<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
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 Section 240.14a-11(c) or Section
240.14a-12
NETWORK LONG DISTANCE, 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):
/ / No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
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>
NETWORK LONG DISTANCE, INC.
11817 Canon Boulevard, Suite 600
Newport News, Virginia 23606
(757) 873-1040
--------------------------------
PROXY STATEMENT
--------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held September 30, 1997
TO THE SHAREHOLDERS OF NETWORK LONG DISTANCE, INC.
NOTICE HEREBY IS GIVEN that the Annual Meeting of Shareholders of Network
Long Distance, Inc., a Delaware corporation ("Network") will be held at the
Company's offices, 11817 Canon Boulevard, Suite 600, Newport News, Virginia,
on September 30, 1997, at 10:00 a.m., Eastern Standard Time, and at any and
all adjournments thereof, for the purpose of considering and acting upon the
following matters:
1. To elect eight (8) Directors of the Company;
2. To transact such other business as properly may come before the
meeting or any adjournment thereof.
Only holders of the voting $.0001 par value common stock of the Company of
record at the close of business on August 31, 1997 will be entitled to notice of
and to vote at the Meeting or at any adjournment or adjournments thereof.
All shareholders, whether or not they expect to attend the Annual Meeting of
Shareholders in person, are urged to sign and date the enclosed Proxy and return
it promptly in the enclosed postage-paid envelope which requires no additional
postage if mailed in the United States. The giving of a proxy will not affect
your right to vote in person if you attend the Meeting.
A copy of the Company's Annual Report on Form 10-K for the year ended March 31,
1997 accompanies this Notice of Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS.
JOHN V. LEAF
SECRETARY
Newport News, Virginia
August 31, 1997
<PAGE>
Network Long Distance, Inc.
11817 Canon Boulevard, Suite 600
Newport News, Virginia 23606
(757) 873-1040
---------------
PROXY STATEMENT
---------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 30, 1997
GENERAL INFORMATION
The enclosed Proxy is solicited by and on behalf of the Board of Directors of
Network Long Distance, Inc., a Delaware corporation (the "Company"), for use
at the Company's Annual Meeting of Shareholders to be held at the Company's
offices, 11817 Canon Boulevard, Suite 600, Newport News, Virginia, on the
30th day of September 1997, at 10:00 a.m., Eastern Standard Time, and at any
adjournment thereof (the "Meeting"). It is anticipated that this Proxy
Statement and the accompanying Proxy will be mailed to the Company's
shareholders on or about August 31, 1997.
Any person signing and returning the enclosed Proxy may revoke it at any time
before it is voted by giving written notice of such revocation to the
Company, or by voting in person at the Meeting. The expense of soliciting
proxies, including the cost of preparing, assembling and mailing this proxy
material to shareholders, will be borne by the Company. It is anticipated
that solicitations of proxies for the Meeting will be made only by use of the
mail; however, the Company may use the services of its Directors, Officers
and employees to solicit proxies personally or by telephone without
additional salary or compensation to them. Brokerage houses, custodians,
nominees and fiduciaries will be requested to forward the proxy soliciting
materials to the beneficial owners of the Company's shares held of record by
such persons, and the Company will reimburse such persons for their
reasonable out-of-pocket expenses incurred by them.
All shares represented by valid proxies will be voted in accordance therewith
at the Meeting. Shares not voting as a result of a proxy marked abstain will
be counted in order to determine whether or not a quorum has been achieved at
the Meeting.
The Company's Annual Report on Form 10-K for the fiscal year ended March 31,
1997 is being mailed simultaneously to the Company's shareholders, but does
not constitute part of these proxy soliciting materials.
SHARES OUTSTANDING AND VOTING RIGHTS
All voting rights are vested exclusively in the holders of the Company's
$.0001 par value voting common stock, with each share entitled to one vote.
Only shareholders of record at the close of business on August 31, 1997 are
entitled to notice of and to vote at the Meeting or any adjournment thereof.
On July 31, 1997 the Company had 13,157,500 shares of its
1
<PAGE>
$.0001 par value voting common stock outstanding, each of which is entitled
to one vote on all matters to be voted upon at the Meeting, including the
election of Directors. No fractional shares are presently outstanding.
A majority of the Company's outstanding voting common stock represented in
person or by proxy shall constitute a quorum at the Meeting. The affirmative
vote of a plurality of the votes cast, providing a quorum is present, is
necessary to elect the Directors. Cumulative voting in the election of
Directors is not permitted. Abstentions and broker non-votes will not affect
the outcome of the election of directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND OF MANAGEMENT
The following table presents information with respect to shares of the
Company's Common Stock beneficially owned by the Company's Directors and
Officers and by all Directors and Executive Officers of the Company as a
group, and by all other persons known by management to own beneficially 5
percent (5%) or more of the Company's Common Stock as of July 31, 1997.
Unless otherwise indicated, each of the shareholders has sole voting or
investment power with respect to the shares beneficially owned.
2
<PAGE>
<TABLE>
Amount and Percent of
Name and Address Nature of Beneficial Class Owned
of Beneficial Owner Ownership Beneficially
- ------------------- --------- ------------
<S> <C> <C>
John D. Crawford (1) 3,065,768 23.028%
2425 Manion Drive
Williamsburg, VA 23185
Timothy A. Barton (2) 505,556 3.861%
5319 W. 101st Terrace
Overland Park, KS 66207
Thomas G. Keefe (3) 134,524 1.027%
102 Lake Herrin Court
Yorktown, VA 23693
John V. Leaf (4) 1,555,239 11.682%
Leaf Family Partners Ltd.
P.O. Box 30055
Winona, MN 55987
Russell J. Page (5) 225,000 1.690%
822 Queens Road
Charlotte, NC 28207
Albert A. Woodward (6) 10,700 *
2000 Midwest Plaza Bldg. W, 801 Nicollet Mall
Minneapolis, MN 55402
Timothy J. Sledz (7) 485,333 3.646%
1861 Paddington Avenue
Naperville, IL 60563
Leon L. Nowalsky (8) 265,000 1.991%
826 Barracks Street
New Orleans, LA 70116
Michael M. Ross (9) 601,691 4.520%
13929 Woodland Ridge
Baton Rouge, LA 70816
O. A. Friend TTEE 1993 Friend FA TR 1,555,239 11.682%
77-740 Seminole
Indian Wells, CA 92260
All Directors and Officers 8,889,606 67.891%
as a Group (10 Persons)
*Less than 1%
</TABLE>
(1) Includes 55,319 shares of the Company's Common Stock held in escrow related
to the Eastern Telecom International ("Eastern") merger.
(2) Includes options to purchase 50,000 shares of the Company's Common Stock,
exercisable within the next 60 days.
(3) Includes options to purchase 30,000 shares of the Company's Common Stock,
exercisable within the next 60 days and 1,887 shares of the Company's
Common Stock held in escrow related to the Eastern merger.
(4) Mr. Leaf is an indirect beneficial owner of 1,555,239 shares of Common
Stock owned by Leaf Family Partners Ltd. by virtue of Mr. Leaf being
General Partner of Leaf Family Partners, Ltd.
3
<PAGE>
(5) Includes options to purchase 225,000 shares of the Company's Common Stock,
exercisable within the next 60 days.
(6) Includes options to purchase 10,000 shares of the Company's Common Stock,
exercisable within the next 60 days.
(7) Includes 370,233 shares of the Company's Common Stock owned by Value Tel,
Inc. of which Mr. Sledz is an officer and director.
(8) Includes options to purchase 225,000 shares of the Company's Common Stock,
exercisable within the next 60 days.
(9) Includes 313,344 shares of the Company's Common Stock held pursuant to an
Escrow Agreement. See Transactions with Management on page 12.
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
Tenure as Executive Officer
Name Age Position or Director
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
John D. Crawford 43 Chairman, Chief Executive Officer From May 7, 1997
and Director to date
- -------------------------------------------------------------------------------------------------------
Timothy A. Barton 31 President and Director Director From November 15, 1996
to date
President From January 7, 1997
to date
- -------------------------------------------------------------------------------------------------------
Thomas G. Keefe 47 Chief Financial Officer, Treasurer From May 7, 1997
and Director to date
- -------------------------------------------------------------------------------------------------------
John V. Leaf 48 Secretary and Director From May 19, 1997
to date
- -------------------------------------------------------------------------------------------------------
Russell J. Page 54 Director From October 26, 1995
to date
- -------------------------------------------------------------------------------------------------------
Leon L. Nowalsky 35 Director From May 24, 1995
to date
- -------------------------------------------------------------------------------------------------------
Albert A. Woodward 56 Director From May 19, 1997
to date
- -------------------------------------------------------------------------------------------------------
Timothy J. Sledz 28 Director From October 31, 1995
to date
- -------------------------------------------------------------------------------------------------------
Michael M. Ross 40 Director From December 19, 1990
to date
- -------------------------------------------------------------------------------------------------------
</TABLE>
ELECTION OF DIRECTORS
The Bylaws presently provide for a Board of Directors of not less than three
(3) members and not more than eleven (11) members. The current number of
Directors of the Company has been fixed at nine (9) by the Company's Board of
Directors. The Company has one (1) non voting advisor to the Board of
Directors who attends all meetings.
The Company's Board of Directors is divided into three classes. The term of
the initial Class A directors expires at the annual shareholders' meeting for
1999, the term of the initial Class B directors expires at the annual
shareholders' meeting for 1998, and the term of the initial Class C directors
expires at the annual shareholders' meeting for 2000. At each annual
shareholders' meeting beginning with the annual shareholders' meeting for
1998, directors elected to succeed the directors whose terms expire at such
meeting are elected for a full three-year term.
4
<PAGE>
The Company's Board of Directors recommends the election of Directors of the
eight (8) nominees listed below, in the Class and for the term indicated, to
hold office until the Annual Meeting of Shareholders in the year indicated
and until their successors are elected and qualified or until their earlier
death, resignation or removal.
The persons named as "proxies" in the enclosed form of Proxy, who have been
designated by Management, intend to vote for the eight (8) nominees for
election as Directors unless otherwise instructed in such proxy. If at the
time of the Meeting, any of the nominees named below should be unable to
serve, which event is not expected to occur, the discretionary authority
provided in the Proxy will be exercised to vote for such substitute nominee
and nominees, if any, as shall be designated by the Board of Directors.
NOMINEES
The following table sets forth the name and age of each nominee for Director
indicating the period during which he has served as such, and the class and
term for which he has been nominated:
YEAR
NAME AGE FIRST DIRECTOR
- ---- --- --------------
CLASS A NOMINEES - TERMS EXPIRING AT THE
ANNUAL SHAREHOLDERS MEETING IN 1999
-----------------------------------------
Leon L. Nowalsky 35 1995
Russell J. Page 54 1995
Timothy A. Barton 31 1996
CLASS B NOMINEES - TERMS EXPIRING AT THE
ANNUAL SHAREHOLDERS MEETING IN 1998
-----------------------------------------
Timothy J. Sledz 28 1995
Albert A. Woodward 56 1997
CLASS C NOMINEES - TERMS EXPIRING AT THE
ANNUAL SHAREHOLDERS MEETING IN 2000
-----------------------------------------
John D. Crawford 43 1997
John V. Leaf 48 1997
Thomas G. Keefe 47 1997
BUSINESS EXPERIENCE OF DIRECTORS AND EXECUTIVE OFFICERS
JOHN D. CRAWFORD
Director, Chairman and Chief Executive Officer
Mr. Crawford was appointed Chief Executive Officer and Chairman of the Board
of Network in May, 1997 after the company he founded, Eastern, was acquired
by Network. He brings to Network the experience and knowledge of more than
two decades of entrepreneurship. Mr. Crawford started Eastern in 1987 as a
small pay phone company with fewer than 10 phones. Within two years, Eastern
had grown to the largest independent pay phone concern in southeast Virginia.
To further expand the enterprise, Mr. Crawford began supplying long
5
<PAGE>
distance operator services to hotels nationwide in 1989. In 1993, he
introduced 1+ long distance services primarily to businesses, acquired
switching facilities and sold the maturing pay phone business in 1994. He
rapidly developed and brought to market a broad array of telecommunications
products, including paging, private line and internet services. Under Mr.
Crawford's leadership, Eastern's revenue doubled every year since its
inception, and by the time of its acquisition was generating an annual
revenue run rate of over $26 million.
TIMOTHY A. BARTON
Director and President
Mr. Barton was named President of Network in January, 1997. He became
responsible for the Company's mergers and acquisitions program and quickly
completed two sizable mergers, Eastern and National Teleservice, Inc.
("NTI"). In addition to mergers and acquisitions, he is also responsible for
legal and regulatory matters, business development, and general
administrative functions. Previously he was president and CEO of United Wats,
Inc. ("UWI"), a nationwide long distance reseller based in Kansas City,
Missouri. Under Mr. Barton's leadership, UWI grew from under $500,000 in
revenues in 1992 to more than $20,000,000 in annualized revenues when it was
merged into Network in November 1996. Mr. Barton holds a bachelors degree
from the University of Kansas and a masters degree from Louisiana State
University.
JOHN V. LEAF
Director and Secretary
Mr. Leaf was one of the founders of NTI and has served as President and Chief
Executive Officer of NTI since its inception in 1984. A graduate of
Marquette University, Mr. Leaf's background is primarily in sales, marketing
and operations, with a focus on operational performance.
THOMAS G. KEEFE
Director, Chief Financial Officer and Treasurer
Mr. Keefe served as chief financial officer and treasurer of Eastern from
1993 until its acquisition by Network in May, 1997, when he assumed his
current positions. At Eastern, Mr. Keefe managed the financial, accounting
and administrative activities of the firm and was responsible for obtaining
the necessary capital and contracts to transform the company from a $5
million pay phone operator in 1993 to a $26 million full service telecom
provider in 1997. From 1989 through 1993, Mr. Keefe was Comptroller for Great
Atlantic Management Company, where he controlled $110 million in rental
income from real estate properties throughout the Southeast. For fourteen
years prior to that, Mr. Keefe held increasingly responsible positions at
Newport News Shipbuilding, a division of Tenneco, Inc. These duties included
Manager of Government Accounting, where he was responsible for federal cost
accounting standards for a $6 billion defense backlog, and Controller and
Treasurer for the company's industrial products subsidiary. At Network, he
currently has responsibility for financial accounting, SEC reporting and
human resource activities. Mr. Keefe holds a BA degree in Business
Administration from Washington and Lee University and an MBA from William and
Mary. He is a certified public accountant.
6
<PAGE>
ALBERT A. WOODWARD
Director
Mr. Woodward was appointed Director in June 1997. He has been a senior
partner in the law firm of Maun & Simon PLC, a Minneapolis-based law firm
since 1974 where he practices primarily in the areas of corporate finance and
mergers and acquisitions. Mr. Woodward received a Bachelor of Arts Degree
from St. John's University and a Juris doctorate from the University of
Minnesota.
LEON L. NOWALSKY
Director
Mr. Nowalsky has served as independent legal counsel to the Company since
1992, and has been a Director since 1995. Since 1990, he has been a senior
partner in the law firm of Nowalsky & Bronston, LLP, a New Orleans-based law
practice specializing in telecommunications regulatory matters and mergers
and acquisitions and serves as counsel to over 40 independent telecom firms
nationwide. From 1985 to 1986, he served as in-house counsel for a
Louisiana-based long distance company which was acquired by Advanced
Telecommunications Corp. ("ATC"). Mr. Nowalsky served ATC as chief
regulatory counsel with responsibility for all compliance issues in a
15-state region, and in 1987, he was promoted to interim general counsel of
ATC, where he managed the legal aspects of the company's telecommunications
operations. Mr. Nowalsky holds a bachelors degree from Tulane University in
New Orleans and earned his Juris doctorate from Loyola University School of
Law in New Orleans. He serves on the Boards of Receivables Funding Corp., an
Ohio-based financial concern, and J.C. Dupont, Inc., a Louisiana-based energy
company.
RUSSELL J. (RUSTY) PAGE
Director
Mr. Page has served as a Director of the Company since 1995. Since April of
1996, Mr. Page has served as a principal of Rusty Page & Company/Strategic
Equity Marketing. For the prior 15 years he served as Senior Vice President
of NationsBank Corporation, the fourth largest U.S. bank holding company.
Mr. Page joined NationsBank in 1981, where he assisted the bank in fulfilling
its growth. As Equity Marketing Executive, he has had direct responsibility
for all investor relations for NationsBank. In addition to his role at
NationsBank, Mr. Page has served as an independent equity markets/investor
relations consultant to a number of public companies. Mr. Page served on the
national Marketing Committee of The NASDAQ Stock Market, and is a member of
the Board of Directors and the Executive Committee of the National Investor
Relations Institute ("NIRI"), and he is Chairman of NIRI's International
Committee. He is also a member of the National Security Traders Association.
TIMOTHY J. SLEDZ
Director
Mr. Sledz has served as a Director of the Company since 1995. He is the
President and Chief Operating Officer of Value Tel, Inc., ("Value Tel") a
nationwide diversified telecommunications corporation based in Chicago,
Illinois. Mr. Sledz joined Value Tel's predecessor company, Discount Network
Services, Inc. ("DNS") in 1992 to assist in DNS's aggressive growth and
7
<PAGE>
expansion plan. He served as a Director, Chief Financial Officer and
Corporate Secretary of DNS until its May, 1995 merger into Value Tel, at
which time Mr. Sledz became President of the combined companies. In
November, 1995, Value Tel sold a significant base of its nationwide
telecommunications business and long distance customer base to Network, and
since that time, Mr. Sledz has overseen the transition of its previous
customer base to Network. In addition, Mr. Sledz currently oversees all of
Value Tel's independent operational and administrative functions. He is
experienced in all areas of computer and management information systems,
including programming, networking, and telecommunications provisioning and
billing. Mr. Sledz is the former President and Chief Executive Officer of
Computer Document Imaging, Inc., a Chicago-based computer consulting firm.
MICHAEL M. ROSS
Founder, Director, Former President and Chief Executive Officer
Mr. Ross founded the Company along with Mr. Becker in 1979, and has served as
a Director and Officer of Network and its predecessor company, M.M. Ross,
Inc. Mr. Ross has been active in every facet of the telecommunications
industry on an industry-wide level. Mr. Ross is a former Director of Telecom
Management, Inc. (1984 to 1985) and Direct Communications, Inc., (1985 to
1990) both of which were merged into Network. He was a charter member in the
Telecommunications Resellers Association ("TRA"). He is a graduate of
Louisiana State University in Baton Rouge. Mr. Ross's term expires at this
annual meeting and he has not been nominated for reelection.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has two standing committees. The Audit Committee is
responsible for reviewing audit procedures and supervising the relationship
between the Company and its independent auditors. The Audit Committee met
one (1) time during the past fiscal year. The members of this committee are
Russell J. Page and Timothy J. Sledz. The Remuneration and Stock
Option/Warrant Committee is responsible for approving compensation
arrangements for senior management of the Company and administering the
Company's stock option plans. Currently, the members of this committee are
Leon L. Nowalsky and Albert A. Woodward. During the fiscal year ending 1997,
the members were Messrs. Nowalsky, Page and Becker, which met one (1) time
during the past fiscal year.
During fiscal year ending 1997, there were 10 regular and 16 special meetings
of the Board of Directors of the Company. Each member of the Board of
Directors attended all the meetings of the Board of Directors and of each
Committee of which he was a member during the year.
COMPLIANCE WITH SECTION 16(a) OF SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 required the Company's
officers and directors, and persons who own more than 10% of the Common
Stock, to file certain reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC"). Officers, directors and persons
owning beneficially greater than 10% of the Company's Common Stock are
required by SEC regulations to furnish the Company with copies of all such
reports.
8
<PAGE>
Based solely on its review of the copies of such reports received by the
Company, or written representations from certain reporting persons, the Company
believes that all filing requirements applicable to its officers, directors, and
greater than 10% beneficial owners were complied with during the fiscal year
ended March 31, 1997.
FAMILY RELATIONSHIPS
There is no family relationship between any director, executive or person
nominated or chosen by the Company to become a director or executive officer.
EXECUTIVE COMPENSATION
The following table sets forth all compensation paid or accrued by the Company
during the fiscal years 1995, 1996 and 1997 by those of its executive officers
whose salaries and other compensation during 1997 exceeded $100,000.
SUMMARY COMPENSATION TABLE
Annual Compensation
<TABLE>
- -----------------------------------------------------------------------------------------------------
Other Securities All
Name Annual Underlying Other
and Compen- Restricted Options/ LTIP Compen-
Principal sation Stock SARs Pay- sation
Position Year(1) Salary Bonus (2) Awards (#) outs (3)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael M. Ross 1997 $104,035 $0 0 N/A 0 N/A $5,867
Former President 1996 $ 99,386 $0 $221 N/A N/A $9,155
& CEO 1995 $ 94,846 $0 $2,316 N/A N/A $8,822
Marc I. Becker 1997 $104,035 $0 0 N/A 0 N/A $5,867
Former Executive 1996 $103,073 $0 $221 N/A N/A $5,455
Vice President & COO 1995 $ 99,022 $0 $884 N/A N/A $5,449
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) Periods presented are for the years ended March 31.
(2) Represents a $500 monthly allowance less health insurance. For
fiscal year 1996, the monthly allowance was terminated July 1, 1995.
(3) Represents employer contributions for insurance, disability and a
car allowance.
COMPENSATION OF DIRECTORS
Two (2) non-employee Directors of the Company, Mr. Russell J. Page and
Mr. Leon L. Nowalsky have been authorized Stock Warrants under
Directorship Agreements, as described below. All Directors receive
expenses to attend board meetings and expenses related to board duties
assigned.
On April 29, 1995, Mr. Leon L. Nowalsky, in consideration for
accepting a directorship, was authorized to receive warrants to
purchase 225,000 shares of the Company's Common Stock for a ten (10)
year period for $7.75 per share. On October 1, 1995, Mr. Russell J.
Page, in consideration for accepting a directorship, was authorized to
receive warrants to purchase 225,000 shares of the Company's Common
Stock for a ten (10) year period for $9.13 per share. On July 1,
1997, Mr. Albert A. Woodward was authorized to receive warrants to
purchase 10,000 shares of the Company's Common Stock for a five (5)
year period for $9.375 per share.
9
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's compensation committee for the fiscal year ended March
31, 1997 consisted of Mr. Page, Mr. Nowalsky and Marc I. Becker. Mr.
Page and Mr. Nowalsky are not officers or employees of the Company.
Mr. Becker was an Executive Vice President and Chief Operating Officer
of the Company, but is no longer with the Company as an officer,
employee or director.
EMPLOYMENT AGREEMENTS
Mr. Crawford, Mr. Keefe and Mr. Barton (the "Executives") have entered
into employment agreements with the Company that provide for their
employment by the Company through November 15, 1998, in the case of
Mr. Barton, and May 5, 1999 in the case of Messrs. Crawford and
Keefe. The agreements provide for a base salary subject to increase
at the discretion of the board of directors. Messrs. Crawford's,
Barton's and Keefe's salaries are presently $180,000, $170,000 and
$140,000, respectively. None of the Executives received more than
$100,000 in salary and bonus during the fiscal year ended March 31,
1997. In addition, the Executives are entitled to participate in
other incentive compensation arrangements as determined by the board
of directors and in other benefit plans available to key management.
Pursuant to the agreements, the Executives may be terminated for
"cause" (as defined in the agreements). Upon death, their estate
receives a benefit of 100% of the Executive's compensation for the
preceding year. Upon disability the Executives are entitled to a
severance payment equal to 100% of the Executive's salary for the
preceding year and 60% of such amount each year thereafter (reduced by
disability payments received from other sources) until the age of 65.
If the Executives are terminated without cause they are entitled to a
severance payment equal to 100% of the Executive's compensation for
the preceding year. If the Executives voluntarily terminate their
employment, their ability to compete with the Company is restricted
for a period of one year after such termination.
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
COMPENSATION POLICIES
Although the Remuneration and Stock Option/Warrant Committee (the
"Committee") has not to date adopted a formal policy addressing
executive compensation, the structure of the Company's executive
compensation is reflective of the principle that the compensation of
its executive officers should be competitive with compensation of
senior executives at comparable companies.
Members of the Committee believe they have a general awareness of pay
practices among companies of roughly comparable size, complexity, and
industry focus. As a result, the Committee has not commissioned any
studies or reviewed any specific information concerning compensation
practices of other companies. On the basis of the Committee's general
knowledge and experience, it is believed that the Company's
compensation levels are generally commensurate with those of similar
companies.
10
<PAGE>
Compensation of the executive officers is a subjective determination and has
not been determined by reference to any specific criteria or factors related
to corporate performance.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
On January 1, 1994, the Company entered into an employment agreement
with Mr. Ross that provided for a minimum salary of $96,000, subject
to increase by the Committee. In the fiscal year ended June 30, 1997,
Mr. Ross' salary was $104,035. In determining the chief executive
officer's base salary, the Committee did not consider any specific
factors or criteria, and relied only on the general principles
outlined in the "Compensation Policies" discussion above.
Because Mr. Ross had an interest in a significant number of shares of
the Company's common stock held in an escrow account to be distributed
upon certain future events, including a minimum net income per share
level, the Committee believed that his personal financial interests
were closely aligned with shareholder value. Accordingly, the
Committee did not attempt to provide additional incentive to Mr. Ross
in the form of stock options or other forms of equity based
compensation.
PERFORMANCE GRAPH
The Company's common stock began trading on the Nasdaq Stock Market on
March 1, 1994. The following performance graph compares the
cumulative total shareholder return on the Company's common stock with
the Nasdaq Telecom Index and the Standard & Poor's 500 Index for the
period March 1, 1994 to March 31, 1997. The graph assumes that the
value of the investment in the Company's common stock and each index
was $100 on March 1, 1994, and that all dividends are reinvested. The
shareholder return shown below for the historical period may not be
indicative of future performance.
"Network Long Distance, Inc." S&P 500 Nasdaq Telecom Index
3/ 1/94 $100.00 $100.00 $100.00
3/31/95 143.18 107.81 93.61
3/31/96 168.18 138.98 125.87
3/31/97 154.55 163.02 116.22
11
<PAGE>
TRANSACTIONS WITH MANAGEMENT
March 7, 1994, Michael M. Ross and Marc I. Becker placed 626,691
shares in escrow, subject to release upon certain objective
performance levels or upon certain merger. In order for the shares to
be released, the Company's net income per share on a fully diluted
basis, as defined in the agreement, must have been as follows:
Fiscal Net Income Per Share Amount of Shares
Year-End (Fully-Diluted) to be Released
- -------- -------------------- ----------------
March 31, 1995 $.375 per share 208,897 shares
March 31, 1996 $0.60 per share 208,897 shares
March 31, 1997 $1.00 per share 208,897 shares
None of the above net income per share levels were achieved and no
applicable merger transactions occurred. Mr. Becker's shares have
been returned to the Company from the escrow with his agreement. Mr.
Ross has instituted litigation against the Company claiming that his
shares should be released to him and not to the Company. The Company
disputes Mr. Ross's claim.
The staff of the SEC may view the placement of shares in escrow
similar to a recapitalization by management. The agreement to release
shares upon the achievement of certain objective criteria is presumed
to be a separate compensatory arrangement between the Company and
management. The effect is that the fair value of the shares released
from escrow is charged to income in that period. Accordingly the
Company's profitability could be significantly effected in any period
the shares held in escrow are released.
Mr. Leon L. Nowalsky, a Director of the Company, is a partner of
Nowalsky & Bronston, LLP. The law firm performed legal services for
the Company during the last fiscal year and was paid approximately
$129,773.
OTHER BUSINESS
As of the date of this Proxy Statement, management of the Company was
not aware of any other matter to be presented at the Meeting other
than as set forth herein. However, if any other matters are properly
brought before the Meeting, the shares represented by valid proxies
will be voted with respect to such matters in accordance with the
judgement of the persons voting them.
INDEPENDENT AUDITORS
Arthur Andersen, LLP, certified public accountants, served as
independent auditors for the Company for the year ended March 31, 1997
and have been retained to serve as its auditors for the current year.
Representatives of Arthur Andersen, LLP are expected to be present at
the Meeting with the opportunity to make a statement if they desire to
do so and be available to respond to appropriate questions.
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<PAGE>
DATE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Any proposal by a shareholder to be presented at the Company's 1998
annual meeting must be received at the offices of the Company, 11817
Canon Boulevard, Suite 600, Newport News, Virginia 23606, no later
than May 3, 1998.
JOHN V. LEAF
SECRETARY
Newport News, Virginia
August 31, 1997
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<PAGE>
PROXY PROXY
NETWORK LONG DISTANCE, INC.
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF THE SHAREHOLDERS TO BE HELD
SEPTEMBER 30, 1997
The undersigned hereby constitutes and appoints ________________________
and ____________________________________, and each of them, the true and
lawful attorneys and proxies of the undersigned, with full power of
substitution and appointment, for and in the name, place and stead of the
undersigned, to act for and vote all of the undersigned's shares of the
$.0001 par value common stock of Network Long Distance, Inc., a Delaware
corporation at the Annual Meeting of Shareholders to be held at, 11817 Canon
Boulevard, Suite 600, Newport News, Virginia, at 10:00 a.m. Eastern
Standard Time, on September 30, 1997, and any and all adjournments thereof,
for the following purposes:
1. The election of eight (8) Directors of the Company:
/ / FOR all nominees listed below (except as marked to the contrary):
/ / WITHHOLD AUTHORITY to vote for all the nominees listed below:
Class A Nominees Class B Nominees Class C Nominees
TWO YEAR TERM ONE YEAR TERM THREE YEAR TERM
----------------- ---------------- ----------------
Leon L. Nowalsky Timothy J. Sledz John D. Crawford
Russell J. Page Albert A. Woodward John V. Leaf
Timothy A. Barton Thomas G. Keefe
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, CROSS OUT THAT NOMINEE'S NAME ABOVE.)
2. To transact such other business as properly may come before
the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR THE ABOVE.
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<PAGE>
The undersigned hereby revokes any proxies as to said shares and heretofore
given by the undersigned, and ratifies and confirms all that said attorneys
and proxies may lawfully do by virtue hereof.
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AT THE MEETING IN ACCORDANCE
WITH THE SHAREHOLDER'S SPECIFICATION ABOVE. THIS PROXY CONFERS
DISCRETIONARY AUTHORITY IN RESPECT TO MATTERS NOT KNOWN OR DETERMINED AT THE
TIME OF THE MAILING OF THE NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS TO
THE UNDERSIGNED.
The undersigned hereby acknowledges receipt of the
Notice of Annual Meeting of Shareholders, Proxy
Statement and Annual Report to Shareholders furnished
therewith.
Dated: ___________________________, 1997
----------------------------------------
----------------------------------------
Signature(s) of Shareholder(s)
Signature(s) should agree with the name(s) hereon.
Executors, administrators, trustees, guardians and
attorneys should indicate when signing. Attorneys
should submit powers of attorney.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF NETWORK
LONG DISTANCE, INC. PLEASE SIGN AND RETURN THIS PROXY TO NETWORK LONG
DISTANCE, INC., 11817 CANON BLVD., SUITE 600, NEWPORT NEWS, VIRGINIA
23606. THE GIVING OF A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN
PERSON IF YOU ATTEND THE MEETING.
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