1
TELS Corporation
705 East Main Street
American Fork, Utah 84003
NOTICE OF 1998 ANNUAL MEETING OF SHAREHOLDERS
To be Held June 1, 1998
To the Shareholders of TELS Corporation,
Notice is hereby given that the Annual Meeting of the Shareholders of TELS
Corporation (the "Company"), a Utah corporation, will be held on June 1, 1998,
at 2:00 P.M. MDT time, at the Company's principal executive offices located at
705 East Main Street, American Fork, Utah 84003 for the following purposes:
1. To elect two directors to serve until the 2001 Annual Meeting of
Shareholders, and;
2. To transact such other business as may properly come before the meeting or
any adjournment or adjournments thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Requests for additional Proxy Statements, Notices of Annual Meeting and
Annual Reports can be obtained from TELS Corporation, 705 East Main Street,
American Fork, Utah 84003.
The Board of Directors has fixed the close of business on April 3, 1998 as
the record date (the "Record Date") for the determination of shareholders
entitled to notice of and to vote at this Annual Meeting. Only holders of Common
Stock at the close of business on the Record Date will be entitled to vote at
the Annual Meeting and any adjournment(s) thereof.
By Order of the Board of Directors
Willard H. Gardner, Secretary
American Fork, Utah
Dated: May 6, 1998
- ------------------------------------
THE VOTE OF EACH SHAREHOLDER WILL BE IMPORTANT AT THIS MEETING. YOU ARE
URGED TO COMPLETE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED
POSTAGE PAID ENVELOPE AS SOON AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE
ANNUAL MEETING. SUCH ACTION WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON SHOULD
YOU CHOOSE TO ATTEND THE MEETING. TELS Corporation
<PAGE>
705 East Main Street
American Fork, Utah 84003
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
To be held on June 1, 1998
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 on June
1, 1998, at 2:00 P.M. MDT, and any adjournments thereof, for the purpose set
forth herein and in the accompanying Notice of Annual Meeting of Shareholders.
The Annual Meeting of Shareholders will be held at 705 East Main Street,
American Fork, Utah 84003 (see enclosed map).
These Proxy solicitation materials were mailed on or about May 6, 1998 to
all shareholders entitled to vote at the meeting. The cost of soliciting Proxies
will be borne by the Company. These costs will include the expenses of preparing
and mailing the Proxy materials for the Annual Meeting and reimbursement paid to
brokerage firms and others for their expenses incurred in forwarding
solicitation material regarding the Annual Meeting to beneficial owners of the
Company's Common Stock. The Company may conduct further solicitation of Proxies
by telephone, facsimile, mail or personal contact by certain of its directors,
officers and employees, none of whom will receive additional compensation for
assisting with the solicitation.
VOTING OF PROXY
Proxies shall be voted in accordance with the directions of the
Shareholders and will be voted by John L. Gunter, Chief Executive Officer of the
Company, and Willard H. Gardner, Secretary of the Company. Unless otherwise
directed, Proxies will be voted FOR the persons named herein as management's
nominees for directors of the Company. Management knows of no other matter or
motion to be presented at the meeting. If any other matter or motion should be
presented at the meeting upon which a vote may be taken, it is the intention of
the persons named in the accompanying form of Proxy to vote such Proxy in
accordance with their judgment, including any matter or motion dealing with the
conduct of the meeting.
REVOCABILITY OF PROXIES
Any stockholder giving a Proxy may revoke it at any time before it is
exercised by delivering written notice of revocation to the Company, by
delivering a duly executed Proxy bearing a later date, or by attending the
meeting and voting in person.
REQUIRED VOTE
On April 3, 1998 (the "Record Date"), the Company had issued and
outstanding 3,891,819 shares of Common Stock, $.02 par value ("Common Stock")
and there were no shares of Preferred Stock outstanding.. Each share of Common
Stock is entitled to one vote. 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 shares entitled to vote shall constitute a quorum for the transaction of
business. All elections of directors will be decided by a plurality of the votes
cast at the meeting in respect thereof. Present management, which beneficially
holds approximately forty percent (40%) of the aggregate of the Common Stock,
has indicated its intention to vote in favor of all directors. If no voting
direction is indicated on the Proxy Card, the shares will be considered voted
FOR the election of the nominees for director.
<PAGE>
PROPOSAL ONE
------------
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes whose terms expire at
successive annual meetings. Two directors will be elected at the Annual Meeting
to serve for a three year term expiring at the Company's Annual Meting in the
year 2001. Each nominee elected as a director will continue in office until
their respective successors are duly elected and qualified.
The Board of Directors has proposed the following nominees for election as
Directors at the Annual Meeting: David K. Doyle and Ming-Tzong Chen. Unless
otherwise instructed, the proxy holders will vote for the two nominees proposed.
In the event a 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 replaced. The Board of Directors has no
reason to believe that any nominee will be unavailable. All Directors have
served continuously since first elected as a Director. Directors are elected by
a plurality of the votes present in person or represented by proxy and entitled
to vote at the meeting.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
THE NOMINEES LISTED ABOVE.
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is the principal occupation of, and certain other
information regarding, such nominees and other Directors whose terms of office
will continue after the Annual Meeting.
Director Nominees - Terms ending in 2001
David K. Doyle, Director, Chairman Executive Compensation Committee, age 68
Lieutenant General David K. 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 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, 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 is a
Director for Global Information Systems Technology, Inc., a computer based
training and development company. He has also 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.
Dr. Ming-Tzong Chen, Director, age 57
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,
1997. 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) from 1980 to 1986.
<PAGE>
Directors Continuing in Office - Terms ending in 1999
Dr. John L. Gunter, Chairman of the Board, Chief Executive Officer, age 61
Dr. Gunter, TELS' founder, has been a Director and CEO of the Company
since its organization in February, 1981. He was elected Chairman of the Board
on February 9, 1984. From November, 1980 to February, 1981, he was involved in
activities leading to the organization of the Company. 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.
Directors Continuing in Office - Terms ending in 2000
Willard H. Gardner, Director, Secretary, Chairman Budget Audit Committee, age 72
Willard H. 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 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 decade of 1960.
Stephen M. Nelson, Director, President and Treasurer, age 49
Stephen M. 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. In 1994 he became a member of the Office of the President, and
in 1996 he was appointed President and Treasurer. 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. Mr. Nelson is a member of the American Institute of Certified
Public Accountants and the Utah Association of Certified Public Accountants and
is 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 1994, and is a member of TEC, an international association
of CEO's.
<PAGE>
Executive Officers
R. James Taylor, Vice President, Chief Technical Officer, General Manager HTI
and MICROMEGA, age 40
R. James Taylor joined the Company as a software programmer on January
13, 1986. In 1987, he was appointed manager of Research and Development. In
1988, he assumed the additional responsibilities of managing Production and
Customer Service. In September of 1989, he was appointed Vice President of
Operations, and in 1991 he was appointed General Manager of MICROMEGA
Corporation. In 1994, he was appointed Vice President of TELS Corporation and
became a member of the Office of the President. In 1996, he was appointed
Executive Vice President and General Manager of HTI. He has also been a major
force behind the Company's acquisition initiatives and has been instrumental in
automating the Company's production systems. In addition, he was appointed Chief
Technology Officer for the Corporation. Mr. Taylor has been instrumental in the
planning and development of several of the Company's new products. Additionally,
Mr. Taylor has designed and implemented several of the automated processes for
the Company and its subsidiaries. Mr. Taylor graduated from the University of
Utah in 1985 with a B.S. degree in Physiological Psychology and was president of
Psi Chi, a national honor society. He was the founder and general manager of a
printing company from 1974 to 1976. He was also the co-founder and general
manager of a computer consulting company from 1980 to 1982. From 1982 to 1985 he
was the manager of Kay-Bee Toys, in Salt Lake City, Utah. From 1985 to 1986 he
was the manager of Follett's College Stores, in Salt Lake City, Utah.
Sean M. Gunter, General Manager TEL electronics, inc., age 32
Sean M. Gunter joined the Company on August 21, 1989 as a customer
service technician where he gained extensive product knowledge and customer
support experience. Mr. Gunter was appointed as a Sales Representative in June,
1991. Mr. Gunter has served in several sales positions with the Company
including Upgrade Sales Manager in 1992, Installed Base Sales Manager in 1993,
Inner Circle Sales Manager in 1994, and Director of National Accounts in 1995.
He was appointed General Manager of TEL electronics, inc. on February 19, 1996.
Mr. Gunter's experience coordinating the sales program and managing the sales
team efforts for TEL electronics, inc. has been instrumental in the organization
and maintenance of the Company's current revenue levels. In 1997 he was also
selected to receive the 1996 President's Award.
Melody J. Rasmussen, Chief Financial Officer, Controller, age 37
Melody J. Rasmussen joined the Company in April, 1997, as the Chief
Financial Officer and Controller. Prior to joining TELS Corporation, Ms.
Rasmussen was the Controller from December 1992 until April 1997 for Woodside
Homes Corporation in Salt Lake City, Utah. Ms. Rasmussen is a CPA, has several
years of tax consulting experience, and since February, 1988, has been an
Instructor for Conviser, Duffy & Miller CPA Exam Review Course. Ms. Rasmussen is
also a Registered Nurse. She graduated from Brigham Young University in August,
1985, where she received a Masters Degree in Accounting, Taxation, and a
Bachelor of Science Degree in Accounting, and from January, 1985 to August, 1985
was the Vice President for Beta Alpha PSI Fraternity, a National Accounting
Fraternity.
<PAGE>
BOARD MEETINGS AND COMMITTEES
During the fiscal year ended December 31, 1997, the Company's Board of
Directors held fourteen meetings either in person or by telephone and also
executed various resolutions and written actions in lieu of meeting. 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 two meetings in 1997.
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 four meetings during
the year. Pursuant to delegated authority from the Board of Directors, Mr.
Nelson as President, determines all salaries except for the Company's corporate
officers.
COMPENSATION OF DIRECTORS
Directors who are Company employees receive no additional or special
remuneration for serving as directors. Effective March 1, 1997, non-employee
directors receive a monthly retainer fee of $800, and $600 for each meeting
attended in person. Non-employee directors do not receive fees for telephone
meetings. 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 March 3, 1997, each outside
director received 5,000 options under the non-discretionary grant provision of
the plan.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT
AND CHANGE OF CONTROL ARRANGEMENTS
In March, 1994, the Board of Directors authorized a form of employment
contract for Dr. John L. Gunter, CEO, and Mr. Stephen M. Nelson, President and
Treasurer, allowing for base annual compensation of $150,000 and $115,000,
respectively. The contract is for a term of three years beginning on March 1,
1994, automatically renewable on December of each year, unless notice is
properly given by the Company or the executive. The contract allows for a
severance agreement which provides that: (a) if termination occurs for reasons
other than death, disability, or cause, the executive shall receive his
annualized base salary and other benefits, throughout the remaining term of the
agreement, and (b) if termination occurs by the Company or the executive, due to
a change in control, the executive will be entitled to receive an amount equal
to two hundred fifty percent of the amount includable in the gross income of the
executive during the preceding one year period ending on the executive's
termination date.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of the Company's Common Stock, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. To the Company's
knowledge, based solely on information furnished to the Company and written
representations that no other reports were required, during the last fiscal year
all applicable Section 16(a) filing requirements were met.
<PAGE>
EXECUTIVE OFFICER COMPENSATION
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 $100,000:
<TABLE>
<CAPTION>
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
-------------------- ---------- ----------
Securities All
Name and Year Other Annual Restricted Underlying LTIP Other
Principal ended Salary Bonus Compensation Stock Awards Option/SARs Payouts Compensation
Position 12/31 ($) ($) ($) ($) (#) ($) ($)
- -------- ----- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
John L. Gunter (2) 1997 150,330 4,100 18,341 0 0 0 0
CEO ................... 1996 150,330 4,100 18,341 0 0 0 0
1995 150,330 4,165 16,756 0 0 0 0
Stephen M. Nelson ..... 1997 115,253 0 (1) 0 0 0 0
President ............. 1996 115,253 0 (1) 0 0 0 0
1995 115,385 0 (1) 0 0 0 0
</TABLE>
(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 $ 71,959. For
information regarding such indebtedness, see Certain Transactions.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information with respect to stock options
granted during the Company's last fiscal year to the named Executive Officers.
No stock appreciation rights (SAR's) were granted in 1997:
% of Total
Options/SAR's
Number of Securities Granted to Exercise or
Underlying Options Employees in Base Price Expiration
Name Granted Fiscal Year ($/sh) Date
- ---- ------- ----------- ------ ----
John L. Gunter 0 - - -
Stephen M. Nelson 0 - - -
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION/SAR VALUES
The following sets forth information concerning the exercise of stock
options and/or SARs during the last fiscal year by persons named in the Summary
Compensation Table, the number of unexercised options and/or SARs held by the
named Executive Officers and lists the value of their unexercised options at
December 31, 1997.
No. of Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs
FY-End (#) FY-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
- ---- --------------- ------------ ------------- -------------
John L. Gunter 0 - 95,000/10,000 $ 0/0
Stephen M. Nelson 0 - 82,000/15,500 $ 0/0
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of April 3, 1998, (i) by each person
who is known by the Company to own beneficially more than five percent of the
Company's outstanding shares of Common Stock, (ii) each of the Company's
Directors, (iii) each of the Executive Officers, and (iv) all of the Directors
and Executive Officers of the Company as a group.
Shares of Common Percent of
Stock Beneficially Total Voting
Name and Address of Beneficial Owner Owned Shares
- ------------------------------------ ----- ------
Dr. John L. Gunter,
Director & Executive Officer (1), (2) .......... 561,266 14%
705 East Main Street
American Fork, Utah 84003
P. Diane Gunter, Principal Shareholder (1) ...... 196,600 5%
705 East Main Street
American Fork, Utah 84003
Willard H. Gardner, Director (3) ................ 164,251 4%
1495 Oak Lane
Provo, Utah 84057
David K. Doyle, Director (4) .................... 156,051 4%
8809 Bell Mountain Drive
Austin, Texas 78730
Stephen M. Nelson, Director & Executive Officer (5) 292,166 8%
705 East Main Street
American Fork, Utah 84003
R. James Taylor, Executive Officer (6) ........... 108,373 3%
705 East Main Street
American Fork, Utah 84003
Sean Gunter, Executive Officer (1), (7) ........... 60,666 2%
705 East Main Street
American Fork, Utah 84003
Ming-T. Chen, Director ........................... 1,666 *
705 East Main Street
American Fork, Utah 84003
Melody Rasmussen, Executive Officer .............. 3,500 *
705 East Main Street
American Fork, Utah 84003
Mr. & Mrs. John A. Moses, Principal Shareholders .. 195,600 5%
2715 S. Eldorado
Stockton, California 95206
All Directors and Officers as a Group (9 persons) 1,740,139 40%
* Represents less than 1% of the total issued and outstanding shares of Common
Stock.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, cont.
(1) Dr. and Mrs. Gunter and Sean M. Gunter may be deemed to have control of the
Company by virtue of their combined ownership of 17% of the Company's
outstanding voting shares.
(2) Includes voting securities and 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 also includes 101,666 shares for Mr. Gunter
which may be acquired by such Director or Executive Officer pursuant to stock
options that are or will become exercisable within 60 days.
(3) Includes voting securities and 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 also includes 130,001 shares for Mr. Gardner
which may be acquired by such Director or Executive Officer pursuant to stock
options that are or will become exercisable within 60 days.
(4) Includes voting securities and 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 also includes 130,001 shares for Mr. Doyle which
may be acquired by such Director or Executive Officer pursuant to stock options
that are or will become exercisable within 60 days.
(5) Includes voting securities and 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 also includes 84,166 shares for Mr. Nelson which
may be acquired by such Director or Executive Officer pursuant to stock options
that are or will become exercisable within 60 days.
(6) Includes voting securities and 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 also includes 99,499 shares for Mr. Taylor which
may be acquired by such Director or Executive Officer pursuant to stock options
that are or will become exercisable within 60 days.
(7) Includes voting securities and 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 also includes 56,666 shares for Mr. Sean Gunter
which may be acquired by such Director or Executive Officer pursuant to stock
options that are or will become exercisable within 60 days.
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.
<PAGE>
STOCK OPTION AND STOCK BONUS PLANS
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 537,500 at December 31, 1997. No shares were
issued under this plan in 1997.
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 1997, the
Company granted 64,000 options under this plan.
TELS Corporation 1994 Outside Directors Stock Option Plan
On June 6, 1994, the shareholders of the Company approved the Outside
Directors Plan. This Director's Plan provides for the grant of non-statutory
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 March
1997, each outside director received 5,000 options under the automatic,
non-discretionary grant provision of the plan.
401(k) PLAN
The Company has a defined contribution 401(k) salary reduction plan
("401(k) Plan"). Company employees who are at least 21 years of age are eligible
to participate in the 401(k) Plan after six months of service. Eligible
employees become participants in the 401(k) Plan on the earlier of the first day
of the plan year or the first day of the seventh month of the plan year
coinciding with or next following the date on which the employee meets the
401(k) Plan's eligibility requirements. By electing to defer a portion of his or
her compensation, a participating employee may make pre-tax contributions to the
401(k) Plan, subject to limitations under the Internal Revenue Code of 1986, as
amended. The Company may make matching contributions to the 401(k) Plan at the
discretion of its Board of Directors. Participant contributions and earnings are
100% vested, while Company matching contributions vest in increments over a
seven-year period. Participants may alter their contribution amounts at the
first of each month. The Company pays all expenses associated with
administration of the 401(k) Plan.
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
At December 31, 1997, 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
$32,657 for expenses.
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, 1998. 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, 1997. 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 or
about May 6, 1998. Any shareholder desiring to submit a proposal for
consideration at the next Annual Meeting of Shareholders in 1999 should transmit
such proposal(s) to the offices of the Company on or before January 4, 1999.
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.
ADDITIONAL INFORMATION
TELS Corporation will provide without charge to each person solicited,
upon oral or written request of any such person, a copy of the Company's Annual
Report on Form 10-KSB, including the consolidated financial statements and the
financial statement schedules required to be filed with the Securities and
Exchange Commission pursuant to Rule 13a-1 under the Securities Exchange Act of
1934. Direct any such correspondence to the Secretary of the Company.
TELS Corporation
Willard H. Gardner, Secretary
<PAGE>
APPENDIX
PROXY CARD
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF TELS CORPORATION
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JUNE 1, 1998
The undersigned hereby appoints John L. Gunter and Willard H. Gardner, and each
of them the attorney and Proxy of the undersigned, with full power of
substitution, to vote all of the Common Stock of TELS Corporation which the
undersigned is entitled to vote at the Annual Meeting of Shareholders to be held
at TELS Corporation, 705 East Main Street, American Fork, Utah 84003 on June 1,
1998, at 2:00 p.m., MDT, and at any time all adjournments thereof with all of
the powers the undersigned would possess if personally present, as follows
below, and on the reverse side:
To vote in accordance with the recommendation of the board of directors, just
sign and date this proxy. No boxes need be checked.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder, unless otherwise directed, the shares
represented by this proxy will be voted (1) for the election of directors
nominated by the Board of Directors, (2) in the discretion of the persons named
in this Proxy, upon such other matters as may properly come before the meeting.
Please sign exactly as name appears in this proxy. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Dated:-------------------,1998 Signature--------------------------------------
Signature if held jointly ---------------------------------------------
Please mark, sign, date and return the proxy card promptly using the enclosed
envelope.
TELS Corporation If you expect to attend the meeting, please
705 East Main Street check here [ ]
American Fork, UT 84003
ELECTION OF DIRECTOR(S)
David K. Doyle Ming-Tzong Chen
[ ] FOR the nominee listed [ ] FOR the nominee listed
[ ] WITHHOLD AUTHORITY [ ] WITHHOLD AUTHORITY
to vote for the listed nominee. to vote for the listed nominee.
