================================
</TABLE>
(1) All securities subject to this Registration Statement are on behalf of
selling shareholders (see "Selling Shareholders").
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 by reference to the last sale reported on the
NASDAQ Small-Cap(SM) Market on February 10, 1997.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
The Exhibit Index appears on page II-5 of the sequentially numbered pages
of this Registration Statement. This Registration Statement, including
exhibits, contains 43 pages.
<PAGE>
NETWORK LONG DISTANCE, INC.
Cross-Reference Sheet pursuant to Item 501(b) of Regulation S-K
between Registration Statement (Form S-3) and Form of Prospectus.
Item Number and Caption Location in Prospectus
----------------------- ----------------------
1. Forepart of the Registration Cover Page; Inside Front
Statement and Outside Front Cover Pages
Cover Page of Prospectus
2. Inside Front and Outside Back Inside Front Cover Pages
3. Summary Information, Risk Prospectus Summary; Risk
Factors and Ratio of Earnings Factors
to Fixed Charges
4. Use of Proceeds Not Applicable
5. Determination of Offering Price Cover Page; Plan of Distribution
6. Dilution Not Applicable
7. Selling Security Holders Selling Shareholders
8. Plan of Distribution Plan of Distribution
9. Description of Securities to Not Applicable
be Registered
10. Interest of Named Experts Not Applicable
and Counsel
11. Material Changes Recent Developments
12. Incorporation of Certain Incorporation of Certain
Information by Reference Documents by Reference
13. Disclosure of Commission Part II, Item 17
Position on Indemnification
for Securities Act Liabilities
<PAGE>
Subject to Completion dated February 14, 1997
PROSPECTUS
- ---------------------------------------------------------------------------
NETWORK LONG DISTANCE, INC.
2,528,887 SHARES COMMON STOCK
($.0001 PAR VALUE)
All of the shares of Network Long Distance, Inc. (the "Company")
Common Stock are being registered on behalf of security holders ("Selling
Shareholders"), which are offering for sale 2,528,887 shares of the
Company's Common Stock which are presently outstanding. The Selling
Shareholders are not restricted in the price or prices at which they may
sell their shares and sales of such shares may depress the market price of
the Company's Common Stock. (See "Selling Shareholders".)
This offering is not being underwritten. The shares will be offered
and sold by the Selling Shareholders from time to time at prices to be
determined at the time of such sales.
It is anticipated that sales of the 2,528,887 shares of Common Stock
being offered hereby when made, will be made through customary brokerage
channels either through broker-dealers acting as agents or brokers for the
Selling Shareholders, or through broker-dealers acting as principals who
may then resell the shares in the over-the-counter market or otherwise, or
at private sales in the over-the-counter market or otherwise, at negotiated
prices related to prevailing market prices at the time of the sales or by
a combination of such methods of offering. Thus, the period of
distribution of such shares may occur over an extended period of time. The
Selling Shareholders will pay or assume brokerage commissions or discounts
incurred in the sale of their shares.
The Company is paying all of the expenses of registering the Common
Stock under the Securities Act of 1933, as amended, estimated to be $16,000
for filing, printing, legal, accounting and miscellaneous expenses in
connection with the offering.
On February 10, 1997, the closing sale price of the Company's Common
Stock as reported on the NASDAQ Small-Cap(SM) Market was $8.75.
-----------------------
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. (SEE "RISK FACTORS".)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-----------------------
The date of this Prospectus is February ____, 1997.
<PAGE>
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this Prospectus in connection with the offer
contained in this Prospectus, and, if given or made, such other information
or representations must not be relied upon as having been authorized by the
Company or the Selling Stockholders. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances,
create an implication that there has been no change in the affairs of the
Company since the date hereof.
AVAILABLE INFORMATION
---------------------
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended ("the 1934 Act"), and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information can be inspected and copied
at the public reference facilities maintained by the Commission at its
principal office at Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following Regional Offices of the Commission: in
Denver, 1801 California Street, Suite 4800, Denver, Colorado 80202; in
Chicago, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661; in
New York, 7 World Trade Center, Suite 1300, New York, New York 10048; in
Miami, 1401 Brickell Avenue, Suite 200, Miami, Florida 33131; and in Los
Angeles, 5670 Wilshire Boulevard, 11th Floor, Los Angeles, California
90036. Copies of such materials can be obtained at prescribed rates by
written request addressed to the Commission, Public Reference Section, 450
Fifth Street, N.W., Washington, D.C. 20549. The Commission also maintains
a Web Site that contains reports, proxy and information statements and
other information regarding registrants, including Touch Tone, that file
electronically with the Commission at http://www.sec.gov. In addition,
copies of such documents and other information are provided to Nasdaq and
can be inspected at the Nasdaq offices maintained at the National
Association of Securities Dealers, Inc., 1735"K" Street, Washington, D.C.
20549.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
-----------------------------------------------
The following documents, all which were previously filed with the
Commission, are hereby incorporated by reference in this Prospectus:
1. The Company's Annual Report on Form 10-K for the year ended March 31,
1996.
2. The Company's Quarterly Report on Form 10-Q for the three months ended
June 30, 1996.
3. The Company's Quarterly Report on Form 10-Q for the six months ended
September 30, 1996.
4. The Company's Quarterly Report on Form 10-Q for the nine months ended
December 31, 1996.
5. The Company's Current Reports on Form 8-K dated May 31, 1996, June 30,
1996 and Current Reports on Form 8K/A dated August 1, 1996 and August
5, 1996.
6. The Company's Current Reports on Form 8-K dated November 15, 1996 and
Current Reports on Form 8-K/A dated September 16, 1996, November 27,
1996 and January 14, 1997.
All documents filed by the Company prior to the date of this
Prospectus pursuant to Sections 13(a), 13(c), 14 or 15(d) of the 1934 Act
prior to the termination of the offering of the shares of Common Stock
shall be deemed to be incorporated by reference in this Prospectus and to
be a part hereof from the date of filing of those documents.
2
<PAGE>
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that such statement is modified or replaced by a
statement contained in this Prospectus or in any other subsequently filed
document that also is or is deemed to be incorporated by reference into
this Prospectus. Any such statement so modified or superseded shall not be
deemed, except as so modified or replaced, to constitute a part of this
Prospectus. The Company undertakes to provide without charge to each
person to whom a copy of this Prospectus has been delivered, upon the
written or oral request of any such person, including any beneficial owner,
a copy of any or all of the documents referred to above that have been or
may be incorporated in this Prospectus by reference, other than exhibits to
such documents. Written or oral requests for such copies should be
directed to Marc I. Becker, Vice President, Network Long Distance, Inc.,
525 Florida Street, Baton Rouge, Louisiana 70801, (504) 343-3125.
3
<PAGE>
TABLE OF CONTENTS
-----------------
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . .2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE. . . . . . . . . . . . .2
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . .5
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
RECENT DEVELOPMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 11
SELLING SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . 12
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . 12
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
LEGAL OPINIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4
<PAGE>
PROSPECTUS SUMMARY
------------------
The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information appearing elsewhere
in this Prospectus.
The Company
- -----------
Network Long Distance, Inc. ("Network" or the "Company"), is a
Delaware corporation organized on December 9, 1987. Network maintains its
principal executive offices at 525 Florida Street, Baton Rouge, Louisiana
70801, and its telephone number is (504) 343-3125.
Network provides long distance services to business and residential
customers. The Company also provides long distance and other
telecommunication services to switchless resellers and to agents who sell
the Company's services to other end-users. The Company transmits long
distance telephone calls through and over various types of transmission
circuits leased from other telecommunications carriers at fixed or variable
rates. Calls can be routed through the Company's switching center, which
selects the least expensive among the various available transmission
alternatives to complete the call. Calls can also be completed by various
underlying carriers and the Company provides billing, customer service and
other features relative to the call.
Based on the comparison of the Company's tariffed rate per minute as
compared to other long distance competitors, the Company believes its rates
for long distance services to be below those charged by AT&T Corp.
("AT&T"), MCI Communications Corporation ("MCI"), Sprint Corporation
("Sprint") and WorldCom, Inc. ("WorldCom") and are competitive or below
rates charged by other interexchange carriers. The Company obtained this
information from published Federal Communication Commission Tariff
schedules.
Profits are based on the Company's ability to charge rates in excess
of the Company's cost of transmitting calls over the transmission lines
selected by the switching equipment or in excess of underlying carrier
costs.
The Company is a provider of long distance services throughout most of
the United States. The Company offers a variety of value added features
and options designed to attract long distance customers. The Company
primarily charges customers on the basis of minutes of usage at rates that
vary with the time of day of the call.
The Company's goal is to establish itself as a second-level long
distance telecommunications company. The long distance industry is
dominated by the four largest long distance providers namely AT&T, MCI,
Sprint and WorldCom with revenues over $1 billion. The second level, the
Company's goal, is comprised of companies under $1 billion but in excess of
$100 million in annual revenues. The Company will attempt to achieve this
goal through its planned acquisition of other long distance companies,
increased call volumes and the addition of new services for its customers.
The Company has four subsidiaries, Network Advanced Services, Inc.,
Network Acquisition Corp., United Wats, Inc. and Long Distance Telcom, Inc.
All references to the Company include its subsidiaries and its subsidiaries
prior operations, except as stated otherwise.
5
<PAGE>
The Offering
- ------------
Securities Offered 2,528,887 Shares of Common Stock,
$.0001 par value per share.
Offering Price All or part of the Shares offered
hereby may be sold from time to time in
amounts and on terms to be determined
by the Selling Shareholders at the time
of the sale.
NASDAQ Symbol "NTWK"
6
<PAGE>
RISK FACTORS
------------
WHEN USED IN THIS PROSPECTUS, THE WORDS "ANTICIPATE," "ESTIMATE,"
"EXPECT," "PROJECT" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY
FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS ARE SUBJECT TO CERTAIN RISKS,
UNCERTAINTIES AND ASSUMPTIONS. SHOULD ONE OR MORE OF THESE RISKS OR
UNCERTAINTIES MATERIALIZE, OR SHOULD UNDERLYING ASSUMPTIONS PROVE
INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE ANTICIPATED,
ESTIMATED, EXPECTED OR PROJECTED. SEVERAL KEY FACTORS THAT HAVE A DIRECT
BEARING ON THE COMPANY'S ABILITY TO ATTAIN THEIR GOALS ARE DISCUSSED BELOW.
THE COMPANY WILL NOT UNDERTAKE AND SPECIFICALLY DECLINE ANY OBLIGATION TO
PUBLICLY RELEASE THE RESULT OF ANY REVISIONS WHICH MAY BE MADE TO ANY
FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE
DATE OF SUCH STATEMENTS OR TO REFLECT THE OCCURRENCE OF ANTICIPATED OR
UNANTICIPATED EVENTS.
Prospective purchasers of the Company's Common Stock should carefully
consider, together with the other information herein, the following risk
factors:
Dependance on Carriers and the Availability of Transmission Facilities Not
- -------------------------------------------------------------------------
Assured
- -------
The Company's long distance telephone business is dependent upon lease
or resale arrangements with fiber-optic and digital microwave carriers for
the transmission of calls. The future profitability of the Company is
based upon its ability to transmit long distance telephone calls over
transmission facilities leased from others on a cost-effective basis. The
Company is currently dependent on three primary carriers, Frontier
Communications Services, Inc., WorldCom Network Services, Inc. ("WilTel")
and Sprint. The Company leases transmission facilities on one to four year
contracts. The Company's contract with Frontier Communications Services,
Inc. expires in June 1997 and automatically continues until either party
elects to terminate after ninety days written notice. The Company's
contract with WilTel expires the earlier of expending $36 million or in
August 2000. The contract with Sprint expires in June 1997 and carries a
minimum monthly commitment of $1,000,000. The Company utilizes other fiber
optic carriers to a lesser extent to supplement communication transport
services, however, there can be no assurance that in the future the Company
will continue to have access, on an ongoing basis, to transmission
facilities at favorable rates.
Adverse Effect of Service Interruptions
- ---------------------------------------
The Company's business requires that transmission and switching
facilities and other equipment be operational 24 hours per day, 365 days
per year. Long distance telephone companies, including the Company, have
on occasion and may in the future experience temporary service
interruptions or equipment failures, in some cases resulting from causes
beyond their control. Any such event experienced by the Company would
impair the Company's ability to service its customers and could have a
material adverse effect on the Company's business.
Recent Losses From Operations
- -----------------------------
The Company has incurred losses and was unprofitable for the fiscal
year ended March 31, 1996 and for the nine (9) months ended December 31,
1996. Although the Company will attempt to attain profitability as its
recent acquisitions are integrated more fully into the Company's
operations, there is no assurance that this will occur or that the Company
will achieve, or be able to sustain, profitable operations. See "Financial
Statements" contained in the Company's Form 10-K for 1996 and Quarterly
Report on Form 10-Q for the nine (9) months ended December 31, 1996.
7
<PAGE>
Regulation Risks
- ----------------
The Company is subject to extensive regulation at the federal and
state levels.
The regulation of the telecommunications industry is changing rapidly,
and the regulatory environment varies substantially from state to state.
There can be no assurance that future regulatory changes will not have a
material adverse impact on the Company. On February 8, 1996, President
Clinton signed the Telecommunications Act of 1996 (the "Telecom Act"),
which: permits, without limitation, the Bell Operating Companies (the
"BOCs") to provide domestic and international long distance services to
customers located outside of the BOC's home regions; permits a petitioning
BOC to provide domestic and international long distance service to
customers within its home region upon a finding by the Federal
Communications Commission (the "FCC") that a petitioning BOC has satisfied
certain criteria for opening up its local exchange network to competition
and that its provision of long distance services would further the public
interest; and removes existing barriers to entry into local service
markets. Additionally, there are significant changes in: the manner in
which carrier-to-carrier arrangements are regulated at the federal and
state level; procedures to revise universal service standards; and
penalties for unauthorized switching of customers. The FCC has instituted
proceedings addressing the implementation of this legislation.
On August 1, 1996, the FCC announced its intention to conduct a
proceeding in the fall of 1996 leading to the reform of access charges.
Such charges are a principal component of the Company's line cost expense.
The Company cannot predict whether or not the result of such a proceeding
will have a material impact upon the Company.
On August 8, 1996, the FCC released its First Report and Order in the
Matter of Implementation of the Local Competition Provisions in the Telecom
Act (the "FCC Interconnect Order"). In the FCC Interconnect Order, the FCC
established nationwide rules designed to encourage new entrants to
participate in the local service markets through interconnection with the
incumbent local exchange carriers ("ILEC"), resale of the ILEC's retail
services and unbundled network elements. These rules set the groundwork
for the statutory criteria governing BOC entry into the long distance
markets. The Company cannot predict the effect such legislation or the
implementing regulations will have on the Company or the industry. Motions
to stay implementation of the FCC Interconnect Order have been filed with
the FCC and federal courts of appeal. Appeals challenging, among other
things, the validity of the FCC Interconnect Order have been filed in
several federal courts of appeal and assigned to the Eighth Circuit Court
of Appeals for Disposition. The Company cannot predict either the outcome
of these challenges and appeals or the eventual effect on its business or
the industry in general.
The Company believes that it has all the necessary FCC authorizations
for its current operations. There can be no assurance, however, that the
Company will receive all authorizations or licenses necessary for new
communications services or that delays in the licensing process will not
adversely affect the Company's business.
Dependence on Availability of Transmission Facilities
- -----------------------------------------------------
The future profitability of the Company will be dependent in part on
its ability to utilize transmission facilities leased from others on a
cost-effective basis. Due to the possibility of unforeseen changes in
industry conditions, the continued availability of leased transmission
facilities at historical rates cannot be assured.
8
<PAGE>
Competition Risks
- -----------------
TRADITIONAL TELECOMMUNICATIONS SERVICES. The Company faces intense
competition in providing long distance telecommunications services.
Domestically, the Company competes for interLATA and intraLATA services
with AT&T, MCI, Sprint and WorldCom, the local exchange carriers ("LECs")
and other national and regional interexchange carriers ("IXCs"), where
permissible. Certain of these companies have substantially greater market
share and financial resources than the Company, and some of them are the
source of communications capacity used by the Company to provide its own
services.
The Company expects to encounter continued competition from major
domestic communications companies, including AT&T, MCI, Sprint and
WorldCom. In addition, the Company may be subject to additional
competition due to the enactment of the Telecom Act, the development of new
technologies and increased availability of domestic transmission capacity.
For example, even though fiber-optic networks are now widely used for
long distance transmission, it is possible that the desirability of such
networks could be adversely affected by changing technology. The
telecommunications industry is in a period of rapid technological
evolution, marked by the introduction of new product and service offerings
and increasing satellite and fiber optic transmission capacity for services
similar to those provided by the Company. The Company cannot predict which
of many possible future product and service offerings will be important to
maintain its competitive position or what expenditures will be required to
develop and provide such products and services.
Virtually all markets for telecommunications services are extremely
competitive, and the Company expects that competition will intensify in the
future. In each of the markets in which it offers telecommunications
services, the Company faces significant competition from larger, better
financed incumbent carriers. The Company competes with incumbent
providers, which have historically dominated their local telecommunications
markets, and long distance carriers, for the provision of long distance
services. In certain markets the incumbent provider offers both local and
long distance services. The incumbent LECs presently have numerous
advantages as a result of their historic monopoly control of the local
exchange market. A continuing trend toward business combinations and
alliances in the telecommunications industry may create significant new
competitors to the Company. Many of the Company's existing and potential
competitors have financial, personnel and other resources significantly
greater than those of the Company. The Company also faces competition in
most markets in which it operates from one or more competitors, including
competitive access providers ("CAPs") operating fiber optic networks, in
some cases in conjunction with the local cable television operator. Each
of AT&T, MCI, Sprint and WorldCom has indicated its intention to offer
local telecommunications services in major U.S. markets using its own
facilities or by resale of the LECs' or other providers' services. Other
potential competitors include cable television companies, wireless
telephone companies, electric utilities, microwave carriers and private
networks of large end users. In addition, the Company competes with
telecommunications management companies with respect to certain portions of
its business.
Under the Telecom Act and ensuing federal and state regulatory
initiatives, barriers to local exchange competition are being removed. The
introduction of such competition, however, also establishes the predicate
for the BOCs to provide in-region interexchange long distance services.
The BOCs are currently allowed to offer certain "incidental" long distance
services in-region and to offer out-of-region long distance services. Once
the BOCs are allowed to offer in-region long distance services, both they
and the four largest long distance carriers (AT&T, MCI, Sprint and
WorldCom) will be in a position to offer single source local and long
distance service similar to that being offered by the Company. The Company
expects that the increased competition made possible by regulatory reform
will result in certain pricing and margin pressures in the domestic
telecommunications services business.
9
<PAGE>
Rapid Technological Changes; Dependence Upon Product Development
- ----------------------------------------------------------------
The telecommunications industry is subject to rapid and significant
changes in technology. While the Company does not believe that, for the
foreseeable future, these changes will either materially and adversely
affect the continued use of fiber optic cable or materially hinder its
ability to acquire necessary technologies, the effect of technological
changes, including changes relating to emerging wireline and wireless
transmission and switching technologies, on the businesses of the Company
cannot be predicted.
Variability of Quarterly Operating Results
- ------------------------------------------
As a result of the significant expenses associated with expansion, the
operating results of the Company could vary significantly from period to
period. Additional factors contributing to variability of operating
results include the pricing and mix of services and products sold by the
Company, customer terminations of service, the timing and costs of
marketing and advertising efforts, and the timing and costs of any
acquisitions of businesses, products or technologies.
Dependence on Management for Successful Operations and Continued Growth
- -----------------------------------------------------------------------
Continued growth and expansion of the Company depends on continued
active participation of Michael Ross, Marc Becker and Timothy Barton, three
of the current Officers and Directors of the Company. The Company has
employment agreements with Messrs. Ross and Becker which terminate on
December 31, 1997 and Mr. Barton which terminates December 31, 1998. In
addition, the Company has an escrow agreement with Messrs. Ross and Becker
relating to the possible return to the Company's treasury of certain shares
owned by these individuals. The escrow agreement in its entirety is
attached hereto as Exhibit 10.1. The Company currently has "key-man"
insurance on Messrs. Ross and Becker. The cost of the "key-man" insurance
is currently paid from operating revenues and in the future, will be paid
from operating revenues. The loss of the services of any of these
individuals could adversely affect the continuation and future development
of the Company's business. Messrs. Ross, Becker and Barton devote 100% of
their time to the business of the Company.
Dividend Policy
- ---------------
The Company has paid no cash dividends on its Common Stock and has no
present intention of paying cash dividends in the foreseeable future. It
is the present policy of the board of Directors to retain all earnings to
provide for the growth of the Company. Payment of cash dividends in the
future will depend, among other things, upon the company's future earnings,
requirements for capital improvements, the operating and financial
conditions of the Company and other factors deemed relevant by the Board of
Directors.
Expansion Policy
- ----------------
The Company is committed to an expansion policy of acquiring other
long distance and telecommunications companies for cash and the Company's
common stock. The Company may be required to raise additional capital and
continue to issue common stock to facilitate its expansion policy. There
can be no assurance that funding will be available and as the Company
issues its common stock for cash or in connection with an acquisition,
existing shareholders will face dilution of their existing investment in
the Company.
10
<PAGE>
RECENT DEVELOPMENTS
-------------------
UNIVERSAL NETWORK SERVICES, INC.
On May 8, 1996, effective May 31, 1996, the Company acquired all or
substantially all of the assets and assumed certain liabilities of
Universal Network Services, Inc. of Newport Beach, California ("UniNet").
UniNet is an interexchange carrier that provides telecommunications
services to both residential and business customers throughout the United
States and in certain foreign countries. These assets consist of certain
of UniNet's long distance customer accounts and associated accounts
receivable as of May 31, 1996. The customer accounts which were purchased
include retail customer contracts, applications for service, applications
for credit, customer lists, databases, mailing lists and billing
information.
The Company purchased the UniNet assets for approximately $3,628,000
in cash and 243,758 shares of common stock with a value of approximately
$2,800,000 on the date of the transaction. Of the 243,758 shares given,
approximately 49,000 shares are held in escrow pending certain achievements
in the acquired customer base.
LONG DISTANCE TELCOM, INC.
On June 30, 1996, the Company acquired all of the issued and
outstanding stock of Long Distance Telcom, Inc., formerly known as
Telecommunications Ventures Limited Partnership No. 1, DBA Blue Ridge
Telephone ("Blue Ridge"). The Company issued a total of 337,079 shares
valued at approximately $3,700,000 in exchange for the Blue Ridge shares.
The number of shares issued to Blue Ridge was based upon a multiple of the
dollar amount of Blue Ridge's monthly revenue and accounts receivable and
the market price of the Company's common stock.
The Company believes the acquisition of the UniNet assets and the
merger with Blue Ridge to be beneficial as it will allow for the
consolidation and reduction in overhead costs while increasing overall
revenues from operations. The Company also believes these transactions
will enhance its corporate image in an area of the country in which it has
had limited operations and may provide additional acquisition
opportunities.
There exists no material relationship between the Company, its
officers and directors and the UniNet and former Blue Ridge officers,
directors or affiliates. The common stock used by the Company to
acquire Blue Ridge and to purchase the assets of UniNet were from the
Company's authorized but unissued common stock.
UNITED WATS, INC.
On November 15, 1996, the Registrant entered into a Share Exchange
Agreement and Plan of Reorganization (the "Agreement") with United Wats,
Inc., a privately held company based in Kansas City, Missouri. Pursuant to
the Agreement, the Registrant acquired all of the issued and outstanding
shares of United Wats, Inc. for 2,277,780 shares of the Company's
restricted Common Stock.
United Wats, Inc. is an independent inter-exchange carrier which
provides long distance, travel card and ancillary services to over 10,000
small business and commercial customers nationwide. Mr. Timothy A. Barton,
President of United Wats, Inc. was appointed to the Registrant's Board of
Directors. In January 1997, Mr. Barton was appointed President of the
Company.
11
<PAGE>
SELLING SHAREHOLDERS
--------------------
All of the securities offered hereby are to be offered for the account
of the security holders set forth below ("Selling Shareholders").
Shares Beneficially Shares Beneficially
Owned Prior to Owned
Name Offering (1) After Offering
------------------- ------------------ -------------------
Timothy A. Barton (1) 455,556 -0-
Jonathan Barton (1) 455,556 -0-
Michael Miroslaw (1) 455,556 -0-
David Ferdman (1) 455,556 -0-
Kevin Jackson (1) 455,556 -0-
Universal Network
Services, Inc. (1) 231,796 -0-
Network Services, Inc. (1) 7,349 -0-
Spring Valley Marketing
Group, Inc. (1) 11,962 -0-
---------
Total 2,528,887
=========
- ---------------------
(1) All shares were issued by the Company in connection with the purchase
of all the outstanding stock of United Wats, Inc. on November 15, 1996
and/or in connection with the acquisition of long distance customer
bases.
PLAN OF DISTRIBUTION
--------------------
The Selling Shareholders are not restricted as to the prices at which
they may sell their shares and sales of such shares at less than the market
price may depress the market price of the Company's Common Stock. Further,
the Selling Shareholders are not restricted as to the number of shares
which may be sold at any one time, and it is possible that a significant
number of shares could be sold at the same time which may also have a
depressive effective on the market price of the Company's Common Stock.
However, it is anticipated that the sale of the Common Stock being offered
hereby will be made through customary brokerage channels either through
broker-dealers acting as agents or brokers for the seller, or through
broker-dealers acting as principals, who may then resell the shares in the
over-the-counter market, or a private sale in the over-the-counter market
or otherwise, at negotiated prices related to prevailing market prices and
customary brokerage commissions at the time of the sales, or by a
combination of such methods. Thus, the period for sale of such shares by
the Selling Shareholders may occur over an extended period of time.
There are no contractual arrangements between or among any of the
Selling Shareholders and the Company with regard to the sale of the shares
and no professional underwriter in its capacity as such will be acting for
the Selling Shareholders.
EXPERTS
-------
The financial statements of Network Long Distance, Inc., incorporated
by reference in this prospectus and elsewhere in the registration
statement, to the extent and for the periods indicated in their
12
<PAGE>
reports, have been audited by Arthur Andersen LLP, independent public
accountants, and are included herein in reliance upon the authority of said
firm as experts in accounting and auditing in giving said report.
The financial statements of Network Long Distance, Inc., incorporated
by reference in this prospectus and elsewhere in the registration
statement, to the extent and for the periods indicated in their reports,
have been audited by Faulk and Winkler LLC, independent public accountants,
and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said report.
The financial statements of Universal Network Services, Inc.,
incorporated by reference in this prospectus and elsewhere in the
registration statement, to the extent and for the periods indicated in
their reports, have been audited by Corbin & Wertz, independent certified
public accountants, and are included herein in reliance upon the authority
of said firm as experts in accounting and auditing in giving said report.
The financial statements of Telecommunications Ventures Limited
Partnership No. 1 T/A Blue Ridge Telephone incorporated by reference in
this prospectus and elsewhere in the registration statement, to the extent
and for the periods indicated in their report, have been audited by Yount,
Hyde & Barbour, P.C., independent certified public accountants, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said report.
The financial statements of United Wats, Inc. incorporated by
reference in this prospectus and elsewhere in the registration statement,
to the extent and for the periods indicated in their report, have been
audited by Mayer Hoffman McCann L.C., independent certified public
accountants, and are included herein in reliance upon the authority of said
firm as experts in accounting and auditing in giving said report.
LEGAL OPINIONS
--------------
The legality of the Shares offered hereby will be passed upon for the
Company by John B. Wills, Attorney At Law.
13
<PAGE>
PART II
-------
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
- ------- -------------------------------------------
The estimated expenses of the offering, all of which are to be born by
the Registrant, are as follows:
SEC Filing Fee. . . . . . . . . . . . . . . . . . . . $6,705.38
Printing Expenses . . . . . . . . . . . . . . . . . . 500.00 *
Accounting Fees and Expenses. . . . . . . . . . . . . 4,000.00 *
Legal Fees and Expenses . . . . . . . . . . . . . . . 4,500.00 *
Miscellaneous . . . . . . . . . . . . . . . . . . . . 294.62 *
---------
Total . . . . . . . . . . . . . . . . . . . . . . $16,000.00
==========
- -------------------
*Estimated
Item 15. Indemnification of Directors and Officers.
- ------- -----------------------------------------
1) Section 145 of the General Corporation Law of Delaware provides:
"(a) A corporation shall have power to indemnify any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation) by reason
of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and
reasonable incurred by him in connection with such action, suit
or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of NOLO
CONTENDERE, shall not, of itself, create a presumption that the
person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was
unlawful.
(b) A corporation shall have power to indemnify any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust
or other
II-1
<PAGE>
enterprise against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
(c) To the extent that a director, officer, employee or
agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred
to in subsections (a) and (b), or in defense of any claim, issue
or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by
him in connection therewith.
(d) Any indemnification under subsections (a) and (b)
(unless ordered by a court) shall be made by the corporation only
as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is
proper in the circumstances because he has met the applicable
standard of conduct set forth in subsections (a) and (b). Such
determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (2) if such a
quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel
in a written opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an
officer or director in defending any civil, criminal,
administrative, or investigative action, suit or proceeding may
be paid by the corporation in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this Section.
Such expenses (including attorneys' fees) incurred by other
employees and agents may be so paid upon such terms and
conditions, if any, as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses
provided by, or grated pursuant to, the other subsections of this
section shall not be deemed exclusive of any other rights to
which those seeking indemnification or advancement of expenses my
be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while
holding such office.
(g) A corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted
against him and incurred by him in any such capacity, or arising
out of his status as such, whether or not the corporation would
have the power to indemnify him against such liability under the
provisions of this section.
II-2
<PAGE>
(h) For purposes of this Section, references to "the
corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have
had power and authority to indemnify its directors, officers, and
employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is
or was serving at the request of such constituent corporation as
a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall
stand in the same position under the provisions of this Section
with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this Section, references to "other
enterprises": shall include employee benefit plans; references to
"fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to "serving
at the request of the corporation" shall include any service as
a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to an employee benefit
plan, its participants, or beneficiaries; and a person who acted
in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee
benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation": as referred to
in this Section.
(j) The indemnification and advancement of expenses
provided by, or granted pursuant to, this section shall, unless
otherwise provided when authorized or ratified, continue as to a
person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and
administrators of such a person."
2) Article IX of the Company's Articles of Incorporation provide as
follows:
ARTICLE IX
INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS
(a) The corporation shall have power to indemnify any person who was
or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of NOLO CONTENDERE or its
equivalent, shall not, or itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had reasonable cause to believe that
his conduct was unlawful.
II-3
<PAGE>
(b) The corporation shall have power to indemnify any person who was
or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation
to procure a judgment in its favor by reason of the fact that he is or was
a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation
and except that no indemnification shall be made in respect of any claim,
issue or matter at to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b), or
in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) (unless ordered
by a court) shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has
met the applicable standard of conduct set forth in subsections (a) and
(b). Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to
such action, suit or proceeding, or (2) if such a quorum is not obtainable,
or, even if obtainable a quorum or disinterested directors so directs, by
independent legal counsel in a written opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative, or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this Section. Such
expenses (including attorneys' fees) incurred by other employees and agents
may be so paid upon such terms and conditions, if any, as the board of
directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any by-law, agreement,
vote of stockholders of disinterested directors or otherwise, both as to
action in his official capacity and as to action in another capacity while
holding such office.
(g) The corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability
under the provisions of this section.
II-4
<PAGE>
(h) For purposes of this Section, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation partnership, joint
venture, trust or other enterprise, shall stand in the same position under
the provisions of this Section with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation
if its separate existence had continued.
(i) For purposes of this Section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include
any excise taxes assessed on a person with respect to an employee benefit
plan; and references to "serving at the request of the corporation" shall
include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee, or agent with respect to an employee benefit
plan, its participants, or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
Item 16. Exhibits.
- ------- --------
The following Exhibits are filed as part of this Registration
Statement pursuant to Item 601 of Regulation S-K:
Exhibit No. Title
- ----------- -----
5 Opinion of John B. Wills, Attorney at Law, regarding
the legality of the securities being registered dated
February 14, 1997.
10.1 Escrow Agreement For Major Shareholders dated March 7,
1994.
24.1 Consent of John B. Wills, Attorney at Law, dated
February 14, 1997.
24.2 Consent of Arthur Andersen LLP dated February 14, 1997.
24.3 Consent of Faulk & Winkler LLC dated February 14, 1997.
24.4 Consent of Corbin & Wertz dated February 14, 1997.
24.5 Consent of Yount, Hyde & Barbour, P.C. dated February
14, 1997.
24.6 Consent of Mayer Hoffman McCann L.C. dated February 14,
1997.
II-5
<PAGE>
Item 17. Undertakings.
- ------- ------------
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual report pursuant of Section 13(a) or Section 15(d)
of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference in
the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Baton Rouge, State of Louisiana on February 13,
1997.
NETWORK LONG DISTANCE, INC.
Date: February 13, 1997 By: /s/ Timothy A. Barton
-------------------------------
Timothy A. Barton, President
Date: February 13, 1997 By: /s/ Michael M. Ross
-------------------------------
Michael M. Ross,
Chief Executive Officer
Date: February 13, 1997 By: /s/ Marc I. Becker
-------------------------------
Marc I. Becker, Vice President,
Principal Financial Officer
and Principal Accounting Officer
SIGNATURE DATE
- --------- ----
/s/ Michael M. Ross February 13, 1997
- ------------------------------ ------------------------------
Michael M. Ross
/s/ Marc I. Becker February 13, 1997
- ------------------------------ ------------------------------
Marc I. Becker
/s/ Joseph M. Edelman February 13, 1997
- ------------------------------ ------------------------------
Joseph M. Edelman
/s/ Leon L. Nowalsky February 13, 1997
- ------------------------------ ------------------------------
Leon L. Nowalsky
/s/ Russell J. Page February 13, 1997
- ------------------------------ ------------------------------
Russell J. Page
/s/ Tim Sledz February 13, 1997
- ------------------------------ ------------------------------
Tim Sledz
/s/ Timothy A. Barton February 13, 1997
- ------------------------------ ------------------------------
Timothy A. Barton
II-7
<PAGE>
NETWORK LONG DISTANCE, INC.
FORM S-3 REGISTRATION STATEMENT
EXHIBIT INDEX
-------------
Exhibit Number
in Registration Sequentially
Statement Description Numbered Pages
--------------- ----------- --------------
5 Opinion of John B. Wills,
Attorney at Law dated February 14, 1997
10.1 Escrow Agreement For Major
Shareholders dated March 7, 1994.
24.1 Consent of John B. Wills,
Attorney at Law dated February 14, 1997
24.2 Consent of Arthur Andersen LLP
dated February 14, 1997
24.3 Consent of Faulk and Winkler LLC
dated February 14, 1997
24.4 Consent of Corbin & Wertz
dated February 14, 1997
24.5 Consent of Yount, Hyde & Barbour, P.C.
dated February 14, 1997
24.6 Consent of Mayer Hoffman McCann L.C.
dated February 14, 1997
Exhibit 5
[LETTERHEAD]
February 14, 1997
Network Long Distance, Inc.
525 Florida Street
Baton Rouge, LA 70801
RE: SEC REGISTRATION STATEMENT ON FORM S-3
Gentlemen:
I am counsel for Network Long Distance, Inc., a Delaware corporation
(the "Company"), in connection with its proposed public offering under the
Securities Act of 1933, as amended, of 2,528,887 shares of the Company's
Common Stock through a Registration Statement on Form S-3 as to which this
opinion is a part, to be filed with the Securities and Exchange Commission
(the "Commission").
In connection with rendering my opinion as set forth below, I have
reviewed and examined originals or copies identified to my satisfaction of
the following:
(1) Certificate and Amended Certificate of Incorporation of the
Company as filed with the Secretary of State of the State of Delaware.
(2) Minute Book containing the written deliberations and resolutions
of the Board of Directors and Shareholders of the Company.
(3) The Registration Statement and the Preliminary Prospectus
contained within the Registration Statement.
(4) The other exhibits to the Registration Statement filed with the
Commission.
I have examined such other documents and records, instruments and
certificates of public officials, officers and representatives of the
Company, and have made such other investigations as I have deemed necessary
or appropriate under the circumstances.
<PAGE>
Network Long Distance, Inc.
February 14, 1997
Page 2
Based upon the foregoing and in reliance thereon, it is my opinion
that the 2,528,887 shares of Common Stock, $.0001 value, have been duly and
validly authorized, legally issued, and are fully paid and non-assessable.
I hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the use of my name under the caption "Legal
Matters" in the Prospectus constituting a part thereof.
Very truly yours,
JOHN B. WILLS
Attorney at Law
By: /s/ JOHN B. WILLS
___________________________________
John B. Wills
JBW/db
EXHIBIT 10.1
ESCROW AGREEMENT
FOR
THE MAJOR STOCKHOLDERS
OF
NETWORK LONG DISTANCE, INC.
STATE OF LOUISIANA
PARISH OF EAST BATON ROUGE
BE IT KNOWN that effective this 7 day of March, 1994, before me, the
undersigned Notary Public, personally came and appeared:
MICHAEL M. ROSS, of the full age of majority and
domiciled in the Parish of East Baton Rouge, Louisiana,
whose permanent mailing address is declared to be Post
Office Box 66351, Baton Rouge, Louisiana 70896
("Ross");
MARC I. BECKER, of the full age of majority and
domiciled in the Parish of East Baton Rouge, Louisiana,
whose permanent mailing address is declared to be Post
Office Box 66351, Baton Rouge, Louisiana 70896
("Becker");
NETWORK LONG DISTANCE, INC., a foreign corporation
organized and existing under the laws of the State of
Delaware, authorized to do and doing business in the
State of Louisiana and appearing herein through its
duly authorized undersigned agent and representative
("Company");
R. GRAY SEXTON, of the full age of majority and
domiciled in the Parish of East Baton Rouge, Louisiana,
whose permanent mailing address is declared to be Post
Office Box 80359, Baton Rouge, Louisiana 70898-0359
("Escrow Agent");
who, after being duly sworn, deposed and stated that they have this day
entered into the following agreement and contract, to-wit:
WITNESSETH:
<PAGE>
WHEREAS, by virtue of a Private Placement Memorandum of September 1,
1993, the Company offered 60,000 shares of Series B Convertible Preferred
Stock at the price of $5.00 per share for a total offering of 60,000 shares
offered in reliance upon the availability of an exemption from the
registration provisions of the Securities Act of 1933, as amended, and by
virtue of which the Company intends to comply with the provisions of
Section 4(2) of the aforementioned Act and Rule 506 of Regulation D adopted
under said Act; and
WHEREAS, as part of the aforementioned Private Placement memorandum,
the Company has provided prospective purchasers with a July 2, 1993 Letter
of Intent issued by Barron Chase Securities, Inc., ("Barron Chase") and by
virtue of which Barron Chase has agreed pursuant to the terms and
conditions more particularly set forth in the aforementioned Letter of
Intent of July 2, 1993 to prepare and to propose a Secondary Offering of the
aforementioned Company securities; and
WHEREAS, among other terms and conditions of the aforementioned Letter
of Intent of July 2, 1993 is the representation that the Company will take
all necessary and required corporate actions to promptly prepare and file
under the aforementioned Act a Registration Statement on Form S(1) or Form
SB-2, if available, with respect to the securities being offered as more
particularly set forth hereinabove; and
WHEREAS, by virtue of the aforementioned Letter of Intent, in general,
and the provisions set forth at Article 29 thereof, in
2
<PAGE>
particular, the Company, through its management, (Becker and Ross) have
agreed to transfer, place and deposit 626,691 shares of the Company's
common stock owned by Becker and Ross into an Escrow Account with an
independent Escrow Agent, to be released pursuant to the terms and
conditions of the aforementioned Article 29, in particular; and
WHEREAS, it is therefore the desire and the intention of the appearers
by these presents to memorialize the creation, establishment and execution
of the aforementioned Escrow Agreement, by virtue of which there will be
transferred to the Escrow Account the aforementioned shares of the
Company's common stock pursuant to the terms and conditions more
particularly set forth hereinafter.
NOW THEREFORE IT IS CONTRACTED, COVENANTED AND AGREED THAT:
1. Designation of the Escrow Agent
1.1 The Company, Ross, and Becker do by these presents hereby
nominate, designate and appoint R. Gray Sexton as the Escrow Agent and do
otherwise designate, nominate and appoint him as their attorney-in-fact
with all power and authority necessary to fully comport with all of the
terms and conditions of this Agreement.
1.2 R. Gray Sexton does by these presents hereby accept the
nomination, designation and appointment as Escrow Agent and contracts,
covenants and agrees to discharge all of the duties and obligations
incumbent upon him by virtue of this appointment.
2. Designation of the Escrow Shares
2.1 The appearers do by these presents hereby designate as the Escrow
Shares 626,691 shares of the Company's common stock evidenced by the
following Stock Certificates:
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NAME OF HOLDER
NUMBER OF SHARES AND OWNER OF
STOCK CERTIFICATE NO. EVIDENCE BY CERTIFICATE STOCK CERTIFICATE
309 104,448 Marc I. Becker
310 104,448 Marc I. Becker
311 104,448 Marc I. Becker
314 104,448 Michael M. Ross
315 104,448 Michael M. Ross
316 104,448 Michael M. Ross
2.2 The Company, Ross and Becker do further by these presents
declare, acknowledge and certify that each of the aforementioned
stockholders and shareholders is, in fact, the owner of each of the
aforementioned Stock Certificates, each representing the applicable number
of shares of the Company's common stock, that none of the aforementioned
Stock Certificates or corresponding shares have been loaned, pledged,
alienated, mortgaged or otherwise encumbered and that each of the
aforementioned designated stockholders is, indeed, the full and complete
owner of each of the aforementioned Stock Certificates and the
corresponding shares and that each has the power and authority to enter
into this Escrow Agreement without limitation or impediment.
3.
Transfer to the Escrow Agent
3.1 Becker does by these presents hereby transfer and deliver to the
Escrow Agent Stock Certificates 309, 310 and 311 to be held by the Escrow
Agent pursuant to, but only pursuant to, the terms and conditions of this
Agreement.
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3.2 Ross does by these presents hereby transfer and deliver to the
Escrow Agent Stock Certificates 314, 315 and 316 to be held by the Escrow
Agent pursuant to, but only pursuant to, the terms and conditions of this
Agreement.
3.3 The Escrow Agent does by these presents acknowledge that he has
this day received the aforementioned Stock Certificates and that the
aforementioned Stock Certificates will be held by the Escrow Agent pursuant
to the terms and conditions of this Agreement.
4. Term
4.1 This Escrow Agreement will terminate at midnight on the 105th day
after the end of the 2000 fiscal year-end (January 27, 2000) and, at that
time, all of the escrowed shares that have not otherwise been released
pursuant to the provisions of Article 5, below, and that are otherwise
still held in the Escrow Account will be transferred and delivered by the
Escrow Agent to the Treasurer of the Company to be canceled on the books of
the corporation and to return to the Company's treasury as capital
contribution.
5. Release
5.1 All of the Escrow Shares shall remain in the Escrow Account until
either (1) released pursuant to the terms and conditions of this Article or
(2) transferred and delivered to the Company by the Escrow Agent pursuant
to Article 4, above.
5.2 The Escrow Agent shall, but only on written request of Ross and
Becker, immediately release and return to the shareholder of record the
Escrow Shares if the Company's net income (following
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an audit by the Company's Independent Public Accountants, the "minimum net
income") amounts to at least the amount set forth below on a fully-diluted
per share basis, to-wit:
FISCAL MINIMUM NET INCOME PER AMOUNT OF SHARES TO BE
YEAR END SHARE (FULLY-DILUTED) RELEASED FROM ESCROW
March 31, 1995 $ .375 per share 208,896 shares
March 31, 1996 $ .60 per share 208,896 shares
March 31, 1997 $1.00 per share 208,896 shares
5.2.1 In order to achieve the release to which reference is made in
5.2 above, the Escrow Agent is by these presents hereby authorized,
empowered and directed to transfer and deliver free and clear of any and
all encumbrances otherwise created by this Escrow Agreement each of the
aforementioned Escrowed Shares to the stockholder of record within fifteen
(15) days following his receipt of the aforementioned audit and provided,
however, that the aforementioned audit reflects the Company's minimum net
income at the per share (fully-diluted) amounts more particularly set forth
hereinabove in 5.2.
5.2.2 In the event the Company fails to achieve the minimum net income
for either (or both) of the first two fiscal years as set forth in 5.2,
above (and except as otherwise extended by Article 7, below), the Escrow
Shares shall nevertheless remain in the Escrow Account and Becker and Ross
together with the Company shall have until the end of the following fiscal
year in order to achieve the minimum net income per share (fully-diluted)
of one dollar per share and the Escrow Agent shall not transfer or deliver
to the Treasurer of the Company for cancellation the Escrowed
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Shares until such time as the Company has failed to achieve a minimum net
income per share of one dollar during the last fiscal year-end as
established in 5.2, above (or as otherwise extended by Article 7, below).
5.2.2.1 In the event the Company fails to achieve the minimum net
income for either of the first two fiscal years as set forth in 5.2, above
(and except as otherwise extended by Article 7, below), but in fact does
achieve the minimum net income in a subsequent fiscal year, then, and in
such event, the Escrow Agent shall not only release to Becker and Ross the
Escrow Shares for the fiscal year in which the minimum net income was
earned but shall also release to Becker and Ross the Escrow Shares for the
preceding year(s) in which such minimum net income was not earned.
5.2.3 If in any of the aforementioned years, (fiscal years ending
March 31, 1995, March 31, 1996 and March 31, 1997) or as otherwise extended
by Article 7, below, the Company should achieve a minimum net income per
share that either equals or exceeds the minimum net income per share level
for any subsequent fiscal year-end, then, and in such event, the Escrow
Agent shall, as otherwise provided for in 5.2.1, above, release to Becker
and Ross not only the Escrow Shares for the current year but shall also
release to Becker and Ross the Escrow Shares for the subsequent fiscal
year(s). Lest there be any doubt, and for purposes of illustration only,
in the event that the Company should achieve the minimum net income per
share of one dollar during fiscal year ending March 31, 1995, then, and in
such event, the Escrow Agent shall release all
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(626,688) of the Escrow Shares to Becker and Ross as is otherwise provided
for in 5.2.1, above.
6. Minimum Net Income
6.1 For all purposes cognizable under this Escrow Agreement, the term
"minimum net income" shall mean and shall be defined as being the
consolidated net income but without giving affect to charges to income, if
any arising from the release of the Escrow Shares in the manner more
particularly set forth in the Article 5.2, hereinabove, and as reasonably
determined under generally accepted accounting principles. The "minimum
net income" per share (fully-diluted) shall be calculated without giving
affect to 200,000 shares of common capital stock in the Corporation.
6.2 Furthermore, and not withstanding anything to the contrary
otherwise contained in 6.1, above, in the event that additional common
stock is issued by the Company (a) through sale, the minimum net income
shall increase, proportionately, so that the minimum net income per
share (fully-diluted) shall remain unchanged, and (b) in the event the
Company should issue additional common stock by virtue of a stock split,
(including the aforementioned 200,000 shares) stock dividend or otherwise,
then and in such event there shall likewise be a PRO RATA adjustment as
reasonable determined by the Company's independent certified public
accounts in order that the appropriate minimum net income per share
(fully-diluted) is achieved.
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7. Additional Offering
In the event, after completion of this proposed secondary offering,
the Company completes another offering pursuant to which the Company
obtains at least $5,000,000 in equity financing at a minimum price of
$10.00 per share of common stock, the fiscal year ending periods referred
to in Article 5.2, above, shall be adjusted by extending each such fiscal
year-end period for one additional year, so that, for example, March 31, 1997
shall become March 31, 1998.
8. Acquisitions and Mergers
In the event the Company is acquired or merged into another entity
prior to March 31, 1997, or prior to such later date as the fiscal year
ending periods referred to in Article 5.2, above, have been adjusted by
virtue of the provisions of Article 7, hereinabove, at a price equivalent
to at least $10.00 per share, all of the escrowed shares shall be released
from escrow. Alternatively, in the event the Company is acquired or merged
into another entity prior to March 31, 1997, or prior to such later date as
the fiscal year ending periods referred to in Article 5.2, above, have been
adjusted by virtue of the provisions of Article 7, hereinabove, at a price
equivalent of less than $10.00 per share, all of the escrowed shares still
remaining in escrow at the time of any such acquisition or merger shall be
forfeited and all such shares shall be placed in the Company's treasury for
cancellation thereof as a contribution of capital.
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9. Voting Rights
At all times throughout the terms of this Escrow Agreement the owners
of the Escrow Shares as more particularly set forth in Article 2.1, above,
shall have full and unrestricted voting rights with respect to all such
shares and certificates of stock, as if this Escrow Agreement had never
been confected.
10. Assignment and Transferability
Throughout the term of this Escrow Agreement, the Escrow Shares shall
neither be assignable nor transferable, except as otherwise more
particularly set forth in Article 5 and 8, above, and the Escrow Agent
shall hold and maintain said Escrow Shares in escrow pursuant to the terms
and conditions of this Agreement.
11. Dividends
Dividends, if any, paid on the Escrowed Shares shall be paid to the
Escrow Agent by check of company made payable to the Escrow Agent with a
notation of this Agreement thereon, and any such dividends shall be held
pursuant to the terms of this Agreement. The Escrow Agent shall place any
such dividends in an interest bearing account. The dividends and interest
earned thereon will be disbursed in proportion to the number of Escrowed
Shares released from the escrow at the time the shares are released
pursuant to paragraph 5, above, and to the extent so released shall
disburse such amounts to Company.
12. Stock Dividends or Splits
Stock dividends on, and shares resulting from stock splits of, the
Escrowed Shares shall be delivered to Escrow Agent and shall be
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held pursuant to this Agreement as if they were original shares of the
Escrowed Shares deposited hereunder.
13. Reliance by Escrow Agent
The Escrow Agent may conclusively rely on, and shall be protected,
when he acts in good faith, upon any statement, certificate, notice,
request, consent order or the document which he believes to be genuine and
signed by the proper party. The Escrow agent shall have no duty or
liability to verify any such statement, certificate, notice, request,
consent, order or other document and their sole responsibility shall be
only to be under no obligation to institute or defend any action, suit or
proceeding in connection with this Agreement once it is indemnified to its
satisfaction. The Escrow Agent may consult counsel with respect to any
question arising under this Agreement and the Escrow Agent shall not be
liable for any action taken or omitted in good faith upon advice of
counsel. In performing any of their duties hereunder, the Escrow Agent
shall not incur any liability to anyone for any damages, losses or expenses
except for willful default or gross negligence, and they shall accordingly
not incur any such liability with respect to any action taken or omitted in
good faith upon advice of their counsel or counsel for Company given with
respect to any questions relating to the duties and responsibilities of the
Escrow Agent under this Agreement, or any action taken or omitted in
reliance upon any instrument, including written advice provided for herein,
not only as to execution and validity of the effectiveness of its
provisions but also as to the
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truth and accuracy of any information contained therein, which the Escrow
Agents shall in good faith believe to be genuine, to be signed or presented
by a proper person or persons, and to conform with the provisions of the
Agreement. All Escrowed Shares and funds held pursuant to this Agreement
shall constitute trust property the Escrow Agent shall not be liable for
any interest on the Escrowed Shares.
THIS DONE AND SIGNED in Baton Rouge, Louisiana effective on the date
first above given after a reading of the whole in the presence of the
hereinafter subscribing witnesses and me, Notary Public.
WITNESSES:
/s/ /s/ Michael M. Ross
- ---------------------------- -------------------------------
MICHAEL M. ROSS
/s/ /s/ Marc I. Becker
- ---------------------------- -------------------------------
MARC I. BECKER
NETWORK LONG DISTANCE, INC.
/s/ By: /s/ Marc I. Becker
- ---------------------------- -------------------------------
/s/ By: /s/ R. Gray Sexton
- ---------------------------- -------------------------------
R. GRAY SEXTON (Escrow Agent)
/s/
-------------------------------------
NOTARY PUBLIC
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Exhibit 24.1
CONSENT OF ATTORNEYS
Reference is made to the Registration Statement on Form S-3 of
Network Long Distance, Inc.
I hereby consent to the use of my opinion concerning the legality of
the securities being registered dated February 14, 1997 filed as an exhibit
to the Registration Statement, and to being named in the Registration
Statement as having advised Network Long Distance, Inc. as to the legality
of its securities proposed to be sold.
JOHN B. WILLS
Attorney at Law
By: /s/ JOHN B. WILLS
-----------------------------------
John B. Wills
Denver, Colorado
February 14, 1997
Exhibit 24.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all reference to our Firm) included in or made a part of
this registration statement.
/s/ ARTHUR ANDERSEN LLP
-----------------------------------
Arthur Andersen LLP
Jackson, Mississippi
February 14, 1997
Exhibit 24.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all reference to our Firm) included in or made a part of
this registration statement.
/s/ FAULK & WINKLER, LLC
-----------------------------------
Faulk & Winkler, LLC
Baton Rouge, Louisiana
February 14, 1997
Exhibit 24.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
Board of Directors
Universal Network Services, Inc.
and Subsidiaries
We consent to the incorporation by reference in this Form S-3
Registration Statement of Network Long Distance, Inc., of our report
dated May 24, 1996, related to the 1994 and 1995 consolidated financial
statements of Universal Network Services, Inc. and subsidiaries, included
in Network Long Distance, Inc.'s Form 8-K/A dated August 2, 1996 and to
the reference to our firm under the heading "Experts" included in the
Prospectus.
/s/ CORBIN & WERTZ
-----------------------------------
Corbin & Wertz
Irvine, California
February 14, 1997
Exhibit 24.5
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated
May 10, 1996 included in Network Long Distance, Inc.'s Form 8-K/A dated
August 5, 1996, and to all reference to our Firm included in this
registration statement.
/s/ YOUNT, HYDE & BARBOUR, P.C.
-------------------------------------
Yount, Hyde & Barbour, P.C.
Culpepper, Virginia
February 14, 1997
Exhibit 24.6
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use
of our reports (and to all reference to our Firm) included in or
made a part of this registration statement.
/s/ MAYER HOFFMAN MCCANN L.C.
-----------------------------------
Mayer Hoffman McCann L.C.
Kansas City, Missouri
February 14, 1997
