<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
NATIONAL INFORMATION CONSORTIUM, INC.
- --------------------------------------------------------------------------------
(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
NATIONAL INFORMATION CONSORTIUM, INC.
12 CORPORATE WOODS
10975 BENSON STREET, SUITE 390
OVERLAND PARK, KANSAS 66210
(913) 498-3468
================================================================================
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 2, 2000
- --------------------------------------------------------------------------------
TO THE SHAREHOLDERS OF NATIONAL INFORMATION CONSORTIUM, INC.:
The Annual Meeting of Shareholders of National Information Consortium,
Inc., a Colorado corporation (the "Company"), will be held at the Doubletree
Hotel, Kansas City - Corporate Woods, 10100 College Boulevard, Overland Park,
Kansas, on May 2, 2000, at 10:00 a.m., Central Daylight Time, to consider and
take action on:
1. To elect seven (7) directors to serve until the next Annual Meeting
of Shareholders;
2. To consider and act upon a proposal to ratify the appointment of
PricewaterhouseCoopers LLP as the Company's independent public accountants for
the fiscal year ending December 31, 2000; and
3. In the discretion of the designated proxies upon such other business
relating to the foregoing as may properly come before the meeting, and such
matters incidental to the conduct of the meeting, and at any adjournments or
postponements thereof.
The Board of Directors has fixed March 17, 1999, as the record date for
the determination of Shareholders entitled to receive notice of and to vote at
the meeting or any adjournments or postponements thereof. A list of the
Shareholders will be available for inspection at the offices of the Company
during ordinary business hours for the ten-day period prior to the Annual
Meeting.
By Order of the Board of Directors:
William F. Bradley, Jr.
Secretary
Overland Park, Kansas
March 21, 2000
<PAGE> 3
NATIONAL INFORMATION CONSORTIUM, INC.
---------------
PROXY STATEMENT
---------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of National Information Consortium, Inc. (the
"Company"), a Colorado corporation, of proxies, in the accompanying form, to be
used at the Annual Meeting of Shareholders. The meeting will be held at the
Doubletree Hotel, Kansas City - Corporate Woods, 10100 College Boulevard,
Overland Park, Kansas, on May 2, 2000, at 10:00 a.m. Central Daylight Time, and
any adjournments thereof (the "Meeting").
If you specify a choice on the proxy as to how your shares are to be
voted on a particular matter, the shares will be voted accordingly. If no choice
is specified, the shares will be voted
o FOR the election of the seven nominees for Director named herein;
and
o FOR the ratification of the appointment of PricewaterhouseCoopers
LLP as the Company's independent public accountants for the fiscal
year ended December 31, 2000.
You can revoke your proxy any time before the voting at the Meeting by
sending a properly signed written notice of your revocation to the Corporate
Secretary of the Company, by submitting another proxy that is properly signed
and bears a later date; or by voting in person at the Meeting. Attendance at the
Meeting will not itself revoke an earlier submitted proxy. You should direct any
written notices of revocation and related correspondence to 12 Corporate Woods,
10975 Benson Street, Suite 390, Overland Park, Kansas 66210, Attention:
Corporate Secretary.
Shares represented by valid proxies in the form enclosed received in
time for use at the Meeting and not revoked at or prior to the Meeting, will be
voted at the Meeting. The presence, in person or by proxy, of the holders of a
majority of the outstanding shares of the Company's Common Stock is necessary to
constitute a quorum at the Meeting. With respect to the tabulation of proxies
for purposes of constituting a quorum, abstentions will be counted as part of
total shares voting in order to determine whether or not a quorum has been
achieved at the Meeting. Abstentions and broker non-votes will have no effect on
the election of directors.
The close of business on March 17, 2000, has been fixed as the record
date for determining the Shareholders entitled to notice of and to vote at the
Meeting. As of that date, the Company had 53,309,502 shares of Common Stock
outstanding and entitled to vote. Holders of Common Stock
-2-
<PAGE> 4
are entitled to one vote per share on all matters to be voted on by
Shareholders. This Proxy Statement and the accompanying proxy are being mailed
on or about March 23, 2000, to all Shareholders entitled to notice of and to
vote at the Meeting.
The cost of soliciting proxies, including expenses in connection with
preparing and mailing this Proxy Statement, will be borne by the Company. In
addition, the Company will reimburse brokerage firms and other persons
representing beneficial owners of the Common Stock of the Company for their
expenses in forwarding proxy material to such beneficial owners. Solicitation of
proxies by mail may be supplemented by telephone, telegram, and other electronic
means, and personal solicitation by the Directors, officers or employees of the
Company. No additional compensation will be paid to Directors, officers or
employees for such solicitation.
The Annual Report to Shareholders for the fiscal year ended December
31, 1999, is being mailed to the Shareholders with the Proxy Statement but does
not constitute a part hereof.
-3-
<PAGE> 5
SHARE OWNERSHIP
The following table sets forth information concerning the ownership of
Common Stock by (i) each current member of the Board of Directors of the
Company, (ii) each executive officer of the Company named in the Summary
Compensation Table appearing under "Executive Compensation," below, (iii) all
current Directors, and executive officers of the Company as a group and (iv) the
beneficial owners of more than 5% of the outstanding shares of Common Stock, all
as of January 31, 2000.
<TABLE>
<CAPTION>
Shares Beneficially Owned(1)
--------------------------------
Number Percentage
------ ----------
<S> <C> <C>
5% SHAREHOLDERS
Jeffery S. Fraser and Ross C. Hartley,
co-trustees of National Information
Consortium Voting Trust, dated
June 30, 1998 c/o Jeffery S. Fraser
1811 Wakarusa Drive, Suite 100
Lawrence, KS 66047.................................................... 27,469,884 51.6%
Hellman & Friedman Capital Partners III, L.P.
c/o Hellman & Friedman LLC
One Maritime Plaza
San Francisco, CA 94111............................................... 8,216,609 15.4
H&F Orchard Partners III, L.P.
c/o Hellman & Friedman LLC
One Maritime Plaza
San Francisco, CA 94111............................................... 545,255 1.0
H&F International Partners III, L.P.
c/o Hellman & Friedman LLC
One Maritime Plaza
San Francisco, CA 94111............................................... 162,844 *
NAMED EXECUTIVE OFFICERS AND DIRECTORS
Jeffery S. Fraser..................................................... 27,469,884 51.6
James B. Dodd......................................................... 602,714 1.1
William F. Bradley, Jr................................................ 1,835,363 3.4
Kevin C. Childress.................................................... 91,145 *
Samuel R. Somerhalder................................................. 2,018,185 3.8
Harry H. Herington.................................................... 1,034,447 1.9
John L. Bunce, Jr..................................................... 8,924,708 16.8
Dan Evans............................................................. 41,442 *
Ross C. Hartley....................................................... 27,469,884 51.6
</TABLE>
-4-
<PAGE> 6
<TABLE>
<CAPTION>
Shares Beneficially Owned(1)
--------------------------------
Number Percentage
------ ----------
<S> <C> <C>
Patrick J. Healy...................................................... 8,924,708 16.8
Pete Wilson........................................................... 10,000 *
All executive officers and directors
as a group (14 persons).......................................... 37,005,023 69.5
</TABLE>
- --------------------------
* Less than 1%
(1) The number of shares of Common Stock issued and outstanding on January 31,
2000, was 53,215,616. The calculation of percentages is based upon the
number of shares of Common Stock issued and outstanding on such date, plus
shares of Common Stock subject to options held by the respective persons on
January 31, 2000 and exercisable within 60 days thereafter. The persons and
entities named in the table have sole voting and dispositive power with
respect to all shares shown as beneficially owned by them, except as
described below.
H&F Investors III, a California general partnership, is the sole
general partner of Hellman & Friedman Capital Partners III, L.P., a California
limited partnership, H&F Orchard Partners III, L.P., a California limited
partnership, and H&F International Partners III, L.P., a California limited
partnership. Messrs. Bunce and Healy are Managing Directors of Hellman &
Friedman LLC, an affiliate of H&F Investors III. The managing general partner of
H&F Investors III is Hellman & Friedman Associates III, L.P., a California
limited partnership, and the general partners of Hellman & Friedman Associates
III are H&F Management III, L.L.C., a California limited liability company, and
H&F Investors III, Inc., a California corporation. The sole shareholder of H&F
Investors III, Inc. is the Hellman Family Revocable Trust. The investment
decisions of H&F Investors III, Inc. and H&F Management III, L.L.C. are made by
an executive committee, of which Mr. Bunce is a member. The executive committee
indirectly exercises voting and investment power with respect to the shares of
Common Stock held by Hellman & Friedman Capital Partners III, H&F Orchard
Partners III and H&F International Partners III, and could be deemed to
beneficially own such shares. The executive committee disclaims such beneficial
ownership except to the extent of its indirect pecuniary interest in such
shares.
Shares held by Mr. Bunce and Mr. Healy consist of shares owned by
Hellman & Friedman Capital Partners III, L.P., H&F Orchard Partners III, L.P.
and H&F International Partners III, L.P. Mr. Bunce and Mr. Healy each disclaim
beneficial ownership of all shares of Common Stock held by Hellman & Friedman
Capital Partners III, H&F Orchard Partners III and H&F International Partners
III, except to the extent of their individual indirect pecuniary interest in
those shares.
Shares held by Mr. Fraser include 21,074,192 shares held in the Voting
Trust for which Mr. Fraser acts as a co-trustee and 6,084,426 shares held in the
Voting Trust of which a family trust established for the benefit of Mr. Fraser
is the beneficial owner and 311,266 shares are held for the benefit of Crimson
Tide Charitable Remainder Unitrust for which Mr. Fraser is the trustee.
Shares held by Mr. Dodd include 149,103 shares held for the benefit of
Mr. Dodd in the Voting Trust for which Messrs. Fraser and Hartley act as
co-trustees and 445,763 shares subject to options exercisable within 60 days of
January 31, 2000.
-5-
<PAGE> 7
Shares held by Mr. Bradley include 1,835,363 shares held for the
benefit of Mr. Bradley in the Voting Trust for which Messrs. Fraser and Hartley
act as co-trustees.
Shares held by Mr. Childress include 20,419 shares held for the benefit
of Mr. Childress in the Voting Trust for which Messrs. Fraser and Hartley act as
co-trustee and 69,651 shares subject to options exercisable within 60 days of
January 31, 2000.
Shares held by Mr. Somerhalder include 2,018,185 shares held for the
benefit of Mr. Somerhalder or his wife in the Voting Trust for which Messrs.
Fraser and Hartley act as co-trustees. These shares include 177,823 shares held
by Mr. Somerhalder's wife, Jean Somerhalder, as custodian to Chloe V. Fraser,
177,823 shares held by Mrs. Somerhalder as custodian to Jacob B. Fraser, 177,823
shares held by Mrs. Somerhalder as custodian to Joshua D. Fraser, 177,823 shares
held by Mrs. Somerhalder as custodian to Matthew S. Fraser and 177,823 shares
held by Mrs. Somerhalder as custodian to William N. Fraser.
Shares held by Mr. Herington include 1,034,447 shares held for the
benefit of Mr. Herington in the Voting Trust for which Messrs. Fraser and
Hartley act as co-trustees.
Shares held by Mr. Hartley include 20,168,754 shares held in the Voting
Trust for which Mr. Hartley acts as a co-trustee and 7,301,130 shares held for
the benefit of Mr. Hartley or his children in the Voting Trust. Shares held for
the benefit of Mr. Hartley or his children include 319,683 shares held in an
irrevocable trust established for the benefit of Hillary L. Hartley, 319,683
shares held in an irrevocable trust established for the benefit of Antonia C.
Hartley and 319,683 shares held in an irrevocable trust established for the
benefit of William R. Hartley.
Shares held by Governor Wilson include 10,000 shares subject to options
exercisable within 60 days of January 31, 2000.
Shares held by all executive officers and directors as a group include
27,469,884 shares held in the Voting Trust for which Messrs. Fraser and Hartley
act as co-trustees and 525,414 shares subject to options exercisable within 60
days of January 31, 2000.
-6-
<PAGE> 8
MANAGEMENT
DIRECTORS
The following table sets forth certain information regarding NIC's
directors:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Jeffery S. Fraser.................... 40 Chairman of the Board and Director
James B. Dodd........................ 42 President, Chief Executive Officer and Director
John L. Bunce, Jr.................... 40 Director
Dan Evans............................ 75 Director
Ross C. Hartley...................... 52 Director
Patrick J. Healy..................... 32 Director
Pete Wilson.......................... 66 Director
</TABLE>
Jeffery S. Fraser, one of the Company's founders, has served as the
Company's Chairman since April 1998 and as one of the Company's directors since
the Company's formation. Mr. Fraser also served as the Company's Chief Executive
Officer from April 1998 until November 1999 and as its President from April 1998
to December 1998. Mr. Fraser was also the Chief Executive Officer from April
1998 to December 1998 and President and Chief Executive Officer of the Company's
subsidiary, National Information Consortium USA, Inc., from January 1993 to
April 1998. Additionally, from January 1992 to September 1998, he served as
President and Chief Executive Officer of the Company's subsidiary, Kansas
Information Consortium, Inc. Mr. Fraser holds a B.S. in human resource
management and an M.S. in information systems from Friends University in
Wichita, Kansas.
James B. Dodd has served as the Company's President, Chief Executive
Officer and a director since November 1999. He also served as the Company's
President, Chief Operating Officer and a director from January 1999 to December
1999. Prior to joining the Company, Mr. Dodd spent 14 years with Sprint
Corporation, a telecommunications company, where he served in various senior
management positions including, most recently, as Vice President and General
Manager of Sprint's Consumer Internet Access Group. Other positions he held at
Sprint included Vice President of Consumer International Marketing from 1992 to
1994, and Vice President of Consumer Product Management and Development from
1995 to 1996. Mr. Dodd earned a CPA in 1982 and holds a B.A. in economics from
Stanford University and an M.B.A. from the Harvard Business School.
John L. Bunce, Jr. has served as one of the Company's directors since
June 1998. Mr. Bunce is a Managing Director and a member of the executive
committee of Hellman & Friedman LLC, a direct investment firm, which he joined
as an associate in 1988. Hellman & Friedman LLC is an affiliate of Hellman &
Friedman Capital Partners III, L.P., H&F Orchard Partners III, L.P. and H&F
International Partners III, L.P. Mr. Bunce also serves as a director of Western
Wireless Corporation, a cellular telecommunications company, Voicestream
Wireless Corporation, a telecommunications provider of personal communications
services, Bronner Slosberg Humphrey, Co., a direct marketing
-7-
<PAGE> 9
and interactive agency, Falcon International Communications L.P., a cable
company, and MobileMedia Corporation, a paging and messaging services company.
Mr. Bunce holds a B.A. in international relations from Stanford University and
an M.B.A. from the Harvard Business School.
Dan Evans has served as one of the Company's directors since November
1998. Governor Evans is the chairman of and has served as a consultant for Dan
Evans Associates Consulting, a consulting company in Washington, since May 1989.
Governor Evans currently serves as a director of Puget Sound Energy, an
investor-owned electric utility company, Flow International, a robotics company,
Western Wireless Corporation, a wireless communications company, and Tera
Computer, a computer manufacturing company. He also served as a U.S. Senator
from September 1983 to January 1989 and the Governor of the State of Washington
from January 1965 to January 1977. Governor Evans holds a B.S. and an M.S. in
civil engineering from the University of Washington.
Ross C. Hartley, one of the Company's founders, has served as one of
the Company's directors since the Company's formation. From its incorporation to
March 1999, Mr. Hartley served as Vice President of Marketing of Kansas
Information Consortium, Inc. Mr. Hartley also has served as President of The
Hartley Insurance Group, an insurance company in Kansas, since 1974. He also
serves as a director of Empire District Electric Company, an investor-owned
electric utility company. Mr. Hartley holds a B.S. in mathematics from Baker
University in Baldwin City, Kansas and a J.D. degree from the University of
Kansas School of Law.
Patrick J. Healy has served as one of the Company's directors since
June 1998. Mr. Healy is a Managing Director of Hellman & Friedman LLC, a direct
investment firm, having joined Hellman & Friedman LLC as an associate in 1994.
Hellman & Friedman LLC is an affiliate of Hellman & Friedman Capital Partners
III, L.P., H&F Orchard Partners III, L.P. and H&F International Partners III,
L.P. Currently, he also serves as a director of Bronner Slosberg Humphrey, Co.,
a direct marketing and interactive agency. Mr. Healy holds an A.B. in economics
from Harvard College and an M.B.A. from the Harvard Business School.
Pete Wilson has served as one of the Company's directors since July
1999. Governor Wilson served as Governor of the State of California from 1991
until 1999. Prior to serving as Governor of California, Governor Wilson served
in the U.S. Senate for eight years, representing the State of California. He has
also served as the mayor of San Diego, California. Governor Wilson is a member
of The Irvine Company board of directors and is on the Thomas Weisel Partners
board of advisors. He received his undergraduate degree from Yale University and
his law degree from Boalt Hall (University of California at Berkeley). After
graduating from Yale, Governor Wilson spent three years in the Marine Corps as
an infantry officer.
All directors hold office until the next annual meeting of the
shareholders and until their successors have been duly elected and qualified.
Executive officers are elected by and serve at the discretion of the board of
directors.
-8-
<PAGE> 10
Committees of the Board and Meetings
Meeting Attendance. During the fiscal year ended December 31,
1999, there were four (4) meetings of the Board of Directors and two (2)
meetings of the Compensation Committee of the Board of Directors. No Director
attended fewer than 75% of the total number of meetings of the Board of
Directors and its committees on which he served during the fiscal year. In
addition, the Board of Directors and its Committees acted at various times by
unanimous written consent pursuant to Colorado law.
Audit Committee. The Audit Committee, which held no meetings
in fiscal 1999, currently has three members, Messrs. Hartley, Evans and Wilson.
The Audit Committee reviews the engagement of the Company's independent
accountants, and reviews annual financial statements, considers matters relating
to accounting policy and internal controls and reviews the scope of annual
audits.
Compensation Committee. The Compensation Committee, which met
two (2) times during fiscal 1999, currently has four members, Messrs. Fraser,
Hartley, Healy and Bunce. The Compensation Committee reviews and approves the
salaries, bonuses and other compensation payable to the Company's executive
officers. The Committee also administers the Company's stock plans, including
the Amended and Restated 1998 Stock Option Plan and the 1999 Employee Stock
Purchase Plan.
Compensation of Directors
The Company's policy is not to pay cash compensation to members of the
Board for serving as a Director or for their attendance at Board meetings or
Committee meetings. Directors who are not employees of the Company are
reimbursed for travel expenses and other out-of-pocket costs incurred in
connection with their attendance at meetings.
All Directors are eligible to participate in the Company's Amended and
Restated 1998 Stock Option Plan, and non-employee Directors are eligible to
participate in the Company's 1999 Employee Stock Purchase Plan. The Compensation
Committee determines the number and terms of grants, subject to the restrictions
in the Plans relating to the duration of the options, the size of an option
award and the exercise price.
Family Relationships
There are no family relationships among any of the Company's directors
or executive officers other than between Mr. Fraser and Mr. Somerhalder, who are
brothers-in-law.
-9-
<PAGE> 11
EXECUTIVE OFFICERS
The names of, and certain information regarding, executive officers of
the Company who are not Directors of the Company, are set forth below. The
executive officers serve at the pleasure of the Board of Directors.
<TABLE>
<CAPTION>
Name Age Positions with the Company
- ---- --- --------------------------
<S> <C> <C>
Kevin C. Childress 41 Chief Financial Officer
William F. Bradley, Jr. 45 Executive Vice President - Strategy, Policy & Legal,
General Counsel and Secretary
Samuel R. Somerhalder 57 Executive Vice President - Operations and
Administration
Harry H. Herington 39 Executive Vice President - State Operations and
Assistant Secretary
Joseph Nemelka 31 Executive Vice President - Marketing Development
Terrence L. Parker 35 Chief Technology Officer
Ray G. Coutermarsh 41 Executive Vice President - Local Markets
</TABLE>
Kevin C. Childress has served as the Company's Chief Financial Officer
since May 1999. Prior to joining the Company, Mr. Childress served as a Managing
Director at the investment banking firm of BT Alex. Brown, Inc. from 1992 to
1999. Prior to joining BT Alex. Brown, Mr. Childress was with Salomon Brothers
Inc. for 11 years, part of which time was spent as the manager of the firm's
Chicago-based Midwest municipal finance group. Mr. Childress holds a B.A. in
economics and political science from Stanford University.
William F. Bradley, Jr. has served as the Company's Secretary since May
1998, General Counsel since July 1998 and Executive Vice PresidentnStrategy,
Policy and Legal since January 1999. In addition, Mr. Bradley served as a
director between May 1998 to February 1999. From January 1995 to the present, he
has served in various executive capacities with the Company's subsidiaries. From
July 1989 to December 1994, Mr. Bradley was an associate and later a law partner
at Hinkle, Eberhart & Elkouri, LLC, a law firm in Kansas. Mr. Bradley holds a
B.A. in English from the University of Kansas, Lawrence, and a J.D. degree from
the University of Kansas School of Law.
Samuel R. Somerhalder has served as the Company's Executive Vice
PresidentnOperations and Administration since January 1999. From May 1998 to
November 1998, Mr. Somerhalder served as one of the Company's directors. Prior
to that, he served as President, Chief Executive Officer and a director of the
Company's subsidiary, Nebraska Interactive, Inc., from January 1995 until August
1999. From November 1994 to April 1996, he also served as Secretary of Nebraska
Interactive, Inc. Prior to joining the Company, Mr. Somerhalder was the Senior
Vice President of Marketing for First Commerce Technologies, Inc., an
information technology company, from October 1991 to January 1995. Mr.
Somerhalder holds a B.S. in business administration from Kansas State
University.
-10-
<PAGE> 12
Harry H. Herington has served as the Company's Executive Vice
PresidentnState Operations since January 1999. He served as one of the Company's
directors from May 1998 to February 1999. He also serves as President of
National Information Consortium USA, Inc. From September 1995 to September 1996,
Mr. Herington served as the Vice President of Kansas Information Consortium,
Inc. Prior to accepting his present position with the Company, Mr. Herington was
the Associate General Counsel for the League of Kansas Municipalities from
August 1992 to September 1995. Mr. Herington holds a B.A. in photo journalism
from Wichita State University in Kansas and a J.D. degree from the University of
Kansas School of Law.
Joseph Nemelka has served as the Company's Executive Vice
PresidentnMarketing Development since November 1999. Mr. Nemelka also served as
Chief Executive Officer and a director of the Company's subsidiary, Utah
Interactive, Inc. Mr. Nemelka also served as the President of the Company's
Market Development Division from October 1996 to July 1999. From July 1997 to
March 1999, he served as President and Chief Executive Officer of Arkansas
Information Consortium, Inc. Mr. Nemelka served as a marketing associate for
Kansas Information Consortium, Inc. from October 1995 to August 1996 and for
Indiana Interactive, Inc. from August 1996 to October 1996. From October 1996 to
July 1997, he served as a project manager for the Georgia division of the
Company's subsidiary National Information Consortium USA. Mr. Nemelka holds a
B.A. in political science from Brigham Young University and a J.D. degree from
the University of Kansas School of Law.
Terrence L. Parker has served as the Company's Chief Technology Officer
since November 1999. Prior to joining the Company, Mr. Parker served Sprint
Corporation for five years in various technical capacities, ultimately becoming
Senior Director of Next Generation Products and Applications. As Senior Director
at Sprint, Mr. Parker was responsible for developing Internet-enabled services
for its broadband business. Additionally, Mr. Parker was the principal architect
of Sprint Consumer ISP technical operations.
Ray G. Coutermarsh has served as the Company's Executive Vice
PresidentnLocal Markets since February 2000. Prior to joining the Company, Mr.
Coutermarsh was the National Partner in charge of KPMG Peat Marwick LLP's Public
Sector electronic commerce practice, where he was responsible for launching
electronic commerce solutions targeted at strategic market segments in high
technology and government. Prior to that, Mr. Coutermarsh was responsible for
KPMG's electronic commerce vendor alliance strategy, working with such
technology leaders as BroadVision and Microsoft. Mr. Coutermarsh earned a B.S.
in business administration from Plymouth State College, a member of the
University of New Hampshire systems, and an MBA from New Hampshire College.
-11-
<PAGE> 13
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth summary information
as to compensation received by the Company's Chief Executive Officer and each of
the four other most highly compensated persons whose total salary, bonus and
other compensation exceeded $100,000 (collectively, the "named executive
officers") during fiscal 1999. In accordance with the rules of the SEC, the
compensation described in this table does not include perquisites and other
personal benefits received by the executive officers named in the table below
which do not exceed the lesser of $50,000 or 10% of the total salary and bonus
reported for these officers.
<TABLE>
<CAPTION>
Annual Compensation All Other Compensation
----------------------------- --------------------------------
Health Consulting 401(k)
Year Salary Bonus Insurance Fees Match
---- ------ ----- --------- ---- -----
<S> <C> <C> <C> <C> <C> <C>
James B. Dodd 1999 $197,746 $-- $14,670 $4,500 $5,000
President and Chief Executive
Officer
Jeffery S. Fraser 1999 $208,333 $-- $16,660 $4,500 $5,000
Chairman
William F. Bradley, Jr. 1999 $138,000 $-- $13,588 $1,500 $5,000
Executive Vice President--
Strategy, Policy and Legal, and
General Counsel
Samuel R. Somerhalder 1999 $131,500 $-- $15,632 $1,000 $3,945
Executive Vice President--
Operations and Administration
Harry H. Herington 1999 $136,500 $-- $16,004 $3,500 $5,000
Executive Vice President--
State Operations
</TABLE>
Consulting fees consist of fees the Company paid to the executive
officers in the table above for their services as directors of the Company's
subsidiaries, as well as for business advisory services they performed for the
Company's subsidiaries.
Mr. Fraser served as a director of each of the Company's subsidiaries.
Mr. Bradley served as a director of the Company's subsidiary Indiana
Interactive, Inc. and, briefly, as a director of the Company's subsidiary
Nebraska Interactive, Inc. Mr. Herington served as a director of the Company's
subsidiaries Nebraska Interactive, Inc., Kansas Information Consortium, Inc.,
Indiana Interactive, Inc. and Arkansas Information Consortium, Inc.
-12-
<PAGE> 14
OPTION GRANTS AND EXERCISES DURING FISCAL 1999
No stock options were granted to or exercised by each of the executive
officers listed in the Summary Compensation Table above during the year ended
December 31, 1999.
AGGREGATE OPTION EXERCISES IN FISCAL 1999 AND FISCAL YEAR-END OPTION VALUES
None of the executive officers exercised options in 1999. Other than
James B. Dodd, none of the executive officers listed in the Summary Compensation
Table above held options in 1999.
EMPLOYMENT AGREEMENTS
Jeffery S. Fraser
On July 24, 1998, Jeffery S. Fraser entered into an employment
agreement with the Company. Mr. Fraser currently serves as the Company's
Chairman and as one of the Company's directors. The employment agreement
provides Mr. Fraser with an annual base salary of $249,000. Should the Company
terminate Mr. Fraser's employment without cause before July 1, 2001, it must pay
Mr. Fraser one year's base salary in a single lump sum distribution on the first
regular Company pay period after his termination. Should the Company terminate
Mr. Fraser's employment without cause on or after July 1, 2001, it must pay Mr.
Fraser the equivalent of his base salary for the number of months remaining in
one lump sum on the first regular pay period after his termination, and Mr.
Fraser will not be entitled to severance pay, except as provided in the
Company's severance benefit plan, if any, in effect on the termination date.
Cause is defined in the agreement as: (a) indictment or conviction for any
felony or crime involving dishonesty; (b) willful participation in any fraud
against the Company; (c) willful breach of Mr. Fraser's duties to the Company;
(d) intentional damage to any of the Company's property; or (e) conduct by Mr.
Fraser which the Company's board of directors determines to be inappropriate for
his position.
Should the Company terminate Mr. Fraser's employment for cause, it must
pay Mr. Fraser all compensation due on the date of termination.
Under the terms of his agreement, Mr. Fraser may terminate his
employment with the Company in writing at any time for any reason. In connection
with his employment agreement, Mr. Fraser entered into a proprietary information
and inventions agreement and a non-competition agreement. Should Mr. Fraser's
employment with the Company terminate for any reason, the agreements provide
collectively that Mr. Fraser: (a) will not use any of the Company's proprietary
information without the Company's prior written consent; (b) will not use any
confidential information to compete against the Company or any of the Company's
employees; and (c) will not, for three years following termination, solicit any
of the Company's employees or customers.
-13-
<PAGE> 15
James B. Dodd
On January 1, 1999, James B. Dodd entered into an employment agreement
with the Company. Mr. Dodd currently serves as the Company's President and Chief
Executive Officer. His employment agreement provides Mr. Dodd with an annual
base salary of $200,000. Should the Company terminate Mr. Dodd's employment
without cause, as similarly defined in Mr. Fraser's employment agreement, before
January 1, 2002, the Company must pay Mr. Dodd his then-current salary in equal
monthly payments on the first day of the month for each of the 18 months
following his termination. Should the Company terminate Mr. Dodd's employment
without cause on or after January 1, 2002, Mr. Dodd will not be entitled to
severance pay, except as provided in the Company's severance benefit plan, if
any, in effect on the termination date.
Should the Company terminate Mr. Dodd's employment for cause, it must
pay Mr. Dodd all compensation due on the date of termination.
Under the terms of his agreement, Mr. Dodd may terminate his employment
with the Company in writing at any time for any reason. In connection with his
employment agreement, Mr. Dodd entered into a proprietary information and
inventions agreement and a non-competition agreement. Should Mr. Dodd's
employment with the Company terminate for any reason, the agreements provide
collectively that Mr. Dodd: (a) will not use any of the Company's proprietary
information without the Company's prior written consent; (b) will not use any
confidential information to compete against the Company or any of the Company's
employees; and (c) will not, for three years following termination, solicit any
of the Company's employees or customers.
Kevin C. Childress
On May 16, 1999, Kevin C. Childress entered into an employment
agreement with the Company to serve as the Company's Chief Financial Officer.
This agreement provides Mr. Childress with an annual base salary of $175,000.
Should the Company terminate Mr. Childress' employment without cause, as
similarly defined in Mr. Fraser's employment agreement, before May 16, 2002, the
Company must pay Mr. Childress his then-current salary in equal monthly payments
on the first day of the month for each of the 18 months following his
termination. Should the Company terminate Mr. Childress' employment without
cause on or after May 16, 2002, Mr. Childress will not be entitled to severance
pay, except as provided in the Company's severance benefit plan, if any, in
effect on the termination date.
Should the Company terminate Mr. Childress' employment for cause, it
must pay Mr. Childress all compensation due on the date of termination.
Under the terms of his agreement, Mr. Childress may terminate his
employment with the Company in writing at any time for any reason. In connection
with his employment agreement, Mr. Childress entered into a proprietary
information and inventions agreement and a non-competition agreement. Should Mr.
Childress' employment with the Company terminate for any reason, the agreements
provide collectively that Mr. Childress: (a) will not use any of the Company's
-14-
<PAGE> 16
proprietary information without the Company's prior written consent; (b) will
not use any confidential information to compete against the Company or any of
the Company's employees; and (c) will not, for three years following
termination, solicit any of the Company's employees or customers.
William F. Bradley, Jr.
On July 24, 1998, William F. Bradley Jr., entered into an employment
agreement with the Company. Mr. Bradley currently serves as the Company's
Executive Vice PresidentnStrategy, Policy and Legal, General Counsel and
Secretary. The employment agreement provides Mr. Bradley with an annual base
salary of $140,000. Should the Company terminate Mr. Bradley's employment
without cause, as similarly defined in Mr. Fraser's employment agreement, before
July 1, 2001, the Company must pay Mr. Bradley one year's base salary in equal
monthly payments on the first day of the month for each of the 12 months
following his termination. Should the Company terminate Mr. Bradley's employment
without cause on or after July 1, 2001, the Company must pay Mr. Bradley the
equivalent of his base salary for the number of months remaining, and Mr.
Bradley will not be entitled to severance pay, except as provided in the
Company's severance benefit plan, if any, in effect on the termination date.
Should the Company terminate Mr. Bradley's employment for cause, it
must pay Mr. Bradley all compensation due on the date of termination.
Under the terms of his agreement, Mr. Bradley may terminate his
employment with the Company in writing at any time for any reason. In connection
with his employment agreement, Mr. Bradley entered into a proprietary
information and inventions agreement and a non-competition agreement. Should Mr.
Bradley's employment with the Company terminate for any reason, the agreements
provide collectively that Mr. Bradley: (a) will not use any of the Company's
proprietary information without the Company's prior written consent; (b) will
not use any confidential information to compete against the Company or any of
the Company's employees; and (c) will not, for three years following
termination, solicit any of the Company's employees or customers.
Samuel R. Somerhalder
On July 24, 1998, Samuel R. Somerhalder entered into an employment
agreement with the Company. Mr. Somerhalder currently serves as the Company's
Executive Vice PresidentnOperations and Administration. The employment agreement
provides Mr. Somerhalder with an annual base salary of $115,000. Should the
Company terminate Mr. Somerhalder's employment without cause, as similarly
defined in Mr. Fraser's employment agreement, before July 1, 2001, the Company
must pay Mr. Somerhalder one year's base salary in equal monthly payments on the
first day of the month for each of the 12 months following his termination.
Should the Company terminate Mr. Somerhalder's employment without cause on or
after July 1, 2001, the Company must pay Mr. Somerhalder the equivalent of his
base salary for the number of months remaining, and Mr. Somerhalder will not be
entitled to severance pay, except as provided in the Company's severance benefit
plan, if any, in effect on the termination date.
-15-
<PAGE> 17
Should the Company terminate Mr. Somerhalder's employment for cause, it
must pay Mr. Somerhalder all compensation due on the date of termination.
Under the terms of his agreement, Mr. Somerhalder may terminate his
employment with the Company in writing at any time for any reason. In connection
with his employment agreement, Mr. Somerhalder entered into a proprietary
information and inventions agreement and a non-competition agreement. Should Mr.
Somerhalder's employment with the Company terminate for any reason, the
agreements provide collectively that Mr. Somerhalder: (a) will not use any of
the Company's proprietary information without the Company's prior written
consent; (b) will not use any confidential information to compete against the
Company or any of the Company's employees; and (c) will not, for three years
following termination, solicit any of the Company's employees or customers.
Harry H. Herington
On July 24, 1998, Harry H. Herington entered into an employment
agreement with the Company. Mr. Herington currently serves as the Company's
Executive Vice PresidentnState Operations. The employment agreement provides Mr.
Herington with an annual base salary of $125,000. Should the Company terminate
Mr. Herington's employment without cause, as similarly defined in Mr. Fraser's
employment agreement, before July 1, 2001, the Company must pay Mr. Herington
one year's base salary in equal monthly payments on the first day of the month
for each of the 12 months following his termination. Should the Company
terminate Mr. Herington's employment without cause on or after July 1, 2001, the
Company must pay Mr. Herington the equivalent of his base salary for the number
of months remaining, and Mr. Herington will not be entitled to severance pay,
except as provided in the Company's severance benefit plan, if any, in effect on
the termination date.
Should the Company terminate Mr. Herington's employment for cause, it
must pay Mr. Herington all compensation due on the date of termination.
Under the terms of his agreement, Mr. Herington may terminate his
employment with the Company in writing at any time for any reason. In connection
with his employment agreement, Mr. Herington entered into a proprietary
information and inventions agreement and a non-competition agreement. Should Mr.
Herington's employment with the Company terminate for any reason, the agreements
provide collectively that Mr. Herington: (a) will not use any of the Company's
proprietary information without the Company's prior written consent; (b) will
not use any confidential information to compete against the Company or any of
the Company's employees; and (c) will not, for three years following
termination, solicit any of the Company's employees or customers.
Ray G. Coutermarsh
On February 1, 2000, Ray G. Coutermarsh entered into an employment
agreement with the Company. He currently serves as the Company's Executive Vice
PresidentnLocal Markets. This
-16-
<PAGE> 18
agreement provides Mr. Coutermarsh with an annual base salary of $140,000.
Should the Company terminate Mr. Coutermarsh's employment without cause, as
similarly defined in Mr. Fraser's employment agreement, before February 1, 2003,
the Company must pay Mr. Coutermarsh his then-current annual salary in a single
lump sum payment on the Company's first regular company pay period after his
termination. Should the Company terminate Mr. Coutermarsh's employment without
cause on or after February 1, 2003, Mr. Coutermarsh will not be entitled to
severance pay, except as provided in the Company's severance benefit plan, if
any, in effect on the termination date.
Should the Company terminate Mr. Coutermarsh's employment for cause, it
must pay Mr. Coutermarsh all compensation due on the date of termination.
Under the terms of his agreement, Mr. Coutermarsh may terminate his
employment with the Company in writing at any time for any reason. If Mr.
Coutermarsh terminates his employment with the Company voluntarily, he will not
be entitled to severance pay. In connection with his employment agreement, Mr.
Coutermarsh entered into a proprietary information and inventions agreement and
a non-competition agreement. Should Mr. Coutermarsh's employment with the
Company terminate for any reason, the agreements provide collectively that Mr.
Coutermarsh: (a) will not use any of the Company's proprietary information
without the Company's prior written consent and (b) will not use any
confidential information to compete against the Company or any of the Company's
employees for a period of two years following termination.
Terrence L. Parker
On November 9, 1999, Terrence L. Parker entered into an employment
agreement with the Company to serve as the Company's Chief Technology Officer.
This agreement provides Mr. Parker with an annual base salary of $130,000.
Should the Company terminate Mr. Parker's employment without cause, as similarly
defined in Mr. Fraser's employment agreement, the Company must pay Mr. Parker
his then-current base compensation for 12 months in a single lump sum payment on
the Company's first regular pay period following his termination. Should the
Company terminate Mr. Parker's employment for cause, it must pay Mr. Parker all
compensation due on the date of termination.
Under the terms of his agreement, Mr. Parker may terminate his
employment with the Company in writing at any time for any reason. If Mr. Parker
terminates his employment with the Company voluntarily, he will not be entitled
to severance pay. In connection with his employment agreement, Mr. Parker
entered into a proprietary information and inventions agreement and a
non-competition agreement. Should Mr. Parker's employment with the Company
terminate for any reason, the agreements provide collectively that Mr. Parker:
(a) will not use any of the Company's proprietary information without the
Company's prior written consent and (b) will not use any confidential
information to compete against the Company or any of the Company's employees for
two years following termination.
-17-
<PAGE> 19
Joseph Nemelka
On July 24, 1998, Joseph Nemelka entered into an employment agreement
with the Company. He currently serves as the Company's Executive Vice
PresidentnMarketing Development. This agreement provides Mr. Nemelka with an
annual base salary of $115,000. Should the Company terminate Mr. Nemelka's
employment without cause, as similarly defined in Mr. Fraser's employment
agreement, before July 1, 2001, the Company must pay Mr. Nemelka his
then-current salary in equal monthly payments on the first day of the month for
each of the 12 months following his termination. Should the Company terminate
Mr. Nemelka's employment without cause on or after July 1, 2001, Mr. Nemelka
will not be entitled to severance pay, except as provided in the Company's
severance benefit plan, if any, in effect on the termination date.
Should the Company terminate Mr. Nemelka's employment for cause, it
must pay Mr. Nemelka all compensation due on the date of termination.
Under the terms of his agreement, Mr. Nemelka may terminate his
employment with the Company in writing at any time for any reason. If Mr.
Nemelka terminates his employment with the Company voluntarily, he will not be
entitled to severance pay. In connection with his employment agreement, Mr.
Nemelka entered into a proprietary information and inventions agreement and a
non-competition agreement. Should Mr. Nemelka's employment with the Company
terminate for any reason, the agreements provide collectively that Mr. Nemelka:
(a) will not use any of the Company's proprietary information without the
Company's prior written consent; (b) will not use any confidential information
to compete against the Company or any of the Company's employees; and (c) will
not, for three years following termination, solicit any of the Company's
employees or customers.
BENEFIT PLANS
Amended and Restated 1998 Stock Option Plan
The 1998 plan was adopted and approved by the Company's board of
directors and by the Company's shareholders in May 1998, at which time a total
of 4,643,377 shares of Common Stock were reserved for issuance under this plan.
In November 1998, the 1998 plan was amended to reserve a total of 7,893,741
shares of Common Stock for issuance under this plan. In May 1999, the 1998 plan
was amended to reserve a total of 9,286,754 shares of Common Stock for issuance
under this plan. At December 31, 1999, options to purchase 122,954 shares of
Common Stock granted under the 1998 plan had been exercised, options to purchase
4,025,593 shares of Common Stock were outstanding and options to purchase
5,138,207 shares of Common Stock remained available for grant. The outstanding
options were exercisable at a weighted average exercise price of $7.49 per
share. Outstanding options to purchase an aggregate of 1,581,768 shares were
held by employees who are not officers or directors of NIC.
NIC's board of directors has delegated administration of the 1998 plan
to its Compensation Committee. Awards under the 1998 plan may consist of
incentive stock options, which qualify under Section 422 of the Internal Revenue
Code, or non-qualified stock options, which are stock options that do not
qualify under that provision.
-18-
<PAGE> 20
The Compensation Committee may grant incentive stock options to
employees and officers of the Company or any of its subsidiaries, and
non-qualified stock options to employees, officers or directors of the Company
or any of its subsidiaries. The Compensation Committee may set the terms of such
grants, subject to the restrictions in the 1998 plan. Incentive stock option
grants are subject to certain restrictions relating to the duration of the
option, the size of an option award and the exercise price.
In the event of (a) a merger, consolidation or reorganization in which
NIC is not the surviving company or (b) the acquisition by another company of
all or substantially all of the Company's assets, then every option outstanding
under the 1998 plan may be assumed or replaced with new options of comparable
value by the surviving, continuing, successor or acquiring company. In the
alternative, the Compensation Committee may provide that an optionee can
exercise his or her options within the period of 30 days prior to the merger,
consolidation, reorganization or acquisition. Additionally, in connection with
change of control situations in which a person, other than one of the Company's
shareholders, directors or officers, acquires greater than 50% of the combined
voting power of the company or less than a majority of the directors are persons
who were nominated or selected by the Company's board of directors, the
Compensation Committee may accelerate the time at which options granted under
the 1998 plan may be exercised by an optionee.
The 1998 plan will terminate automatically in 2008 unless sooner
terminated by the board of directors. The board of directors has the authority
to amend, suspend or terminate the 1998 plan, subject to shareholder approval of
some of the amendments. However, no action may be taken which will affect any
shares of Common Stock previously issued and sold or any option previously
granted under the 1998 plan without the optionee's consent.
1999 Employee Stock Purchase Plan
The 1999 stock purchase plan was approved by the board of directors and
the Company's shareholders in May 1999. The Company's stock purchase plan is
intended to qualify as an employee stock purchase plan under Section 423 of the
Internal Revenue Code in order to provide the Company's employees with an
opportunity to purchase shares of the Company's stock through payroll
deductions. An aggregate of 2,321,688 shares of Common Stock has been reserved
for issuance and are available for purchase under the stock purchase plan,
subject to adjustment in the event of a stock split, stock dividend or other
similar change in the Company's Common Stock or its capital structure. At
December 31, 1999, no shares of Common Stock had been purchased by employees
under the 1999 plan.
All employees of the Company and of its affiliates who have been
employed for a continuous period, as determined by the board or committee
administering the stock purchase plan but which will not exceed two years,
preceding the offering are eligible to participate in the Company's stock
purchase plan, provided that no employee of the Company or of its affiliates
whose customary employment is for less than five months in any calendar year and
less than 20 hours per week are eligible to participate in the Company's stock
purchase plan. Non-employee directors, consultants, and employees subject to the
rules or laws of a foreign jurisdiction that prohibit or make impractical
-19-
<PAGE> 21
their participation in a stock purchase plan are not eligible to participate in
NIC's stock purchase plan.
The Company's stock purchase plan will be administered by the
Compensation Committee of the board of directors. The Compensation Committee
will have complete authority to make awards and will designate offering periods
not to exceed 27 months. The Compensation Committee will establish one or more
purchase dates during an offering period during which stock purchase rights may
be exercised and Common Stock may be purchased.
In the event the Company dissolves, liquidates, merges or consolidates
through a merger in which NIC is not the surviving corporation, effectuate a
reverse merger in which NIC is the surviving corporation but the shares of
Common Stock outstanding prior to the merger are converted into other property,
whether in the form of securities, cash or otherwise, or are acquired by any
person, entity or group, as defined by the Exchange Act or any successive
provisions, holding at least 50% of the Company's combined voting power, then,
the board or committee administering the stock purchase plan may (a) allow the
surviving or acquiring corporation to assume the outstanding rights or
substitute similar rights for those participating under the stock purchase plan,
(b) have the existing rights under the stock purchase plan remain in full force
and effect or (c) allow those participating under the stock purchase plan to use
their accumulated payroll deductions to purchase the Company's Common Stock
immediately prior to the transactions described above, provided that their
rights under the ongoing offering period will be terminated.
A participating employee is granted a purchase right by which shares of
the Company's Common Stock may be purchased during any offering period at the
lesser of (a) 85% of the fair market value of the Company's Common Stock on the
date of the commencement of the offer period or (b) 85% of the fair market value
of the Company's Common Stock on the purchase date. The participant's purchase
right is exercised in this manner on each exercise date arising in the offer
period unless, on any purchase date, the fair market value of the Company's
Common Stock is lower than the fair market value of the Company's Common Stock
on the first day of the offering period. If so, the participant's participation
in the original offering period is terminated, and the participant is
automatically enrolled in the next offering period which will commence on the
next day.
Payroll deductions may range up to 15% of a participant's regular base
pay, exclusive of bonuses, overtime, shift-premiums, commissions, reimbursements
or other expense allowances. Participants may not make direct cash payments to
their accounts. The board or committee administering the stock purchase plan may
establish the maximum number of the Company's shares of Common Stock that any
employee may purchase under the stock purchase plan during an offering period.
The Internal Revenue Code imposes additional limitations on the amount of Common
Stock that may be purchased during any calendar year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee serves as a member of the board
of directors or compensation committee of any entity that has one or more
executive officers serving as a
-20-
<PAGE> 22
member of the Company's Board of Directors or Compensation Committee. Jeffery S.
Fraser, who served as Chief Executive Officer of the Company until November
1999, served as a member of the Compensation Committee during the fiscal year
ended December 31, 1999, and participated in decisions concerning compensation
of executive officers.
PERFORMANCE GRAPH
The performance graph compares the annual change in the Company's
cumulative total Shareholder return on its Common Stock during a period
commencing on July 15, 1999, the date the Company's stock began publicly
trading, and ending on December 31, 1999 (as measured by dividing (i) the sum of
(A) the cumulative amount of dividends for the measurement period, assuming
dividend reinvestment and (B) the difference between the Company's share price
at the end and the beginning of the measurement period; by (ii) the share price
at the beginning of the measurement period) with the cumulative total return of
each of: (a) the Nasdaq (U.S. Companies) Index (Nasdaq); and (b) an industry
peer group index during such period, assuming a $100 investment on July 15,
1999. The Company's share price at the beginning of the measurement period was
the closing price for the Company's Common Stock on July 15, 1999, and not the
price at which the Company's shares of Common Stock were initially offered for
purchase in its public offering. It should be noted that the Company has not
paid any dividends on the Common Stock, and no dividends are included in the
representation of the Company's performance. The stock price performance on the
graph below is not necessarily indicative of future price performance.
-21-
<PAGE> 23
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
NATIONAL INFORMATION CONSORTIUM, INC.,
NASDAQ (U.S. COMPANIES) INDEX (NASDAQ) AND A PEER GROUP
Total Return Analysis
<TABLE>
<CAPTION>
National
Info Peer Nasdaq
Consortium Group Composite
---------- ------- ---------
<S> <C> <C> <C>
7/15/99 $100.00 $100.00 $100.00
12/31/99 $184.84 $247.48 $143.50
</TABLE>
The Peer Group consists of Network Solutions, Inc., Official Payments
Corporation, USWeb/CKS Corp., AppNet Inc. and VerticalNet Inc., each of which
engages in one or more of the lines of business in which the Company operates.
-22-
<PAGE> 24
REPORT ON EXECUTIVE COMPENSATION BY THE
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee (the "Committee") consists of three
non-employee, independent members of the Board of Directors, and the Chairman of
the Board. It is the responsibility of the Committee to review, recommend and
approve changes to the Company's compensation policies and benefits programs, to
administer the Company's stock option plans, including approving stock option
grants to executive officers, and to otherwise ensure that the Company's
compensation philosophy is consistent with the Company's best interests and is
properly implemented.
The goal of the Compensation Committee is to ensure that the Company
employs qualified, experienced executives whose financial interest is aligned
with that of the shareholders. The Committee considers general industry practice
and other factors in structuring executive compensation. The principal
components of the Company's executive compensation arrangements are base salary
and stock options.
Salaries at all employee levels are generally targeted at median market
levels. In determining appropriate salary levels, the Committee considers the
officer's impact level, scope of responsibility, prior experience, past
accomplishments and data on prevailing compensation levels in relevant executive
labor markets. In February 2000, the Committee retained consultants to conduct a
compensation survey in order to track Company compensation for management with
that of other employers. The Committee reviews each senior executive officer's
salary annually, and such salaries are adjusted periodically when the Committee
believes that adjustment is required, taking into account competitive factors in
the industry and locations of the Company's activities. While none have yet been
made, supplemental cash bonus awards may be made periodically to reflect
superior performance by individual employees, in accordance with recommendations
by senior management.
Mr. Dodd became the Company's President and Chief Operating Officer in
January 1999 and Chief Executive Officer in November, 1999. The terms of Mr.
Dodd's compensation were established by direct negotiation between Mr. Dodd and
the then-CEO, Jeffery S. Fraser. The Company was not a public company in January
1999. The Committee will annually review the compensation of Mr. Dodd. Mr.
Dodd's compensation is determined in a manner consistent with the practices used
in determining the compensation of other executive officers of the Company. Mr.
Dodd's base salary for fiscal 2000 provides Mr. Dodd with a total cash
compensation opportunity somewhat more conservative than relevant executive
labor markets.
The Committee believes that equity-based incentive arrangements, such
as employee stock options and restricted stock, are among the most effective
means available to the Company of aligning the interests of employees with the
objectives of shareholders generally, competing in today's environment in the
high technology sector of virtually zero unemployment, and of building their
long term commitment to the Company. The Company emphasizes stock option awards
as an essential element of the remuneration package available to its executives
and employees, and believes that the practice of granting stock options is
critical to retaining and recruiting talented
-23-
<PAGE> 25
executive personnel. Stock options typically vest in annual increments over
periods of up to four years to encourage long-term commitment to the Company by
the grantees. In determining the number of shares and/or share options to be
given to each executive, the Committee considers the officer's responsibilities,
the expected future contribution of the officer to the Company's performance and
his base salary. During the fiscal year ended December 31, 1999, none of the
named executive officers (5 people) received options to purchase shares.
The Committee believes the Company's stock option plans have been
effective in attracting, retaining and motivating executives and employees of
the Company and are an important component of the overall compensation program.
The Committee will monitor the Company's compensation program in order to
maintain a proper balance between cash compensation and equity-based incentives,
and may consider revisions in the future, although it is expected that
equity-based compensation will remain one of the principal components of
compensation.
THE COMPENSATION COMMITTEE
Jeffery S. Fraser
Ross C. Hartley
John L. Bunce, Jr.
Patrick J. Healy
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and officers, and persons who own more than 10%
of the Common Stock, to file initial reports of ownership and reports of changes
in ownership (Forms 3,4 and 5) of Common Stock with the Securities and Exchange
Commission (the "SEC") and Nasdaq. Officers, directors and greater than 10%
shareholders are required by SEC regulation to furnish the Company with copies
of all such forms that they file.
Based solely on review of the copies of such reports furnished to the
Company, the Company believes that all filing requirements with respect to the
year ended December 31, 1999, applicable to its officers, directors and greater
than 10% beneficial owners were complied with except that the following persons
or entities each filed one or more late report(s) (with the number of late
reports followed by the number of transactions reported late indicated in
parenthesis): Jeffery S. Fraser (4,1); Ross C. Hartley (3,1); National
Information Consortium Voting Trust (3,1); James B. Dodd (1,1); Kevin C.
Childress (1,1); William F. Bradley, Jr. (2,1), Samuel R. Somerhalder (2,2);
Harry H. Herington (2,1); Joseph Nemelka (3,1) and Pete Wilson (1,1).
-24-
<PAGE> 26
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Hartley, one of the Company's founders and a member of the
Company's board of directors, is the President of the Hartley Insurance Agency,
an insurance company which acts as the Company's insurance agent and broker. In
1998, a payment of $8,345 was made directly to the Hartley Insurance Agency.
However, the aggregate insurance payment the Company made that was brokered by
the Hartley Insurance Agency totaled $478,392, including the $8,345 payment made
directly to the Hartley Insurance Agency. In 1999, the Company made no direct
payment to the Hartley Insurance Agency. However, the Company made an aggregate
payment of $353,504 for all brokering services provided by the Hartley Insurance
Agency.
The Company has periodically leased aircraft from Sky King Leasing, a
Kansas corporation, of which Mr. Fraser, one of the Company's founders, Mr.
Hartley and Christopher L. Shults, one of the Company's shareholders, each
approximately have a 25% interest. In 1998, the Company made payments totaling
$24,223 to Sky King Leasing. The Company made no payments to Sky King Leasing in
1999.
On January 8, 1998, the Company entered into an agreement with each of
Messrs. Fraser and Hartley to provide their respective estates with a right to
require the Company to repurchase some or all shares of the Company's Common
Stock owned by them upon their death. These agreements were terminated on July
1, 1998.
In March 1998, the Company completed an exchange offer in which
shareholders in the Company's local operating networks exchanged their stock for
shares of the Company's Common Stock. Messrs. Fraser, Hartley, Bradley,
Somerhalder and Herington received an aggregate of 21,614,414 shares of the
Company's Common Stock in the exchange offer.
On June 30, 1998, Messrs. Fraser and Hartley entered into a voting
trust agreement under which they act as joint trustees for a Voting Trust which
holds, as of March 1, 2000, 27,469,884 shares of the Company's Common Stock.
On June 30, 1998, the Voting Trust sold to Hellman & Friedman Capital
Partners III, L.P. and its affiliates H&F International Partners III, L.P. and
H&F Orchard Partners III, L.P., collectively, 10,516,547 shares of the Company's
Common Stock at a price of $1.43 per share for an aggregate of approximately
$15,000,000. In connection with this sale, the Company entered into an investor
rights agreement with Hellman & Friedman and its affiliates in which the Company
granted them rights to register shares of the Company's Common Stock in the
future.
On December 31, 1998, the Company issued to James B. Dodd options to
purchase 1,393,010 shares of the Company's Common Stock at an exercise price of
$1.44 per share. This grant resulted in a noncash compensation charge of
$197,660 to the Company for the period ended December 31, 1998, based on the
difference between the exercise price and the fair value of the Company's Common
Stock on the date of the grant. The Company will take an additional compensation
charge of approximately $1.9 million for this grant, amortized over a four-year
period.
-25-
<PAGE> 27
On February 9, 1999, the Company sold to Mr. Dodd 173,258 shares of the
Company's Common Stock at $1.44 per share for an aggregate of approximately
$250,000. A compensation charge of $620,888 was taken by the Company in
connection with this stock purchase.
On May 16, 1999, the Company sold to Kevin C. Childress 23,727 shares
of the Company's Common Stock at $5.27 per share for an aggregate of
approximately $125,000. A compensation charge of $84,826 was taken by the
Company in connection with this stock purchase. Additionally, the Company issued
to Mr. Childress options to purchase 696,511 shares of the Company's Common
Stock at an exercise price of $5.27 per share. This grant resulted in a noncash
compensation charge of $249,000 based on the difference between the exercise
price and the fair value of the Company's Common Stock on the date of the grant.
The Company will take an additional compensation charge of approximately $2.2
million for this grant, amortized over four years from the date of grant.
The Company has entered into indemnification agreements with each of
the Company's directors and officers. These indemnification agreements will
require the Company to indemnify these individuals to the fullest extent
permitted by Colorado law. The Company has also entered into various employment
agreements with the Company's officers. See "ManagementnEmployment Agreements"
for a more detailed description.
The Company believes that all of the transactions set forth above were
made on terms no less favorable to the Company than could have been obtained
from unaffiliated third parties. The Company intends that all future
transactions, including loans, between the Company and its officers, directors,
principal shareholders and their affiliates will be approved by a majority of
the Board of Directors, including a majority of the independent and
disinterested outside directors on the Board of Directors, and will be on terms
no less favorable to the Company than could be obtained from unaffiliated third
parties.
ELECTION OF DIRECTORS
(ITEM 1)
The Board of Directors currently consists of seven directors. If any of
the nominees becomes unable to serve for any reason, or for good cause will not
serve, which is not anticipated, the Board of Directors may, unless the Board by
resolution provides for a lesser number of directors, designate substitute
nominees. If that occurs, the persons named in the enclosed proxy will vote
proxies that would otherwise be voted for all named nominees for the election of
the substitute nominee or nominees.
The seven nominees receiving the most votes for their election will be
elected directors. Abstentions and broker non-votes have no effect on the
election of directors. Shareholders do not have the right to cumulate their
votes for directors.
The following is biographical information about each of the nominees:
-26-
<PAGE> 28
<TABLE>
<CAPTION>
Name Age Business Experience
- ---- --- -------------------
<S> <C> <C>
Jeffery S. Fraser 40 One of the Company's founders, has served as the Company's Chairman since April 1998 and as one of
the Company's directors since the Company's formation. Mr. Fraser also served as the Company's
Chief Executive Officer from April 1998 until November 1999 and as the Company's President from
April 1998 to December 1998. He was also the Chief Executive Officer from April 1998 to December
1998 and President and Chief Executive Officer of the Company's subsidiary, National Information
Consortium USA, Inc., from January 1993 to April 1998. Additionally, from January 1992 to September
1998, he served as President and Chief Executive Officer of the Company's subsidiary, Kansas
Information Consortium, Inc. Mr. Fraser holds a B.S. in human resource management and an M.S. in
information systems from Friends University in Wichita, Kansas.
James B. Dodd 42 Has served as the Company's President, Chief Executive Officer and director since November 1999. He
also served as the Company's President, Chief Operating Officer and a director from January 1999 to
December 1999. Prior to joining the Company, Mr. Dodd spent 14 years with Sprint Corporation, a
telecommunications company, where he served in various senior management positions including, most
recently, as Vice President and General Manager of Sprint's Consumer Internet Access Group. Other
positions he held at Sprint included Vice President of Consumer International Marketing from 1992
to 1994, and Vice President of Consumer Product Management and Development from 1995 to 1996.
Mr. Dodd earned a CPA in 1982 and holds a B.A. in economics from Stanford University and an M.B.A.
from the Harvard Business School.
John L. Bunce, Jr. 40 Has served as one of the Company's directors since June 1998. Mr. Bunce is a Managing Director and
a member of the executive committee of Hellman & Friedman LLC, a direct investment firm, which he
joined as an associate in 1988. Hellman & Friedman LLC is an affiliate of Hellman & Friedman
Capital Partners III, L.P., H&F Orchard Partners III, L.P. and H&F International Partners III, L.P.
Mr. Bunce also serves as a director of Western Wireless Corporation, a cellular telecommunications
company, Voicestream Wireless Corporation, a telecommunications provider of personal communications
services, Bronner Slosberg Humphrey, Co., a direct marketing and interactive agency, Falcon
International Communications L.P., a cable company, and MobileMedia Corporation, a paging and
messaging services company. Mr. Bunce holds a B.A. in international relations from Stanford
University and an M.B.A. from the Harvard Business School.
</TABLE>
-27-
<PAGE> 29
<TABLE>
<CAPTION>
Name Age Business Experience
- ---- --- -------------------
<S> <C> <C>
Dan Evans 75 Has served as one of the Company's directors since November 1998. Governor Evans is the chairman of
and has served as a consultant for Daniel J. Evans Associates Consulting, a consulting company in
Washington, since May 1989. Governor Evans currently serves as a director of Puget Sound Energy, an
investor-owned electric utility company, Flow International, a robotics company, Western Wireless
Corporation, a wireless communications company, and Tera Computer, a computer manufacturing
company. He also served as a U.S. Senator from September 1983 to January 1989 and the Governor of
the State of Washington from January 1965 to January 1977. Governor Evans holds a B.S. and an M.S.
in civil engineering from the University of Washington.
Ross C. Hartley 52 One of the Company's founders, has served as one of the Company's directors since the Company's
formation. From its incorporation to March 1999, Mr. Hartley served as Vice President of Marketing
of Kansas Information Consortium, Inc. Mr. Hartley also has served as President of The Hartley
Insurance Group, an insurance company in Kansas, since 1974. He also serves as a director of Empire
District Electric Company, an investor-owned electric utility company. Mr. Hartley holds a B.S. in
mathematics from Baker University in Baldwin City, Kansas and a J.D. degree from the University of
Kansas School of Law.
Patrick J. Healy 32 Has served as one of the Company's directors since June 1998. Mr. Healy is a Managing Director of
Hellman & Friedman LLC, a direct investment firm, having joined Hellman & Friedman LLC as an
associate in 1994. Hellman & Friedman LLC is an affiliate of Hellman & Friedman Capital Partners
III, L.P., H&F Orchard Partners III, L.P. and H&F International Partners III, L.P. Currently, he
also serves as a director of Bronner Slosberg Humphrey, Co., a direct marketing and interactive
agency. Mr. Healy holds an A.B. in economics from Harvard College and an M.B.A. from the Harvard
Business School.
Pete Wilson 66 Has served as one of the Company's directors since July 1999. Governor Wilson served as Governor of
the State of California from 1991 until 1999. Prior to serving as Governor of California, Governor
Wilson served in the U.S. Senate for eight years, representing the State of California. He has also
served as the mayor of San Diego, California. Governor Wilson is a member of The Irvine Company
board of directors and is on the Thomas Weisel Partners board of advisors. He received his
undergraduate degree from Yale University and his law degree from Boalt Hall (University of
California at Berkeley). After graduating from Yale, Governor Wilson spent three years in the
Marine Corps as an infantry officer.
</TABLE>
-28-
<PAGE> 30
RECOMMENDATION OF THE BOARD OF DIRECTORS CONCERNING THE ELECTION OF DIRECTORS
The Board of Directors of the Company recommends a vote FOR Jeffery S.
Fraser, James B. Dodd, John L. Bunce, Jr., Dan Evans, Ross C. Hartley, Patrick
J. Healy and Pete Wilson to hold office until the 2001 Annual Meeting of
Shareholders and until their successors are elected and qualified. Proxies
received by the Board of Directors will be voted FOR all of the nominees unless
shareholders specify a contrary choice in their proxy.
INDEPENDENT PUBLIC ACCOUNTANTS
(ITEM 2)
The Board of Directors has appointed PricewaterhouseCoopers LLP,
independent public accountants, to audit the financial statements of the Company
for the fiscal year ending December 31, 2000. The Board proposes that the
shareholders ratify this appointment. PricewaterhouseCoopers LLP audited the
Company's financial statements for the fiscal year ended December 31, 1999. The
Company expects that representatives of PricewaterhouseCoopers LLP will be
present at the Meeting, with the opportunity to make a statement if they so
desire, and will be available to respond to appropriate questions.
In the event that ratification of the appointment of
PricewaterhouseCoopers LLP as the independent public accountants for the Company
is not obtained at the Meeting, the Board of Directors will reconsider the
appointment.
The affirmative vote of a majority of the votes cast at the Meeting is
required to ratify the appointment of the independent public accountants.
RECOMMENDATION OF THE BOARD OF DIRECTORS CONCERNING THE RATIFICATION OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company recommends a vote FOR the
ratification of the appointment of the independent public accountants. Proxies
solicited by the Board will be voted in favor thereof unless a shareholder has
indicated otherwise on the proxy.
-29-
<PAGE> 31
OTHER MATTERS
The Board of Directors knows of no other business which will be
presented to the Meeting. If any other business is properly brought before the
Meeting, it is intended that proxies in the enclosed form will be voted in
respect thereof in accordance with the judgement of the persons voting the
proxies.
SHAREHOLDER PROPOSALS
To be considered for inclusion in the Company's proxy statement
relating to the 2001 Annual Meeting of Shareholders, Shareholder proposals must
be received no later than November 15, 2000. To be considered for presentation
at the Annual Meeting, although not included in the proxy statement, proposals
must be received no later than February 1, 2001, nor earlier than January 1,
2001. All Shareholder proposals should be marked for the attention of Corporate
Secretary, National Information Consortium, Inc., 12 Corporate Woods, 10975
Benson Street, Suite 390, Overland Park, Kansas 66210.
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING, YOU ARE URGED
TO FILL OUT, SIGN, DATE AND RETURN THE ENCLOSED PROXY AT YOUR EARLIEST
CONVENIENCE.
By order of the Board of Directors:
William F. Bradley, Jr.
Corporate Secretary
Overland Park, Kansas
March 21, 2000
-30-
<PAGE> 32
- ------------------------------------------------------------------------------
PROXY
- ------------------------------------------------------------------------------
NATIONAL INFORMATION CONSORTIUM, INC.
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 2, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
KNOW ALL MEN BY THESE PRESENTS: That the undersigned shareholder of
National Information Consortium, Inc. (the "Company") hereby constitutes and
appoints Jeffery S. Fraser and __________, or either of them, as attorneys and
proxies to appear, attend and vote all of the shares of the Common Stock of
National Information Consortium, Inc. standing in the name of the undersigned at
the Annual Meeting of Shareholders of National Information Consortium, Inc. to
be held at the Doubletree Hotel, Kansas City - Corporate Woods, 10100 College
Boulevard, Overland Park, Kansas, on May 2, 2000, at 10:00 a.m., Central
Daylight Time, and at any adjournment or adjournments thereof.
1. A proposal to elect the following seven Directors: Jeffery S.
Fraser, James B. Dodd, John L. Bunce, Jr., Dan Evans, Ross C. Hartley, Patrick
J. Healy and Pete Wilson
For all nominees _______.
Withhold authority to vote for all nominee(s) ______.
Withhold authority to vote for nominee(s) named below:
-------------------------------
-------------------------------
2. Ratify the appointment of PricewaterhouseCoopers LLP as independent
auditors for the fiscal year ended December 31, 2000.
For ____ Against ____ Abstain ____
3. In the discretion of the designated proxies upon such other business
relating to the foregoing as may properly come before the meeting, and
such matters incidental to the conduct of the meeting, and at any
adjournments or postponements thereof.
<PAGE> 33
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS SPECIFIED HEREON WITH
RESPECT TO PROPOSAL ONE. IF NO SPECIFICATION IS MADE, THE SHARES REPRESENTED
HEREBY WILL BE VOTED FOR PROPOSALS ONE AND TWO. THIS PROXY WILL BE VOTED IN
ACCORDANCE WITH THE DISCRETION OF THE PROXIES ON ANY OTHER BUSINESS.
Please mark, date and sign your name exactly as it appears hereon and
return the Proxy in the enclosed envelope as promptly as possible. It is
important to return this Proxy properly signed in order to exercise your right
to vote if you do not attend the meeting and vote in person. When signing as
agent, partner, attorney, administrator, guardian, trustee or in any other
fiduciary or official capacity, please indicate your title. If stock is held
jointly, each joint owner must sign.
Date: ____________, 2000
----------------------------------------
Signature(s)
----------------------------------------
Print Name
Address if different from that on label:
----------------------------------------
Street Address
----------------------------------------
City, State and Zip Code
----------------------------------------
Number of shares
Please check if you intend to be present at the meeting: ________
