UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
or
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-28536
BILLING CONCEPTS CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 74-2781950
(State or other jurisdiction of (IRS Employer ID No.)
incorporation or organization)
7411 JOHN SMITH DRIVE, SUITE 200 78229
SAN ANTONIO, TEXAS (Zip code)
(Address of principal executive offices)
(210) 949-7000
(Registrant's telephone number, including area code)
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No
Indicated below is the number of shares outstanding of the registrant's only class of common stock at May 5, 1998:
NUMBER OF SHARES
TITLE OF CLASS OUTSTANDING
-------------- ----------------
Common Stock, $.01 par value 33,671,940
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BILLING CONCEPTS CORP. AND SUBSIDIARIES
INDEX
PAGE
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PART I FINANCIAL INFORMATION
Item 1. Interim Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - March 31, 1998 and September 30, 1997................ 3
Condensed Consolidated Statements of Income - For the Three and Six Months Ended
March 31, 1998 and 1997.................................................................. 4
Condensed Consolidated Statements of Cash Flows - For the Six Months Ended
March 31, 1998 and 1997.................................................................. 5
Notes to Interim Condensed Consolidated Financial Statements................................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........ 10
PART II OTHER INFORMATION
Item 1. Legal Proceedings............................................................................ 15
Item 4. Submission of Matters to a Vote of Security Holders.......................................... 15
Item 6. Exhibits and Reports on Form 8-K............................................................. 16
SIGNATURE.................................................................................................. 17
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PART I FINANCIAL INFORMATION
ITEM 1. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
BILLING CONCEPTS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
ASSETS
MARCH 31, SEPTEMBER 30,
1998 1997
---------- ----------
Current assets:
Cash and cash equivalents...................................................................... $ 75,997 $ 41,444
Accounts receivable, net ...................................................................... 37,385 25,919
Purchased receivables.......................................................................... 104,777 70,175
Prepaids and other............................................................................. 3,330 3,196
---------- ----------
Total current assets......................................................................... 221,489 140,734
Property and equipment, net...................................................................... 18,238 18,156
Equipment held under capital leases, net......................................................... 612 606
Other assets, net................................................................................ 6,702 7,516
---------- ----------
Total assets................................................................................. $ 247,041 $ 167,012
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable:
Trade........................................................................................ $ 16,945 $ 19,223
Billing customers............................................................................ 124,987 75,166
Accrued liabilities........................................................................... 25,927 17,728
Revolving line of credit for purchased receivables............................................ 0 0
Current portion of long-term debt............................................................. 606 606
Current portion of obligations under capital leases........................................... 395 441
---------- ----------
Total current liabilities................................................................... 168,860 113,164
Long-term debt, less current portion............................................................. 1,971 2,324
Obligations under capital leases, less current portion........................................... 100 290
Deferred income taxes............................................................................ 1,884 2,048
Other liabilities................................................................................ 616 499
---------- ----------
Total liabilities........................................................................... 173,431 118,325
Commitments and contingencies (Note 4)
Stockholders' equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized; no shares issued or
outstanding at March 31 or September 30....................................................... 0 0
Common stock, $0.01 par value, 75,000,000 shares authorized; 33,471,030 shares
issued and outstanding at March 31; 32,395,170 shares issued and outstanding
at September 30............................................................................... 335 324
Additional paid-in capital....................................................................... 53,387 42,916
Retained earnings................................................................................ 20,618 6,397
Deferred compensation............................................................................ (730) (950)
---------- ----------
Total stockholders' equity.................................................................. 73,610 48,687
---------- ----------
Total liabilities and stockholders' equity.................................................. $ 247,041 $ 167,012
========== ==========
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The accompanying notes are an integral part of these condensed consolidated financial statements.
BILLING CONCEPTS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
--------------------- ---------------------
1998 1997 1998 1997
-------- -------- -------- --------
Operating revenues ............................................. $ 41,014 $ 27,382 $ 79,262 $ 55,200
Cost of revenues ............................................... 24,901 16,936 48,086 34,894
-------- -------- -------- --------
Gross profit ................................................... 16,113 10,446 31,176 20,306
Selling, general and administrative expenses ................... 5,221 2,995 9,795 5,898
Research and development ....................................... 307 0 821 0
Advance funding program income ................................. (2,271) (1,735) (4,327) (3,484)
Advance funding program expense ................................ 31 165 63 489
Depreciation and amortization expense .......................... 1,565 826 3,080 1,347
-------- -------- -------- --------
Income from operations ......................................... 11,260 8,195 21,744 16,056
Other income (expense):
Interest income .............................................. 709 190 1,428 432
Interest expense ............................................. (47) (124) (137) (243)
Other, net ................................................... 59 56 89 (6)
-------- -------- -------- --------
Total other income .......................................... 721 122 1,380 183
-------- -------- -------- --------
Income before income taxes ..................................... 11,981 8,317 23,124 16,239
Income tax expense ............................................. (4,613) (3,160) (8,903) (6,171)
-------- -------- -------- --------
Net income ..................................................... $ 7,368 $ 5,157 $ 14,221 $ 10,068
======== ======== ======== ========
Earnings per common share - basic (See Note 3) ................. $ 0.22 $ 0.17 $ 0.43 $ 0.33
Earnings per common share - diluted (See Note 3) ............... $ 0.21 $ 0.16 $ 0.41 $ 0.31
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The accompanying notes are an integral part of these condensed consolidated financial statements.
BILLING CONCEPTS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
SIX MONTHS ENDED
MARCH 31,
---------------------------
1998 1997
--------- ---------
Cash flows from operating activities:
Net income..................................................................................... $ 14,221 $ 10,068
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................................................ 3,080 1,347
Deferred compensation........................................................................ 390 0
Gain on disposition of equipment............................................................. 0 (73)
Changes in operating assets and liabilities:
Increase in accounts receivable............................................................. (11,466) (4,376)
Increase in prepaids and other.............................................................. (134) (986)
Increase (decrease) in accounts payable..................................................... (2,278) 1,710
Increase (decrease) in accrued liabilities.................................................. 9,993 (1,430)
Increase in other liabilities............................................................... 117 0
--------- ---------
Net cash provided by operating activities........................................................ 13,923 6,260
Cash flows from investing activities:
Purchases of property and equipment............................................................ (2,714) (10,582)
Payments for purchased receivables from billing customers, net................................. (34,602) (10,062)
Collections of proceeds due (payments made) to billing customers, net.......................... 49,821 (3,025)
Collections of sales taxes due on behalf of billing customers, net............................. 3,578 3,886
Proceeds from sale of equipment................................................................ 0 125
Other investing activities..................................................................... 196 (982)
--------- ---------
Net cash provided by (used in) investing activities.............................................. 16,279 (20,640)
Cash flows from financing activities:
Draws on revolving line of credit for purchased receivables, net............................... 0 6,957
Proceeds from issuance of long-term debt....................................................... 0 2,014
Payments on long-term debt..................................................................... (353) (339)
Payments on capital leases..................................................................... (236) (453)
Proceeds from issuance of common stock......................................................... 4,940 1,939
--------- ---------
Net cash provided by financing activities........................................................ 4,351 10,118
--------- ---------
Net increase (decrease) in cash and cash equivalents............................................. 34,553 (4,262)
Cash and cash equivalents, beginning of period................................................... 41,444 34,135
--------- ---------
Cash and cash equivalents, end of period......................................................... $ 75,997 $ 29,873
========= =========
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The accompanying notes are an integral part of these condensed consolidated financial statements.
BILLING CONCEPTS CORP. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The interim condensed consolidated financial statements included herein have been prepared by Billing Concepts Corp. ("BIC"), formerly known as Billing Information Concepts Corp., and subsidiaries (collectively referred to as the "Company"), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of the Company's management, the accompanying interim condensed consolidated financial statements reflect all adjustments that are necessary for a fair presentation of the Company's financial position, results of operations and cash flows for such periods. All such adjustments are of a normal recurring nature. It is recommended that these interim condensed consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 1997. Results of operations for interim periods are not necessarily indicative of results that may be expected for any other interim periods or the full fiscal year.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
On January 9, 1998, the Company announced that its Board of Directors declared a one-for-one common stock dividend. The dividend was distributed on January 30, 1998 to stockholders of record on January 20, 1998. No additional proceeds were received on the dividend date and all costs associated with the share dividend were capitalized as a reduction of additional paid-in capital. All share and per share information in the accompanying condensed consolidated financial statements has been adjusted to give retroactive effect to the stock dividend.
NOTE 2. STATEMENT OF CASH FLOWS
Cash payments and non-cash activities during the periods indicated were as follows:
SIX MONTHS ENDED
MARCH 31,
-----------------
1998 1997
---- ----
(IN THOUSANDS)
Cash payments for income taxes...................................................... $ 7,816 $ 6,648
Cash payments for interest.......................................................... 201 835
Tax benefit recognized in connection with stock option exercises.................... 5,370 3,748
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BILLING CONCEPTS CORP. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. EARNINGS PER SHARE
Earnings per share for all periods have been restated to reflect the adoption of Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share," which established standards for computing and presenting earnings per share ("EPS") for entities with publicly held common stock or potential common stock. SFAS No. 128 requires dual presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures. Basic EPS were computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted EPS differs from basic EPS due to the assumed conversions of potentially dilutive options and warrants that were outstanding during the period. The following is a reconciliation of the numerators and the denominators of the basic and diluted per-share computations for net income.
FOR THE QUARTER ENDED MARCH 31, 1998
-----------------------------------------------
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
BASIC EPS
Net income available to common stockholders 7,368,000 33,197,000 $0.22
=====
EFFECT OF POTENTIALLY DILUTIVE SECURITIES
Warrants 46,000
Stock options 1,966,000
-------------
DILUTED EPS
Net income available to common stockholders
including assumed conversions 7,368,000 35,209,000 $0.21
=========== ============= =====
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FOR THE QUARTER ENDED MARCH 31, 1997
-----------------------------------------------
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- --------
BASIC EPS
Net income available to common stockholders 5,157,000 30,494,000 $0.17
=====
EFFECT OF POTENTIALLY DILUTIVE SECURITIES
Warrants 294,000
Stock options 1,700,000
-------------
DILUTED EPS
Net income available to common stockholders
including assumed conversions 5,157,000 32,488,000 $0.16
=========== ============= =====
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BILLING CONCEPTS CORP. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE SIX MONTHS ENDED MARCH 31, 1998
-----------------------------------------------
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
BASIC EPS
Net income available to common stockholders 14,221,000 32,866,000 $0.43
=====
EFFECT OF POTENTIALLY DILUTIVE SECURITIES
Warrants 130,000
Stock options 1,900,000
-------------
DILUTED EPS
Net income available to common stockholders
including assumed conversions 14,221,000 34,896,000 $0.41
=========== ============= =====
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FOR THE SIX MONTHS ENDED MARCH 31, 1997
-----------------------------------------------
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
BASIC EPS
Net income available to common stockholders 10,068,000 30,348,000 $0.33
=====
EFFECT OF POTENTIALLY DILUTIVE SECURITIES
Warrants 296,000
Stock options 1,795,000
-------------
DILUTED EPS
Net income available to common stockholders
including assumed conversions 10,068,000 32,439,000 $0.31
=========== ============= =====
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NOTE 4. COMMITMENTS AND CONTINGENCIES
The Company is involved in various claims, legal actions and regulatory proceedings arising in the ordinary course of business. The Company believes it is unlikely that the final outcome of any of the claims or proceedings to which the Company is a party will have a material adverse effect on the Company's financial position or results of operations; however, due to the inherent uncertainty of litigation, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on the Company's results of operations for the fiscal period in which such resolution occurred.
The Company is obligated as a guarantor of a certain equipment financing agreement entered into by USLD Communications Corp. ("USLD"), a subsidiary of LCI International, Inc. The aggregate unpaid principal amount of indebtedness under this agreement at March 31, 1998 was approximately $886,000, due in varying amounts through June 1999.
BILLING CONCEPTS CORP. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5. RELATED PARTY TRANSACTIONS
The Company and USLD shared a common individual on their respective boards of directors through June 2, 1997. Therefore, USLD was considered a related party for purposes of financial disclosure through this date. The Company provides billing and information management services for USLD and purchases telecommunications services from USLD. Transactions under the agreements for these services have been reflected in the accompanying consolidated financial statements at market prices. Related party transactions between the Company and USLD are summarized as follows:
SIX MONTHS ENDED
MARCH 31, 1997
----------------
(IN THOUSANDS)
Sales to USLD.......................................... $ 2,362
Purchases from USLD.................................... 1,240
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In addition, at March 31, 1997, the Company's accounts receivable balance included $883,000 and the billing customers accounts payable balance included $947,000 related to billing services performed for USLD. The Company also had $96,000 payable to USLD included in accrued liabilities and $904,000 payable to USLD included in long-term debt at March 31, 1997.
The Company leases a jet airplane from a company associated with an officer/director of the Company. Under the terms of the lease agreement, the Company is obligated to pay annual minimum fees of $500,000 over the five years ending March 31, 2003 for such charter services.
From time to time, the Company has made advances to or was owed amounts from certain officers of the Company, however, no amounts were outstanding during the six months ended March 31, 1998. The Company had a $250,000 note receivable bearing interest at 7.0% from a certain officer of the Company at April 30, 1998.
NOTE 6. NEW ACCOUNTING STANDARDS
In October 1997, the American Institute of Certified Public Accountants ("AICPA") issued Statement of Position ("SOP") 97-2, "Software Revenue Recognition," which provides guidance on when revenue should be recognized and in what amounts for licensing, selling, leasing, or otherwise marketing computer software. SOP 97-2 is effective for transactions entered into in fiscal years beginning after December 15, 1997 and is to be applied prospectively. In March 1998, the AICPA issued SOP 98-4, "Deferral of the Effective Date of a Provision of SOP 97-2." SOP 98-4 defers for one year the application of certain provisions of SOP 97-2. Management of the Company does not anticipate the adoption of SOP 97-2 and 98-4 will have a material impact on the Company's financial position or results of operations.
ITEM 2.
This Quarterly Report on Form 10-Q contains certain "forward-looking" statements as such term is defined in the Private Securities Litigation Reform Act of 1995 and information relating to the Company and its subsidiaries that are based on the beliefs of the Company's management as well as assumptions made by and information currently available to the Company's management. When used in this report, the words "anticipate," "believe," "estimate," "expect" and "intend" and words or phrases of similar import, as they relate to the Company or its subsidiaries or Company management, are intended to identify forward-looking statements. Such statements reflect the current risks, uncertainties and assumptions related to certain factors including, without limitations, competitive factors, general economic conditions, customer relations, relationships with vendors, the interest rate environment, governmental regulation and supervision, seasonality, distribution networks, product introductions and acceptance, technological change, changes in industry practices, onetime events and other factors described herein and in other filings made by the Company with the Securities and Exchange Commission. Based upon changing conditions, should any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended. The Company does not intend to update these forward-looking statements.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following is a discussion of the consolidated financial condition and results of operations of the Company for the quarters and six months ended March 31, 1998 and 1997. It should be read in conjunction with the Interim Condensed Consolidated Financial Statements of the Company, the notes thereto and other financial information included elsewhere in this report, and the Company's Annual Report on Form 10-K for the year ended September 30, 1997. For purposes of the following discussion, references to year periods refer to the Company's fiscal year ended September 30 and references to quarterly periods refer to the Company's fiscal quarter ended March 31.
RESULTS OF OPERATIONS
The following table presents certain items in the Company's Condensed Consolidated Statements of Income as a percentage of total revenues:
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
----------------------- ----------------------
1998 1997 1998 1997
----- ----- ----- -----
Operating revenues............................................ 100.0% 100.0% 100.0% 100.0%
Cost of services.............................................. 60.7 61.9 60.7 63.2
----- ----- ----- -----
Gross profit.................................................. 39.3 38.1 39.3 36.8
Selling, general and administrative expenses.................. 12.7 10.9 12.4 10.7
Research and development...................................... 0.7 0.0 1.0 0.0
Advance funding program income................................ (5.5) (6.3) (5.5) (6.3)
Advance funding program expense............................... 0.1 0.6 0.1 0.9
Depreciation and amortization expense......................... 3.8 3.0 3.9 2.4
----- ----- ----- -----
Income from operations........................................ 27.5 29.9 27.4 29.1
Other income, net............................................. 1.8 0.4 1.7 0.3
----- ----- ----- -----
Income before income taxes.................................... 29.2 30.4 29.2 29.4
Income tax expense............................................ (11.2) (11.5) (11.3) (11.2)
----- ----- ----- -----
Net income.................................................... 18.0% 18.8% 17.9% 18.2%
===== ===== ===== =====
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Operating Revenues
The Company's revenues are derived primarily from the provision of billing clearinghouse and information management services to direct dial long distance carriers and operator services providers ("Local Exchange Carrier billing" or "LEC billing"). Revenues are also derived from enhanced billing services provided to companies that offer 900 services or other non-regulated telecommunications equipment and services. LEC billing fees charged by the Company include processing and customer service inquiry fees. Processing fees are assessed to customers either as a fee charged for each telephone call record or other transaction processed or as a percentage of the customer's revenue that is submitted by the Company to local telephone companies for billing and collection. Processing fees also include any charges assessed to the Company by local telephone companies for billing and collection services that are passed through to the customer. Customer service inquiry fees are assessed to customers either as a fee charged for each record processed by the Company or as a fee charged for each billing inquiry made by end users.
The Company also develops, sells and supports convergent billing systems for telecommunications service providers and provides direct billing outsourcing services through its wholly owned subsidiary, Billing Concepts Systems, Inc. ("BCS"). In addition to license and maintenance fees charged by the Company for the use of its billing software applications, fees are also charged on a time and materials basis for software customization and professional services. Processing fees for direct billing services provided through the Company's service bureau are assessed to customers based on volume. Billing systems revenues also include retail sales of computer hardware and third party software.
Total revenues for the quarter ended March 31, 1998 were $41.0 million, an increase of 49.8% from the comparable prior year quarter. During the first six months of 1998, total revenues increased 43.6% to $79.3 million from $55.2 million during the comparable period of 1997. LEC billing services revenues increased 38.1% to $37.8 million in the second quarter of 1998, from $27.4 million in the second quarter of 1997. For the first six months of 1998, LEC billing services increased 33.3% to $73.6 million, from $55.2 million in the first six months of 1997. The remaining increase in revenues from the prior year periods was attributable to billing systems sales and related services. The LEC billing services revenue increases are attributable primarily to an increase in the number of telephone call records processed and billed on behalf of direct dial long distance customers. Direct dial long distance billing services revenues have exceeded prior period revenues on a quarterly basis since the inception of this business in 1993. Revenues derived from operator and enhanced billing services customers also increased from the comparable prior year periods due to an increase in the number of telephone call records processed on behalf of existing customers as well as new customers. Telephone call record volumes were as follows:
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
------------------ ------------------
1998 1997 1998 1997
----- ---- ---- ----
(IN MILLIONS) (IN MILLIONS)
Direct dial long distance services....................... 164.6 122.1 324.9 241.3
Operator services........................................ 36.9 28.0 73.8 58.0
Enhanced billing services................................ 3.3 2.0 6.4 3.7
Billing management services.............................. 86.9 83.4 183.8 171.6
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Revenue per record for billing management customers, who have their own billing and collection agreements with the local telephone companies, is significantly less than revenue per record for the Company's other customers.
Cost of Revenues
Cost of revenues includes billing and collection fees charged to the Company by local telephone companies and related transmission costs, as well as all costs associated with the customer service organization, including staffing expenses and costs associated with telecommunications services. Billing and collection fees charged by the local telephone companies include fees that are assessed for each record submitted and for each bill rendered to its end-user customers. The Company achieves discounted billing costs due to its aggregated volumes and can pass these discounts on to its customers. Cost of revenues also includes the cost of computer hardware and software sold, and the salaries and benefits of software development, technical, service bureau and professional service personnel who generate revenue from hourly billings.
The gross profit margin of 39.3% reported for the quarter and six months ended March 31, 1998, increased from 38.1% and 36.8% achieved in the respective prior year periods. The addition of sales of billing systems and related services revenues in 1998 served to improve gross margin due to the higher margins associated with systems sales. Lower billing and collection costs as a percentage of revenue also contributed to the increase in the gross profit margin for both periods. The Company currently believes that its gross profit margin could increase in subsequent periods as a result of the potential addition of higher gross margin billing systems sales and related services revenues.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses are comprised of all selling, marketing and administrative costs incurred in direct support of the business operations of the Company. SG&A expenses for the second quarter of 1998 and 1997 were $5.2 million and $3.0 million, representing 12.7% and 10.9% of revenues, respectively. SG&A expenses for the first six months of 1998 increased to $9.8 million, or 12.4% of revenues, from $5.9 million, or 10.7% of revenues, in the comparable period of 1997. The higher SG&A expenses were primarily due to the growth of the management infrastructure and technical staff of BCS, which was acquired during the third quarter of 1997.
Research and Development
Research and development expenses are comprised of the salaries and benefits of the employees involved in software development and related expenses. During the third quarter of 1997, the Company acquired a software development company that was actively involved in ongoing research and development efforts associated with creating new and enhanced products related to its convergent billing software platform. In the fourth quarter of 1997, the Company also commenced internally funded research and development activities with respect to efforts to offer "invoice ready" billing services. Consequently, research and development expenses were $307,000 in the second quarter of 1998 and $821,000 for the first six months of 1998. The Company intends to continue its research and development efforts in the future and anticipates spending from $2 to $3 million during 1998 for such expenses.
Advance Funding Program Income and Expense
Advance funding program income increased 30.9% to $2.3 million for the second quarter of 1998 from $1.7 million for the second quarter of 1997. Advance funding program income for the first six months of 1998 increased 24.2% to $4.3 million from $3.5 million in the first six months of 1997. The increase was primarily the result of financing a higher level of customer receivables under the Company's advance funding program. The quarterly average balance of purchased receivables was $88.4 million and $71.1 million for the six months ended March 31, 1998 and 1997, respectively.
Advance funding program expense decreased 81.2% to $31,000 for the second quarter of 1998 from $165,000 for the second quarter of 1997. Advance funding program expense for the first six months of 1998 decreased 87.1% to $63,000 from $489,000 in the comparable period of 1997. In addition to declining from period to period, advance funding program expense declined relative to advance funding program income due to the use of internally generated funds for the financing of all purchased receivables during the first six months of 1998. The expense recognized during 1998 represents unused credit facility fees and is the minimum expense that the Company could have incurred during this period.
Depreciation and Amortization
Depreciation and amortization expenses are incurred with respect to certain assets, including computer hardware, software, office equipment, furniture, leasehold improvements, costs incurred in securing contracts with local telephone companies, goodwill and other intangibles. Asset lives range between three and fifteen years.
Depreciation and amortization expense was $1.6 million in the second quarter of 1998 compared with $826,000 in the second quarter of 1997. Depreciation and amortization expense as a percentage of revenues was 3.8% and 3.0% in the second quarter of 1998 and 1997, respectively. For the first six months of 1998, depreciation and amortization expense was $3.1 million, or 3.9% of revenues, compared to $1.3 million, or 2.4% of revenues, for the first six months of 1997. The increase in the percentage of revenues from the prior year periods is attributable to increased capital expenditures made in order to provide the infrastructure needed to support the growth of the Company's employee base and the continued expansion of the Company's business.
Income from Operations
Income from operations in the second quarter of 1998 was $11.3 million, or 27.5% of revenues, compared to income from operations of $8.2 million, or 29.9% of revenues, in the second quarter of 1997. Income from operations in the first six months of 1998 increased to $21.7 million, or 27.4% of revenues, from $16.1 million, or 29.1% of revenues, in the first six months of 1997. The decrease in income from operations as a percentage of revenues from the prior year periods is attributable to higher SG&A expenses and depreciation as a percentage of revenues and research and development expenses incurred in the first six months of 1998, offset partly by a higher gross profit margin and higher net advance funding income.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash balance increased to $76.0 million at March 31, 1998 from $41.4 million at September 30, 1997. Large fluctuations in daily cash balances are normal due to the large amount of customer receivables that the Company collects on behalf of its customers. The Company's working capital position and current ratio increased to $52.6 million and 1.3:1 at March 31, 1998, from $27.6 million and 1.2:1 at September 30, 1997, respectively. This improvement in working capital is due in part to $4.7 million in cash received and a tax benefit of $5.4 million recognized by the Company in connection with stock options and warrants exercised during the six months ended March 31, 1998. The Company also received $200,000 in cash from the issuance of common stock under the Company's Employee Stock Purchase Plan during this period. Net cash provided by operating activities was $13.9 million and $6.3 million in the first six months of 1998 and 1997, respectively, and reflected the increase in net income from the prior year period.
The Company has a $50.0 million revolving line of credit facility with certain lenders primarily to draw upon to advance funds to its billing customers prior to collection of the funds from the local telephone companies. This credit facility terminates on December 20, 1999. Borrowings under the credit facility are limited to a portion of the Company's eligible receivables. Management believes that the capacity under the credit facility will be sufficient to fund advances to its billing customers for the foreseeable future. No amounts were borrowed by the Company under its credit facility to finance the advance funding program at either March 31, 1998 or September 30, 1997. At March 31, 1998, the amount available under the Company's receivable financing facility was $50.0 million.
In addition to the revolving line of credit facility described above, the Company is obligated as a guarantor of USLD's equipment financing agreement with a certain lender. The aggregate unpaid principal amount of indebtedness under this agreement at March 31, 1998 was approximately $886,000, due in varying amounts through June 1999. Under certain of its credit agreements, the Company is prohibited from paying dividends on its common stock, is required to comply with certain financial covenants and is subject to certain limitations on the issuance of additional secured debt. The Company obtained a waiver from a certain lender consenting to the distribution of a one-for-one common stock dividend to stockholders on January 20, 1998. Cross-default provisions of certain of the Company's equipment loans may place the Company in default of such loans in the event that USLD defaults under the equipment finance agreements that the Company has guaranteed. The Company was in compliance with all required covenants at March 31, 1998.
Capital expenditures amounted to approximately $2.7 million in the first six months of 1998 and related primarily to purchases of computer equipment and software. The Company anticipates spending approximately $8 million over the next six months, including expenditures for local telephone company agreements that will enable it to offer "invoice ready" billing services. The Company believes that it will be able to fund expenditures with internally generated funds and borrowings, but there can be no assurance that such funds will be available or expended.
On January 9, 1998, the Company announced that its Board of Directors declared a one-for-one common stock dividend. The dividend was distributed on January 30, 1998 to stockholders of record on January 20, 1998. No additional proceeds were received on the dividend date and all costs associated with the share dividend were capitalized as a reduction of additional paid-in capital. The Company also amended its Certificate of Incorporation on February 27, 1998, changing the name of the Company to Billing Concepts Corp. and increasing the number of shares of the Company's authorized common stock to 75,000,000 from 60,000,000. This amendment was approved by vote of the Company's stockholders at the Annual Meeting of Stockholders held on February 26, 1998.
The Company's operating cash requirements consist principally of working capital requirements, requirements under its advance funding program, scheduled payments of principal on its outstanding indebtedness and capital expenditures. The Company believes that it has the ability to continue to secure long-term equipment financing and that this ability, combined with cash flows generated from operations and periodic borrowings under its receivable financing facility, will be sufficient to fund capital expenditures, advance funding requirements, working capital needs and debt repayment requirements for the foreseeable future.
YEAR 2000 COMPLIANCE
The efficient operation of the Company's business is highly dependent on its computer software programs and operating systems (collectively, "Programs and Systems"). These Programs and Systems are used in several key areas of the Company's business, including LEC billing processing, information management services, convergent billing systems and financial reporting, as well as in various administrative functions. The Company has been evaluating its Programs and Systems to identify potential year 2000 compliance problems, as well as manual processes, external interfaces with customers and services supplied by vendors to coordinate year 2000 compliance and conversion. The year 2000 problem refers to the limitations of the programming code in certain existing software programs to recognize date sensitive information for the year 2000 and beyond. Unless modified prior to the year 2000, such systems may not properly recognize such information and could generate erroneous data or cause a system to fail to operate properly.
Based on current information, the Company expects to attain year 2000 compliance and institute appropriate testing of its modifications and replacements in a timely fashion and in advance of the year 2000 date change. It is anticipated that modification or replacement of the Company's Programs and Systems will be performed in-house by Company personnel. The Company believes that, with modifications to existing software and conversions to new software, the year 2000 problem will not pose a significant operational problem for the Company. However, because most computer systems are, by their very nature, interdependent, it is possible that non-compliant third party computers may not interface properly with the Company's computer systems. The Company could be adversely affected by the year 2000 problem if it or unrelated parties fail to successfully address this issue. Management of the Company currently anticipates that the expenses and capital expenditures associated with its year 2000 compliance project will not have a material effect on its financial position or results of operations.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in various claims, legal actions and regulatory proceedings arising in the ordinary course of business. The Company believes it is unlikely that the final outcome of any of the claims or proceedings to which the Company is a party would have a material adverse effect on the Company's financial position or results of operations; however, due to the inherent uncertainty of litigation, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on the Company's results of operations for the fiscal period in which such resolution occurred.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Stockholders held on February 26, 1998, the following matters were adopted by the margins indicated:
1. To elect director Lee Cooke to serve until the 2001 Annual Meeting of Stockholders.
For: 15,252,045 Against: N/A Abstain: 119,783 |
2. To amend the Company's Amended and Restated Certificate of Incorporation to change the name of the Company to Billing Concepts Corp.
For: 15,346,575 Against: 5,636 Abstain: 11,618 |
3. To amend the Company's Amended and Restated Certificate of Incorporation to increase the number of authorized shares of the Company's Common Stock from 60,000,000 shares to
75,000,000 shares.
For: 14,987,403
Against: 344,461
Abstain: 31,964
|
4. To ratify the appointment of Arthur Andersen LLP as independent public accountants of the Company for the fiscal year ending September 30, 1998.
For: 15,335,301 Against: 4,944 Abstain: 23,583 |
The following directors continue their term of office subsequent to the Annual meeting: Parris H. Holmes, Jr., Alan W. Saltman, James E. Sowell and Thomas G. Loeffler.
PART II OTHER INFORMATION (CONTINUED)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
The exhibits listed below are filed as part of or incorporated by reference in this report. Where such filing is made by incorporation by reference to a previously filed document, such document is identified in parentheses.
EXHIBIT
NUMBER DESCRIPTION
3.4 Certificate of Amendment to Certificate of
Incorporation, amending Article I to change the name
of the Company to Billing Concepts Corp. and amending
Article IV to increase the number of authorized
shares of common stock from 60,000,000 to 75,000,000,
filed with the Delaware Secretary of State on
February 27, 1998 (filed herewith)
4.1 Form of Stock Certificate of Common Stock (filed
herewith)
10.31 First Amendment to Lease Agreement dated September
30,1996, by and between Medical Plaza Partners, Ltd.
and Billing Information Concepts, Inc. (filed
herewith)
10.32 Second Amendment to Lease Agreement dated November 8,
1996, by and between Medical Plaza Partners, Ltd. And
Billing Information Concepts, Inc. (filed herewith)
10.33 Third Amendment to Lease Agreement dated January 24,
1997, by and between Medical Plaza Partners, Ltd. And
Billing Information Concepts, Inc. (filed herewith)
10.34 Employment Agreement dated October 1, 1997, by and
between the Company and Michael Hancock (filed
herewith)
10.35 Employment Agreement dated January 1, 1998, by and
between the Company and Paul L. Gehri (filed
herewith)
10.36 Employment Agreement effective January 15, 1998, by
and between the Company and Audie Long (filed
herewith)
27.1 Financial Data Schedule (filed herewith)
|
(b) Current Reports on Form 8-K:
None.
ITEMS 2, 3, AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
BILLING CONCEPTS CORP.
(Registrant)
Date: May 12, 1998 By: /s/ KELLY E. SIMMONS
-------------------------------------
Kelly E. Simmons
Senior Vice President
Chief Financial Officer
(Duly authorized and principal financial officer)
|
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
3.4 Certificate of Amendment to Certificate of
Incorporation, amending Article I to change the name
of the Company to Billing Concepts Corp. and amending
Article IV to increase the number of authorized
shares of common stock from 60,000,000 to 75,000,000,
filed with the Delaware Secretary of State on
February 27, 1998 (filed herewith)
4.1 Form of Stock Certificate of Common Stock (filed
herewith)
10.31 First Amendment to Lease Agreement dated September
30,1996, by and between Medical Plaza Partners, Ltd.
and Billing Information Concepts, Inc. (filed
herewith)
10.32 Second Amendment to Lease Agreement dated November 8,
1996, by and between Medical Plaza Partners, Ltd. And
Billing Information Concepts, Inc. (filed herewith)
10.33 Third Amendment to Lease Agreement dated January 24,
1997, by and between Medical Plaza Partners, Ltd. And
Billing Information Concepts, Inc. (filed herewith)
10.34 Employment Agreement dated October 1, 1997, by and
between the Company and Michael Hancock (filed
herewith)
10.35 Employment Agreement dated January 1, 1998, by and
between the Company and Paul L. Gehri (filed
herewith)
10.36 Employment Agreement effective January 15, 1998, by
and between the Company and Audie Long (filed
herewith)
27.1 Financial Data Schedule (filed herewith)
|
EXHIBIT 3.4
BILLING INFORMATION CONCEPTS CORP.
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
Billing Information Concepts Corp. (the "Company"), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware ("DGCL"), does hereby certify:
FIRST: That the Board of Directors of the Company, by written consent in lieu of a special meeting, unanimously adopted resolutions proposing and declaring advisable the following amendments to the Amended and Restated Certificate of Incorporation of the Company and directed that such amendments be considered at the next annual meeting of stockholders of the Company:
To amend Article I of the Amended and Restated Certificate of Incorporation in its entirety to read as follows:
"Article I - Name. The name of the corporation (the "corporation") is Billing Concepts Corp."
To amend the first paragraph of Article IV of the Amended and Restated Certificate of Incorporation in its entirety to read as follows:
"4.1 Total Number of Shares of Stock. The total number of
shares of all classes of stock which the corporation shall have
authority to issue is eighty-five million (85,000,000). Of such shares,
(i) seventy-five million (75,000,000) shall be common stock, par value
$0.01 per share ("Common Stock"), and (ii) ten million (10,000,000)
shall be preferred stock, par value $0.01 per share ("Preferred
Stock")."
SECOND: That at the annual meeting of stockholders of the Company duly called and held on February 26, 1998, in accordance with Section 222 of the DGCL, the holders of a majority of the shares of Common Stock of the Company entitled to vote on such amendments voted in favor of such amendments.
THIRD: That the aforesaid amendments were duly adopted in accordance with the applicable provisions of Section 242 of the DGCL.
IN WITNESS WHEREOF, the Company has caused this Certificate to be signed on February 26, 1998, by Audie Long, its Corporate Secretary.
Billing Information Concepts Corp.
By: /s/ Audie Long
---------------------------------------
Audie Long, Corporate Secretary
|
EXHIBIT 4.1
SEE REVERSE FOR LEGEND
NUMBER SHARES
COMMON STOCK PAR VALUE $.01 PER SHARE
BILLING CONCEPTS CORP.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
CUSIP 090063 10 8
SEE REVERSE SIDE FOR
CERTAIN DEFINITIONS
THIS CERTIFIES THAT
is the registered holder of
FULLY PAID AND NON-ASSESSABLE COMMON SHARES, WITH A
PAR VALUE OF $.01 PER SHARE,
in the Capital of the above named Company transferable on the books of the Company by the registered holder in person or by attorney duly authorized in writing upon surrender of this certificate properly endorsed. This certificate and the shares represented hereby are issued and shall be held subject to all of the terms, conditions and limitations of the Certificate of Incorporation and the Bylaws of the Company, as restated or amended, or as same may be restated or amended hereafter, to all of which the holder hereof by acceptance hereof agrees and assents.
This certificate is not valid unless countersigned by the Transfer Agent and Registrar of the Company.
IN WITNESS WHEREOF the Company has caused this certificate to be signed on its behalf by the facsimile signatures of its duly authorized officers and to be sealed with the facsimile of its Corporate Seal.
DATED
/s/ PARRIS H. HOLMES, JR. COUNTERSIGNED AND REGISTERED
Chief Executive Officer MONTREAL TRUST COMPANY OF CANADA VANCOUVER
TRANSFER AGENT AND REGISTRAR
|
[SEAL]
/s/ AUDIE LONG By SPECIMEN
Secretary ------------------------------------------
Authorized Officer
|
The shares represented by this certificate are transferable at the offices of Montreal Trust Company of Canada, Vancouver, B.C.
BILLING CONCEPTS CORP.
Billing Concepts Corp. will furnish to the record holder of this certificate without charge on written request to such corporation at its principal place of business a full statement of the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof which such corporation is authorized to issue and the qualifications, limitations or restrictions of such preferences and/or rights.
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
TEN ENT - as tenants by the ------ --------
entireties (Cust) (Minor)
JT TEN - as joint tenants with under Uniform Gift to
right of survivorship Minors
and not as tenants Act
in common ------------------
(State)
|
Additional abbreviations may also be used though not in the above list.
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
Signature(s) must be guaranteed by a commercial Bank or Trust Company or a member firm of a major stock exchange.
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO CERTAIN RIGHTS AS SET FORTH IN AN AGREEMENT BETWEEN BILLING CONCEPTS CORP. FORMERLY KNOWN AS BILLING INFORMATION CONCEPTS CORP., AND U.S. TRUST COMPANY OF TEXAS, N.A., AS RIGHTS AGENT, DATED AS OF JULY 10, 1996, AND AS AMENDED FROM TIME TO TIME (THE "AGREEMENT"), THE TERMS OF WHICH ARE INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICE OF U.S. TRUST COMPANY OF TEXAS, N.A. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE AGREEMENT, SUCH RIGHTS WILL BE EVIDENCED BY SEPARATE CERTIFICATES AND WILL NO LONGER BE EVIDENCED BY THIS CERTIFICATE. U.S. TRUST COMPANY OF TEXAS, N.A. WILL MAIL TO THE HOLDER OF THIS CERTIFICATE A COPY OF THE AGREEMENT WITHOUT CHARGE PROMPTLY AFTER RECEIPT BY IT OF A WRITTEN REQUEST THEREFOR, RIGHTS ISSUED TO OR BENEFICIALLY OWNED BY A PERSON WHO IS OR BECOMES AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF SUCH ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE AGREEMENT) OR, UNDER CERTAIN CIRCUMSTANCES, TRANSFEREES THEREOF WILL BECOME VOID AS PROVIDED IN SECTION 11(A)(ii) OF THE AGREEMENT AND THEREAFTER MAY NOT
BE TRANSFERRED TO ANY PERSON.
EXHIBIT 10.31
FIRST AMENDMENT TO LEASE AGREEMENT
This First Amendment to Lease Agreement ("First Amendment") is entered into by and between Medical Plaza Partners, Ltd., a Texas limited partnership ("Landlord"), and Billing Information Concepts, Inc., a Delaware corporation ("Tenant").
For and in consideration of One and No/100 Dollar ($1.00) and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, Landlord and Tenant hereby recite and agree as follows:
1. Recitals.
(a) Lease. Landlord and Tenant entered into the Office Building Lease Agreement ("Lease") dated July 11, 1996, with respect to certain Premises situated at 7411 John Smith Drive, San Antonio, Texas, as more particularly described in the Lease.
(b) Tenant Improvements. In accordance with the Construction Rider attached as Exhibit D to the Lease, Tenant has submitted the Construction Documents to Landlord and Landlord has approved the Construction Documents, subject to Tenant's agreeing to pay certain excess cost of construction of the Tenant Improvements. Tenant has agreed to pay such excess costs as described herein and Landlord and Tenant desire to enter into this First Amendment to set forth the basis upon which such excess costs shall be paid by Tenant.
(c) Capitalized Terms. All capitalized terms used herein and not otherwise specifically defined shall have the same meaning as is ascribed to such terms in the Lease.
2. Approval of Construction Documents and Agreement to Pay Excess Costs. Landlord hereby approves the Construction Documents prepared by Insite Architects, dated August 19, 1996, as revised through August 22, 1996, and the same shall constitute the Approved Tenant Improvement Construction Documents under the Lease. Landlord and Tenant have agreed that the total cost of the Tenant Improvements pursuant to the Approved Tenant Improvement Construction Documents ("Total Cost") is $2,084,242.11, which Total Cost shall be shared and paid by Landlord and Tenant as hereinafter provided. Landlord shall pay $715,000.00 ("Base Cost") of the Total Cost, and Tenant shall pay the additional amount of the Total Cost actually incurred by Landlord ("Excess Costs") up to $1,369,242.11. Any costs for the Tenant Improvements as reflected in the Approved Tenant Improvement Construction Documents in excess of $2,084,242.11 shall be at
Landlord's sole cost and expense, except that Tenant shall pay any costs for the Tenant Improvements in excess of $2,084,242.11 which are due to Tenant requested changes to the Tenant Improvements as reflected in the Approved Tenant Improvement Construction Documents in accordance with subparagraph (g) of the Construction Rider attached to the Lease as Exhibit D.
3. Payment of Excess Costs. The Excess Costs shall be paid by Tenant to Landlord in monthly installments within five (5) days following Landlord's delivery to Tenant of (i) periodic draw requests substantially in accordance with applicable AIA draw forms, requesting payment for work performed by the Contractor in accordance with the Contract Documents, which draw requests shall be signed by Contractor and approved by Michael Schroeder of Insite Architects ("Architect"); and (ii) lien waivers signed by the general contractor and from any major subcontractors (i.e. subcontractors performing work costing in excess of $15,000.00 during the period covered by the draw request) covering all work performed and materials delivered prior to the date of the draw request. Periodic draw requests pursuant to this First Amendment shall be made as soon as reasonably possible following Landlord's receipt of draw requests from the Contractor for payment of the Tenant Improvements, and the amount of each draw request for funds to be advanced under this First Amendment shall be based upon the proportion that the work completed as of the effective date of the draw request bears to the total work covered by the construction contract, subject to any retainages required by the construction contract. When Landlord desires to receive a disbursement from Tenant, Landlord shall deliver to Tenant a written request for disbursement together with the draw request and other documents described above ("Disbursement Request"). Within five (5) days following the date that Landlord delivers the Disbursement Request to Tenant, Tenant shall deliver good funds to Landlord in full payment thereof. Upon final completion of the Tenant Improvements and the Contractor being entitled to full and final payment of the cost of the Tenant Improvements pursuant to the construction contract therefor, Landlord shall deliver to Tenant as a part of the documents comprising the final Disbursement Request a certificate of substantial completion in the form promulgated by the AIA signed by the Architect confirming the substantial completion of the Tenant Improvements in accordance with the Contract Documents.
4. Letter of Credit. In order to secure Tenant's payment of the Excess Costs, within two (2) business days following the execution of this First Amendment, Tenant shall deliver to Landlord an unconditional irrevocable letter of credit, in substantially the form attached hereto as Exhibit A, in the amount of $1,369,242.11. The Letter of Credit shall be issued to Landlord and have an initial expiration date of January 2, 1997 ("Initial Expiration Date"); and the Letter of Credit shall provide that the expiration date will be automatically extended until April 1, 1997 in the event that the amount thereof has not
been reduced to zero by the Initial Expiration Date. The Letter of Credit shall provide that the amount payable thereunder shall be reduced on a dollar-for-dollar basis for all amounts paid by Tenant to Landlord in payment of the Excess Costs. Upon payment in full of the Excess Costs, Landlord shall execute and deliver a Certificate to Tenant evidencing payment in full of the Excess Costs and the expiration of the Letter of Credit (or the reduction of its face amount to zero). Landlord shall have the right to collaterally assign its rights under the Letter of Credit to Broadway National Bank to additionally secure Broadway National Bank with respect to Tenant's obligation to pay the Excess Costs pursuant to this First Amendment, and Tenant agrees to execute such documents as may be reasonably required by Broadway National Bank in connection therewith provided that Broadway National Bank expressly agrees that the Letter of Credit only secures Tenant's payment of the Excess Costs as herein provided. In the event Tenant defaults in the payment of any amounts due hereunder (subject to Tenant's notice and cure rights as provided in Section 18(a) of the Lease), Landlord shall be entitled to draw the full amount outstanding under the Letter of Credit and apply the proceeds thereof towards payment of Tenant's obligation to pay the Excess Costs.
5. Cost Savings. The first sentence of paragraph (h) of Exhibit D of the Lease is deleted in its entirety. In lieu thereof, paragraph (g) of Exhibit D of the Lease is hereby modified to add the following sentences to the end of such paragraph:
"In the event the Change Order Request would result in a decrease in the cost of the Tenant Improvements, Landlord's Response shall advise Tenant of the amount of such decrease and Tenant shall have three (3) days following its receipt of Landlord's Response in which to advise Landlord whether Tenant elects to proceed with such changes. In the event Tenant so elects to proceed with the changes, Tenant shall receive a credit against the Excess Costs payable by Tenant in the amount of the decrease in cost attributable thereto."
6. Other Terms. All other terms, conditions and provisions of the Lease shall remain in full force and effect as of the date thereof.
7. Binding Effect. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.
8. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be an original, but all of which shall constitute one instrument.
EXECUTED to be effective on September 30, 1996.
LANDLORD:
MEDICAL PLAZA PARTNERS, LTD.
By: ORION PARTNERS MEDICAL PLAZA,
LTD., ITS GENERAL PARTNER
By: ORION PARTNERS, INC.,
ITS GENERAL PARTNER
By: /s/ T.H. Chandler
-----------------------------------------
Name: T.H. Chandler
---------------------------------------
Title: Sr. VP
--------------------------------------
|
TENANT:
BILLING INFORMATION CONCEPTS, INC.
By: /s/ Kelly E. Simmons
-----------------------------------------
Name: Kelly E. Simmons
---------------------------------------
Title: Sr. VP & CFO
--------------------------------------
|
EXHIBIT 10.32
SECOND AMENDMENT TO LEASE AGREEMENT
This Second Amendment to Lease Agreement ("Second Amendment") is entered into by and between Medical Plaza Partners, Ltd., a Texas limited partnership ("Landlord"), and Billing Information Concepts, Inc., a Delaware corporation ("Tenant").
For and in consideration of One and No/100 Dollar ($1.00) and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, Landlord and Tenant hereby recite and agree as follows:
1. Recitals.
(a) Lease. Landlord and Tenant entered into the Office Building Lease Agreement ("Lease") dated July 11, 1996, with respect to certain Premises situated at 7411 John Smith Drive, San Antonio, Texas, as more particularly described in the Lease, which Lease was amended by a First Amendment to Lease Agreement executed effective September 30, 1996.
(b) Commencement Date Regarding 4th Floor of Building. Pursuant to paragraph II, Phase I, subsection (a) of the Basic Lease Information of the Lease, Landlord and Tenant agreed to an early occupancy of the 4th floor of the Building and that the Commencement Date for the 4th floor of the Building would be November 1, 1996. Landlord and Tenant have mutually agreed to Tenant's early occupancy of the 3rd floor of the Building instead of the 4th floor, and Landlord and Tenant desire to enter into this Second Amendment to effect the same.
(c) Capitalized Terms. All capitalized terms used herein and not otherwise specifically defined shall have the same meaning as is ascribed to such terms in the Lease.
2. Agreement of Early Commencement Date Regarding 3rd Floor of
Building. Landlord and Tenant hereby modify paragraph II, Phase I, subsection
(a) of the Basic Lease Information to delete any reference therein to "the 4th
floor" and to substitute "the 3rd floor" in lieu thereof. Landlord and Tenant
further agree that any other reference to the early occupancy of the 4th floor
appearing in the Lease shall be replaced to reference the early occupancy of the
3rd floor in lieu thereof.
3. Other Terms. All other terms, conditions and provisions of the Lease shall remain in full force and effect as of the date thereof.
4. Binding Effect. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.
5. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be an original, but all of which shall constitute one instrument.
EXECUTED to be effective on November 8, 1996.
LANDLORD:
MEDICAL PLAZA PARTNERS, LTD.
By: ORION PARTNERS MEDICAL PLAZA,
LTD., ITS GENERAL PARTNER
By: ORION PARTNERS, INC.,
ITS GENERAL PARTNER
By: /s/ T.H. Chandler
-----------------------------------------
Name: T.H. Chandler
---------------------------------------
Title: Sr. VP
--------------------------------------
|
TENANT:
BILLING INFORMATION CONCEPTS, INC.
By: /s/ Kelly E. Simmons
----------------------------------------
Name: Kelly E. Simmons
---------------------------------------
Title: Sr. VP
---------------------------------------
|
EXHIBIT 10.33
THIRD AMENDMENT TO LEASE AGREEMENT
This Third Amendment to Lease Agreement ("Third Amendment") is entered into by and between Medical Plaza Partners, Ltd., a Texas limited partnership ("Landlord"), and Billing Information Concepts, Inc., a Delaware corporation ("Tenant").
For and in consideration of One and No/100 Dollar ($1.00) and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, Landlord and Tenant hereby recite and agree as follows:
1. Recitals.
(a) Lease. Landlord and Tenant entered into the Office Building Lease Agreement ("Lease") dated July 11, 1996, with respect to certain Premises situated at 7411 John Smith Drive, San Antonio, Texas, as more particularly described in the Lease, which Lease was amended by a First Amendment to Lease Agreement executed effective September 30, 1996, and further amended by a Second Amendment to Lease Agreement executed effective November 8, 1996.
(b) Commencement Date Regarding Floors 2 through 6 of Building. Pursuant to paragraph II, Phase I, subsection (a), as amended by the Second Amendment to Lease Agreement, and subsection (b) of the Basic Lease Information of the Lease, Landlord and Tenant agreed that the Commencement Date with respect to the 3rd floor would be November 1, 1996, and with respect to the remaining Phase I floors, 2, 4, 5 and 6, would be the Completion Date as shown on Exhibit "D" attached to the Lease. Landlord and Tenant have mutually agreed to establish a revised Commencement Date for Floors 2, 3, 4, 5 and 6 of February 1, 1997, and Landlord and Tenant desire to enter into this Third Amendment to effect the same.
(c) Capitalized Terms. All capitalized terms used herein and not otherwise specifically defined shall have the same meaning as is ascribed to such terms in the Lease.
2. Agreement of Revised Commencement Date Regarding Floors 2, 3, 4, 5 and 6 of Building. Landlord and Tenant hereby modify paragraph II, Phase I, subsection (a), as amended by the Second Amendment to Lease Agreement, and subsection (b) of the Basic Lease Information to delete any references therein to a Commencement Date, and agree that the Commencement Date for Floors 2, 3, 4, 5 and 6 shall be February 1, 1997.
3. Other Terms. All other terms, conditions and provisions of the Lease shall remain in full force and effect as of the date thereof.
4. Binding Effect. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.
5. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be an original, but all of which shall constitute one instrument.
EXECUTED to be effective on January 24, 1997.
LANDLORD:
MEDICAL PLAZA PARTNERS, LTD.
By: ORION PARTNERS MEDICAL PLAZA
LTD., its General Partner
By: ORION PARTNERS, INC.,
its General Partner
By: /s/ T.H. Chandler
----------------------
Name: T.H. Chandler
--------------------
Title: Sr. VP
-------------------
|
TENANT:
BILLING INFORMATION CONCEPTS, INC.
By: /s/ Kelly E. Simmons
------------------------------------
Name: Kelly E. Simmons
----------------------------------
Title: CFO
---------------------------------
|
EXHIBIT 10.34
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into between Mike Hancock ("Employee") and Billing Concepts Corp. (the "Company") on the date indicated below. The terms and conditions of this Agreement are as follows:
1. EFFECTIVE DATE AND TERM. This Agreement shall commence on October 1, 1997, and end on September 30, 1998. The undersigned Employee's employment with the Company shall continue unless and until terminated as provided herein. Nothing in this Agreement is to be construed as imposing, whether by implication or otherwise, any legal or contractual obligations or restrictions upon the Company's ability to terminate the Employee beyond those set forth in Paragraph 9 below.
2. DUTIES. The undersigned Employee is employed to work exclusively and actively on behalf of the Company as Senior Vice President and Chief Operating Officer of Billing Concepts Systems, Inc. ("BCSI"), and Vice President of Billing Concepts Corp. ("BCC"). The Employee shall devote full time to his employment with the Company and extend all best efforts on behalf of the Company. The Employee agrees to abide by all Company policies and also agrees to abide by all terms and conditions contained within this Agreement. The Employee shall perform all duties associated with his employment with the Company and such other duties as are incidental or implied from the foregoing, consistent with the background, training and qualifications of the Employee or as may be reasonably delegated from time to time to the Employee as being in the best interests of the Company.
3. COMPENSATION.
A. Salary: During his employment, Employee will be paid a monthly base salary of Fifteen Thousand and No/100 Dollars ($15,000.00), less any applicable federal, state or local taxes and other required deductions. Said monthly base salary will be paid on the Company's regular pay dates. The obligation of Company to pay this salary or any of the benefits listed below to Employee pursuant to this Agreement shall terminate as of the date of termination of employment, pursuant to the provisions of this Agreement, except as provided by Paragraph 9 of this Agreement.
B. Bonus Potential: During his employment, Employee will be eligible for, but not guaranteed, an annual bonus of up to One Hundred Twenty Thousand and No/100 Dollars ($120,000.00), less any applicable federal, state or local taxes and other required deductions, payable from time to time and based upon the following, all at the discretion of the Company:
i. Up to a $30,000.00 bonus, contingent upon BCSI revenue for fiscal year 1998, as follows:
(a) $13,000,000.00 gross revenue = $7,000.00 bonus
(b) $16,000,000.00 gross revenue = $16,000.00 bonus
(c) $19,000,000.00 gross revenue = $7,000.00 bonus
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ii. Up to a $20,000.00 bonus, contingent upon BCSI income for fiscal year 1998, as follows:
(a) $3,800,000.00 in net income = $5,000.00 bonus
(b) $4,400,000.00 in net income = $10,000.00 bonus
(c) $5,000,000.00 in net income = $5,000.00 bonus
iii. Up to a $10,000.00 bonus, contingent upon BCSI gross margin for fiscal year 1998, as follows:
(a) 50% gross margin = $5,000.00 bonus
(b) 55% gross margin = $5,000.00 bonus
iv. Up to a $60,000.00 bonus, contingent upon subjective criteria as determined by Parris Holmes, Alan Saltzman and Mike Harrelson.
C. Stock Options.
i. Employee will be granted a non-qualified stock option to purchase seventy-five thousand (75,000) shares of Billing Concepts common stock at the lower of either: a) the closing price of the stock on the date the offer letter is signed, or, b) the closing price of the stock on the first day of employment with Billing Concepts. The right to exercise such options shall vest twenty-five percent (25%) on each of the four anniversary dates following the date of grant, provided Employee is still employed by the Company at such times. Employee's right to exercise shall expire on the seventh anniversary of the date of grant, provided that Employee is still employed by the Company on such date.
ii. Employee will be granted twenty-eight hundred (2,800) shares of Billing Concepts common stock, one-half of which (1,400 shares) will vest on September 30, 1998, and the remaining one-half (1,400 shares) will vest on September 30, 1999, provided Employee is employed by Company on such date.
Notwithstanding any other provision in this Agreement, nothing contained in this paragraph shall be construed as a guarantee of continued employment or employment beyond the one year term of this Agreement. Employee's entitlement to vesting and exercising the stock options referenced in this Paragraph 3(C) is expressly contingent upon Employee being employed by Company, pursuant to a separate written agreement, as of the dates for vesting and exercising the stock options as set forth in this paragraph.
D. Benefits. Employee shall be eligible for all Billing Concepts sponsored, funded or endorsed benefits provided to Executive Management, including, but not limited to retirement, group life and group health insurance, in accordance with the terms and conditions of said benefits, and such other benefits as are instituted from time to time for all similarly-situated employees of Billing Concepts. In addition, Employee is entitled to:
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i. Three (3) weeks of vacation per year, beginning October 1, 1997;
ii. A mutually agreeable corporate-paid furnished apartment in San
Antonio until March 31, 1998.
iii. Two corporate-paid round trip airline tickets per month between
San Antonio and Dallas until March 31, 1998.
4. REPRESENTATION. The undersigned Employee agrees not to make any representations concerning the Company or its services which are contrary or in addition to information released to the Employee by the Company. The undersigned Employee agrees to indemnify, defend and hold the Company harmless from any and all liability that may arise from said unauthorized representations.
5. INDEMNIFICATION. The undersigned Employee agrees to indemnify, defend and hold the Company harmless from any and all claims, demands, activities, suits, allegations, actions, or causes of action arising from or incident to, whether directly or indirectly, any intentional or willful act or omission on the part of the Employee in the conduct of his duties or any conduct outside the scope of his employment which may give rise to liability or potential liability on the part of the Company, its directors, officers, agents, representatives or employees.
6. CONFIDENTIAL INFORMATION. The Company has provided Employee confidential and proprietary information and trade secrets in exchange for the Employee's promise not to disclose them. The undersigned Employee agrees to treat all information concerning the Company, acquired or obtained as a result of his employment relationship with the Company, including, but without limitation, its products, services, systems, customers, employees, or future business plans as confidential during his employment and for a period of two (2) years from the termination, for any reason, of the Employee's employment with the Company, and to use such information solely for the benefit of the Company. The undersigned Employee agrees to return to the Company within fifteen (15) days from the date of his termination all books, catalogues, customer lists, credit cards, and any other material relating to the Company and its products, services, systems, customers, employees, or future business plans ("Company property"). The undersigned Employee agrees to pay for any Company property not returned in accordance with this paragraph.
7. COVENANT NOT TO COMPETE. The undersigned Employee agrees that during his employment and for a period of one (1) year from the termination, for any reason, of the Employee's employment with the Company, the Employee will not, directly or indirectly, engage in, be employed by, or own any interest in any firm or entity which sells or otherwise is engaged in products or services in the specific geographic areas covered by the Employee under this Agreement that are or would be competitive, whether directly or indirectly, to the Company's products and/or services for which the Employee receives or received compensation under this Agreement.
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Further, the undersigned Employee agrees that for a period of one (1) year from the termination, for any reason, of the Employee's employment with the Company, the Employee will not, directly or indirectly, solicit nor accept business from, or otherwise attempt to do business with, customers of the Company ("non-solicitation provision"). This non-solicitation provision shall be limited to the specific geographic areas covered by the Employee while employed by the Company.
Employee represents that his experience and capabilities are such that the restrictions contained herein will not prevent Employee from obtaining employment or otherwise earning a living at the same general economic benefit as reasonably required by him and that he has, prior to the executive of this Agreement, carefully reviewed this Agreement.
For a period of one (1) year immediately following the end of Employee's employment with the Company, Employee will inform each new employer, prior to accepting employment, of the existence and details of this Agreement and provide the employer with a copy of this Agreement.
8. ARBITRATION. As part of, and in consideration for this Agreement and the compensation and other benefits paid herein and in consideration for the Company's mutual agreement to arbitrate certain claims, Employee and the Company agree that any Dispute he may have against the Company, its subsidiaries, officers, directors, employees, agents, representatives, attorneys, successors, and assigns (herein referred to as "the Company"), under either state or federal law, arising out of Employee's employment with the Company or termination of employment will be submitted to final and binding arbitration in accordance with the Company's arbitration procedures adopting the procedures of the American Arbitration Association. By agreeing to arbitrate, Employee understands that he is not giving up any substantive rights under either state or federal law. Rather, Employee and the Company are mutually agreeing only to submit all Disputes to an arbitral, rather than judicial, forum.
Pursuant to the Company's arbitration procedures, the American Arbitration Association shall schedule any arbitration and appoint the arbitrator, if the parties cannot agree on the selection of the arbitrator. Employee understands that the filing and administrative fees of the arbitration will be borne equally by Employee and the Company. The arbitrator's fee will be paid by the Company in statutory claims by Employee. The arbitrator may award fees and costs in the award, and the decision of the arbitrator shall be final and binding on all matters. In the event that a party of this Agreement brings or pursues a Dispute in a court of law, which Dispute is subject to final and binding arbitration in accordance with the Company's arbitration procedures and should have been brought or submitted to arbitration pursuant to those procedures, that party shall pay all reasonable attorney's fees and court costs incurred by the other party in filing any motion to compel arbitration, motion to dismiss or other pleading with said court to enforce arbitration under those procedures.
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By Employee's signature below, Employee acknowledges that he has received a copy of the Company's arbitration procedures and has had the opportunity to review them. The undersigned employee further warrants that he has read the Company's arbitration procedures, understands them, and agrees to abide by their terms and provisions. Employee understands and agrees that the Company is engaged in transactions involving interstate commerce and that this Employment Agreement evidences a transaction involving commerce.
9. TERMINATION. Notwithstanding any other provision of this Agreement, the employment relationship between the parties may be terminated at any time, by either party, without requirement of cause upon written notice to the other party. If the Company terminates the employment relationship for any reason, Company shall continue to pay Employee his monthly base salary pursuant to Paragraph 3(A) until September 30, 1998. Upon termination, all other obligations between the parties will cease, except for Employee's continuing obligations to Company pursuant to Paragraphs 6, 7, and 8 of this Agreement.
10. ENTIRE AGREEMENT. This Agreement shall constitute the entire agreement between the parties with respect to the subject matter hereof and may not be changed, modified or altered except by written agreement signed by the Company and the Employee, or by judicial reformation, if applicable, as noted in Paragraph 12 below. It is expressly understood that no oral understandings or agreements exist outside of the written terms of this Agreement, and that all oral understandings and agreements have been made apart of and incorporated within this written Agreement.
11. APPLICABLE LAW. This Agreement shall be construed and enforced under the laws of the State of Texas, shall be considered as having been entered into in the State of Texas, and shall be performable in Bexar County, San Antonio, Texas.
12. SEVERABILITY. Should any provision of this Agreement be found to be in violation of any federal, state or local statute or regulation or by other operation of law or judicial interpretation be therefore deemed invalid, all other terms and conditions of this Agreement shall remain in full force and in effect. To the extent possible and permitted by applicable law, judicial reformation of this Agreement, or any provision hereof, is acknowledged by the parties to be preferred and desired to preserve the intent and purpose of any provision herein to the fullest extent allowed by applicable law, should said provision be found or deemed to be unlawful and invalid by a court of competent jurisdiction.
IN WITNESS WHEREOF, the parties, on the day and year indicated below, have executed this Agreement.
DATED this 1st day of October, 1997.
EMPLOYEE: BILLING CONCEPTS CORP.:
/s/ Michael Hancock By: /s/ Parris H. Holmes, Jr.
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Mike Hancock Parris H. Holmes, Jr.
Chairman of the Board and
Chief Executive Officer
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EXHIBIT 10.35
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made effective the first day of January, 1998, by and between BILLING CONCEPTS CORP., a Delaware corporation, with principal offices located at 7411 John Smith Drive, Suite 200, San Antonio, Texas 78229 (the "Company"), and PAUL L. GEHRI, a resident of San Antonio, Bexar County, Texas (the "Employee").
W I T N E S S E T H:
WHEREAS, the Employee is now employed by the Company, and the Employee and the Company desire to enter into an agreement relating to such employment, outlining the duties and obligations of each:
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereby agree as follows:
1. EMPLOYMENT. The Company agrees to continue to employ the Employee, and the Employee agrees to continue to be employed by the Company, subject to the terms and conditions set forth herein.
2. TERM. Subject to the provisions hereof, the term of the Employee's employment by the Company under this Agreement shall be for a period of one (1) year commencing on the date hereof; provided that such term of employment shall continue thereafter unless and until terminated by either the Company or the Employee upon no less than one hundred twenty (120) days' prior written notice to the other of the desire to terminate such employment. The term of the Employee's employment hereunder, including any subsequent continuation of the original term, is hereinafter referred to as the "Employment Period."
3. POSITION AND DUTIES. During the Employment Period, the Employee shall serve as Senior Vice President of Sales of the Company, with such assignments, powers and duties as are assigned or delegated to him by the Chairman of the Board of Directors of Billing Concepts Corp., the parent corporation of the Company (which at present is Mr. Parris H. Holmes, Jr.), or his authorized representative. Such assignments, powers and duties may, from time to time, be modified by the Company, as the Company's needs may require. The Employee shall also, at the request of the Company, perform similar services for any Affiliate (as hereinafter defined) of the Company without additional compensation. The Employee agrees to devote all of his business time, skill, attention and best efforts to the business of the Company and its Affiliates in the advancement of the best interests of the Company and its Affiliates. As used in this Agreement, the term "Affiliate" of the Company means any person or corporation that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under the control of the Company or its parent corporation. During the Employment Period, the Employee agrees to abide by all Company policies which may be in effect from time to time.
4. COMPENSATION.
A. For all services rendered by the Employee to the Company during the Employment Period, the Company shall pay the Employee a salary at the rate of One Hundred Fifty Thousand and 00/100 Dollars ($150,000.00) annually, plus commissions earned pursuant to the commission schedule attached hereto as Exhibit "A" and incorporated herein for all purposes. The compensation is to be payable, subject to such withholdings as are required by law, in installments in accordance with the Company's customary payroll practices.
B. The Employee will be eligible for bonuses from a bonus pool, the make-up, terms, conditions and awards therefrom to be determined by the Compensation Committee of the Board of Directors of the Company.
5. OFFICE FACILITIES. During the Employment Period, the Company will furnish the Employee, without charge, with suitable office facilities for the purpose of performing his duties
hereunder, which facilities shall include secretarial, telephone, clerical and support personnel and services, and shall be similar to those furnished to employees of the Company having comparable positions.
6. FRINGE BENEFITS; VACATIONS. During the Employment Period, the Employee shall be entitled to participate in or receive benefits under such pension, medical and life insurance and other employee benefit plans of the Company which may be in effect from time to time, to the extent he is eligible under the terms of those plans, on the same basis as other employees of the Company having comparable positions. The Employee shall be entitled to vacations with pay in accordance with the policies of the Company which may be in effect from time to time.
7. EXPENSES. Subject to such policies regarding expenses and expense reimbursement as may be adopted from time to time by the Company, and compliance therewith by the Employee, the Employee is authorized to incur reasonable expenses in the performance of his duties hereunder, and the Company will reimburse the Employee for such reasonable out-of-pocket expenses upon the presentation by the Employee of an itemized account and receipts satisfactory to the Company.
8. TERMINATION.
A. If the Employee dies or becomes disabled during the Employment Period, the Employee's salary and all other rights under this Agreement or as an employee of the Company (except for salary and other rights accrued prior thereto) shall terminate at the end of the month during which death or disability occurs. For purposes of this Agreement, the Employee shall be deemed to be "disabled" if, at any time during the Employment Period, the Employee shall have been unable to perform the essential duties of his employment hereunder, with or without accommodation, due to physical or mental incapacity for a period of ninety (90) days or any ninety (90) days in a period of two hundred seventy (270) days.
B. If the Employee fails to perform the essential duties of his employment hereunder in a manner reasonably satisfactory to the Company or to comply with any of the provisions hereof, or commits any act of misconduct, malfeasance, gross negligence or disloyalty, the Employment Period and the Employee's salary and all other rights under this Agreement as an employee of the Company, shall immediately terminate upon written notice from the Company to the Employee, but such termination shall not affect the liability of the Employee by reason of his misconduct, malfeasance, gross negligence or disloyalty.
9. COVENANTS NOT TO DISCLOSE. The Company agrees to provide the Employee with confidential and proprietary information and trade secrets in exchange for the Employee's promise not to disclose them (the "Non-disclosure Provision"). In accordance with this Non-disclosure Provision, the Employee covenants and agrees that he will not, at any time during or after the termination of his employment by the Company, communicate, divulge or disclose to any Person (as hereinafter defined) or use for his own account, or advise, discuss with, or in any way assist any other Person in obtaining or learning about, without the prior written consent of the Company, information concerning any of the Company's services, systems, employees, customers, pricing practices, strategies, plans, general or specific "know-how," training programs, methods of doing business, processes, programs, flow charts or equipment used in its business, or any other secret or confidential information (including, without limitation, any customer lists, trade secrets, future business plans or information concerning any work done by the Company for its customers or done in any effort to solicit or obtain customers) concerning the business and affairs of the Company or any of its Affiliates acquired or obtained by the Employee during the term of his employment by the Company. The Employee further covenants and agrees that he shall retain all such knowledge and information concerning the foregoing in trust for the sole benefit of the Company and its Affiliates and their respective successors and assigns. For purposes of this Agreement, the term "Person" shall mean any individual, corporation, partnership, association, trust, estate or other entity of organization.
The Employee agrees to return to the Company, within fifteen (15) days from the date of termination of his employment by the Company, all books, catalogues, customer lists, computer
diskettes and files, company credit cards, and any other materials and documents relating to Company and its services, systems, employees, customers, pricing practices, strategies, plans, general or specific "know-how," training programs, methods of doing business, processes, programs, flow charts or equipment used in, or any secret or confidential information (including, without limitation, any customer lists, trade secrets, future business plans or information concerning any work done by the Company for its customers or done in any effort to solicit or obtain customers) concerning the business and affairs of the Company or any of its Affiliates acquired or obtained by the Employee during the term of his employment by the Company. The Employee agrees not to use or retain any copies of any such materials after the date of termination of his employment by the Company.
10. COVENANT NOT TO COMPETE. To enforce the Non-disclosure Provision contained in Section 9 above, the Employee covenants and agrees that, during the Employment Period and for a period of one (1) year after his resignation or termination of employment by the Company, he will not, directly or indirectly, own any interest in, render services or advice to, or be engaged in a business which is similar to or in competition with the business of providing third-party billing clearinghouse, direct billing, information management, billing management, and enhanced billing products or services which have been, are then, or will in the future be, marketed through or by the Company in the geographic areas where the Company had or solicited customers during the Employment Period, except upon the written consent of the Company.
The Employee agrees that for a period of one (1) year from his resignation or termination of employment by the Company, the Employee will not, directly or indirectly, solicit or accept business from, or otherwise attempt to do business with, any customers of the Company (the "Non-Solicitation Provision"). This Non-Solicitation Provision shall be limited to the same specific geographic area noted above.
The Employee represents that his experience and capabilities are such that the restrictions contained herein will not prevent the Employee from obtaining employment, or otherwise
earning a living, at the same general economic benefit as reasonably required by him and that he has, prior to the execution of this Agreement, carefully reviewed this Agreement.
11. ESSENTIAL NATURE OF COVENANTS. The covenants of the Employee contained in Sections 9 and 10 shall be construed as independent of any other provision of this Agreement. The existence of any claim or cause of action of the Employee against the Company or any of its Affiliates, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of said covenants. The Employee understands that the covenants contained in Sections 9 and 10 are essential elements of the transactions contemplated by this Agreement and, but for the agreement of the Employee to Sections 9 and 10, the Company would not have agreed to enter into such transactions. The Employee has been advised to consult with his counsel in order to be informed in all respects concerning the reasonableness and propriety of Sections 9 and 10, with specific regard to the nature of the business conducted by the Company, and the Employee acknowledges that Sections 9 and 10 are reasonable and acceptable in all respects.
12. INDEMNIFICATION. The Employee agrees to indemnify, defend and hold the Company harmless from any and all claims, demands, activities, suits, allegations, actions, or causes of action arising from or incident to, whether directly or indirectly, any misconduct, malfeasance, gross negligence, disloyalty, representation or omission on the part of the Employee in the conduct of his duties or any conduct outside the scope of his employment which may give rise to liability or potential liability on the part of the Company, its directors, officers, agents, representatives or employees.
13. REMEDIES. It is stipulated that the parties to this Agreement recognize that a breach by Employee of his obligations under Sections 9 and 10 of this Agreement cannot be adequately compensated by money damages. In the event of a breach or threatened breach by the Employee of Section 9 or 10, the Company shall be fully entitled to seek and obtain a temporary restraining order and an injunction restraining the Employee from the commission of such breach. Nothing contained herein shall be construed as prohibiting the Company from pursuing
any other remedies available to it for such breach or threatened breach, including the recovery of money damages.
14. ARBITRATION. As part of, and in consideration for this Agreement and the compensation and other benefits paid by the Company to the Employee herein, and in consideration for the Company's mutual agreement to arbitrate certain claims, the Employee agrees that any dispute he may have against the Company, its Affiliates, directors, officers, agents, representatives, attorneys, employees, successors or assigns, under either state or federal law, arising out of Employee's employment by the Company or termination of employment will be submitted to final and binding arbitration in accordance with the Company's arbitration procedures. By agreeing to arbitrate, the Employee understands that he is not giving up any substantive rights under either state or federal law. Rather, the Employee and the Company are only mutually agreeing to submit all disputes to an arbitral, rather than judicial, forum.
Prior to submitting any dispute to arbitration, the parties shall first attempt to resolve the matter by the claimant notifying the other party in writing of the dispute; by giving the other party the opportunity to respond in writing to the dispute within fifteen (15) days of receipt of the written claim; and by giving the other party the opportunity to meet and confer. If the matter is not resolved in this manner, the dispute may then proceed to arbitration at the request of either party.
Pursuant to the Company's arbitration procedures, the American Arbitration Association shall schedule any arbitration and appoint the arbitrator, if the parties cannot agree on the selection of the arbitrator. The Employee understands that the cost of the arbitrator will be borne equally by the Employee and the Company (although the Employee will not be required to contribute more than $2,500.00 towards the cost of the arbitrator), and that the decision of the arbitrator shall be final and binding upon the parties. In the event that a party to this Agreement brings or pursues a dispute in a court of law, which dispute is subject to final and binding arbitration in accordance with this Section 14, and should have been brought or submitted to arbitration pursuant to the foregoing procedures, that party shall pay all reasonable attorneys'
fees and court costs incurred by the other party in filing any motion to compel arbitration, motion to dismiss or other pleadings with said court to enforce arbitration pursuant to this Section 14.
The Employee understands and agrees that the Company is engaged in transactions involving interstate commerce and that this Section 14 evidences a transaction involving commerce.
15. WAIVER OF BREACH. The waiver by the Company of a breach of any provision of this Agreement by the Employee shall not operate or be construed as a waiver of any subsequent breach by the Employee.
16. BINDING EFFECT; ASSIGNMENT. This Agreement shall inure to the benefit of and shall be binding upon the parties hereto and their respective successors, assigns, heirs and legal representatives. Insofar as the Employee is concerned, this Agreement, being personal, cannot be assigned.
17. SEVERABILITY; JUDICIAL REFORMATION. The invalidity of all or any part of any section or provision of this Agreement shall not render invalid the remainder of this Agreement or the remainder of such section or provision. If any section or provision of this Agreement is so broad as to be unenforceable, such section or provision shall be reformed and interpreted to be only so broad as to be enforceable. To the extent possible and permitted by applicable law, judicial reformation of this Agreement, or any section or provision hereof, is acknowledged by the parties to be preferred and desired to preserve the intent and purpose of any section or provision herein to the fullest extent allowed by applicable law, should said section or provision be found or deemed to be unlawful and invalid by a court of competent jurisdiction.
18. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which, when executed, shall be deemed to be an original, but all of which together shall constitute one and the same instrument.
19. GOVERNING LAW. This Agreement shall be construed (both as to validity and performance) and enforced in accordance with and governed by the laws of the State of Texas.
20. NOTICE. All notices which are required or which may be given under this Agreement shall be in writing and shall be deemed to have been duly given when delivered in person or three (3) business days after being mailed by registered or certified first-class mail, postage prepaid, return receipt requested, if to the Employee at 14939 Dancers Image, San Antonio, Texas 78248, or if to the Company, at the address listed above, or to such other address as either party shall have specified by written notice to the other party.
21. ENTIRE AGREEMENT; MODIFICATION. This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior agreements, understandings and arrangements, oral or written, between the parties with respect to the subject matter hereof. This Agreement may not be changed, modified or altered except by written agreement signed by the Company and the Employee or by judicial reformation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and date first above written.
BILLING CONCEPTS CORP. EMPLOYEE BY: /S/ ALAN W. SALTZMAN BY: /S/ PAUL L. GEHRI ------------------------------- --------------------------------- ALAN W. SALTZMAN PAUL L. GEHRI PRESIDENT |
EXHIBIT 10.36
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into this day of ____________, 199__, by and between W. Audie Long ("Employee") and Billing Information Concepts Corp., a Delaware corporation (the "Company") to be effective as January 15, 1998 (the "Effective Date").
WITNESSETH:
WHEREAS, the Company and Employee desire to enter into an agreement to establish the terms of Employee's employment with the Company and to set forth each party's duties and obligations to the other;
NOW, THEREFORE, in consideration of the foregoing premises, the mutual agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, this Agreement is entered into to read as follows:
ARTICLE I
DUTIES
1.1 DUTIES. During the term of this Agreement, the Company agrees to employ Employee as General Counsel, Senior Vice President and Secretary of the Company, and Employee agrees to serve the Company in such capacities or in such other capacities (subject to Employee's termination rights under Section 4.2) as the Board of Directors of the Company may direct, all upon the terms and subject to the conditions set forth in this Agreement.
1.2 EXTENT OF DUTIES. Employee shall devote substantially all of his business time, energy and skill to the affairs of the Company as the Company, acting through its Board of Directors, shall reasonably deem necessary to discharge Employee's duties in such capacities. Employee may participate in social, civic, charitable, religious, business, education or professional associations, so long as such participation would not materially detract from Employee's ability to perform his duties under this Agreement. Employee shall not engage in any other business activity during the term of this Agreement without the prior written consent of the Company, other than the passive management of employee's personal investments or activities which would not materially detract from Employee's ability to perform his duties under this Agreement.
ARTICLE II
TERM OF EMPLOYMENT
2.1 GENERAL TERM OF EMPLOYMENT. The term of this Agreement shall commence on the Effective Date and continue for a period of one year. The term of this Agreement shall
be automatically extended on each one year anniversary of this Agreement for an additional one-year term unless, at least 30 days prior to the end of the then effective one-year term, the Company shall give Employee written notice of its election to terminate this Agreement as of the end of the then effective one-year term. In the event the Company elects to so terminate this Agreement, the Company shall pay Employee, within 15 days of the effective date of such termination, a lump-sum payment equal to (without discounting to present value) one times' his then effective annual base salary under Section 3.1 hereof and shall continue Employee's medical, health and disability benefits for one year from such termination. Payment of such sums and continuation of such medical benefits by the Company shall constitute Employee's full severance pay and the Company shall have no further obligation to Employee arising out of such termination. This Agreement is also subject to earlier termination as hereinafter provided.
ARTICLE III
COMPENSATION
3.1 ANNUAL BASE COMPENSATION. As compensation for services rendered under this Agreement, Employee shall be entitled to receive from Company an annual base salary of $150,000 (before standard deductions) during the initial term of this Agreement. Employee's annual base salary shall be subject to review and adjustment by the Compensation Committee of the Company (the "Compensation Committee") on an annual basis, provided that any such adjustment shall not result in a reduction in Employee's annual base salary below $150,000 without Employee's consent. Employee's annual base salary shall be payable at regular intervals in accordance with the prevailing practice and policy of the Company.
3.2 INCENTIVE BONUS. As additional compensation for services rendered under this Agreement, the Compensation Committee may, in its sole discretion and without any obligation to do so, declare that Employee shall be entitled to an annual incentive bonus (whether payable in cash, stock, stock rights or other property) as the Compensation Committee shall determine. If any such bonus is declared, the bonus shall be payable in accordance with the terms prescribed by the Compensation Committee.
3.3 OTHER BENEFITS. Employee shall, in addition to the compensation provided for in Sections 3.1 and 3.2 above, be entitled to the following additional benefits:
(a) MEDICAL, HEALTH AND DISABILITY BENEFITS. Employee shall be entitled to receive all of the medical, health and disability benefits that may, from time to time, be provided by the Company to its executive officers.
(b) OTHER BENEFITS. Employee shall also be entitled to receive any other benefits provided by the Company to all employees of Company as a group, or all executive officers of the Company as a group, including any profit sharing, 401(k) or retirement benefits.
(c) VACATION PAY. Employee shall be entitled to an annual vacation as determined in accordance with the prevailing practice and policy of the Company.
(d) HOLIDAYS. Employee shall be entitled to holidays in accordance with the prevailing practice and policy of the Company.
(e) REIMBURSEMENT OF EXPENSES. The Company shall reimburse Employee for all expenses reasonably incurred by Employee on behalf of the Company in accordance with the prevailing practice and policy of the Company.
(f) APARTMENT. Employer agrees to continue, at its expense, to provide to Employee the apartment at The Meridian Apartments including the provision of all related utility and telephone expenses, all at Company's expense.
ARTICLE IV
TERMINATION
4.1 TERMINATION BY THE COMPANY WITHOUT CAUSE. Subject to the provisions of this Section 4.1, this Agreement may be terminated by the Company without cause upon 30 days prior written notice thereof given to Employee. In the event of termination pursuant to this Section 4.1, (a) the Company shall pay Employee, within 15 days of the effective date of such termination, a lump-sum payment equal to (without discounting to present value) one times' his then effective annual base salary under Section 3.1 hereof and (b) Employee shall be entitled to all benefits under Section 3.3 hereof, through the expiration of the one year term then in effect, to the extent continuation of such benefits is not prohibited by application state and/or federal law. Payment of such sum by the Company and continuation of benefits provided under Section 3.3 shall constitute Employee's full severance pay and the Company shall have no further obligation to Employee arising out of such termination.
4.2 VOLUNTARY TERMINATION BY EMPLOYEE FOR GOOD REASON. Employee may at
any time voluntarily terminate his employment for "good reason" (as defined
below). In the event of such voluntary termination for "good reason," (a) the
Company shall pay Employee, within 15 days of the effective date of such
termination, a lump-sum payment equal to (without discounting to present value)
one times' his then effective annual base salary under Section 3.1 hereof and
(b) the Company shall provide the continued benefit coverage described in
Section 4.1.
For purposes of this Agreement, "good reason" shall mean the occurrence of any of the following events:
(a) Removal from the offices Employee holds on the date of this Agreement or a material reduction in Employee's authority or responsibility, including, without limitation, involuntary removal from the Board of Directors, but not including termination of Employee for "cause," as defined below;
(b) A reduction in the Employee's then effective base salary under Section 3.1; or
(c) The Company otherwise commits a material breach of this Agreement.
4.3. TERMINATION BY THE COMPANY FOR CAUSE. The Company may terminate this Agreement at any time if such termination is for "cause" (as defined below), by delivering to Employee written notice describing the cause of termination 30 days before the effective date of such termination and by granting Employee at least 30 days to cure the cause. In the event the employment of Employee is terminated for "cause," Employee shall be entitled only to the base salary earned pro rata to the date of such termination with no entitlement to any base salary continuation payments or benefits continuation (except as specifically provided by the terms of an employee benefit plan of the Company). Except as otherwise provided in this Agreement, the determination of whether Employee shall be terminated for "cause" shall be made by the Board of Directors of the Company, in the reasonable exercise of its business judgment, and shall be limited to the occurrence of the following events:
(a) Conviction of or a plea of nolo contendere to the charge of a felony (which, through lapse of time or otherwise, is not subject to appeal);
(b) Willful refusal without proper legal cause to perform, or gross negligence in performing, Employee's duties and responsibilities;
(c) Material breach of fiduciary duty to the Company through the misappropriation of Company funds or property; or
(d) The unauthorized absence of Employee from work (other than for sick leave or disability) for a period of 30 working days or more during any period of 45 working days during the term of this Agreement.
4.4 TERMINATION UPON DEATH OR PERMANENT DISABILITY. In the event that Employee dies, this Agreement shall terminate upon the Employee's death. Likewise, if the Employee becomes unable to perform the essential functions of the position, with or without reasonable accommodation, on account of illness, disability, or other reason whatsoever for a period of more than six consecutive or nonconsecutive months in any twelve-month period, this Agreement shall terminate effective upon such incapacity, and Employee (or his legal representatives) shall be entitled only to the base salary earned pro rata to the date of such termination with no entitlement to any base salary continuation payments or benefits continuation (except as specifically provided by the terms of an employee benefit plan of the Company).
4.5 VOLUNTARY TERMINATION BY EMPLOYEE. Employee may terminate this Agreement at any time upon delivering 30 days' written notice of resignation to the Company. In the event of such voluntary termination other than for "good reason" (as defined above), Employee shall be entitled to his base salary earned pro rata to the date of his resignation, but
no base salary continuation payments or benefits continuation (except as specifically provided by the terms of an employee benefit plan of the Company). On or after the date the Company receives notice of Employee's resignation, the Company may, at its option, pay Employee his base salary through the effective date of his resignation and terminate his employment immediately.
4.6 TERMINATION FOLLOWING CHANGE OF CONTROL.
(a) Notwithstanding anything to the contrary contained herein, should Employee at any time within 12 months of the occurrence of a "change of control" (as defined below) cease to be an employee of the Company (or its successor), by reason of (i) termination by the Company (or its successor) other than for "cause" (following a change of control, "cause" shall be limited to the conviction of or a plea of nolo contendere to the charge of a felony which, through lapse of time or otherwise, is not subject to appeal), or a material breach of fiduciary duty to the Company through the misappropriation of Company funds or property) or (ii) voluntary termination by Employee for "good reason upon change of control" (as defined below), then in any such event, (1) the Company shall pay Employee, within 45 days of the severance of employment described in this Section 4.6, a lump-sum payment equal to (without discounting to present value) one times' his then effective base salary under Section 3.1 hereof, and (2) all outstanding stock options held by Employee not already vested and exercisable shall become fully vested and exercisable. In addition, Company shall continue all benefits under Section 3.3 hereof, through the expiration of the one year term then in effect, to the extent continuation of such benefits is not prohibited by applicable state and/or federal law.
(b) Employee shall also be entitled to an additional payment,
to the extent all payments to Employee (whether pursuant to this Agreement or
any other agreement whatsoever) in connection with a change of control as
defined in this Section 4.6 do not exceed in aggregate, the maximum amount that
could be paid to Employee, without triggering an excess parachute payment under
Section 280G(b) of the Internal Revenue Code of 1986, as amended (the "Code"),
and the resulting excise tax under Section 4999 of the Code, (referred to herein
as the "maximum payment amount") equal to an amount, which when added to the
amounts payable to the Employee under paragraph (a) equals the maximum payment
amount; it being the express intention of the parties that Employee in all cases
(whether through this Agreement or any other agreement whatsoever) receive the
maximum payment amount in connection with a change of control without creating
an excess parachute payment. If such a payment is required under this paragraph
(b) in addition to the amounts set forth in paragraph (a) above, it shall be
paid at the time and in the manner set forth under paragraph (a) above.
(c) In determining the amount to be paid to Employee under this Section 4.6, as well as the limitation determined under Section 280G of the Code, (i) no portion of the total payments which Employee has waived in writing prior to the date of the payment of benefits under this Agreement will be taken into account, (ii) no portion of the total payments which nationally recognized tax counsel (whether through consultation or retention of any actuary, consultant or other expert), selected by the Company's independent auditors and acceptable to Employee, (referred to herein as "Tax Counsel") determines not to constitute a
"parachute payment" within the meaning of Section 280G(b)(2) of the Code will be taken into account, (iii) no portion of the total payments which Tax Counsel determines to be reasonable compensation for services rendered within the meaning of Section 280G(b)(4) of the Code will be taken into account, and (iv) the value of any non-cash benefit or any deferred payment or benefit included in the total payments will be determined by the Company's independent auditors in accordance with Sections 280G(d)(3) and (iv) of the Code.
(d) As used in this Section, voluntary termination by Employee for "good reason upon change of control" shall mean (i) removal of Employee from the offices Employee holds on the date of this Agreement, (ii) a material reduction in Employee's authority or responsibility, including, without limitation, involuntary removal from the Board of Directors, (iii) relocation of the Company's headquarters from Bexar County, Texas, (iv) a reduction in Employee's then effective base salary under Section 3.1, or (v) the Company otherwise commits a breach of this Agreement.
(e) As used in this Agreement, a "change of control" shall be
deemed to have occurred if (i) any "Person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), is or becomes a "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing more than 30% of the combined voting power of the Company's then
outstanding securities, or (ii) at any time during the 24-month period after a
tender offer, merger, consolidation, sale of assets or contested election, or
any combination of such transactions, at least a majority of the Company's Board
of Directors shall cease to consist of "continuing directors" (meaning directors
of the Company who either were directors prior to such transaction or who
subsequently became directors and whose election, or nomination for election by
the Company's stockholders, was approved by a vote of at least two-thirds of the
directors then still in office who were directors prior to such transaction), or
(iii) the stockholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation that
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at least 60% of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or (iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement of sale or disposition by
the Company of all or substantially all of the Company's assets.
(f) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company or any of its affiliates to or for the benefit of Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (any such payments or distributions being individually referred to herein as a "Payment," and any two or more of such payments or distributions being referred to herein as "Payments"), would be subject to the excise tax imposed by Section 4999 of the Code (such excise tax, together with any interest thereon, any penalties, additions to tax, or additional amounts with respect to such excise tax, and any interest in respect of such penalties, additions to tax or additional amounts,
being collectively referred herein to as the "Excise Tax"), then Employee shall be entitled to receive an additional payment or payments (individually referred to herein as a "Gross-Up Payment" and any two or more of such additional payments being referred to herein as "Gross-Up Payments") in an amount such that after payment by Employee of all taxes (as defined in paragraph (p) below) imposed upon the Gross-Up Payment, Employee retains an amount of such Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
(g) Subject to the provisions of paragraph (h) through (n) below, any determination (individually, a "Determination") required to be made under this Section 4.6, including whether a Gross-Up Payment is required and the amount of such Gross-Up Payment, shall initially be made, at the Company's expense, by Tax Counsel. Tax Counsel shall provide detailed supporting legal authorities, calculations, and documentation both to the Company and Employee within 15 business days of the termination of Employee's employment, if applicable, or such other time or times as is reasonably requested by the Company or Employee. If Tax Counsel makes the initial Determination that no Excise Tax is payable by Employee with respect to a Payment or Payments, it shall furnish Employee with an opinion reasonably acceptable to Employee that no Excise Tax will be imposed with respect to any such Payment or Payments. Employee shall have the right to dispute any Determination (a "Dispute") within 15 business days after delivery of Tax Counsel's opinion with respect to such Determination. The Gross-Up Payment, if any, as determined pursuant to such Determination shall, at the Company's expense, be paid by the Company to Employee within five business days of Employee's receipt of such Determination. The existence of a Dispute shall not in any way affect Employee's right to receive the Gross-Up Payment in accordance with such Determination. If there is no Dispute, such Determination shall be binding, final and conclusive upon the Company and Employee, subject in all respects, however, to the provisions of paragraph (h) through (n) below. As a result of the uncertainty in the application of Sections 4999 and 280G of the Code, it is possible that Gross-Up Payments (or portions thereof) which will not have been made by the Company should have been made ("Underpayment"), and if upon any reasonable written request from Employee or the Company to Tax Counsel, or upon Tax Counsel's own initiative, Tax Counsel, at the Company's expense, thereafter determines that Employee is required to make a payment of any Excise Tax or any additional Excise Tax, as the case may be, Tax Counsel shall, at the Company's expense, determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to Employee.
(h) The Company shall defend, hold harmless, and indemnify Employee on a fully grossed-up after tax basis from and against any and all claims, losses, liabilities, obligations, damages, impositions, assessments, demands, judgements, settlements, costs and expenses (including reasonable attorneys', accountants', and experts' fees and expenses) with respect to any tax liability of Employee resulting from any Final Determination (as defined in paragraph (o) below) that any Payment is subject to the Excise Tax.
(i) If a party hereto receives any written or oral communication with respect to any question, adjustment, assessment or pending or threatened audit, examination, investigation or administrative, court or other proceeding which, if pursued successfully, could result in or give rise to a claim by Employee against the Company under this paragraph
(i) ("Claim"), including, but not limited to, a claim for indemnification of Employee by the Company under paragraph (h) above, then such party shall promptly notify the other party hereto in writing of such Claim ("Tax Claim Notice").
(j) If a Claim is asserted against Employee ("Employee Claim"), Employee shall take or cause to be taken such action in connection with contesting such Employee Claim as the Company shall reasonably request in writing from time to time, including the retention of counsel and experts as are reasonably designated by the Company (it being understood and agreed by the parties hereto that the terms of any such retention shall expressly provide that the Company shall be solely responsible for the payment of any and all fees and disbursements of such counsel and any experts) and the execution of powers of attorney, provided that:
(i) within 30 calendar days after the Company receives or delivers, as the case may be, the Tax Claim Notice relating to such Employee Claim (or such earlier date that any payment of the taxes claimed is due from Employee, but in no event sooner than five calendar days after the Company receives or delivers such Tax Claim Notice), the Company shall have notified Employee in writing ("Election Notice") that the Company does not dispute its obligations (including, but not limited to, its indemnity obligations) under this Agreement and that the Company elects to contest, and to control the defense or prosecution of, such Employee Claim at the Company's sole risk and sole cost and expense; and
(ii) the Company shall have advanced to Employee on an interest-free basis, the total amount of the tax claimed in order for Employee, at the Company's request, to pay or cause to be paid the tax claimed, file a claim for refund of such tax and, subject to the provisions of the last sentence of paragraph (l) below, sue for a refund of such tax if such claim for refund is disallowed by the appropriate taxing authority (it being understood and agreed by the parties hereto that the Company shall only be entitled to sue for a refund and the Company shall not be entitled to initiate any proceeding in, for example, United States Tax Court) and shall indemnify and hold Employee harmless, on a fully grossed-up after tax basis, from any tax imposed with respect to such advance or with respect to any imputed income with respect to such advance; and
(iii) the Company shall reimburse Employee for any and all costs and expenses resulting from any such request by the Company and shall indemnify and hold Employee harmless, on fully grossed-up after-tax basis, from any tax imposed as a result of such reimbursement.
(k) Subject to the provisions of paragraph (j) above, the Company shall have the right to defend or prosecute, at the sole cost, expense and risk of the Company, such Employee Claim by all appropriate proceedings, which proceedings shall be defended or prosecuted diligently by the Company to a Final Determination; provided, however, that (i) the Company shall not, without Employee's prior written consent, enter into any compromise or settlement of such Employee Claim that would adversely affect Employee, (ii) any request
from the Company to Employee regarding any extension of the statute of limitations relating to assessment, payment, or collection of taxes for the taxable year of Employee with respect to which the contested issues involved in, and amount of, the Employee Claim relate is limited solely to such contested issues and amount, and (iii) the Company's control of any contest or proceeding shall be limited to issues with respect to the Employee Claim and Employee shall be entitled to settle or contest, in his sole and absolute discretion, any other issue raised by the Internal Revenue Service or any other taxing authority. So long as the Company is diligently defending or prosecuting such Employee Claim, Employee shall provide or cause to be provided to the Company any information reasonably requested by the Company that relates to such Employee Claim, and shall otherwise cooperate with the Company and its representatives in good faith in order to contest effectively such Employee Claim. The Company shall keep Employee informed of all developments and events relating to any such Employee Claim (including, without limitation, providing to Employee copies of all written materials pertaining to any such Employee Claim), and Employee or his authorized representatives shall be entitled, at Employee's expense, to participate in all conferences, meetings and proceedings relating to any such Employee Claim.
(l) If, after actual receipt by Employee of an amount of a tax claimed (pursuant to an Employee Claim) that has been advanced by the Company pursuant to paragraph (j)(ii) above, the extent of the liability of the Company hereunder with respect to such tax claimed has been established by a Final Determination, Employee shall promptly pay or cause to be paid to the Company any refund actually received by, or actually credited to, Employee with respect to such tax (together with any interest paid or credited thereon by the taxing authority and any recovery of legal fees from such taxing authority related thereto), except to the extent that any amounts are then due and payable by the Company to Employee, whether under the provisions of this Agreement or otherwise. If, after the receipt by Employee of an amount advanced by the Company pursuant to paragraph (j)(ii) above, a determination is made by the Internal Revenue Service or other appropriate taxing authority that Employee shall not be entitled to any refund with respect to such tax claimed and the Company does not notify Employee in writing of its intent to contest such denial of refund prior to the expiration of thirty days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of any Gross-Up Payments and other payments required to be paid hereunder.
(m) With respect to any Employee Claim, if the Company fails to deliver an Election Notice to Employee within the period provided in paragraph (j)(i) above or, after delivery of such Election Notice, the Company fails to comply with the provisions of paragraph (j)(ii) above and (iii) and (k) above, then Employee shall at any time thereafter have the right (but not the obligation), at his election and in his sole and absolute discretion, to defend or prosecute, at the sole cost, expense and risk of the Company, such Employee Claim. Employee shall have full control of such defense or prosecution and such proceedings, including any settlement or compromise thereof. If requested by Employee, the Company shall cooperate, and shall cause its affiliates to cooperate, in good faith with Employee and his authorized representatives in order to contest effectively such Employee Claim. The Company may attend, but not participate in or control, any defense, prosecution, settlement or
compromise of any Employee Claim controlled by Employee pursuant to this paragraph (m) and shall bear its own costs and expenses with respect thereto. In the case of any Employee Claim that is defended or prosecuted by Employee, Employee shall, from time to time, be entitled to current payment, on a fully grossed-up after tax basis, from the Company with respect to costs and expenses incurred by Employee in connection with such defense or prosecution.
(n) In the case of any Employee Claim that is defended or prosecuted to a Final Determination pursuant to the terms of this paragraph (n), the Company shall pay, on a fully grossed-up after tax basis, to Employee in immediately available funds the full amount of any taxes arising or resulting from or incurred in connection with such Employee Claim that have not theretofore been paid by the Company to Employee, together with the costs and expenses, on a fully grossed-up after tax basis, incurred in connection therewith that have not theretofore been paid by the Company to Employee, within ten calendar days after such Final Determination. In the case of any Employee Claim not covered by the preceding sentence, the Company shall pay, on a fully grossed-up after tax basis, to Employee in immediately available funds the full amount of any taxes arising or resulting from or incurred in connection with such Employee Claim at least ten calendar days before the date payment of such taxes is due from Employee, except where payment of such taxes is sooner required under the provisions of this paragraph (n), in which case payment of such taxes (and payment, on a fully grossed-up after tax basis, of any costs and expenses required to be paid under this paragraph (n) shall be made within the time and in the manner otherwise provided in this paragraph (n).
(o) For purposes of this Agreement, the term "Final Determination" shall mean (i) a decision, judgment, decree or other order by a court or other tribunal with appropriate jurisdiction, which has become final and non-appealable; (ii) a final and binding settlement or compromise with an administrative agency with appropriate jurisdiction, including, but not limited to, a closing agreement under Section 7121 of the Code; (iii) any disallowance of a claim for refund or credit in respect to an overpayment of tax unless a suit is filed on a timely basis; or (iv) any final disposition by reason of the expiration of all applicable statutes of limitations.
(p) For purposes of this Agreement, the terms "tax" and "taxes" mean any and all taxes of any kind whatsoever (including, but not limited to, any and all Excise Taxes, income taxes, and employment taxes), together with any interest thereon, any penalties, additions to tax, or additional amounts with respect to such taxes and any interest in respect of such penalties, additions to tax, or additional amounts.
(q) For purposes of this Agreement, the terms "affiliate" and "affiliates" mean, when used with respect to any entity, individual, or other person, any other entity, individual, or other person which, directly or indirectly, through one or more intermediaries controls, or is controlled by, or is under common control with such entity, individual or person. The term "control" and derivations thereof when used in the immediately preceding sentence means the ownership, directly or indirectly, of 50% or more of the voting securities of an entity or other person or possessing the power to direct or cause the direction of the
management and policies of such entity or other person, whether through the ownership of voting securities, by contract or otherwise.
(r) The Company shall defend, hold harmless, and indemnify Employee on
a fully grossed-up after tax basis from and against any and all costs and
expenses (including reasonable attorneys', accountants' and experts' fees and
expenses) incurred by Employee from time to time as a result of any contest
(regardless of the outcome) by the Company or others contesting the validity or
enforcement of, or liability under, any term or provision of this Agreement,
plus in each case interest at the applicable federal rate provided for in
Section 7872(f)(2)(B) of the Code.
4.7 EXCLUSIVITY OF TERMINATION PROVISIONS. The termination provisions of this Agreement regarding the parties' respective obligations in the event Employee's employment is terminated, are intended to be exclusive and in lieu of any other rights or remedies to which Employee or the Company may otherwise be entitled at law, in equity or otherwise. It is also agreed that, although the personnel policies and fringe benefit programs of the Company may be unilaterally modified from time to time, the termination provisions of this Agreement are not subject to modification, whether orally, impliedly or in writing, unless any such modification is mutually agreed upon and signed by the parties.
ARTICLE V
CONFIDENTIAL INFORMATION AND NONCOMPETITION
5.1 NONDISCLOSURE. During the term of this Agreement and thereafter, Employee shall not, without the prior written consent of the Board of Directors, disclose or use for any purpose (except in the course of his employment under this Agreement and in furtherance of the business of the Company) confidential information, proprietary data or trade secrets of the Company (or any of its subsidiaries), including but not limited to customer, business planning or business strategy information, except as required by applicable law or legal process; provided, however, that confidential information shall not include any information known generally to the public or ascertainable from public or published information (other than as a result of unauthorized disclosure by Employee) or any information of a type not otherwise considered confidential by persons engaged in the same business or a business similar to that conducted by the Company (or any of its subsidiaries). All documents which Employee prepared or which may have been provided or made available to Employee in the course of work for the Company shall be deemed the exclusive property of the Company and shall remain in the Company's possession. Upon the termination of Employee's employment with the Company, regardless of the reason for such termination, Employee shall promptly deliver to the Company all materials of a confidential nature relating to the business of the Company (or any of its subsidiaries) which are within Employee's possession or control.
5.2 NONCOMPETITION. The Company and Employee agree that the services rendered by Employee hereunder are unique and irreplaceable. For this reason and in consideration of the benefits of this Agreement, specifically including but not limited to applicable termination pay provisions, as well as confidential/proprietary/trade secret
information provided to Employee, Employee hereby agrees that, during the term of this Agreement and for a period of eighteen months thereafter, he shall not (except in the course of his employment under this Agreement and in furtherance of the business of the Company (or any of its subsidiaries)) (i) engage in as principal, consultant or employee in any segment of a business of a company, partnership or firm ("Business Segment") that is directly competitive with any significant business of the Company in one of its major commercial or geographic markets or (ii) hold an interest (except as a holder of less than 5% interest in a publicly traded firm or mutual funds, or as a minority stockholder or unitholder in a form not publicly traded) in a company, partnership or firm with a Business Segment that is directly competitive, without the prior written consent of the Company.
5.3 VALIDITY OF NONCOMPETITION. The foregoing provisions of Section 5.2 shall not be held invalid because of the scope of the territory covered, the actions restricted thereby, or the period of time such covenant is operative. Any judgment of a court of competent jurisdiction may define the maximum territory, the actions subject to and restricted by Section 5.2 and the period of time during which such agreement is enforceable.
5.4 NONCOMPETITION COVENANTS INDEPENDENT. The covenants of the Employee contained in Section 5.2 will be construed as independent of any other provision in this Agreement; and the existence of any claim or cause of action by the Employee against the Company will not constitute a defense to the enforcement by the Company of said covenants. The Employee understands that the covenants contained in Section 5.2 are essential elements of the transaction contemplated by this Agreement and, but for the agreement of the Employee to Section 5.2, the Company would not have agreed to enter into such transaction. The Employee has been advised to consult with counsel in order to be informed in all respects concerning the reasonableness and propriety of Section 5.2 and its provisions with specific regard to the nature of the business conducted by the Company and the Employee acknowledges that Section 5.2 and its provisions are reasonable in all respects.
5.5 COOPERATION. In the event of termination, and regardless of the reason for such termination, Employee agrees to cooperate with the Company and its representatives by responding to questions, attending meetings, depositions, administrative proceedings and court hearings, executing documents and cooperating with the Company and its legal counsel with respect to issues, claims, litigation or administrative proceedings of which Employee has personal or corporate knowledge. Employee further agrees to maintain in strict confidence any information or knowledge Employee has regarding current or future claims, litigation or administrative proceedings involving the Company (or any of its subsidiaries). Employee agrees that any communication with a party adverse to the Company, or with a representative, agent or counsel for such adverse party, relating to any claim, litigation or administrative proceeding, shall be solely and exclusively through counsel for the Company.
5.6 REMEDIES. In the event of a breach or threatened breach by the Employee of any of the provisions of Sections 5.1, 5.2 or 5.5, the Company shall be entitled to a temporary restraining order and an injunctive restraining the Employee from the commission of such breach. Nothing herein shall be construed as prohibiting the Company from pursuing any
other remedies available to it for such breach or threatened breach, including the recovery of money damages.
ARTICLE VI
ARBITRATION
Except for the provisions of Sections 5.1, 5.2 and 5.5 dealing with issues of nondisclosure, noncompetition and cooperation, with respect to which the Company reserves the right to petition a court directly for injunction or other relief, any controversy of any nature whatsoever, including but not limited to tort claims or contract disputes, between the parties to this Agreement or between the Employee, his heirs, executors, administrators, legal representatives, successors, and assigns and the Company and its affiliates, arising out of or related to the Employee's employment with the Company, any resignation from or termination of such employment and/or the terms and conditions of this Agreement, including the implementation, applicability and interpretation thereof, shall, upon the written request of one party served upon the other, be submitted to and settled by arbitration in accordance with the provisions of the Federal Arbitration Act, 9 U.S.C. ss.ss.1-15, as amended. Each of the parties to this Agreement shall appoint one person as an arbitrator to hear and determine such disputes, and if they should be unable to agree, then the two arbitrators shall chose a third arbitrator from a panel made up of experienced arbitrators selected pursuant to the procedures of the American Arbitration Association (the "AAA") and, once chosen, the third arbitrator's decision shall be final, binding and conclusive upon the parties to this Agreement. Each party shall be responsible for the fees and expenses of its arbitrator and the fees and expenses of the third arbitrator shall be shared equally by the parties. The terms of the commercial arbitration rules of AAA shall apply except to the extent they conflict with the provisions of this paragraph. It is further agreed that any of the parties hereto may petition the United States District Court for the Western District of Texas, San Antonio Division, for a judgment to be entered upon any award entered through such arbitration proceedings.
ARTICLE VII
MISCELLANEOUS
7.1 COMPLETE AGREEMENT. This Agreement constitutes the entire agreement between the parties and cancels and supersedes all other agreements between the parties which may have related to the subject matter contained in this Agreement.
7.2 MODIFICATION; AMENDMENT; WAIVER. No modification, amendment or waiver of any provisions of this Agreement shall be effective unless approved in writing by both parties. The failure at any time to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of either party thereafter to enforce each and every provision hereof in accordance with its terms.
7.3 GOVERNING LAW; JURISDICTION. This Agreement and performance under it, and all proceedings that may ensue from its breach, shall be construed in accordance with and under the laws of the State of Texas.
7.4 EMPLOYEE'S REPRESENTATIONS. Employee represents and warrants that he is free to enter in to this Agreement and to perform each of the terms and covenants of it. Employee represents and warrants that he is not restricted or prohibited, contractually or otherwise, from entering into and performing this Agreement, and that his execution and performance of this Agreement is not a violation or breach of any other agreement between Employee and any other person or entity.
7.5 COMPANY'S REPRESENTATIONS. Company represents and warrants that it is free to enter into this Agreement and to perform each of the terms and covenants of it. Company represents and warrants that it is not restricted or prohibited, contractually or otherwise, from entering into and performing this Agreement and that its execution and performance of this Agreement is not a violation or breach of any other agreements between Company and any other person or entity. The Company represents and warrants that this Agreement is a legal, valid and binding agreement of the Company, enforceable in accordance with its terms.
7.6 SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.
7.7 ASSIGNMENT. The rights and obligations of the parties under this Agreement shall be binding upon and inure to the benefit of their respective successors, assigns, executors, administrators and heirs, provided, however, that neither the Company nor Employee any assign any duties under this Agreement without the prior written consent of the other.
7.8 LIMITATION. This Agreement shall not confer any right or impose any obligation on the Company to continue the employment of Employee in any capacity, or limit the right of the Company or Employee to terminate Employee's employment.
7.9 ATTORNEYS' FEES AND COSTS. If any action at law or in equity is brought to enforce or interpret the terms of this Agreement or any obligation owing thereunder, venue will be in Bexar County, Texas and the prevailing party shall be entitled to reasonable attorney's fees and all costs and expenses of suit, including, without limitation, expert and accountant fees, and such other relief which a court of competent jurisdiction may deem appropriate.
7.10 NOTICES. All notices and other communications under this Agreement shall be in writing and shall be given in person or by either personal delivery, overnight delivery, or first class mail, certified or registered with return receipt requested, with postage or delivery charges prepaid, and shall be deemed to have been duly given when delivered personally, upon actual receipt, and on the next business day when sent via overnight delivery, or three days after mailing first class, certified or registered with return receipt requested, to the respective persons named below:
If to the Company: Corporate Secretary
Billing Information Concepts Corp.
7411 John Smith Dr., Suite 1500
San Antonio, Texas 78229
If to the Employee: W. Audie Long
7411 John Smith Dr., Suite 1500
San Antonio, Texas 78229
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IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the day and year indicated above.
COMPANY: BILLING INFORMATION CONCEPTS CORP.
By /s/ Parris H. Holmes, Jr.
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Title Chairman & CEO
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EMPLOYEE: /s/ Audie Long
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W. Audie Long
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The Compensation Committee of Billing Information Concepts Corp. hereby agrees to the above Employment Agreement between Billing Information Concepts Corp. and the Employee all as set forth above.
COMPENSATION COMMITTEE
By /s/ Lee Cooke
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Name: Lee Cooke
Title: Chairman
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| ARTICLE 5 |
| THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR BILLING CONCEPTS CORP. AND SUBSIDIARIES AS OF AND FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FINANCIAL STATEMENTS. |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | 6 MOS |
| FISCAL YEAR END | SEP 30 1998 |
| PERIOD START | OCT 01 1998 |
| PERIOD END | MAR 31 1998 |
| CASH | 75,997 |
| SECURITIES | 0 |
| RECEIVABLES | 37,636 |
| ALLOWANCES | 251 |
| INVENTORY | 0 |
| CURRENT ASSETS | 221,489 |
| PP&E | 27,191 |
| DEPRECIATION | 8,341 |
| TOTAL ASSETS | 247,041 |
| CURRENT LIABILITIES | 168,860 |
| BONDS | 2,071 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 335 |
| OTHER SE | 73,275 |
| TOTAL LIABILITY AND EQUITY | 247,041 |
| SALES | 0 |
| TOTAL REVENUES | 79,262 |
| CGS | 0 |
| TOTAL COSTS | 48,086 |
| OTHER EXPENSES | 0 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 137 |
| INCOME PRETAX | 23,124 |
| INCOME TAX | 8,903 |
| INCOME CONTINUING | 14,221 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 14,221 |
| EPS PRIMARY | 0.43 |
| EPS DILUTED | 0.41 |