<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
Billing Information Concepts Corp.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
BILLING INFORMATION CONCEPTS CORP.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Billing Information Concepts Corp. (the "Company") will be held on Thursday,
February 20, 1997, at 10:00 a.m., C.S.T., in Ballroom B, at the Omni San
Antonio Hotel, 9821 Colonnade Blvd., San Antonio, Texas, for the following
purposes:
(1) A proposal to elect two (2) directors to serve until the
2000 Annual Meeting of Stockholders;
(2) A proposal to ratify the appointment of Arthur Andersen
LLP as independent public accountants of the Company for the fiscal year ending
September 30, 1997; and
(3) To consider and act upon any other matter which may
properly come before the meeting or any adjournment thereof. The Board of
Directors is presently unaware of any other business to be presented to a vote
of the stockholders at the Annual Meeting.
Information with respect to the above matters is set forth in the
Proxy Statement that accompanies this Notice.
The Board of Directors of the Company has fixed the close of business
on January 10, 1997, as the record date for determining stockholders entitled
to notice of and to vote at the meeting. A complete list of the stockholders
entitled to vote at the meeting will be maintained at the Company's principal
executive offices during ordinary business hours for a period of ten (10) days
prior to the meeting. The list will be open to the examination of any
stockholder for any purpose germane to the meeting during this time. The list
will also be produced at the time and place of the meeting and will be open
during the whole time thereof.
By Order of the Board of Directors,
KELLY E. SIMMONS
Corporate Secretary
San Antonio, Texas
January 17, 1997
---------------------
IMPORTANT
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON.
EVEN IF YOU PLAN TO BE PRESENT, PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED
PROXY AT YOUR EARLIEST CONVENIENCE IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE MEETING, YOU MAY
VOTE EITHER IN PERSON OR BY YOUR PROXY.
<PAGE> 3
BILLING INFORMATION CONCEPTS CORP.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 20, 1997
GENERAL INFORMATION
This Proxy Statement and the accompanying proxy are furnished to the
stockholders of Billing Information Concepts Corp., a Delaware corporation (the
"Company" or "Billing"), in connection with the solicitation by the Board of
Directors of proxies for use at the Annual Meeting of Stockholders (the "Annual
Meeting" or "Meeting") to be held on Thursday, February 20, 1997, at 10:00
a.m., C.S.T., in Ballroom B, at the Omni San Antonio Hotel, 9821 Colonnade
Blvd., San Antonio, Texas, and at any adjournment or postponement thereof, for
the purposes set forth in the foregoing Notice of Annual Meeting of
Stockholders. Properly executed proxies received in time for the Meeting will
be voted.
The securities of the Company entitled to vote at the Annual Meeting
consist of shares of common stock, $0.01 par value (the "Common Stock"). At
the close of business on January 10, 1997 (the "Record Date"), there were
outstanding and entitled to vote 15,161,528 shares of Common Stock. The
holders of record of Common Stock on the Record Date will be entitled to one
vote per share. The Company's Amended and Restated Certificate of
Incorporation does not permit cumulative voting in the election of directors.
The Annual Report to Stockholders for the year ended September 30,
1996 has been or is being furnished with this Proxy Statement, which is being
mailed on or about January 17, 1997, to the holders of record of Common Stock
on the Record Date. The Annual Report to Stockholders does not constitute a
part of the proxy materials.
VOTING AND PROXY PROCEDURES
Properly executed proxies received in time for the Meeting will be
voted. Stockholders are urged to specify their choices on the proxy, but if no
choice is specified, eligible shares will be voted for the election of the two
nominees for director named herein and for ratification of the appointment of
Arthur Andersen LLP as the Company's independent public accountants for the
fiscal year ending September 30, 1997. At the date of this Proxy Statement,
management of the Company knows of no other matters which are likely to be
brought before the Annual Meeting. However, if any other matters should
properly come before the Annual Meeting, the persons named in the enclosed
proxy will have discretionary authority to vote such proxy in accordance with
their best judgment on such matters.
If the enclosed form of proxy is executed and returned, it may
nevertheless be revoked by a later-dated proxy or by written notice filed with
the Secretary at the Company's executive offices at any time before the
enclosed proxy is exercised. Stockholders attending the Annual Meeting may
revoke their proxies and vote in person. The Company's executive offices are
located at 9311 San Pedro Avenue, Suite 400, San Antonio, Texas 78216.
The holders of a majority of the total shares of Common Stock issued
and outstanding at the close of business on the Record Date, whether present in
person or represented by proxy, will constitute a quorum for the transaction of
business at the Annual Meeting. The affirmative vote of a plurality of the
total shares of Common Stock present in person or represented by proxy and
entitled to vote at the Meeting is required for the election of directors, and
the affirmative vote of a majority of the total shares of Common Stock present
in person or represented by proxy and entitled to vote at the Annual Meeting is
required for the ratification of the appointment of Arthur Andersen LLP and any
other matters as may properly come before the Annual Meeting or any adjournment
thereof.
1
<PAGE> 4
Abstentions are counted toward the calculation of a quorum, but are
not treated as either a vote for or against a proposal. An abstention has the
same effect as a vote against the proposal. Any unvoted position in a
brokerage account will be considered as not voted and will not be counted
toward fulfillment of quorum requirements.
The cost of solicitation of proxies will be paid by the Company. In
addition to solicitation by mail, proxies may be solicited by the directors,
officers and employees of the Company, without additional compensation (other
than reimbursement of out-of-pocket expenses), by personal interview,
telephone, telegram or otherwise. Arrangements will also be made with
brokerage firms and other custodians, nominees and fiduciaries who hold the
voting securities of record for the forwarding of solicitation materials to the
beneficial owners thereof. The Company will reimburse such brokers,
custodians, nominees and fiduciaries for reasonable out-of-pocket expenses
incurred by them in connection therewith. The Company has elected to retain
the services of D. F. King & Co. for the purpose of soliciting proxies to be
voted at the Annual Meeting at an estimated cost of $4,000, plus out-of-pocket
expenses.
SPIN-OFF FROM USLD
The Company began operating as an independent publicly-held company on
August 2, 1996, as a result of its spin- off (the "Spin-Off") from U.S. Long
Distance Corp. ("USLD"). Prior to the Spin-Off, the Company operated as a
wholly- owned subsidiary of USLD. As a result of the Spin-Off, the Company now
owns and operates substantially all the billing clearinghouse and information
management services business previously operated by USLD. As part of the
Spin-Off, shares of Common Stock were distributed to record holders of USLD
common stock as of the close of business on August 2, 1996.
For information regarding certain transactions and agreements with
USLD, see "Certain Transactions."
OWNERSHIP OF COMMON STOCK
PRINCIPAL STOCKHOLDERS
The following table sets forth as of December 16, 1996, certain
information with respect to the Common Stock beneficially owned by persons who
are known to the Company to be the beneficial owners of more than five percent
(5%) of the Common Stock. For purposes of this Proxy Statement, beneficial
ownership is defined in accordance with the rules of the Securities and
Exchange Commission (the "Commission") to mean generally the power to vote or
dispose of shares, regardless of any economic interest therein. The persons
listed have sole voting power and sole dispositive power with respect to all
shares set forth in the table unless otherwise specified in the footnotes to
the table.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
NAME AND ADDRESS OWNERSHIP(1) PERCENT(2)
---------------- ----------------- ---------
<S> <C> <C>
Montgomery Asset Management, L.P. . . . . . . . . . . . . . . . 1,039,000 6.88%
101 California
San Francisco, CA 94111
AIM Management Group, Inc. . . . . . . . . . . . . . . . . . . 842,300 5.57%
11 Greenway Plaza, Suite 1919
Houston, TX 77046
Edgemont Asset Management Corp. . . . . . . . . . . . . . . . . 830,000 5.49%
140 E. 45th Street, 43rd Floor
New York, NY 10017
</TABLE>
- ---------------
(1) Based on record ownership as of December 16, 1996, as reported by the
Company's transfer agent.
(2) Based on a total of 15,115,312 shares of Common Stock issued and
outstanding on December 16, 1996.
2
<PAGE> 5
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of December 16, 1996, certain
information with respect to the Company's Common Stock beneficially owned by
each of its directors and nominees for director, each executive officer named
in the Summary Compensation Table and by all its directors and executive
officers as a group. Such persons have sole voting power and sole dispositive
power with respect to all shares set forth in the table unless otherwise
specified in the footnotes to the table.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
NAME OWNERSHIP(1) PERCENT(2)
---- --------- -------
<S> <C> <C>
Parris H. Holmes, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 345,064(3) 2.3%
Alan W. Saltzman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157,969(4) 1.0%
Kelly E. Simmons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,000(5) *
Paul L. Gehri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,751(6) *
Michael R. Long . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,000(7) *
Lee Cooke . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000(8) *
James E. Sowell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000(9) *
Thomas G. Loeffler . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000(10) *
All executive officers and directors as a group
(eight persons, including the executive officers
and directors listed above) . . . . . . . . . . . . . . . . . . . . . . . . 633,031(11) 4.1%
</TABLE>
- ---------------
* Represents less than 1% of the issued and outstanding shares of Common
Stock.
(1) Information with respect to beneficial ownership is based upon
information furnished by each director or officer of the Company or
contained in filings made with the Commission. Includes shares
subject to acquisition within 60 days by such person or group.
(2) Based on a total of 15,115,312 shares of Common Stock issued and
outstanding on December 16, 1996.
(3) Represents 185,000 shares that Mr. Holmes has the right to acquire
upon the exercise of stock options and 64 shares that Mr. Holmes
holds in his Billing 401(k) Retirement Plan account at
December 16, 1996.
(4) Includes 103,000 shares that Mr. Saltzman has the right to acquire
upon exercise of stock options, an aggregate of 700 shares held in
individual retirement accounts for Mr. Saltzman and his wife and 3,597
shares that Mr. Saltzman holds in his Billing 401(k) Retirement Plan
account at December 16, 1996.
(5) Represents 45,000 shares that Mr. Simmons has the right to acquire
upon exercise of stock options.
(6) Represents 19,751 shares that Mr. Gehri has the right to acquire
upon exercise of stock options.
(7) Represents 14,000 shares that Mr. Long has the right to acquire upon
exercise of stock options.
(8) Represents 20,000 shares that Mr. Cooke has the right to acquire upon
the exercise of stock options.
(9) Includes shares owned by Jim Sowell Construction Co., Inc., a
corporation of which Mr. Sowell owns 100%, and represents 10,000 shares
that Mr. Sowell has the right to acquire upon the exercise of stock
options.
(10) Represents 10,000 shares that Mr. Loeffler has the right to acquire
upon the exercise of stock options.
(11) Represents 406,751 shares that eight directors and executive officers
have the right to acquire upon exercise of stock options,
700 shares held in individual retirement accounts and 3,661 shares
that such executive officers held in their Billing 401(k) Retirement
Plan accounts at December 16, 1996.
3
<PAGE> 6
MATTERS TO COME BEFORE THE ANNUAL MEETING
PROPOSAL 1: ELECTION OF TWO DIRECTORS
The Company's Amended and Restated Certificate of Incorporation and
Amended and Restated Bylaws provide that the Board of Directors will consist of
not less than three persons, the exact number to be fixed from time to time by
the Board of Directors. The Board of Directors has fixed the authorized number
of directors at five. Directors are divided into three classes, of which two
have two members each and one has one member. Each class is elected for a term
of three years, so that the term of office of one class of directors expires at
every annual meeting.
The Board of Directors has nominated two persons for election as
directors in the class whose term of office will expire at the Company's 2000
Annual Meeting of Stockholders or until their respective successors are elected
and qualified. The nominees are James E. Sowell and Thomas G. Loeffler. The
respective terms of the directors expire on the dates set forth below.
<TABLE>
<CAPTION>
DIRECTORS WHOSE TERMS EXPIRE POSITION AND OFFICES
AT THE 1999 ANNUAL MEETING WITH THE COMPANY AGE DIRECTOR SINCE
------------------------------------------ --------------------- ------- -------------------
<S> <C> <C> <C>
Parris H. Holmes, Jr Chairman of the Board 53 May 13, 1996
and Chief Executive
Officer
Alan W. Saltzman Director, President 49 May 13, 1996
and Chief Operating
Officer
<CAPTION>
DIRECTORS WHOSE TERMS EXPIRE POSITION AND OFFICES
AT THE 1998 ANNUAL MEETING WITH THE COMPANY AGE DIRECTOR SINCE
------------------------------------------ --------------------- ------- -------------------
Lee Cooke Director 52 May 13, 1996
<CAPTION>
DIRECTORS WHOSE TERMS EXPIRE
AT THE 1997 ANNUAL MEETING AND NOMINEES
FOR ELECTION FOR TERMS EXPIRING POSITION AND OFFICES
AT THE 2000 ANNUAL MEETING WITH THE COMPANY AGE DIRECTOR SINCE
------------------------------------------ --------------------- ------- -------------------
James E. Sowell Director 48 June 21, 1996
Thomas G. Loeffler Director 50 August 21, 1996
</TABLE>
Biographical information on these directors is set forth below under
"Further Information -- Board of Directors and Executive Officers."
It is the intention of the persons named in the enclosed proxy to vote
such proxy for the election of such nominees. Management of the Company does
not contemplate that either of such nominees will become unavailable for any
reason, but if that should occur before the meeting, proxies that do not
withhold authority to vote for directors will be voted for another nominee, or
other nominees, in accordance with the best judgment of the person or persons
appointed to vote the proxy.
The enclosed form of proxy provides a means for the holders of Common
Stock to vote for both of the nominees listed therein, to withhold authority to
vote for one or more of such nominees or to withhold authority to vote for both
nominees. Each properly executed proxy received in time for the Meeting will
be voted as specified therein, or if a stockholder does not specify in his or
her executed proxy how the shares represented by his or her
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<PAGE> 7
proxy are to be voted, such shares shall be voted for the nominees listed
therein or for other nominees as provided above. The director nominees
receiving a plurality of the votes cast at the Annual Meeting will be elected
as directors. Abstentions and broker non-votes will not be treated as a vote
for or against any particular director nominee and will not affect the outcome
of the election.
The Company's Amended and Restated Bylaws establish an advance notice
procedure with regard to the nomination of candidates for election as directors
other than by or at the direction of the Company's Board of Directors (the
"Nomination Procedure"). The Nomination Procedure provides that only persons
who are nominated by or at the direction of the Company's Board of Directors,
or by a stockholder who has given timely prior written notice to the Secretary
of the Company prior to the meeting at which directors are to be elected, will
be eligible for election as directors. To be timely, notice must be received
by the Company (i) in the case of an annual meeting, not less than 90 days
prior to the annual meeting, or (ii) in the case of a special meeting, not
later than the seventh day following the day on which notice of such meeting is
first given to stockholders.
Under the Nomination Procedure, notice to the Company from a
stockholder who proposes to nominate a person at a meeting for election as a
director must contain certain information about that person, including business
and residence addresses, a representation that the stockholder is a holder of
record of stock of the Company entitled to vote at such meeting and intends to
appear in person or by proxy to nominate the person, a description of all
arrangements or understandings between the stockholder and each nominee and any
other person pursuant to which the nomination is to be made, such other
information regarding each nominee as would be required pursuant to the proxy
rules of the Commission had the nominee been nominated by the Company's Board
of Directors, the consent of such nominee to be nominated and such other
information as would be required to be included in a proxy statement soliciting
proxies for the election of the proposed nominee, and certain information about
the stockholder proposing to nominate that person. If the Chairman or other
officer presiding at a meeting determines that a person was not nominated in
accordance with the Nomination Procedure, such person will not be eligible for
election as a director. Nothing in the Nomination Procedure will preclude
discussion by any stockholder of any nomination properly made or brought
before an annual or special meeting in accordance with the above-mentioned
procedures.
COMMITTEES OF THE BOARD OF DIRECTORS
The business of the Company is managed under the direction of its
Board of Directors. The Company's Board of Directors has established three
standing committees: Audit, Compensation and Nominating.
The Audit Committee is comprised of certain directors who are not
employees of the Company or any of its subsidiaries. Messrs. Cooke and Sowell
are the current members of the Audit Committee. The Audit Committee meets with
the independent auditors, management representatives and internal auditors;
recommends to the Board of Directors appointment of independent auditors;
approves the scope of audits and other services to be performed by the
independent and internal auditors; considers whether the performance of any
professional services by the auditors other than services provided in
connection with the audit function could impair the independence of the outside
auditors; and reviews the results of internal and external audits and the
accounting principles applied in financial reporting and financial and
operational controls. The independent auditors and internal auditors have
unrestricted access to the Audit Committee and vice versa.
The Compensation Committee is comprised of certain directors who are
not employees of the Company or any of its subsidiaries. Messrs. Cooke and
Sowell are the current members of the Compensation Committee. The Compensation
Committee's functions include recommendations on policies and procedures
relating to compensation and various employee stock and other benefit plans and
approval of individual salary adjustments and stock awards in those areas.
The Nominating Committee is comprised of certain directors who are not
employees of the Company or any of its subsidiaries. Messrs. Cooke and Sowell
are the current members of the Nominating Committee. The Nominating Committee
considers candidates for election as directors and is responsible for keeping
abreast of and making recommendations with regard to corporate governance in
general. In addition, the Nominating Committee fulfills an advisory function
with respect to a range of matters affecting the Board of Directors and its
committees, including the making of recommendations with respect to
qualifications of director candidates, compensation of
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<PAGE> 8
directors, the selection of committee chairmen, committee assignments and
related matters affecting the functioning of the Board of Directors. The
Nominating Committee considers nominees to the Board of Directors recommended
by stockholders of the Company where such recommendations are made pursuant to
the procedures which are described in the Company's Amended and Restated
Certificate of Incorporation and Bylaws.
MEETINGS OF THE BOARD OF DIRECTORS
During the fiscal year ended September 30, 1996, the Board of
Directors met four (4) times and took action on nine (9) occasions by unanimous
written consent, the Compensation Committee met one (1) time and took action on
three (3) occasions by unanimous written consent, the Nominating Committee did
not meet and the Audit Committee met one (1) time. Each of the directors of
the Company attended at least 75% of the aggregate of the meetings of the Board
of Directors and committees of which he was a member.
COMPENSATION OF DIRECTORS
Fees. Each outside member of the Board of Directors receives a
meeting fee of $500 for each meeting of the Board of Directors attended.
Additionally, each member of the Compensation Committee, Audit Committee or
Nominating Committee receives $500 for each committee meeting attended during
the year except that the Chairperson of each such committee receives $1,000 for
attendance. In each case, the members of the Board of Directors are reimbursed
for their travel expenses to and from the meetings. The members of the Board
of Directors do not receive a fee for telephonic meetings.
Stock Options. A total of 400,000 shares of Common Stock are subject
to the Company's 1996 Non-Employee Director Plan (the "Director Plan"). Upon
election and re-election to the Board of Directors of the Company, each
eligible director is granted an option to purchase 30,000 shares effective as
of the date of such election or re- election with vesting over a three year
period. In addition, directors with terms expiring at the 1997 Annual Meeting
and 1998 Annual Meeting received options to purchase an additional 10,000 and
20,000 shares, respectively, with 10,000 vesting at each subsequent annual
meeting, and, pursuant to the terms of the Spin-Off, Mr. Cooke received an
option to purchase 10,000 shares under the Director Plan. See "Certain
Transactions -- Agreements With USLD -- Distribution Agreement." Accordingly,
options have been granted to each of Messrs. Sowell and Loeffler to purchase
40,000 shares at an exercise price of $16.125, and to Mr. Cooke to purchase
50,000, 5,000 and an additional 5,000 shares at an exercise price of $16.125,
$2.16 and $7.97, respectively.
Director Compensation Deferral Plan. The Company has adopted the
Billing Information Concepts Corp. Director Compensation Deferral Plan (the
"Director Deferral Plan"), which generally allows outside directors to make
voluntary deferral contributions, on a pre-tax basis, of the fees paid by the
Company for services rendered as a director. From time to time the Company
credits each participant's plan with interest at the rate declared by the
Company in accordance with the Director Deferral Plan. The Company has
eliminated the ability of directors to make deferral contributions under the
Director Deferral Plan. The Director Deferral Plan remains in effect solely to
maintain contributions that were transferred to the Director Deferral Plan
pursuant to the Spin-Off by former USLD directors who are now directors of the
Company and who held such deferred amounts under the corresponding USLD
deferral plan prior to the Spin-Off. Benefits generally are payable to a
director upon retirement, disability, termination of service or death, in each
case as provided in the Director Deferral Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION
OF THE INDIVIDUALS NOMINATED FOR ELECTION AS DIRECTORS
6
<PAGE> 9
PROPOSAL 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon recommendation of its Audit Committee,
has appointed the firm of Arthur Andersen LLP to serve as independent public
accountants of the Company for the fiscal year ending September 30, 1997.
Although stockholder ratification is not required, the Board of Directors has
directed that such appointment be submitted to the stockholders of the Company
for ratification at the Annual Meeting. Arthur Andersen LLP has served as
independent public accountants of the Company with respect to the Company's
consolidated financial statements for the fiscal year ending September 30,
1996, independent public accountants of USLD prior to the Spin-Off, and is
considered by management of the Company to be well qualified. If the
stockholders do not ratify the appointment of Arthur Andersen LLP, the Board of
Directors may reconsider the appointment.
Representatives of Arthur Andersen LLP will be present at the Annual
Meeting. They will have an opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions from
stockholders.
Assuming the presence of a quorum, ratification of the appointment of
Arthur Andersen LLP requires the affirmative vote of a majority of the votes
cast by the holders of shares of Common Stock entitled to vote in person or by
proxy at the Annual Meeting. Abstentions and broker non-votes will not be
considered as a vote for or against the proposal and therefore will have no
effect on the outcome of the proposal. Proxies will be voted for or against
such approval in accordance with specifications marked thereon, and if no
specification is made, the proxies will be voted for such approval.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO RATIFY
THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS
OF THE COMPANY FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 1997
FURTHER INFORMATION
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is information with respect to each director and
executive officer of the Company as of December 16, 1996. The executive
officers are elected by the Board of Directors and serve at the discretion of
the Board. There are no family relationships between any two directors or
executive officers.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Parris H. Holmes, Jr. . . . . . . . . . . 53 Chairman of the Board and Chief Executive Officer
Alan W. Saltzman . . . . . . . . . . . . 49 President, Chief Operating Officer and Director
Kelly E. Simmons . . . . . . . . . . . . 41 Senior Vice President, Chief Financial Officer,
Treasurer and Corporate Secretary
Paul L. Gehri . . . . . . . . . . . . . . 42 Vice President of Sales and Marketing of Billing
Information Concepts, Inc. and Enhanced Services
Billing, Inc.
Michael R. Long . . . . . . . . . . . . . 51 Vice President of Information Technology of Billing
Information Concepts, Inc. and Enhanced Services
Billing, Inc.
Lee Cooke . . . . . . . . . . . . . . . . 52 Director(1)(2)(3)
James E. Sowell . . . . . . . . . . . . . 48 Director(1)(2)(3)
Thomas G. Loeffler . . . . . . . . . . . 50 Director
</TABLE>
- -------------------------
(Footnotes on following page)
7
<PAGE> 10
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Nominating Committee.
Parris H. Holmes, Jr. has served as Chairman of the Board and Chief
Executive Officer of the Company since May 1996. Mr. Holmes served as Chairman
of the Board and Chief Executive Officer of USLD from September 1986 until
August 1996, and continues to serve as Chairman of the Board of USLD. Prior to
March 1993, Mr. Holmes also served as President of USLD. Mr. Holmes is also
Vice Chairman and a member of the Board of Directors of Tanisys Technology,
Inc., a developer, manufacturer and marketer of computer peripheral equipment.
Mr. Holmes is also a director of Poore Brothers, Inc., a manufacturer and
distributor of flavored potato chips. On December 18, 1996, the Commission
filed a civil injunctive action in the United States District Court for the
District of Columbia alleging that Mr. Holmes failed to file timely twelve
reports regarding certain 1991 and 1992 transactions in the stock of USLD as
required by Section 16(a) of the Securities and Exchange Act of 1934, as
amended (the "Exchange Act"). Section 16(a) requires officers and directors of
such companies to file reports with the Commission regarding their personal
transactions in the securities of their company. Mr. Holmes settled this
action on December 18, 1996, without admitting or denying the allegations of
the complaint, by consenting to the entry of an injunction with respect to
these requirements and paying a civil penalty of $50,000. The Commission Staff
also has notified Mr. Holmes of its decision to terminate its investigation of
trading in the securities of USLD and the securities of Value-Added
Communications, Inc. (In the Matter of Trading in the Securities of Value-Added
Communications, Inc. (HO-2765)).
Alan W. Saltzman has been President, Chief Operating Officer and
Director of the Company since May 1996, and served as Executive Vice President
- -- Operations, Billing and Information Management of USLD from May 1993 until
August 1996. Mr. Saltzman had been Chief Operating Officer of Billing
Information Concepts, Inc. ("BICI"), a wholly-owned subsidiary of the Company,
known as Zero Plus Dialing, Inc., a subsidiary of USLD ("ZPDI"), prior to the
Spin-Off, since February 1991. In August 1994, Mr. Saltzman was elected
President of ZPDI. Mr. Saltzman has served as an adviser to the Board of
Directors of USLD from February 1994 to August 1996. Mr. Saltzman joined ZPDI
in 1989 as Vice President -- Management Information Systems. Mr. Saltzman is
an advisory director of Tanisys Technology, Inc.
Kelly E. Simmons has served as Senior Vice President, Chief Financial
Officer, Treasurer and Corporate Secretary of the Company since May 1996. From
1988 until August 1996, Mr. Simmons held various executive positions with USLD,
including Vice President -- Finance and Corporate Treasurer, Vice President --
Administration and Senior Vice President of Business Development.
Paul L. Gehri has served as Vice President of Sales and Marketing for
BICI and Enhanced Services Billing, Inc. ("ESBI"), a wholly-owned subsidiary
of the Company, since August 1996, and served in the same position with ZPDI
since May 1992. Mr. Gehri was Vice President of Sales of U.S. Long Distance,
Inc. from July 1991 to May 1992 and was Director of Sales and a principal of
National Telephone Exchange, Inc., a company acquired by USLD, from 1988 to
July 1991.
Michael R. Long has served as Vice President of Information Technology
of BICI and ESBI since August 1996, and served as Vice President -- Management
Information Systems of U.S. Long Distance, Inc. from December 1993 until July
1996. From 1989 to 1993, Mr. Long served in various capacities at United
Services Automobile Association, first as Director -- Life Systems Strategic
Development (1989-1991), then as Executive Director -- Life Systems Strategic
Development (1991-1993) and most recently as Assistant Vice President -- Life,
Health and Annuity Systems (1993).
Lee Cooke has served as a director of the Company since May 1996, and
was a director of USLD from 1991 until July 1996. Since May 1992, he has been
Chairman of the Board and Chief Executive Officer of U. S. Medical Systems,
Inc. Mr. Cooke is also an advisory director of Tanisys Technology, Inc. From
1988 through 1991, Mr. Cooke served in the elected position of Mayor of Austin,
Texas.
James E. Sowell has served as a director of the Company since June
1996 and is the founder of Jim Sowell Construction Co., Inc., which began in
1972 primarily for single-family home construction. Since 1972, the company
has expanded its scope of operations and ownership to include land development,
income property
8
<PAGE> 11
development, financial institutions, country club and golf course operations
and ownership, hotel and restaurant ownership and operations, as well as
interests in major corporations. Mr. Sowell is a director of Tanisys
Technology, Inc. Mr. Sowell was Chairman of the Board of Business Capital
Corporation ("BCC"), Arlington Golf Club, Inc. ("AGC") and Sable Homes, Inc.
("SHI") and a general partner of SBS Venture ("SBS"). All of these entities
filed petitions for relief under the U. S. Bankruptcy Code, BCC in March 1991
(emerged in January 1992), AGC in April 1992 (dismissed in January 1993), SHI
in September 1993, and SBS in September 1991 (petition withdrawn in December
1991).
Thomas G. Loeffler has served as a director of the Company since
August 1996, and has been an attorney with the law firm of Arter & Hadden since
June 1993. Prior to that time, Mr. Loeffler acted as a practicing attorney and
consultant. From 1979 to 1986, Mr. Loeffler served as an elected
representative to the United States House of Representatives.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
General
The Compensation Committee of the Board of Directors (the
"Compensation Committee") has furnished the following report on the Company's
executive compensation policies. The report describes the Compensation
Committee's compensation policies applicable to the Company's executive
officers and provides specific information regarding the compensation of the
Company's Chief Executive Officer. As discussed elsewhere in this Proxy
Statement, during the major part of fiscal 1996, the Company operated as a
wholly-owned subsidiary of USLD. Accordingly, many of the decisions regarding
1996 compensation of the Company's executives were made by USLD and this report
does not describe the basis for that compensation or the relationship of the
Company's performance to such compensation. Instead, this report is intended
to discuss the limited compensation decisions made by the Compensation
Committee subsequent to the Spin-Off and the current intent of the Compensation
Committee regarding policies concerning executive compensation, which will be
applicable beginning in fiscal 1997. (The information contained in the report
shall not be deemed to be "soliciting material" or to be "filed" with the
Commission, nor shall such information be incorporated by reference into any
future filings under the Securities Act of 1933, as amended (the "Securities
Act"), or the Exchange Act, except to the extent that the Company specifically
incorporates it by reference into such filing.)
The Compensation Committee is comprised of two outside directors,
Messrs. Sowell and Cooke, and administers and oversees all aspects of the
Company's executive compensation policy and reports its determinations to the
Board of Directors. The Compensation Committee's overall goal is to develop
executive compensation policies that are consistent with, and linked to,
strategic business objectives and Company values. The Compensation Committee
approves the design of, assesses the effectiveness of, and administers
executive compensation programs in support of, the Company's compensation
policies. The Compensation Committee also reviews and approves all salary
arrangements and other remuneration for executives, evaluates executive
performance and considers related matters.
Compensation Philosophy
The Company's executive compensation policies have four primary
objectives: to attract and retain highly competent executives to manage the
Company's business, to offer executives appropriate incentives for
accomplishment of the Company's business objectives and strategy, to encourage
stock ownership by executives to enhance mutuality of interest with
stockholders and to maximize long-term stockholder value. The Compensation
Committee believes the compensation policies should operate in support of these
objectives and should emphasize the following: a long-term and at-risk focus, a
pay-for-performance culture, an equity orientation and management development.
Elements of Compensation
Each element of compensation considers median compensation levels paid
within the competitive market. Competitive market data compares the Company's
compensation practices to a group of comparator companies that tend to have
similar sales volumes, market capitalizations, employment levels and lines of
business. The
9
<PAGE> 12
Compensation Committee reviews and approves the selection of companies used for
compensation comparison purposes.
The key elements of the Company's executive compensation are base
salary, annual incentive and long-term incentive. These key elements are
addressed separately below. In determining compensation, the Compensation
Committee considers all elements of an executive's total compensation package.
Base Salaries. Base salaries for executives are initially determined
by evaluating executives' levels of responsibility, prior experience, breadth
of knowledge, internal equity issues and external pay practices. Base salaries
are below the size-adjusted medians of the competitive market.
Increases to base salaries are driven primarily by individual
performance. Individual performance is evaluated based on sustained levels of
individual contribution to the Company. When evaluating individual
performance, the Compensation Committee considers the executive's efforts in
promoting Company values, continuing educational and management training,
improving product quality, developing relationships with customers, vendors and
employees, and demonstrating leadership abilities among co-workers.
As described elsewhere in this Proxy Statement, the annual base salary
for Mr. Holmes has been established pursuant to arm's length negotiations as a
part of the Spin-Off of the Company from USLD. Accordingly, the Compensation
Committee did not separately review the base salary of Mr. Holmes during fiscal
1996.
Annual Incentive. Each year, the Compensation Committee evaluates the
performance of the Company as a whole, as well as the performance of each
individual executive. Factors considered include revenue growth, net
profitability and cost control. The Compensation Committee does not utilize
formalized mathematical formulae, nor does it assign weightings to these
factors. The Compensation Committee, in its sole discretion, determines the
amount, if any, of incentive payments to each executive. The Compensation
Committee believes that the Company's growth in revenue and profitability
requires subjectivity on the part of the Committee when determining incentive
payments. The Compensation Committee believes that specific formulae restrict
flexibility and are too rigid at this stage of the Company's development. Mr.
Holmes did not receive a bonus from the Company in fiscal 1996.
Long-Term Incentive. The Company's long-term compensation philosophy
provides that long-term incentives should relate to improvement in stockholder
value, thereby creating a mutuality of interests between executives and
stockholders. Additionally, the Compensation Committee believes that the
long-term security of executives is critical for the perpetuation of the
Company. Long-term incentives are provided to executives through the Company's
1996 Employee Comprehensive Stock Plan, in the form of options and restricted
stock awards, and the Company's Executive Compensation Deferral Plan.
In keeping with the Company's commitment to provide a total
compensation package that favors at-risk components to pay, long-term
incentives comprise an appreciable portion of an executive's total compensation
package. When awarding long-term incentives, the Compensation Committee
considers executives' respective levels of responsibility, prior experience,
historical award data, various performance criteria and compensation practices
at comparator companies. Again, the Compensation Committee does not utilize
formal mathematical formulae when determining the number of options/shares
granted to executives.
Restricted Stock
Officers and certain key employees of the Company, including directors
who are also full-time employees, are eligible for awards of restricted stock
under the Billing Employee Stock Plan (as hereinafter defined). The number of
shares of Common Stock to be awarded to an employee and other terms of the
award are determined by the Compensation Committee, which administers the
Billing Employee Stock Plan. Each award is evidenced by an agreement that sets
forth the terms and conditions of the restricted stock granted, including the
vesting schedule. The Billing Employee Stock Plan provides for certain vesting
upon death, permanent disability, retirement, termination for good reason by
the employee and upon a change of control. The restricted stock may not be
sold, assigned, transferred, pledged or otherwise encumbered for a period of
not less than one year but not greater than two years. The employee, as owner
of the restricted stock, has all rights of a stockholder including voting
rights and the right to receive cash dividends, if any.
10
<PAGE> 13
Stock Options
Stock options generally are granted at an option price not less than
the fair market value of the Common Stock on the date of grant. Accordingly,
stock options have value only if the price of the Common Stock appreciates
after the date the options are granted. This design focuses executives on the
creation of stockholder value over the long term and encourages equity
ownership in the Company.
In fiscal 1996, Mr. Holmes received an option to purchase 150,000
shares of Common Stock with an exercise price of $16.125 per share. One third
of the options granted to Mr. Holmes vest on each of August 1997, 1998 and 1999
as detailed in the table entitled "Stock Option Grants in Fiscal 1996" below.
In determining the number of shares subject to the option granted to Mr.
Holmes, the Committee considered the level of total stockholder return and
numerous subjective factors indicative of Mr. Holmes' dedication to the success
of the Company. Pursuant to the terms of the Spin-Off, Mr. Holmes also
received options to purchase 185,000 shares of Common Stock to correspond to
his outstanding USLD options. As of December 16, 1996, Mr. Holmes owned
160,000 shares of the Company's Common Stock and, including the fiscal 1996
grant, held options to purchase a total of 335,000 shares. The Compensation
Committee believes that this equity interest provides an appropriate link to
the interests of stockholders.
Executive Compensation Deferral Plan
The Company offers to certain key employees the ability to defer a
portion of their respective salaries, on a pre-tax basis, up to 100% of base
compensation, with benefits generally payable upon retirement, disability,
termination of employment (other than for cause) or death. The Company may
make certain matching contributions to each participant's account under such
plan with vesting to occur over time; however, the Company has retained the
ability to limit its contributions thereunder at any time. The Committee
believes that this type of plan provides additional long- term incentive for
overall corporate success. The Company made an aggregate of approximately
$17,532.15 in matching contributions from August 2, 1996, to December 31, 1996,
$8,015.50 of which was made on behalf of Mr. Holmes.
Section 162(m)
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), currently imposes a $1.0 million limitation on the deductibility of
certain compensation paid to each of the Company's five highest paid
executives. Excluded from this limitation is compensation that is "performance
based." For compensation to be performance based it must meet certain
criteria, including being based on predetermined objective standards approved
by stockholders. In general, the Company believes that compensation relating
to options granted under the Billing Employee Stock Plan should be excluded
from the $1.0 million limitation calculation. The Compensation Committee
intends to take into account the potential application of Section 162(m) with
respect to incentive compensation awards and other compensation decisions made
by it in the future.
Conclusion
The Compensation Committee believes these executive compensation
policies serve the interests of the stockholders and the Company effectively.
The Committee believes that the various pay vehicles offered are appropriately
balanced to provide increased motivation for executives to contribute to the
Company's overall future successes, thereby enhancing the value of the Company
for the stockholders' benefit.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
James E. Sowell
Lee Cooke
11
<PAGE> 14
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth certain
information concerning compensation of the Company's Chief Executive Officer
and each of the Company's four other most highly compensated executive officers
for fiscal 1996. During the major part of fiscal 1996, the Company was
operating as a wholly-owned subsidiary of USLD and, accordingly, the officers,
who were then employed by USLD, were compensated in accordance with USLD's
plans and policies unless otherwise indicated. All references in the following
Summary Compensation Table to compensation, stock and stock options relate to
compensation paid by, and awards of stock and stock options of, USLD, and some
of the information included herein and therein has been provided or derived
from information provided by USLD. The compensation paid and stock options
granted by Billing to the named executive officers during fiscal 1996 is
footnoted in the Summary Compensation Table. All references in the tables
entitled "Stock Option Grants in Fiscal 1996" and "Aggregated Option Exercises
in Fiscal 1996 and Fiscal Year-End Option Values" relate to awards of stock
options of Billing.
As a result of the Spin-Off, the exercise prices of shares of USLD
stock underlying outstanding USLD options were adjusted to reflect the
distribution of the Company's Common Stock in the Spin-Off (such adjustments
are referred to as the "Spin-Off Adjustments"). Employees of the Company who
held USLD options as of the time of the Spin-Off were given new Company options
under the Billing Employee Stock Plan to purchase one share of the Company's
Common Stock for every one share of USLD common stock subject to an outstanding
USLD option at the time of the Spin-Off. Except as otherwise indicated, all
references in the Summary Compensation Table to awards of stock and stock
options of USLD reflect the original terms of those awards prior to the
Spin-Off Adjustments.
The exercise prices and numbers of shares of common stock subject to
the USLD options were determined as of the time of the Spin-Off so as to
preserve the investment basis and intrinsic gain associated with the USLD
options. Generally, the terms of the Billing options received are similar to
the terms of the corresponding USLD options.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------- -----------------------
OTHER RESTRICTED SECURITIES ALL OTHER
NAME AND FISCAL ANNUAL STOCK UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS ($) COMPENSATION($) AWARDS($)(2) OPTIONS(#) ($)
- ------------------ ------ -------- -------- -------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Parris H. Holmes, Jr. . . 1996(3) $261,808(4) $805,000 $15,524 $602,800(5) 160,000 $1,339,979(6)
Chairman of the Board 1995 276,000 750,000(1) 22,421(7) 0 100,000 38,964(8)
and Chief Executive 1994 271,113 0 0 159,375(9) 90,000 24,637
Officer
Alan W. Saltzman . . . . 1996(10) $138,462(4) $100,000 $17,962 $133,330(11) 25,000 $ 239,032
President and Chief 1995 147,308 100,000(1) 0 0 25,000 8,792(12)
Operating Officer 1994 136,790 10,000 0 31,875(13) 58,000 6,614
Kelly E. Simmons . . . . 1996(14) $ 88,154(4) $ 33,000 $ 1,565 0 10,000 $ 63,489(15)
Senior Vice President 1995 96,000 33,000(1) 0 0 0 2,863(16)
and Chief Financial 1994 96,000 10,000 0 $ 12,250(17) 19,000 2,062
Officer
Paul L. Gehri . . . . . . 1996(18) $ 75,962(4) $ 35,000 $28,000 0 10,000 0
Vice President of Sales 1995 83,654 10,000(1) 0 0 0 $ 3,333(19)
and Marketing of BICI 1994 80,462 10,000 0 0 16,500 3,033
and ESBI
Michael R. Long . . . . . 1996(20) $ 77,692(4) $ 35,500 0 0 10,000 0
Vice President of 1995 84,900 15,500(1) 0 0 0 0
Information Technology 1994 63,750(21) 0 0 0 19,500 0
of BICI and ESBI
</TABLE>
- ---------------
(Footnotes on following page)
12
<PAGE> 15
(1) In 1994, represents bonuses earned in the fiscal year, but paid 50% in
January and 50% in April of fiscal year 1995. Payment of such bonuses
was conditioned upon USLD recognizing a profit in its first and second
fiscal quarters, respectively. These conditions, however, were waived
by USLD for those bonuses earned for fiscal 1994.
(2) At September 30, 1996, the number and aggregate USLD restricted stock
award holdings were as follows: Mr. Holmes, 120,000 shares
($1,072,500); Mr. Saltzman, 27,000 shares ($241,313); and Mr. Simmons,
1,000 shares ($8,938). Messrs. Gehri and Long did not hold any
restricted stock of USLD at September 30, 1996.
(3) During fiscal 1996, Mr. Holmes received from Billing a salary of
$46,539 and was granted an option to purchase 150,000 shares of
Billing Common Stock. Pursuant to the terms of the Spin-Off, Mr.
Holmes received options to purchase 185,000 shares of Billing Common
Stock to correspond to his outstanding USLD options.
(4) Represents salary paid through August 1, 1996 by USLD.
(5) Mr. Holmes was granted 55,000 shares of USLD common stock on January
26, 1996 which, as amended, vested 100% on July 2, 1996, and was
granted 50,000 shares of USLD common stock on July 16, 1996 which
vested 100% on the date of grant.
(6) Represents $3,256 in USLD 401(k) Retirement Plan contributions,
$15,143 in USLD deferred compensation contributions and $21,580 in
life insurance premiums made or paid on behalf of Mr. Holmes during
fiscal 1996 and a $1,300,000 severance payment by USLD in connection
with the Spin-Off.
(7) Represents amounts reimbursed during fiscal 1995 for the payment of
certain taxes.
(8) Represents $1,871 in USLD 401(k) Retirement Plan contributions, $15,686
in USLD deferred compensation contributions and $21,407 in life
insurance premiums made or paid on behalf of Mr. Holmes during fiscal
1995.
(9) Mr. Holmes was granted 15,000 shares on March 1, 1994, which vested 50%
on February 1, 1995, and 50% on February 1, 1996.
(10) During fiscal 1996, Mr. Saltzman received from Billing a salary of
$30,423 and was granted an option to purchase 100,000 shares of
Billing Common Stock. Pursuant to the terms of the Spin-Off, Mr.
Saltzman received options to purchase 103,000 shares of Billing Common
Stock to correspond to his outstanding USLD options.
(11) Mr. Saltzman was granted 16,000 shares of USLD common stock on March
8, 1996 which, as amended, vested 100% on July 2, 1996, and was
granted 7,000 shares of USLD common stock on July 16, 1996 which
vested 100% on the date of grant.
(12) Represents $2,391 in USLD 401(k) Retirement Plan contributions and
$6,401 in USLD deferred compensation contributions made on behalf of
Mr. Saltzman during fiscal 1995.
(13) Mr. Saltzman was granted 3,000 shares on March 1, 1994, which vested
50% on February 1, 1995, and 50% on February 1, 1996.
(14) During fiscal 1996, Mr. Simmons received from Billing a salary of
$21,046 and was granted an option to purchase 50,000 shares of Billing
Common Stock. Pursuant to the terms of the Spin-Off, Mr. Simmons
received options to purchase 45,000 shares of Billing Common Stock to
correspond to his outstanding USLD options.
(15) Represents $1,258 in USLD 401(k) Retirement Plan contributions and
$2,231 in USLD deferred compensation contributions made on behalf of
Mr. Simmons during fiscal 1996, and a $60,000 severance payment in
connection with the Distribution.
(16) Represents $1,303 in USLD 401(k) Retirement Plan contributions and
$1,560 in USLD deferred compensation contributions made on behalf of
Mr. Simmons during fiscal 1995.
(17) Mr. Simmons was granted 1,000 shares on March 24, 1994, which vested
50% on February 1, 1995 and 50% on February 1, 1996.
(18) During fiscal 1996, Mr. Gehri received from Billing a salary of
$15,923 and was granted an option to purchase 30,000 shares of Billing
Common Stock. Pursuant to the terms of the Spin-Off, Mr. Gehri
received options to purchase 31,750 shares of Billing Common Stock to
correspond to his outstanding USLD options.
(19) Represents $1,538 in USLD 401(k) Retirement Plan contributions and
$1,795 in USLD deferred compensation contributions made on behalf of
Mr. Gehri.
(20) During fiscal 1996, Mr. Long received from the Company a salary of
$14,615 and was granted an option to purchase 30,000 shares of the
Company's Common Stock. Pursuant to the terms of the Spin-Off, Mr.
Long received options to purchase 22,999 shares of the Company's
Common Stock to correspond to his outstanding USLD options.
(21) Amount shown reflects Mr. Long's salary from December 27, 1993, the
beginning date of his employment with USLD through the end of fiscal
1994.
13
<PAGE> 16
STOCK OPTION GRANTS IN FISCAL 1996
The following table provides certain information related to options
granted by Billing to the named executive officers during fiscal 1996 pursuant
to the Billing Employee Stock Plan.
INDIVIDUAL GRANTS
-----------------
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
% OF TOTAL APPRECIATION FOR
NUMBER OF OPTIONS OPTION TERM(2)
SECURITIES GRANTED TO EXERCISE OR --------------------
UNDERLYING EMPLOYEES IN BASE PRICE EXPIRATION
NAME OPTIONS GRANTED (#) FISCAL 1996(1) ($/SH) DATE 5% ($) 10% ($)
---- ------------------- -------------- ----------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Parris H. Holmes, Jr. . 150,000 23.2% $16.125 08/21/02 $822,800 $1,666,150
100,000(3) 8.34 11/27/00 196,600 427,800
40,000(3) 7.32 06/30/99 44,800 93,960
37,000(3) 7.22 02/01/99 34,743 72,261
8,000(3) 6.30 06/24/99 7,712 16,176
Alan W. Saltzman . . . 100,000 15.5% $16.125 08/21/02 $548,400 $1,244,100
25,000(3) 8.34 11/27/00 49,150 106,950
30,000(3) 7.32 06/30/99 33,600 70,470
28,000(3) 7.22 02/01/99 26,292 54,684
20,000(3) 6.30 06/24/99 19,280 40,440
Kelly E. Simmons . . . 50,000 7.77% $16.125 08/21/02 $274,200 $ 622,050
10,000(3) 8.34 11/27/00 19,660 42,780
9,000(3) 7.32 06/30/99 10,080 21,141
10,000(3) 7.22 02/01/99 9,390 19,530
10,000(3) 6.30 06/24/99 9,640 20,220
6,000(3) 2.22 08/15/98 1,428 2,934
Paul L. Gehri . . . . . 30,000 4.66% $16.125 08/21/02 $164,520 $ 373,230
10,000(3) 8.34 11/27/00 19,660 42,780
10,000(3) 7.32 06/30/99 11,200 23,490
6,500(3) 7.22 02/01/99 6,104 12,695
5,250(3) 6.30 06/24/99 5,061 10,616
Michael R. Long . . . . 30,000 4.66% $16.125 08/21/02 $164,520 $ 373,230
10,000(3) 8.34 11/27/00 19,660 42,780
4,666(3) 7.32 06/30/99 5,226 10,960
8,333(3) 7.22 02/01/99 7,825 16,274
</TABLE>
- ---------------
(1) Excludes all options which were granted pursuant to the terms of the
Spin-Off to correspond to outstanding USLD options.
(2) The potential realizable value is calculated based on the term of the
option and is calculated by assuming that the fair market value of
Common Stock on the date of the grant as determined by the Board
appreciates at the indicated annual rate compounded annually for the
entire term of the option and that the option is exercised and the
Common Stock received therefor is sold on the last day of the term of
the option for the appreciated price. The 5% and 10% rates of
appreciation are derived from the rules of the Commission and do not
reflect the Company's estimate of future stock price appreciation.
The actual value realized may be greater than or less than the
potential realizable values set forth in the table.
(3) Options granted under the Billing Employee Stock Plan pursuant to the
terms of the Spin-Off to correspond to outstanding USLD options held
by the named individuals.
14
<PAGE> 17
AGGREGATED OPTION EXERCISES IN FISCAL 1996 AND FISCAL YEAR-END OPTION VALUES
The following table provides information related to options of Billing
exercised by the named executive officers of the Company during fiscal 1996 and
the number and value of Billing options held at fiscal year end.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
UNDERLYING UNEXERCISED THE-MONEY OPTIONS AT
OPTIONS AT FY-END (#) FY-END($)(1)
----------------------------- ----------------- --------
SHARES ACQUIRED
UPON OPTION VALUE
NAME EXERCISE (#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---------------- ------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Parris H. Holmes, Jr. -0- -0- 185,000 150,000 $2,671,910 $918,750
Alan W. Saltzman . . -0- -0- 103,000 100,000 1,535,490 612,500
Kelly E. Simmons . . -0- -0- 45,000 50,000 703,450 306,250
Paul L. Gehri . . . . -0- -0- 21,751 39,999 327,347 326,236
Michael R. Long . . . -0- -0- 9,834 43,165 143,838 373,921
</TABLE>
- ---------------
(1) Represents the product of (a) the number of shares underlying options
granted under the Billing Employee Stock Plan multiplied by (b) the
difference between (i) the fair market value of Common Stock on
September 30, 1996 ($22.25), and (ii) the exercise price of the
options.
EMPLOYEE BENEFIT PLANS
Billing Information Concepts Corp. 401(k) Retirement Plan
The Company maintains the Billing Information Concepts Corp. 401(k)
Retirement Plan (the "Billing Retirement Plan"). Participation in the Billing
Retirement Plan is offered to eligible employees of Billing or its subsidiaries
(collectively, the "Participants"). Generally, all employees of Billing or its
subsidiaries who are 21 years of age and who have completed one year of service
during which they worked at least 1,000 hours are eligible for participation in
the Billing Retirement Plan.
The Billing Retirement Plan is a 401(k) plan, a form of defined
contribution plan, which provides that Participants generally may make
voluntary salary deferral contributions, on a pre-tax basis, of between 1% and
15% of their base compensation in the form of voluntary payroll deductions up
to a maximum amount as indexed for cost-of-living adjustments ("Voluntary
Contributions"). The Company makes matching contributions equal to 50% of the
first 3% of a Participant's compensation contributed as salary deferral. The
Company may from time to time make additional discretionary contributions at
the sole discretion of the Company's Board of Directors. The discretionary
contributions, if any, are allocated to Participants' accounts based on a
discretionary percentage of the Participants' respective salary deferrals.
Participants gradually vest in all contributions made by the Company
over a period of five years of credited service, vesting 25% a year for each
full year of service beginning with the Participant's second anniversary, and
becoming 100% vested after five years of service or upon death, total and
permanent disability, retirement under the Retirement Plan or Retirement Plan
termination. Participants are always 100% vested in their Voluntary
Contributions. Service with USLD prior to the Spin-Off was credited under the
Billing Retirement Plan for purposes of vesting as well as eligibility to
participate.
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<PAGE> 18
1996 Employee Comprehensive Stock Plan
The Company has adopted the Billing Information Concepts Corp. 1996
Employee Comprehensive Stock Plan (the "Billing Employee Stock Plan"). The
Billing Employee Stock Plan provides for (i) the grant of incentive stock
options ("ISOs") under Section 422 of the Internal Revenue Code, (ii) the grant
of non-qualified stock options that do not qualify under Section 422 of the
Code ("NQSOs") and (iii) the award of shares of restricted stock of the
Company. Under the terms of the Billing Employee Stock Plan, 3,500,000 shares
of Common Stock have been reserved for the granting of options and awards of
restricted stock. At December 16, 1996, options to purchase 2,339,004 shares
had been granted under the Billing Employee Stock Plan. If any option or award
granted under the Billing Employee Stock Plan terminates, expires or is
surrendered as to any shares, new options or awards may thereafter be made
covering such shares.
The Billing Employee Stock Plan is administered by the Compensation
Committee of two "disinterested persons" appointed by the Board, currently, Lee
Cooke and James Sowell. The Billing Employee Stock Plan grants broad authority
to the Compensation Committee to grant options or award restricted shares to
full-time employees and officers of the Company and its subsidiaries (estimated
to total 300 eligible individuals at December 16, 1996) selected by the
Compensation Committee, to determine the number of shares subject to options or
awards and to provide for the appropriate periods and methods of exercise and
requirements regarding the vesting of options and awards of restricted shares.
The option price per share with respect to each option shall be determined by
the Compensation Committee, but shall in no instance be less than the par value
of the shares subject to the option. In addition, the option price for ISOs
may not be less than 100% of the fair market value of the Common Stock on the
date of grant. An ISO may be granted to a participant only if such
participant, at the time the option is granted, does not own stock possessing
more than 10% of the total combined voting power of all classes of Common Stock
of the Company or a subsidiary. The preceding restriction shall not apply if
at the time the option is granted the option price is at least 110% of the fair
market value of the Common Stock subject to the option and such option by its
terms is not exercisable after the expiration of five years from the date of
grant. The aggregate fair market value (determined as of the time the option
is granted) of the stock with respect to which ISOs are exercisable for the
first time by a participant in any calendar year (under all plans of Billing
and of any parent or subsidiary) shall not exceed $100,000. There is no price
requirement for NQSOs, other than that the option price must exceed the par
value of the Common Stock. The Compensation Committee may permit the option
purchase price to be payable by transfer to Billing of Common Stock owned by
the option holder with a fair market value at the time of exercise equal to the
option purchase price. No participant shall receive any grant of options,
whether ISOs or NQSOs, for more than an aggregate of 150,00 shares of Common
Stock during any one fiscal year.
The Billing Employee Stock Plan permits the Compensation Committee to
make awards of restricted shares of Common Stock that are subject to a
designated period during which such shares of Common Stock may not be sold,
assigned, transferred, pledged, or otherwise encumbered, which period shall not
be less than one (1) year nor more than two (2) years from the date of grant.
As a condition to any award, the Compensation Committee may require an employee
to pay to the Company the amount (such as the par value of such shares)
required to be received by Billing in order to assure compliance with
applicable state law. Any award for which such requirement is established
shall automatically expire if not purchased in accordance with the Compensation
Committee's requirements within 60 days after the date of grant. The
Compensation Committee may, at any time, reduce the restricted period with
respect to any outstanding shares of restricted stock and any retained
distributions with respect thereto awarded under the Billing Employee Stock
Plan. Shares of restricted stock awarded under the Billing Employee Stock Plan
shall constitute issued and outstanding shares of Common Stock for all
corporate purposes.
Each employee has the right to vote the restricted stock held by such
employee, to receive and retain all cash dividends and distributions thereon
and exercise all other rights, powers and privileges of a holder of Common
Stock with respect to such restricted stock, subject to certain exceptions.
Unless otherwise provided in the agreement relating to an award, upon the
occurrence of a change of control, as defined in the Billing Employee Stock
Plan, all restrictions imposed on the employee's restricted stock and any
retained distributions shall automatically terminate and lapse and the
restricted period shall terminate; provided, however, that if the change of
control occurs within six months of the date of grant the restrictions and the
restricted period shall terminate on the six-month anniversary of the date of
grant.
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<PAGE> 19
1996 Employee Stock Purchase Plan
The Company has adopted the Billing Information Concepts Corp. 1996
Employee Stock Purchase Plan (the "Billing Purchase Plan"). The Billing
Purchase Plan allows employees of the Company and its subsidiaries to purchase
Common Stock at regular intervals by means of wage and salary deferrals on a
tax-favored basis.
The Billing Purchase Plan, which is intended to qualify under Section
423 of the Code, is administered by the Employee Stock Purchase Plan Committee,
which is appointed by the Board of Directors. The committee consists of at
least three (3) persons who need not be members of the Board of Directors. The
committee supervises the administration and enforcement of the Billing Purchase
Plan, and all questions of interpretation or application of the Billing
Purchase Plan are determined in the sole discretion of the committee. All
decisions made by the committee are final, conclusive and binding on all of the
participants of the Billing Purchase Plan and the Company.
Every employee of the Company and its subsidiaries is eligible to
participate in the Billing Purchase Plan on a voluntary basis with the
exception of (i) employees who have not completed at least six months of
continuous service with Billing (or USLD prior to the Spin-Off) as of the
applicable enrollment date and (ii) employees who would, immediately upon
enrollment, own directly or indirectly, or hold purchase rights, options or
rights to acquire, an aggregate of 5% or more of the total combined voting
power or value of all outstanding shares of all classes of the Company or any
subsidiary. To participate in the Billing Purchase Plan, eligible employees
must enroll in the Billing Purchase Plan and authorize payroll deductions
pursuant to the Billing Purchase Plan. Approximately 300 employees are
eligible to participate under the Billing Purchase Plan.
Enrollment in the Billing Purchase Plan constitutes a grant by the
Company to the participant of the right to purchase shares of Common Stock.
The aggregate number of shares that may be issued under the Billing Purchase
Plan may not exceed 1,000,000 shares of Billing Common Stock, subject to
adjustment as provided in the Billing Purchase Plan. The purchase price per
share is the lesser of (i) 85% of the fair market value of the Common Stock on
the first day of the applicable participation period or (ii) 85% of the fair
market value of the Common Stock on the last day of such participation period.
The number of shares purchased is determined by dividing the total amount of
payroll deductions withheld from a participant's paychecks during a
participation period by the purchase price. The aggregate of monthly payroll
deductions cannot exceed $10,625 in any six-month participation period. At the
end of each offering period, the applicable number of shares of Common Stock is
automatically purchased for the participant.
Executive Compensation Deferral Plan
The Company has adopted the Billing Information Concepts Corp.
Executive Compensation Deferral Plan (the "Billing Executive Deferral Plan").
Participation in the Billing Executive Deferral Plan is offered to certain key
employees occupying management positions and/or certain other highly
compensated employees of the Company who are determined by the Board, from time
to time, to be eligible to participate in the Billing Executive Deferral Plan
("Billing Executive Deferral Participants"). As of December 31, 1996, there
were eight participants in the Billing Executive Deferral Plan.
The Billing Executive Deferral Plan is a deferred compensation plan
that provides that Billing Executive Deferral Participants generally may make
voluntary salary deferral contributions, on a pre-tax basis, in equal monthly
amounts of up to 100% of his or her base compensation ("Voluntary Deferral
Contribution"). In addition, the Company intends to make certain matching
contributions with respect to each Voluntary Deferral Contribution (the
"Deferral Contribution") equal to the lesser of (i) the Voluntary Deferral
Contribution or (ii) that amount together with the Voluntary Deferral
Contribution which actuarially determined would yield a 10-year annuity equal
to 50% of the Billing Executive Deferral Participant's compensation payable at
age 65, with a minimum contribution of $3,000. However, the Company reserves
the right, at any time, to decrease the Deferral Contribution or provide no
Deferral Contribution whatsoever for any plan year. From time to time the
Company shall credit each Billing Executive Deferral Participant's plan account
with interest at the rate declared by the Company in accordance with the
Billing Executive Deferral Plan. The Company made approximately $17,532.15 in
Company Deferral Contributions to this plan from August 2, 1996, to December
31, 1996.
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<PAGE> 20
Unless terminated for cause, Billing Executive Deferral Participants
are annually vested in 33% of any Deferral Contribution beginning with the
Billing Executive Deferral Participant's first anniversary of service and
becoming 100% vested after the third anniversary of service or upon a change in
control of the Company. Service with USLD is considered service for this
purpose. Benefits generally are payable to a Billing Executive Deferral
Participant (or his or her beneficiaries) upon retirement, disability,
termination of employment (other than for cause) or death, in each case as
provided in the Billing Executive Deferral Plan.
Executive Qualified Disability Plan
The Company has adopted the Billing Information Concepts Corp.
Executive Qualified Disability Plan (the "Billing Disability Plan"). The
Billing Disability Plan provides long-term disability benefits for certain key
employees occupying management positions and/or certain other highly
compensated employees of the Company who are determined by the Board, from time
to time, to be eligible to participate. Benefits under the Billing Disability
Plan are provided directly by the Company based on definitions, terms and
conditions contained in the Billing Disability Plan documents. Benefits under
the Billing Disability Plan supplement benefits provided under the Company's
insured long- term disability plan. No benefits were paid to any participant
under the Billing Disability Plan during fiscal 1996.
EMPLOYMENT AGREEMENTS AND CHANGE-OF-CONTROL ARRANGEMENTS
In August 1996, USLD consummated the Spin-Off to its stockholders of
its ownership position in the Company. In connection with the Spin-Off, the
Company entered into an employment agreement with Mr. Parris H. Holmes, Jr.
The agreement provides for a four-year term, subject to automatic extension for
an additional one year on each one-year anniversary of the agreement unless
terminated early as provided therein, including termination by the Company for
"cause" (as defined in the employment agreement) or termination by Mr. Holmes
for "good reason" (as defined in the employment agreement). This employment
agreement provides for an annual, calendar year base salary of $300,000 and an
incentive bonus at the discretion of the Committee.
In connection with the Spin-Off, the Company entered into an
employment agreement with Mr. Alan W. Saltzman. This agreement expires two
years from the date of the Spin-Off subject to extension for successive
two-year terms unless the Company elects not to extend the agreement. The
employment agreement is subject to early termination as provided therein,
including termination by the Company for "cause" (as defined in the employment
agreement) or termination by Mr. Saltzman for "good reason" (as defined in the
employment agreement). The employment agreement provides for an annual,
calendar year base salary of $200,000. The employment agreement also provides
for incentive bonuses at the discretion of the Compensation Committee.
In connection with the Spin-Off, the Company entered into an
employment agreement with Mr. Kelly E. Simmons. This agreement provides for a
one-year term, subject to automatic extension unless and until terminated by
either the Company or Mr. Simmons upon not less than 120 days' prior written
notice. The employment agreement is subject to early termination as provided
therein, including if Mr. Simmons fails to perform his duties thereunder or to
comply with any of the provisions thereof or commits any act of misconduct,
malfeasance, gross negligence or disloyalty, upon written notice from the
Company. The employment agreement provides for an annual, calendar year base
salary of $140,000. The employment agreement also provides for an incentive
bonus at the discretion of the Compensation Committee.
The employment agreements of Messrs. Holmes, Saltzman and Simmons
provide that if the Company terminates their employment without cause
(including the Company's election to not extend the employment agreement at any
renewal date) or if they resign their employment for "good reason" (as "good
reason" is defined in their employment agreements), they will be entitled to
the following severance: Mr. Holmes -- at his election, either a lump-sum
payment in the amount equal to his base salary for the unexpired portion of the
four-year term of his agreement then in effect and without giving effect to any
further extension (a maximum of approximately $1,200,000) or continuation of
his base salary and benefits through the unexpired term of his agreement; Mr.
Saltzman -- a lump-sum payment in the amount equal to two times his then
effective annual base salary ($400,000); Mr. Simmons -- a lump-sum payment in
the amount equal to one times his then effective annual base salary ($140,000).
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<PAGE> 21
A change of control is deemed to have occurred if (i) more than 30% of
the combined voting power of the Company's then outstanding securities is
acquired, directly or indirectly, or (ii) at any time during the 24-month
period after a tender offer, merger, consolidation, sale of assets or contested
election, or any combination of such transactions, at least a majority of the
Company's Board of Directors shall cease to consist of "continuing directors"
(meaning directors of the Company who either were directors prior to such
transaction or who subsequently became directors and whose election, or
nomination for election by the Company's stockholders, was approved by a vote
of at least two thirds of the directors then still in office who were directors
prior to such transaction), or (iii) the stockholders of the Company approve a
merger or consolidation of the Company with any other corporation, other than a
merger or consolidation that would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting securities of the
surviving entity) at least 60% of the total voting power represented by the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or (iv) the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
of sale or disposition by the Company of all or substantially all of the
Company's assets.
The employment agreements with Messrs. Holmes, Saltzman and Simmons
provide that if, at any time within twelve months of a change of control, they
cease to be an employee of the Company by reason of (i) termination by the
Company (or its successor) without "cause" (as defined in the employment
agreement) or (ii) voluntary termination by the employee for "good reason upon
change of control" (as defined in the employment agreement), they will be
entitled to the following benefits in addition to the severance stated above:
Mr. Holmes, Mr. Saltzman and Mr. Simmons -- all outstanding stock options held
by each shall become fully vested and exercisable and such individuals shall
receive an additional payment that, when added to all other payments received
in connection with a change of control, will result in the maximum amount
allowed to be paid to an employee without triggering an excess parachute
payment (as defined by the Internal Revenue Code); Mr. Holmes -- all benefits
(as defined by his employment agreement) shall continue throughout the
remainder of its term.
Billing Information Concepts, Inc., a wholly-owned subsidiary of the
Company ("BICI"), has an employment agreement with Mr. Paul L. Gehri. This
agreement continues until December 31, 1997, subject to automatic extension
unless and until terminated by either BICI or Mr. Gehri upon not less than 120
days' prior written notice. The employment agreement is subject to early
termination as provided therein, including if Mr. Gehri fails to perform his
duties thereunder or to comply with any of the provisions thereof or commits
any act of misconduct, malfeasance, gross negligence or disloyalty, upon
written notice from BICI. The employment agreement provides for an annual,
calendar year base salary of $92,000, plus commissions earned if the quarterly
and annual revenue budgets for the third party billing component of BICI exceed
certain amounts, with the total value of the bonus plan for the fiscal year
ended September 30, 1996, equal to $30,000. The employment agreement also
provides for an incentive bonus at the discretion of the Compensation
Committee.
BICI has an employment agreement with Mr. Michael R. Long. This
agreement continues until December 31, 1997, subject to automatic extension
unless and until terminated by either BICI or Mr. Long upon not less than 120
days' prior written notice. The employment agreement is subject to early
termination as provided therein, including if Mr. Long fails to perform his
duties thereunder or to comply with any of the provisions thereof or commits
any act of misconduct, malfeasance, gross negligence or disloyalty, upon
written notice from BICI. The employment agreement provides for an annual,
calendar year base salary of $95,000. The employment agreement also provides
for an incentive bonus at the discretion of the Compensation Committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
James E. Sowell and Lee Cooke, directors of the Company, served on the
Compensation Committee during the fiscal year ending September 30, 1996. Mr.
Cooke is the Chairman of the Board and Chief Executive Officer of U. S. Medical
Systems, Inc. Mr. Holmes formerly served on the Board of Directors for U. S.
Medical Systems, Inc. Mr. Holmes is Chairman of the Board of Directors and
Chief Executive Officer of the Company.
Mr. Sowell and Mr. Holmes serve on the Board of Directors, and Messrs.
Cooke and Saltzman serve as advisory directors, of Tanisys Technology, Inc., a
developer, manufacturer and marketer of computer peripheral equipment. Mr.
Holmes also serves on the Compensation Committee of Tanisys Technology, Inc.
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<PAGE> 22
PERFORMANCE GRAPH
The Company's Common Stock has been traded publicly since August 2,
1996. Prior to such date, there was no established market for its Common
Stock. The following Performance Graph compares the Company's cumulative
total stockholder return on its Common Stock from August 2, 1996 (the first day
which the Common Stock was publicly traded), through December 20, 1996, with
the cumulative total return of the S&P 500 Index and the S&P Computer Software
Services Index ("CSSI") over the same period. CSSI is a subgroup of the S&P
500 Index containing 10 companies with similar standard industrial
classification codes as the Company.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, S&P 500 INDEX AND THE CSSI
<TABLE>
<CAPTION>
August 2, 1996 December 20, 1996
-------------- -----------------
<S> <C> <C>
Company 100 144.05
S&P 500 Index 100 114.01
CSSI 100 119.02
</TABLE>
The foregoing graph is based on historical data and is not necessarily
indicative of future performance. This graph shall not be deemed to be
"soliciting material" or to be "filed" with the Commission or subject to
Regulations 14A and 14C under the Exchange Act or to the liabilities of Section
18 under the Exchange Act.
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<PAGE> 23
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires that the Company's
directors, executive officers and persons who own more than 10 percent of a
registered class of the Company's equity securities file with the Commission
initial reports of ownership and reports of changes in ownership of Common
Stock and other equity securities of the Company. Directors, executive
officers and greater than 10 percent stockholders are required by Commission
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on a review of the copies of
the Section 16(a) reports furnished to the Company and written representations
that no other reports were required, during the fiscal year ended September 30,
1996, all Section 16(a) filing requirements applicable to its directors,
executive officers and greater than 10 percent beneficial owners were complied
with.
CERTAIN TRANSACTIONS
AGREEMENTS WITH USLD
On August 2, 1996, USLD distributed to its stockholders all of the
outstanding shares of Common Stock of the Company (the "Distribution"), which
was a wholly-owned subsidiary of USLD. Upon the completion of the
Distribution, Billing became an independent, publicly-held company that owns
and operates the billing clearinghouse and information management services
business previously operated by USLD through certain of its subsidiaries (the
"Billing Group"). In connection with the Spin-Off, the Company and USLD
entered into several agreements for the purpose of giving effect to the
Spin-Off and defining their ongoing relationship. The following is a summary
of certain agreements, arrangements and transactions between Billing and USLD.
Distribution Agreement
Billing and USLD entered into the Distribution Agreement, which
provided for (i) certain of the principal corporate transactions required to
effect the Spin-Off; (ii) the Distribution; (iii) the division between Billing
and USLD of certain assets and liabilities; (iv) the sharing of the obligations
under certain warrants previously issued by USLD; (v) the issuance by Billing
of a stock option to a former USLD director who has agreed to join the Board of
Directors of Billing in consideration of his joining the Board of Directors of
Billing and to replace an expiring, unvested option to acquire shares of USLD
Common Stock and (vi) certain other agreements governing the relationship
between Billing and USLD following the Distribution.
Subject to certain exceptions, the Distribution Agreement provides for
assumptions of liabilities and cross- indemnities designed to allocate
financial responsibility for the liabilities arising out of or in connection
with the business of the Billing Group ("Billing Group Business") to Billing
and its subsidiaries, and financial responsibility for the liabilities arising
out of or in connection with the business of USLD ("Telecommunications Group
Business") to USLD and its retained subsidiaries. The agreements executed in
connection with the Distribution Agreement set forth certain specific
allocations of liabilities between Billing and USLD.
USLD has issued and outstanding warrants to purchase an aggregate of
225,000 shares of USLD Common Stock. USLD and Billing have agreed that, in
connection with the Distribution, if so elected by USLD, Billing will assume
its proportionate share of obligations represented by such warrants such that,
after the Distribution and at USLD's option, each warrant will be exercisable
for one share of USLD Common Stock and one share of Billing Common Stock. The
Distribution Agreement provides that, upon notice to USLD of the exercise of
such warrants, USLD, if it so elects, will promptly provide notice thereof to
Billing and Billing shall promptly thereafter issue to the exercising holder of
the warrant the appropriate number of shares of Billing Common Stock and
Billing will be entitled to receive a pro rata portion of the exercise price
(such pro rata portion to be established by allocating the exercise price of
the warrants between the Billing Common Stock and the USLD common stock
issuable upon exercise of the warrants in accordance with their average per
share price for each of the ten consecutive trading days beginning on and
including the Distribution Date).
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<PAGE> 24
Pursuant to the Distribution Agreement, Billing also granted to Lee
Cooke, who agreed to join the Board of Directors of Billing, in consideration
of his joining the Billing Board of Directors and to replace an unvested option
for 5,000 shares of USLD common stock, a non-qualified stock option of Billing
to purchase 5,000 shares of Billing Common Stock at an exercise price of $2.16,
which preserves the spread between the exercise price of such unvested USLD
option and the price of the USLD common stock as of the day immediately
preceding the record date of the Spin-Off.
To avoid adversely affecting the intended tax consequences of the
Distribution and related transactions, the Distribution Agreement provides
that, until the second anniversary of the Distribution Date, Billing must
obtain an opinion of counsel reasonably satisfactory to USLD or a supplemental
tax ruling from the Internal Revenue Service ("IRS") before Billing may make
certain material dispositions of its assets, engage in certain repurchases of
Billing capital stock or cease the active conduct of its business
independently, with its own employees and without material changes. Billing
does not expect these limitations to inhibit significantly its operations,
growth opportunities or its ability to respond to unanticipated developments.
USLD must also obtain an opinion of counsel reasonably satisfactory to Billing
or a supplemental tax ruling from the IRS before USLD may engage in similar
transactions during such period. USLD does not expect these limitations to
inhibit significantly its operations, growth opportunities or its ability to
respond to unanticipated developments.
The Distribution Agreement also provides that each of USLD and Billing
agrees that for a period of one (1) year after the Distribution Date, whether a
breach of the Distribution Agreement or any related agreement is alleged or
not, neither USLD nor Billing will, without the prior written consent of the
other, which consent may be withheld in the sole discretion of each, engage,
whether for compensation or not, as an owner, partner, stockholder, investor or
in any other capacity whatsoever, in any activity or endeavor that competes
directly or indirectly with the business of the other as engaged in, or
proposed to be engaged in, as of the Distribution Date; provided, however, that
such noncompetition agreement shall not prohibit either USLD or Billing from
engaging in a merger, consolidation or other business combination with another
person or entity with departments or divisions that compete with either USLD or
Billing, as the case may be. Such restriction applies worldwide.
Each of USLD and Billing further agrees that for a period of six (6)
months after the Distribution Date, notwithstanding any allegation of breach of
the Distribution Agreement or any related agreement, not, without the prior
written consent of the other, to solicit, influence or attempt to influence any
of the other's employees to terminate his or her employment or other
contractual relationship with his or her respective employer for any reason
including, without limitation, working for such soliciting party. Either
Billing or USLD may elect to pay to the other fifty percent (50%) of the total
previous 12 months' salary and bonus of any employee of the other for the
privilege of soliciting the employment of such employee without the necessity
of obtaining the consent of the employing party.
The Distribution Agreement also provides that each of Billing and USLD
will be granted access to certain records and information in the possession of
the other, generally consisting of pre-Distribution, nonproprietary, non-
customer, noncompetitive related information, and requires the retention by
each of Billing and USLD for a period of ten years following the Distribution
of all such information in its possession, and thereafter requires that each
party give the other prior notice of its intention to dispose of such
information. In addition, the Distribution Agreement provides for the
allocation of shared privileges with respect to certain information and
requires each of Billing and USLD to obtain the consent of the other prior to
waiving any shared privilege.
Because the terms of certain waivers and consents under USLD's and/or
Billing's, or their respective subsidiaries, debt agreements require that,
after the Distribution, USLD or Billing, and/or their respective subsidiaries,
each remain liable as a guarantor and continue to pledge security with respect
to certain indebtedness that cannot be economically separated under existing
arrangements and allocated to only USLD or only Billing prior to the
Distribution Date, each of USLD and Billing has agreed to pay annually to each
other a credit support fee equal to 1% per annum of the average monthly balance
of indebtedness guaranteed by one on behalf of the other for as long as such
guarantees continue after the Distribution Date.
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<PAGE> 25
Benefit Plans and Employment Matters Allocation Agreement
In connection with the Spin-Off, USLD and Billing entered into a
Benefit Plans and Employment Matters Allocation Agreement (the "Benefits
Agreement") providing for the allocation of certain responsibilities with
respect to employee compensation, benefit and labor matters. The allocation of
responsibility and adjustments made pursuant to the Benefits Agreement are
substantially consistent with the existing benefits provided to USLD employees
under USLD's various compensation plans. The Benefits Agreement provides that
Billing will, or will cause one or more of its subsidiaries to, assume or
retain, as the case may be, all liabilities of USLD, to the extent unpaid as of
the Distribution Date, under employee benefit plans, policies, arrangements,
contracts and agreements, with respect to employees who, on or after the
Distribution Date, will be employees of Billing or its subsidiaries. The
Benefits Agreement also provides that USLD will, or will cause one or more of
its subsidiaries to, assume or retain, as the case may be, all liabilities of
USLD, to the extent unpaid as of the Distribution Date, under employee benefit
plans, policies, arrangements, contracts and agreements, with respect to
employees who on or after the Distribution Date will be employees of USLD or
its subsidiaries.
In addition, Billing assumed, with respect to employees who, on or
after the Distribution Date, will be employees of Billing or any of its
subsidiaries, all responsibility for liabilities and obligations as of the
Distribution Date for medical and dental plan coverage and for vacation and
welfare plans. USLD assumed, with respect to the employees who, on or after
the Distribution Date, will be employees of USLD or any of its subsidiaries,
all responsibilities for all liabilities and obligations as of the Distribution
Date for medical and dental plan coverage and for vacation and welfare plans.
Immediately prior to the Distribution, Billing granted, under the
Billing Employee Stock Plan and Director Plan, respectively, options to
purchase Common Stock to each holder of an outstanding option to purchase
shares of USLD common stock under the USLD Employee Stock Option Plan and USLD
Non-Employee Director Plan, respectively. The Billing options will be
exercisable for Billing Common Stock on the basis of one share of Billing
Common Stock for every one share of USLD common stock subject to the
outstanding USLD options. Billing options to purchase a total of 1,686,000
shares of Billing Common Stock were granted in connection with the grant to
USLD option holders. In connection with the grant of the Billing options, the
exercise price of the USLD options was adjusted to preserve the economic value
of the USLD options existing immediately prior to the Distribution after giving
effect to the grant of the Billing options. The Billing options have vesting
schedules mirroring the vesting schedules of the related USLD options. Each
Billing option granted in connection with the Distribution and held by a USLD
employee after the Distribution Date will terminate in accordance with the
original USLD option grant. Each Billing option granted in connection with the
Distribution and held by a Billing employee will terminate in accordance with
the original USLD option grant.
Tax Sharing Agreement
Billing and USLD entered into a Tax Sharing Agreement (the "Tax
Sharing Agreement") that defines the parties' rights and obligations with
respect to deficiencies and refunds of federal, state and other income or
franchise taxes relating to Billing's business for tax years prior to the
Distribution and with respect to certain tax attributes of Billing after the
Distribution. In general, with respect to periods ending on or before
September 30, 1996, the fiscal year end for USLD, USLD is responsible for (i)
filing both consolidated federal tax returns for the USLD affiliated group and
combined or consolidated state tax returns for any group that includes a member
of the USLD affiliated group, including in each case Billing and its
subsidiaries for the relevant periods of time that such companies were members
of the applicable group and (ii) paying the taxes related to such returns
(including any subsequent adjustments resulting from the redetermination of
such tax liabilities by the applicable taxing authorities). Billing will
reimburse to USLD the taxes attributed to any Billing Group member and the cost
of preparation of the associated tax returns related to the Billing Group.
Billing is responsible for filing returns and paying taxes related to the
Billing Group for periods commencing on and after October 1, 1996. Billing and
USLD have agreed to cooperate with each other and to share information in
preparing such tax returns and in dealing with other tax matters.
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Transitional Services and Sublease Agreement
USLD and Billing entered into the Transitional Services and Sublease
Agreement pursuant to which (i) USLD agreed to provide to Billing for six
months after the Spin-Off certain services requested by Billing for the conduct
of Billing's business, (ii) USLD subleased to Billing certain office space on a
month-to-month basis and certain other office space through March 31, 1997,
with Billing to share equally USLD's out-of-pocket costs on this space should
USLD be unable to sublease this space for the remainder of the term ending in
January 1998, and (iii) Billing agreed to provide to USLD for six months after
the Spin-Off certain services requested by USLD for the conduct of USLD's
business. The fee for USLD's services is based on a cost-plus basis or other
negotiated arms-length basis. The fee for Billing's services is based on a
cost-plus basis or other negotiated arms-length basis. The subleases are on
the same terms and conditions as the terms and conditions of the lease
agreements pursuant to which USLD leases such space from its landlord. Subject
to termination provisions of the agreement, Billing and USLD are free to
procure such services from outside vendors or may develop an in-house
capability in order to provide such services internally, and Billing may lease
office space from outside landlords. The transitional services to be provided
to Billing pursuant to such agreement may include accounting, tax, finance and
legal services office services, employee benefit services, information
services, and may include any other similar services that Billing may require.
The transitional services to be provided to USLD pursuant to such agreement may
include accounting, tax, finance and legal services, office services, employee
benefit services, information services, management information systems and
software consulting with respect to the direct billing function to be retained
by USLD and may include any other similar services that USLD may require.
Billing Agreements
USLD and Billing entered into a Zero Plus - Zero Minus Billing and
Information Management Services Agreement (the "Zero Plus - Zero Minus Billing
Agreement") and a One Plus Billing and Information Management Services
Agreement (the "One Plus Billing Agreement"). Under these agreements, Billing
provides to USLD billing through local telephone companies for certain
qualifying "zero plus," "zero minus" and "one plus" direct dialed or operator
assisted station to station or person to person calls. USLD is charged for the
local telephone company's applicable fees, charges, chargebacks, credits and
adjustments as prescribed in the agreement between Billing and the local
telephone company, as well as billing service fees, charges, chargebacks,
credits and assessments of Billing. These charges are deducted from the
amounts payable to USLD for qualifying calls. Each agreement has an initial
term of three (3) years.
Telecommunications Agreement
USLD and Billing entered into a Telecommunications Agreement (the
"Telecommunications Agreement") whereby USLD provides to Billing certain direct
dial long distance and 800 services. The Telecommunications Agreement has a
three- year term and renews for an additional one year unless either party
notifies the other not less than 60 days prior to the termination date. In
addition, Billing has the right to terminate services under the
Telecommunications Agreement by providing written notice within 30 days of
Billing's intent to cancel services 60 days from notice.
Leasing Agreement
USLD and Billing entered into a Leasing Agreement (the "Leasing
Agreement") whereby USLD may elect to lease an airplane owned by Billing on an
hourly or volume usage basis.
Policies and Procedures for Addressing Conflicts
The ongoing relationship between USLD and Billing will present certain
conflict situations for Parris H. Holmes, Jr., who serves as Chairman of the
Board of USLD and Billing and Chief Executive Officer of Billing. Parris H.
Holmes, Jr., as well as other officers and directors of USLD and Billing, also
own (or have options to acquire) a significant number of shares of USLD common
stock and, as a result of the Spin-Off, own (or have options to acquire) a
significant number of shares of Billing Common Stock. Billing and USLD have
adopted appropriate policies and procedures to be followed by the board of
directors of each company to limit the
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<PAGE> 27
involvement of Mr. Holmes (or such executive officers and other directors
having a significant ownership interest in the companies) in conflict
situations, including matters relating to contractual relations or litigation
between USLD and Billing. Such procedures include requiring Mr. Holmes (or
such executive officers or other directors having a significant ownership
interest in the companies) to abstain from voting as directors of each company
with respect to matters that place a material conflict of interest between the
companies. Whether or not a material conflict of interest situation exists
will be determined on a case by case basis depending on such factors as the
dollar value of the matter, the degree of personal interest of Mr. Holmes (or
such executive officers and other directors having a significant ownership
interest in the companies) in the matter and a likelihood that resolution of
the matter has significant strategic, operational or financial implications for
the business of Billing. It is the principal responsibility of the general
counsel of each of Billing and USLD to monitor this issue in consultation with
USLD's or Billing's (as applicable) board of directors. In the event that the
board of directors of either company is unable to reach a decision on a
particular matter because of a split in the board of directors, the vote of its
outside disinterested directors will control. Billing believes such conflicts
will be minimal.
PROPOSALS FOR NEXT ANNUAL MEETING
Any proposals of holders of Common Stock intended to be presented at
the Annual Meeting of Stockholders of the Company to be held in 1998 must be
received by the Company, addressed to the Secretary of the Company at 9311 San
Pedro Avenue, Suite 400, San Antonio, Texas 78216, no later than September 19,
1997, to be considered for inclusion in the Proxy Statement and form of proxy
relating to that meeting.
The Company's Amended and Restated Bylaws establish an advance notice
procedure with regard to stockholder proposals to be brought before an annual
or special meeting of stockholders (the "Business Procedure"). The Business
Procedure provides that stockholder proposals must be submitted in writing in a
timely manner in order to be considered at any annual or special meeting. To
be timely, notice must be received by Billing (i) in the case of an annual
meeting, not less than 90 days nor more than 120 days prior to the date of
Billing's proxy materials for the previous year's annual meeting, or (ii) in
the case of a special meeting, not less than the close of business on the
seventh day following the day on which notice of such meeting is first given to
stockholders.
Under the Business Procedure, notice relating to a stockholder
proposal must contain certain information about such proposal and about the
stockholder who proposes to bring the proposal before the meeting, including
(a) the name and address of the stockholder who intends to make the proposal
and the text of the proposal to be introduced; (b) the class and number of
shares of stock held of record, owned beneficially and represented by proxy by
such stockholder as of the record date for the meeting (if such date shall then
have been made publicly available) and as of the date of such notice; and (c) a
representation that the stockholder intends to appear in person or by proxy at
the meeting to introduce the proposal or proposals, specified in the notice.
No business shall be conducted at a meeting except business brought before the
annual meeting in accordance with the procedures set forth above. If the
Chairman or other officer presiding at a meeting determines that the
stockholder proposal was not properly brought before such meeting, such
proposal will not be introduced at such meeting. Nothing in the Business
Procedure will preclude discussion by any stockholder of any proposal properly
made or brought before an annual or special meeting in accordance with the
above- mentioned procedures.
The provisions of the Business Procedure will be subject to rules of
the Commission with respect to stockholder proposals so long as the Common
Stock remains quoted on the NASDAQ National Market or is listed on a national
securities exchange or is otherwise required to be registered under the
Exchange Act. Any stockholder proposal that is submitted in compliance with
such rules and is required by such rules to be set forth in the proxy statement
of the Company will be so set forth despite the requirements of the Amended and
Restated Bylaws of the Company with respect to the timing and form of notice
for such proposals.
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OTHER MATTERS
As of the date of this Proxy Statement, management does not intend to
present any other items of business and is not aware of any matters to be
presented for action at the Annual Meeting other than those described above.
However, if any other matters should come before the Annual Meeting, it is the
intention of the persons named as proxies in the accompanying proxy card to
vote in accordance with their best judgment on such matters.
By order of the Board of Directors,
Kelly E. Simmons
Corporate Secretary
San Antonio, Texas
January 17, 1997
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<PAGE> 29
P R O X Y
BILLING INFORMATION CONCEPTS CORP.
PROXY -- ANNUAL MEETING OF STOCKHOLDERS -- February 20, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Please mark, sign, date and return in the enclosed envelope.
The undersigned stockholder of Billing Information Concepts Corp. (the
"Company") hereby appoints Parris H. Holmes, Jr., Alan W. Saltzman and Kelly E.
Simmons, or each of them, proxies of the undersigned with full power of
substitution to vote at the Annual Meeting of Stockholders of the Company to be
held on Thursday, February 20, 1997, at 10:00 a.m., Central Standard Time, at
the Omni San Antonio Hotel, 9821 Colonnade Blvd., San Antonio, Texas, and at
any adjournment thereof, the number of votes which the undersigned would be
entitled to cast if personally present:
(1) ELECTION OF DIRECTORS
FOR [ ] WITHHOLD AUTHORITY [ ]
all nominees listed below to vote for all nominees
(except as marked below) listed below
James E. Sowell Thomas G. Loeffler
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, DRAW
A LINE THROUGH OR STRIKE OUT THAT NOMINEE'S NAME AS SET
FORTH ABOVE.
(2) PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS
THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL
YEAR ENDING SEPTEMBER 30, 1997
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) To consider and act upon any other matter which may properly
come before the meeting or any adjournment thereof;
all as more particularly described in the Proxy Statement
dated January 17, 1997, relating to such meeting, receipt of
which is hereby acknowledged.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy
will be voted FOR the nominees listed in Proposal 1 and FOR Proposal 2.
<PAGE> 30
----------------------------------------
----------------------------------------
Signature of Stockholder(s)
Please sign your name exactly as it
appears hereon. Joint owners
must each sign. When signing
as attorney, executor,
administrator, trustee or
guardian, please give your
full title as it appears
hereon.
Dated , 1997.
----------------------
<PAGE> 31
[FULBRIGHT & JAWORSKI LOGO]
January 15, 1997
VIA ELECTRONIC DELIVERY
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Billing Information Concepts Corp. (the "Company")
Commission File No. 0-28536
Dear Sirs:
On behalf of the Company, transmitted herewith for electronic filing
pursuant to Rule 14a-6(b) of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended, is the Company's proxy statement and form of
proxy relating to the Company's Annual Meeting of Stockholders to be held on
February 20, 1997.
The filing has been effected through the Securities and Exchange
Commission's EDGAR electronic filing system.
If you should need any additional information, please call the
undersigned or Phillip M. Renfro, Esq. at (210) 270-7172.
Very truly yours,
/s/ Daryl L. Lansdale, Jr.
Daryl L. Lansdale, Jr.
Enclosures
cc: Marshall Millard
Phillip M. Renfro (Firm)
