<PAGE> 1
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
July 5, 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 Jurisdiction) (Commission File No.) (IRS Employer I.D. No.)
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
Silver Ledge, Incorporated
352 South Main Street
Clearfield, Utah 84015
---------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
Item 1. Changes in Control of Registrant.
Pursuant to an Agreement and Plan of Merger (the "Plan") dated July 10,
1996, between the Company, certain principal stockholders of the Company (the
"Company's Principal Stockholders"), Net Telecommunications, Incorporated, a
Nevada corporation ("Net Tel"), and certain stockholders of Net Tel who owned in
excess of a majority of the outstanding voting securities of Net Tel and who
executed and delivered a copy of the Plan (the "Net Tel Majority Stockholders"),
the Net Tel Majority Stockholders became the controlling stockholders of the
Company in a transaction viewed as a "reverse merger," which became effective
on July 11, 1996. The Plan was accounted for as a recapitalization of Net Tel.
Prior to the completion of the Plan, Robin D. Porter, Rodney G. Porter,
Karen Porter and Jennie Porter of Clearfield, Utah, were the principal and
controlling stockholders of the Company, collectively owning 27,622,793
pre-split shares of the Company's common stock or approximately 63% of the
pre-Plan outstanding voting securities of the Company. As a condition to the
Plan and in accordance with Exhibit B to the Plan, which is an Exchange
Agreement between the Company and the Company's Principal Stockholders, the
Company exchanged all of its right, title and interest in and to the securities
of all of its subsidiaries, through which it owned or operated all of its
properties, assets and business, for the 27,622,793 pre-split shares of the
Company owned by the Company's Principal Stockholders; as a result thereof,
immediately prior to the completion of the Plan, the Company had no assets or
liabilities. There were 43,657,907 outstanding voting securities of the Company
at the time of the adoption of the Plan, and after deducting the 27,622,793
shares owned by the Company's Principal Stockholders, which were also voted in
favor of the Plan, there was a balance of 16,035,114 shares of common voting
stock owned by persons who had no interest in the Plan not shared by all other
stockholders; 8,744,189 of these shares or approximately 55% were voted in favor
of the Plan by written consent pursuant to Section 78.320 of the Nevada Revised
Statutes. There was no relationship between the Company's Principal Stockholders
and the Net Tel Majority Stockholders or Net Tel prior to the completion of the
Plan.
The source of the consideration used by the Net Tel Majority
Stockholders to acquire their respective interests in the Company was the
exchange of 1,791.12 shares of $0.001 par value common voting stock of Net Tel
amounting to approximately 71% of the outstanding voting securities of Net Tel
for 4,272,538 post-split shares of $0.001 par value common voting stock of the
Company, amounting to approximately 53% of the outstanding post-Plan voting
securities of the Company. Accordingly, the basis of the "control" by the Net
Tel Majority Stockholders is based upon this stock ownership, and their present
capacities as directors or executive officers of the Company.
In summary, pursuant to the Plan, (i) Net Tel merged with and into the
Company, with the Company being the surviving corporation; (ii) the name of the
Company was changed to "Net Telecommunications, Incorporated"; (iii) the
pre-Plan outstanding voting securities of the Company were reverse split on the
basis of 40.087785 for one, while
<PAGE> 3
retaining the authorized capital at 50,000,000 shares and the par value at
$0.001 per share, with appropriate adjustments to the stated capital and
additional paid in capital accounts of the Company; (iv) each issued,
outstanding or subscribed share of common stock of Net Tel was exchanged for
2,385.4 post-split shares of common stock of the Company, amounting to
approximately 6,000,000 post-split shares in the aggregate; (v) the Company's
Principal Stockholders exchanged 27,622,793 pre-split shares of the Company's
common stock (approximately 689,057 post-split shares) for the Company's
interest in all of its subsidiaries, including all of its properties, assets
and business, resulting in there being approximately 400,000 post-split
outstanding shares of common stock of the Company immediately prior to the
completion of the Plan, not taking into account any shares of common voting
stock to be issued under the Plan; and (vi) an additional 1,600,000 post-split
shares are to be issued to certain consultants of the Company and Net Tel,
610,000 and 990,000 shares respectively, for services related to the
negotiation and consummation of the Plan.
Following the completion of the Plan, taking into account the
foregoing, there are or will be approximately 8,000,000 post-split outstanding
voting securities of the Company.
The following table indicates the names, addresses and stockholdings of
the Net Tel Majority Stockholders, to-wit:
Robert P. Amira 1,290,788 16.1%
2721 Brookstone Ct.
Las Vegas, Nevada 89117
Michael Gorts 1,490,875 18.6%
9301 Leaping Lily Lane
Las Vegas, Nevada 89129
Tony Tegano 1,490,875 18.6%
9016 Opus Drive
Las Vegas, Nevada 89117
Copies of the Plan and related exhibits, the Notice of Dissenters'
Rights and the Articles of Merger accompany this Report and are incorporated
herein by reference. See Item 7 of this Report.
Item 2. Acquisition or Disposition of Assets.
(a) See Item 1 of this Report.
(b) No material assets of Net Tel succeeded to by the Company in the
recapitalization of Net Tel constituted plant, equipment or other physical
property.
Item 3. Bankruptcy or Receivership.
None; not applicable.
<PAGE> 4
Item 4. Changes in Registrant's Certifying Accountant.
None; not applicable.
Item 5. Other Events.
Effective July 5, 1996, the Company changed its domicile from Montana
to Nevada. A copy of the Letter to Stockholders and accompanying Notice of
Dissenters' Rights and the Articles of Merger and Plan of merger respecting
this change of domicile are attached hereto and incorporated herein by
reference. See Item 7 of this Report.
Item 6. Resignations of Directors and Executive Officers.
No director has resigned or declined to stand for re-election to the
Board of Directors since the date of the last annual meeting of stockholders
because of any disagreement with the Company on any matter relating to the
Company's operations, policies or practices.
Pursuant to the Plan (see Item 1 of this Report), the persons who were
serving as directors and executive officers of the Company immediately prior to
the completion of the Plan resigned, in seriatim, and appointed the persons who
were serving as directors and executive officers of Net Tel immediately prior
to the completion of the Plan, as follows, respectively, to-wit:
Resigned:
Name Position
- - ---- --------
Robin D. Porter President, CEO, Treasurer and Director
Rodney G. Porter Operations Officer and Director
Godfrey Penrod Chairman of the Board and Director
Jennie Porter Secretary and Director
Elected:
Michael W. Gorts President and Director
Robert Briare Secretary/Treasurer and Director
Tony Tegano Director
Lonnie Ellis Director
Chris Fanelli Director
Robert P. Amira Director
<PAGE> 5
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
Long Distance International* Financial Statements
Independent Auditors' Report
Balance Sheet as of March 31, 1996 and December 31, 1995
Statement of Operations for the three months ended
March 31, 1996 and the year ended December 31, 1995,
and from inception (October 24, 1994) to March 31, 1996
Statements of Stockholders' Equity for the three months ended
March 31, 1996 and the year ended December 31, 1995,
and from inception (October 24, 1994) to March 31, 1996
Statement of Cash Flows for the three months ended
March 31, 1996 and the year ended December 31, 1995,
and from inception (October 24, 1994) to March 31, 1996 from
Notes to Financial Statements
* Net Tel was the successor in a recapitalization of Long Distance
International, Inc., a Nevada corporation, effective June 18, 1996, primarily
to change the name of the Company from "Long Distance International, Inc." to
"Net Telecommunications, Incorporated" and to increase the authorized capital
of Net Tel from 2,500 shares of no par value common voting stock to 10,000
shares of no par value common voting stock.
See Exhibit E to the Agreement and Plan of Merger between the Company
and Net Telecommunications, Incorporated.
(b) Pro Forma Financial Information.
Consolidated Pro Forma Financial Statements of the Company for the
period ended March 31, 1996, taking into account the completion of the Plan
Compilation Report
Consolidated Pro Forma Balance Sheet
Consolidated Pro Forma Statements of Operations
Statements of Assumptions and Disclosures for the
Consolidated Pro Forma Financial Statements
(c) Exhibits.
<PAGE> 6
Exhibit
Description of Exhibit* Number
----------------------- -------
Agreement and Plan of Merger between the Company 2
and Net Telecommunications, Incorporated
Exhibit A - Stockholders of Net Tel
Exhibit B - Exchange Agreement
Exhibit C - Silver Ledge, Incorporated Financial
Statements for the years ended
December 31, 1995 and 1994
Exhibit C-1 - Silver Ledge, Incorporated Financial
Statements for the period ended
March 31, 1996
Exhibit D - Exceptions to the Silver Ledge Financial
Statements
Exhibit E - Net Telecommunications, Incorporated
Financial Statements for the periods ended
December 31, 1995, and March 31, 1996
Exhibit F - Exceptions to the Net Telecommunications,
Incorporated Financial Statements
Exhibit G - Investment Letter
Exhibit H - Compliance Certificate of Silver Ledge,
Incorporated
Exhibit I - Compliance Certificate of Net
Telecommunications, Incorporated
Exhibit J - Finders
Articles of Merger and Plan of Merger regarding change of domicile 3.1
Articles of Merger and Plan of Merger regarding Net Tel Merger 3.2
Letter to Shareholders 19.1
News Release 19.2
Notice of Dissenters' Rights regarding change of domicile 20.1
Notice of Dissenters' Rights regarding Net Tel 20.2
Documents Incorporated by Reference*
None.
* Summaries of any exhibit are modified in their entirety by this
reference to each exhibit
Item 8. Change in Fiscal Year.
None; not applicable.
<PAGE> 7
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: 7/18/96 /s/ Michael W. Gorts, President
<PAGE> 8
NET TELECOMMUNICATIONS, INC.
(Formerly Silver Ledge, Inc.)
Consolidated Proforma Financial Statements
March 31, 1996
<PAGE> 9
C O N T E N T S
<TABLE>
<S> <C>
Accountants' Report ........................................................ 3
Consolidated Proforma Balance Sheet ........................................ 4
Consolidated Proforma Statement of Operations .............................. 6
Statements of Assumptions and Disclosures................................... 7
</TABLE>
<PAGE> 10
[Jones, Jensen & Co. Letterhead]
The Board of Directors
Net Telecommunications, Inc.
(Formerly Silver Ledge, Inc.)
Las Vegas, Nevada
We have compiled the accompanying consolidated proforma balance sheet of Net
Telecommunications, Inc. (Formerly Silver Ledge, Inc.) as of March 31, 1996 and
the related statement of operations for the three months then ended.
The accompanying presentation and this report was prepared for your company for
the purpose of examining the results of the proposed transactions as outlined in
the assumptions and disclosures presented with these proforma financial
statements and should not be used for any other purpose.
A compilation is limited to presenting in the form of proforma financial
statements information that is the representation of management and does not
include evaluation of the support for the assumptions underlying the proforma
transactions. We have not examined the accompanying proforma financial
statements and, accordingly, we do not express an opinion or any form of
assurance on them.
/s/ Jones Jensen & Company
Jones, Jensen, & Company
July 17, 1996
<PAGE> 11
NET TELECOMMUNICATIONS, INC.
(Formerly Silver Ledge, Inc.)
Consolidated Proforma Balance Sheet
March 31, 1996
(Unaudited)
ASSETS
------
<TABLE>
<CAPTION>
Long
Silver Distance Proforma
Ledge, Inc. International Adjustments
March 31, March 31, Increase Proforma
1996 1996 (Decrease) Consolidation
--------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash $ - $54,624 $ - $54,624
Accounts receivable 803,884 15,050 (803,884) 15,050
Inventory 412,761 5,024 (412,761) 5,024
---------- ------- ----------- -------
Total Current Assets 1,216,645 74,698 (1,216,645) 74,698
---------- ------- ----------- -------
PROPERTY AND EQUIPMENT -
at cost, net of accumulated
depreciation 44,952 7,285 (44,952) 7,285
---------- ------- ----------- -------
TOTAL ASSETS $1,261,597 $81,983 $(1,261,597) $81,983
========== ======= =========== =======
</TABLE>
See Summary of Assumptions and Disclosures and Accountants' Report
-4-
<PAGE> 12
NET TELECOMMUNICATIONS, INC.
(Formerly Silver Ledge, Inc.)
Consolidated Proforma Balance Sheet
March 31, 1996
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Long
Silver Distance Proforma
Ledge, Inc. International Adjustments
March 31, March 31, Increase Proforma
1996 1996 (Decrease) Consolidation
----------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
CURRENT LIABILITIES
Cash overdraft $ 73,563 $ - $ (73,563) $ -
Accounts payable 174,155 13,660 (149,155) 38,660
Accrued expenses 1,100 565 (1,100) 565
Line of credit 234,061 - (234,061) -
Note payable - related parties - 4,041 - 4,041
----------- ----------- ----------- -----------
Total Current Liabilities 482,879 18,266 (457,879) 43,266
----------- ----------- ----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock; par value $0.001;
50,000,000 authorized, 8,000,000
issued and outstanding 4,565,791 181,632 (4,739,423) 8,000
Additional paid-in capital (deficit) (2,946,215) - 3,094,847 148,632
Accumulated deficit (840,858) (117,915) 840,858 (117,915)
----------- ----------- ----------- -----------
Total Stockholders' Equity
(Deficit) 778,718 63,717 (803,718) 38,717
----------- ----------- ----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT) $ 1,261,597 $ 81,983 $(1,261,597) $ 81,983
=========== =========== =========== ===========
</TABLE>
See Summary of Assumptions and Disclosures and Accountants' Report
-5-
<PAGE> 13
NET TELECOMMUNICATIONS, INC.
(Formerly Silver Ledge, Inc.)
Consolidated Proforma Statements of Operations
March 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Long
Silver Distance Proforma
Ledge,Inc. International Adjustments
March 31, March 31, Increase Proforma
1996 1996 (Decrease) Consolidation
--------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
SALES $ 696,119 $ 9,013 $(696,119) $ 9,013
COST OF SALES 515,128 - (515,128) -
--------- --------- --------- ---------
GROSS PROFIT 180,991 9,013 (180,991) 9,013
--------- --------- --------- ---------
EXPENSES
Depreciation and amortization 1,842 809 (1,842) 809
General and administrative 162,163 26,432 (162,163) 26,432
--------- --------- --------- ---------
Total Expenses 164,005 27,241 (164,005) 27,241
--------- --------- --------- ---------
INCOME (LOSS) FROM OPERATIONS 16,986 (18,228) (16,986) (18,228)
--------- --------- --------- ---------
OTHER INCOME (EXPENSE)
Other income - 751 - 751
--------- --------- --------- ---------
Total Other Income (Expense) - 751 - 751
--------- --------- --------- ---------
NET INCOME (LOSS) $ 16,986 $ (17,477) $ (16,986) $ (17,477)
========= ========= ========= =========
</TABLE>
See Summary of Assumptions and Disclosures and Accountants' Report
-6-
<PAGE> 14
NET TELECOMMUNICATIONS, INC.
(Formerly Silver Ledge, Inc.)
Statements of Assumptions and Disclosures for the
Consolidated Proforma Financial Statements
March 31, 1996
(Unaudited)
BACKGROUND AND HISTORICAL INFORMATION
Silver Ledge, Inc.(SLI) was incorporated under the laws of the
State of Nevada. SLI has been in the business of manufacturing
and selling steel and steel related products such as wood
burning stoves. In connection with the reorganization
described below, SLI has disposed of its steel related
business and changed its name to Net Telecommunications, Inc.
Long Distance International, (LDI) was incorporated under the
laws of the State of Nevada on October 24, 1994. LDI started
its operations in May of 1995 primarily as a reseller of long
distance telephone services.
PROFORMA TRANSACTIONS
The historical financial information contained herein has been
consolidated assuming the issuance of 7,600,000 shares of
common stock of SLI for all the outstanding common stock of
LDI as of March 31, 1996. The purchase was effective on July
10, 1996, but has been retroactively applied to the historical
information of both companies. The balance sheets of SLI and
LDI are shown at March 31, 1996. The statements of operations
cover the three months ended March 31, 1996.
-7-
<PAGE> 15
NET TELECOMMUNICATIONS, INC.
(Formerly Silver Ledge, Inc.)
Statements of Assumptions and Disclosures for the
Consolidated Proforma Financial Statements
March 31, 1996
(Unaudited)
PROFORMA ADJUSTMENTS
SLI issued 6,000,000 shares of common stock in exchange for
all of the outstanding shares of LDI and 1,600,000 shares to
various consultants in connection with the exchange. The
proforma adjustment has been prepared as a recapitalization of
LDI and all significant inter-company transactions have been
eliminated. The proforma adjustments to record the
recapitalization of LDI.
1) Record the 40,087,785 for 1 reverse stock split of SLI
common stock and change in par value to $0.001 from $0.10.
Common stock $(4,564,702)
Additional paid-in capital 4,564,702
-----------
Total $ -
===========
2) Cancellation of 689,057 shares of common stock (post split)
(27,622,793 shares pre split).
Common stock $(689)
Additional paid-in capital 689
-----
Total $ -
=====
3) Eliminate the equity of LDI.
Common stock $(181,632)
Additional paid-in capital 181,632
---------
Total $ -
=========
4) Acquisition of LDI for 7,600,000 shares of SLI stock.
Common stock $ 7,600
Additional paid-in capital (7,600)
-------
Total $ -
=======
5) Charge estimated costs to be incurred in connection with
the shares to be issued in the acquisition of LDI against
additional paid-in capital.
Accounts payable $25,000
Additional paid-in capital (25,000)
-------
Total $ -
-8-
<PAGE> 16
NET TELECOMMUNICATIONS, INC.
(Formerly Silver Ledge, Inc.)
Statements of Assumptions and Disclosures for the
Consolidated Proforma Financial Statements
March 31, 1996
(Unaudited)
6) Record the spin off of SLI.
<TABLE>
<S> <C>
Accounts receivable $ (803,884)
Inventory (412,761)
Property and equipment (44,952)
Cash overdraft 73,563
Accounts payable 174,155
Accrued expenses 1,100
Line of credit 234,061
Additional paid-in capital 1,619,576
Accumulated deficit (840,858)
----------
Total $ -
==========
</TABLE>
See Summary of Assumptions and Disclosures and Accountants' Report
-9-
<PAGE> 1
EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT (the "Plan") is made this 10th day of July, 1996,
between Silver Ledge, Incorporated, a Nevada corporation ("Silver Ledge");
certain principal stockholders of Silver Ledge, namely, Robin D. Porter, Rodney
G. Porter, Karen Porter and Jennie Porter (the "Silver Ledge Principal
Stockholders"); Net Telecommunications, Incorporated, a Nevada corporation ("Net
Tel"); and the persons listed in Exhibit A hereof (which is a record of the
owners of all of the issued and outstanding voting securities of Net Tel) who
execute and deliver a copy of the Plan (the "Net Tel Stockholders");
W I T N E S S E T H :
WHEREAS, the respective Boards of Directors of Silver Ledge and Net Tel
have adopted certain resolutions whereby Silver Ledge and Net Tel will merge
pursuant to the provisions of Section 368(a)(1)(A) of the Internal Revenue Code
of 1954, as amended, and the applicable provisions of the Nevada Revised
Statutes; and
WHEREAS, Silver Ledge has formed a Nevada corporation as a wholly-owned
subsidiary and is in the process of changing its domicile from the State of
Montana to the State of Nevada by merging with and into such subsidiary, with
the present intent that this Plan shall be binding upon either or both such
entities; and
WHEREAS, the respective resolutions provide for the ratification or
approval of the respective stockholders of Silver Ledge and Net Tel, as outlined
hereinbelow;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreement of the parties hereto, the Plan and the terms and conditions thereof
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. Net Tel will merge into
Silver Ledge, with Silver Ledge being the "Surviving Corporation"; the separate
existence of Net Tel shall cease, and the name of the Surviving Corporation
shall become "Net Telecommunications, Incorporated." Until amended, modified or
otherwise altered, the Articles of Incorporation of Silver Ledge shall continue
to be the Articles of Incorporation of the Surviving Corporation; and the Bylaws
of Silver Ledge shall become the Bylaws of the Surviving Corporation.
<PAGE> 2
1.2 Changes in Capitalization and Par Value. The outstanding
voting securities of Silver Ledge shall be reverse split on a basis of 40.087785
for one, while retaining the authorized capital of Silver Ledge at 50,000,000
shares, with appropriate adjustments being made in the stated capital and
additional paid in capital accounts of Silver Ledge.
1.3 Share Conversion. Each share of issued, outstanding or
subscribed common stock of Net Tel (the "Net Tel Shares") shall, upon the
effective date of the Plan, be converted into 2,385.4 post-split shares of
common stock of Silver Ledge, amounting to approximately 6,000,000 post-split
shares in the aggregate, as outlined in Exhibit A; all fractional shares shall
be rounded to the nearest whole share.
1.4 Exchange Agreement. Simultaneous with the Closing, Silver
Ledge shall have entered into a Exchange Agreement with the Silver Ledge
Principal Stockholders pursuant to which Silver Ledge will exchange all of the
outstanding securities of all of its subsidiaries for the 27,622,793 pre-split
shares of common stock of Silver Ledge (approximately 689,057 post-split shares)
owned by the Silver Ledge Principal Stockholders, presently amounting to
approximately 63% of the pre-Plan outstanding securities of Silver Ledge, and
resulting in there then being approximately 400,000 post-split outstanding
shares of common stock of Silver Ledge, not taking into account any shares of
Silver Ledge common stock to be issued pursuant to the Plan. A copy of the
Exchange Agreement is attached hereto as Exhibit B and incorporated herein by
reference.
1.5 Assets and Liabilities of Silver Ledge at Closing. Taking into
account the completion of the Exchange Agreement outlined in Section 1.4 hereof,
Silver Ledge shall have no assets or liabilities at Closing, and all costs
incurred by Silver Ledge incident to the Plan shall have been paid or satisfied
at Closing.
1.6 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 Net Tel; and all and
singular, the rights, privileges, powers and franchises of Net Tel, and all
property, real, personal and mixed, and all debts due to Net Tel on whatever
account, as well for stock subscriptions as all other things in action or
belonging to Net Tel 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 Net Tel, and the title to any real estate vested by
deed or otherwise in Net Tel 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 Net Tel shall be preserved unimpaired, and all debts, liabilities and duties
of Net Tel 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. Specifically, but not by way of
limitation, the Surviving Corporation shall be responsible and liable to
dissenting stockholders of Net Tel and Silver Ledge; and any action or
proceeding, whether civil, criminal or
2
<PAGE> 3
administrative, pending by or against Net Tel, shall be prosecuted as if the
Plan had not taken place, or the Surviving Corporation may be substituted in
such action or proceeding.
1.7 Survivor's Succession to Corporate Acts, Plans, Contracts,
etc. All corporate acts, plans, policies, contracts, approvals and
authorizations of Net Tel 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 Net Tel. The
employees of Net Tel 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 Net Tel.
1.8 Survivor's Rights to Assets, Liabilities, Reserves, etc. The
assets, liabilities, reserves and accounts of Net Tel 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 Net Tel, subject to such adjustments or
eliminations of intercompany items as may be appropriate in giving effect to the
Plan.
1.9 Resignations of Present Directors and Executive Officers and
Designation of New Directors and Executive Officers. On Closing, the present
directors and executive officers of Silver Ledge shall resign, in seriatim, and
designate the directors and executive officers of Net Tel 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.
1.10 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.
1.11 Adoption. The Plan must be adopted by persons owning a
majority of the outstanding voting securities of Silver Ledge, not taking into
account the shares of common stock of Silver Ledge owned by the Silver Ledge
Principal Stockholders; and, subject to the provisions of Section 9 herein
regarding termination resulting from dissenters' rights as may be accorded or
exercised under the laws of the State of Nevada, persons owning a majority of
the outstanding voting securities of Net Tel.
1.12 Dissenters' Rights and Notification. Stockholders of both
corporations shall be afforded all rights and privileges and be subject to such
obligations as are contained within the Nevada Revised Statutes regarding
dissenters' rights, and the Surviving Corporation shall be obligated to notify
all such stockholders as provided therein.
3
<PAGE> 4
1.13 Delivery of Certificates by Net Tel Stockholders. The transfer
of the Net Tel Shares by the Net Tel Stockholders shall be effected by the
delivery to Silver Ledge or its transfer agent of certificates representing the
Net Tel Shares endorsed in blank or accompanied by stock powers executed in
blank, with all signatures witnessed or guaranteed to the satisfaction of Silver
Ledge and Net Tel and with all necessary transfer taxes and other revenue stamps
affixed and acquired at the Net Tel Stockholders' expense, and on receipt
thereof to the satisfaction of the Surviving Corporation, stock certificates
representing shares in the Surviving Corporation as outlined in Exhibit A shall
be forwarded to non-dissenting Net Tel Stockholders; as a condition to the
exchange of the Net Tel Shares, the Surviving Corporation may require the Net
Tel Stockholders to execute and deliver and Investment Letter as outlined in
Section 4.12 hereof, acknowledging, among other things, that the shares of
Silver Ledge to be received in exchange for the Net Tel 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 any of the Net Tel Stockholders,
unless an exemption from such registration is available for any such sale.
1.14 Consultant's Shares. Silver Ledge shall also issue 1,600,000
post-split shares of its common stock to certain consultants of Silver Ledge and
Net Tel, 610,000 and 990,000 shares, respectively, resulting in there be
approximately 8,000,000 post-split outstanding shares of $0.001 par value common
of the Surviving Corporation following the Closing of the Plan.
1.15 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.
1.16 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 offices of Leonard W. Burningham, Esq., Hermes Building, Suite 205, 455
East Fifth South, Salt Lake City, Utah 84111, 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.
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Section 3
Representations and Warranties of Silver Ledge and the Silver Ledge Principal
Stockholders
Silver Ledge and the Silver Ledge Principal Stockholders represent and
warrant to, and covenants with, the Net Tel Stockholders and Net Tel as follows:
3.1 Corporate Status. Silver Ledge 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. Silver Ledge 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; Silver Ledge
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 Net
Tel, and which such reports are true and correct in every material respect; and
the securities of Silver Ledge are currently listed on the OTC Bulletin Board of
the National Association of Securities Dealers, Inc. (the "NASD"), though there
is no "established trading market" for these securities.
3.2 Capitalization. The authorized capital stock of Silver Ledge
consists of 50,000,000 shares of common voting stock, having a par value of
$0.001 per share of which 43,657,907 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 Silver Ledge.
3.3 Financial Statements. The audited financial statements of
Silver Ledge furnished to the Net Tel Stockholders and Net Tel, consisting of a
balance sheet dated December 31, 1995 and 1994, and a related statement of
income for the periods then ended, attached hereto as Exhibit C, and an
unaudited balance sheet and related statement of income for the period ended
March 31, 1996, attached hereto as Exhibit C-1, and incorporated herein by
reference, are correct and fairly present the financial condition of Silver
Ledge 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. Silver Ledge has no liabilities of
any nature except to the extent reflected or reserved against in its balance
sheets, whether accrued, absolute, contingent or otherwise, including, without
limitation, tax liabilities and interest due
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or to become due, except as set forth in Exhibit D. All business operations of
Silver Ledge have been conducted through its present or former subsidiaries, and
Silver Ledge has no singular responsibility for any such operations or any
related liabilities, contingent or otherwise.
3.5 Interim Changes. Since the date of its balance sheets, except
as set forth in Exhibit D, there have been no (1) changes in financial
condition, assets, liabilities or business of Silver Ledge which, in the
aggregate, have been materially adverse; (2) damages, destruction or losses of
or to property of Silver Ledge, payments of any dividend or other distribution
in respect of any class of stock of Silver Ledge, 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. Silver Ledge has good and marketable title
to all properties and assets, real and personal, reflected in its balance
sheets, and the properties and assets of Silver Ledge 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 Silver Ledge, threatened, against or relating to Silver
Ledge, 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 Silver Ledge
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 Silver Ledge.
3.8 Books and Records. From the date of this Plan to the Closing,
Silver Ledge will (1) give to the Net Tel Stockholders and Net Tel 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 Net Tel Stockholders and Net Tel or their respective
representatives may inspect and audit them; and (2) furnish such information
concerning the properties and affairs of Silver Ledge as the Net Tel
Stockholders and Net Tel or their respective representatives may reasonably
request.
3.9 Tax Returns. Silver Ledge 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), Silver Ledge and its representatives will keep confidential any
information which they obtain from the Net Tel Stockholders or from Net Tel
concerning the properties, assets and business of Net Tel. If the transactions
contemplated by this Plan are not consummated by July 15, 1996, Silver Ledge
will return to Net Tel all written matter with respect to Net Tel obtained by
Silver Ledge in connection with the negotiation or consummation of this Plan.
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3.11 Corporate Authority. Silver Ledge has full corporate power and
authority to enter into this Plan and to carry out its obligations hereunder and
will deliver to the Net Tel Stockholders and Net Tel 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. Subject to approval of the Plan by persons
owning a majority of the outstanding voting securities of Silver Ledge, the
execution of this Plan and performance by Silver Ledge hereunder has been duly
authorized by all requisite corporate action on the part of Silver Ledge, and
this Plan constitutes a valid and binding obligation of Silver Ledge and
performance hereunder will not violate any provision of the Articles of
Incorporation, Bylaws, agreements, mortgages or other commitments of Silver
Ledge.
3.13 Environmental Matters. Silver Ledge 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 Net Tel. Silver Ledge and the
Silver Ledge Principal Stockholders 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, 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 Net Tel or any
proposed acquisition targets 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 4
Representations, Warranties and Covenants of Net Tel and the Net Tel
Stockholders
Net Tel and the Net Tel Stockholders represent and warrant to, and
covenant with, Silver Ledge as follows:
4.1 Net Tel Shares. The Net Tel Stockholders are respectively the
record and beneficial owners of the Net Tel Shares, free and clear of adverse
claims of third parties; and Exhibit A correctly sets forth the names, addresses
and number of Net Tel Shares owned by each of the Net Tel Stockholders.
4.2 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
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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 Net Tel
consists of 10,000 shares of common voting stock, having no par value per share,
of which 2,515.4 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 Net Tel.
4.4 Financial Statements. The audited financial statements of Net
Tel furnished to Silver Ledge, consisting of a balance sheet for the year ended
December 31, 1995, and the period ended March 31, 1996, and a related statement
of income for the periods then ended, attached hereto as Exhibit E 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 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. Net Tel 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 Net Tel which, in the aggregate,
have been materially adverse; (2) damages, destruction or loss of or to the
property of Net Tel, payment of any dividend or other distribution in respect of
the capital stock of Net Tel, 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. Net Tel 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 Net Tel 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 Net Tel, threatened, against or relating to Net Tel, 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 Net Tel is party to
any material legal proceeding which could have an
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adverse effect on Net Tel (financial or otherwise), and none is party to any
action or proceeding wherein any has an interest adverse to Net Tel.
4.9 Books and Records. From the date of this Plan to the Closing,
the Net Tel Stockholders will cause Net Tel to (1) give to Silver Ledge 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
Silver Ledge may inspect and audit them; and (2) furnish such information
concerning the properties and affairs of Net Tel as Silver Ledge may reasonably
request.
4.10 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.
4.11 Confidentiality. Until the Closing (and continuously if there
is no Closing), the Net Tel Stockholders and Net Tel and their respective
representatives will keep confidential any information which they obtain from
Silver Ledge concerning its properties, assets and business. If the transactions
contemplated by this Plan are not consummated by July 15, 1996, the Net Tel
Stockholders and Net Tel will return to Silver Ledge all written matter with
respect to Silver Ledge obtained by them in connection with the negotiation or
consummation of this Plan.
4.12 Investment Intent. The Net Tel Stockholders are acquiring the
shares to be delivered to them under this Plan for investment and not with a
view to the sale or distribution thereof, and the Net Tel Stockholders have no
commitment or present intention to liquidate the Company or to sell or otherwise
dispose of the Silver Ledge common stock being received under the Plan, The Net
Tel Stockholders shall execute and deliver to Silver Ledge, as a condition
subsequent 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 Silver Ledge being received under the
Plan in exchange for the Net Tel Shares, and receipt of certain material
information regarding Silver Ledge, including, but not limited to the reports of
Silver Ledge 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. Net Tel has full corporate power and
authority to enter into this Plan and to carry out its obligations hereunder and
will deliver to Silver Ledge 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. Subject to approval of the Plan by persons
owning a majority of the outstanding voting securities of Net Tel, the execution
of this Plan and performance by Net Tel hereunder have 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
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performance hereunder will not violate any provision of the Articles of
Incorporation, Bylaws, agreements, mortgages or other commitments of Net Tel.
4.15 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.
4.16 Access to Information Regarding Silver Ledge. Net Tel and the
Net Tel Stockholders who execute and deliver a copy of the Plan acknowledge that
they have been delivered copies of what has been represented to be documentation
containing all material information respecting Silver Ledge and its present and
contemplated business operations, management and other factors, all in the form
of annual and quarterly reports filed by Silver Ledge 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 Silver Ledge, and with the legal and accounting firms of
Silver Ledge, 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 Net Tel Pending the Closing
Except as otherwise provided herein, Net Tel and the Net Tel
Stockholders agree that Net Tel 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 Net Tel.
5.2 Capitalization, etc. Net Tel 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. 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 Silver Ledge, enter
into any material commitments except in the ordinary course of business.
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Section 6
Conduct of Silver Ledge Pending the Closing
Except as otherwise provided herein, Silver Ledge and the Silver Ledge
Principal Stockholders agree that Silver Ledge 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 Silver Ledge.
6.2 Capitalization, etc. Silver Ledge 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, except as contemplated by this Plan and Section 1.4 hereof.
6.3 Conduct of Business. Silver Ledge 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 7
Conditions Precedent to Obligations of the Net Tel Stockholders and Net Tel
All obligations of the Net Tel Stockholders and Net Tel 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 Silver Ledge and the Silver Ledge Principal
Stockholders 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. Silver Ledge and the Silver Ledge Principal
Stockholders 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. The Net Tel Stockholders shall have
been furnished with a certificate signed by the President and Secretary of
Silver Ledge, attached hereto as Exhibit H attached hereto 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 and C-1 hereto), there has been no material
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adverse change in the financial condition, business or properties of Silver
Ledge, taken as a whole.
7.4 Opinion of Counsel of Silver Ledge. The Net Tel Stockholders
and Net Tel shall have received an opinion of counsel for Silver Ledge, 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
Silver Ledge to be issued to the Net Tel Stockholders under this Plan will, when
so issued, be validly issued, fully paid and non-assessable.
7.5 Assets and Liabilities of Silver Ledge. The Exchange Agreement
between Silver Ledge and the Silver Ledge Principal Stockholders shall have been
executed and delivered to the Closing by the parties and shall have been
approved by non-interested stockholders of Silver Ledge owning a majority of the
remaining outstanding voting securities of Silver Ledge, after deduction of the
Silver Ledge Principal Stockholders' shares, and Silver Ledge shall have no
other assets and liabilities at Closing, and all costs, expenses and fees
incident to the Plan shall have been paid.
7.6 Resignations of Present Directors and Executive Officers and
Designation of New Directors and Executive Officers. The present directors and
executive officers of Silver Ledge shall have resigned, in seriatim, and shall
have designated the directors and executive officers of Net Tel to serve in
their place and stead, until the next respective annual meetings of the
stockholders and Board of Directors of Silver Ledge, and until their respective
successors shall be elected and qualified or until their respective prior
resignations or terminations.
7.7 Dissenters'. Silver Ledge stockholders who exercise
dissenters' rights shall not exceed 10% of the outstanding voting securities of
Silver Ledge.
Section 8
Conditions Precedent to Obligations of Silver Ledge
All obligations of Silver Ledge and the Silver Ledge Principal
Stockholders 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 Net Tel
Stockholders' and Net Tel's representations and warranties 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.
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8.2 Due Performance. The Net Tel Stockholders and Net Tel 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. Silver Ledge shall
have been furnished with a certificate signed by the President and Secretary of
Net Tel, and all of the Net Tel Stockholders who own 10% or more of the
outstanding voting securities of Net Tel and who adopt, ratify and approve the
Plan or their duly authorized representatives, 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 Net Tel taken as a whole.
8.4 Opinion of Counsel of Net Tel. Silver Ledge shall have
received an opinion of counsel for Net Tel, dated as of the Closing, to the
effect that (1) the representations of Sections 4.2, 4.3 and 4.13 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 Net Tel Shares to be delivered
to Silver Ledge 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 Net Tel Stockholders or the Board of
Directors of Net Tel shall have caused Net Tel to make available all books and
records of Net Tel, including minute books and stock transfer records; provided,
however, only to the extent requested in writing by Silver Ledge at Closing.
8.6 Revocation of Prior Authorizations. The officers of Net Tel
shall have delivered to Silver Ledge certified copies of resolutions of the
Board of Directors of Net Tel revoking all prior authorizations, powers of
attorney, designations and appointments relating to the signing of checks,
borrowing of funds, access to corporate safe-deposit boxes and other similar
matters, to the extent requested by Silver Ledge.
8.7 Acceptance by Stockholders. The terms of this Plan shall have
been accepted by the Net Tel Stockholders who own not less than 51% of the
outstanding voting securities of Net Tel as evidenced by their signatures on
Exhibit G.
8.8 Exchange Agreement and Stockholders' Approval Thereof and of
the Plan. The Exchange Agreement between Silver Ledge and the Silver Ledge
Principal Stockholders and the Plan shall have been executed and delivered to
the Closing by the parties and shall have been approved by non-interested
stockholders of Silver Ledge owning a majority of the remaining outstanding
voting securities of Silver Ledge, after deduction of the Silver Ledge Principal
Stockholders' shares.
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Section 9
Termination
Prior to Closing, this Plan may be terminated (1) by mutual consent in
writing; (2) by either the Directors of Silver Ledge or the Net Tel Stockholders
and Net Tel 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
Silver Ledge or the Net Tel Stockholders and Net Tel 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; or by Net Tel, if Silver Ledge stockholders who
exercise dissenters' rights exceed 10% of the outstanding voting securities of
Silver Ledge.
Section 10
Stockholders' Representative
The Net Tel Stockholders hereby irrevocably designate and appoint
Michael Gorts as their agent and attorney in fact ("Net Tel Stockholders'
Representative") with full power and authority until the Closing to execute,
deliver and receive on their behalf all notices, requests and other
communications hereunder; to fix and alter on their behalf the date, time and
place of the Closing; to waive, amend or modify any provisions of this Plan and
to take such other action on their behalf in connection with this Plan, the
Closing and the transactions contemplated hereby as such agent deems
appropriate; provided, however, that no such waiver, amendment or modification
may be made if it would decrease the number of shares to be issued to the Net
Tel Stockholders under Section 1.3 hereof or increase the extent of their
obligation to Silver Ledge hereunder, unless agreed in writing by the Net Tel
Stockholders.
Section 11
Survival and Indemnity
11.1 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.
11.2 Indemnity from Silver Ledge and the Silver Ledge Principal
Stockholders. Silver Ledge and the Silver Ledge Principal Stockholders agree to
indemnify and hold Net Tel and the Net Tel Stockholders harmless against and in
respect of:
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(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 Silver Ledge
herein or in any exhibit hereto, (iii) any materially
misleading information furnished by Silver Ledge herein or in
any exhibit hereto, (iv) any breach by Silver Ledge of any
representation, warranty or covenant herein or in any exhibit
hereto, or (v) any debt or other obligation of Silver Ledge
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 Net Tel or any of the Net Tel
Stockholders in connection with any action, suit, proceeding,
demand, assessment or judgment incident to any of the matters
indemnified against in this Section 11.2.
11.3 Indemnity from Net Tel and Net Tel Stockholders. Net Tel and
the 10% Net Tel Stockholders who execute and deliver a copy of this Plan agree
to indemnify and hold Silver Ledge and the Silver Ledge Principal Stockholders
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 Net Tel or the Net Tel
Stockholders herein or in any exhibit hereto (ii) any
misrepresentation or omission by Net Tel or the Net Tel
Stockholders herein or in any exhibit hereto or (iii) any
materially misleading information furnished by Net Tel or the
Net Tel Stockholders herein or in any exhibit hereto; and
(b) All reasonable costs and expenses (including reasonable
attorneys' fees) incurred by Silver Ledge and the Silver Ledge
Principal Stockholders in connection with any action, suit,
proceeding, demand, assessment, or judgment incident to any of
the matters indemnified against in this Section 11.3.
11.4 Not Exclusive Remedy. Any right of indemnity of any party
pursuant to this Section 11 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.
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Section 12
General Provisions
12.1 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.
12.2 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.
12.3 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/her 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/her.
12.4 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 Silver Ledge: Robin D. Porter
2245 West 550 North
West Point, Utah 84015
With a copy to: Leonard E. Neilson, Esq.
1121 East 3900 South
Salt Lake City, Utah 84124
If to Net Tel: Robert Briare
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 the Net Tel
Stockholders: To the addresses listed on Exhibit A
12.5 Entire Agreement. This Plan constitutes the entire agreement
between the parties and supersedes and cancels any other agreement,
representation, or communication,
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whether oral or written, between the parties hereto relating to the transactions
contemplated herein or the subject matter hereof.
12.6 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.
12.7 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.
12.8 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.
12.9 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.
12.10 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.
17
<PAGE> 18
IN WITNESS WHEREOF, the parties have executed this Agreement and Plan
of Merger effective the day and year first above written.
SILVER LEDGE, INCORPORATED
By /s/ Robin D. Porter
-----------------------------------
Robin D. Porter
/s/ Robin D. Porter
--------------------------------------
Robin D. Porter, Personally
/s/ Rodney G. Porter
--------------------------------------
Rodney G. Porter, Personally
/s/ Karen Porter
--------------------------------------
Karen Porter, Personally
/s/ Jennie Porter
--------------------------------------
Jennie Porter, Personally
18
<PAGE> 19
IN WITNESS WHEREOF, the parties have executed this Agreement and Plan
of Merger effective the day and year first above written.
NET TELECOMMUNICATIONS, INCORPORATED
By /s/ Michael Gorts
-----------------------------------
Michael Gorts, President
/s/ Robert P. Amira
--------------------------------------
Robert P. Amira, Personally
/s/ Michael Gortz
--------------------------------------
Michael Gortz, Personally
/s/ Tony Tegano
--------------------------------------
Tony Tegano, Personally
19
<PAGE> 20
EXHIBIT A
<TABLE>
<CAPTION>
Number of Shares Number of Shares
Owned of of Stock of
Long Distance Silver Ledge to be
Name and Address International Received in Exchange
- - ---------------- --------------- --------------------
<S> <C> <C>
Jim Akamine 24 57,249
Wallace Tekanaka
8616 Desert Bird Drive
Las Vegas, NV 89128
James P. Armour, Jr. 6 14,312
11910 Thoroughbred, Apt. 310
Houston, Texas 77065
Donald J. Borders 19.65 46,873
801 Deercross Court
Louisville, Kentucky 40245
Lane Clissold 19.66 46,897
135 W. 900 South
Salt Lake City, Utah 84124
Nas Rullah Dobani 19.66 46,897
High Trading Corporation
8115 Gulf Freeway
Houston, Texas 77017
Dr. Richard Ellis 188 448,455
Carol Ellis
93 Priceville Lane
Las Vegas, Nevada 89113
Jerry Engel and 41.94 100,044
Sharlene Engel, as
Trustees for The Jerry Engel
and Sharlene Engel Revocable
Family Trust, U/A/D 7/14/76
Franklin F. Harberg, Jr., 19.66 46,897
Trustee
11 Greenway Plaza, Suite 2100
Houston, Texas 77065
</TABLE>
<PAGE> 21
<TABLE>
<S> <C> <C>
James H. Jones, II 15 35,781
6623 Lost Horizon Drive
Austin, Texas 78759
Laguna Enterprises, Ltd. 30 71,562
Peter D. Anderson
P. O. Box 2097
Grand Cayman, B.W.I.
Sidney Lazard 30 71,562
3400 N. El Camino Rinconado
Tucson, Arizona 85749
Vincent M. McGuire 19.06 45,466
3286 Deer Creek Cove
Salt Lake City, Utah 84121
McKenna Group 19.66 46,897
Kenneth Ward
c/o Givens Hall Bank & Trust
Genesis Bldg., 3rd Floor
Georgetown, Grand Cayman, B.W.I.
Horace E. Najvar 19.65 46,873
15015 Havenridge
Houston, Texas 77083
The Steven J. Oshins 1995 20.97 50,022
Irrevocable Trust
1645 Village Center Circle,
Suite 170
Las Vegas, Nevada 89134
Richard Edwin Pitts 30 71,562
7710 Beechnut, Suite 100
Houston, Texas 77074
R.C.M., Inc. 75 178,905
Alan Schaefer
Randal R. Thompson
H. Dale Thompson
P. O. Box 2097
Grand Cayman, B.W.I.
Sue Read 30.2 71,610
2315 Brent Drive
Big Spring, Texas 79720-6020
</TABLE>
<PAGE> 22
<TABLE>
<S> <C> <C>
Rockport Trading Company, Ltd. 30 71,562
Peter D. Anderson
P. O. Box 2097
Grand Cayman, B.W.I.
Sterling Guarantee 4.11 9,804
P. O. Box 22081
Houston, Texas 77227
Gus Thiros and Virginia Thiros, 20.97 50,022
as Trustees for
The Gus Thiros and
Virginia Thiros
Revocable Family
Trust U/A/D 3/8/84
9712 Stellar View Lane
Las Vegas, Nevada 89117
Shahram Vaziri 11.31 26,979
5757 Westheimer, #3-158
Houston, Texas 77057
Kenneth Ward 19.66 46,897
McKenna, Ltd.
c/o Givens Hall Bank & Trust
Genesis Bld., 3rd Floor
Georgetown, Grand Cayman, B.W.I.
David Wiederanders 10 23,854
Box 690553
San Antonio, Texas 78269
Robert P. Amira 541.12 1,290,788
2721 Brookstone Ct.
Las Vegas, Nevada 89117
Michael Gorts 625 1,490,875
9301 Leaping Lily Lane
Las Vegas, Nevada 89129
Tony Tegano 625 1,490,875
9016 Opus Drive
Las Vegas, Nevada 89117 ________ _________
2,515.28 5,999,520
</TABLE>
<PAGE> 23
EXHIBIT B
EXCHANGE AGREEMENT
<PAGE> 24
EXCHANGE AGREEMENT
THIS AGREEMENT (the "Agreement") is made this 10th day of July, 1996,
between Silver Ledge, Incorporated, a Nevada corporation ("Silver Ledge"); and
certain principal stockholders of Silver Ledge, namely, Robin D. Porter, Rodney
G. Porter, Karen Porter and Jennie Porter (the "Silver Ledge Principal
Stockholders");
WITNESSETH:
WHEREAS, Silver Ledge and the Silver Ledge Principal Stockholders have
entered into an Agreement and Plan of Merger (the "Plan") with Net
Telecommunications, Incorporated, a Nevada corporation ("Net Tel"), whereby Net
Tel will merge with and into Silver Ledge; and
WHEREAS, as a condition to the Plan, Silver Ledge must have no assets
or liabilities on closing thereof; and
WHEREAS, the Plan provides for the exchange by the Silver Ledge
Principal Stockholders of 27,622,793 shares of $0.10 par value common voting
stock of Silver Ledge presently owned by them for the interest of Silver Ledge
in all of the outstanding securities of all of the subsidiaries of Silver Ledge,
and the Silver Ledge Principal Stockholders' joint and several assumption,
indemnification and hold harmless covenants with respect to any and all
liabilities of Silver Ledge or such subsidiaries, subject to the approval of
persons owning a majority of the remaining outstanding voting securities of
Silver Ledge, after deduction of the 27,622,793 shares owned by the Silver Ledge
Principal Stockholders;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the Plan and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto do hereby agree
as follows:
1
Exchange of Shares
Silver Ledge hereby exchanges all its right, title and interest in all
of the outstanding shares of its subsidiaries to the Silver Ledge Principal
Stockholders, in exchange for 27,622,793 shares of Silver Ledge's $0.10 par
value common stock owned by the Silver Ledge Principal Stockholders.
<PAGE> 25
2
Representations and Warranties of the Silver Ledge Principal Stockholders
2.1 All representations of Silver Ledge and the Silver Ledge Principal
Stockholders contained in the Plan are hereby restated and incorporated herein.
2.2 The Silver Ledge Principal Stockholders are the owners of the
27,622,793 shares of $0.10 par value common stock of Silver Ledge to be
exchanged hereunder, free and clear of any liens or encumbrances of any type or
nature whatsoever.
2.3 This Agreement has been approved by persons owning a majority of
the outstanding voting securities of Silver Ledge, after deducting the shares of
Silver Ledge being exchanged hereunder.
3.
Assumption, Indemnification and Hold Harmless Agreement
The Silver Ledge Principal Stockholders shall:
3.1 Indemnify and hold Silver Ledge harmless from and against any and
all liabilities of any type or nature whatsoever, whether actual or contingent,
which are in any way related to the business operations of Silver Ledge or any
of its present or past subsidiaries, to and including the closing of the Plan.
3.2 Specifically, but not by way of limitation, and as between the
parties, the Silver Ledge Principal Stockholders shall also assume, indemnify
and hold Silver Ledge harmless from and against the liabilities referred to in
the notes to Silver Ledge's financial statements for the periods ended December
31, 1995 and 1994, to MAC JAC Development and Ellsworth (L.J.) Construction,
Inc.
4.
Delivery of Stock Certificates
4.1 All stock certificates of Silver Ledge's subsidiaries and those to
be exchanged therefor by the Silver Ledge Principal Stockholders shall be
deposited in escrow with Leonard Neilson, Esq., pending the closing of the Plan,
and on such closing, shall be delivered to the respective parties entitled
thereto under this Agreement.
4.2 The Silver Ledge Principal Stockholders agree that Mr. Neilson can
deliver the subsidiary stock certificates deposited to Robin D. Porter, for
their mutual benefit, and that they shall be responsible with dividing such
securities as they shall agree.
<PAGE> 26
5.
Miscellaneous
5.1 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
securities transferred hereunder or otherwise to carry out the intent and
purposes of this Agreement.
5.2 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.
5.3 Each party represents to the other parties hereunder that no broker
or finder has acted for it/him/her in connection with this Agreement, 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/her.
5.4 This Agreement 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.
5.5 This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Utah, except to the extent pre-empted
by federal law, in which event (and to that extent only), federal law shall
govern.
5.6 This Agreement 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 Agreement without the prior
written consent of the other parties shall be void.
5.7 This Agreement 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.
5.8 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 provsions hereof.
<PAGE> 27
IN WITNESS WHEREOF, the parties have executed this Agreement and Plan
of Reorganization effective the day and year first above written.
SILVER LEDGE, INCORPORATED
By /s/ Robin D. Porter
---------------------------------
Robin D. Porter, President
/s/ Robin D. Porter
---------------------------------
Robin D. Porter
/s/ Rodney G. Porter
---------------------------------
Rodney G. Porter
/s/ Karen Porter
---------------------------------
Karen Porter
/s/ Jennie Porter
---------------------------------
Jennie Porter
<PAGE> 28
EXHIBIT C
SILVER LEDGE, INCORPORATED
FINANCIAL STATEMENTS
December 31, 1995 and 1994
<PAGE> 29
[JONES, JENSEN & COMPANY LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
Board of Directors
Silver Ledge, Inc.
Clearfield, Utah
We have audited the accompanying consolidated balance sheets of Silver Ledge,
Inc. and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the years ended December 31, 1995, 1994 and 1993. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Silver Ledge, Inc.
and subsidiaries as of December 31, 1995 and 1994 and the results of their
operations and their cash flows for the years ended December 31, 1995, 1994, and
1993, in conformity with generally accepted accounting principles.
/s/ Jones, Jensen & Company
Jones, Jensen & Company
February 13, 1996
-6-
<PAGE> 30
SILVER LEDGE, INC.
Consolidated Balance Sheets
ASSETS
<TABLE>
<CAPTION>
December 31,
---------------------------
1995 1994
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 279 $ 3,655
Accounts receivable - trade
(Note 1) 305,556 318,966
Accounts receivable -
related parties (Note 2) 436,971 346,534
Inventory (Note 1) 547,136 370,716
---------- ----------
Total Current Assets 1,289,942 1,039,871
---------- ----------
FIXED ASSETS, net of accumulated
depreciation (Note 1) 46,794 38,632
---------- ----------
TOTAL ASSETS $1,336,736 $1,078,503
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Cash overdraft $ 58,044 $ --
Accounts payable 146,908 365,388
Accrued expenses 78,150 17,724
Line of credit 291,902 --
---------- -----------
Total Current Liabilities 575,004 383,112
---------- -----------
Total Liabilities 575,004 383,112
---------- -----------
COMMITMENTS AND CONTINGENCIES
(Note 3) -- --
---------- -----------
STOCKHOLDERS' EQUITY
Common Stock, par value
$0.10 per share, 50,000,000
shares authorized, 45,657,907
shares issued and
outstanding 4,565,791 4,565,791
Deficit in capital in
excess of par value (2,946,215) (2,946,215)
Accumulated deficit (857,844) (924,185)
----------- -----------
Total Stockholders' Equity 761,732 695,391
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 1,336,736 $ 1,078,503
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-7-
<PAGE> 31
SILVER LEDGE, INC.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the Years Ended December 31,
-------------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
REVENUES
Sales $ 3,065,581 $ 3,387,992 $ 2,713,190
Cost of goods sold 2,366,112 2,591,152 2,065,137
----------- ----------- -----------
Gross Profit 699,469 796,840 648,053
----------- ----------- -----------
EXPENSES
Auto and truck expense 11,467 21,211 --
Equipment leasing 198,000 198,100 --
Insurance 67,151 66,706 68,459
Phone 9,796 9,647 7,767
Legal and professional 23,113 72,621 12,044
Rent 116,600 110,406 286,490
Taxes and licenses 123,940 84,893 53,152
Utilities 51,744 57,222 55,114
Bad debt expense 12,499 13,057 14,379
Depreciation and amortization 7,367 3,078 1,387
General and administrative 2,722 2,089 6,465
----------- ----------- -----------
Total Expenses 624,399 639,030 505,257
----------- ----------- -----------
NET INCOME FROM
OPERATIONS 75,070 157,810 142,796
OTHER GAIN OR LOSS
Interest expense (8,729) (16,035) (14,749)
----------- ----------- -----------
NET INCOME
BEFORE INCOME TAXES 66,341 141,775 128,047
Income tax expense (Note 1) -- -- --
----------- ----------- -----------
NET INCOME (LOSS) $ 66,341 $ 141,775 $ 128,047
=========== =========== ===========
INCOME (LOSS)
PER SHARE $ 0.00 $ 0.00 $ 0.00
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-8-
<PAGE> 32
SILVER LEDGE, INC.
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Deficit in
Common Stock Capital in
------------ Excess of Accumulated
Shares Amount Par Value Deficit
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance,
December 31, 1992 42,657,907 $ 4,565,791 $(2,946,215) $(1,194,007)
Net income for
the year ended
December 31, 1993 -- -- -- 128,047
----------- ----------- ----------- -----------
Balance,
December 31, 1993 45,657,907 4,565,791 (2,946,215) (1,065,960)
Net income for
the year ended
December 31, 1994 -- -- -- 141,775
----------- ----------- ----------- -----------
Balance,
December 31, 1994 45,657,907 4,565,791 (2,946,215) (924,185)
Net income for
the year ended
December 31, 1995 -- -- -- 66,341
----------- ----------- ----------- -----------
Balance,
December 31, 1995 45,657,907 $ 4,565,791 $(2,946,215) $ (857,844)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-9-
<PAGE> 33
SILVER LEDGE, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the Years Ended December 31,
-------------------------------------------
1995 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 66,341 $ 141,775 $ 128,047
Non-cash expenses and revenues
included in income:
Depreciation 7,367 3,078 1,387
Allowance for bad debts 12,499 13,057 --
Changes in operating assets and liabilities
(Increase) decrease in accounts receivable (89,526) (138,581) (122,529)
(Increase) decrease in inventory (176,420) (60,233) (95,328)
Increase (decrease) in cash overdraft 58,044 -- --
Increase (decrease) in accounts payable (218,480) 65,950 98,387
Increase (decrease) in accrued expenses 60,426 2,106 7,936
Increase (decrease) in line of credit 291,902 --
--------- --------- ---------
Net Cash Provided by Operating Activities 12,153 27,152 17,900
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (15,529) (25,677) (17,420)
--------- --------- ---------
Net Cash (Used) by Investing Activities (15,529) (25,677) (17,420)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments of long-term debt -- -- --
--------- --------- ---------
Net Cash (Used) by Financing Activities -- -- --
--------- --------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents (3,376) 1,475 480
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 3,655 2,180 1,700
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 279 $ 3,655 $ 2,180
========= ========= =========
CASH PAID FOR
Interest $ 8,729 $ 16,035 $ 14,749
Income taxes $ -- $ -- $ --
</TABLE>
The accompanying notes are an integral part of these financial statements.
-10-
<PAGE> 34
SILVER LEDGE, INC.
Notes to the Consolidated Financial Statements
December 31, 1995 and 1994
NOTE 1 - Summary of Significant Accounting Policies
This summary of significant accounting policies of Silver Ledge,
Inc. (the Company) is presented to assist in understanding these
financial statements. These accounting policies conform to
generally accepted accounting principles.
The Company is in the business of manufacturing and selling steel
and steel related products such as wood burning stoves.
a. Property and Equipment
Maintenance and repairs of property and equipment that do not
improve or extend the life of the respective assets are charged to
expense as incurred. The property and equipment are depreciated
over their estimated useful life of 5-7 years.
b. Income Taxes
No provision for income taxes has been made due to operating losses
in prior years. The Company has net operating loss carryovers to
future years as follows:
<TABLE>
<CAPTION>
Expiring
Amount in Year
--------- --------
<S> <C> <C>
$ 379,924 2001
2,523 2004
---------
Total $ 382,447
</TABLE>
c. Dividends
No dividends have been declared or paid since the inception of the
Company.
d. Income (Loss) Per Share
Income (loss) per share is computed based on the weighted average
number of shares outstanding during each year.
-11-
<PAGE> 35
SILVER LEDGE, INC.
Notes to the Consolidated Financial Statements
December 31, 1995 and 1994
NOTE 1 - Summary of Significant Accounting Policies (Continued)
e. Accounts Receivable
Accounts receivable are shown net of any accounts deemed
uncollectible by the Company. The allowance for doubtful accounts
for the years ended December 31, 1995 and 1994 was $12,499 and
$13,057, respectively.
f. Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of Silver Ledge, Inc. and its wholly-owned subsidiaries:
Heritage Stoves, Inc., Clearfield Manufacturing and Clearfield
Products. The consolidation was completed using the pooling of
interests method of accounting for business combinations and all
significant inter-company transactions have been eliminated.
g. Inventory
The inventory consists of raw materials used in the manufacturing
processes and work in process. The inventory is carried at its
lower of cost or market value using the first-in-first-out method.
At December 31, inventories were as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Raw materials and supplies $ 401,959 $254,266
Work-in-process 18,021 92,256
Finished goods 127,156 24,194
--------- --------
Total $ 547,136 $370,716
========= ========
</TABLE>
h. Cash Equivalents
The Company considers all highly liquid investments with a maturity
of three months or less when purchased to be cash equivalents.
i. Fixed Assets
The Company's fixed assets are recorded at cost:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Equipment $ 53,628 $ 38,097
Vehicles 5,000 5,000
-------- --------
58,628 43,097
Accumulated depreciation (11,834) (4,465)
-------- --------
Net book value $ 46,794 $ 38,632
======== ========
</TABLE>
-12-
<PAGE> 36
SILVER LEDGE, INC.
Notes to the Consolidated Financial Statements
December 31, 1995 and 1994
NOTE 2 - Related Party Transactions
In 1992 the Company's officers and directors formed a company which
assumed all of the debt on the equipment that the Company then
owned. The officers and directors are leasing the equipment back to
the Company. Neither the sale nor the lease back agreements were
negotiated at arms length. The Company was owed $139,139 from the
sale and lease back of the equipment at December 31, 1995 and
December 31, 1994. The Company paid $198,000 in rent to the related
parties in 1995. The Company is renting its buildings from two
major shareholders on a month to month basis. The Company paid
$116,600 to the shareholders in 1995.
The Company had approximately $800,000 in sales to companies owned
by a major shareholder. At December 31, 1995 and 1994, the Company
was owed $436,971 and $346,534 by those companies, respectively.
NOTE 3 - Commitments and Contingencies
The Company is involved in litigation arising in the course of
business. It is not possible to state the ultimate outcome, if any,
in these matters. The following is a summary of those matters:
Matters reduced to judgment against the Company or its
subsidiaries, or otherwise made certain, but still pending because
the amount remains unpaid or no agreement for payment has been
reached:
A. MAC JAC DEVELOPMENT vs. SILVER LEDGE, INC. dba CLEARFIELD
COMPANIES, INC.; Superior Court, County of Sacramento, State of
California, Case No. 356036 (filed 1987). The claim in the
principal sum of $3,000 was for back rent with a total three-year
rental of $64,368 potentially being due (less any amount of
mitigation) and for unlawful detainer pursuant to a written
agreement for the rental of real property. The claim was disputed
by Clearfield Companies, Inc. The amount of the claim was disputed
by Silver Ledge, Inc. as possession of the premises was returned to
lessor for re-rental. Judgement was rendered for the Plaintiff. The
judgement remains unpaid.
B. ELLSWORTH (L.J.) CONSTRUCTION, INC. vs. SILVER LEDGE, INC., et
al.; Seventh Judicial District Court, Bingham County, State of
Idaho, Case No. 13426 (filed 1987). The claim in the principal sum
of $33,871 was for goods provided and services rendered. Default
Judgment was entered, prior to 1990, for failure to answer. The
judgment remains unpaid. The financial statements have been
adjusted to reflect the claim in accounts payable.
-13-
<PAGE> 37
EXHIBIT C-1
SILVER LEDGE, INCORPORATED
FINANCIAL STATEMENTS
March 31, 1996
(Unaudited)
<PAGE> 38
SILVER LEDGE, INC.
Consolidated Balance Sheets
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---------- -----------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ - $ 279
Accounts receivable - trade (Note 1) 276,140 305,556
Accounts receivable - related parties (Note 2) 527,744 436,971
Inventory (Note 1) 412,761 547,136
----------- -----------
Total Current Assets 1,216,645 1,289,942
----------- -----------
FIXED ASSETS, net of accumulated depreciation (Note 1) 44,952 46,794
----------- -----------
TOTAL ASSETS $1,261,597 $ 1,336,736
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Cash overdraft $ 73,563 $ 58,044
Accounts payable 174,155 146,908
Accrued expenses 1,100 78,150
Line of credit 234,061 291,902
----------- -----------
Total Current Liabilities 482,879 575,004
----------- -----------
Total Liabilities 482,879 575,004
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 3) - -
----------- -----------
STOCKHOLDERS' EQUITY
Common Stock, par value $0.10 per share,
50,000,000 shares authorized, 45,657,907 shares
issued and outstanding 4,565,791 4,565,791
Deficit in capital in excess of par value (2,946,215) (2,946,215)
Accumulated deficit (840,858) (857,844)
----------- -----------
Total Stockholders' Equity 778,718 761,732
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,261,597 $ 1,336,736
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
-2-
<PAGE> 39
SILVER LEDGE, INC.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the Three
Months Ended March 31,
-------------------------
1996 1995
----------- -----------
(Unaudited) (Unaudited)
REVENUES
<S> <C> <C>
Sales $696,119 $804,511
Cost of goods sold 515,128 631,428
-------- --------
Gross Profit 180,991 173,083
-------- --------
EXPENSES
Depreciation and amortization 1,842 771
General and administrative 162,163 140,482
-------- --------
Total Expenses 164,005 141,253
-------- --------
NET INCOME FROM OPERATIONS 16,986 31,830
Income tax expense (Note 1) -- --
-------- --------
NET INCOME (LOSS) $ 16,986 $ 31,830
======== ========
INCOME (LOSS)
PER SHARE $ 0.00 $ 0.00
======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
-3-
<PAGE> 40
SILVER LEDGE, INC.
Consolidated Statements of Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Deficit in
Common Stock Capital in
------------------------- Excess of Accumulated
Shares Amount Par Value Deficit
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance,
December 31, 1994 45,657,907 $ 4,565,791 $(2,946,215) $ (924,185)
Net income for
the year ended
December 31, 1995 -- -- -- 66,341
----------- ----------- ----------- -----------
Balance,
December 31, 1995 45,657,907 4,565,791 (2,946,215) (857,844)
Net income for the
three months ended
March 31, 1996 -- -- -- 16,986
----------- ----------- ----------- -----------
Balance, March 31, 1996 45,657,907 $ 4,565,791 $(2,946,215) $ (840,858)
=========== =========== =========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
-4-
<PAGE> 41
SILVER LEDGE, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the Three
Months Ended March 31,
---------------------------
1996 1995
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 16,986 $ 31,830
Non-cash expenses and revenues
included in income
Depreciation 1,842 771
Changes in operating assets and liabilities
(Increase) decrease in accounts receivable (61,357) (32,570)
(Increase) decrease in inventory 134,375 (83,173)
Increase (decrease) in accounts
payable and accrued expenses (49,803) (124,921)
Increase (decrease) in cash overdraft 15,519 --
--------- ---------
Net Cash (Used) by Operating Activities 57,562 (208,063)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets -- --
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of line of credit (57,841) --
Proceeds from line of credit -- 227,041
--------- ---------
Net Cash Provided by Financing Activities (57,841) 227,041
--------- ---------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (279) 18,978
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 279 3,655
--------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ -- $ 22,633
========= =========
CASH PAID FOR
Interest $ -- $ 17,359
Income taxes -- --
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
-5-
<PAGE> 42
SILVER LEDGE, INC.
Notes to the Consolidated Financial Statements
December 31, 1995 and March 31, 1996
NOTE 1 - Summary of Significant Accounting Policies
This summary of significant accounting policies of Silver Ledge,
Inc. (the Company) is presented to assist in understanding these
financial statements. These accounting policies conform to
generally accepted accounting principles.
The Company is in the business of manufacturing and selling steel
and steel related products such as wood burning stoves.
a. Property and Equipment
Maintenance and repairs of property and equipment that do not
improve or extend the life of the respective assets are charged to
expense as incurred. The property and equipment are depreciated
over their estimated useful life of 5-7 years.
b. Income Taxes
No provision for income taxes has been made due to operating losses
in prior years. The Company has net operating loss carryovers to
future years as follows:
<TABLE>
<CAPTION>
Expiring
Amount in Year
-------- --------
<S> <C>
$379,924 2001
2,523 2004
--------
Total $382,447
========
</TABLE>
c. Dividends
No dividends have been declared or paid since the inception of the
Company.
d. Income (Loss) Per Share
Income (loss) per share is computed based on the weighted average
number of shares outstanding during each year.
-6-
<PAGE> 43
SILVER LEDGE, INC.
Notes to the Consolidated Financial Statements
December 31, 1995 and March 31, 1996
NOTE 1 - Summary of Significant Accounting Policies (Continued)
e. Accounts Receivable
Accounts receivable are shown net of any accounts deemed
uncollectible by the Company. The allowance for doubtful accounts
for the year ended December 31, 1995 was $12,499.
f. Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of Silver Ledge, Inc. and its wholly-owned subsidiaries:
Heritage Stoves, Inc., Clearfield Manufacturing and Clearfield
Products. The consolidation was completed using the pooling of
interests method of accounting for business combinations and all
significant inter-company transactions have been eliminated.
g. Inventory
The inventory consists of raw materials used in the manufacturing
processes and work in process. The inventory is carried at its
lower of cost or market value using the first-in-first-out method.
At December 31, inventories were as follows:
<TABLE>
<CAPTION>
1995
--------
<S> <C>
Raw materials and supplies $401,959
Work-in-process 18,021
Finished goods 127,156
--------
Total $547,136
========
</TABLE>
h. Cash Equivalents
The Company considers all highly liquid investments with a maturity
of three months or less when purchased to be cash equivalents.
i. Fixed Assets
The Company's fixed assets are recorded at cost:
<TABLE>
<CAPTION>
1995
--------
<S> <C>
Equipment $ 53,628
Vehicles 5,000
--------
58,628
Accumulated depreciation (11,834)
--------
Net book value $ 46,794
========
</TABLE>
-7-
<PAGE> 44
SILVER LEDGE, INC.
Notes to the Consolidated Financial Statements
December 31, 1995 and March 31, 1996
NOTE 2 - Related Party Transactions
In 1992 the Company's officers and directors formed a company which
assumed all of the debt on the equipment that the Company then
owned. The officers and directors are leasing the equipment back to
the Company. Neither the sale nor the lease back agreements were
negotiated at arms length. The Company was owed $139,139 and
$27,055 from the sale and lease back of the equipment at December
31, 1995 and March 31, 1996, respectively. The Company paid
$198,000 in rent to the related parties in 1995. The Company is
renting its buildings from two major shareholders on a month to
month basis. The Company paid $116,600 to the shareholders in 1995.
In 1994, the Company had approximately $800,000 in sales to
companies owned by a major shareholder. At December 31, 1995 and
March 31, 1996, the Company was owed $436,971 and $500,689 by those
companies, respectively.
NOTE 3 - Commitments and Contingencies
The Company is involved in litigation arising in the course of
business. It is not possible to state the ultimate outcome, if any,
in these matters. The following is a summary of those matters:
Matters reduced to judgment against the Company or its
subsidiaries, or otherwise made certain, but still pending because
the amount remains unpaid or no agreement for payment has been
reached:
A. MAC JAC DEVELOPMENT vs. SILVER LEDGE, INC. dba CLEARFIELD
COMPANIES, INC.; Superior Court, County of Sacramento, State of
California, Case No. 356036 (filed 1987). The claim in the
principal sum of $3,000 was for back rent with a total three-year
rental of $64,368 potentially being due (less any amount of
mitigation) and for unlawful detainer pursuant to a written
agreement for the rental of real property. The claim was disputed
by Clearfield Companies, Inc. The amount of the claim was disputed
by Silver Ledge, Inc. as possession of the premises was returned to
lessor for re-rental. Judgement was rendered for the Plaintiff. The
judgement remains unpaid.
B. ELLSWORTH (L.J.) CONSTRUCTION, INC. vs. SILVER LEDGE, INC., et
al.; Seventh Judicial District Court, Bingham County, State of
Idaho, Case No. 13426 (filed 1987). The claim in the principal sum
of $33,871 was for goods provided and services rendered. Default
Judgment was entered, prior to 1990, for failure to answer. The
judgment remains unpaid. The financial statements have been
adjusted to reflect the claim in accounts payable.
-8-
<PAGE> 45
EXHIBIT D
Subject to the completion of the Plan, Silver Ledge is required to
issue 610,000 post-split shares of its common stock to Hap Russell, a consultant
to Silver Ledge, for services rendered in connection with the negotiation and
consummation of the Plan.
<PAGE> 46
EXHIBIT E
NET TELECOMMUNICATIONS, INCORPORATED
FINANCIAL STATEMENTS FOR THE PERIODS ENDED
December 31, 1995 and March 31, 1996
<PAGE> 47
LONG DISTANCE INTERNATIONAL
(A Development Stage Company)
FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
AND
FOR THE YEAR ENDED DECEMBER 31, 1995
WITH
INDEPENDENT AUDITOR'S REPORT
<PAGE> 48
LONG DISTANCE INTERNATIONAL
(A Development Stage Company)
CONTENTS
PAGE
Independent Auditor's Report 1
Balance Sheets, March 31, 1996 and
December 31, 1995 2
Statement of Operations, for the three months
ended March 31, 1996 and for the year ended
December 31, 1995 and from inception
(October 24, 1994) to March 31, 1996 3
Statement of Stockholders' Equity, for the
three months ended March 31, 1996 and for
the year ended December 31, 1995 and from
inception (October 24, 1994) to March 31,
1996 4
Statement of Cash Flows, for the three months
ended March 31, 1996 for the year ended
December 31, 1995 and from inception
(October 21, 1994) to March 31, 1996 5
Notes to Financial Statements 6-10
<PAGE> 49
[LETTERHEAD OF DAVID T. THOMPSON P.C.]
Independent Auditor's Report
Board of Directors and Stockholders
LONG DISTANCE INTERNATIONAL
Las Vegas, Nevada
I have audited the accompanying balance sheets of Long Distance International (a
development stage company) as of March 31, 1996 and December 31, 1995 and the
related statements of operations, stockholders' equity and cash flows for the
three months ended March 31, 1996 and the year ended December 31, 1995 and from
Inception (October 24, 1994) to March 31, 1996. These financial statements are
the responsibility of the Company's management. My responsibility is to express
an opinion on the financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Long Distance International (a
development stage company) as of March 31, 1996 and December 31, 1995 and the
results of its operations and its cash flows for the three months ended March
31, 1996 and the year ended December 31, 1995 and from inception (October 24,
1994) to March 31, 1996 in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 6, the Company is
in the development stage and has sustained significant losses during its
development stage which raise substantial doubt about its ability to continue as
a going concern., Management's plans in regard to these matters are also
discussed in Note 6. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ David T. Thomson P.C.
Salt Lake City, Utah
April 22, 1996 (except as to Notes 8 and 9 which are as of June 21, 1996)
<PAGE> 50
LONG DISTANCE INTERNATIONAL
(A Development Stage Company)
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash in bank $ 54,624 $ 22,380
Accounts receivable 9,930 5,808
Receivable - related party 5,120 5,120
Marketable securities 4,950 --
Prepaid expenses 74 74
Loans receivable, less an allowance of
$8,000 each period -- --
--------- ---------
Total Current Assets 74,698 33,382
--------- ---------
EQUIPMENT
Office equipment 10,118 10,118
Less - accumulated depreciation (2,833) (2,024)
--------- ---------
Equipment - net 7,285 8,094
--------- ---------
TOTAL ASSETS $ 81,983 $ 41,476
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 13,660 $ 2,606
Commissions payable 565 452
Payable to company officers 4,041 6,555
--------- ---------
Total Current Liabilities 18,266 9,613
--------- ---------
STOCKHOLDERS' EQUITY
Common stock; no par value,
2,500 shares authorized,
2,427 and 2,278 shares issued and
outstanding respectively 181,632 132,301
Earnings (deficit) accumulated
during the development stage (117,915) (100,438)
--------- ---------
Total Stockholders' Equity 63,717 31,863
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 81,983 $ 41,476
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 51
LONG DISTANCE INTERNATIONAL
(A Development Stage Company)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For The
Three Months For The Cumulative
Ended Year Ended During the
March 31, December 31, Development
1996 1995 Stage
---------- ---------- -----------
<S> <C> <C> <C>
REVENUE
Commissions on sale of
telephone services $9,013 $10,746 $19,759
Interest income 1 1 2
Unrealized gain on
marketable securities 750 - 750
--------- --------- ---------
9,764 10,747 20,511
--------- --------- ---------
EXPENSES
Wages and contract -- 43,657 44,657
services
Payroll taxes -- 4,740 4,740
Office expenses 962 5,216 6,178
Commissions 832 579 1,411
Health insurance -- 5,156 5,156
Professional fees 2,995 1,081 4,076
Meals and entertainment 1,156 2,831 3,987
Rent and occupancy 1,840 12,561 14,401
Travel and transportation 14,846 16,317 31,163
Bad debt expenses 1,575 8,182 9,757
Telephone cost and 1,582 7,327 8,909
expenses
Depreciation 809 2,024 2,833
Advertising and promotion 541 390 931
Taxes 103 124 227
--------- --------- ---------
27,241 110,185 138,426
--------- --------- ---------
NET INCOME (LOSS) $ (17,477) $ (99,438) $(117,915)
========= ========= =========
EARNINGS (LOSS) PER SHARE $ (7) $ (49) $ (56)
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 52
LONG DISTANCE INTERNATIONAL
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Cumulative
Common Stock During the
------------------------- Development
Shares Amount Stage
--------- --------- ---------
<S> <C> <C> <C>
BALANCE, October 24, 1994 (Inception) $ -- $ -- $ --
Shares issued to initial stockholders for
services valued at $1,000; October 24, 1994 1,875 1,000 --
Net income (loss) from inception to December 31, 1994 -- -- (1,000)
--------- --------- ---------
BALANCE, December 31, 1994 1,875 1,000 (1,000)
Issuance of common stock in exchange for debt
November 1995 at an approximate price of
$319.149 per share 188 60,000 --
Issuance of common stock for cash at various dates
at approximately $331.125 per share 215 71,301 --
Net income (loss) for the year ended December 31, 1995 -- -- (99,438)
--------- --------- ---------
BALANCE, December 31, 1995 2,278 132,301 (100,438)
Issuance of common stock for cash at various dates
at approximately $331.125 per share 149 49,331 --
Net income (loss) for the three months ended March 31, 1996 -- -- (17,477)
--------- --------- ---------
BALANCE, March 31, 1996 $ 2,427 $ 181,632 $(117,915)
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 53
LONG DISTANCE INTERNATIONAL
(A Development Stage Company)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the
Three Months For the Cumulative
Ended Year Ended During the
March 31, March 31, Development
1996 1995 Stage
------------ ----------- ------------
<S> <C> <C> <C>
INCREASED (DECREASE) IN CASH
CASH FLOWS FROM OPERATING ACTIVITIES
Sale of telephone services $4,891 $4,938 $9,829
Interest income 1 1 2
Cash paid for services and to suppliers (17,676) (103,618) (121,294)
Cash paid for taxes (103) (124) (227)
--------- --------- ---------
Net Cash Flows (Used) in Operating Activities (12,887) (98,803) (111,690)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of marketable securities (4,200) - (4,200)
Purchase of office equipment - (10,118) (10,118)
--------- --------- ---------
Net Cash Flows (Used in Investing Activites (4,200) (10,118) (14,318)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock 49,331 131,301 180,632
--------- --------- ---------
Net Cash Flows from Financing Activities 49,331 131,301 180,632
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH 32,244 22,380 54,624
CASH - BEGINNING OF PERIOD 22,380 - -
--------- --------- ---------
CASH - END OF PERIOD $54,624 $22,380 $54,624
--------- --------- ---------
RECONCILIATION OF NET INCOME (LOSS) TO NET CASH PROVIDED
(USED) BY OPERATING ACTIVITIES
NET INCOME (LOSS) $ (17,477) $ (99,438) $(117,915)
--------- --------- ---------
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities
Stock issued for services -- -- 1,000
Depreciation 809 2,024 2,833
Bad debt allowances -- 8,000 8,000
Unrealized gain (750) -- (750)
Change in assets and liabilities
Increase in accounts receivable (4,122) (5,808) (9,930)
Increase in receivable related parties -- (5,120) (5,120)
Increase in loans receivable -- (8,000) (8,000)
Increase in prepaid expenses -- (74) (74)
Increase in accounts payable 9,512 5,260 14,772
Increase in commissions payable 113 452 565
Increase (decrease) in payable to officer (972) 3,901 2,929
--------- --------- ---------
Total Adjustments 4,590 635 6,225
--------- --------- ---------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ (12,887) $ (98,803) $(111,690)
--------- --------- ---------
SUPPLEMENTAL INFORMATION
Stock issued for services $ -- $ -- $ 1,000
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 54
LONG DISTANCE INTERNATIONAL
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCCOUNTING POLICIES
Organization - The Company was organized under the laws of the State of
Nevada on October 24, 1994 and has elected a fiscal year end of December
31st. The Company started its operation in May of 1995 primarily as a
resaler of long distance services. The Company is considered a development
stage Company as defined in SFAS No. 7. The Company, has at the present
time, not paid any dividends and any dividends that may be paid in the
future will depend upon the financial requirements of the Company and other
relevant factors.
Earnings (Loss) Per Share - The computation of earnings (loss) per share of
common stock is based on the weighted average number of shares outstanding
during the period presented.
Income Taxes - Due to no income at March 31, 1996 and December 31, 1995 no
provision for income taxes has been made. There are no deferred income
taxes resulting from income and expense items being reported for financial
accounting and tax reporting purposes in different periods.
Office Equipment - The cost of equipment is depreciated over the estimated
useful lives of the related assets. Depreciation is computed using the
Modified Accelerated Cost Recovery System using double declining balance
over a 5 year life with a half year convention for determining when the
asset was placed in service.
Cash and Cash Equivalents - For purposes of the statement of cash flows,
the Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. During 1995 the
Company had a noncash financing activity in which stock was issued in
exchange for $60,000 of debt.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Marketable Securities - Marketable securities are stated at fair value. All
marketable securities are defined as trading securities under the
provisions of statement of Financial Accounting Standards No 115,
"Accounting for Certain Investments in Debt and Equity Securities" (SFAS
115) and unrealized holding gains and losses are reflected in earnings.
Fair value is determined by the most recently traded price of the security
at the balance sheet date. At the date of the audit report the fair value
of the marketable securities was $6,200.
6
<PAGE> 55
LONG DISTANCE INTERNATIONAL
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - COMMON STOCK TRANSATIONS
At inception of the Company, initial stockholders were issued 1,875 shares
of the Company's no par stock for services valued at $1,000. On November
23, 1994 188 shares of common stock of the Company was exchanged for
$60,000 of debt at a price per share of approximately $319.149.
During 1995 and 1996 the Company sold additional shares of its common stock
for cash at an approximate price of $331.125 per share. During 1995, 214.62
shares were sold for $71,301 and during the three months ended March 31,
1996, 148.98 shares of stock was sold for $49,331.
Subsequent to March 31, 1996 and to the date of this audit report the
Company sold an additional 88.68 shares for cash of $29,368. The shares
described in this paragraph and the above paragraph were sold for a total
of $150,000 cash and a consulting fee of $9,000 was paid.
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company shares office space and employee services with another
organization that is related by management and stock ownership. For the
three months ended March 31, 1996 and the year ended December 31, 1995, the
Company paid $1,530 and $3,302 to the related organization for the expenses
explained above. Subsequent to March 31, 1996 and to the date of this
report $2,236 had been paid. At March 31, 1996 and December 31, 1995 this
same related organization owed the Company $5,120.
Certain officers of the Company, one of which is also a stockholder, have
paid expenses in behalf of the organization which were unreimbursed and due
to them at March 31, 1996 and December 31, 1995. The amounts owed were
$4,041 at March 31, 1996 and $6,555 at December 31, 1995.
NOTE 4 - INCOME TAXES
The Company has adopted Statement of Financial Accounting Standards No.
109- "Accounting for Income Taxes" (SFAS 109). SFAS 109 is an asset and
liability approach that requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have
been recognized in the Company's financial statements or tax returns. In
estimating future tax consequences, SFAS 109 generally considers all
expected future events other than enactments of changes in the tax law or
rates. For tax purposes, the Company has available at December 31, 1995 a
net operating loss carryforward for Federal Income Tax purposes of
approximately $98,023 which will expire as shown below. A valuation
allowance of $33,328 has been established for those tax credits which are
not expected to be realized.
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
2010 $98,023
</TABLE>
7
<PAGE> 56
LONG DISTANCE INTERNATIONAL
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - AGREEMENTS
The Company has entered into an agreement with LCI International, Inc.
(LCI). LCI appointed the Company as a non-exclusive representative to
promote the sale of and solicit orders for LCI long distant telephone
services. The Company receives commissions for the sale of the above
services at 10% of monthly Collected Revenue for 12 months. After 12 months
the commission rate varies from 5% to 15% based on various Monthly
Collected Revenue levels per different types of name long distance services
as outlined in the agreement and its amendments.
The Company has also entered into an agreement with Metrocom Corporation
(Metrocom). Metrocom appointed the Company as a non-exclusive
representative to sell and solicit orders for Metrocom long distance
telephone services. The Company also gets commissions on this agreement
based on a complicated commission schedule with rates from 5% to 30% as
outlined in the agreement per certain volume levels of orders obtained.
During the three months ended March 31, 1996 and the year ended December
31, 1995, 97% and 100% respectively of the commission received were from
LCI. The estimated gross long distance revenue the commissions were based
on was $76,260 and $86,819 for the three months ended March 31, 1996 and
the year ended December 31, 1995 respectively.
The Company has consultant agreements with individuals and other
organization to pay commission of 5% to 6% on billed long distance minus
taxes and discounts.
The Company has agreements with two former employees. Under the agreement
funds advanced to the employees after their termination, were to be treated
as loans and repaid at future dates through payroll deductions when hired
again. The advances were recorded as loans receivable at March 31, 1996 and
December 31, 1995 in a total amount of $8,000. Due to the uncertainty as to
collectibility a valuation allowance was applied against the loans in the
balance sheets at March 31, 1995 and December 31, 1996.
NOTE 6 - GOING CONCERN
The Company has experienced losses of $17,477 and $99,438 for the three
months ended March 31, 1996 and the year ended December 31, 1995
respectively. The Company has yet to generate sales or revenue to cover
operations to date, and it can't be assured that sales will be enough to
cover future expenses. In light of the above circumstances, the ability of
the Company to continue as a going concern is substantially in doubt. The
financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
Management believes their plans will provide the Company with the ability
to continue in existence. Management plans to initiate a corporate
reorganization. (See Note 9). The Company also plans to take steps to
reduce expenses and enhance sales. There can be no assurance, assuming the
Company successfully initiates a corporate reorganization or enters into a
business alliance or changes its method to enhance sales, that the Company
will achieve profitability or positive cash flow.
8
<PAGE> 57
LONG DISTANCE INTERNATIONAL
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - CONTINGENCIES
In connection with the limited offering of the Corporation's common stock
(see note 2), an offer was made to a resident of the State of Pennsylvania,
without filing the required Notice with the Pennsylvania Securities
Commission to claim the appropriate exemption. A Recission Offer was sent
to this person. The person has returned the Recission Offer and has
rejected it.
75,000 post-split shares of common stock are to be issued to the Company's
counsel pursuant to an Engagement Letter. The shares will be issued
pursuant to a Consultant's Compensation Plan to be entered into between the
attorney and the proposed publicly held reorganization candidate, Silver
Ledge, Inc., a Montana corporation. This Consultant's Compensation Plan
will be subject to the completion of the proposed reorganization with
Silver Ledge, Inc. (see Note 8).
NOTE 8 - SUBSEQUENT EVENTS
On May 6, 1996 the Company loaned $10,000 to Las Vegas Reservation, Inc.
and two individuals acting as its officers. Each principal, jointly and
severally promised to pay pursuant to a promissory note, the $10,000 by May
6, 1997. The note is unsecured and carries no interest.
On May 9, 1996, the Company incorporated a wholly-owned subsidiary, Net
Telecommunications, Incorporated, under the laws of the State of Nevada
("Net Tel"). The Company intended to merge into this wholly-owned
subsidiary, with the sole purpose thereof being to change the name of the
Company to "Net Telecommunications, Incorporated" and to increase its
authorized capital from 2,500 no par shares to 10,000 no par shares. This
merger was completed and filed with Nevada on June 18, 1996. The Company is
presently negotiating a "reverse" merger (the "Plan") with a publicly held
company, Silver Ledge, Incorporated, ("Silver Ledge") a Montana corporation
which has resolved to change its domicile to Nevada. Pursuant to the
proposed Plan, Silver Ledge would:
Effect a 40.087785 for one reverse split of its 43,675,907 outstanding
shares, retaining the authorized shares at 50,000,000 and reducing the par
value from $0.10 to $0.001 per share, with appropriate adjustments being
made in the additional paid in capital and stated capital accounts of the
Company, and resulting in a total of approximately 1,089,057 shares of
$0.001 par value common voting stock being issued and outstanding.
Convey all of the outstanding securities of its wholly-owned subsidiaries
through which it owns and operates all of its assets and liabilities in
exchange for the cancellation of 689,057 post-split shares of Silver Ledge,
resulting in there then being 400,000 shares issued and outstanding.
Exchange 6,000,000 post-split "unregistered" and "restricted" shares of
common stock of Silver Ledge for 100% of the outstanding securities of the
Company in a merger with Silver Ledge being the surviving Company, or
approximately 2,385.4 shares of Silver Ledge for each outstanding share of
the Company.
9
<PAGE> 58
LONG DISTANCE INTERNATIONAL
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - SUBSEQUENT EVENTS - CONTINUED
An additional 100,000, 500,000, 450,000 and 600,000 of such post-split
shares, respectively, shall be issued by the surviving Company under the
Plan (Silver Ledge) to Intralink U.S.A., Inc., a Nevada corporation
("Intralink"), Global Tours, Inc., a Nevada corporation ("Global Tours"),
Las Vegas Reservations, Inc., a Nevada corporation (Las Vegas
Reservations"), and Sierra-Net, Inc., a Nevada corporation ("Sierra-Net"),
respectively, pursuant to the Letters of Intent between these respective
entities and the Corporation, which are subject to the completion of the
Plan and a merger between the Company and Net Tel, with Net Tel being the
survivor.
Also, 140,000 post-split shares of common stock of Silver Ledge will be
issued to certain consultants pursuant to written Compensation Agreements
and will be issued subject to the filing of an S-8 Registration Statement;
these 140,000 post-split shares shall include the 75,000 post-split shares
due and payable by the Company pursuant to the Engagement Letter with its
counsel. (see note 7)
The reorganized Silver Ledge will issue an additional 1,460,000
"unregistered" and "restricted" shares of common stock to certain other
consultants to the Company and Silver Ledge, 610,000 and 650,000,
respectively.
The directors and officers of the Company will become directors and
officers of the reorganized Silver Ledge.
The foregoing will result in there then being 9,650,000 post-split
outstanding shares in the reorganized entity (assuming definitive
agreements can be negotiated and completed with Intralink, Global Tours,
Las Vegas Reservations and Sierra-Net), with Silver Ledge having four
subsidiaries, those being, Intralink, Global Tours, Las Vegas Reservations
and Sierra-Net.
10
<PAGE> 59
EXHIBIT F
Subject to the completion of the Plan, Net Tel is required to
issue the following shares of common stock following the completion the Plan
with a publicly held company, to-wit:
1. 100,000, 500,000, 450,000 and 600,000 of post-split
"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"), Las Vegas Reservations, Inc., a Nevada
corporation ("Las Vegas Reservations"), and Sierra-Net, Inc., a Nevada
corporation ("Sierra-Net"), pursuant to the Letters of Intent between these
respective entities and Net Tel, whereby all of these entities will become
wholly-owned subsidiaries of the Surviving Corporation under the Plan, and all
of which are subject to the completion of the Plan, and further subject to the
execution and delivery of definitive agreements between the respective parties;
2. 140,000 post-split shares of common stock to certain
consultants pursuant to written Compensation Agreements and which will be issued
subject to the filing of an S-8 Registration Statement by the Surviving
Corporation; these 140,000 post-split shares shall include the 75,000 post-split
shares due and payable to Net Tel's legal counsel pursuant to the Engagement
Letter with its counsel; and
3. 850,000 post-split "unregistered" and "restricted" shares to
certain other consultants for similar services, to be issued pursuant to
Regulation S of the Securities and Exchange Commission by the Surviving
Corporation.
<PAGE> 60
EXHIBIT G
Fidelity Stock Transfer Company
1800 South West Temple, Suite 301
Salt Lake City, Utah 84115
Silver Ledge, Incorporated
352 South Main Street
Clearfield, Utah 84015
Re: Exchange of shares of Net Telecommunications,
Incorporated, a Nevada corporation ("Net Tel"), for
shares of Silver Ledge, Incorporated, a Nevada
corporation ("Silver Ledge or "Company")
Gentlemen:
Pursuant to that certain Agreement and Plan of Merger ("Plan")
between the undersigned, Net Tel, and Silver Ledge, 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 Silver Ledge for the year ended December 31,
1995, and its Quarterly Report on Form 10-QSB for the quarter ended March 31,
1996. 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 Net Tel being
exchanged.
I further understand that immediately prior to the completion
of the Plan, Silver Ledge will have no assets of any measurable value, having
exchanged all such assets for shares of its common stock owned by certain
principal stockholders of Silver Ledge, and that in actuality, the completion of
the Plan and the exchange of my shares of Net Tel for shares of Silver Ledge
results in a decrease in the actual percentage of ownership that my shares of
Net Tel represented in Net Tel prior to the completion of the Plan by
approximately 25%.
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
<PAGE> 61
Page 2
firms for the Company. I understand that the accounting firm for Silver Ledge is
Jones, Jensen & Co., Certified Public Accountants, 349 South 200 East, Salt Lake
City, Utah 84111; Telephone #801-328-4408; and that legal counsel for Silver
Ledge is Leonard E. Neilson, Esq., 1121 East 3900 South, Salt Lake City, Utah
84124; Telephone #801-288-2855. I also understand that copies of all material
documentation concerning Silver Ledge have been delivered to Net Tel and its
legal counsel.
I further understand that I must bear the economic risk of
ownership of any of the Silver Ledge 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 Silver Ledge as they are being made to induce you to issue me the
shares of Silver Ledge 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;
<PAGE> 62
Page 3
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
Silver Ledge, all shares of Silver Ledge 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. Silver Ledge will attempt to accommodate
any stockholders' request where Silver Ledge views the request is made for valid
business or personal reasons so long as in the sole discretion of Silver Ledge,
the granting of the request will not facilitate a "public" distribution of
unregistered shares of common voting stock of Silver Ledge.
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.
<PAGE> 63
Page 4
Thank you very much.
Dated this 8 day of July, 1996.
Very truly yours,
/s/ Robert P. Amira
-------------------
<PAGE> 64
Page 4
Thank you very much.
Dated this 8 day of July, 1996.
- ----
Very truly yours,
/s/ Michael W. Gorts
--------------------
<PAGE> 65
Page 4
Thank you very much.
Dated this 3 day of July, 1996.
- ----
Very truly yours,
/s/ Tony Tegano
-----------------
<PAGE> 66
Reg. S230.215. The term "accredited investor" as used in section
2(15)(ii) of the Securities Act of 1933 (15 U.S.C. 77b(15)(ii)) shall include
the following persons:
(a) Any savings and loan association or other institution specified in
section 3(a)(5)(A) of the Act whether acting in its individual or fiduciary
capacity; any broker or dealer registered pursuant to section 15 of the
Securities Exchange Act of 1934; any plan established and maintained by a state,
its political subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, if such plan has total
assets in excess of $5,000,000; an employee benefit plan within the meaning of
Title I of the Employee Retirement Income Security Act of 1974, if the
investment decision is made by a plan fiduciary, as defined in section 3(21) of
such Act, which is a savings and loan association, or if the employee benefit
plan has total assets in excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are accredited investors;
[Amended in Release No. 33-6758 (P84,221), effective April 11, 1988, 53 F.R.
7866; and Release No. 33-6825 (P84,404), effective April 19, 1989, 54 F.R.
11369.]
(b) Any private business development company as defined in section
202(a)(22) of the Investment Advisers Act of 1940;
(c) Any organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000; [Amended in Release No.
33-6758 (P84,221), effective April 11, 1988, 53 F.R. 7866.]
(d) Any director, executive officer, or general partner of the issuer
of the securities being offered or sold, or any director, executive officer, or
general partner of a general partner of that issuer;
(e) Any natural person whose individual net worth, or joint net worth
with that person's spouse, at the time of his purchase exceeds $1,000,000;
(f) Any natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income with that person's
spouse in excess of $300,000 in each of those years and has a reasonable
expectation of reaching the same income level in the current year; [Amended in
Release No. 33-6758 (P84,221), effective April 11, 1988, 53 F.R. 7866.]
(g) Any trust, with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the securities offered, whose purchase is
directed by a sophisticated person as described in S230.506(b)(2)(ii); and
[Added in Release No. 33-6758 (P84,221), effective April 11, 1988, 53 F.R.
7866.]
(h) Any entity in which all of the equity owners are accredited
investors. [Amended in Release No. 33-6758 (P84,221), effective April 11, 1988,
53 F.R. 7866.]
[Adopted in Release No. 33-6389 (P83,106), effective April 15, 1982, 47
F.R. 11251; amended in Release No. 33-6758 (P84,221), effective April 11, 1988,
53 F.R. 7866; and Release No. 33-6825 (P84,404), effective April 19, 1989, 54
F.R. 11369.]
EXHIBIT A
<PAGE> 67
EXHIBIT H
CERTIFICATE OF OFFICER PURSUANT TO
AGREEMENT AND PLAN OF MERGER
The undersigned, the President of Silver Ledge, Incorporated, a
Nevada corporation ("Silver Ledge"), represents and warrants the following as
required by the Agreement and Plan of Merger (the "Plan") between Silver Ledge
and Net Telecommunications, Incorporated, a Nevada corporation ("Net Tel"), and
certain stockholders of Net Tel (the "Net Tel Stockholders):
1. That he is the President of Silver Ledge and has been
authorized and empowered by its Board of Directors to execute and deliver this
Certificate to Net Tel and the Net Tel Stockholders.
2. Based on his personal knowledge, information, belief and
opinions of counsel for Silver Ledge regarding the Plan:
(i) All representations and warranties of Silver Ledge
contained within the Plan are true and correct;
(ii) Silver Ledge 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 Silver Ledge as set forth in
its financial statements for the periods ended
December 31, 1995 and 1994, and March 31, 1996,
except as set forth in Exhibit D to the Plan.
SILVER LEDGE, INCORPORATED
By /s/Robin D. Porter
-----------------------------
Robin D. Porter, President
/s/Robin D. Porter /s/Rodney G. Porter
- - ------------------------------- -----------------------------------
Robin D. Porter, Personally Rodney G. Porter, Personally
/s/Jennie Porter /s/Karen Porter
- - ------------------------------- -----------------------------------
Jennie Porter, Personally Karen Porter, Personally
<PAGE> 68
EXHIBIT I
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 ("Plan") between Net
Tel, certain of its stockholders (the "Net Tel Stockholders") and Silver Ledge,
Incorporated, a Nevada corporation ("Silver Ledge"):
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 Silver Ledge.
2. Based on his personal knowledge, information, belief:
(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 F to the Plan.
NET TELECOMMUNICATIONS,
INCORPORATED
By /s/ Michael Gorts
--------------------------------
Michael Gorts, President
/s/Robert P. Amira /s/ Michael Gortz
- - ------------------------------- -----------------------------------
Robert P. Amira, Personally Michael Gortz, Personally
/s/Tony Tegano
- - -------------------------------
Tony Tegano, Personally
<PAGE> 69
EXHIBIT J
Finders
None.
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF MERGER
OF
SILVER LEDGE, INCORPORATED
(a Nevada corporation)
AND
SILVER LEDGE, INCORPORATED
(a Montana corporation)
To the Secretaries of State of the
State of Montana and the
State of Nevada
Pursuant to the provisions of Section 35-1-813 of the Montana
Code Annotated and Section 92A.190 of the Nevada Revised Statutes, it is hereby
certified that:
1. The names of the merging corporations are Silver Ledge,
Incorporated, which is a business corporation organized under the laws of the
State of Nevada ("Silver Ledge - Nevada"), 352 South Main Street, Clearfield,
Utah 84015, and Silver Ledge, Incorporated, which is a business corporation
organized under the laws of the State of Montana ("Silver Ledge - Montana"), 352
South Main Street, Clearfield, Utah 84015.
2. Annexed hereto and made a part hereof is the Plan of Merger
for merging Silver Ledge - Montana with and into Silver Ledge - Nevada as
approved by the Board of Directors of each of said corporations, pursuant to
which Silver Ledge - Nevada will be the surviving corporation.
3. The number of shares of Silver Ledge - Nevada which were
entitled to vote at the time of the approval of the Plan of Merger by its
shareholders is 100, all of which are of one class, common, and all of which are
owned by Silver Ledge - Montana; all 100 shares were voted in favor of the
merger, representing a voting percentage in excess of the number required for
approval under Section 92A.120 of the Nevada Revised Statutes.
The shareholders of Silver Ledge - Montana approved the merger
at a stockholders' meeting held June 24, 1996, with 29,245,254 shares approving,
no shares voting against and no shares abstaining, such approving shares
representing 66.9% of the 43,657,907 outstanding voting securities of Silver
Ledge - Montana, representing a voting percentage in excess of the number
required for approval under Section 35-1-815 of the Montana Code Annotated.
<PAGE> 2
4. 100% of the stockholders of Silver Ledge - Nevada approved
the merger, and therefore no dissenters' rights are afforded stockholders of
Silver Ledge - Nevada as the effect of the merger is to change the domicile of
Silver Ledge - Montana from Montana to Nevada, and all of the outstanding voting
securities of Silver Ledge - Nevada are owned or subscribed by Silver Ledge -
Montana; the Articles of Incorporation of Silver Ledge - Montana and Silver
Ledge - Nevada are substantially identical; and the stockholders of Silver Ledge
- - - Montana will have the same number of shares and percentage of ownership in
Silver Ledge - Nevada following the merger as they had in Silver Ledge -
Montana.
Copies of Sections 35-1-826 through 35-1-839 of the Montana
Code Annotated were provided to each stockholder of Silver Ledge - Montana,
together with a copy of the Notice of Special Meeting of Stockholders in
accordance with Section 35-1-520 of the Montana Code Annotated. Under the Plan
of Merger, a copy of which is attached hereto and incorporated herein by
reference, Silver Ledge - Nevada, the "Surviving Corporation" under the merger,
is liable to dissenting stockholders for the fair value of their shares in
accordance with the Montana Code Annotated.
5. The applicable provisions of the Montana Code Annotated
relating to the merger of Silver Ledge - Montana with and into Silver Ledge -
Nevada will have been complied with upon compliance with any of the filing and
recording requirements thereof, together with the filing of a final tax return
with the State of Montana.
6. In accordance with Section 35-1-819(2)(a), Montana Code
Annotated, the address to which copies of process may be sent by the Secretary
of State of the State of Montana is: 352 South Main Street, Clearfield, Utah
84015.
8. The merger herein provided for shall become effective in the
State of Montana and the State of Nevada on the respective dates of filing
hereof.
SILVER LEDGE, INCORPORATED
(a Montana corporation)
Date: 6/26/96 By /s/Robin D. Porter
----------------------------
Robin D. Porter, President
Date: 6-26-96 By /s/Jennie Porter
----------------------------
Jennie Porter, Secretary
2
<PAGE> 3
STATE OF UTAH )
) ss
COUNTY OF SALT LAKE )
Personally appeared before me this ________ day of June, 1996,
Robin D. Porter and Jennie Porter, who duly acknowledged to me that they are the
President and Secretary, respectively, of Silver Ledge, Incorporated, a Montana
corporation, and that they are authorized to and did execute the foregoing
Articles of Merger.
/s/ Lane Clissold
--------------------------------
NOTARY PUBLIC
SILVER LEDGE, INCORPORATED
(a Nevada corporation)
Date: 6/26/96 By /s/Robin D. Porter
----------------------------
Robin D. Porter, President
Date: 6-26-96 By /s/Jennie Porter
----------------------------
Jennie Porter, Secretary
STATE OF UTAH )
) ss
COUNTY OF SALT LAKE )
Personally appeared before me this 26 day of June 1996,
Robin D. Porter and Jennie Porter, who duly acknowledged to me that they are the
Interim President and Interim Secretary, respectively, of Silver Ledge,
Incorporated, a Nevada corporation, and that they are authorized to and did
execute the foregoing Articles of Merger.
/s/ Lane Clissold
--------------------------------
NOTARY PUBLIC
3
<PAGE> 4
PLAN OF MERGER
THIS AGREEMENT approved on the 24th day of June, 1996, by
Silver Ledge, Incorporated, a business corporation organized under the laws of
the State of Montana ("Silver Ledge - Montana"), and Silver Ledge, Incorporated,
a business corporation to be organized as a wholly-owned subsidiary of Silver
Ledge - Montana under the laws of the State of Nevada ("Silver Ledge - Nevada"),
by the Board of Directors and stockholders owning a majority of the outstanding
voting securities of Silver Ledge - Montana; and by the incorporator, the
prospective Board of Directors and sole subscriber for shares of common stock of
Silver Ledge - Nevada.
1. Silver Ledge - Montana and Silver Ledge - Nevada shall,
pursuant to the provisions of the Nevada Revised Statutes and the provisions of
the Montana Code Annotated, be merged with and into a single corporation; Silver
Ledge - Nevada shall be the surviving corporation upon the effective date of the
merger and is sometimes hereinafter referred to as the "Surviving Corporation,"
whose existence shall continue as the said Surviving Corporation under its
present name pursuant to the provisions of the Nevada Revised Statutes. The
separate existence of Silver Ledge - Montana, which is sometimes hereinafter
referred to as the "Terminating Corporation," shall cease upon the effective
date of the merger in accordance with the Montana Code Annotated.
2. The Certificate of Incorporation of the Surviving
Corporation upon the effective date of the merger shall be the Certificate of
Incorporation of the said Surviving Corporation and said Certificate of
Incorporation shall continue in full force and effect until further amended in
the manner prescribed by the provisions of the Nevada Revised Statutes.
3. The Bylaws of the Surviving Corporation upon the effective
date of the merger will be the Bylaws of the said Surviving Corporation and will
continue in full force and effect until changed, altered or amended as therein
provided and in the manner prescribed by the provisions of the Nevada Revised
Statutes.
4. The directors and executive officers in office of the
Surviving Corporation upon the effective date of the merger shall be the members
of the first Board of Directors and the first executive officers of the
Surviving Corporation, all of whom shall hold their directorships and offices
until the election and qualification of their respective successors or until
their tenure is otherwise terminated in accordance with the Bylaws of the
Surviving Corporation; and the terms of office of the interim directors and
executive officers of the Surviving Corporation, who are also the directors and
executive officers of the Terminating Corporation, shall terminate.
5. Each issued share of the Terminating Corporation shall, upon
the effective date of the merger, be converted into one share of the Surviving
Corporation. The present issued shares of the Surviving Corporation shall be
cancelled, all of which are owned by the Terminating Corporation.
<PAGE> 5
6. The merger of the Terminating Corporation with and into the
Surviving Corporation shall be authorized in the manner prescribed by the
Montana Code Annotated, and the Plan of Merger herein made and approved shall be
submitted to the shareholders of the Surviving Corporation for their approval or
rejection in the manner prescribed by the provisions of the Nevada Revised
Statutes.
7. In the event that the merger of the Terminating Corporation
with and into the Surviving Corporation shall have been duly authorized in
compliance with the laws of the Montana Code Annotated, and in the event that
the Plan of Merger shall have been approved by the shareholders entitled to vote
of the Surviving Corporation in the manner prescribed by the provisions of the
Nevada Revised Statutes, the Terminating Corporation and the Surviving
Corporation hereby stipulate that they will cause to be executed and filed
and/or recorded any document or documents prescribed by the laws of the States
of Nevada and Montana, and that they will cause to be performed all necessary
acts therein and elsewhere to effectuate the merger.
8. The Board of Directors and the proper executive officers of
the Terminating Corporation and of the Surviving Corporation, respectively, are
hereby authorized, empowered and directed to do any and all acts and things, and
to make, execute, deliver, file and/or record any and all instruments, papers
and documents which shall be or become necessary, proper or convenient to carry
out or put into effect any of the provisions of this Plan of Merger or of the
merger herein provided for.
9. The Surviving Corporation shall be liable to any dissenting
stockholder of the Terminating Corporation in accordance with the Montana Code
Annotated.
10. The merger herein provided for shall become effective in
the State of Montana and the State of Nevada on the respective dates of filing
hereof.
SILVER LEDGE, INCORPORATED
(a Montana corporation)
352 South Main Street
Clearfield, Utah 84015
Date: 6/26/96 By /s/Robin D. Porter
----------------------------------------
Robin D. Porter, President
SILVER LEDGE, INCORPORATED
(a Nevada corporation)
352 South Main Street
Clearfield, Utah 84015
Date: 6/26/96 By /s/Robin D. Porter
----------------------------------------
Robin D. Porter, Interim President
<PAGE> 1
EXHIBIT 3.2
ARTICLES OF MERGER
OF
NET TELECOMMUNICATIONS, INCORPORATED
(a Nevada corporation)
AND
SILVER LEDGE, 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 Net
Telecommunications, 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 ("Net Tel"), and Silver Ledge, Incorporated, 352 South Main
Street, Clearfield, Utah 85015,, which is a business corporation organized under
the laws of the State of Nevada ("Silver Ledge").
2. The following is the Plan of Merger (the "Plan") for merging Net
Tel with and into Silver Ledge as approved by the Board of Directors of each of
said corporations, pursuant to which Silver Ledge will be the surviving
corporation:
Plan of Merger
1.1 Merger and Surviving Corporation. Net Tel will merge into
Silver Ledge, with Silver Ledge being the "Surviving Corporation"; the separate
existence of Net Tel shall cease, and the name of the Surviving Corporation
shall become "Net Telecommunications, Incorporated." Until amended, modified or
otherwise altered, the Articles of Incorporation of Silver Ledge shall continue
to be the Articles of Incorporation of the Surviving Corporation; and the Bylaws
of Silver Ledge shall become the Bylaws of the Surviving Corporation.
1.2 Changes in Capitalization and Par Value. The outstanding
voting securities of Silver Ledge shall be reverse split on a basis of 40.087785
for one, while retaining the authorized capital of Silver Ledge at 50,000,000
shares, with appropriate adjustments being made in the stated capital and
additional paid in capital accounts of Silver Ledge.
<PAGE> 2
1.3 Share Conversion. Each share of issued, outstanding or
subscribed common stock of Net Tel (the "Net Tel Shares") shall, upon the
effective date of the Plan, be converted into 2,385.4 post-split shares of
common stock of Silver Ledge, amounting to approximately 6,000,000 post-split
shares in the aggregate, as outlined in Exhibit A; all fractional shares shall
be rounded to the nearest whole share.
1.4 Exchange Agreement. Simultaneous with the Closing, Silver
Ledge shall have entered into a Exchange Agreement with the Silver Ledge
Principal Stockholders pursuant to which Silver Ledge will exchange all of the
outstanding securities of all of its subsidiaries for the 27,622,793 pre-split
shares of common stock of Silver Ledge (approximately 689,057 post-split shares)
owned by the Silver Ledge Principal Stockholders, presently amounting to
approximately 63% of the pre-Plan outstanding securities of Silver Ledge, and
resulting in there then being approximately 400,000 post-split outstanding
shares of common stock of Silver Ledge, not taking into account any shares of
Silver Ledge common stock to be issued pursuant to the Plan.
1.5 Assets and Liabilities of Silver Ledge at Closing. Taking
into account the completion of the Exchange Agreement outlined in Section 1.4
hereof, Silver Ledge shall have no assets or liabilities at Closing, and all
costs incurred by Silver Ledge incident to the Plan shall have been paid or
satisfied at Closing.
1.6 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 Net Tel; and all and
singular, the rights, privileges, powers and franchises of Net Tel, and all
property, real, personal and mixed, and all debts due to Net Tel on whatever
account, as well for stock subscriptions as all other things in action or
belonging to Net Tel 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 Net Tel, and the title to any real estate vested by
deed or otherwise in Net Tel 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 Net Tel shall be preserved unimpaired, and all debts, liabilities and duties
of Net Tel 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. Specifically, but not by way of
limitation, the Surviving Corporation shall be responsible and liable to
dissenting stockholders of Net Tel and Silver Ledge; and any action or
proceeding, whether civil, criminal or administrative, pending by or against Net
Tel, shall be prosecuted as if the Plan had not taken place, or the Surviving
Corporation may be substituted in such action or proceeding.
1.7 Survivor's Succession to Corporate Acts, Plans, Contracts,
etc. All corporate acts, plans, policies, contracts, approvals and
authorizations of Net Tel 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
2
<PAGE> 3
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
Net Tel. The employees of Net Tel 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 Net Tel.
1.8 Survivor's Rights to Assets, Liabilities, Reserves, etc.
The assets, liabilities, reserves and accounts of Net Tel 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 Net Tel, subject to such
adjustments or eliminations of intercompany items as may be appropriate in
giving effect to the Plan.
1.9 Resignations of Present Directors and Executive Officers
and Designation of New Directors and Executive Officers. On Closing, the present
directors and executive officers of Silver Ledge shall resign, in seriatim, and
designate the directors and executive officers of Net Tel 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.
1.10 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.
1.11 Adoption. The Plan must be adopted by persons owning a
majority of the outstanding voting securities of Silver Ledge, not taking into
account the shares of common stock of Silver Ledge owned by the Silver Ledge
Principal Stockholders; and, subject to the provisions of Section 9 herein
regarding termination resulting from dissenters' rights as may be accorded or
exercised under the laws of the State of Nevada, persons owning a majority of
the outstanding voting securities of Net Tel.
1.12 Dissenters' Rights and Notification. Stockholders of both
corporations shall be afforded all rights and privileges and be subject to such
obligations as are contained within the Nevada Revised Statutes regarding
dissenters' rights, and the Surviving Corporation shall be obligated to notify
all such stockholders as provided therein.
1.13 Delivery of Certificates by Net Tel Stockholders. The
transfer of the Net Tel Shares by the Net Tel Stockholders shall be effected by
the delivery to Silver Ledge or its transfer agent of certificates representing
the Net Tel Shares endorsed in blank or accompanied by stock powers executed in
blank, with all signatures witnessed or guaranteed to the satisfaction of Silver
Ledge and Net Tel and with all necessary transfer taxes and other revenue stamps
affixed and acquired at the Net Tel Stockholders' expense, and on receipt
thereof to the satisfaction of the Surviving Corporation, stock certificates
representing shares
3
<PAGE> 4
in the Surviving Corporation as outlined in Exhibit A shall be forwarded to
non-dissenting Net Tel Stockholders; as a condition to the exchange of the Net
Tel Shares, the Surviving Corporation may require the Net Tel Stockholders to
execute and deliver and Investment Letter as outlined in Section 4.12 hereof,
acknowledging, among other things, that the shares of Silver Ledge to be
received in exchange for the Net Tel 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 any of the Net Tel Stockholders, unless an exemption from such
registration is available for any such sale.
1.14 Consultant's Shares. Silver Ledge shall also issue
1,600,000 post-split shares of its common stock to certain consultants of Silver
Ledge and Net Tel, 610,000 and 990,000 shares, respectively, resulting in there
be approximately 8,000,000 post-split outstanding shares of $0.001 par value
common of the Surviving Corporation following the Closing of the Plan.
1.15 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.
1.16 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 and
stockholders Silver Ledge and Net Tel, in accordance with the provisions of
Section 92A.120 of the Nevada Revised Statutes. Net Tel has one class of
outstanding securities, such class being common voting stock, and persons owning
approximately 71% of such securities adopted, ratified and approved the Plan in
accordance with Section 78.320 of the Nevada Revised Statutes; and Silver Ledge
has one class of outstanding securities, such class being common voting stock,
and persons owning approximately 83% 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 Net Tel with and into Silver Ledge 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.
4
<PAGE> 5
SILVER LEDGE, INCORPORATED
Date: 7/8/96 By /s/Robin D. Porter
---------------------------------------
Robin D. Porter, President
Date: 7-8-96 By /s/Jennie Porter
---------------------------------------
Jennie Porter, Secretary
STATE OF UTAH )
) ss
COUNTY OF WEBER )
Personally appeared before me this 8th day of July, 1996, Robin D.
Porter and Jennie Porter, who duly acknowledged to me that they are the
President and Secretary, respectively, of Silver Ledge, Incorporated, and that
they are authorized to and did execute the foregoing Articles of Merger.
/s/ Lane Clissold
----------------------------------------
NOTARY PUBLIC
NET TELECOMMUNICATIONS, INCORPORATED
Date: 7-3-96 By /s/Michael Gorts
--------------------------------------
Michael Gorts, President
Date: 7/3/96 By /s/Robert Briare
--------------------------------------
Robert Briare, Secretary
STATE OF NEVADA )
) ss
COUNTY OF CLARK )
5
<PAGE> 6
SILVER LEDGE, INCORPORATED
Date: By
------------------- ------------------------
Robin D. Porter, President
Date: By
------------------- ------------------------
Jennie Porter, Secretary
STATE OF UTAH )
) SS
COUNTY OF WEBER )
Personally appeared before me this day of , 1996,
Robin D. Porter and Jennie Porter, who duly acknowledged to me that they are
the President and Secretary, respectively, of Silver Ledge, Incorporated, and
that they are authorized to and did execute the foregoing Articles of Merger.
----------------------------------------
NOTARY PUBLIC
NET TELECOMMUNICATIONS, INCORPORATED
Date: 7-3-96 By /s/ Michael Gorts
------------------- ------------------------
Michael Gorts, President
Date: 7-3-96 By /s/ Robert Briare
------------------- ------------------------
Robert Briare, Secretary
STATE OF NEVADA )
) SS
COUNTY OF CLARK )
5
<PAGE> 7
Personally appeared before me this 3rd 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.
/s/ Lin-Belle Addington
-----------------------------------------
NOTARY PUBLIC
6
<PAGE> 1
EXHIBIT 19.1
SILVER LEDGE, INC.
352 South Main Street
Clearfield, Utah 84015
Telephone: (801) 773-1311
July 22, 1996
Dear Stockholder:
Enclosed herewith please find a Notice of Special
Meeting of Stockholders of Silver Ledge, Inc. (the "Company") for a special
meeting to be held on June 24, 1996. At the meeting, stockholders of the Company
will be asked to consider and vote upon a change of domicile of the Company from
the State of Montana to the State of Nevada.
Present members of management and members of their
family who together own an aggregate total of 27,622,793 shares of common stock
of the Company (63% of the outstanding voting securities of the Company), have
agreed to vote in favor of the change of domicile, and no further votes are
needed.
The Company intends to incorporate a Nevada corporation
whose articles will have substantially the same provisions as the Articles of
Incorporation of the Company, and on the adoption of the proposed resolutions
which would merge the Company into this to be formed wholly-owned subsidiary,
each presently outstanding share of common stock of the Company would be
exchanged for one like common share of the to be formed wholly-owned subsidiary.
The present ownership of each stockholder in the Company shall be the same in
the to be formed wholly-owned subsidiary, following the completion of the
merger, and each shareholder of the Company will own an identical percentage of
shares in the to be formed subsidiary as presently owned in the Company.
With the exception that the rights, obligations and
duties of the Company and its stockholders will be governed by the Nevada
Revised Statutes rather than the Montana Business Corporations Act, there will
be no material change in the corporate structure or ownership of the Company.
Stockholders of the Company are entitled to dissenters'
rights under the Montana Business Corporation Act, specifically Sections
35-1-826 through 35-1-839, inclusive, and copies of these sections are enclosed
herewith for your review.
Copies of the proposed Articles of Incorporation of the
to be formed subsidiary and the proposed Articles of Merger and Plan of Merger
will be available for inspection at the meeting.
THE BOARD OF DIRECTORS
<PAGE> 1
EXHIBIT 19.2
NEWS RELEASE
Silver Ledge, Incorporated, a Clearfield, Utah based
Nevada corporation which recently changed its domicile from Montana to Nevada
("Silver Ledge"), OTC Bulletin Board Symbol, "SILL," announced today the closing
of an Agreement and Plan of Merger (the "Plan") pursuant to which Net
Telecommunications, Incorporated, a Nevada corporation ("Net Tel"), merged with
and into Silver Ledge, with Silver Ledge being the surviving corporation
Pursuant to the Plan, the 43,657,907 outstanding shares
of Silver Ledge are to be reverse split on a basis of 40.087785 for one,
reducing the pre-Plan outstanding shares of Silver Ledge to 1,089,057 shares,
and the name of Silver Ledge is to be changed to "Net Telecommunications,
Incorporated." As a result, approximately 40 shares of pre-split common stock of
Silver Ledge will equal one post-split share of common stock of Silver Ledge;
the reverse split and name change shall be effective on the filing of the
Articles of Merger with the Secretary of State of Nevada, which is anticipated
to be on Thursday, July 11, 1996. The Plan is deemed to be effective for
accounting purposes as of June 30, 1996.
As a part of the Plan, an Exchange Agreement, which was
approved by the written consent in accordance with the Nevada Revised Statutes
of non-interested persons who owned a majority of the outstanding voting
securities of Silver Ledge, was executed by Silver Ledge and Robin D. Porter,
Rodney G. Porter, Karen Porter and Jennie Porter, who were principal
stockholders or members of management of Silver Ledge, and pursuant to which
Silver Ledge exchanged all of its interest in the securities of all of its
subsidiaries to the Porters for the 689,057 post-split shares of Silver Ledge
owned by the Porters. All of the pre-Plan properties, assets and business of
Silver Ledge was held by and conducted through these subsidiaries. As a result
of the Exchange Agreement, Silver had no assets or liabilities immediately prior
to the completion of the merger with Net Tel.
Pursuant to the Plan, approximately 6,000,000 post-
split "unregistered" and "restricted" shares of Silver Ledge's common stock are
to be issued to the stockholders of Net Tel in exchange for all of their
respective shares of Net Tel; and an additional 1,600,000 post-split shares of
common stock were agreed to be issued to certain consultants of Silver Ledge and
Net Tel, 750,000 to be issued under a written Consultants' Compensation Plan and
an S-8 Registration Statement, and 850,000 to be issued pursuant to Regulation S
of the Securities and Exchange Commission, which will result in there being
8,000,000 post-split outstanding shares following the completion of the Plan.
Stockholders of Silver Ledge and Net Tel will be
afforded Dissenters' Rights under the Nevada Revised Statutes.
Net Tel is a successor to Long Distance International,
Inc., a Nevada corporation, which was formed on October 24, 1994, and commenced
operations in May, 1995, primarily as a resaler of long distance services.
<PAGE> 2
Page 2
July 22, 1996
News Release
Silver Ledge, Incorporated
Silver Ledges current directors and executive officers
have resigned, in seriatim, and the following persons have been designated to
serve on the Board of Directors and as executive officers until the next
respective annual meetings of the stockholders and directors or until their
respective successors have been elected and qualified or their prior
resignations or terminations: Michael Gorts, President and Director; Robert
Briare, Secretary, Treasurer and Director; Robert P. Amira, Director; Lonnie
Ellis, Director; Chris Fanelli, Director; Doug Staite, Director; and Tony
Tegano, Director. These persons held the same positions with Net Tel prior to
the completion of the Plan.
The new principal executive offices of the reorganized
company are located at 8170 West Sahara Avenue, Suite 203, Las Vegas, Nevada
89117.
For further information, contact: Robert Briare at
Telephone No.702-256-9956, Facsimile No. 702-256-9233.
July 10, 1996
cc. Dow Wire Service Fax No. 212-416-4008
Bloomberg Wire Service Fax No. 609-279-5976
Reuters Fax No. 212-859-1717
<PAGE> 1
EXHIBIT 20.1
MONTANA DISSENTERS' RIGHTS
35-1-826. Definitions. As used in 35-1-826 through 35-1-839, the follow-
ing definitions apply:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporation" includes the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by merger
or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under 35-1-827 and who exercises that right when and in the
manner required by 35-1-829 through 35-1-837.
(4) "Fair value", with respect to a dissenter's shares, means the value the
shares immediately before the effectuation of the corporate action to which the
dissenter objects, excluding any appreciation or depreciation in anticipation of
the corporate action unless exclusion would be inequitable.
(5) "Interest" means interest from the effective date of the corporate
action until the date of payment at the average rate currently paid by the
corporation on its principal bank loans or, if the corporation has no loans, at
a rate that is fair and equitable under all the circumstances.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial shareholder to the
extent of the rights granted by a nominee certificate on file with a
corporation.
(7) "Shareholder" means the record shareholder or the beneficial share-
holder.
History: En. Sec. 133, Ch. 368, L. 1991.
35-1-827. Right to dissent. (1) A shareholder is entitled to dissent from
and obtain payment of the fair value of the shareholder's shares in the event of
any of the following corporate actions:
(a) consummation of a plan of merger to which the corporation is a party
if:
(i) shareholder approval is required for the merger by 35-1-815 or the
articles of incorporation and the shareholder is entitled to vote on the merger;
or
(ii) the corporation is a subsidiary that is merged with its parent
corporation under 35-1-818;
(b) consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired if the shareholder is
entitled to vote on the plan;
(c) consummation of a sale or exchange of all or substantially all of the
property of the corporation other than in the usual and regular course of
business if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution but not including a sale pursuant to court order
or a sale for cash pursuant to a plan by which all or substantially all of the
net proceeds of the sale will be distributed to the shareholders within 1 year
after the date of sale;
(d) an amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(i) alters or abolishes a preferential right of the shares;
<PAGE> 2
(ii) creates, alters, or abolishes a right in respect of redemption,
including a provision with respect to a sinking fund for the redemption or
repurchase of the shares;
(iii) alters or abolishes a preemptive right of the holder of the shares to
acquire shares or other securities;
(iv) excludes or limits the right of the shares to be voted on any matter
or to cumulate votes, other than a limitation by dilution through issuance of
shares or other securities with similar voting rights; or
(v) reduces the number of shares owned by the shareholder to a fraction of
a share if the fractional share created is to be acquired for cash under
35-1-621; or
(e) any corporate action taken pursuant to a shareholder vote to the extent
the articles of incorporation, bylaws, or a resolution of the board of directors
provides that voting or nonvoting shareholders are entitled to dissent and to
obtain payment for their shares.
(2) A shareholder entitled to dissent and to obtain payment for shares
under 35-1-826 through 35-1-839 may not challenge the corporate action creating
the shareholder's entitlement unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
History: En. Sec. 134, Ch. 368, L.1991; amd. Sec. 2, Ch. 249, L 1993.
35-1-828. Dissent by nominees and beneficial owners. (1) A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(a) he submits to the corporation the record shareholder's written consent
to the dissent not later than the time the beneficial shareholder asserts
dissenters' rights; and
(b) he does so with respect to all shares of which he is the beneficial
shareholder or over which he has power to direct the vote.
History: En. Sec. 135, Ch. 368, L. 1991.
36-1-829. Notice of dissenters' rights. (1) If a proposed corporate action
creating dissenters' rights under 35-1-827 is submitted to a vote at
shareholders' meeting, the meeting notice must state that shareholders are or
may be entitled to assert dissenters' rights under 35-1-826 through 35-1-839 and
must be accompanied by a copy of 35-1-826 through 35-1-839.
(2) If a corporate action creating dissenters' rights under 35-1-827 is
taken without a vote of shareholders, the corporation shall give written
notification to all shareholders entitled to assert dissenters' rights that the
action was taken and shall send them the dissenters' notice described in
35-1-831.
History: En. Sec. 136, Ch.. 368, L. 1991.
35-1-830. Notice of intent to demand payment. (1) If proposed corporate
action creating dissenters' rights under 35-1-827 is submitted to a vote at a
<PAGE> 3
shareholders' meeting, a shareholder who wishes to assert dissenters' rights:
(a) shall deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed action is
effectuated, and
(b) may not vote his shares in favor of the proposed action.
(2) A shareholder who does not satisfy the requirements of subsection(1)(a)
is not entitled to payment for his shares under 35-1-826 through 35-1-839.
History: En. Sec. 137, Ch. 368. L. 1991.
35-1-831. Dissenters' notice. (1) If proposed corporate action creating
dissenters' rights under 35-1-827 is authorized at a shareholders' meeting, the
corporation shall deliver a written dissenters' notice to all shareholders who
have satisfied the requirements of 35-1-830.
(2) The dissenters' notice must be sent no later than 10 days after the
corporate action was taken and must:
(a) state where the payment demand must be sent and where and when
certificates for certified shares must be deposited;
(b) inform shareholders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment is received;
(c) supply a form for demanding payment that includes the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action and that requires the person asserting dissenters' rights to
certify whether or not he acquired beneficial ownership of the shares before
that date;
(d) set a date by which the corporation must receive the payment demand,
which may not be fewer than 30 nor more than 60 days after the date required
notice under subsection (1) is delivered; and
(e) be accompanied by a copy of 35-1-826 through 35-1-839.
History: En. See. 138, Ch. 368, L. 1991.
35-1-832. Duty to demand payment. (1) A shareholder sent a dissenters'
notice described in 35-1-831 shall demand payment, certify whether the
shareholder acquired beneficial ownership of the shares before the date required
to be set forth in the dissenters' notice pursuant to 35-1831(2)(c), and deposit
his certificates in accordance with the terms of the notice.
(2) The shareholder who demands payment and deposits his certificates under
subsection (1) retains all other rights of a shareholder until these rights are
canceled or modified by the taking of the proposed corporate action.
(3) A shareholder who does not demand payment or deposit his certificates
where required, each by the date set in the dissenters' notice, is not entitled
to payment for his shares under 35-1-826 through 35-1-839.
History: En. See. 139, Ch. 368, L. 1991.
35-1-833. Share restrictions. (1) The corporation may restrict the transfer
of uncertificated shares from the date the demand for their payment is received
until the proposed corporate action is taken or the restrictions are released
under 35-1-835.
<PAGE> 4
(2) The person for whom dissenters' rights are asserted as to uncertifi-
cated shares retains all other rights of a shareholder until these rights are
canceled or modified by the taking of the proposed corporate action.
History: En. See. 140, Ch. 368, L. 1991.
35-1-834. Payment. (1) Except as provided in 35-1-836, as soon as the
proposed corporate action is taken or upon receipt of a payment demand, the
corporation shall pay each dissenter who complied with 35-1-832 the amount the
corporation estimates to be the fair value of the dissenter's shares plus
accrued interest.
(2) The payment must be accompanied by:
(a) the corporation's balance sheet as of the end of a fiscal year ending
not more than 16 months before the date of payment, an income statement for that
year, a statement of changes in shareholders' equity for that year. and the
latest available interim financial statements, if any;
(b) a statement of the corporation's estimate of the fair value of the
shares;
(c) an explanation of how the interest was calculated;
(d) a statement of the dissenter's right to demand payment under 35-1837,
and
(e) a copy of 35- 1-826 through 35- 1-839.
History: En. See. 141, Ch. 368, L. 1991.
35-1-835. Failure to take action. (1) If the corporation does not take the
proposed action within 60 days after the date set for demanding payment and
depositing certificates, the corporation shall return the deposited certificates
and release the transfer restrictions imposed on uncertificated shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it shall send a new
dissenters' notice under 35-1- 831 and repeat the payment demand procedure.
History: En. See. 142, Ch. 368, L. 1991.
35-1-836. After-acquired shares. (1) A corporation may elect to withhold
payment required by 35-1-834 from a dissenter unless the dissenter was the
beneficial owner of the shares before the date set forth in the dissenters'
notice as the date of the first announcement to news media or to shareholders of
the terms of the proposed corporate action.
(2) To the extent the corporation elects to withhold payment under
subsection (1), after taking the proposed corporate action, the corporation
shall estimate the fair value of the shares plus accrued interest and shall pay
this amount to each dissenter who agrees to accept it in full satisfaction of
his demand. The corporation shall send with its offer a statement of its
estimate of the fair value of the shares, an explanation of how the interest was
calculated, and a statement of the dissenter's right to demand payment under
35-1-837.
History: En. Sec. 143, Ch. 368, L. 1991.
38-1-837. Procedure if shareholder dissatisfied with payment or offer. (1)
A dissenter may notify the corporation in writing of the dissenter's own
estimate of the fair value of the dissenter's shares and the amount of interest
due and may demand payment of the dissenter's estimate, less any
<PAGE> 5
payment under 35-1-834, or reject the corporation's offer under 35-1-836 and
demand payment of the fair value of the dissenter's shares and the interest due
if:
(a) the dissenter believes that the amount paid under 35-1-834 or offered
under 35-1836 is less than the fair value of the dissenter's shares or that the
interest due is incorrectly calculated;
(b) the corporation fails to make payment under 35-1-834 within 60 days
after the date set for demanding payment; or
(c) the corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer restrictions imposed
on uncertificated shares within 60 days after the date set for demanding
payment.
(2) A dissenter waives the right to demand payment under this section
unless he notifies the corporation of his demand in writing under subsection (1)
within 30 days after the corporation made or offered payment for his shares.
History: En. Sec. 144, Ch. 368, L. 1991.
35-1-838. Court action. (1) If a demand for payment under 35-1-837 remains
unsettled, the corporation shall commence a proceeding within 60 days after
receiving the payment demand and shall petition the court to determine the fair
value of the shares and accrued interest. If the corporation does not commence
the proceeding within the 60 day period, it shall pay each dissenter whose
demand remains unsettled the amount demanded.
(2) The corporation shall commence the proceeding in the district court of
the county where a corporation's principal office or, if its principal office is
not located in this state, where its registered office is located. If the
corporation is a foreign corporation without a registered office in this state,
it shall commence the proceeding in the county in this state where the
registered office of the domestic corporation merged with or whose shares were
acquired by the foreign corporation was located.
(3) The corporation shall make all dissenters whose demands remain
unsettled, whether or not residents of this state, parties to the proceeding as
in an action against their shares, and all parties must be served with a copy of
the petition. Nonresidents may be served by certified mail or by publication as
provided by law.
(4) The jurisdiction of the district court in which the proceeding is
commenced under subsection (2) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them or in any amendment to it. The dissenters are entitled to
the same discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding is entitled to judgment:
(a) for the amount, if any, by which the court finds the fair value of the
dissenter's shares plus interest exceeds the amount paid by the corporation; or
(b) for the fair value plus accrued interest of his after-acquired shares
for which the corporation elected to withhold payment under 35-1-836.
History: En. Sec. 145, Ch. 368, L. 1991.
<PAGE> 6
35-1-839. Court costs and attorney fees. (1) The court in an appraisal
proceeding commenced under 35- 1-838 shall determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court. The court shall assess the costs against the
corporation, except that the court may assess costs against all or some of the
dissenters, in amounts the court finds equitable, to the extent the court finds
dissenters acted arbitrarily, vexatiously, or not in good faith in demanding
payment under 351-837.
(2) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(a) against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the requirements
of 35-1-829 through 35-1837; or
(b) against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses are
assessed acted arbitrarily, vexatiously, or not in good faith with respect to
the rights provided by 35-1- 826 through 35-1-839.
(3) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated and that the fees
for those services should not be assessed against the corporation, the court may
award the counsel reasonable attorney fees to be paid out of the amounts awarded
the dissenters who were benefited.
History: En. Sec. 146, Ch. 368, L. 1991.
<PAGE> 1
EXHIBIT 20.2
NOTICE OF DISSENTERS' RIGHTS
TO THE STOCKHOLDERS OF SILVER LEDGE, INCORPORATED
(a Nevada corporation)
and
NET TELECOMMUNICATIONS, INCORPORATED
(a Nevada corporation)
8170 West Sahara Avenue, Suite 203
Las Vegas, Nevada 89117
INTRODUCTION
Pursuant to an Agreement and Plan of Merger (the "Plan")
dated July 10, 1996, between the Silver Ledge, Incorporated, a Nevada
corporation, which recently changed its domicile from Montana to Nevada (the
"Company"), Robin D. Porter (President, CEO, Treasurer and Director), Rodney G.
Porter (Operations Officer and Director), Karen Porter (Rodney G. Porter's wife)
and Jennie Porter (Secretary and Director) (sometimes called the "Company's
Principal Stockholders"), Net Telecommunications, Incorporated, a Nevada
corporation ("Net Tel"), and certain stockholders of Net Tel who owned in excess
of a majority of the outstanding voting securities of Net Tel and who executed
and delivered a copy of the Plan (the "Net Tel Majority Stockholders"), the Net
Tel Majority Stockholders became the controlling stockholders of the Company in
a transaction viewed as a "reverse merger," which became effective on July 11,
1996. The Plan was accounted for as a recapitalization of Net Tel.
Net Tel is a recently organized Nevada corporation and a
successor to Long Distance International, Inc., a Nevada corporation ("LDI"),
which was organized under the laws of the State of Nevada on October 24, 1994,
and commenced business operations in May, 1995, primarily as a resaler of long
distance services. Net Tel succeeded to the business operations of LDI when LDI
merged with and into Net Tel solely to change its name to "Net
Telecommunications, Incorporated" and to increase its authorized capital on June
18, 1996. At the time of the completion of the Plan with the Company, Net Tel
was party to four Letters of Intent to acquire four other entities involved in
endeavors related to the business operations of LDI which were succeeded to by
Net Tel in its merger with LDI.
Prior to the completion of the Plan, Robin D. Porter, Rodney G.
Porter, Karen Porter and Jennie Porter of Clearfield, Utah, were the principal
and controlling stockholders of the Company, collectively owning 27,622,793
pre-split shares of the Company's common stock or approximately 63% of the
pre-Plan outstanding voting securities of the Company. As a condition to the
Plan and in accordance with Exhibit B to the Plan, which is an Exchange
Agreement between the Company and the Company' Principal Stockholders, the
Company exchanged all of its right, title and interest in and to the securities
of all of its subsidiaries,
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through which it owned or operated all of its properties, assets and business,
for the 27,622,793 pre-split shares of the Company owned by the Company's
Principal Stockholders; as a result thereof, immediately prior to the completion
of the Plan, the Company had no assets or liabilities. There were 43,657,907
outstanding voting securities of the Company at the time of the adoption of the
Plan, and after deducting the 27,622,793 shares owned by the Company's Principal
Stockholders, which were also voted in favor of the Plan, there was a balance of
16,035,114 shares of common voting stock owned by persons who had no interest in
the Plan not shared by all other stockholders; 8,744,189 of these shares or
approximately 55% were voted in favor of the Plan by written consent pursuant to
Section 78.320 of the Nevada Revised Statutes. There was no relationship between
the Company's Principal Stockholders and the Net Tel Majority Stockholders or
Net Tel prior to the completion of the Plan.
The source of the consideration used by the Net Tel
Majority Stockholders to acquire their respective interests in the Company was
the exchange of 1,791.12 shares of $0.001 par value common voting stock of Net
Tel amounting to approximately 71% of the outstanding voting securities of Net
Tel for 4,272,538 post-split shares of $0.001 par value common voting stock of
the Company, amounting to approximately 53% of the outstanding post-Plan voting
securities of the Company. Accordingly, the basis of the "control" by the Net
Tel Majority Stockholders is this stock ownership, and their present capacities
as directors or executive officers of the Company.
SUMMARY OF PLAN OF MERGER
In summary, pursuant to the Plan, (i) Net Tel merged
with and into the Company, with the Company being the surviving corporation;
(ii) the name of the Company was changed to "Net Telecommunications,
Incorporated"; (iii) the pre-Plan outstanding voting securities of the Company
were reverse split on the basis of 40.087785 for one (stockholders of the
Company will be required to divide the number of shares of common stock of the
Company presently owned by 40.087785 to determine the number of shares presently
owned, which will amount to approximately 1/40th of one share in the reorganized
company for each share presently owned), while retaining the authorized capital
at 50,000,000 shares and the par value at $0.001 per share, with appropriate
adjustments to the stated capital and additional paid in capital accounts of the
Company; (iv) each issued, outstanding or subscribed share of common stock of
Net Tel was exchanged for 2,385.4 post-split shares of common stock of the
Company, amounting to approximately 6,000,000 post-split shares in the aggregate
(the shares of common stock of the Company to be received by the Net Tel
Stockholders in exchange for their Net Tel shares are "unregistered" and
"restricted" shares, and the completion of the Plan will result in a new
"holding period" for the Net Tel shareholders for purposes of resale under Rule
144 of the Securities and Exchange Commission); (v) the Company's Principal
Stockholders exchanged 27,622,793 pre-split shares of the Company's common stock
(approximately 689,057 post-split shares) for the Company's interest in all of
its subsidiaries, including all of its properties, assets and business,
resulting in there being approximately 400,000 post-split outstanding shares of
common stock of the Company
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immediately prior to the completion of the Plan, not taking into account any
shares of common voting stock to be issued under the Plan; and (vi) an
additional 1,600,000 post-split shares are to be issued to certain consultants
of the Company and Net Tel, 610,000 and 990,000 shares, respectively, for
services related to the negotiation and consummation of the Plan.
Following the completion of the Plan, taking into
account the foregoing, there are or will be approximately 8,000,000 post-split
outstanding voting securities of the Company.
PRINCIPAL STOCKHOLDERS FOLLOWING COMPLETION
OF PLAN OF MERGER
The following table indicates the names, addresses and
Company stockholdings of the Net Tel Majority Stockholders, following the
completion of the Plan, to-wit:
<TABLE>
<CAPTION>
Number of Percent
Name Shares Owned of Class
---- ------------ --------
<S> <C> <C>
Robert P. Amira 1,290,788 16.1%
2721 Brookstone Ct.
Las Vegas, Nevada 89117
Michael W. Gorts 1,490,875 18.6%
9301 Leaping Lily Lane
Las Vegas, Nevada 89129
Tony Tegano 1,490,875 18.6%
9016 Opus Drive
Las Vegas, Nevada 89117 --------- -----
4,272,538 53.3%
</TABLE>
FORMER AND PRESENT MANAGEMENT, TAKING INTO ACCOUNT
COMPLETION OF THE PLAN OF MERGER
Pursuant to the Plan, the persons who were serving as
directors and executive officers of the Company immediately prior to its
completion resigned, in seriatim, and appointed the persons who were serving as
directors and executive officers of Net Tel immediately prior to its completion,
as follows, respectively, to-wit:
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<TABLE>
<CAPTION>
Resigned:
Name Position
<S> <C>
Robin D. Porter President, CEO, Treasurer
and Director
Rodney G. Porter Operations Officer and
Director
Godfrey Penrod Chairman of the Board and
Director
Jennie Porter Secretary and Director
Elected:
Michael W. Gorts President and Director
Robert Briare Secretary/Treasurer and
Director
Tony Tegano Director
Lonnie Ellis Director
Chris Fanelli Director
Robert P. Amira Director
</TABLE>
DISSENTERS' RIGHTS
As a result of the completion of the Plan, the
stockholders of the Company and of Net Tel are each entitled to dissenters'
rights under the Nevada Revised Statutes, which are as follows, to-wit:
92A.300. Definitions.
As used in NRS 92A.300 to 92A.500, inclusive, unless the
context otherwise requires, the words and terms defined in NRS 92A.305 to
92A.335, inclusive, have the meanings ascribed to them in those sections. (1995,
ch. 586, Section 35, p.2086.)
92A.305 "Beneficial stockholder" defined.
"Beneficial stockholder" means a person who is a
beneficial owner of shares held in a voting trust or by a nominee as a
stockholder of record. (1995, ch. 586, Section 36, p. 2087.)
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92A.310. "Corporate action" defined.
"Corporate action" means the action of a domestic
corporation. (1995, ch. 586, Section 37, p. 2087.)
92A.315. "Dissenter" defined.
"Dissenter" means a stockholder who is entitled to
dissent from a domestic corporation's action under NRS 92A.380 and who exercises
that right when notified thereof pursuant to Section 92A.410. (1995, ch. 586,
Section 38, p. 2087.)
92A.320. "Fair value" defined.
"Fair value," with respect to a dissenter's shares,
means the value of the shares immediately before the effectuation of the
corporate action to which he objects, excluding any appreciation or depreciation
in anticipation of the corporate action unless exclusion would be inequitable.
(1995, ch. 586 Section 39, p. 2087.)
92A.325. "Stockholder" defined.
"Stockholder" means a stockholder of record or a
beneficial stockholder of a domestic corporation. (1995, ch. 586, Section 40, p.
2087.)
92A.330. "Stockholder of record" defined.
"Stockholder of record" means the person in whose name
shares are registered in the records of a domestic corporation or the beneficial
owner of shares to the extent of the rights granted by a nominee's certificate
on file with the domestic corporation. (1995, ch. 586, Section 41, p. 2087.)
92.335. "Subject corporation" defined.
"Subject corporation" means the domestic corporation
which is the issuer of the shares held by a dissenter before the corporate
action creating the dissenter's rights becomes effective or the surviving or
acquiring entity of that issuer after the corporate action becomes effective.
(1995, ch. 586, Section 42, p. 2087.)
92A.340. Computation of interest.
Interest payable pursuant to NRS 92A.300 to 92A.500,
inclusive, must be computed from the effective date of the action until the date
of payment at the average rate currently paid by the entity on its principal
bank loans or, if it has no bank loans, at a rate that is fair and equitable
under all of the circumstances. (1995, ch. 586, Section 43, p. 2087.)
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92A.350. Rights of dissenting partner of a domestic limited
partnership.
A partnership agreement of a domestic limited
partnership or, unless otherwise provided in the partnership agreement, an
agreement of merger or exchange, may provide that contractual rights with
respect to the partnership interest of a dissenting general or limited partner
of a domestic limited partnership are available for any class or group of
partnership interests in connection with any merger or exchange in which the
domestic limited partnership is a constituent entity. (1995, ch. 586, Section
47, p. 2088.)
92A.360. Rights of dissenting member of domestic limited-
liability company.
The articles of organization or operating agreement of a
domestic limited-liability company or, unless otherwise provided in the articles
of organization or operating agreement, an agreement of merger or exchange, may
provide that contractual rights with respect to the interest of a dissenting
member are available in connection with any merger or exchange in which the
domestic limited-liability company is a constituent entity. (1995, ch. 586,
Section 48, p. 2088.)
92A.370. Rights of dissenting member of domestic nonprofit
corporation.
1. Except as otherwise provided in subsection 2 and
unless otherwise provided in the articles or bylaws, any member of any
constituent domestic nonprofit corporation who voted against the merger may,
without prior notice, but within 30 days after the effective date of the merger,
resign from membership and is thereby excused from all contractual obligations
to the constituent or surviving corporations which did not occur before his
resignation and is thereby entitled to those rights, if any, which would have
existed if there had been no merger and the membership had been terminated or
the member had been expelled.
2. Unless otherwise provided in its articles of
incorporation or bylaws, no member of a domestic nonprofit corporation,
including, but not limited to, a cooperative corporation, which supplies
services described in Chapter 704 of NRS to its members only, and no person who
is a member of a domestic nonprofit corporation as a condition of or by reason
of the ownership of an interest in real property, may resign and dissent
pursuant to subsection 1. (1995, ch. 586, Section 46, p. 2088.)
92A.380. Right of stockholder to dissent from certain corporate
actions and to obtain payment for shares.
1. Except as otherwise provided in NRS 92A.370 to
92A.390, a stockholder is entitled to dissent from, and obtain payment of the
fair value of his shares in the event of any of the following corporate actions;
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(a) Consummation of a plan of merger to which the
domestic corporation is a party:
(1) If approval by the stockholders is required for
the merger by NRS 92A.120 to 92A.160, inclusive,
or the articles of incorporation and he is
entitled to vote on the merger; or
(2) If the domestic corporation is a subsidiary and
is merged with its parent under NRS 92A.180.
(b) Consummation of a plan of exchange to which the
domestic corporation is a party as the corporation
whose subject owner's interests will be acquired, if
he is entitled to vote on the plan.
(c) Any corporate action taken pursuant to a vote of the
stockholders to the event that the articles of
incorporation, bylaws or a resolution of the board
of directors provides that voting or nonvoting
stockholders are entitled to dissent and obtain
payment for their shares.
2. A stockholder who is entitled to dissent and obtain
payment under NRS 92A.300 to 92A.500, inclusive, may not challenge the corporate
action creating his entitlement unless the action is unlawful or fraudulent with
respect to him or the domestic corporation. (1995, ch. 586, Section 44, p.
2087.)
92A.390. Limitations on right of dissent: Stockholders of
certain classes or series; action of stockholders not
required for plan of merger.
1. There is no right of dissent with respect to a plan
of merger or exchange in favor of stockholders of any class or series which, at
the record date fixed to determine the stockholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or exchange is to be
acted on, were either listed on a national securities exchange, included in the
national market system by the National Association of Securities Dealers, Inc.,
or held by at least 2,000 stockholders of record, unless:
(a) The articles of incorporation of the corporation
issuing the shares provide otherwise; or
(b) The holders of the class or series are required
under the plan of merger or exchange to accept for
the shares anything except:
(1) Cash, owner's interests or owner's interests and
cash in lieu of fractional owner's interests of:
(I) The surviving or acquiring entity; or
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(II) Any other entity which, at the effective
date of the plan of merger or exchange, were
either listed on a national securities
exchange, included in the national market
system by the National Association of
Securities Dealers, Inc., or held of record
by at least 2,000 holders of owner's
interests of record; or
(2) A combination of cash and owner's interests of
the kind described in sub-subparagraphs (I) and
(II) of subparagraph (1) of paragraph (b).
2. There is no right of dissent for any holders of stock
of the surviving domestic corporation if the plan of merger does not require
action of the stockholders of the surviving domestic corporation under NRS
92A.130. (1995, ch. 586, Section 45, p. 2088.)
92A.400. Limitations on right of dissent: Assertion as to
portions only to shares registered to stockholder;
assertion by beneficial stockholder.
1. A stockholder of record may assert dissenter's rights
as to fewer than all of the shares registered in his name only if he dissents
with respect to all shares beneficially owned by any one person and notifies the
subject corporation in writing of the name and address of each person on whose
behalf he asserts dissenter's rights. The rights of a partial dissenter under
this section are determined as if the shares as to which he dissents and his
other shares were registered in the names of different stockholders.
2. A beneficial stockholder may assert dissenter's
rights as to shares held on his behalf only if:
(a) He submits to the subject corporation the written
consent of the stockholder of record to the dissent
not later than the time the beneficial stockholder
asserts dissenter's rights; and
(b) He does so with respect to all shares of which he is
the beneficial stockholder or over which he has
power to direct the vote. (1995, ch. 586, Section
49, p. 2089.
92A.410. Notification of stockholders regarding right of
dissent.
1. If a proposed corporate action creating dissenters'
rights is submitted to a vote at a stockholders' meeting, the notice of the
meeting must state that stockholders are or may be entitled to assert
dissenters' rights under NRS 92A.300 to 92A.500, inclusive, and be accompanied
by a copy of those sections.
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2. If the corporate action creating dissenters' rights
is taken without a vote of the stockholders, the domestic corporation shall
notify in writing all stockholders entitled to assert dissenters' rights that
the action was taken and send them the dissenter's notice described in NRS
92A.430. (1995, ch. 586, Section 50, p. 2089.)
92A.420. Prerequisites to demand for payment for shares.
1. If a proposed corporate action creating dissenters'
rights is submitted to a vote at a stockholders' meeting, a stockholder who
wishes to assert dissenter's rights:
(a) Must deliver to the subject corporation, before the
vote is taken, written notice of his intent to
demand payment for his shares if the proposed action
is effectuated; and
(b) Must not vote his shares in favor of the proposed
action.
2. A stockholder who does not satisfy the requirements
of subsection 1 is not entitled to payment for his shares under this chapter.
(1995, ch. 586, Section 51, p. 2089.)
92A.430. Dissenter's notice: Delivery to stockholders entitled
to assert rights; contents.
1. If a proposed corporate action creating dissenters'
rights is authorized at a stockholders' meeting, the subject corporation shall
deliver a written dissenter's notice to all stockholders who satisfied the
requirements to assert those rights.
2. The dissenter's notice must be sent no later than 10
days after the effectuation of the corporate action, and must:
(a) State where the demand for payment must be sent and
where and when certificates, if any, for shares must
be deposited;
(b) Inform the holders of shares not represented by
certificates to what extent the transfer of the
shares will be restricted after the demand for
payment is received;
(c) Supply a form for demanding payment that includes
the date of the first announcement to the news media
or to the stockholders of the terms of the proposed
action and requires that the person asserting
dissenter's rights certify whether or not he
acquired beneficial ownership of the shares before
that date;
(d) Set a date by which the subject corporation must
receive the demand for payment, which may not be
less than 30 nor more than 60 days after the date
the notice is delivered; and
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(e) Be accompanied by a copy o NRS 92A.300 to 92A.500,
inclusive. (1995, ch. 586, Section 52, p. 2089.)
92A.440 Demand for payment and deposit of certificates;
retention of rights of stockholder.
1. A stockholder to whom a dissenter's notice is sent
must:
(a) Demand payment;
(b) Certify whether he acquired beneficial ownership of
the shares before the date required to be set forth
in the dissenter's notice for this certification;
and
(c) Deposit his certificates, if any, in accordance with
the terms of the notice.
2. The stockholder who demands payment and deposits his
certificate, if any, retains all other rights of a stockholder until those
rights are canceled or modified by the taking of the proposed corporate action.
3. The stockholder who does not demand payment or
deposit his certificates where required, each by the date set forth in the
dissenter's notice, is not entitled to payment for his shares under this
chapter. (9195, ch. 586, Section 53, p. 2090.)
92A.450. Uncertificated shares: Authority to restrict transfer
after demand for payment; retention of rights of
stockholder.
1. The subject corporation may restrict the transfer of
shares not represented by a certificate from the date the demand for their
payment is received.
2. The person for whom dissenter's rights are asserted
as to shares not represented by a certificate retains all other rights of a
stockholder until those rights are canceled or modified by the taking of the
proposed corporate action. (1995, ch. 586, Section 54, p. 2090.)
92A.460. Payment for shares: General requirements.
1. Except as otherwise provided in NRS 92A.470, within
30 days after receipt of a demand for payment, the subject corporation shall pay
each dissenter who complied with NRS 92A.440 the amount the subject corporation
estimates to be the fair value of his shares, plus accrued interest. The
obligation of the subject corporation under this subsection may be enforced by
the district court:
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(a) Of the county where the corporation's registered
office is located; or
(b) At the election of any dissenter residing or having
its registered office in this state, or the county
where the dissenter resides or has its registered
office. The court shall dispose of the complaint
promptly.
2. The payment must be accompanied by:
(a) The subject corporation's balance sheet as of the
end of a fiscal year ending not more than 16 months
before the date of payment, a statement of income
for that year, a statement of changes in the
stockholders' equity for that year and the latest
available interim financial statements, if any;
(b) A statement of the subject corporation's estimate of
the fair value of the shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's rights to demand
payment under NRS 92A.480; and
(e) A copy of NRS 92A.300 to 92A.500, inclusive. (1995,
ch. 586, Section 55, p. 2090.)
92A.470. Payment for shares: Shares acquired on or after date
of dissenter's notice.
1. A subject corporation may elect to withhold payment
from a dissenter unless he was the beneficial owner of the shares before the
date set forth in the dissenter's notice as the date of the first announcement
to the news media or to the stockholders of the terms of the proposed action.
2. To the extent the subject corporation elects to
withhold payment, after taking the proposed action, it shall estimate the fair
value of the shares, plus accrued interest, and shall offer to pay this amount
to each dissenter who agrees to accept it in full satisfaction of his demand.
The subject corporation shall send with its offer a statement of its estimate of
the fair value of the shares, an explanation of how the interest was calculated
and a statement of the dissenters' right to demand payment pursuant to NRS
92A.480. (1995, ch. 586, Section 56, p. 2091.)
92A.480 Dissenter's estimate of fair value: Notification of
subject corporation; demand for payment of estimate.
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1. A dissenter may notify the subject corporation in
writing of his own estimate of the fair value of his shares and the amount of
interest due, and demand payment of his estimate, less any payment pursuant to
NRS 92A.460, or reject the offer pursuant to NRS 92A.470 and demand payment of
the fair value of his shares and interest due, if he believes that the amount
paid pursuant to NRS 92A.460 or offered pursuant to NRS 92A.470 is less than the
fair value of his shares or that the interest due is incorrectly calculated.
2. A dissenter waives his right to demand payment
pursuant to this section unless he notifies the subject corporation of his
demand in writing within 30 days after the subject corporation made or offered
payment for his shares. (1995, ch. 586, Section 57, p. 2091.)
92A.490 Legal proceeding to determine fair value: Duties of
subject corporation; powers of court; rights of
dissenter.
1. If a demand for payment remains unsettled, the
subject corporation shall commence a proceeding within 60 days after receiving
the demand and petition the court to determine the fair value of the shares and
accrued interest. If the subject corporation does not commence the proceeding
within the 60-day period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.
2. A subject corporation shall commence the proceeding
in the district court of the county where its registered office is located. If
the subject corporation is a foreign entity without a resident agent in the
state, it shall commence the proceeding in the county where the registered
office of the domestic corporation merged with or whose shares were acquired by
the foreign entity was located.
3. The subject corporation shall make all dissenters,
whether or not residents of Nevada, whose demands remain unsettled, parties to
the proceeding as in an action against their shares. All parties must be served
with a copy of the petition. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
4. The jurisdiction of the court in which the proceeding
is commenced under subsection 2 is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend a decision
on the question of fair value. The appraisers have the powers described in the
order appointing them, or any amendment thereto. The dissenters are entitled to
the same discovery rights as parties in other civil proceedings.
5. Each dissenter who is made a party to the proceeding
is entitled to a judgment:
(a) For the amount, if any, by which the court finds the
fair value of his shares, plus interest, exceeds the
amount paid by the subject corporation; or
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(b) For the fair value, plus accrued interest, of his
after-acquired shares for which the subject
corporation elected to withhold payment pursuant to
NRS 92A.470. (1995, ch. 586, Section 58, p. 2091.)
92A. 500 Legal proceeding to determine fair value: Assessment
of costs and fees.
1. The court in a proceeding to determine fair value
shall determine all of the costs of the proceeding, including the reasonable
compensation and expenses of any appraisers appointed by the court. The court
shall assess the costs against the subject corporation, except that the court
may assess costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously or not in good faith in demanding payment.
2. The court may also assess the fees and expenses of
the counsel and experts for the respective parties, in amounts the court finds
equitable:
(a) Against the subject corporation and in favor of all
dissenters, if the court finds the subject corporation did
not substantially comply with the requirements of NRS
92A.300 to 92A.500, inclusive; or
(b) Against either the subject corporation or a
dissenter in favor of any other party, if the court
finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously
or not in good faith with respect to the rights
provided by NRS 92A.300 to 92A.500, inclusive.
3. If the court finds that the services of counsel for
any dissenter were of substantial benefit to other dissenters similarly
situated, and that the fees for those services should not be assessed against
the subject corporation, the court may award to those counsel reasonable fees to
be paid out of the amounts awarded to the dissenters who were benefited.
4. In a proceeding commenced pursuant to NRS 92A.460,
the court may assess the costs against the subject corporation, except that the
court may assess costs against all or some of the dissenters who are parties to
the proceeding, in amounts the court finds equitable, to the extent the court
finds that such parties did not act in good faith in instituting the proceeding.
5. This section does not preclude any party in a
proceeding commenced pursuant to NRS 92A.460 or 92A.490 from applying the
provisions of N.R.C.P. 68 or NRS 17.115. (1995, ch. 586, Section 59, p. 2092.)
A Form of Dissenters' Rights to exercise such rights,
which accompanies this Notice of Dissenters' Rights, requires the certificated
or uncertificated shares of any dissenter to be forwarded for deposit with the
Company on the election of any such rights, and the
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shares of common stock represented thereby shall be subject to restrictions on
transfer until settlement and payment of the fair value thereof, by offer,
negotiation or court action.
ADDITIONAL INFORMATION
The Company is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended, and in accordance therewith,
files reports and other information with the Securities and Exchange Commission.
Such reports and other information can be inspected and copied at the public
reference facilities of the Securities and Exchange Commission at Room 1024, 450
Fifth Street, N.W., Washington, D. C. 20549; and copies of such materials can be
obtained from the public reference facilities which are located at 450 Fifth
Street, N.W., Washington, D. C. 20549, at prescribed rates.
Regarding the financial position of the Company prior to
the completion of the Plan, specifically see the 10-KSB Annual Report of the
Company for the year ended December 31, 1995, and its 10-QSB Quarterly Report
for the quarter ended March 31, 1996 (this 10-QSB Quarterly Report should be
available via the Internet, through EDGAR).
The 8-K Current Report dated July 5, 1996, which takes
into account the completion of the Plan and the disposition of all of the
properties, assets and business of the Company in exchange for the 27,622,793
pre-split shares owned by the Company's principal stockholders and the
completion of the Plan with Net Tel should also be available via the Internet,
through EDGAR.
The Company will also provide, on written request, to
any dissenter, a copy of the most recent financial statements of the Company and
Net Tel, and the combined pro forma balance sheet, taking into account the
completion of the Plan, without cost.
TRANSFER OF SECURITIES
Non-dissenting stockholders of Net Tel who may own stock
certificates of Net Tel or those reflecting ownership in "Long Distance
International, Inc." should forward their stock certificates to the Company at
the address above, and new stock certificates representing shares of common
stock of the Company each is entitled to under the Plan shall be issued and
delivered to these respective stockholders; each such stock certificate shall
bear an appropriate "restrictive" legend, requiring a minimum holding period of
two years prior to any public sale pursuant to Rule 144 of the Securities and
Exchange Commission, unless the Securities and Exchange Commission's present
proposal to reduce the required holding period under Rule 144 to one year
becomes effective.
Stockholders of the Company (Silver Ledge,
Incorporated") who desire to exchange their stock certificates for new stock
certificates bearing the new name of the Company and reflecting the reverse
split of 40.087785 for one, should forward their stock certificates to Fidelity
Stock Transfer, 1800 South West Temple, #301, Salt Lake City, Utah
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84115, together with a check in the amount of $11 for a new stock certificate;
or you may maintain your present stock certificate until you have an intention
to sell it, at which time your broker-dealer will effect the transfer for you.
The shares of common stock represented by any stock certificate registered in
the name "Silver Ledge, Incorporated" shall be divided by 40.087785, for
example, to-wit: 100 shares shall equal 3 post--split shares, after rounding to
the nearest whole share; 1,000 shares shall equal 25 post-split shares; 10,000
shares shall equal 250 post-split shares; and 100,000 shares shall equal 2,500
post-split shares, etc.
MARKET INFORMATION
Prior to the completion of the Plan, the Company's
shares were quoted on the OTC Bulletin Board under the Symbol "SILL"; however,
the shares traded on a limited and sporadic basis and no broker-dealer
maintained a market in the shares of common stock on a regular basis. During the
Company's fiscal years ended December 31, 1994 and 1995, there has not been a
firm quotation for the Company's shares and immediately prior to the completion
of the Plan, the Company's shares had a bid price of $0.001 per share; taking
into account the reverse split, this would amount to a post-split bid price of
approximately $0.04 per share. Any quotation currently provided by a
broker-dealer is not a firm quotation and does not represent any actual
transactions. With the completion of the Plan, the Company has a new symbol,
"NETQ," and management anticipates, based upon recent inquiries, that a viable
market for the Company's shares of common stock may exist in the future. In
considering whether to dissent, stockholders of the Company and Net Tel may wish
to consult their stock brokerage representative with respect to effect any
potential market may have on their election to dissent.
July 22, 1996 THE BOARD OF DIRECTORS
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