SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
August 1, 1996
Date of Report
Date of Earliest Event Reported
NET TELECOMMUNICATIONS INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
Nevada 33-2279-D 87-0297202
(State or other (Commission File No.) (IRS Employer I.D. No.)
Jurisdiction)
8170 West Sahara Avenue, Suite 203
Las Vegas, Nevada 89117
(Principal Executive Office Address
Registrant's Telephone Number,
Including Area Code: (702) 256-9956
Registrant's Facsimile Number ,
Including Area Code: (702) 256-9233
N/A
(Former Name or Former Address if Changed Since Last Report)
Item 1. Changes in Control of Registrant.
None; not applicable.
Item 2. Acquisition or Disposition of Assets.
(a) Pursuant to an Agreement and Plan of Merger (the "Plan")
dated July 29, 1996, between Net Telecommunications,
Incorporated, a Nevada corporation (the "Company"); First Net
Telecommunications Subsidiary, Incorporated, a Nevada corporation
and recently formed wholly-owned subsidiary of the Company (the
Net Tel Subsidiary ); Sierra-Net, Inc., a Nevada corporation
( Sierra ); and all of the stockholders of Sierra (the Sierra
Stockholders ), Sierra merged with and into the Net Tel
Subsidiary, with the Net Tel Subsidiary being the surviving
corporation, and each issued, outstanding or subscribed share of
common stock of Sierra was exchanged for 100 shares of common
stock of the Company, amounting to an aggregate total of 600,000
shares of the Company's "unregistered" and "restricted" common
stock. The Plan was treated as a "purchase" for accounting
purposes.
Following the completion of the Plan, Sierra became a wholly-
owned subsidiary of the Company by virtue of its merger into the
Net Tel Subsidiary, which was formed solely for the purpose of
this merger.
Immediately prior to the completion of the Plan, there were
approximately 8,000,000 outstanding shares of common stock of the
Company, and with its completion, there were approximately
8,600,000 outstanding shares.
The source of the consideration used by the Sierra Stockholders
to acquire the respective interests in the Company was the
exchange of shares of common voting stock of Sierra, and the
number of shares received by the Sierra Stockholders in the
merger was the result of "arms length" negotiations, as there
were no prior material relationships between any of the Sierra
Stockholders and the Company or any of the Company's directors,
executive officers or "affiliates."
Copies of the Plan and related exhibits, the News Release issued
by the Company and the Articles of Merger accompany this Report
and are incorporated herein by reference. See Item 7 of this
Report.
(b) No material assets of Sierra were succeeded to by the Company
in the merger of Sierra into the Net Tel Subsidiary which
constituted plant, equipment or other physical property.
Item 3. Bankruptcy or Receivership.
None; not applicable.
Item 4. Changes in Registrant's Certifying Accountant.
None; not applicable.
Item 5. Other Events.
None; not applicable.
Item 6. Resignations of Directors and Executive Officers.
None; not applicable.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
The financial statements of Sierra will be available and filed
with the Securities and Exchange Commission within 75 days of the
date of filing of this Report.
(b) Pro Forma Financial Information.
Consolidated Pro Forma Financial Statements of the Company taking
into account the Plan will be available and filed with the
Securities and Exchange Commission within 75 days of the date of
filing of this Report.
(c) Exhibits.
Exhibit
Description of Exhibit* Number
Agreement and Plan of Merger 2
Exhibit A - Stockholder of Sierra
Exhibit B - Articles of Incorporation of
First Net Telecommunications
Subsidiary, Incorporated
Exhibit C - The Company's Financial Statements
for the periods ended December 31,
1995, and March 31, 1996*
Exhibit D - Exceptions to the Company's
Financial Statements
Exhibit E - Sierra Balance Sheet
For the period ended December 31,
1995, and Profit and Loss Statement
For the period January 1, 1996, to
March 31, 1996
Exhibit F - Exceptions to Sierra Financial
Statements
Exhibit F-1 - Further Exceptions to Sierra
Financial Statements
Exhibit - G Investment Letter
Exhibit H - Compliance Certificate of
the Company
Exhibit I - Compliance Certificate of
Sierra
Exhibit J - Finders
Articles of Merger and Plan of Merger 3
News Release 19
Documents Incorporated by Reference*
The Company's financial statements, which were filed as an
Exhibit to the 8-K Current Report of the Company dated July 5,
1996, and which were Exhibit E to the Agreement and Plan of
Merger between the Company and Net Telecommunications,
Incorporated, a Nevada corporation, reported therein.
* Summaries of any exhibit are modified in their entirety by this
reference to each exhibit.
Item 8. Change in Fiscal Year.
None; not applicable.
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.
NET TELECOMMUNICATIONS, INCORPORATED
Date: /s/ Michael W. Gorts
, President
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT (the "Plan") is made this ____ day of July, 1996,
by and between Net Telecommunications, Incorporated, a Nevada
corporation ("Net Tel"); a wholly-owned subsidiary to be formed
by Net Tel (the "Net Tel Subsidiary"); Sierra-Net, Inc., a Nevada
corporation ("Sierra"); and the person listed in Exhibit A
hereof, who is the sole owner of record of all of the outstanding
securities of Sierra (the "Sierra Stockholder");
W I T N E S S E T H :
WHEREAS, the respective Boards of Directors of Net Tel
and Sierra have adopted certain resolutions whereby the Net Tel
Subsidiary and Sierra will merge in a "forward triangular merger"
pursuant to the provisions of Sections 368(a)(1) and 368(a)(2)(D)
of the Internal Revenue Code and the applicable provisions of the
Nevada Revised Statutes, and whereby the Sierra Stockholder will
receive shares of common stock of Net Tel in consideration of
such merger; and
WHEREAS, the Net Tel Subsidiary shall be the surviving
corporation under the merger, as contemplated by this Plan;
NOW, THEREFORE, in consideration of the premises and of
the mutual agreement of the parties hereto, the Plan and the
terms and conditions hereof and the mode of carrying the same
into effect, together with any provisions required or permitted
to be set forth therein, are hereby determined and agreed upon as
required by the laws of the State of Nevada as follows, to-wit:
Section 1
Plan of Merger
1.1 Merger and Surviving Corporation. Sierra will
merge into the Net Tel Subsidiary, with Net Tel Subsidiary being
the "Surviving Corporation"; the separate existence of Sierra
shall cease, and the name of the Surviving Corporation shall
become "Sierra-Net, Inc." Until amended, modified or otherwise
altered, the Articles of Incorporation of the Net Tel Subsidiary
shall continue to be the Articles of Incorporation of the
Surviving Corporation; and the Bylaws of the Net Tel Subsidiary
shall continue to be the Bylaws of the Surviving Corporation.
1.2 Share Conversion. Each share of issued,
outstanding or subscribed common stock of Sierra (the "Sierra
Shares") shall, upon the effective date of the Plan, be converted
into 100 shares of common stock of Net Tel, amounting to 600,000
shares in the aggregate, as outlined in Exhibit A; all fractional
shares shall be rounded to the nearest whole share.
1.3 Survivor's Succession to Corporate Rights. The
Surviving Corporation shall thereupon and thereafter possess all
the rights, privileges, powers and franchises as well of a public
as of a private nature, and be subject to all of the
restrictions, disabilities and duties of Sierra; and all and
singular, the rights, privileges, powers and franchises of
Sierra, and all property, real, personal and mixed, and all debts
due to Sierra on whatever account, as well for stock
subscriptions as all other things in action or belonging to
Sierra shall be vested in the Surviving Corporation; and all
property, rights, privileges, powers and franchises, and all and
every other interest shall be thereafter as effectually the
property of the Surviving Corporation as they were of Sierra, and
the title to any real estate vested by deed or otherwise in
Sierra shall not revert or be in any way impaired by reason of
the Plan; but all rights of creditors and all liens upon any
property of Sierra shall be preserved unimpaired, and all debts,
liabilities and duties of Sierra shall thenceforth attach to the
Surviving Corporation and may be enforced against it to the same
extent as if said debts, liabilities and duties had been incurred
or contracted by it.
1.4 Survivor's Succession to Corporate Acts, Plans,
Contracts, etc. All corporate acts, plans, policies, contracts,
approvals and authorizations of Sierra and its stockholders, its
Board of Directors, committees elected or appointed by the Board
of Directors, officers and agents, which were valid and effective
immediately prior to the effective time of the Plan, shall be
taken for all purposes as the acts, plans, policies, contracts,
approvals and authorizations of the Surviving Corporation and
shall be as effective and binding thereon as the same were with
respect to Sierra. The employees of Sierra shall become the
employees of the Surviving Corporation and continue to be
entitled to the same rights and benefits which they enjoyed as
employees of Sierra.
1.5 Survivor's Rights to Assets, Liabilities,
Reserves, etc. The assets, liabilities, reserves and accounts of
Sierra shall be recorded on the books of the Surviving
Corporation at the amounts at which they, respectively, shall
then be carried on the books of Sierra, subject to such
adjustments or eliminations of intercompany items as may be
appropriate in giving effect to the Plan.
1.6 Resignations of Present Directors and Executive
Officers of the Surviving Corporation and Designation of New
Directors and Executive Officers. On Closing, with the exception
of Michael W. Gorts, the present directors and executive officers
of the Net Tel Subsidiary shall resign, in seriatim, and
designate the directors and executive officers of Sierra to serve
in their place and stead, until the next respective annual
meetings of the stockholders and Board of Directors of the
Surviving Corporation, and until their respective successors
shall be elected and qualified or until their respective prior
resignations or terminations. Not less than one member of the
Board of Directors of Net Tel shall serve on the Board of
Directors of the Surviving Corporation at all times.
1.7 Principal Office. The principal executive office
of the Surviving Corporation shall be located at 8170 West Sahara
Avenue, Suite 203, Las Vegas, Nevada 89117. The Surviving
Corporation shall also maintain a registered office in the State
of Nevada at the same address. The Surviving Corporation shall
also maintain an executive office at 917 Tahoe Blvd., Suite 200,
Incline Village, Nevada 89450-3709.
1.8 Adoption. The Plan shall be adopted by the Board
of Directors of Net Tel as the sole stockholder of the Net Tel
Subsidiary, and by the Sierra Stockholder.
1.9 Dissenters' Rights and Notification. As the Plan
requires the affirmative vote of all of the outstanding voting
securities of the Net Tel Subsidiary and Sierra, and the Nevada
Revised Statutes do not require a vote of Net Tel stockholders,
dissenters' rights are not applicable under the Plan;
1.10 Delivery of Certificates by the Sierra
Stockholder. The transfer of the Sierra Shares by the Sierra
Stockholder shall be effected by the delivery to Net Tel or its
transfer agent of certificates representing the Sierra Shares
endorsed in blank or accompanied by stock powers executed in
blank, with all signatures witnessed or guaranteed to the
satisfaction of Net Tel and the Net Tel Subsidiary and with any
necessary transfer taxes and other revenue stamps affixed (which
are usually not applicable) and acquired at the expense of the
Sierra Stockholder, and on receipt thereof to the satisfaction of
the Surviving Corporation, a stock certificate representing
shares in the Net Tel as outlined in Exhibit A shall be issued
and delivered to the Sierra Stockholder; as a condition to the
exchange of the Sierra Shares, Net Tel and the Surviving
Corporation shall require the Sierra Stockholder to execute and
deliver and Investment Letter as outlined in Section 4.12 hereof,
acknowledging, among other things, that the shares of Net Tel to
be received in exchange for the Sierra Shares are "unregistered"
and "restricted" securities which have not been registered with
the Securities and Exchange Commission or any state regulatory
agency, and which must be so registered prior to public sale by
the Sierra Stockholder, unless an exemption from such
registration is available for any such sale.
1.11 Further Assurances. At the Closing and from time
to time thereafter, the parties shall execute such additional
instruments and take such other action as may be reasonably
required or necessary to carry out the terms and provisions
hereof.
1.12 Effective Date. The Effective Date of the Plan
shall be the date when the Articles of Merger are filed and
accepted by the Secretary of State of the State of Nevada and at
such time as all applicable provisions of the Nevada Revised
Statutes have been met.
Section 2
Closing
The Closing contemplated by Section 1.1 shall be held
at the principal executive offices of the Surviving Corporation
as outlined in Section 1.7 hereof, not later than ten days
following the date of this Plan, unless another place or time is
agreed upon in writing by the parties. The Closing may be
accomplished by wire, express mail or other courier service,
conference telephone communications or as otherwise agreed by the
respective parties or their duly authorized representatives.
Section 3
Representations and Warranties of Net Tel and the Net Tel
Subsidiary
Net Tel and the Net Tel Subsidiary represent and
warrant to, and covenant with, the Sierra Stockholder and Sierra
as follows:
3.1 Corporate Status. Net Tel is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Nevada and is licensed or qualified as a foreign
corporation in all states in which the nature of its business or
the character or ownership of its properties makes such licensing
or qualification necessary. Net Tel is a publicly held company,
having lawfully offered and sold a portion of its securities to
residents of the State of Utah pursuant to an Application of
Registration of Securities filed with the Utah Securities
Division (now, the "Utah Division of Securities") and an S-18
Registration Statement filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended; Net Tel
is "current" in the filing of all reports required to be filed by
it with the Securities and Exchange Commission, copies of which
have been delivered to the Sierra Stockholder and Sierra, and
which such reports are true and correct in every material
respect; and the securities of Net Tel are currently listed on
the OTC Bulletin Board of the National Association of Securities
Dealers, Inc. (the "NASD").
The Net Tel Subsidiary will be organized under the laws
of the State of Nevada immediately following the execution and
delivery of this Plan, by the filing of the Articles of
Incorporation attached hereto as Exhibit B.
3.2 Capitalization. The authorized capital stock of
Net Tel consists of 50,000,000 shares of common voting stock,
having a par value of $0.001 per share, of which 8,000,000 shares
are subscribed or issued and outstanding, all fully paid and non-
assessable; except as may be provided herein, there are no
outstanding options, warrants or calls pursuant to which any
person has the right to purchase any authorized and unissued
capital stock of Net Tel.
The capitalization of the Net Tel Subsidiary shall be
as set forth in Exhibit B, and except as provided in this Plan,
there are no outstanding options, warrants or calls pursuant to
which any person has the right to purchase any authorized and
unissued capital stock of the Net Tel Subsidiary.
3.3 Financial Statements. The audited financial
statements of Net Tel furnished to the Sierra Stockholder and
Sierra, consisting of a balance sheet dated December 31, 1995,
and March 31, 1996, and a related statement of income for the
periods then ended, attached hereto as Exhibit C and incorporated
herein by reference, are correct and fairly present the financial
condition of Net Tel at such dates and for the periods involved;
such statements were prepared in accordance with generally
accepted accounting principles consistently applied, and no
material change has occurred in the matters disclosed therein,
except as indicated in Exhibit D, which is attached hereto and
incorporated herein by reference. Such financial statements do
not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein
not misleading.
3.4 Undisclosed Liabilities. Net Tel has no
liabilities of any nature except to the extent reflected or
reserved against in its balance sheet, whether accrued, absolute,
contingent or otherwise, including, without limitation, tax
liabilities and interest due or to become due, except as set
forth in Exhibit D.
3.5 Interim Changes. Since the date of its balance
sheet, except as set forth in Exhibit D, there have been no (1)
changes in financial condition, assets, liabilities or business
of Net Tel which, in the aggregate, have been materially adverse;
(2) damages, destruction or losses of or to property of Net Tel,
payments of any dividend or other distribution in respect of any
class of stock of Net Tel, or any direct or indirect redemption,
purchase or other acquisition of any class of any such stock; or
(3) increases paid or agreed to in the compensation, retirement
benefits or other commitments to employees.
3.6 Title to Property. Net Tel has good and
marketable title to all properties and assets, real and personal,
reflected in its balance sheet, and the properties and assets of
Net Tel are subject to no mortgage, pledge, lien or encumbrance,
except for liens shown therein or in Exhibit D, with respect to
which no default exists.
3.7 Litigation. There is no litigation or proceeding
pending, or to the knowledge of Net Tel, threatened, against or
relating to Net Tel, its properties or business, except as set
forth in Exhibit D. Further, no officer, director or person who
may be deemed to be an affiliate of Net Tel is party to any
material legal proceeding which could have an adverse effect on
the Company (financial or otherwise), and none is party to any
action or proceeding wherein any has an interest adverse to Net
Tel.
3.8 Books and Records. From the date of this Plan to
the Closing, Net Tel will (1) give to the Sierra Stockholder and
Sierra or their respective representatives full access during
normal business hours to all of its offices, books, records,
contracts and other corporate documents and properties so that
the Sierra Stockholder and Sierra or their respective
representatives may inspect and audit them; and (2) furnish such
information concerning the properties and affairs of Net Tel as
the Sierra Stockholder and Sierra or their respective
representatives may reasonably request.
3.9 Tax Returns. Net Tel has filed all federal and
state income or franchise tax returns required to be filed or has
received currently effective extensions of the required filing
dates.
3.10 Confidentiality. Until the Closing (and
thereafter if there is no Closing), Net Tel and its
representatives will keep confidential any information which they
obtain from the Sierra Stockholder or from Sierra concerning the
properties, assets and business of Sierra. If the transactions
contemplated by this Plan are not consummated by July 22, 1996,
Net Tel will return to Sierra all written matter with respect to
Sierra obtained by Net Tel in connection with the negotiation or
consummation of this Plan.
3.11 Corporate Authority. Net Tel has full corporate
power and authority to enter into this Plan and to carry out its
obligations hereunder and will deliver to the Sierra Stockholder
and Sierra or their respective representatives at the Closing a
certified copy of resolutions of its Board of Directors
authorizing execution of this Plan by its officers and
performance thereunder.
3.12 Due Authorization. The execution of this Plan
and performance by Net Tel hereunder has been duly authorized by
all requisite corporate action on the part of Net Tel, and this
Plan constitutes a valid and binding obligation of Net Tel and
performance hereunder will not violate any provision of the
Articles of Incorporation, Bylaws, agreements, mortgages or other
commitments of Net Tel.
3.13 Environmental Matters. Net Tel has no knowledge
of any assertion by any governmental agency or other regulatory
authority of any environmental lien or action, or of any cause
for any such lien or action.
3.14 Access to Information Regarding Sierra. Net Tel
and the Net Tel Subsidiary acknowledge that they have been
delivered copies of what has been represented to be documentation
containing all material information respecting Sierra and its
present and contemplated business operations, potential
acquisitions, management and other factors; that they have had a
reasonable opportunity to review such documentation and discuss
it, to the extent desired, with their legal counsel, directors
and executive officers; that they have had, to the extent
desired, the opportunity to ask questions of and receive
responses from the directors and executive officers of Sierra,
and with the legal and accounting firms of Sierra, with respect
to such documentation; and that to the extent requested, all
questions raised have been answered to their complete
satisfaction.
Section 4
Representations, Warranties and Covenants of Sierra and the
Sierra Stockholder
Sierra and the Sierra Stockholder represent and warrant
to, and covenant with, Net Tel and the Net Tel Subsidiary as
follows:
4.1 Sierra Shares. The Sierra Stockholder is the
record and beneficial owner of the Sierra Shares, free and clear
of adverse claims of third parties; and Exhibit A correctly sets
forth the name, address and number of Sierra Shares owned by the
Sierra Stockholder.
4.2 Corporate Status. Sierra is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Nevada and is licensed or qualified as a foreign
corporation in all states in which the nature of its business or
the character or ownership of its properties makes such licensing
or qualification necessary.
4.3 Capitalization. The authorized capital stock of
Sierra consists of 25,000 shares of common voting stock with a
par value of $1 per share, divided into two classes, A and B,
with each class having 12,500 shares, of which 6,000 Class A
shares are issued and outstanding, all fully paid and non-
assessable; except as may be provided herein, there are no
outstanding options, warrants or calls pursuant to which any
person has the right to purchase any authorized and unissued
capital stock of Sierra.
4.4 Financial Statements. The unaudited financial
statements of Sierra furnished to Net Tel, consisting of a
balance sheet for the year ended December 31, 1995, and a profit
and loss statement for the period from January 1, 1996, through
March 31, 1996, attached hereto as Exhibit E and incorporated
herein by reference, are correct and fairly present the financial
condition of Sierra at such dates and for the periods involved;
such statements were prepared in accordance with generally
accepted accounting principles consistently applied, and no
material change has occurred in the matters disclosed therein,
except as indicated in Exhibit F, which is attached hereto and
incorporated herein by reference. Such financial statements do
not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein
not misleading.
4.5 Undisclosed Liabilities. Sierra has no material
liabilities of any nature except to the extent reflected or
reserved against in the balance sheet, whether accrued, absolute,
contingent or otherwise, including, without limitation, tax
liabilities and interest due or to become due, except as set
forth in Exhibit F.
4.6 Interim Changes. Since the date of its balance
sheet, except as set forth in Exhibit F, there have been no (1)
changes in the financial condition, assets, liabilities or
business of Sierra which, in the aggregate, have been materially
adverse; (2) damages, destruction or loss of or to the property
of Sierra, payment of any dividend or other distribution in
respect of the capital stock of Sierra, or any direct or indirect
redemption, purchase or other acquisition of any such stock; or
(3) increases paid or agreed to in the compensation, retirement
benefits or other commitments to employees.
4.7 Title to Property. Sierra has good and marketable
title to all properties and assets, real and personal,
proprietary or otherwise, reflected in its balance sheet, and the
properties and assets of Sierra are subject to no mortgage,
pledge, lien or encumbrance, except for liens shown therein or in
Exhibit F, with respect to which no default exists.
4.8 Litigation. There is no litigation or proceeding
pending, or to the knowledge of Sierra, threatened, against or
relating to Sierra, its properties or business, except as set
forth in Exhibit F. Further, no officer, director or person who
may be deemed to be an affiliate of Sierra is party to any
material legal proceeding which could have an adverse effect on
Sierra (financial or otherwise), and none is party to any action
or proceeding wherein any has an interest adverse to Sierra.
4.9 Books and Records. From the date of this Plan to
the Closing, the Sierra Stockholder will cause Sierra to (1) give
to Net Tel and its representatives full access during normal
business hours to all of its offices, books, records, contracts
and other corporate documents and properties so that Net Tel may
inspect and audit them; and (2) furnish such information
concerning the properties and affairs of Sierra as Net Tel may
reasonably request.
4.10 Tax Returns. Sierra has filed all federal and
state income or franchise tax returns required to be filed or has
received currently effective extensions of the required filing
dates.
4.11 Confidentiality. Until the Closing (and
continuously if there is no Closing), the Sierra Stockholder and
Sierra and their respective representatives will keep
confidential any information which they obtain from Net Tel
concerning its properties, assets and business. If the
transactions contemplated by this Plan are not consummated by
July 22, 1996, the Sierra Stockholder and Sierra will return to
Net Tel all written matter with respect to Net Tel obtained by
them in connection with the negotiation or consummation of this
Plan.
4.12 Investment Intent. The Sierra Stockholder is
acquiring the shares to be delivered to him under this Plan for
investment and not with a view to the sale or distribution
thereof, and the Sierra Stockholder has no commitment or present
intention to dispose of the Net Tel common stock being received
under the Plan. The Sierra Stockholder shall execute and deliver
to Net Tel, as a condition to the Closing, an Investment Letter
attached hereto as Exhibit G and incorporated herein by
reference, acknowledging the "unregistered" and "restricted"
nature of the securities of Net Tel being received under the Plan
in exchange for the Sierra Shares, and receipt of certain
material information regarding Net Tel, including, but not
limited to the reports of Net Tel filed with the Securities and
Exchange Commission during the past twelve months and a copy of
this Plan and all exhibits hereto.
4.13 Corporate Authority. Sierra has full corporate
power and authority to enter into this Plan and to carry out its
obligations hereunder and will deliver to Net Tel or its
representatives at the Closing a certified copy of resolutions of
its Board of Directors authorizing execution of this Plan by its
officers and performance thereunder.
4.14 Due Authorization. The execution of this Plan and
performance by Sierra hereunder have been duly authorized by all
requisite corporate action on the part of Sierra, and this Plan
constitutes a valid and binding obligation of Sierra and
performance hereunder will not violate any provision of the
Articles of Incorporation, Bylaws, agreements, mortgages or other
commitments of Sierra.
4.15 Environmental Matters. Sierra has no knowledge of
any assertion by any governmental agency or other regulatory
authority of any environmental lien or action, or of any cause
for any such lien or action.
4.16 Access to Information Regarding Net Tel. The
Sierra Stockholder and Sierra acknowledge that they have been
delivered copies of what has been represented to be documentation
containing all material information respecting Net Tel and its
present and contemplated business operations, management and
other factors, all in the form of annual and quarterly reports
filed by Net Tel with the Securities and Exchange Commission;
that they have had a reasonable opportunity to review such
documentation and discuss it, to the extent desired, with their
legal counsel, directors and executive officers; that they have
had, to the extent desired, the opportunity to ask questions of
and receive responses from the directors and executive officers
of Net Tel, and with the legal and accounting firms of Net Tel,
with respect to such documentation; and that to the extent
requested, all questions raised have been answered to their
complete satisfaction.
Section 5
Conduct of Sierra Pending the Closing
Except as otherwise provided herein, Sierra and the
Sierra Stockholder agree that Sierra will conduct itself in the
following manner pending the Closing:
5.1 Certificate of Incorporation and Bylaws. No
change will be made in the Certificate of Incorporation or Bylaws
of Sierra.
5.2 Capitalization, etc. Sierra will not make any
change in its authorized or issued shares of any class, declare
or pay any dividend or other distribution, or issue, encumber,
purchase or otherwise acquire any of its shares of any class.
5.3 Conduct of Business. Sierra will use its best
efforts to maintain and preserve its business organization,
employee relationships and good will intact, and will not,
without the written consent of Net Tel, enter into any material
commitments except in the ordinary course of business.
Section 6
Conduct of Net Tel Pending the Closing
Except as otherwise provided herein, Net Tel and the
Net Tel Subsidiary agree that Net Tel will conduct itself in the
following manner pending the Closing:
6.1 Certificate of Incorporation and Bylaws. No
change will be made in the Certificate of Incorporation or Bylaws
of Net Tel.
6.2 Capitalization, etc. Net Tel will not make any
change in its authorized or issued shares, declare or pay any
dividend or other distribution, or issue, encumber, purchase or
otherwise acquire any of its shares of any class.
6.3 Conduct of Business. Net Tel will use its best
efforts to maintain and preserve its business organization,
employee relationships and good will intact, and will not,
without the written consent of Sierra, enter into any material
commitments except in the ordinary course of business.
Section 7
Conditions Precedent to Obligations of the Sierra Stockholder and
Sierra
All obligations of the Sierra Stockholder and Sierra
under this Plan are subject, at their option, to the fulfillment,
before or at the Closing, of each of the following conditions:
7.1 Representations and Warranties True at Closing.
The representations and warranties of Net Tel and the Net Tel
Subsidiary contained in this Plan shall be deemed to have been
made again at and as of the Closing and shall then be true in all
material respects and shall survive the Closing.
7.2 Due Performance. Net Tel and the Net Tel
Subsidiary shall have performed and complied with all the terms
and conditions required by this Plan to be performed or complied
with by them before the Closing.
7.3 Officers' Certificate. Sierra and the Sierra
Stockholder shall have been furnished with a certificate signed
by the President and Secretary of Net Tel, attached hereto as
Exhibit H and incorporated herein by reference, dated as of the
Closing, certifying (1) to the effects set out in Sections 6.1
and 6.2; and (2) that since the date of the financial statements
(Exhibits C hereto), there has been no material adverse change in
the financial condition, business or properties of Net Tel, taken
as a whole.
7.4 Opinion of Counsel of Net Tel. The Sierra
Stockholder and Sierra shall have received an opinion of counsel
for Net Tel, dated as of the Closing, to the effect that (1) the
representations of Sections 3.1, 3.2 and 3.12 are correct; (2)
except as specified in the opinion, counsel knows of no
inaccuracy in the representations in 3.5, 3.6 or 3.7; and (3) the
shares of Net Tel to be issued to the Sierra Stockholder under
this Plan will, when so issued, be validly issued, fully paid and
non-assessable.
Section 8
Conditions Precedent to Obligations of Net Tel
All obligations of Net Tel and the Net Tel Subsidiary
under this Plan are subject, at their option, to the fulfillment,
before or at the Closing, of each of the following conditions:
8.1 Representations and Warranties True at Closing.
The representations and warranties of Sierra and the Sierra
Stockholder contained in this Plan shall be deemed to have been
made again at and as of the Closing and shall then be true in all
material respects and shall survive the Closing.
8.2 Due Performance. The Sierra Stockholder and
Sierra shall have performed and complied with all the terms and
conditions required by this Plan to be performed or complied with
by them before the Closing.
8.3 Officers' and Stockholders' Certificate. Net Tel
shall have been furnished with a certificate signed by the
President and Secretary of Sierra and the Sierra Stockholder,
attached hereto as Exhibit I and incorporated herein by
reference, dated as of the Closing, certifying (1) to the effects
set out in Sections 5.1 and 5.2; and (2) that since the date of
the financial statements (Exhibit E), there has been no material
adverse change in the financial condition, business or properties
of Sierra taken as a whole.
8.4 Opinion of Counsel of Sierra. Net Tel shall have
received an opinion of counsel for Sierra, dated as of the
Closing, to the effect that (1) the representations of Sections
4.2, 4.3 and 4.14 are correct; (2) except as specified in the
opinion, counsel knows of no inaccuracy in the representations in
4.6, 4.7 or 4.8; and (3) the Sierra Shares to be delivered to Net
Tel under this Plan will, when so delivered, have been validly
issued, fully paid and non-assessable, and will be free and clear
of any liens or encumbrances.
8.5 Books and Records. The Sierra Stockholder or the
Board of Directors of Sierra shall have caused Sierra to make
available all books and records of Sierra, including minute books
and stock transfer records; provided, however, only to the extent
requested in writing by Net Tel at Closing.
8.6 Acceptance by Stockholders. The terms of this
Plan shall have been approved by the sole Sierra Stockholder as
evidenced by his signature on Exhibit G.
Section 9
Termination
Prior to Closing, this Plan may be terminated (1) by
mutual consent in writing; (2) by either the Directors of Net Tel
or the Sierra Stockholder and Sierra if there has been a material
misrepresentation or material breach of any warranty or covenant
by the other party; or (3) by either the Directors of Net Tel or
the Sierra Stockholder and Sierra if the Closing shall not have
taken place, unless adjourned to a later date by mutual consent
in writing, by the date fixed in Section 2.
Section 10
Survival and Indemnity
10.1 Survival of Representations, Warranties, Covenants
and Agreements. The representations, warranties, covenants and
agreements contained herein shall survive the Closing without
regard to any action taken pursuant to this Plan, including
without limitation, any investigation made by the party asserting
any breach thereof, and shall continue in full force and effect
for three years after the Closing.
10.2 Indemnity from Net Tel and the Net Tel Subsidiary.
Net Tel and the Net Tel Subsidiary agree to indemnify and hold
Sierra and the Sierra Stockholder harmless against and in respect
of:
(a) Any damage, liability, deficiency, loss, cost,
expense or claim arising out of or resulting from
(i) any defect in title, (ii) any
misrepresentation or omission by Net Tel or the
Net Tel Subsidiary herein or in any exhibit
hereto, (iii) any materially misleading
information furnished by Net Tel or the Net Tel
Subsidiary herein or in any exhibit hereto, (iv)
any breach by Net Tel or the Net Tel Subsidiary of
any representation, warranty or covenant herein or
in any exhibit hereto, or (v) any debt or other
obligation of Net Tel or the Net Tel Subsidiary
existing at or prior to the Closing or arising
thereafter in connection with events occurring
prior to the Closing (to the extent only that such
debt or obligation is attributable to such events
prior to the Closing); and
(b) All reasonable costs and expenses (including
reasonable attorneys' fees) incurred by Sierra or
the Sierra Stockholder in connection with any
action, suit, proceeding, demand, assessment or
judgment incident to any of the matters
indemnified against in this Section 10.2.
10.3 Indemnity from Sierra and Sierra Stockholder.
Sierra the Sierra Stockholder agree to indemnify and hold Net Tel
and the Net Tel Subsidiary harmless from and against and in
respect of:
(a) Any damage, liability, deficiency, loss, cost,
expense or claim arising out of or resulting from
(i) the breach of any representation, warranty or
covenant by Sierra or the Sierra Stockholder
herein or in any exhibit hereto (ii) any
misrepresentation or omission by Sierra or the
Sierra Stockholder herein or in any exhibit hereto
or (iii) any materially misleading information
furnished by Sierra or the Sierra Stockholder
herein or in any exhibit hereto; and
(b) All reasonable costs and expenses (including
reasonable attorneys' fees) incurred by Net Tel
and the Net Tel Subsidiary in connection with any
action, suit, proceeding, demand, assessment, or
judgment incident to any of the matters
indemnified against in this Section 10.3.
10.4 Not Exclusive Remedy. Any right of indemnity of
any party pursuant to this Section 10 shall be in addition to and
shall not operate as a limitation on any other right to indemnity
of such party pursuant to this Plan, any other document or
instrument executed in connection with the consummation of the
transaction contemplated hereby, or otherwise.
Section 11
General Provisions
11.1 Further Assurances. At any time, and from time to
time, after the Closing, each party will execute such additional
instruments and take such action as may be reasonably requested
by the other party to confirm or perfect title to any property
transferred hereunder or otherwise to carry out the intent and
purposes of this Plan.
11.2 Waiver. Any failure on the part of any party
hereto to comply with any of their respective obligations,
agreements or conditions hereunder may be waived in writing by
the party to whom such compliance is owed.
11.3 Brokers. Except as otherwise shown in Exhibit J,
each party represents to the other parties hereunder that no
broker or finder has acted for it/him/ in connection with this
Plan, and agrees to indemnify and hold harmless the other parties
against any fee, loss or expense arising out of claims by brokers
or finders employed or alleged to have been employed by it/him/.
11.4 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been
given if delivered in person or sent by prepaid first-class
registered or certified mail, return receipt requested, as
follows:
If to Net Tel: Michael W. Gorts
8170 West Sahara Avenue, Suite 203
Las Vegas, Nevada 89117
With a copy to: Leonard W. Burningham, Esq.
455 East 500 South, Suite 205
Salt Lake City, Utah 84111
If to Sierra or the Bruce Komito
Sierra Stockholder P. O. Box 3709
Incline Village, Nevada 89450
11.5 Entire Agreement. This Plan constitutes the
entire agreement between the parties and supersedes and cancels
any other agreement, representation, or communication, whether
oral or written, between the parties hereto relating to the
transactions contemplated herein or the subject matter hereof.
11.6 Headings. The section and subsection headings in
this Plan are inserted for convenience only and shall not affect
in any way the meaning or interpretation of this Plan.
11.7 Governing Law. This Plan shall be governed by and
construed and enforced in accordance with the laws of the State
of Nevada, except to the extent pre-empted by federal law, in
which event (and to that extent only), federal law shall govern.
11.8 Assignment. This Plan shall inure to the benefit
of, and be binding upon, the parties hereto and their successors
and assigns; provided however, that any assignment by any party
of any rights under this Plan without the prior written consent
of the other parties shall be void.
11.9 Counterparts. This Plan may be executed
simultaneously in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute
one and the same instrument.
11.10 Default. In the event of default hereunder,
the defaulting party shall be liable to the non-defaulting party
for all costs and reasonable attorney's fees incurred in the
enforcement of any of the provisions hereof.
IN WITNESS WHEREOF, the parties have executed this
Agreement and Plan of Merger effective the day and year first
above written.
NET TELECOMMUNICATIONS, INCORPORATED
/s/ Michael W. Gorts, President
SIERRA-NET, INC.
/s/ Bruce Komito, President
SIERRA-NET STOCKHOLDER
/s/ Bruce Komito, Sole Stockholder
EXHIBIT A
Number of Shares
Number of Shares of Stock of
Owned of Long Distance Silver Ledge to be
Name and Address International Received in Exchange
Bruce Komito 6,000 600,000
P. O. Box 3709
917 Tahoe Blvd, #200
Incline Village,
Nevada 89450-3709
EXHIBIT B
ARTICLES OF INCORPORATION OF THE NET TEL SUBSIDIARY
ARTICLES OF INCORPORATION
OF
FIRST NET TELECOMMUNICATIONS SUBSIDIARY, INCORPORATED
The undersigned natural person, acting as incorporator of
the corporation under the Nevada Revised Statutes, adopts the
following Articles of Incorporation for such corporation.
ARTICLE I
Name. The name of the corporation is "First Net
Telecommunications Subsidiary, Incorporated" (hereinafter, the
"Corporation").
ARTICLE II
Period of Duration. The period of duration of the
Corporation is perpetual.
ARTICLE III
Purposes and Powers. The purpose for which the Corporation
is organized is to engage in any and all lawful business.
ARTICLE IV
Capitalization. The Corporation shall have the authority to
issue 1000 shares of common voting stock having a par value of $1
per share. All stock of the Corporation shall be of the same
class and shall have the same rights and preferences. Fully paid
stock of the Corporation shall not be liable for further call or
assessment. The authorized shares shall be issued at the
discretion of the Board of Directors of the Corporation.
ARTICLE V
Initial Resident Agent. The initial resident agent of the
Corporation shall be Michael W. Gorts, and the street address and
mailing address of the initial resident agent are: 8170 West
Sahara Avenue, Suite 203, Las Vegas, Nevada 89117.
ARTICLE VI
Directors. The Corporation shall be governed by a Board of
Directors consisting of no less than two directors. The number
of directors constituting the initial Board of Directors is two
and the name and street address of the persons who shall serve as
directors until their successors are elected and qualified are,
to-wit:
Michael W. Gorts
9301 Leaping Lily Lane
Las Vegas, Nevada 89129
Robert Briare
6736 Waterville Circle
Las Vegas, Nevada 89107
ARTICLE VII
Incorporator. The name and street address of the
incorporator is:
Michael W. Gorts
9301 Leaping Lily Lane
Las Vegas, Nevada 89129
ARTICLE VIII
Control Share Acquisitions. The provisions of NRS 78.378 to
78.3793, inclusive, are not applicable to the Corporation.
ARTICLE IX
Indemnification of Directors and Executive Officers. To the
fullest extent allowed by law, the directors and executive
officers of the Corporation shall be entitled to indemnification
from the Corporation for acts and omissions taking place in
connection with their activities in such capacities.
/s/ Michael W. Gorts
STATE OF NEVADA )
:ss
COUNTY OF CLARK )
On the 17th day of July, 1996, personally appeared before me
Michael W. Gorts, who duly acknowledged to me that he is the
person who signed the foregoing instrument as incorporator; that
he has read the foregoing instrument and knows the contents
thereof; and that the contents thereof are true of his personal
knowledge.
/s/ Lin-Belle Addington
Notary Public
<PAGE>
EXHIBIT C
NET TELECOMMUNICATIONS, INCORPORATED
FINANCIAL STATEMENTS
December 31, 1995, and March 31, 1996
See Exhibit E to the Agreement and Plan of Merger
between the Company and Net Telecommunications, Incorporated,
which were filed as an Exhibit to the 8-K Current Report of the
Company dated July 5, 1996.
EXHIBIT D
EXCEPTIONS TO NET TEL FINANCIAL STATEMENTS
The financial statements of Net Tel do not reflect the
recent Agreement and Plan of Merger between Net Tel and Net
Telecommunications, Incorporated, a Nevada corporation, formerly
known as "Long Distance International, Inc." ("Net Tel Private
Nevada"), pursuant to which Net Tel, then known as "Silver Ledge,
Incorporated," was the surviving corporation in a merger with Net
Tel Private Nevada, and under which all of the assets and
liabilities of Silver Ledge were exchanged for certain
outstanding shares of common stock of Silver Ledge, leaving the
surviving corporation (now, Net Tel) with no assets or
liabilities immediately prior to the merger with Net Tel Private
Nevada and 400,000 outstanding voting securities; and 7,600,000
shares of Net Tel as the surviving corporation were issued in
connection with the merger, approximately 6,000,000 shares to the
stockholders of Net Tel Private Nevada and 1,600,000 shares to
certain consultants to the parties to the merger, resulting in
there being 8,000,000 outstanding shares of Net Tel following the
completion of the merger, as outlined in Section 3.2 of the Plan.
The only material change in Net Tel's financial statements
relates to the number of outstanding and authorized shares, which
are as set for in Section 3.2 of the Plan, rather than as set
forth in the financial statements. A copy of the merger and
related exhibits between these parties has been provided to the
Sierra Stockholder and Sierra prior to the Closing under this
Plan.
Further, 100,000, 500,000 and 450,000 "unregistered"
and "restricted" shares, respectively, shall be issued to
Intralink U.S.A., Inc., a Nevada corporation ("Intralink"),
Global Tours, Inc., a Nevada corporation ("Global Tours"), and
Las Vegas Reservations, Inc., a Nevada corporation ("Las Vegas
Reservations"), pursuant to the Letters of Intent between these
respective entities and Net Tel, whereby all of these entities
will become wholly-owned subsidiaries of Net Tel, and all of
which were subject to the completion of the merger involving Net
Tel Private Nevada, and are further subject to the execution and
delivery of definitive agreements between the respective parties.
Copies of these Letters of Intent and all material documentation
respecting these entities have been provided to Sierra and the
Sierra Stockholder prior to the Closing under this Plan; however,
no assurance can be given that these transactions will be
completed.
EXHIBIT E
SIERRA-NET, INC.
FINANCIAL STATEMENTS FOR THE PERIODS ENDED
Balance Sheet-December 31, 1995
Dec 31, '95
ASSETS
Current Assets
Checking Savings
Norwest Bank 9,398.18
Petty Cash 47.36
Total Checking/Savings 9,445.54
Accounts Receivable
Accounts Receivable 47,343.55
Total Accounts Receivable 47,343.55
Other Current Assets
Allowance for Estimated Uncollected -9,579.00
Pre-payments, Deposits 1,600.00
Undeposited Funds 2,975.00
Total Other Current Assets 5,004.00
Total Current Assets 51,785.09
Fixed Assets
Fixed Assets 22,598.21
Furniture, Fixtures 2,000.00
Total Fixed Assets 24,598.21
TOTAL ASSETS 78,383.30
LIABILITIES & EQUITY
Liabilities
Current Liabilities
Accounts Payable
Accounts Payable 34,668.34
Total Accounts Payable 34,668.34
Other Current Liabilities
Accrued payroll payable 7,844.56
Deposits -4,566.65
Payment advances 64,275.00
Payroll Liabilities 3,137.41
Sales Tax Payable 246.90
Tahoe On-line Collections -3,068.26
Total Other Current Liabilities 67,868.96
Total Current Liabilities 102,573.30
Total Liabilities 102,537.30
Equity
Opening Bal Equity 2,281.90
Paid in capital 1,000.00
Retained Earnings -27,739.72
Net Income -1,696.18
Total Equity 26,154.00
TOTAL LIABILITIES & EQUITY 76,383.30
SIERRA-NET, INC.
Profit and Loss Statement
January 1, 1996, to March 31, 1996
Jan - Mar '96
Ordinary Income/Expense
Income
Hardware Revenue 10,430.80
Internet Service Revenue 229,234.66
Software revenue 529.65
Web Services Revenue 24,127.75
Total Income 264,322.86
Gross Profit 264,322.86
Expense
Advertising 520.15
Bank Service Charges 306.00
Commission expense 700.00
Computer 44,427.34
Dues and Subscriptions 341.85
Equipment Rental 130.00
Filing Fees 85.00
Freight 1,184.44
Interest Expense 96.68
Licenses and permits 60.00
Miscellaneous 5,529.22
Outside Services 232.00
Payroll Expenses 36,366.12
Payroll taxes 4,123.02
Postage and Delivery 476.18
Professional Fees 5,962.84
Rent 10,138.00
Repairs 3,003.94
Supplies 2,326.64
Telecommuncations 18,844.01
Telephone 43,063.44
Travel & Entertainment 1,617.43
Utilities 250.00
Total Expense 179,785.28
Net Ordinary Income 84,537.58
Net Income 84,537.58
EXHIBIT F
EXCEPTIONS TO SIERRA FINANCIAL STATEMENTS
See Exhibit F-1.
EXHIBIT F-1
Legal Proceedings
1. Rider v. Komito, Sierra-Net, Inc., BK Systems, Inc., CV-N-
95-00650-ECR, October 1995, US District Court
Rider, a former employee of Sierra-net, voluntarily resigned his
position with Sierra-net in September, 1995. Upon separation
from the Company, email sent to Rider's email address, which was
used mostly for Company business and was provided by the Company
at no cost to Rider, was read by other employees. Rider is
claiming violation of the federal wiretapping statutes and is
seeking unspecified damages.
2. Rider v. Komito, Sierra-Net, Inc., BK Systems, Inc., CV95-
07102, October 1995, Nevada 2nd District Court
In a verbal agreement, Rider was offered options to purchase up
to 40% of Sierra-net stock at a price of $10,000 and that the
options were to have vested over a 4 year period. After
voluntarily resigning his position with Sierra-net after 1 year,
Rider claims that he was offered a 40% share in the business and
not options and is seeking unspecified damages.
3. Ellis v. Komito, Sierra-net, Inc., Hale, CV96-02217, April
1996, Nevada 2nd District Court
Ellis is a former employee of Sierra-net, who was terminated for
cause in February, 1996. In a written agreement dated December,
1995, to which Ellis was a party, it was agreed that Sierra-net
would spin of a web design company to which Ellis was entitled
stock and stock options, if certain revenue goals were attained.
The revenue goals were not attained at th time of Ellis'
termination, and in fact have yet to be attained. Ellis seeks to
force Sierra-Net to spin off its web business (which has in fact
already been done),and unspecified damages.
EXHIBIT G
Net Telecommunications, Incorporated
8170 West Sahara Avenue, Suite 203
Las Vegas, Nevada 89117
Fidelity Stock Transfer Company
1800 South West Temple, Suite 301
Salt Lake City, Utah 84115
Re: Exchange of shares of Sierra-Net,
Inc., a Nevada corporation
("Sierra"), for shares of Net Tel,
Incorporated, a Nevada corporation
("Net Tel or the "Company")
Gentlemen:
Pursuant to that certain Agreement and Plan of Merger
("Plan") between the undersigned, Sierra, and Net Tel, I
acknowledge that I have approved this exchange; that I am aware
of all of the terms and conditions of the Plan; that I have
received and personally reviewed a copy of the Plan; the Annual
Report on Form 10-KSB of Net Tel for the year ended December 31,
1995; and its Quarterly Report on Form 10-QSB for the quarter
ended March 31, 1996; its merger and related exhibits with Net
Tel Private Nevada; and all information regarding certain
proposed acquisitions or mergers of Net Tel, and I represent and
warrant that no director or executive officer of the Company or
any associate of either has solicited this exchange; that I am an
"accredited investor" as that term is known under the Rules and
Regulations of the Securities and Exchange Commission (see
Exhibit "A" hereto); and/or I represent and warrant that I have
sufficient knowledge and experience to understand the nature of
the exchange, and I am fully capable of bearing the economic risk
of the loss of my entire cost basis in the shares of Sierra being
exchanged.
I understand that you have and will make books and
records of your Company available to me for my inspection in
connection with the contemplated exchange of my shares, and that
I have been encouraged to review the information and ask any
questions I may have concerning the information of any director
or executive officer of the Company whose addresses are listed in
the aforesaid Annual Report, or of the legal and accounting firms
for the Company. I understand that the accounting firm for Net
Tel is Jones, Jensen & Co., Certified Public Accountants, 349
South 200 East, Salt Lake City, Utah 84111, Telephone #801-328-
4408; or Dave Thomson, CPA, 180 South 300 West, Salt Lake City,
Utah 84101, Telephone #801-328-3900; and that legal counsel for
Net Tel is Leonard W. Burningham, Esq. Suite 205, Hermes
Building, 455 East 500 South, Salt Lake City, Utah 84111,
Telephone #801-363-7411.
I further understand that I must bear the economic risk
of ownership of any of the Net Tel shares for a long period of
time, the minimum of which will be two (2) years, as these shares
are "unregistered" shares and may not be sold unless any
subsequent offer or sale is registered with the United States
Securities and Exchange Commission or is otherwise exempt from
the registration requirements of the Securities Act of 1933, as
amended (the "Act"), or other applicable securities laws, rules
and regulations.
I intend that you rely on all of my representations
made herein and those in the personal questionnaire (if
applicable) I provided to Net Tel for use by Net Tel as they are
being made to induce you to issue me the shares of Net Tel under
the Plan, and I further represent (of my personal knowledge or by
virtue of my reliance on one or more personal representatives),
and agree as follows, to-wit:
1. That the shares being acquired are being received
for investment purposes and not with a view toward further
distribution;
2. That I have a full and complete understanding of
the phrase "for investment purposes and not with a view toward
further distribution";
3. That I understand the meaning of "unregistered
shares" and know that they are not freely tradeable;
4. That any stock certificate issued by you to me in
connection with the shares being acquired shall be imprinted with
a legend restricting the sale, assignment, hypothecation or other
disposition unless it can be made in accordance with applicable
laws, rules and regulations;
5. I agree that the stock transfer records of your
Company shall reflect that I have requested the Company not to
effect any transfer of any stock certificate representing any of
the shares being acquired unless I shall first have obtained an
opinion of legal counsel to the effect that the shares may be
sold in accordance with applicable laws, rules and regulations,
and I understand that any opinion must be from legal counsel
satisfactory to the Company and, regardless of any opinion, I
understand that the exemption covered by any opinion must in fact
be applicable to the shares;
6. That I shall not sell, offer to sell, transfer,
assign, hypothecate or make any other disposition of any interest
in the shares being acquired except as may be pursuant to any
applicable laws, rules and regulations;
7. I fully understand that my shares which are being
exchanged for shares of the Company are "risk capital," and I am
fully capable of bearing the economic risks attendant to this
investment, without qualification; and
8. I also understand that without approval of counsel
for Net Tel, all shares of Net Tel to be issued and delivered to
me in exchange for my shares of Net Tel shall be represented by
one stock certificate only and which such stock certificate shall
be imprinted with the following legend or a reasonable facsimile
thereof on the front and reverse sides thereof:
The shares of stock represented by this
certificate have not been registered under
the Securities Act of 1933, as amended, and
may not be sold or otherwise transferred
unless compliance with the registration
provisions of such Act has been made or
unless availability of an exemption from such
registration provisions has been established,
or unless sold pursuant to Rule 144 under the
Act.
Any request for more than one stock certificate must be
accompanied by a letter signed by the requesting stockholder
setting forth all relevant facts relating to the request. Net
Tel will attempt to accommodate any stockholders' request where
Net Tel views the request is made for valid business or personal
reasons so long as in the sole discretion of Net Tel, the
granting of the request will not facilitate a "public"
distribution of unregistered shares of common voting stock of Net
Tel.
You are requested and instructed to issue a stock
certificate as follows, to-wit:
_________________________________________
(Name)
_________________________________________
(Address)
_________________________________________
_________________________________________
If joint tenancy with full rights
of survivorship is desired, put the
initials JTRS after your names.
Thank you very much.
Dated this ________ day of __________________, 1996.
Very truly yours,
______________________________________
<PAGE>
EXHIBIT H
CERTIFICATE OF OFFICER PURSUANT TO
AGREEMENT AND PLAN OF MERGER
The undersigned, the President of Net
Telecommunications, Incorporated, a Nevada corporation ("Net
Tel"), represents and warrants the following as required by the
Agreement and Plan of Merger (the "Plan") between Net Tel and
Sierra-Net, Inc., a Nevada corporation ("Sierra"), and the sole
stockholder of Sierra (the "Sierra Stockholder):
1. That he is the President of Net Tel and has been
authorized and empowered by its Board of Directors to execute and
deliver this Certificate to Sierra and the Sierra Stockholder.
2. Based on his personal knowledge, information,
belief and opinions of counsel for Net Tel regarding the Plan:
(i) All representations and warranties of Net Tel
contained within the Plan are true and
correct;
(ii) Net Tel has complied with all terms and
provisions required of it pursuant to the
Plan; and
(iii) There have been no material adverse changes
in the financial position of Net Tel as set
forth in its financial statements for the
periods ended December 31, 1995, and March
31, 1996, except as set forth in Exhibit D to
the Plan.
NET TELECOMMUNICATIONS, INCORPORATED
/s/ Michael W. Gorts, President
/s/ Robert Briare, Secretary<PAGE>
EXHIBIT I
CERTIFICATE OF OFFICER PURSUANT TO
AGREEMENT AND PLAN OF MERGER
The undersigned, the President of Sierra-Net, Inc., a
Nevada corporation ("Sierra"), represents and warrants the
following as required by the Agreement and Plan of Merger (the
"Plan") between Sierra, its sole stockholder (the "Sierra
Stockholder") and Net Telecommunications, Incorporated, a Nevada
corporation ("Net Tel"):
1. That he is the President of Sierra and has been
authorized and empowered by its Board of Directors to execute and
deliver this Certificate to Net Tel.
2. Based on his personal knowledge, information,
belief:
(i) All representations and warranties of Sierra
contained within the Plan are true and
correct;
(ii) Sierra has complied with all terms and
provisions required of it pursuant to the
Plan; and
(iii) There have been no material adverse changes
in the financial position of Sierra as set
forth in its financial statements for the
periods ended December 31, 1995, and January
1, 1996, through March 31, 1996, except as
set forth in Exhibit F to the Plan.
SIERRA-NET, INC.
/s/ Bruce Komito, President
/s/ Bruce Komito, Personally
EXHIBIT J
Finders
None.
ARTICLES OF MERGER
OF
SIERRA-NET, INC.
(a Nevada corporation)
AND
FIRST NET TELECOMMUNICATIONS SUBSIDIARY, INCORPORATED
(a Nevada corporation)
To the Secretary of
State of Nevada
Pursuant to the provisions of Section 92A.190 of the Nevada
Revised Statutes, it is hereby certified that:
1. The names and addresses of the merging corporations are
Sierra-Net, Inc., 917 Tahoe Blvd., Suite 200, Incline Village,
Nevada 89450-3709, which is a business corporation organized
under the laws of the State of Nevada ("Sierra"), and First Net
Telecommunications Subsidiary, Incorporated, 8170 West Sahara
Avenue, Suite 203, Las Vegas, Nevada 89117, which is a business
corporation organized under the laws of the State of Nevada
("First Net Tel").
2. The following is the Plan of Merger (the "Plan") for
merging Sierra with and into First Net Tel as approved by the
Board of Directors and stockholders of each of said corporations
(with the sole stockholder of Sierra being sometimes called the
"Sierra Stockholder"), pursuant to which First Net Tel will be
the surviving corporation:
Plan of Merger
1.1 Merger and Surviving Corporation. Sierra
will merge into First Net Tel, with First Net Tel being the
"Surviving Corporation"; the separate existence of Sierra
shall cease, and the name of the Surviving Corporation shall
become "Sierra-Net, Inc." Until amended, modified or
otherwise altered, the Articles of Incorporation of First
Net Tel shall continue to be the Articles of Incorporation
of the Surviving Corporation; and the Bylaws of the First
Net Tel shall continue to be the Bylaws of the Surviving
Corporation.
1.2 Share Conversion. Each share of issued,
outstanding or subscribed common stock of Sierra (the
"Sierra Shares") shall, upon the effective date of the Plan,
be converted into 100 shares of common stock of Net
Telecommunications, Incorporated, a Nevada corporation and
the parent of First Net Tel ("Parent Net Tel"), amounting to
600,000 shares in the aggregate; all fractional shares shall
be rounded to the nearest whole share.
1.3 Survivor's Succession to Corporate Rights.
The Surviving Corporation shall thereupon and thereafter
possess all the rights, privileges, powers and franchises as
well of a public as of a private nature, and be subject to
all of the restrictions, disabilities and duties of Sierra;
and all and singular, the rights, privileges, powers and
franchises of Sierra, and all property, real, personal and
mixed, and all debts due to Sierra on whatever account, as
well for stock subscriptions as all other things in action
or belonging to Sierra shall be vested in the Surviving
Corporation; and all property, rights, privileges, powers
and franchises, and all and every other interest shall be
thereafter as effectually the property of the Surviving
Corporation as they were of Sierra, and the title to any
real estate vested by deed or otherwise in Sierra shall not
revert or be in any way impaired by reason of the Plan; but
all rights of creditors and all liens upon any property of
Sierra shall be preserved unimpaired, and all debts,
liabilities and duties of Sierra shall thenceforth attach to
the Surviving Corporation and may be enforced against it to
the same extent as if said debts, liabilities and duties had
been incurred or contracted by it.
1.4 Survivor's Succession to Corporate Acts,
Plans, Contracts, etc. All corporate acts, plans, policies,
contracts, approvals and authorizations of Sierra and its
stockholders, its Board of Directors, committees elected or
appointed by the Board of Directors, officers and agents,
which were valid and effective immediately prior to the
effective time of the Plan, shall be taken for all purposes
as the acts, plans, policies, contracts, approvals and
authorizations of the Surviving Corporation and shall be as
effective and binding thereon as the same were with respect
to Sierra. The employees of Sierra shall become the
employees of the Surviving Corporation and continue to be
entitled to the same rights and benefits which they enjoyed
as employees of Sierra.
1.5 Survivor's Rights to Assets, Liabilities,
Reserves, etc. The assets, liabilities, reserves and
accounts of Sierra shall be recorded on the books of the
Surviving Corporation at the amounts at which they,
respectively, shall then be carried on the books of Sierra,
subject to such adjustments or eliminations of intercompany
items as may be appropriate in giving effect to the Plan.
1.6 Resignations of Present Directors and
Executive Officers of the Surviving Corporation and
Designation of New Directors and Executive Officers. On
Closing, with the exception of Michael W. Gorts, who shall
remain a director, the present directors and executive
officers of First Net Tel shall resign, in seriatim, and
designate the directors and executive officers of Sierra to
serve in their place and stead, until the next respective
annual meetings of the stockholders and Board of Directors
of the Surviving Corporation, and until their respective
successors shall be elected and qualified or until their
respective prior resignations or terminations. Not less
than one member of the Board of Directors of Parent Net Tel
shall serve on the Board of Directors of the Surviving
Corporation at all times.
1.7 Principal Office. The principal executive
office of the Surviving Corporation shall be located at 8170
West Sahara Avenue, Suite 203, Las Vegas, Nevada 89117. The
Surviving Corporation shall also maintain a registered
office in the State of Nevada at the same address. The
Surviving Corporation shall also maintain an executive
office at 917 Tahoe Blvd., Suite 200, Incline Village,
Nevada 89450-3709.
1.8 Adoption. The Plan shall be adopted by the
Board of Directors of Parent Net Tel as the sole stockholder
of First Net Tel, and by the sole Sierra Stockholder.
1.9 Dissenters' Rights and Notification. As the
Plan requires the affirmative vote of all of the outstanding
voting securities of the First Net Tel and Sierra, and the
Nevada Revised Statutes do not require a vote of Parent Net
Tel stockholders, dissenters' rights are not applicable
under the Plan;
1.10 Delivery of Certificates by the Sierra
Stockholder. The transfer of the Sierra Shares by the
Sierra Stockholder shall be effected by the delivery to
Parent Net Tel or its transfer agent of certificates
representing the Sierra Shares endorsed in blank or
accompanied by stock powers executed in blank, with all
signatures witnessed or guaranteed to the satisfaction of
Parent Net Tel and First Net Tel and with any necessary
transfer taxes and other revenue stamps affixed (which are
usually not applicable) and acquired at the expense of the
Sierra Stockholder, and on receipt thereof to the
satisfaction of the Surviving Corporation, a stock
certificate representing shares in Parent Net Tel shall be
issued and delivered to the Sierra Stockholder; as a
condition to the exchange of the Sierra Shares, Parent Net
Tel and the Surviving Corporation shall require the Sierra
Stockholder to execute and deliver and Investment Letter,
acknowledging, among other things, that the shares of Parent
Net Tel to be received in exchange for the Sierra Shares are
"unregistered" and "restricted" securities which have not
been registered with the Securities and Exchange Commission
or any state regulatory agency, and which must be so
registered prior to public sale by the Sierra Stockholder,
unless an exemption from such registration is available for
any such sale.
1.11 Further Assurances. At the Closing and from
time to time thereafter, the parties shall execute such
additional instruments and take such other action as may be
reasonably required or necessary to carry out the terms and
provisions hereof.
1.12 Effective Date. The Effective Date of the
Plan shall be the date when the Articles of Merger are filed
and accepted by the Secretary of State of the State of
Nevada and at such time as all applicable provisions of the
Nevada Revised Statutes have been met.
3. The Plan has been approved by respective Boards of
Directors of Parent Net Tel, First Net Tel and Sierra and the
stockholders First Net Tel and Sierra, in accordance with the
provisions of Section 92A.120 of the Nevada Revised Statutes; no
approval of Parent Net Tel stockholders is required under the
Nevada Revised Statutes. Sierra has one class of outstanding
securities, common, being divided into two classes, A and B, with
6,000 shares of Class A common being outstanding; the sole Sierra
Stockholder owning 100% of such securities adopted, ratified and
approved the Plan in accordance with Section 78.320 of the Nevada
Revised Statutes; and First Net Tel has one class of outstanding
securities, such class being common voting stock, and Parent Net
Tel, which owns all 1,000 of such securities, adopted, ratified
and approved the Plan in accordance with Section 78.320 of the
Nevada Revised Statutes.
4. The applicable provisions of the Nevada Revised
Statutes relating to the merger of Sierra with and into First Net
Tel will have been complied with upon compliance with any of the
filing and recording requirements thereof.
5. The merger herein provided for shall become effective
in the State of Nevada on the date of filing hereof.
SIERRA-NET, INC.,
Date: 7/18/96 /s/ Bruce Komito, President
Date: 7/18/96 /s/ Mimi Komito, Secretary
STATE OF UTAH )
) ss
COUNTY OF WEBER )
Personally appeared before me this 18th day of July, 1996,
Bruce and Mimi Komito, who duly acknowledged to me that they are
the President and Secretary, respectively, of Sierra-Net, Inc.,
and that they are authorized to and did execute the foregoing
Articles of Merger.
/s/ Edith Obeso
NOTARY PUBLIC
NET TELECOMMUNICATIONS, INCORPORATED
Date: 7/22/96 /s/ Michael W. Gorts, President
Date: 7/22/96 /s/ Robert Briare, Secretary
STATE OF NEVADA )
) ss
COUNTY OF CLARK )
Personally appeared before me this 22nd day of July, 1996,
Michael Gorts and Robert Briare, who duly acknowledged to me that
they are the President and Secretary, respectively, of Net
Telecommunications, Incorporated, and that they are authorized to
and did execute the foregoing Articles of Merger.
Sandi Saito
NOTARY PUBLIC
NEWS RELEASE
FOR IMMEDIATE RELEASE
July 30, 1996
Net Telecommunications, Inc.
Contact: Michael W. Gorts 702-256-9956
Robert Briare 702-256-9956
Facsimile No. 702-256-9233
Sierra-Net, Inc.
Contact: Bruce Komito 702-832-6911
NetTelecommunications, Inc. ("NetTel")
and
Sierra-Net, Inc. ("Sierra-Net')
Announce Merger
Las Vegas, Nevada - NetTelecommunications, Inc. (OTC Bulletin
Board: NETQ) announced today that it has entered into a merger
agreement with Sierra-Net, Inc. Sierra-Net will become a wholly-
owned subsidiary of Net Tel under terms of the agreement, in
which shareholders of Sierra-Net will receive stock from NetTel
along with a compensation package. Additional terms of
transaction were not disclosed.
Michael Gorts, President and CEO of NetTel stated, "Both
companies believe that the transaction will enhance their
business. NetTel can sell Sierra-net's subscribers long distance
access and Sierra-net can sell NetTel's subscribers Internet
access."
NetTelecommunications, Inc. is implementing a plan of rapid
growth through an aggressive acquisition program of
telecommunication service related providers. NetTel is pursuing
a strategy of "bundling." Bundling is a market theory that
professes the advantages of one-stop shopping for everything:
local service, long distance, cellular, paging, video
conferencing, Internet access, telemarketing, and maybe cable
television. All in one package, under one brand name, with one
monthly bill.
Sierra-net, Inc. is a Reno, Nevada based Internet access
provider, founded in 1994, to target the resale business, selling
services to other smaller Internet access providers.
NetTelecommunications, Inc. is an acquisition vehicle for
telecommunication service related providers.
July 30, 1996
cc: Dow Wire Service Fax No. 212-416-4008
cc: Bloomberg Financial Markets Fax No. 609-279-5976
cc: Reuters Fax No. 212-859-1717
