TELS Corporation
406 West South Jordan Parkway, Suite 250
South Jordan, Utah 84095
NOTICE OF 1996 ANNUAL MEETING OF SHAREHOLDERS
To be Held June 3, 1996
To the Shareholders of TELS Corporation,
The Annual Meeting of the Shareholders of TELS Corporation (the
"Company") will be held on June 3, 1996, at 2:00 P.M. MDT time, at 705 East
Main Street,
American Fork, Utah 84003 for the following purposes:
1. To elect one director;
2. To transact such other business as may properly come
before the meeting or any adjournment or adjournments
thereof.
Only shareholders of record at the close of business on
March 25, 1996 (the "Record Date"), are entitled to notice of and to vote
at the meeting.
By Order of the Board of Directors
Willard H. Gardner, Secretary
South Jordan, Utah
Dated: May 3, 1996
____________________________________
The vote of each shareholder will be important at this meeting.
You are urged to complete and sign the enclosed Proxy and return it in the
accompanying envelope as soon as possible. Such action will not affect your
right to vote in person should you find it possible to attend the meeting.
Requests for additional Proxy Statement, Notice of Annual Meeting
and Annual Report can be obtained from TELS Corporation, 406 West South Jordan
Parkway, Suite 250, South Jordan, Utah 84095.
TELS Corporation
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To be held on June 3, 1996
This Proxy Statement is furnished in connection with the
solicitation of Proxies by the Board of Directors of TELS Corporation, a
Utah corporation (the
"Company"), to be voted at the Annual Meeting of Shareholders to be held at
TELS Corporation, located at 705 East Main Street, American Fork, Utah
84003 (see enclosed
map), on June 3, 1996, at 2:00 P.M. MDT. Certain directors, officers and
employees of the Company may solicit Proxies by telephone, telegram, mail or
personal contact.
Arrangements will be made with brokers, nominees and fiduciaries to send
Proxies and proxy materials to their principals at the Company's expense.
All costs incurred in
connection with the solicitation will be borne by the Company. This form of
Proxy Statement was first mailed to Shareholders on May 3, 1996.
THE PROXY
The enclosed Proxy, even though executed and returned, may be
revoked at any time before being voted by written notice mailed or delivered
to the Secretary
of the Company, by substitution of a new Proxy bearing a later date, or by a
request for return of the Proxy at the Annual Meeting. The mailing address
of the Company is 406
West South Jordan Parkway, Suite 250, South Jordan, Utah 84095.
Proxies shall be voted in accordance with the directions of the
shareholders. Unless otherwise directed, Proxies will be voted (1) for the
election of the nominee
for director designated by the Board of Directors; and (2) in the discretion
of the persons named in the accompanying Proxy, upon such other matters as
may properly come before
the meeting.
INFORMATION ON OUTSTANDING STOCK
On March 25, 1996 (the "Record Date"), the Company had issued and
outstanding 3,891,319 shares of Common Stock, $.02 par value
("Common Stock"). Each
share of Common Stock is entitled to one vote. There were no shares of
Preferred Stock issued and outstanding. Only shareholders of record at
the close of business on the
Record Date will be entitled to notice of and to vote at the meeting.
The presence at the meeting, in person or by Proxy, of a majority of
the votes evidenced by outstanding
shares shall constitute a quorum for the transaction of business.
Individual votes of shareholders are kept private, except as appropriate
to meet legal requirements. Access to
Proxies and other individual shareholder voting records is limited to the
Inspector of Election (Stephen M. Nelson) and certain employees of TELS and
its agents. The nominee
for director receiving a plurality of the votes cast at the meeting in
person or by proxy shall be elected. All other matters require for
approval the favorable vote of a majority
of shares voted at the meeting in person or by proxy. Under Utah law,
abstentions and broker non-votes will not be treated as votes cast and,
therefore, will have no effect on
the outcome of the matters to be voted on at the meeting.
APPOINTMENT OF INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P. have been recommended by the Audit
Committee of the Board for appointment as the Independent Auditors for the
Company for
the year ending December 31, 1996. Neither Coopers & Lybrand L.L.P. nor
any of its members has any financial interest, direct or indirect, in the
Company, nor has Coopers
& Lybrand L.L.P. nor any of its members ever been connected with the
Company as promoter, underwriter, voting trustee, director, officer or
employee. It is anticipated that
a representative of Coopers & Lybrand L.L.P. will attend the meeting and
shall be available to respond to appropriate questions. It is not
anticipated that the representative from
Coopers & Lybrand L.L.P. will make any statement or presentation. Coopers &
Lybrand L.L.P. were the Independent Auditors for the Company for the year
ended December
31, 1995. There have not been, and there are not any, disagreements with
Coopers & Lybrand L.L.P. with regard to the Company's financial statements
or generally accepted auditing standards.
SHAREHOLDER PROPOSALS
The Proxy and Proxy Statement were first mailed to shareholders
on May 3, 1996. Any shareholder desiring to submit a proposal for
consideration at the next
Annual Meeting of Shareholders in 1997 should transmit such proposal(s) to
the offices of the Company on or before January 4, 1997.
Compliance with Section 16(a) of the Exchange Act. Based upon a
review of Forms 3, 4 and 5, and amendments thereto furnished to the Company
during its
most recent fiscal year and any other written representation received by
the Company, each officer, director and known beneficial owner of more than
10% of any class of equity
securities of the Company has filed on a timely basis, as disclosed in the
above Forms, all reports required by Section 16(a) of the Exchange Act
during the most recent fiscal
year or prior fiscal years, except that Mr. Gardner and Mr. Doyle were
delinquent in filing Form 4 regarding the receipt of certain restricted
common stock options.
INFORMATION RELATING TO DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
The following table sets forth, as of the Record Date, the name of
each person who, (i) owns or is known by the Company to own beneficially more
than five
percent of the outstanding shares of Common Stock, (ii) is a Named Executive
or (iii) is a director for the Company of the number of shares owned by each
such person, the
number of shares owned by all directors and officers as a group, and the
percentage of the outstanding shares represented thereby.
COMMON STOCK AND TOTAL STOCK-BASED HOLDINGS
Amount and Nature Percent of
Name of of Beneficial Total Voting
Beneficial Owner Stock(1) Shares
Dr. John L. Gunter (3) 631,115 16%
406 W. South Jordan Parkway, #250
South Jordan, UT 84095
P. Diane Gunter (3) 196,600 5%
705 East Main
American Fork, UT 84003
Willard H. Gardner 155,250 4%
1495 Oak Lane
Provo, UT 84604
David K. Doyle 139,050 4%
8808 Bell Mountain Drive
Austin, TX 78730
Stephen M. Nelson 289,500 8%
406 W. South Jordan Parkway, #250
South Jordan, UT 84095
R. James Taylor 52,574 1%
406 W. South Jordan Parkway, #250
South Jordan, UT 84095
Dr. Ming T. Chen * *
406 W. South Jordan Parkway, #250
South Jordan, UT 84095
Common Stock holdings of all directors and executive officers
as a group were(6 persons) 1,464,089 36%
*Less than 1 percent
(1) This column lists voting securities, including restricted stock
held by executive officers and directors, over which they have
voting power but no investment power. Otherwise, each director
or officer has sole voting and investment power over the shares reported,
except as noted.
This column also includes 111,600 shares for Mr. Gunter; 81,500
shares for Mr. Nelson; 115,000 shares for Mr. Gardner; 113,000 shares for
Mr. Doyle, and
43,700 shares for Mr. Taylor which may be acquired by such
director pursuant to stock options that are or will become exercisable
within 60 days.
(2) Pursuant to the rules of the Securities and Exchange Commission,
shares shown as "beneficially" owned include (a) shares subject to options
exercisable within
60 days of the Record Date, (b) shares held by unincorporated
entities and in trusts and estates over which an individual holds at least
shared voting or investment
powers, and (c) shares held in trusts and estates of which at
least 10 percent of the beneficial interest of such trust is attributable
to specified persons in the
immediate family of the individual(s) involved. This
information is not necessarily indicative of beneficial ownership for any
other purpose. The directors and
officers of the Company have sole voting and investment power
over the shares of the Company's Common Stock held in their names, except
as noted in the
following footnotes. Dr. and Mrs. Gunter may be deemed to have
control of the Company by virtue of their combined ownership of
approximately 18% of the
Company's outstanding voting shares.
ELECTION OF DIRECTORS
One Director is to be elected at the meeting. The Company's
Articles of Incorporation and By-Laws provide for classification of the
Board of Directors into
three classes. Directors are elected at the annual meeting of shareholders
at which their respective class is elected, and they hold office until the
expiration of their terms and
until their successors are elected and qualified. The By-laws of the
Company provide that the number of Directors of the Company shall not be
less than three (3) or more than
nine (9), as determined by vote of the Board. The Board has determined
the most effective size of the Board to be five (5), and therefore has
determined to present only one
individual for election at the meeting.
John L. Gunter, if elected, will serve a three year term
expiring in 1999. In the event that the nominee is unable to serve, the
proxies will be voted for a substitute
nominee, if any, to be designated by the Board of Directors, to serve for
the term proposed for the nominee which such substitute would replace. The
Board of Directors has
no reason to believe that the nominee will be unavailable. All Directors
have served continuously since first appointed or elected as a Director.
Directors are elected by a plurality
of the votes present in person or by proxy and entitled to vote at the
meeting.
Principal Director Present
Name and Position Age Occupation Since Term Expires
NOMINEE:
John L. Gunter (1) 59 Chairman of the Board, 1981 1996
Chairman, President and President and
Chief Executive Officer Chief Executive Officer
Dr. Gunter, TELS' founder, has been a Director and President of the Company
since its organization in February, 1981. He was elected Chairman of the
Board on February 9,
1984. Dr. Gunter received a B.S. in physics from Marshall University,
Huntington, West Virginia, and a doctorate in physics from Brigham Young
University, Provo, Utah.
For five years after completing his doctorate, Dr. Gunter was on the
faculty of Rochester Institute of Technology, Rochester, New York, first as
Associate Professor and Director
of Computer Sciences, and later as the Director of Computing Activities and
the Director (Dean) of the College of Computer and Information Sciences and
Technology. Dr. Gunter
has been involved in design and/or management of design activities in the
computer field for over thirty years, first as a high school and college
student working as a computer
programmer for Union Carbide Corporation, then as Factory Engineer, Project
Design Engineer and Project Manager from 1959 to 1965 for RCA, EDP Division
and for North
American Aviation, Space and Information Systems Division. Dr. Gunter also
served as Senior Vice President for Information Systems with Galbraith and
Green, Inc., an insurance
company, during 1974 and 1975. He was a political appointee of Governor
Calvin Rampton for almost five years, serving as the Director of Systems,
Planning and Computing
for the State of Utah from 1975 to 1979. He served as a private consultant
and as General Manager for Business Communications Systems, Inc.,during 1980.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE STOCKHOLDERS
VOTE FOR THE NOMINEE.
INCUMBENT DIRECTORS
Present
Principal Director Term
Name and Position Age Occupation Since Expires
Willard H. Gardner, (1) 70 Retired, Executive Director 1984 1997
Secretary, Director and Information Systems
Chairman of Audit Committee Services, Brigham Young
University
David K. Doyle (2) 66 Retired, U.S. Army, 1988 1998
Director and Chairman of Lieutenant General and
Executive Compensation Management Consultant
Committee
Stephen M. Nelson (3) 47 Executive Vice President and 1991 1997
Director, Executive V.P., Chief Financial Officer
Chief Financial Officer
and Treasurer
Mr. Gardner has been a Director of the Company since
September 5, 1984, and effective January 14, 1989, he took on the additional
responsibility of Corporate
Secretary. From 1963 until 1990, he was employed by Brigham Young University
in various capacities, including as the Executive Director of Information
Systems Services,
and he was an Associate Professor of Computer Science from 1980 to 1990.
In September of 1990, Mr. Gardner moved into semi-retirement and has since
been involved with
several voluntary industry initiatives intended to expand high-capacity data
telecommunications, both nationally and locally. Mr. Gardner served in the
Utah State Legislature
from 1973 to 1985. He was a Founding Member of the Board of Trustees of
the Utah Technology Finance Corporation, served as a member of the Board
of State Lands and
Forestry and was a Founding Member of the Board of Trustees of the Utah
Information Technology Association. Mr. Gardner received a B.S. in physics
from Utah State
University and an M.S. in mathematics from Brigham Young University. Mr.
Gardner's technical accomplishments include development of computer programs
for trajectory
studies in connection with the ABLE project (first moon shot) in 1958, and
of display checkout routines for the APOLLO project in 1962. He also
managed the development
of payroll and accounting computer programs at BYU during the 1960's.
Lieutenant General Doyle, U.S. Army Retired, was appointed
Director of the Company on July 21, 1988, and has served as a director
continuously since that
time. General Doyle spent over 35 years in the military service before
retiring on June 30, 1986. During his last period of service, he
reengineered the Army's automation and
communications services to create a world-wide integrated information
system. Concurrently, he served as the Army's Chief Information Officer
and organized a new corporate
staff to establish policy, and plan, program and budget for the Army's
tactical command and control, and information management organizations. Since
leaving the service, General
Doyle co-founded WELS Research Corporation, a weather information company.
He has served on an information system oversight committee for the
National Academy of
Science, and has consulted on a wide range of information issues for both
commercial and defense industries.
Mr. Nelson was appointed as a Director in June, 1991, and was
elected to serve a three year term at the June, 1994, annual meeting. He
has been involved with
the Company since 1982. From 1982 through 1986, and from 1987 to 1989, he
was an outside consultant. From 1986 through 1987 he served as Chief
Financial Officer. In
February, 1990 he was appointed Chief Financial Officer, Treasurer and
Vice President Finance. In 1993 he was appointed Senior Executive Vice
President and in 1994 he became
a member of the Office of the President. He has been a major force behind
the Company's acquisition initiatives and has been instrumental in
automating the Company's financial
systems. Mr. Nelson is a Certified Public Accountant. He graduated from
the University of Utah in 1974 with a B.S. degree in accounting. From 1974
through 1980 he worked
in public accounting for Tanner & Co. in Salt Lake City, Utah. From
1980 through 1982, Mr. Nelson worked as the Vice President of Finance and
Treasurer for Gem Insurance
Company, in Salt Lake City, Utah. From 1982 through 1989 he was a partner
and owner of Nelson and Holyoak, Certified Public Accountants. Mr. Nelson
is a member of the
American Institute of Certified Public Accountants, the Utah Association
of Certified Public Accountants and also a member of the Institute of
Management Accountants. From
1989 through 1990 he served as president of the Institute of Management
Accountants. He also served on the Board of Directors of the American
Fork Chamber of Commerce
from January 1992 through December 1994.
SPECIAL APPOINTMENT DIRECTOR
Dr. Ming-Tzong Chen was appointed a Director in December, 1995,
to fill a vacancy on the Board of Directors. His term of appointment expires
on June 3,
1996. Dr. Chen received a doctorate in physics from Brigham Young
University, Provo, Utah. Dr. Chen formed Pro Sports USA, Co. in 1992, to
handle the distribution of Fox
Tennis products worldwide. During the last three years, Pro Sports USA,
Co. has produced a patented golf club head design. Currently, Fox golf and
tennis products are
distributed throughout the United States, as well as many European and
Asian countries. In 1990, Dr. Chen founded Chateau Research, Inc., which
designs and manufactures
top quality loud speaker systems. In 1978, Dr. Chen founded Chen's
International Corp. and Galaxy International Corp. ("Galaxy"), to handle
real estate investments, engage
in international trade and explore other business opportunities. In 1979,
under the management of Dr. Chen, Galaxy obtained a major contract with the
Taiwan Power Company,
which resulted in Galaxy becoming the first firm to export coal from the
western U.S. to Taiwan. Galaxy has also been involved in distribution and
sales of Digital Equipment
Corporation (DEC) equipment and from 1980 to 1986, Galaxy was one of the
fastest growing DEC original equipment manufacturers in the United States.
Compensation of Directors - Effective March 1, 1994, non-employee
directors receive a monthly retainer fee of $800, and $1,400 for each
meeting attended
in person. Non-employee directors do not receive fees for telephone
meetings. All outside directors are reimbursed for expenses incurred
in attending meetings plus board fees
as disclosed in Item 10 of Form 10-K. In addition, each non-employee
Director is entitled to receive common stock options pursuant to the
annual automatic, non-discretionary
grant mechanism under the "TELS Corporation 1994 outside Directors Stock
Option Plan" approved by the shareholders in June, 1994. On April 1, 1995,
each outside director
received 15,000 options under the, non-discretionary grant provision of
the plan based upon 1994 year-end results.
In 1995, the Company's Board of Directors held ten meetings
either in person or by telephone. A majority of directors were in
attendance at all of the meetings.
The Board has established two committees, the Budget Audit Committee,
and the Compensation Committee. The members of both committees are
Willard H. Gardner, David K. Doyle, and Ming T. Chen. The principal
functions of the Budget Audit Committee are to recommend engagement of
the Company's independent auditors, to consult with
the Company's auditors concerning the scope of the audit and to review
with them the results of their examination, to approve the services
performed by the independent auditors,
to review and approve any material accounting policy changes affecting the
Company's operating results, and to review the Company's financial control
procedures and personnel.
The Budget Audit Committee held three meetings in 1995. The Compensation
Committee reviews compensation and benefits for the Company's executives
and administers the
grant of stock options under the Company's existing plans. The Compensation
Committee held one meeting during the year. Pursuant to delegated
authority from the Board
of Directors, Mr. Gunter as Chief Executive Officer, determines all salaries
except for the Company's corporate officers.
REMUNERATION OF EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the aggregate cash
compensation paid by the Company for services rendered during the last
three years to the Company's Chief
Executive Officer and to each of the Company's other executive officers
whose annual salary and bonus exceeded $100,000:
Annual Compensation Long Term Compensation
Name and Year Other Annual Restricted Securities Underlying
Principal ended Salary Bonus Compensation Stock Awards Option/SARs
Position 12/31 ($) ($) ($) ($) (#)
John L. Gunter
1995 150,330 4,165 16,756 0 0
President/CEO1994 140,297 6,500 16,756 0 0
1993 103,158 24,092 (1) 112,500 100,000
Stephen M. Nelson
1995 115,385 0 (1) 0 0
Executive VP 1994 113,558 2,500 (1) 0 0
and CFO 1993 74,521 7,000 (1) 90,000 77,500
(1) Amounts are less than $50,000 or ten percent (10%) of compensation.
Amounts for
incidental benefits, such as personal use of Company
automobiles, which accrue to certain
officers and which, in the opinion of management, are job-related and
appropriate in connection with
the conduct of the Company's business affairs, are included in the above
amounts.
Such benefits are not in excess of $50,000 for any individual.
2) The amounts reflected above do not include indebtedness of
John L. Gunter to the Company in the aggregate amount of $ 76,623. For
information regarding such
indebtedness, see Certain Transactions.
The following table provides information with respect to stock
options granted during the
Company's last fiscal year to the persons named in the Summary Compensation
Table above:
% of Total
Options
Number of Securities Granted to Exercise or
Underlying Options Employees in Base Price Expiration
Name Granted Fiscal Year ($/sh) Date
John L. Gunter None N/A N/A N/A
Stephen M. Nelson None N/A N/A N/A
Aggregated Option/SAR Exercises in Year Ended December 31, 1995, and
Option/SAR Values at
December 31, 1995.
The following table features information concerning the exercise of
options and/or SARs during
the last fiscal year by persons named in the Summary Compensation Table,
the number of unexercised
options and/or SARs held by such persons at the end of the last fiscal year
and the value of such
unexercised options and/or SARs as of such date.
Number of Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs
12/31/95 (#) 12/31/95 ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
John L. Gunter None N/A 100,000 $ 82,800
Stephen M. Nelson None N/A 82,500 $ 68,310
STOCK OPTION AND STOCK BONUS PLANS
1. Executive Stock Bonus Plan - In January, 1984, the Company's Board
of Directors adopted the
1984 Executive Stock Bonus Plan (the "Stock Bonus Plan"). The Stock Bonus
Plan provides for the
Board of Directors or a committee thereof to grant shares of the Company's
Common Stock, or the
right to receive such shares, to officers and other members of the executive
or general management
of the Company, excluding such individuals who hold 10% or more of the
Company's Common Stock.
Shares or rights to shares will be granted without other payment therefore,
as additional compensation
for services rendered to the Company. The Board of Directors, or a duly
appointed committee thereof,
has the power to determine the persons to whom bonus awards will be made,
the number of shares
or rights to be granted, and the terms and conditions under which such
grants will be made, including
issuance in installments, forfeiture provisions or other restrictions. The
Company has reserved 537,500
of the authorized but unissued shares of the Company's Common Stock for
grant under the Stock
Bonus Plan. The total shares issued and outstanding under this plan are
497,625 at December 31, 1995.
No shares were issued under this plan in 1995.
2. TELS Corporation Stock Option and Incentive Plan for Officers and
Key Employees of the
Company and Its Subsidiaries - This Plan, approved by shareholders on
June 7, 1993, replaced the
1984 Incentive Stock Option and the 1984 Non-Qualified stock Option Plans
which expired. This
newer plan permits the granting of incentive stock options, non-qualified
stock options, stock
appreciation rights, stock performance shares, dividend equivalents and
restricted stock. The Board
of Directors believes that the Plan will assist TELS in recruiting and
retaining outstanding individuals
as officers and members of management by enabling such persons to
participate in the long-term
growth of TELS and by providing additional incentive to increase their
efforts in promoting the
financial success of the Company and its subsidiaries. On June 6, 1994,
the shareholders voted to
increase the number of shares reserved under this plan to a maximum of
2,000,000 shares of stock that
may be made subject to awards, as defined. In 1995, the Company granted
120,000 options and 10,974
shares under this plan and recorded compensation expense of $12,767.
3. TELS Corporation Board of Directors Stock Bonus and Option Plan -
On June 6, 1994, the
shareholders of the Company approved the Outside Directors Plan. This
Directors Plan provides for
the grant of nonstatutory stock options to non-employee Directors of the
Company ("Outside
Directors") pursuant to an automatic, non-discretionary grant mechanism.
The primary purposes of
the Director Plan are to enhance the Company's ability to attract and
retain the services of experienced
and knowledgeable individuals to serve on the Board of Directors of the
Company (the "Board"), to
encourage ownership in the Company by the Directors of the Company, and to
provide the
Company's Directors with reward opportunities based upon the success of
the Company. The
shareholders have approved 500,000 shares to be reserved for this plan.
In April 1995, each outside
director received 15,000 options under the automatic, non-discretionary
grant provision of the plan.
4. Employees' Profit Sharing Plan - The Company adopted an employees'
401-K profit sharing plan,
effective January 1, 1988, covering substantially all employees who have
attained age 21 with service
in excess of six months. The plan provides for Company contributions at
the discretion of the Board
of Directors. Company contributions begin partial vesting after the first
full year in which eligible
employees complete 501 hours of service, with full vesting occurring after
seven years. During the
year ended December 31, 1995, the Company contributed $15,000 to the plan.
CERTAIN TRANSACTIONS
At December 31, 1995, Dr. Gunter is indebted to the Company in the
amount of $39,302 plus
accrued interest, evidenced by a promissory note dated March 25, 1986, and
bearing interest at nine
percent (9%), and an employee receivable of $37,321 for expenses.
OTHER MATTERS
The Board of Directors knows of no other matters to be acted upon
at the meeting. However,
if any other matter properly comes before the meeting, it is intended that
the persons voting the
proxies will vote them in accordance with their best judgment.
TELS Corporation
Willard H. Gardner, Secretary
