SEC Info - Usld Communications Corp - ‘DEF 14A’ for 2/25/97

SEC Info℠

Home

Help

Please Sign In

Usld Communications Corp – ‘DEF 14A’ for 2/25/97

As of: Friday, 1/17/97 · For: 2/25/97 · Accession #: 912057-97-1187 · File #: 0-18195

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 1/17/97  Usld Communications Corp          DEF 14A     2/25/97    1:148K                                   Merrill Corp/FA

Definitive Proxy Solicitation Material — Schedule 14A
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: DEF 14A     Form 14-A                                             43    235K

Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Committees, Meetings and Board Compensation Common Stock Compensation Committee Disability Plan Employee Benefit Plans Employee Option Plan Executive Compensation Executive Officers and Directors Management Report of the Compensation Committee Repricing of Options Stock Option Grants in Fiscal 1996 Stock Option Plans Summary Compensation Table Ten-Year Option Repricings Terms of the Plan
1	1st Page - Filing Submission
5	Common Stock
8	Terms of the Plan
13	Management
"	Executive Officers and Directors
15	Committees, Meetings and Board Compensation
"	Compensation Committee
17	Executive Compensation
"	Report of the Compensation Committee
21	Summary Compensation Table
24	Stock Option Grants in Fiscal 1996
26	Repricing of Options
"	Ten-Year Option Repricings
28	Employee Benefit Plans
"	Stock Option Plans
"	Employee Option Plan
30	Disability Plan

DEF 14A 1st Page of 43 TOC ↑Top Previous Next ↓Bottom Just 1st
SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
(AMENDMENT NO. _____)

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(c)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12

U.S. LONG DISTANCE CORP.
(Name of Registrant as Specified In Its Charter)

------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

* Set forth amount on which the filing is calculated and state how it was
determined.

[ ] Fee paid previously with preliminary materials

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:

DEF 14A 2nd Page of 43 TOC 1st Previous Next ↓Bottom Just 2nd
[LETTERHEAD]

January 17, 1997

Dear Stockholder:

On behalf of the Board of Directors, I cordially invite you to attend the
1997 Annual Meeting of the Stockholders of U.S. Long Distance Corp. The
Annual Meeting will be held Tuesday, February 25, 1997, at 10:00 a.m. at the
Club Hotel by DoubleTree, 1111 N. E. Loop 410, San Antonio, Texas. The
formal Notice of the Annual Meeting is set forth in the enclosed material.

The matters expected to be acted upon at the meeting are described in the
attached Proxy Statement. During the meeting, stockholders will have the
opportunity to ask questions and make comments.

It is important that your views be represented whether or not you are able to
be present at the Annual Meeting. Even if you are planning to attend the
Annual Meeting, and to ensure that your vote is counted, we must RECEIVE your
signed proxy card on or before Friday, February 21, 1997. We have enclosed a
postage-paid return envelope for your convenience.

We are gratified by your continued interest in U.S. Long Distance and pleased
that, in the past, so many of you have voted your shares either in person or
by proxy. We hope that you will continue to do so and urge you to return
your proxy card.

Sincerely,

/s/ LARRY M. JAMES
-----------------------------------
Larry M. James
President and
Chief Executive Officer

DEF 14A 3rd Page of 43 TOC 1st Previous Next ↓Bottom Just 3rd
U.S. LONG DISTANCE CORP.
9311 SAN PEDRO, SUITE 100
SAN ANTONIO, TEXAS 78216

----------------------------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 25, 1997

NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Stockholders (the
"Annual Meeting") of U.S. Long Distance Corp., a Delaware corporation (the
"Company"), will be held on Tuesday, February 25, 1997, at 10:00 a.m. local
time at the Club Hotel by DoubleTree, 1111 N.E. Loop 410, in San Antonio,
Texas, for the purpose of considering and voting upon the following:

(1) A proposal to elect two directors to hold office until the 2000 Annual
Meeting of Stockholders or until the election and qualification of
their respective successors.

(2) A proposal to approve amendments to the Company's 1993 Non-Employee
Director Plan (i) to increase the aggregate number of shares of common
stock subject to issuance under this plan from 250,000 to 750,000,
(ii) to increase the number of shares subject to stock options
automatically granted to eligible directors periodically under the
plan from 15,000 to 30,000, (iii) to provide for the discretionary
grant of stock options to non-employee directors and (iv) to delete
the limitation that the plan not be amended more frequently than once
every six months.

(3) A proposal to ratify the grant of a currently outstanding stock option
to a non-employee director of the Company.

(4) A proposal to ratify the appointment of Arthur Andersen LLP as
independent public accountants of the Company for the fiscal year
ending September 30, 1997.

(5) Such other business as may properly come before the Annual Meeting or
any adjournment(s) thereof. The Board of Directors is presently
unaware of any other business to be presented to a vote of the
stockholders at the Annual Meeting.

The items of business are more fully described in the Proxy Statement
accompanying this notice.

The Board of Directors has fixed January 10, 1997, as the record date
(the "Record Date") for the determination of stockholders entitled to notice
of and to vote at the Annual Meeting or any adjournment(s) thereof. Only
stockholders of record at the close of business on the Record Date are
entitled to notice of and to vote at the Annual Meeting. The stock transfer
books will not be closed. A list of stockholders entitled to vote at the
Annual Meeting will be available for examination at the offices of the
Company for ten days prior to the Annual Meeting.

By Order of the Board of Directors

W. AUDIE LONG
CORPORATE SECRETARY
San Antonio, Texas
January 17, 1997

IMPORTANT

YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. HOWEVER, WHETHER
OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE URGED TO
PROMPTLY MARK, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED,
SELF-ADDRESSED, STAMPED ENVELOPE SO THAT YOUR SHARES OF STOCK MAY BE
REPRESENTED AND VOTED IN ACCORDANCE WITH YOUR WISHES AND IN ORDER THAT THE
PRESENCE OF A QUORUM MAY BE ASSURED AT THE ANNUAL MEETING. YOUR PROXY WILL
BE RETURNED TO YOU IF YOU SHOULD BE PRESENT AT THE ANNUAL MEETING AND SHOULD
REQUEST SUCH RETURN OR IF YOU SHOULD REQUEST SUCH RETURN IN THE MANNER
PROVIDED FOR REVOCATION OF PROXIES ON THE INITIAL PAGES OF THE ENCLOSED PROXY
STATEMENT. PROMPT RESPONSE BY OUR STOCKHOLDERS WILL REDUCE THE TIME AND
EXPENSE OF SOLICITATION.

DEF 14A 4th Page of 43 TOC 1st Previous Next ↓Bottom Just 4th
U.S. LONG DISTANCE CORP.
9311 SAN PEDRO, SUITE 100
SAN ANTONIO, TEXAS 78216

----------------------------------

PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 25, 1997

SOLICITATION AND REVOCABILITY OF PROXIES

This Proxy Statement and the accompanying proxy are furnished in connection
with the solicitation by the Board of Directors of U.S. Long Distance Corp. (the
"Company") of proxies for the Annual Meeting of Stockholders of the Company (the
"Annual Meeting"), to be held on Tuesday, February 25, 1997, at the time and
place and for the purposes set forth in the accompanying Notice of Annual
Meeting of Stockholders and any adjournment(s) thereof. This Proxy Statement,
the accompanying proxy and the Company's Annual Report to Stockholders for the
fiscal year ended September 30, 1996 are being first mailed to the Company's
stockholders on or about January 17, 1997.

The accompanying proxy is designed to permit each holder of the Company's
common stock, par value $.01 per share (the "Common Stock"), to vote for or
withhold voting for the nominees for election as directors of the Company set
forth under proposal 1, to vote for or against or to abstain from voting on
proposals 2, 3 and 4 and to authorize the proxies to vote in their discretion
with respect to any other proposal brought before the Annual Meeting. When a
stockholder's executed proxy card specifies a choice with respect to a voting
matter, the shares will be voted accordingly. IF NO SUCH SPECIFICATIONS ARE
MADE, THE PROXIES FOR THE COMMON STOCK WILL BE VOTED BY THOSE PERSONS NAMED IN
THE PROXIES AT THE ANNUAL MEETING: FOR THE ELECTION OF THE NOMINEES UNDER THE
CAPTION "ELECTION OF DIRECTORS," FOR THE AMENDMENTS TO THE 1993 NON-EMPLOYEE
DIRECTOR PLAN OF U.S. LONG DISTANCE CORP., FOR THE RATIFICATION OF A STOCK
OPTION GRANTED TO A NON-EMPLOYEE DIRECTOR OF THE COMPANY AND FOR RATIFICATION OF
THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR THE
CURRENT FISCAL YEAR. If any other matters properly come before the Annual
Meeting, the proxies will vote upon such matters according to their judgment.

The Company encourages the personal attendance of its stockholders at the
Annual Meeting, and execution of the accompanying proxy will not affect a
stockholder's right to attend the Annual Meeting and to vote his or her shares
in person. Any stockholder giving a proxy has the right to revoke it by giving
written notice of revocation to W. Audie Long, General Counsel, Senior Vice
President - Legal and Regulatory Affairs and Corporate Secretary, U.S. Long
Distance Corp., at the Company's principal executive offices, 9311 San Pedro,
Suite 100, San Antonio, Texas 78216, at any time before the proxy is voted, by
executing and delivering a later-dated proxy, or by attending the Annual Meeting
and voting his or her shares in person. No such notice of revocation or later-
dated proxy will be effective, however, until received by the Company at or
prior to the Annual Meeting. Such revocation will not affect a vote on any
matters taken prior to the receipt of such revocation. Mere attendance at the
Annual Meeting will not of itself revoke the proxy.

All expenses of the Company in connection with this solicitation will be
borne by the Company. In addition to the solicitation of proxies by use of the
mail, officers, directors and employees of the Company may solicit the return of
proxies by personal interview, mail, telephone and/or facsimile. Such persons
will not be additionally compensated, but will be reimbursed for out-of-pocket
expenses. The Company also will request brokerage houses and other custodians,
nominees and fiduciaries to forward solicitation materials to the beneficial
owners of shares held of record by such persons and will reimburse such persons
and the Company's transfer agent for their reasonable out-of-pocket expenses in
forwarding such materials. Additionally, the Company has elected to retain the
services of D.F. King & Co. for the purpose of soliciting proxies to be voted at
the Annual Meeting at an estimated cost of $4,500, plus out-of-pocket expenses.

The Annual Report to Stockholders covering the Company's fiscal year ended
September 30, 1996, including audited financial statements, is enclosed
herewith. The Annual Report does not form any part of the material for the
solicitation of proxies.

DEF 14A 5th Page of 43 TOC 1st Previous Next ↓Bottom Just 5th
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS

GENERAL

The Board of Directors has fixed January 10, 1997, as the record date
(the "Record Date") for the Annual Meeting. Only holders of record of the
outstanding shares of Common Stock at the close of business on the Record
Date are entitled to notice of and to vote at the Annual Meeting and any
adjournment(s) thereof. At the close of business on January 10, 1997,
15,123,048 shares of the Common Stock were outstanding and entitled to be
voted at the Annual Meeting. The Common Stock is the only class of stock
entitled to vote at the Annual Meeting. Each share of Common Stock is
entitled to one vote on each matter presented to the stockholders.

QUORUM AND VOTE REQUIRED

The presence, in person or by proxy, of a majority of the outstanding
shares of Common Stock is necessary to constitute a quorum at the Annual
Meeting. Abstentions and broker nonvotes are counted for purposes of
determining the presence or absence of a quorum for the transaction of
business. Abstentions are counted in tabulations of the votes cast on
proposals presented to stockholders, whereas broker nonvotes are not counted
for purposes of determining whether a proposal has been approved. Assuming
the presence of a quorum, the affirmative vote of the holders on the Record
Date of a plurality of the shares of Common Stock outstanding, represented in
person or by proxy at the Annual Meeting, is required to elect directors for
the Company and the affirmative vote of the holders on the Record Date of a
majority of shares of Common Stock represented in person or by proxy at the
Annual Meeting is required to approve or ratify each of the other proposals
to be presented at the Annual Meeting.

SPIN-OFF OF BILLING INFORMATION CONCEPTS CORP.

Effective August 2, 1996 (the "Distribution Date"), the Company
distributed to its stockholders all of the common stock of its wholly owned
subsidiary, Billing Information Concepts Corp. ("Billing"), which conducted
the Company's billing and information management services business (the
"Distribution"). As a result of the Distribution, Billing now owns and
operates substantially all of the billing clearinghouse and information
management services business previously operated by the Company. In addition,
a director and certain officers of the Company resigned in July 1996 and as
of the Distribution Date, respectively, to become a director and officers of
Billing.

SECURITY OWNERSHIP OF MANAGEMENT

The following table and notes thereto set forth certain information with
respect to the shares of Common Stock beneficially owned as of the Record
Date by (i) each director and nominee for director of the Company, (ii) each
executive officer of the Company included in the Summary Compensation Table
set forth under the caption "Executive Compensation" below and (iii) all
executive officers and directors of the Company as a group.

COMMON STOCK
--------------------------------
AMOUNT AND PERCENT
NATURE OF OF CLASS
BENEFICIAL OWNED
NAME OF BENEFICIAL OWNER OWNERSHIP (1) BENEFICIALLY (2)
------------------------ ------------- ----------------
Parris H. Holmes, Jr. 481,219 (3) 3.1%
Larry M. James 234,713 (4) 1.5%
W. Audie Long 164,000 (5) 1.1%
Alan W. Saltzman 163,672 (6) 1.1%
Kelly E. Simmons 46,000 *
James S. Speirs 10,000 (7) *
Phillip J. Storin 37,208 (8) *
Stan G. Masters 21,202 (9) *
Charles E. Amato 45,300 (10) *
Gary D. Becker 32,000 (11) *
F. Gardner Parker 0

-2-

DEF 14A 6th Page of 43 TOC 1st Previous Next ↓Bottom Just 6th
All executive officers and
directors as a group (17
persons, including the
executive officers and
directors listed above) 1,295,001 (12) 8.1%

-------------------
* Represents less than 1% of the issued and outstanding shares of Common
Stock.

(1) Unless otherwise indicated, each of the persons named has sole voting and
investment power with respect to the shares reported.

(2) The percentages indicated are based on outstanding stock options
exercisable within 60 days for each individual and 15,123,048 shares of
Common Stock issued and outstanding on the Record Date.

(3) Includes 245,000 shares that Mr. Holmes has the right to acquire upon the
exercise of stock options, exercisable within 60 days.

(4) Includes 143,000 shares that Mr. James has the right to acquire upon the
exercise of stock options, exercisable within 60 days, and 3,000 shares
owned by Mr. James's wife.

(5) Includes 142,000 shares that Mr. Long has the right to acquire upon the
exercise of stock options, exercisable within 60 days.

(6) Includes 103,000 shares that Mr. Saltzman has the right to acquire upon the
exercise of stock options, exercisable within 60 days, and 350 shares owned
by Mr. Saltzman's wife.

(7) Represents 10,000 shares that Mr. Speirs has the right to acquire upon the
exercise of stock options, exercisable within 60 days.

(8) Includes 23,334 shares that Mr. Storin has the right to acquire upon the
exercise of stock options, exercisable within 60 days.

(9) Includes 16,834 and 3,251 shares that Mr. Masters and his wife,
respectively, have the right to acquire upon the exercise of stock options,
exercisable within 60 days.

(10) Includes 20,000 shares that Mr. Amato has the right to acquire upon the
exercise of stock options, exercisable within 60 days.

(11) Includes 20,000 shares that Mr. Becker has the right to acquire upon the
exercise of stock options, exercisable within 60 days.

(12) Includes 777,670 shares that 17 directors and executive officers (including
those held by Mr. Masters' wife) have the right to acquire upon the
exercise of stock options, exercisable within 60 days.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The Company knows of no person or entity that on the Record Date had
beneficial ownership of 5% or more of the outstanding Common Stock.

-3-

DEF 14A 7th Page of 43 TOC 1st Previous Next ↓Bottom Just 7th
ITEM 1 ON PROXY
ELECTION OF DIRECTORS

NOMINEES

The Bylaws of the Company, as amended, provide that the Board of Directors
shall consist of not fewer than three nor more than fifteen members and that the
number of directors, within such limits, shall be determined by resolution of
the Board of Directors at any meeting or by the stockholders at the Annual
Meeting. The Board of Directors of the Company has set the number of directors
comprising the Board of Directors at five, with such directors being divided
into three classes.

The Board of Directors has nominated for director the individuals named
below to be elected at the Annual Meeting. The nominees will constitute the
class of directors whose term will expire at the 2000 Annual Meeting of
Stockholders. The other directors of the Company will continue in office for
their existing terms.

The table below sets forth the names and ages of the nominees for director
and the year each nominee first became a director of the Company. Each of the
nominees is presently serving as a director of the Company. Biographical
information on the nominees is set forth below under "Management - Executive
Officers and Directors."

NOMINEES FOR DIRECTORS
2000 CLASS - TERM TO EXPIRE AT 2000 ANNUAL MEETING

YEAR FIRST BECAME A
NAME AND AGE DIRECTOR OF THE COMPANY
------------ -----------------------
Parris H. Holmes, Jr. (53) 1986
F. Gardner Parker (54) 1996

Unless otherwise indicated on any duly executed and dated proxy, the
persons named in the enclosed proxy intend to vote the shares that it represents
for the election of the nominees listed in the table above for the term
specified. Although the Company does not anticipate that the above-named
nominees will refuse or be unable to accept or serve as directors of the Company
for the term specified, the persons named in the enclosed form of proxy intend,
if either of such nominees is unable or unwilling to serve as a director, to
vote the shares represented by the proxy for the election of such other person
as may be nominated or designated by management, unless they are directed by the
proxy to do otherwise.

Assuming the presence of a quorum, the affirmative vote of the holders of a
plurality of the shares of Common Stock, represented in person or by proxy at
the Annual Meeting, is required for the election of directors. Assuming the
receipt by each such nominee of the affirmative vote of at least a plurality of
the shares of Common Stock represented at the Annual Meeting, such nominees will
be elected as directors. Proxies will be voted for the nominees in accordance
with the specifications marked thereon, and if no specification is made, will be
voted "FOR" the nominees.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE ELECTION OF THE INDIVIDUALS NOMINATED
FOR ELECTION AS DIRECTORS.

CONTINUING DIRECTORS NOT STANDING FOR RE-ELECTION

The following directors serve terms expiring at the 1998 and 1999 Annual
Meetings of the Stockholders:

1998 CLASS - CONTINUING TO SERVE UNTIL 1998 ANNUAL MEETING

YEAR FIRST BECAME A
NAME AND AGE DIRECTOR OF THE COMPANY
------------ -----------------------
Larry M. James (49) 1991

-4-

DEF 14A 8th Page of 43 TOC 1st Previous Next ↓Bottom Just 8th
1999 CLASS - CONTINUING TO SERVE UNTIL 1999 ANNUAL MEETING

YEAR FIRST BECAME A
NAME AND AGE DIRECTOR OF THE COMPANY
------------ -----------------------
Gary D. Becker (37) 1986
Charles E. Amato (49) 1992

Biographical information on these continuing directors is set forth below
under "Management - Executive Officers and Directors."

ITEM 2 ON PROXY

APPROVAL OF AMENDMENTS TO THE 1993 NON-EMPLOYEE DIRECTOR PLAN
OF U.S. LONG DISTANCE CORP.

OVERVIEW

The Board of Directors proposes that the 1993 Non-Employee Director Plan of
U.S. Long Distance Corp. (the "Director Plan") be amended (i) to increase the
aggregate number of shares subject to issuance under the Director Plan from
250,000 to 750,000, (ii) to increase the number of shares subject to stock
options automatically granted to eligible directors periodically under the plan
from 15,000 to 30,000, (iii) to provide for the discretionary grant of stock
options ("Discretionary Options") to non-employee directors and (iv) to delete
the limitation that the plan not be amended more frequently than once every six
months (collectively, the "Director Plan Amendments"). A copy of the Director
Plan as proposed to be amended is attached hereto as ANNEX A, and the discussion
set forth below is qualified in its entirety by reference to such ANNEX A. The
Director Plan Amendments are effective December 17, 1996, the date the Board
approved the Director Plan Amendments, but are subject to stockholder approval
under the rules and regulations of The Nasdaq Stock Market's National Market
System (the "Nasdaq NMS").

The Director Plan was adopted by the Board of Directors on March 9, 1993
and subsequently approved by the stockholders on February 24, 1994. The
Director Plan incorporated and expanded a plan previously established for the
periodic grant of stock options to non-employee directors. In December 1995,
the Board of Directors approved certain amendments to the Director Plan, which
amendments were subsequently approved by the stockholders on February 29, 1996.
See "Executive Compensation - Employee Benefit Plans - Stock Option Plans."

PURPOSE

The purpose of the Director Plan is to advance the interests of the Company
by providing additional incentives to attract and retain qualified and competent
non-employee directors, upon whose efforts and judgment the success of the
Company (including its subsidiaries) is largely dependent. In furtherance of
this purpose, the Director Plan authorizes the automatic, periodic granting to
such non-employee directors of nonqualified stock options ("Director Options")
to purchase Common Stock. In addition, the Director Plan provides for receipt
by each outside director of an annual retainer fee (the "Annual Director Fee"),
payable at their election in cash or in whole or in part through the grant of a
nonqualified stock option ("Director Fee Option"). The ability to elect to
receive stock options also serves the purpose of the Director Plan in that an
additional incentive is provided to attract and retain qualified and competent
non-employee directors. The Board of Directors of the Company believes that the
proposed Director Plan Amendments are necessary to further the purposes of the
Director Plan and to provide an adequate incentive to attract and retain
qualified and competent non-employee directors. At December 31, 1996, four
directors were eligible to participate in the Director Plan.

TERMS OF THE PLAN

The following is a summary of the existing Director Plan and the Director
Plan Amendments. At December 31, 1996, a total of 250,000 shares of Common
Stock (subject to adjustment as described below) were authorized for issuance

-5-

DEF 14A 9th Page of 43 TOC 1st Previous Next ↓Bottom Just 9th
upon the exercise of Director Options and Director Fee Options. Such amount
included an aggregate of 165,000 shares of Common Stock either (i) reserved for
issuance upon the exercise of outstanding Director Options and Director Fee
Options or (ii) previously acquired pursuant to the exercise of Director Options
granted to existing and previous non-employee members of the Board of Directors.
Accordingly, at such date 85,000 shares of Common Stock remained for the
granting of Director Options and Director Fee Options. As proposed to be
amended, an aggregate of 750,000 shares of Common Stock (subject to adjustment
as described below) will be authorized for issuance under the Director Plan upon
the exercise of Director Options, Director Fee Options and, as proposed,
Discretionary Options. If any Director Option, Director Fee Option or, as
proposed, Discretionary Option terminates, expires or is cancelled or
surrendered as to any shares, new Director Options, Director Fee Options and/or,
as proposed, Discretionary Options may be granted covering such shares.

The Director Plan currently provides that each non-employee director of the
Company who is elected or appointed to the Board of Directors will be granted a
Director Option exercisable for 15,000 shares of Common Stock on the date such
non-employee director is so elected or appointed as a director, whether at the
annual meeting of stockholders or otherwise, at an exercise price equal to the
fair market value of the Common Stock on the date such non-employee director is
elected or appointed. In addition, upon their re-election, each non-employee
director currently receives, on the first business day after the date of each
annual meeting of stockholders of the Company, commencing with the annual
meeting of stockholders immediately following the full vesting of any previously
granted Director Option, a Director Option to purchase an additional 15,000
shares of Common Stock at an exercise price per share equal to the fair market
value of the Common Stock on the date of grant. In each case, such Director
Option currently vests as to 5,000 shares of Common Stock on each of the first
three anniversaries of the date of grant, and each Director Option expires five
years after the date of grant unless sooner terminated as provided in the
Director Plan. As proposed to be amended, the 15,000-share threshold for all
grants of Director Options will be increased to 30,000 shares, with vesting to
occur as to 10,000 shares on each of the first three anniversaries of the date
of grant.

The Director Plan also provides for receipt by each outside director of an
Annual Director Fee on the business day on or immediately after December 15 of
each year. Each non-employee director of the Company must make an election, no
later than December 31 of each year, to receive his Annual Director Fee for the
following year in cash ($15,000) or in whole or in part through the grant of a
Director Fee Option exercisable for up to 7,500 shares of Common Stock at an
exercise price per share equal to the fair market value of the Common Stock on
the date of grant (I.E., the business day on or immediately after December 15).
In December 1996, all non-employee directors elected to receive their Annual
Director Fee for calendar 1997 in Director Fee Options. A non-employee director
must still be a director on December 15 to be eligible to receive an Annual
Director Fee. The Director Fee Option vests immediately, but at least six
months must elapse from the date of the acquisition of the Director Fee Option
to the date of disposition of the Director Fee Option (other than upon exercise
or conversion) or its underlying Common Stock. Each Director Fee Option will
expire five years from the date of grant.

As proposed to be amended, Discretionary Options may be granted from time
to time by the Board of Directors to any non-employee director of the Company.
The Discretionary Options will vest according to the vesting schedule determined
by the Board of Directors and will expire five years from the date of grant. At
least six months must elapse from the date of the acquisition of the
Discretionary Option to the date of disposition of the Director Fee Option
(other than upon exercise or conversion) or its underlying Common Stock.

The Director Plan currently is administered by the Board of Directors.
Director Options, Director Fee Options and, as proposed, Discretionary Options
may not be granted at an exercise price per share that is less than the fair
market value of the Common Stock at the date of grant. The exercise price of a
Director Option, a Director Fee Option or, as proposed, a Discretionary Option
may be paid in cash, certified or cashier's check, money order, or by delivery
of already owned shares of Common Stock having a fair market value equal to the
exercise price, or by delivery of a combination of the above. One purpose for
permitting delivery of Common Stock in full or partial payment of the exercise
price is to make it possible for the optionee to exercise his Director Options,
Director Fee Options or, as proposed, Discretionary Options without the need to
sell Common Stock already owned, which sale would result in the optionee
incurring capital gain (or loss) for federal income tax purposes and/or
potential Section 16(b) liability.

To prevent dilution or enlargement of the rights of a holder of a
Director Option, a Director Fee Option or, as proposed, a Discretionary
Option, the Director Plan provides for the adjustment of (i) the number of
shares upon which Director Options, Director Fee Options and, as proposed,
Discretionary Options may be granted, (ii) the number of shares

-6-

DEF 14A 10th Page of 43 TOC 1st Previous Next ↓Bottom Just 10th
subject to outstanding Director Options, Director Fee Options and, as
proposed, Discretionary Options and (iii) the exercise price of a Director
Option, a Director Fee Option and, as proposed, a Discretionary Option, in
the event of any reorganization, recapitalization, stock split, stock
dividend, spin-off, combination of shares, merger, consolidation, issuance of
rights or any other change in capital structure of the Company.

The Director Options, Director Fee Options and, as proposed, Discretionary
Options are not assignable or transferable other than by will or by the laws of
descent and distribution or pursuant to a qualified domestic relations order.
During the lifetime of an optionee, a Director Option, Director Fee Option or,
as proposed, Discretionary Option is exercisable only by the optionee, the
optionee's guardian or legal representative. The Company has registered with
the Securities and Exchange Commission (the "SEC") the 250,000 shares of Common
Stock currently issuable under the Director Plan. If the amendment to increase
the number of shares issuable under the Director Plan from 250,000 to 750,000 is
approved by the Company's stockholders, the Company will register the additional
500,000 shares to be authorized for issuance under the Director Plan.

A Director Option terminates on the earlier to occur of (i) 30 days after
the date that the optionee ceases to be a Director, except that if the optionee
dies while a director, the Director Option expires one year therefrom or six
months therefrom if the optionee dies during the 30-day period referenced above,
or (ii) five years from the date of grant of the Director Option. A Director
Fee Option and, as proposed, a Discretionary Option terminates five years from
the date of grant.

TERMINATION OF DIRECTOR PLAN

The Director Plan terminates on September 17, 2000, and any Director
Option, Director Fee Option or, as proposed, Discretionary Option outstanding on
such date will remain outstanding until it has either expired or been exercised.

AMENDMENT

The Director Plan currently provides that it may not be amended more than
once every six months, other than to comport with applicable changes to the
Internal Revenue Code of 1986, as amended, the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder. This limitation
related to the requirements of Rule 16b-3 of the SEC prior to its recent
amendment. Because the SEC no longer requires this restriction to obtain an
exemption under Rule 16b-3, the Board of Directors proposes to delete this
limitation.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The federal income tax rules summarized below are based upon current tax
laws and thus are subject to change. Moreover, this summary of the tax
consequences is not intended to be a complete description of all federal, state
and local tax consequences of the Director Plan.

The amount of the Annual Director Fee received in cash will be taxable upon
receipt. The grant of a Director Option, Director Fee Option or, as proposed,
Discretionary Option will not be taxable to an optionee. Generally, upon the
exercise of a Director Option, Director Fee Option or, as proposed,
Discretionary Option that has been held by the optionee for at least six months,
an optionee who is subject to Section 16(b) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") will recognize ordinary income at the time
of exercise in an amount equal to the excess of the then fair market value of
the shares of Common Stock purchased over the exercise price. Optionees who are
not subject to Section 16(b) generally will recognize income at the time of
exercise of a Director Option, Director Fee Option or, as proposed,
Discretionary Option determined in the same manner as optionees subject to
Section 16(b). Because participants in the Director Plan will not be employees
of the Company, there will be no withholding with respect to the recognized
ordinary income resulting from the exercise of Director Options, Director Fee
Options or, as proposed, Discretionary Options or with respect to receipt of the
Annual Director Fee in cash (although the self-employment tax on self-employed
persons generally will apply thereto). When shares of Common Stock received
upon the exercise of a Director Option, Director Fee Option or, as proposed,
Discretionary Option subsequently are disposed of in a taxable transaction, the
optionee generally will recognize capital gain (or loss) in the amount by which
the amount realized exceeds (or is less than) the fair market value of the
Common Stock on the date the Director Option, Director Fee Option or, as
proposed, Discretionary Option was

-7-

DEF 14A 11th Page of 43 TOC 1st Previous Next ↓Bottom Just 11th
exercised. Such capital gain (or loss) will be long- or short-term depending
upon the optionee's holding period for the Common Stock acquired upon
exercise of the Director Option, Director Fee Option or, as proposed,
Discretionary Option.

APPROVAL

Stockholder approval is required under the rules and regulations of the
Nasdaq NMS. Assuming the presence of a quorum, the proposal to approve the
foregoing Director Plan Amendments to the Company's Director Plan requires the
approval of the holders of a majority of the shares of Common Stock represented
at the Annual Meeting in person or by proxy. Proxies will be voted for or
against such approval in accordance with specifications marked thereon, and if
no specification is made, will be voted "FOR" such approval.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE PROPOSED AMENDMENTS TO THE DIRECTOR PLAN

ITEM 3 ON PROXY
RATIFICATION OF OUTSTANDING STOCK OPTION GRANT

DESCRIPTION OF STOCK OPTION GRANT

On August 5, 1996, the Company granted to Mr. Holmes, subject to
stockholder approval, a nonqualified stock option (the "1996 Option") to
purchase 60,000 shares of Common Stock at a purchase price of $4.375 per
share, representing the closing sales price of the Common Stock on the Nasdaq
NMS on August 5, 1996. The grant was made to Mr. Holmes in consideration for
continuing as Chairman of the Board of the Company. The 1996 Option vested
immediately and will expire six years from the date of grant. The 1996
Option is evidenced by a written Stock Option Agreement (the "Option
Agreement").

The Option Agreement provides that the purchase price of shares subject
thereto must be paid in full at the time of exercise in cash or by check.
The 1996 Option is not transferable by Mr. Holmes other than by will or by
the laws of descent and distribution and is exercisable during Mr. Holmes's
lifetime only by him. The maximum aggregate number of shares of Common Stock
which may be issued pursuant to the 1996 Option is 60,000, subject to
adjustment to prevent dilution or enlargement of rights. Such shares may
consist of authorized but unissued shares of Common Stock or previously
issued shares reacquired by the Company.

The 1996 Option is not intended to constitute an incentive stock option
for federal income tax purposes. No federal income tax should be imposed on
Mr. Holmes as the result of the grant of the 1996 Option. Upon the exercise
of the 1996 Option, Mr. Holmes will be treated as receiving compensation
taxable as ordinary income in the year of exercise, in an amount equal to the
excess of the fair market value on the date of exercise of the shares of
Common Stock purchased under the 1996 Option over the purchase price paid
therefor. Upon a subsequent disposition of the shares, any difference
between the fair market value of the shares on the date of exercise and the
amount realized upon disposition will be eligible for treatment as long-term
capital gain or loss, if the shares have been held for more than six months.
The Company will be allowed a deduction for federal income tax purposes for
compensation paid at the same time and in the same amount as ordinary income
from compensation recognized by Mr. Holmes, subject to certain limits on
deductibility imposed by Internal Revenue Service regulations under some
circumstances.

Stockholder approval of the 1996 Option is not required under Delaware
law or for federal income tax purposes, but it is a prerequisite to the
listing of the shares covered thereby on the Nasdaq NMS.

VOTE REQUIRED; EFFECT OF A NEGATIVE VOTE

Ratification of the 1996 Option requires the affirmative vote of a
majority of the shares of Common Stock voting in person or represented by
proxy at the Annual Meeting, provided a quorum is present. Failing
stockholder approval of the 1996 Option at the Annual Meeting, the grant of
the 1996 Option will be voided, and thereupon the Company and Mr. Holmes will
negotiate alternative compensation of equivalent value to him. The Board of
Directors recommends that the

-8-

DEF 14A 12th Page of 43 TOC 1st Previous Next ↓Bottom Just 12th
stockholders ratify the grant of the 1996 Option. Proxies will be voted for or
against such ratification in accordance with the specifications marked thereon,
and if no specification is made, will be voted "FOR" such ratification.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE PROPOSED RATIFICATION OF THE STOCK OPTION GRANT
MADE TO A NON-EMPLOYEE DIRECTOR OF THE COMPANY

ITEM 4 ON PROXY
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS

The Board of Directors of the Company has appointed the firm of Arthur
Andersen LLP to serve as independent public accountants of the Company for
the fiscal year ending September 30, 1997. Although stockholder ratification
is not required, the Board of Directors has directed that such appointment be
submitted to the stockholders of the Company for ratification at the Annual
Meeting. Arthur Andersen LLP has served as independent public accountants of
the Company with respect to the Company's consolidated financial statements
for fiscal years 1988 through 1996 and is considered by management of the
Company to be well qualified. If the stockholders do not ratify the
appointment of Arthur Andersen LLP, the Board of Directors may reconsider the
appointment.

Representatives of Arthur Andersen LLP will be present at the Annual
Meeting. They will have an opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions from
stockholders.

Assuming the presence of a quorum, the affirmative vote of the holders
of a majority of the outstanding shares of Common Stock present at the Annual
Meeting in person or by proxy is necessary for the adoption of the proposal.
Proxies will be voted for or against such ratification in accordance with
specifications marked thereon, and if no specification is made, the proxies
will be voted "FOR" such ratification.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO RATIFY
THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS OF
THE COMPANY FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 1997.

ITEM 5 ON PROXY
OTHER MATTERS THAT MAY COME BEFORE THE ANNUAL MEETING

The Board of Directors of the Company knows of no matters, other than those
referred to in the accompanying Notice of Annual Meeting of Stockholders, which
properly may come before the Annual Meeting. However, if any other matter
should be properly presented for consideration and voting at the Annual Meeting
or any adjournment(s) thereof, it is the intention of the persons named as
proxies on the enclosed form of proxy card to vote the proxy cards in accordance
with their judgment.

-9-

DEF 14A 13th Page of 43 TOC 1st Previous Next ↓Bottom Just 13th
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

On the Record Date, the executive officers and directors of the
Company were as follows:

[Download Table]
NAME AGE POSITION
-------------------- --- --------------------------------------------------

Larry M. James 49 Chief Executive Officer, President and Director

W. Audie Long 52 General Counsel, Senior Vice President - Legal and
Regulatory Affairs and Corporate Secretary

James S. Speirs 45 Senior Vice President - Network Operations
and Chief Technology Officer

Phillip J. Storin 45 Senior Vice President, Chief Financial Officer and
Corporate Treasurer

Stan G. Masters 47 Senior Vice President - Sales

Patrick M. Aelvoet 34 Vice President and Corporate Controller

Richard E. Burk 50 Vice President - Strategic Planning

David S. Horne 42 Vice President - Human Resources

Marion K. Jenkins 43 Vice President - Management Information Systems

Stephen M. Wagner 40 Vice President - Marketing, Sales and Business
Development, U.S. Long Distance, Inc.

John M. Welsh 37 Vice President - Sales and Customer Service,
U.S. Long Distance, Inc.

Parris H. Holmes, Jr. 53 Chairman of the Board (1)(2)

Charles E. Amato 49 Director (1)(2)

Gary D. Becker 37 Director (1)(2)

F. Gardner Parker 54 Director

--------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.

The following is a description of the biographies of the Company's
executive officers and directors for the past five years.

LARRY M. JAMES has served as Chief Executive Officer and President
of the Company since August 1996 and has been a director of the Company since
February 1991. Mr. James served as Chief Operating Officer of the Company
from February 1991 to August 1996 and was named President of the Company in
March 1993. From February 1991 to August 1996, Mr. James served as President
of U.S. Long Distance, Inc., a wholly owned subsidiary of the Company. From
August 1994 to August 1996, Mr. James served as Chief Executive Officer of
Zero Plus Dialing, Inc., now Billing Information

-10-

DEF 14A 14th Page of 43 TOC 1st Previous Next ↓Bottom Just 14th
Concepts, Inc., a separate subsidiary of the Company which conducted the
Company's billing and information management services business prior to the
Distribution. He joined the Company as Vice President - Sales and Marketing
in April 1988.

W. AUDIE LONG has been General Counsel and Senior Vice President -
Legal and Regulatory Affairs of the Company since February 1991 and Corporate
Secretary of the Company since August 1993. Mr. Long joined the Company as
General Counsel and Vice President - Legal and Regulatory Affairs in April
1990. Previously, Mr. Long was an attorney in private practice. He has been
General Counsel to the Company since 1986.

STAN G. MASTERS joined the Company in June 1991 as Director of
Operator Services and Direct Dial Sales Agents of U.S. Long Distance, Inc.
Mr. Masters was elected Vice President - Direct Dial Sales of U.S. Long
Distance, Inc. in April 1993 and Senior Vice President - Sales in October
1994. He was elected Vice President - Sales of the Company in October 1994
and Senior Vice President - Sales in July 1996.

JAMES S. SPEIRS joined the Company in October 1995 as Vice
President - Network Operations and Chief Technical Officer. He was elected
Senior Vice President - Network Operations and Chief Technology Officer in
July 1996. Mr. Speirs has been Senior Vice President - Network Operations of
U.S. Long Distance, Inc. since October 1995. Prior to joining the Company,
Mr. Speirs was Vice President of Network Engineering for Frontier
Communications Corp. from May 1994 to September 1995. From January 1992 to
December 1994, he was a partner in Carlin Club Lodge. He served as Senior
Vice President of Network Operations for COM Systems, Inc. from July 1986 to
October 1991.

PHILLIP J. STORIN joined the Company in July 1992 as Vice President
- Accounting, was named Corporate Controller effective October 1994 and
promoted to Senior Vice President, Chief Financial Officer and Corporate
Treasurer in August 1996. From April 1987 to July 1992, Mr. Storin was
Director of Accounting for Dell Computer Corporation in Austin, Texas. Mr.
Storin was charged with primary responsibility of all accounting matters
while employed with Dell Computer Corporation.

PATRICK M. AELVOET has served as Vice President and Corporate
Controller of the Company since October 1996. Mr. Aelvoet joined the Company
in March 1993 as Director of Financial Reporting. He was promoted to
Director of Accounting in September 1993 and to Financial Controller in
December 1994. Mr. Aelvoet worked for KPMG Peat Marwick as Senior Audit
Manager from August 1985 to March 1993.

RICHARD E. BURK joined the Company in June 1996 as Vice President
- Strategic Planning, with the primary responsibility of implementing the
Company's proposed local exchange business. From January 1996 through June
1996, Mr. Burk was President of Network Intelligence, Inc., a
telecommunications consulting firm, and from October 1990 to January 1996, he
was Vice President of Operations for American Telco, Inc., where he was
responsible for management information systems and software development,
network operations and regulatory affairs. Mr. Burk has served as President
of the Texas Association of Long Distance Carriers (Texaltel) for the last
three years.

DAVID S. HORNE has served as Vice President - Human Resources of
the Company since November 1990. Mr. Horne has over 17 years of experience
in human resources management and previously was Director of Human Resources
for Scott's Food Services, Inc. in Austin, Texas.

MARION K. JENKINS joined the Company in October 1996 as Vice
President - Management Information Systems after having been a consultant to
the Company since July 1996. Mr. Jenkins was employed by American Telco,
Inc. from January 1986 to July 1996, where he was Vice President of Sales and
Customer Service from September 1991 to July 1996.

STEPHEN M. WAGNER joined U.S. Long Distance, Inc. in June 1992 as
Vice President - Sales. In October 1994, Mr. Wagner was promoted to Vice
President - Sales and Business Development of U.S. Long Distance, Inc., and in
March 1996, he also became Vice President - Marketing. Mr. Wagner was
Executive Vice President of Fone America, Inc. from May 1991 to June 1992.

JOHN M. WELSH has served as Vice President - Sales and Customer
Service of U.S. Long Distance, Inc. since September 1994. Mr. Welsh joined
U.S. Long Distance, Inc. in September 1990 in payphone sales and was promoted
to Manager of Payphone Sales in October 1992 and to Director of Payphone
Sales and Customer Service in August 1993.

-11-

DEF 14A 15th Page of 43 TOC 1st Previous Next ↓Bottom Just 15th
PARRIS H. HOLMES, JR. has served as Chairman of the Board of the
Company since September 1986. Mr. Holmes served as Chief Executive Officer
of the Company from September 1986 until August 1996, when he resigned as
Chief Executive Officer to become Chairman and Chief Executive Officer of
Billing upon the effectiveness of the Distribution. Prior to March 1993, Mr.
Holmes also served as President of the Company. Mr. Holmes is also a member
of the Boards of Directors of Tanisys Technology, Inc., a developer, marketer
and manufacturer of computer equipment, and Poore Brothers, Inc., a
manufacturer and distributor of flavored potato chips.

CHARLES E. AMATO has served as a director of the Company since October
1992. Since 1976, he has been Chairman of Southwest Business Corporation, a
financial services company in the insurance brokerage and mortgage banking
business.

GARY D. BECKER has served as a director of the Company since 1986.
Since February 1980, he has been a senior officer at Pace Entertainment
Corp., a diversified live entertainment production and promotion
organization. Mr. Becker was promoted to Chief Executive Officer of Pace
Motor Sports, Inc., a wholly owned subsidiary of Pace Entertainment Corp., in
January 1996.

F. GARDNER PARKER was appointed to the Company's Board of Directors in
December 1996. Mr. Parker has owned and operated Parker Investments, a private
investment firm, since June 1984. Mr. Parker also serves as Managing Trustee of
Camden Property Trust, a New York Stock Exchange real estate investment trust,
and Chairman of the Board of Computer Control Systems, Inc., as well as serving
on the boards of directors of several privately owned companies.

All directors hold office for their elected term or until their
successors are duly elected and qualified. If a director should be disqualified
or unable to serve as a director, the vacancy so arising may be filled by the
Board of Directors for the unexpired portion of his term. All officers serve at
the discretion of the Board of Directors. There are no family relationships
between members of the Board of Directors or any executive officers of the
Company.

COMMITTEES, MEETINGS AND BOARD COMPENSATION

The Board of Directors conducts its business through meetings of
the Board of Directors and through its committees. In accordance with the
Bylaws of the Company, the Board of Directors has established a Compensation
Committee and an Audit Committee. The Board of Directors does not currently
utilize a Nominating Committee or committee performing similar functions.

COMPENSATION COMMITTEE.

The Compensation Committee reviews and makes recommendations to the
Board of Directors concerning major compensation policies and compensation of
officers and executive employees. This committee currently is comprised of
directors Amato, Becker and Holmes. See "Executive Compensation - Report of
the Compensation Committee."

AUDIT COMMITTEE.

The Audit Committee acts on behalf of the Board of Directors with
respect to the Company's financial statements, record-keeping, auditing
practices and matters relating to the Company's independent public
accountants, including recommending to the Board of Directors the firm to be
engaged as independent public accountants for the next fiscal year; reviewing
with the Company's independent public accountants the scope and results of
the audit and any related management letter; consulting with the independent
public accountants and management with regard to the Company's accounting
methods and the adequacy of its internal accounting controls; approving
professional services by the independent public accountants; and reviewing
the independence of the independent public accountants. The Audit Committee
currently is comprised of directors Amato, Becker and Holmes.

BOARD OF DIRECTOR AND COMMITTEE MEETINGS.

During the fiscal year ended September 30, 1996, the Board of
Directors met 16 times and took actions on 13 other occasions by unanimous
written consents. During the year, the Compensation Committee of the Board of
Directors met on two occasions and took action on five separate occasions by
unanimous written consents, and the Audit Committee met on

-12-

DEF 14A 16th Page of 43 TOC 1st Previous Next ↓Bottom Just 16th
three occasions. During fiscal 1996, each director attended at least 75% of
the total of all meetings of the Board of Directors and any committee on
which he served.

DIRECTORS' COMPENSATION.

MEETING AND ANNUAL RETAINER FEES. Each outside member of the Board
of Directors received a meeting fee of $2,000 for each meeting of the Board
attended during fiscal 1996. Additionally, each member of the Compensation
Committee or Audit Committee received $500 for each committee meeting
attended during the year except that the chairperson of each such committee
received $1,000 for attendance. In each case, the members of the Board are
reimbursed for their travel expenses to and from the meetings. The Board
members do not receive a fee for telephonic meetings. In addition,
commencing December 1994, the Company instituted an Annual Director Fee for
all outside directors. For a description of the principal features of the
Annual Director Fee, see "Item 2 on Proxy: Approval of Amendments to the
1993 Non-Employee Director Plan of U.S. Long Distance Corp. - Terms of the
Plan." In December 1996, each non-employee director elected to receive the
Annual Director Fee in the form of a Director Fee Option for 7,500 shares of
Common Stock to be granted on December 15, 1997.

STOCK OPTIONS. Pursuant to the Company's Director Plan, each
outside director has been granted a Director Option or Director Options to
purchase certain shares of Common Stock. At September 30, 1996, no Director
Fee Options had been granted. See "Executive Compensation - Employee Benefit
Plans - Stock Option Plans." In addition, in fiscal 1996, Mr. Amato was
granted an option for the purchase of 10,000 shares at $4.375 per share which
vests one-third on each of the first three anniversaries of the date of grant
and is exercisable for six years, and Mr. Holmes was granted an option for
the purchase of 60,000 shares at $4.375 per share which vested 100% on the
date of grant and is exercisable for six years. See "Item 3 on Proxy:
Ratification of Stock Option Grant." At September 30, 1996, the outside
directors of the Company held the following number and value of options
granted under the Director Plan and outside the Director Plan:

[Enlarge/Download Table]
SECURITIES UNDERLYING UNREALIZED VALUE OF OPTIONS
OPTIONS AT SEPTEMBER 30, 1996 ($)(2)
--------------------------- EXERCISE PRICE ----------------------------
DIRECTOR EXERCISABLE UNEXERCISABLE PER SHARE (1) EXERCISABLE UNEXERCISABLE
--------------------- ----------- ------------- --------------- ----------- -------------

CHARLES E. AMATO 15,000 25,000 $3.43 - $4.76 $ 82,613 $108,288

GARY D. BECKER 15,000 15,000 $3.24 - $4.76 $ 85,463 $ 62,663

PARRIS H. HOLMES, JR. 60,000 0 $4.375 $273,750 0

F. GARDNER PARKER (3) -- -- N/A N/A N/A

--------------------
(1) The exercise price for these, and all other options outstanding as of the
Distribution Date, was adjusted in accordance with a formula adjustment
made in connection with the Distribution whereby the Common Stock was
allocated 25% of the pre-Distribution price and the common stock of Billing
was allocated 75% of the pre-Distribution price, based upon trading in both
stocks during the ten business days after the Distribution Date (the
"Formula Adjustment").

(2) Reflects the aggregate market value of the underlying securities as
determined by reference to the closing price of the Common Stock on the
Nasdaq NMS on September 30, 1996 ($8.9375 per share) minus the aggregate
exercise price for each option. Does not reflect the aggregate market
value of Billing stock underlying Billing stock options received by such
individuals pursuant to the terms of the Distribution.

(3) Mr. Parker was appointed to the Board of Directors in December 1996 to fill
a vacancy created by the Distribution.

DIRECTOR COMPENSATION DEFERRAL PLAN. On February 24, 1994, the
Board of Directors adopted the U.S. Long Distance Corp. Director Compensation
Deferral Plan (the "Director Deferral Plan"). Participation in the Director
Deferral Plan is offered to outside directors of the Company who elect to
participate as provided in the plan (the "Director Deferral Participants").
At December 31, 1996, there were three Director Deferral Participants in the
Director Deferral Plan. The

-13-

DEF 14A 17th Page of 43 TOC 1st Previous Next ↓Bottom Just 17th
Director Deferral Plan is a deferred compensation plan that generally allows
Director Deferral Participants to make voluntary deferral contributions (the
"Voluntary Director Contribution"), on a pre-tax basis, in increments of 1%,
of up to 100% of the fees paid by the Company for services rendered as a
director. In addition, the Company intends to contribute each plan year, on
behalf of each Director Deferral Participant, an amount equal to 33% of that
director's Voluntary Director Contribution (the "Company Director
Contribution"); provided, however, that the Company reserves the right to
eliminate the Company Director Contribution at any time or provide a Company
Director Contribution of a different amount. The Company made approximately
$24,915 in Company Director Contributions to the Director Deferral Plan
during fiscal 1996 on behalf of current directors Amato and Becker and a
former director.

Director Deferral Participants are annually vested in 33% of any
Company Director Contribution beginning with the Director Deferral
Participant's first anniversary of service and becoming 100% vested after the
third anniversary of service or upon a change in control of the Company. At
December 31, 1996, Messrs. Amato, Becker and Holmes were 100% vested in
Company Director Contributions. Benefits generally are payable to a Director
Deferral Participant (or his beneficiary) upon retirement, disability,
termination of service or death, in each case as provided in the Director
Deferral Plan.

EXECUTIVE COMPENSATION

REPORT OF THE COMPENSATION COMMITTEE

The Compensation Committee of the Board of Directors of the Company
(the "Committee") has furnished the following report on the Company's
executive compensation policies. The report describes the Committee's
compensation policies applicable to the Company's executive officers and
provides specific information regarding the compensation of the Company's
Chief Executive Officers in 1996. (The information contained in the report
shall not be deemed to be "soliciting material" or to be "filed" with the
SEC, nor shall such information be incorporated by reference into any future
filings under the Securities Act of 1933, as amended (the "Securities Act"),
or the Exchange Act, except to the extent that the Company specifically
incorporates it by reference into such filing.)

In 1996, the Committee was comprised of two outside directors. The
Committee administers and oversees all aspects of the Company's executive
compensation policy and reports its determinations to the Board of Directors.
See "Management - Committees, Meetings and Board Compensation - Compensation
Committee." The Committee's overall goal is to develop executive
compensation policies that are consistent with, and linked to, strategic
business objectives and Company values. The Committee approves the design
of, assesses the effectiveness of, and administers executive compensation
programs in support of, the Company's compensation policies. The Committee
also reviews and approves all salary arrangements and other remuneration for
executives, evaluates executive performance and considers related matters.

COMPENSATION PHILOSOPHY.

The Company's executive compensation policies have four primary
objectives: to attract and retain highly competent executives to manage the
Company's business, to offer executives appropriate incentives for
accomplishment of the Company's business objectives and strategy, to
encourage stock ownership by executives to enhance mutuality of interest with
stockholders and to maximize long-term stockholder value. The Committee
believes that the compensation policies should operate in support of these
objectives and should emphasize the following: a long-term and at-risk
focus, a pay-for-performance culture, an equity orientation and management
development.

ELEMENTS OF COMPENSATION.

Each element of compensation considers median compensation levels
paid within the competitive market. Competitive market data compares the
Company's compensation practices to a group of comparator companies that tend
to have similar sales volumes, market capitalizations, employment levels and
lines of business. The Committee reviews and approves the selection of
companies used for compensation comparison purposes.

The key elements of the Company's executive compensation are base
salary, annual incentive and long-term incentive. These key elements are
addressed separately below. In determining compensation, the Committee
considers all elements of an executive's total compensation package.

-14-

DEF 14A 18th Page of 43 TOC 1st Previous Next ↓Bottom Just 18th
BASE SALARIES. Base salaries for executives are initially
determined by evaluating executives' levels of responsibility, prior
experience, breadth of knowledge, internal equity issues and external pay
practices. Base salaries are below the size-adjusted medians of the
competitive market.

Increases to base salaries are driven primarily by individual
performance. Individual performance is evaluated based on sustained levels of
individual contribution to the Company. When evaluating individual
performance, the Committee considers the executive's efforts in promoting
Company values, continuing educational and management training, improving
product quality, developing relationships with customers, suppliers and
employees, and demonstrating leadership abilities among co-workers.

Mr. Holmes's and Mr. James's annual, calendar year base salaries
were increased in fiscal 1996 by approximately $24,000 and $40,000,
respectively. In determining the base salaries for Mr. Holmes and Mr. James
for fiscal 1996, the Committee, without Mr. Holmes's or Mr. James's
participation in the process and in its subjective determination, considered
the Company's overall performance, their individual performance and their
long-term contributions to the success of the Company.

ANNUAL INCENTIVE. Annually, each executive is considered for an
incentive bonus. Factors considered in determining the amount of the award
include revenue growth, cost control, net profitability and achievement of
individual goals and objectives. Typically, minimum revenue and earnings
thresholds have been established, below which no awards are made. Bonus
awards for all executives are approved by the Chief Executive Officer. Bonus
awards for the Company's Chief Executive Officer are subject to approval by
the Compensation Committee. Beginning with fiscal year 1997, the timing of
these bonus payments will change from an annual to a quarterly basis. Mr.
Holmes and Mr. James earned cash bonuses of $805,000 and $300,000,
respectively, in fiscal 1996. Because of the Company's record performance,
sizable bonuses also were earned by other executive officers in fiscal 1996.

LONG-TERM INCENTIVES. The Company's long-term compensation
philosophy provides that long-term incentives should relate to improvement in
stockholder value, thereby creating a mutuality of interests between
executives and stockholders. Additionally, the Committee believes that the
long-term security of executives is critical for the perpetuation of the
Company. Long-term incentives are provided to executives through Restricted
Stock Awards, the Company's Employee Option Plan and the Company's Executive
Compensation Deferral Plan.

In keeping with the Company's commitment to provide a total
compensation package that favors at-risk components of pay, long-term
incentives comprise an appreciable portion of an executive's total
compensation package. When awarding long-term incentives, the Committee
considers executives' respective levels of responsibility, prior experience,
historical award data, various performance criteria and compensation
practices at comparator companies. Again, the Committee does not utilize
formal mathematical formulae when determining the number of options/shares
granted to executives.

RESTRICTED STOCK AWARDS.

On December 12, 1995, the Board of Directors adopted the U.S. Long
Distance 1995 Employee Restricted Stock Plan (the "Restricted Stock Plan")
for the purpose of enabling the Company to provide incentives to its key
employees to maximize stockholder value by giving them a proprietary interest
in the Company through the ownership of stock. The Board of Directors
approved an amendment to the Restricted Stock Plan on July 2, 1996, to allow
for immediate vesting of restricted stock grants at the discretion of the
committee administering the Restricted Stock Plan. Officers and certain key
employees of the Company, including directors who are also full-time
employees, are eligible for awards under the Restricted Stock Plan. An
aggregate of 500,000 shares of Common Stock are reserved for awards under the
Restricted Stock Plan. The number of shares of Common Stock to be awarded to
an employee and other terms of the award are determined by a committee of
disinterested persons who administer the Restricted Stock Plan. Each award
is evidenced by an agreement that sets forth the terms and conditions of the
restricted stock granted, including the vesting schedule. The Restricted
Stock Plan provides for certain vesting upon death, permanent disability,
retirement, termination for good reason by the employee and upon a change of
control. The employee, as owner of the restricted stock, has all rights of a
stockholder including voting rights and the right to receive cash dividends,
if any. In fiscal 1996, 188,000 shares of Common Stock were granted under
the Restricted Stock Plan, and at September 30, 1996, 312,000 shares were
available for granting under the plan.

-15-

DEF 14A 19th Page of 43 TOC 1st Previous Next ↓Bottom Just 19th
The Committee believes that restricted stock provides the Company's
executives with an immediate link to stockholder interests. Upon becoming a
stockholder, the executive receives the right to vote Company shares and receive
dividends, further aligning the executive's interests to those of the Company's
stockholders. As detailed in the "Summary Compensation Table" under the
caption "Executive Compensation" below, Messrs. James and Long were granted
28,000 and 16,000 shares, respectively, under the Restricted Stock Plan on
December 14, 1995. On January 26, 1996 and March 8, 1996, Messrs. Holmes and
Saltzman were granted 55,000 and 16,000 shares, respectively, under the
Restricted Stock Plan. Under the terms of the grants to Messrs. James, Long,
Holmes and Saltzman, one half of such shares were to vest November 1, 1996 and
one half on November 1, 1997; such grants were subsequently amended to provide
for 100% vesting on July 2, 1996. In addition, on July 16, 1996, Messrs.
Holmes, James, Long and Saltzman were granted 50,000, 10,000, 6,000 and 7,000
shares, respectively, under the Restricted Stock Plan, which vested 100% on the
date of grant. No restricted stock grants were made in fiscal 1995. See
"Summary Compensation Table" under the caption "Executive Compensation" below.

STOCK OPTIONS.

Stock options are granted at an option price not less than the fair
market value of the Common Stock on the date of grant. Accordingly, stock
options have value only if the price of the Common Stock appreciates after
the date the options are granted. This design focuses executives on the
creation of stockholder value over the long term and encourages equity
ownership in the Company.

As detailed in the table entitled "Stock Option Grants in Fiscal 1996"
under the caption "Executive Compensation" below, in fiscal 1996 Messrs. Holmes
and James received options to purchase 60,000 and 130,000 shares, respectively,
of the Common Stock with an exercise price of $4.375 per share, exercisable for
six years. The grant to Mr. Holmes was a non-plan option and was granted in
consideration for continuing as Chairman of the Board of the Company. The grant
to Mr. Holmes vested 100% on the date of grant. One third of the option granted
to Mr. James vests on each of the first three anniversaries of the grant. In
addition, the stock options for 100,000 and 50,000 shares originally granted to
Messrs. Holmes and James, respectively, on April 13, 1995 at $14.875 per share
were repriced and regranted at $11.25 on November 28, 1995. Under the terms of
the regrants to Messrs. Holmes and James, one third of the options vested on the
date of regrant, one third vested on April 13, 1996 and one third were to vest
on April 13, 1997. Pursuant to the terms of the respective Agreements Regarding
Vesting and Adjustment of Stock Options entered into by Messrs. Holmes and James
and the Company and Billing on June 25, 1996, options unvested as of the
effective date of the Distribution vested as of the Distribution Date.

In determining the number of shares subject to the options granted to
Messrs. Holmes and James, the Committee considered the number of options
previously granted to each of them, the level of total stockholder return and
numerous subjective factors indicative of their respective dedication to the
success of the Company. At December 31, 1996, Messrs. Holmes and James owned
236,219 and 91,713 shares, respectively, of the Company's Common Stock and,
including their respective fiscal 1996 grants, held options to purchase an
additional 245,000 and 273,000 shares, respectively. The Committee believes
that these equity interests provide an appropriate link to the interests of
stockholders.

EXECUTIVE COMPENSATION DEFERRAL PLAN.

During fiscal 1996, the Company continued offering to certain key
employees the ability to defer a portion of their respective salaries, on a
pre-tax basis, up to 100% of base compensation, with benefits generally
payable upon retirement, disability, termination of employment (other than
for cause) or death. The Company may make certain matching contributions to
each participant's account under such plan with vesting to occur over time;
however, the Company has retained the ability to limit its contributions
thereunder at any time. The Committee believes that this type of plan
provides additional long-term incentive for overall corporate success. The
Company made an aggregate of approximately $99,795 in matching contributions
during fiscal 1996, $15,143 and $8,121 of which were made on behalf of
Messrs. Holmes and James, respectively.

-16-

DEF 14A 20th Page of 43 TOC 1st Previous Next ↓Bottom Just 20th
CONCLUSION.

The Committee believes that these executive compensation policies
serve the interests of the stockholders and the Company effectively. The
Committee believes that the various pay vehicles offered are appropriately
balanced to provide increased motivation for executives to contribute to the
Company's overall future successes, thereby enhancing the value of the
Company for the stockholders' benefit.

Charles E. Amato Gary D. Becker

-17-

DEF 14A 21st Page of 43 TOC 1st Previous Next ↓Bottom Just 21st
SUMMARY COMPENSATION TABLE

The following table sets forth certain information regarding
compensation paid during each of the Company's last three fiscal years to the
Company's Chief Executive Officers, each of the Company's four other most
highly compensated executive officers whose base salary and bonus exceeded
$100,000 for fiscal 1996 and two additional individuals for whom disclosure
would have been provided as a most highly compensated executive officer but
for the fact that the individuals were not serving as executive officers at
the end of the most recently completed fiscal year.

[Enlarge/Download Table]
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------------- ----------------------------
OTHER ANNUAL RESTRICTED SECURITIES ALL OTHER
NAME AND PRINCIPAL FISCAL COMPENSATION STOCK UNDERLYING COMPENSATION
POSITION YEAR SALARY($) BONUS ($)(1) ($)(2) AWARDS($)(3) OPTIONS(#)(4) ($)
------------------------- ---- --------- ------------ ------------ ------------ ------------- --------------

PARRIS H. HOLMES, JR. (5) 1996 $261,808 (6) $805,000 $15,524 $602,800 (7) 160,000 $1,339,979 (8)
CHAIRMAN OF THE BOARD 1995 276,000 750,000 22,421 0 100,000 38,964
AND CHIEF EXECUTIVE 1994 271,113 0 0 159,375 (9) 90,000 24,637
OFFICER

LARRY M. JAMES 1996 229,231 300,000 8,467 176,900 (10) 180,000 17,241 (11)
CHIEF EXECUTIVE OFFICER, 1995 200,000 140,000 7,280 0 50,000 9,492
PRESIDENT AND DIRECTOR 1994 189,231 0 0 74,375 (12) 68,000 8,698

W. AUDIE LONG 1996 174,616 55,000 11,152 103,380 (13) 75,000 380,634 (14)
GENERAL COUNSEL, SENIOR 1995 160,427 100,000 9,327 0 25,000 10,583
VICE PRESIDENT-LEGAL 1994 162,398 10,000 0 31,875 (15) 60,000 11,312
AND REGULATORY AFFAIRS
& CORPORATE SECRETARY

ALAN W. SALTZMAN (16) 1996 138,462 (6) 0 0 133,330 (17) 25,000 239,032 (18)
EXECUTIVE VICE PRESIDENT- 1995 147,308 100,000 0 0 25,000 8,792
OPERATIONS, BILLING AND 1994 136,790 10,000 0 31,875 (19) 58,000 6,614
INFORMATION MANAGEMENT

KELLY E. SIMMONS (20) 1996 88,154 (6) 0 0 0 10,000 63,489 (21)
SENIOR VICE PRESIDENT- 1995 96,000 33,000 0 0 0 2,863
BUSINESS DEVELOPMENT 1994 95,479 10,000 0 12,250 (22) 19,000 2,062
AND CORPORATE TREASURER

JAMES S. SPEIRS 1996 117,692 40,000 1,582 0 70,000 2,373 (23)
SENIOR VICE PRESIDENT- 1995 N/A N/A N/A N/A N/A N/A
NETWORK OPERATIONS AND 1994 N/A N/A N/A N/A N/A N/A
CHIEF TECHNOLOGY OFFICER

PHILLIP J. STORIN 1996 102,230 60,000 3,148 0 50,000 4,319 (24)
SENIOR VICE PRESIDENT, 1995 92,000 36,000 0 0 0 3,567
CHIEF FINANCIAL OFFICER 1994 91,412 10,000 0 0 18,000 2,987
AND CORPORATE TREASURER

STAN G. MASTERS 1996 93,654 40,000 0 0 50,000 4,472 (25)
SENIOR VICE PRESIDENT- 1995 89,712 22,000 0 0 0 4,304
SALES 1994 81,359 5,000 0 0 24,000 3,186

--------------------
(1) In 1994, represents bonuses earned in the fiscal year, but paid 50% in
January and 50% in April of fiscal year 1995. Payment of such bonuses was
conditioned upon the Company recognizing a profit in its first and second
fiscal quarters, respectively. These conditions, however, were waived by
the Company for those bonuses earned for fiscal 1994.

(2) Represents amounts reimbursed during fiscal 1996 and fiscal 1995 for the
payment of certain taxes.

(3) At September 30, 1996, the number and value of aggregate restricted stock
award holdings were as follows: Mr. Holmes, 120,000 shares ($1,072,500);
Mr. James, 45,000 shares ($402,188); Mr. Long, 22,000 shares ($196,625);
Mr. Saltzman, 27,000 shares ($241,313); and Mr. Simmons, 1,000 shares
($8,938). Messrs. Storin, Masters and Speirs did not hold any restricted
stock at September 30, 1996. The value of the restricted stock awards was
determined by

-18-

DEF 14A 22nd Page of 43 TOC 1st Previous Next ↓Bottom Just 22nd
multiplying the market value of the Common Stock on September 30, 1996 as
determined by reference to the closing price of the Common Stock on the
Nasdaq NMS ($8.9375 per share) by the number of shares of restricted stock
held. The value of the restricted stock awards does not include the value
of Billing stock awards received by the foregoing individuals pursuant to
the terms of the Distribution. If any dividends are paid with respect to
the Company's Common Stock, such dividends will be paid on the restricted
stock.

(4) Certain of the options granted during fiscal 1996 and 1994 were the result
of the voluntary surrender and exchange of previously granted options under
the Company's Employee Option Plan. See "Stock Option Grants in Fiscal
1996" and "Ten-Year Option Repricings."

(5) Mr. Holmes resigned as Chief Executive Officer as of the Distribution Date
to become Chairman and Chief Executive Officer of Billing. The summary
compensation table does not reflect compensation paid to Mr. Holmes by
Billing after the Distribution Date, nor does it reflect compensation paid
to Mr. Holmes by the Company for services rendered as Chairman of the
Board.

(6) Represents salary paid through August 1, 1996.

(7) Mr. Holmes was granted 55,000 shares on January 26, 1996 which, as amended,
vested 100% on July 2, 1996, and was granted 50,000 shares on July 16, 1996
which vested 100% on the date of grant.

(8) Represents $3,256 in Company 401(k) Retirement Plan contributions, $15,143
in Company deferred compensation contributions and $21,580 in life
insurance premiums made or paid on behalf of Mr. Holmes during fiscal 1996
and a $1,300,000 severance payment in connection with the Distribution.

(9) Mr. Holmes was granted 15,000 shares on March 1, 1994, which vested 50% on
February 1, 1995 and 50% on February 1, 1996.

(10) Mr. James was granted 28,000 shares on December 14, 1995 which, as amended,
vested 100% on July 2, 1996, and was granted 10,000 shares on July 16, 1996
which vested 100% on the date of grant.

(11) Represents $3,202 in Company 401(k) Retirement Plan contributions, $8,121
in Company deferred compensation contributions and $5,918 in life insurance
premiums made or paid on behalf of Mr. James during fiscal 1996.

(12) Mr. James was granted 7,000 shares on March 1, 1994, which vested 50% on
February 1, 1995 and 50% on February 1, 1996.

(13) Mr. Long was granted 16,000 shares on December 14, 1995 which, as amended,
vested 100% on July 2, 1996, and was granted 6,000 shares on July 16, 1996
which vested 100% on the date of grant.

(14) Represents $2,536 in Company 401(k) Retirement Plan contributions, $10,015
in Company deferred compensation contributions and $8,083 in life insurance
premiums made or paid on behalf of Mr. Long during fiscal 1996 and $360,000
paid under contractual agreement in connection with the Distribution.

(15) Mr. Long was granted 3,000 shares on March 1, 1994, which vested 50% on
February 1, 1995 and 50% on February 1, 1996.

(16) Mr. Saltzman resigned as an officer of the Company as of the Distribution
Date to become President and Chief Operating Officer of Billing. The
summary compensation table does not reflect compensation paid to Mr.
Saltzman by Billing after the Distribution Date.

(17) Mr. Saltzman was granted 16,000 shares on March 8, 1996 which, as amended,
vested 100% on July 2, 1996, and was granted 7,000 shares on July 16, 1996
which vested 100% on the date of grant.

-19-

DEF 14A 23rd Page of 43 TOC 1st Previous Next ↓Bottom Just 23rd
(18) Represents $1,998 in Company 401(k) Retirement Plan contributions, $5,636
in Company deferred compensation contributions and $6,398 in life insurance
premiums made or paid on behalf of Mr. Saltzman during fiscal 1996 and a
$225,000 severance payment in connection with the Distribution.

(19) Mr. Saltzman was granted 3,000 shares on March 1, 1994, which vested 50% on
February 1, 1995 and 50% on February 1, 1996.

(20) Mr. Simmons resigned as an officer of the Company as of the Distribution
Date to become Senior Vice President, Chief Financial Officer, Treasurer
and Corporate Secretary of Billing. The summary compensation table does
not reflect compensation paid to Mr. Simmons by Billing after the
Distribution Date.

(21) Represents $1,258 in Company 401(k) Retirement Plan contributions and
$2,231 in Company deferred compensation contributions made on behalf of
Mr. Simmons during fiscal 1996 and a $60,000 severance payment in
connection with the Distribution.

(22) Mr. Simmons was granted 1,000 shares on March 24, 1994, which vested 50% on
February 1, 1995 and 50% on February 1, 1996.

(23) Represents $2,373 in Company deferred compensation contributions made on
behalf of Mr. Speirs during fiscal 1996.

(24) Represents $1,427 in Company 401(k) Retirement Plan contributions and
$2,892 in Company deferred compensation contributions made on behalf of
Mr. Storin during fiscal 1996.

(25) Represents $1,353 in Company 401(k) Retirement Plan contributions and
$3,119 in Company deferred compensation contributions made on behalf of
Mr. Masters during fiscal 1996.

-20-

DEF 14A 24th Page of 43 TOC 1st Previous Next ↓Bottom Just 24th
STOCK OPTION GRANTS IN FISCAL 1996

The following table provides information related to options granted to the
named executive officers during fiscal 1996. The Company has never granted
stock appreciation rights.

[Enlarge/Download Table]
INDIVIDUAL GRANTS
------------------------- POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO EXERCISE PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES OR BASE OPTION TERM(4)
OPTIONS IN FISCAL PRICE EXPIRATION ----------------------
NAME GRANTED(#)(1) 1996 ($/SH) DATE 5%($) 10%($)
---- ------------- ---------- --------- ------------ -------- --------

PARRIS H. HOLMES, JR. 100,000 5.6 $2.91 (2) 11/27/00 (2) $ 80,398 $177,658
60,000 3.4 4.375 8/04/02 72,524 160,259

LARRY M. JAMES 50,000 2.8 2.91 (2) 11/27/00 (2) 40,199 88,829
130,000 7.3 4.375 8/04/02 157,135 347,228

W. AUDIE LONG 25,000 1.4 2.91 (2) 11/27/00 (2) 20,099 44,415
50,000 2.8 4.375 8/04/02 60,437 133,549

ALAN W. SALTZMAN 25,000 1.4 2.91 (2) 11/27/00 (2) 20,099 44,415

KELLY E. SIMMONS 10,000 0.6 2.91 (3) 11/27/00 (3) 8,040 17,766

JAMES S. SPEIRS 30,000 1.7 2.91 (3) 11/27/00 (3) 24,119 53,298
40,000 2.3 4.375 8/04/02 48,349 106,839

PHILLIP J. STORIN 10,000 0.6 2.91 (3) 11/27/00 (3) 8,040 17,766
40,000 2.3 4.375 8/04/02 48,349 106,839

STAN G. MASTERS 11,000 (5) 0.6 2.91 (3) 11/27/00 (3) 8,844 19,542
45,000 (6) 2.5 4.375 8/04/02 54,393 120,194

______________
(1) For each named executive officer, the first option listed represents the
grant of a new option with a lower option exercise price in exchange for
the voluntary surrender of a previously granted option also under the
Company's Employee Option Plan. See "Executive Compensation - Repricing of
Options." The second option listed represents a grant under the Company's
Employee Option Plan. See "Executive Compensation - Employee Benefit Plans
- Stock Option Plans." Under the terms of the regranted options issued in
fiscal 1996 to Messrs. Holmes, James, Long and Saltzman, one-third were
immediately exercisable, one-third were exercisable April 13, 1996 and one-
third were to be exercisable April 13, 1997. Pursuant to the terms of the
Agreements Regarding Vesting and Adjustment of Stock Options entered into
by Messrs. Holmes, James, Long and Saltzman, and the Company and Billing on
June 25, 1996, options unvested as of the effective date of the
Distribution vested as of the Distribution Date. Of the regranted options
issued in fiscal 1996 to Messrs. Speirs, Storin and Masters, one-third were
exercisable on October 4, 1996, one-third will be exercisable on October 4,
1997 and one-third will be exercisable on October 4, 1998. Of the new
options granted in fiscal 1996, one-third each are exercisable on the three
anniversaries following the date of grant.

(2) Each of these options originally was granted on April 13, 1995 at an option
exercise price of $14.875 per share and voluntarily surrendered in November
1995 in consideration of an option grant for the same number of shares at
an option exercise price of $11.25 per share. The option expiration dates
were extended to November 27, 2000. The exercise price for these, and all
other options outstanding as of the Distribution Date, was adjusted in
accordance with a Formula Adjustment resulting from the Distribution.

-21-

DEF 14A 25th Page of 43 TOC 1st Previous Next ↓Bottom Just 25th
(3) Each of these options originally was granted on October 4, 1995 at an
option exercise price of $12.6875 per share and voluntarily surrendered in
November 1995 in consideration of an option grant for the same number of
shares at an option exercise price of $11.25 per share. The option
expiration dates were extended to November 27, 2000. The exercise price
for these, and all other options outstanding as of the Distribution Date,
was adjusted in accordance with a Formula Adjustment resulting from the
Distribution.

(4) Calculation based on stock option exercise price over the exercise period
of the option assuming annual compounding. The columns present estimates
of potential values based on certain mathematical assumptions. The actual
value, if any, that an executive officer may realize is dependent upon the
market price on the date of option exercise. No value is reflected for the
aggregate value of Billing stock underlying Billing stock options received
by such individuals pursuant to the terms of the Distribution.

(5) Includes the grant of an option for 1,000 shares to Mr. Masters' wife, who
serves as the Company's Director of Product Management.

(6) Includes the grant of an option for 5,000 shares to Mr. Masters' wife.

AGGREGATED OPTION EXERCISES IN FISCAL 1996 AND FISCAL YEAR-END OPTION VALUES

The following table provides information related to options exercised by
the named executive officers during the 1996 fiscal year and the number and
value of options held at fiscal year end. The Company does not have any
outstanding stock appreciation rights.

[Enlarge/Download Table]
NUMBER OF SECURITIES VALUE(2) OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES ACQUIRED VALUE OPTIONS AT FY-END(#) OPTIONS AT FY-END($)
UPON OPTION REALIZED -------------------------- --------------------------
NAME EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------- ----------- ------------- ----------- -------------

PARRIS H. HOLMES, JR. 21,000 $356,385 245,000 0 $1,422,578 $ 0

LARRY M. JAMES 0 N/A 143,000 130,000 904,623 593,125

W. AUDIE LONG 0 N/A 142,000 50,000 996,515 228,125

ALAN W. SALTZMAN 0 N/A 103,000 0 656,173 0

KELLY E. SIMMONS 0 N/A 45,000 0 298,068 0

JAMES S. SPEIRS 0 N/A 0 70,000 0 363,325

PHILLIP J. STORIN 10,000 21,750 20,000 53,000 129,620 261,908

STAN G. MASTERS 0 N/A 16,417 (3) 61,833 (4) 106,802 309,465

_____________
(1) Market value of the underlying securities at exercise date, minus the
exercise price.

(2) Market value of the underlying securities at September 30, 1996 ($8.9375),
minus the exercise price. No value is reflected for the aggregate value of
Billing stock underlying Billing stock options received by such individuals
pursuant to the terms of the Distribution.

(3) Includes options for 2,917 shares held by Mr. Masters' wife.

(4) Includes options for 6,833 shares held by Mr. Masters' wife.

-22-

DEF 14A 26th Page of 43 TOC 1st Previous Next ↓Bottom Just 26th
REPRICING OF OPTIONS

REPORT OF COMPENSATION COMMITTEE

The Compensation Committee of the Board of Directors of the Company has
furnished the following report regarding the repricing of options during fiscal
1996. All options repriced during fiscal 1996 resulted from an exchange of
options under the Employee Option Plan for new options with a lower exercise
price under the same plan.

The Committee believes that the value of the Company to its stockholders is
necessarily dependent upon the Company's ability to attract and retain qualified
and competent employees. The Employee Option Plan was expressly established to
provide an additional incentive to such individuals to continue in the service
of the Company. In November of fiscal 1996, the Committee believed that the
value of certain of the options previously granted to key employees under the
Employee Option Plan had eroded to such an extent that the intended incentive to
such employees had failed, and that as a result, it was in the best interests of
the Company and its stockholders to regrant such options. The Committee
believes that by repricing the options previously granted under the Employee
Option Plan, the Company has restored the incentive for such employees. In each
case, the options granted in replacement of previously granted options were made
with an exercise price equal to the fair market price of the underling Common
Stock on the date of the grant. Except for one grant made to one of the
Company's officers, the number of shares subject to exercise and the vesting
periods remain unchanged by the replacement options. The option term of the
replacement options was extended to five years from the date of the regranted
options.

Charles E. Amato Gary D. Becker

TEN-YEAR OPTION REPRICINGS.

The following table provides information related to each option repricing
held by any executive officer of the Company during the last ten completed
fiscal years.

[Enlarge/Download Table]
LENGTH OF
MARKET ORIGINAL
NUMBER OF PRICE OF EXERCISE OPTION
SECURITIES STOCK AT PRICE AT TERM
UNDERLYING TIME OF TIME OF NEW REMAINING
OPTIONS REPRICING REPRICING EXERCISE AT DATE OF
NAME AND PRINCIPAL REPRICED OR AMEND- AMEND- PRICE REPRICING
POSITION DATE AMENDED (#) MENT ($) MENT ($) ($)(2) AMENDMENT
------------------ -------- ----------- --------- --------- -------- ---------

PARRIS H. HOLMES, JR. (1) 2/2/94 50,000 $ 9.75 $12.125 $ 9.75 52 months
CHAIRMAN OF THE BOARD 11/28/95 100,000 11.25 14.875 11.25 43 months
AND CHIEF EXECUTIVE
OFFICER

LARRY M. JAMES 2/2/94 38,000 9.75 12.125 9.75 52 months
CHIEF EXECUTIVE OFFICER, 11/28/95 100,000 11.25 14.875 11.25 43 months
PRESIDENT AND DIRECTOR

W. AUDIE LONG 2/2/94 30,000 9.75 12.125 9.75 52 months
GENERAL COUNSEL, SENIOR 11/28/95 25,000 11.25 14.875 11.25 43 months
VICE PRESIDENT-LEGAL AND
REGULATORY AFFAIRS AND
CORPORATE SECRETARY

ALAN W. SALTZMAN (3) 2/2/94 28,000 9.75 12.125 9.75 52 months
EXECUTIVE VICE PRESIDENT, 11/28/95 25,000 11.25 14.875 11.25 43 months
OPERATIONS, BILLING AND
INFORMATION MANAGEMENT

-23-

DEF 14A 27th Page of 43 TOC 1st Previous Next ↓Bottom Just 27th
[Enlarge/Download Table]

KELLY E. SIMMONS (4) 2/2/94 10,000 9.75 12.125 9.75 52 months
SENIOR VICE PRESIDENT- 11/28/95 10,000 11.25 12.6875 11.25 58 months
BUSINESS DEVELOPMENT
AND CORPORATE TREASURER

JAMES S. SPEIRS 11/28/95 30,000 11.25 12.6875 11.25 58 months
SENIOR VICE PRESIDENT-
NETWORK OPERATIONS AND
CHIEF TECHNOLOGY OFFICER

PHILLIP J. STORIN 2/2/94 9,000 9.75 12.125 9.75 52 months
SENIOR VICE PRESIDENT, 11/28/95 10,000 11.25 12.6875 11.25 58 months
CHIEF FINANCIAL OFFICER
AND CORPORATE TREASURER

STANLEY G. MASTERS 2/2/94 10,500 (5) 9.75 12.125 9.75 52 months
SENIOR VICE PRESIDENT- 9/22/94 15,000 (6) 9.375 9.875 9.375 57 months
SALES 11/28/95 11,000 (7) 11.25 12.6875 11.25 58 months

PATRICK M. AELVOET 2/2/94 5,000 9.75 10.75 9.75 49 months
VICE PRESIDENT AND 11/28/95 3,000 11.25 12.6875 11.25 58 months
CORPORATE CONTROLLER

DAVID S. HORNE 2/2/94 8,000 9.75 12.125 9.75 52 months
VICE PRESIDENT-HUMAN 11/28/95 10,000 11.25 12.6875 11.25 58 months
RESOURCES

STEPHEN M. WAGNER 2/2/94 5,500 9.75 12.125 9.75 52 months
VICE PRESIDENT-MARKETING, 11/28/95 8,000 11.25 12.6875 11.25 58 months
SALES AND BUSINESS
DEVELOPMENT, U.S. LONG
DISTANCE, INC.

JOHN M. WELSH 2/2/94 3,000 9.75 12.125 9.75 52 months
VICE PRESIDENT-SALES AND 11/28/95 10,000 11.25 12.6875 11.25 58 months
CUSTOMER SERVICE, U.S.
LONG DISTANCE, INC.

____________
(1) Mr. Holmes resigned as Chief Executive Officer as of the Distribution Date
to become Chairman and Chief Executive Officer of Billing.

(2) The new exercise price represents the exercise price at the date of the
regrant and is not adjusted to reflect the Formula Adjustment resulting
from the Distribution.

(3) Mr. Saltzman resigned as an officer of the Company as of the Distribution
Date to become President and Chief Operating Officer of Billing.

(4) Mr. Simmons resigned as an officer of the Company as of the Distribution
Date to become Senior Vice President, Chief Financial Officer, Treasurer
and Corporate Secretary of Billing.

(5) Includes an option for 1,500 shares regranted to Mr. Masters' wife.

(6) The option cancelled represented the right to acquire 10,000 shares of
Common Stock upon exercise while the new option granted in replacement
thereof represented the right to acquire 15,000 shares of Common Stock.

(7) Includes an option for 1,000 shares regranted to Mr. Masters' wife.

-24-

DEF 14A 28th Page of 43 TOC 1st Previous Next ↓Bottom Just 28th
EMPLOYEE BENEFIT PLANS

U.S. LONG DISTANCE CORP. 401(K) RETIREMENT PLAN.

The Company adopted the U.S. Long Distance Corp. 401(k) Retirement Plan
(the "Retirement Plan") effective January 1, 1992. Participation in the
Retirement Plan is offered to eligible employees of the Company or its
subsidiaries (collectively, the "Participants"). Generally, all employees of
the Company or its subsidiaries who are 21 years of age and who have completed
one year of service during which they worked at least 1,000 hours are eligible
for participation in the Retirement Plan.

The Retirement Plan is a 401(k) plan, a form of defined contribution plan
which provides that Participants generally may make voluntary salary deferral
contributions, on a pre-tax basis, of between 1% and 15% of their base
compensation in the form of voluntary payroll deductions up to a maximum amount
as indexed for cost-of-living adjustments ("Voluntary Contributions"). From
January 1993 through December 1994, the Company made matching contributions
equal to 33% of the first 6% of a Participant's compensation contributed as
salary deferral. Effective January 1, 1995, the Company made matching
contributions equal to 25% of the first 6% of a Participant's compensation
contributed as salary deferral. Effective January 1, 1996, the Company made
matching contributions equal to 50% of the first 3% of a Participant's
compensation contributed as salary deferral. The Company may from time to time
make additional discretionary contributions at the sole discretion of the Board.
The discretionary contributions, if any, are allocated to Participants' accounts
based on a discretionary percentage of the Participants' respective salary
deferrals.

Participants are gradually vested in all contributions made by the Company
over a period of five years of credited service, vesting 25% a year for each
full year of service beginning with the Participant's second anniversary, and
becoming 100% vested after five years of service or upon death, total and
permanent disability, retirement under the Retirement Plan or Retirement Plan
termination. Participants are always 100% vested in their Voluntary
Contributions.

STOCK OPTION PLANS.

EMPLOYEE OPTION PLAN. On February 6, 1990, the stockholders of the Company
approved the 1990 Employee Stock Option Plan (the "Employee Option Plan"). The
Employee Option Plan provides for the grant of incentive stock options ("ISOs")
under Section 422 of the Internal Revenue Code and stock options that do not
qualify under Section 422 of the Code ("NQSOs"). Under the terms of the
Employee Option Plan, as amended by the stockholders at the Company's 1992, 1994
and 1996 Annual Meetings, 3,966,666 shares of Common Stock have been reserved
for the granting of options. At December 31, 1996, options to purchase
3,176,151 shares had been granted. If any option granted under the Employee
Option Plan terminates, expires or is surrendered, new options may thereafter be
granted covering such shares.

The Employee Option Plan is administered by a committee (the "Option Plan
Committee") of three "disinterested persons" appointed by the Board. The Option
Plan Committee currently consists of the members of the Compensation Committee
of the Board: Charles E. Amato, Gary D. Becker and Parris H. Holmes, Jr. The
Employee Option Plan grants broad authority to the Option Plan Committee to
grant options to full-time employees and officers of the Company and its
subsidiaries (totaling 558 eligible individuals at December 31, 1996) selected
by the Option Plan Committee, to determine the number of shares subject to
options and to provide for the appropriate periods and methods of exercise and
requirements regarding the vesting of options. The option price for ISOs may
not be less than 100% of the fair market value of the Common Stock on the date
of grant, or 110% of the fair market value with respect to any ISO issued to a
holder of 10% or more of the Company's shares. There is no price requirement
for NQSOs, other than that the option price must exceed the par value of the
Common Stock. The Employee Option Plan further directs the Option Plan
Committee to set forth provisions in option agreements regarding the exercise
and expiration of options according to stated criteria. The Option Plan
Committee oversees the methods of exercise of options, with attention being
given to compliance with appropriate securities laws and regulations. The
Employee Option Plan permits the use of already owned Common Stock as payment
for the exercise price of options. Options for no more than 150,000 shares may
be granted to any individual employee under the Employee Option Plan during any
single fiscal year.

DIRECTOR OPTION PLAN. On March 9, 1993, the, Board of Directors adopted,
subject to stockholder approval, the Director Plan. The Director Plan
incorporated and expanded a previous director option plan and authorizes the
granting of nonqualified options ("Director Options") to purchase Common Stock
to non-employee directors (totaling four eligible

-25-

DEF 14A 29th Page of 43 TOC 1st Previous Next ↓Bottom Just 29th
individuals at December 31, 1996). The Director Plan was approved by the
Company's stockholders at the Company's 1994 Annual Meeting, and the
Company's stockholders approved certain amendments to the Director Plan at
the Company's 1996 Annual Meeting, which amendments included the Annual
Director Fee for non-employee directors of the Company. Under the terms of
the Director Plan, each non-employee director must make an election, no later
than December 31 of each year, to receive his Annual Director Fee for the
following year in cash ($15,000) or in whole or in part through the grant of
a Director Fee Option exercisable for up to 7,500 shares of Common Stock at
an exercise price per share equal to the fair market value of the Common
Stock on the date of grant (I.E., the business day on or immediately after
December 15). Certain additional amendments to the Director Plan are being
proposed. See "Item 2 on Proxy: Approval of Amendments to the 1993
Non-Employee Director Plan."

During the fiscal year ended September 30, 1996, directors Amato and Becker
were granted Director Options under the Director Plan, and no Director Fee
Options were granted. A total of 250,000 shares of Common Stock (subject to
certain adjustments) has been reserved for issuance upon exercise of Director
Options. If the Director Plan Amendments are approved by the Company's
stockholders, 750,000 shares will be available for the grant of options under
the Director Plan. At December 31, 1996, options to purchase 165,000 shares of
Common Stock had been granted under the Director Plan. Each such option had a
per share option exercise price equal to the market price per share of the
Common Stock on the date of grant. All Director Options vest in three equal
portions over three years from the first date of the individual's service to the
Company as a director or date of grant, as the case may be, and are exercisable
for a period of five years from the date of grant. All Director Fee Options
vest on the date of grant and are exercisable for a period of five years from
the date of grant. Director Options and Director Fee Options, once granted and
to the extent vested and exercisable, will remain exercisable throughout their
term, except that the unexercised portion of a Director Option will terminate 30
days after the date an optionee ceases to be a Director for any reason other
than death, in which case the Director Option will terminate one year after the
optionee's death or six months after the optionee's death if the death occurs
during the 30-day period referenced above.

EMPLOYEE STOCK PURCHASE PLAN.

The Company adopted the U.S. Long Distance Corp. Employee Stock Purchase
Plan (the "ESPP") effective August 1, 1995, and the stockholders of the Company
approved the ESPP on February 29, 1996. The ESPP allows participating employees
to purchase shares of the Common Stock at a discount with funds from payroll
deductions. Every employee of the Company and its subsidiaries is eligible to
participate in the ESPP on a voluntary basis with the exception of (i) employees
who have not completed at least six months of continuous service with the
Company as of the applicable enrollment date and (ii) employees who would,
immediately upon enrollment, own directly or indirectly, or hold purchase
rights, options or rights to acquire, an aggregate of 5% or more of the total
combined voting power or value of all outstanding shares of all classes of the
Company. At December 31, 1996, there were 154 participants in the ESPP.

Enrollment in the ESPP constitutes a grant by the Company to the
participant of the right to purchase shares of the Company's Common Stock.
Under the terms of the ESPP, 1,000,000 shares of Common Stock have been reserved
for purchase under the plan, subject to adjustment as provided in the ESPP. At
December 31, 1996, 35,094 shares had been purchased under the ESPP. Each
offering of Common Stock under the ESPP (except for the initial offering period,
which was seven months, and the second offering period, which was shortened to
four months due to the Distribution) covers a period of approximately six
months. To participate in the ESPP, eligible employees must enroll in the ESPP
and authorize payroll deductions pursuant to the ESPP. These payroll deductions
may not exceed $10,625 in any six-month participation period. The purchase
price per share is the lesser of (i) 85% of the fair market value of the Common
Stock on the first day of the applicable participation period or (ii) 85% of the
fair market value of the Common Stock on the last day of such participation
period. The ESPP is administered, at the Company's expense, by the Employee
Stock Purchase Plan Committee, which was appointed by the Board of Directors.
The Committee consists of at least three persons who need not be members of the
Board of Directors.

EXECUTIVE COMPENSATION DEFERRAL PLAN.

On December 15, 1993, the Board of Directors adopted the U.S. Long Distance
Corp. Executive Compensation Deferral Plan (the "Executive Deferral Plan") to be
effective January 1, 1994. Participation in the Executive Deferral Plan is
offered to certain key employees occupying management positions and/or certain
other highly compensated employees of the Company who are determined by the
Board, from time to time, to be eligible to participate in the Executive
Deferral Plan

-26-

DEF 14A 30th Page of 43 TOC 1st Previous Next ↓Bottom Just 30th
("Executive Deferral Participants"). At December 31, 1996, there were 16
Executive Deferral Participants in the Executive Deferral Plan.

The Executive Deferral Plan is a deferred compensation plan that provides
that Executive Deferral Participants generally may make voluntary salary
deferral contributions, on a pre-tax basis, in equal monthly amounts of up to
100% of his or her base compensation ("Voluntary Deferral Contribution"). In
addition, the Company intends to make certain matching contributions with
respect to each Voluntary Deferral Contribution (the "Company Deferral
Contribution") equal to the lesser of (i) the Voluntary Deferral Contribution or
(ii) that amount together with the Voluntary Deferral Contribution which
actuarially determined would yield a 10-year annuity equal to 50% of the
Executive Deferral Participant's compensation payable at age 65, with a minimum
contribution of $3,000. However, the Company reserves the right, at any time,
to decrease the Company Deferral Contribution or provide no Company contribution
whatsoever for any plan year. The Company made approximately $99,795 in Company
Deferral Contributions to this plan during fiscal 1996.

Unless terminated for cause, Executive Deferral Participants are annually
vested in 33% of any Company Deferral Contribution beginning with the Executive
Deferral Participant's first anniversary of service and becoming 100% vested
after the third anniversary of service or upon a change in control of the
Company. Benefits generally are payable to an Executive Deferral Participant
(or his or her beneficiaries) upon retirement, disability, termination of
employment (other than for cause) or death, in each case as provided in the
Executive Deferral Plan. Messrs. Holmes, James, Long, Saltzman, Simmons, Storin
and Masters are 100% vested in their respective Company Deferral Contributions.
Mr. Speirs is 33.33% vested in Company Deferral Contributions.

DISABILITY PLAN.

Effective January 1, 1994, the Board of Directors of the Company adopted
the U.S. Long Distance Corp. Executive Qualified Disability Plan (the
"Disability Plan"). The Disability Plan provides long-term disability benefits
for certain employees occupying management positions with the Company or its
subsidiaries. Benefits under the Disability Plan are provided directly by the
Company based on definitions, terms and conditions contained in the Disability
Plan documents. At December 31, 1996, there were 15 participants in the
Disability Plan. No benefits were paid to any participant under the Disability
Plan during fiscal 1996.

-27-

DEF 14A 31st Page of 43 TOC 1st Previous Next ↓Bottom Just 31st
PERFORMANCE GRAPH

The following performance graph compares the performance of the Company's
Common Stock to the Standard and Poors 500 Index (the "S&P 500 Index") and to
the Standard and Poors Telecommunications Index (the "S&P Tel Index") for the
period since September 30, 1991. The S&P Tel Index is comprised of AT&T, MCI
Telecommunications Corporation, Sprint Corporation and Worldcom, Inc. The
graph assumes that the value of the investment in the Company's Common Stock and
each index was $100 at September 30, 1991 and that all dividends were
reinvested. Performance data for the Company is provided as of the last trading
day of each of the Company's last five fiscal years. Performance data for the
S&P 500 Index and for the S&P Tel Index is provided for the last trading day
closest to September 30 of each year.

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL STOCKHOLDER RETURN*
U.S. LONG DISTANCE CORP., S&P 500 INDEX AND S&P TEL INDEX

COMPARATIVE ANALYSIS

Total Shareholder Return
Prepared for

U.S. LONG DISTANCE CORP.

---------------------------------------------------------
9/30/91 9/30/92 9/30/93 9/30/94 9/30/95 9/30/96
---------------------------------------------------------
USLD 100 130.556 215.278 111.111 167.356 383.586
S&P 500 INDEX 100 110.998 125.358 130.020 168.560 202.715
S&P TEL. INDEX 100 118.870 169.240 161.086 190.834 172.814

-----------------------------------------------------------------------------
Notes:

(1) Assumes that the value of the investment in the company's Common stock,
and each index, was $100 on September 30, 1991, and that all dividends were
reinvested.

(2) The peer group index is comprised of the following Companies: AT&T
Corporation, MCI Communications Corporation, Sprint Corporation and Worldcom,
Inc. The index is weighted to reflect the relative market capitalization of
the peer group companies.

(3) The cumulative total return for fiscal 1996 includes the value of
Billing common stock distributed to the Company's stockholdrs in the
Distribution.
-----------------------------------------------------------------------------

There can be no assurance that the Company's stock performance will
continue in the future with the same or similar trends depicted above. The
Company does not and will not make or endorse any predictions as to future
stock performance.

-28-

DEF 14A 32nd Page of 43 TOC 1st Previous Next ↓Bottom Just 32nd
EMPLOYMENT AGREEMENTS AND CHANGE-OF-CONTROL ARRANGEMENTS

Effective January 1, 1994, the Company entered into an employment agreement
with Mr. Holmes. The agreement provided for a four-year term, subject to
automatic extension for an additional one year on each one-year anniversary of
the agreement. This employment agreement was subject to early termination as
provided therein, including termination by the Company for "cause" (as defined
in the employment agreement) or termination by Mr. Holmes for "good reason" (as
defined in the employment agreement). Beginning January 1, 1996, the employment
agreement provided for an annual, calendar year base salary of $325,000 and an
incentive bonus at the discretion of the Compensation Committee of the Board of
Directors. Mr. Holmes resigned as Chief Executive Officer of the Company
effective as of the Distribution Date to become Chairman of the Board and Chief
Executive Officer of Billing, and in accordance with the terms of the employment
agreement, Mr. Holmes was paid a lump-sum severance of $1,300,000 on the
Distribution Date. In addition, pursuant to the Agreement Regarding Vesting and
Adjustment of Stock Options entered into by Mr. Holmes, the Company and Billing
on June 25, 1996, unvested stock options exercisable for the purchase of 33,333
shares of Common Stock, granted under the Employee Option Plan, and a like
number of shares granted under Billing's 1996 Employee Comprehensive Stock Plan
in connection with the Distribution, vested as of the Distribution Date.

Effective January 1, 1994, the Company entered into an employment agreement
with Mr. James. This agreement expires on December 31, 1997, subject to
extension for successive two-year terms unless the Company elects not to extend
the agreement. Beginning January 1, 1996, Mr. James's employment agreement
provides for an annual, calendar year base salary of $240,000 and an incentive
bonus at the discretion of the Compensation Committee of the Board of Directors.

The Company entered into an employment agreement with Mr. Saltzman
effective January 1, 1994, which was to expire on December 31, 1997, subject to
extension for successive two-year terms unless the Company elected not to extend
the agreement. Beginning January 1, 1996, the employment agreement provided for
an annual, calendar year base salary of $170,000 and an incentive bonus at the
discretion of the Compensation Committee of the Board of Directors. Mr.
Saltzman resigned as Executive Vice President - Operations, Billing and
Information Management of the Company effective as of the Distribution Date to
become President and Chief Operating Officer of Billing, and in accordance with
the terms of the employment agreement, Mr. Saltzman was paid a lump-sum
severance of $225,000 on the Distribution Date. In addition, pursuant to the
terms of the Agreement Regarding Vesting and Adjustment of Stock Options entered
into by Mr. Saltzman, the Company and Billing on June 25, 1996, unvested stock
options exercisable for the purchase of 8,333 shares of Common Stock, granted
under the Employee Option Plan, and a like number of shares granted under
Billing's 1996 Employee Comprehensive Stock Plan in connection with the
Distribution, vested as of the Distribution Date.

Effective as of the Distribution Date, the Company and Billing entered into
an employment agreement with Mr. Long. This agreement expires on August 1,
1997, subject to extension for successive one-year terms unless the Company
elects not to extend the agreement. The employment agreement provides for an
annual, calendar year base salary of $150,000 and an incentive bonus at the
discretion of the Compensation Committee of the Board of Directors.

The employment agreements with Messrs. James and Long provide that if the
Company terminates their employment without cause (including the Company's
election to not extend the employment agreements at any renewal date) or if they
resign their employment for "good reason" (as "good reason" is defined in the
employment agreement), Mr. James will be entitled to a lump-sum payment in the
amount equal to two times his annual base salary ($480,000) and Mr. Long will be
entitled to (i) a lump-sum payment in the amount equal to one times his annual
base salary ($150,000) and continuation of certain benefits for two years from
the termination date in the event of termination subsequent to the end of the
initial one-year term of the employment agreement or (ii) no severance payment
or benefits in the event of termination during the initial one-year term of the
employment agreement, in which event his employment shall immediately transfer
to Billing under terms and conditions set forth in the employment agreement.

A change of control is deemed to have occurred if (i) more than 30% of the
combined voting power of the Company's then outstanding securities is acquired,
directly or indirectly, 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

-29-

DEF 14A 33rd Page of 43 TOC 1st Previous Next ↓Bottom Just 33rd
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.

The employment agreements with Messrs. James and Long are subject to early
termination as provided therein, including termination by the Company for
"cause" (as defined in the employment agreements) or termination by the employee
for "good reason" (as defined in the employment agreements). The employment
agreements also provide that if, at any time within twelve months of a change of
control, the employee ceases to be an employee of the Company by reason of (i)
termination by the Company (or its successor) without "cause" (as defined in the
employment agreement) or (ii) voluntary termination by the employee for "good
reason upon change of control" (as defined in the employment agreements), in
addition to the severance stated above, all outstanding stock options held by
them shall become fully vested and exercisable, and they shall receive an
additional payment that, when added to all other payments received in connection
with a change of control, will result in the maximum amount allowed to be paid
to an employee without triggering an excess parachute payment (as defined by the
Internal Revenue Code), and Mr. Long's employment agreement provides that all
benefits (as defined by the employment agreement) shall continue throughout the
remainder of the term of the agreement. Mr. Long's employment agreement further
provides that in the event of termination by the Company without "cause"
during, or in the event Mr. Long elects by providing at least 30 days' written
notice prior to the end of, the initial one-year term of such agreement, Mr.
Long may immediately transfer his employment to Billing, where he shall serve as
Senior Vice President, General Counsel and Secretary of Billing under terms and
conditions identical to those of his employment with the Company as set forth in
the employment agreement. Pursuant to the terms of the Agreements Regarding
Vesting and Adjustment of Stock Options entered into by Messrs. James and Long,
the Company and Billing on June 25, 1996, unvested stock options exercisable for
the purchase of 16,666 and 8,333 shares of Common Stock, granted to Mr. James
and Mr. Long, respectively, under the Employee Option Plan, and a like number of
shares granted under Billing's 1996 Employee Comprehensive Stock Plan in
connection with the Distribution, vested as of the Distribution Date.

Effective January 1, 1996, the Company entered into an employment agreement
with Mr. Simmons, which continued thereafter until terminated by the Company or
the employee upon 120 days' notice as provided therein. Beginning January 1,
1996, this employment agreement provided for an annual, calendar year base
salary of $108,000 and an incentive bonus at the discretion of the Compensation
Committee of the Board of Directors. Mr. Simmons resigned as Senior Vice
President - Business Development and Corporate Treasurer of the Company as of
the Distribution Date to become Senior Vice President, Chief Financial Officer,
Treasurer and Corporate Secretary of Billing, and in accordance with the terms
of the employment agreement, Mr. Simmons was paid a lump-sum severance of
$60,000 on the Distribution Date. In addition, pursuant to the terms of the
Agreement Regarding Vesting and Adjustment of Stock Options entered into by Mr.
Simmons, the Company and Billing on July 10, 1996, unvested stock options
exercisable for the purchase of 13,000 shares of Common Stock, granted under the
Employee Option Plan, and a like number of shares granted under Billing's 1996
Employee Comprehensive Stock Plan in connection with the Distribution, vested as
of the Distribution Date.

Effective January 1, 1996, the Company entered into employment agreements
with Messrs. Speirs and Storin, each of which continues thereafter until
terminated by the Company or the employee upon 120 days' notice as provided
therein. Beginning October 1, 1995 and October 1, 1996, these employment
agreements provide for annual, calendar year base salaries of $120,000 and
$140,000 for Mr. Speirs and Mr. Storin, respectively. Messrs. Speirs and Storin
also are eligible to receive incentive bonuses at the discretion of the
Compensation Committee of the Board.

The employment agreements with Messrs. Speirs and Storin provide that if
the Company terminates their employment without cause (including the Company's
election to not extend the employment agreements at any renewal date) or if they
resign their employment for "good reason" (as "good reason" is defined in the
employment agreement), they will be entitled to a lump-sum payment equal to one
times their respective annual base salaries ($120,000 and $140,000,
respectively).

-30-

DEF 14A 34th Page of 43 TOC 1st Previous Next ↓Bottom Just 34th
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Until the Distribution Date, directors Amato and Becker comprised the
Compensation Committee of the Board of Directors of the Company, at which time
director Holmes also was appointed to the Compensation Committee.

Parris H. Holmes, Jr., Chairman of the Board, also served as Chief
Executive Officer of the Company until he resigned as of the Distribution Date
to serve as Chairman of the Board and Chief Executive Officer of Billing. Mr.
Holmes also serves on the Compensation Committee of Tanisys Technology, Inc.

During fiscal 1996, the Company contracted for director and officer
liability, employee dishonesty, general liability, commercial auto, workers'
compensation, umbrella liability, employee benefits liability, property,
earthquake, fiduciary responsibility, employment practices and aircraft policies
of insurance. The aggregate amount of premiums for these policies was $846,605.
SWBC Insurance Services, Inc., a full service insurance agency owned 25% by Mr.
Amato, a director of the Company, served as the agent for the placement of these
policies. Mr. Amato also serves as a director and Vice President of SWBC
Insurance Services, Inc.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On May 30, 1995, Parris H. Holmes, Jr., the Company's Chairman of the Board
and Chief Executive Officer at that time, borrowed $50,000 from the Company.
This loan accrued interest at the rate of 10% per annum and matured on
January 30, 1996, at which time Mr. Holmes repaid $20,000 of principal plus
accrued interest and the loan on the remaining principal balance was renewed and
extended under same terms as the original note. The loan matured and was paid
on July 18, 1996. The loan was secured by a first lien collateral interest in
and to (i) any bonus to be realized by Mr. Holmes from the Company for fiscal
years 1995 and 1996 and (ii) the proceeds from the exercise of stock options
that vested prior to the repayment of such loan. The largest aggregate amount
of this indebtedness outstanding from Mr. Holmes to the Company for this loan
(including interest) during the period October 1, 1995 through September 30,
1996 was $53,403.

SECTION 16(a) REPORTING

Paragraph Section 16(a) of the Exchange Act requires the Company's
directors and executive officers, and persons who own more than 10% of the
Company's Common Stock, to file with the SEC initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Company. Officers, directors and greater than 10% stockholders are required
by SEC regulation to furnish the Company with copies of all Section 16(a)
reports they file. To the Company's knowledge, based solely on review of the
copies of such reports furnished to the Company and written representations,
during the fiscal year ended September 30, 1996, all Section 16(a) filing
requirements applicable to its officers, directors and greater than 10%
beneficial owners were complied with.

On December 18, 1996, the SEC filed a civil injunctive action in the
Federal District Court for the District of Columbia alleging that Mr. Parris H.
Holmes, Jr., Chairman of the Board of the Company, failed to file timely twelve
reports regarding certain 1991 and 1992 transactions in the stock of the Company
as required by Section 16(a) of the Exchange Act. Section 16(a) requires
officers and directors of reporting companies to file monthly reports with the
Commission regarding their personal transactions in the securities of their
company. Mr. Holmes settled this action on December 18, 1996, without admitting
or denying the allegations of the complaint, by consenting to the entry of an
injunction barring future violations with respect to these requirements and
paying a civil penalty of $50,000.

-31-

DEF 14A 35th Page of 43 TOC 1st Previous Next ↓Bottom Just 35th
STOCKHOLDERS' PROPOSALS FOR 1998 ANNUAL MEETING

Proposals of stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders should be submitted by certified mail, return receipt
requested, and must be received by the Company at its principal executive
offices in San Antonio, Texas on or before September 19, 1997, to be eligible
for inclusion in the Company's proxy statement and form of proxy relating to
that meeting.

By Order of the Board of Directors

W. Audie Long, Corporate Secretary

San Antonio, Texas
January 17, 1997

IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. STOCKHOLDERS WHO DO NOT
EXPECT TO ATTEND THE ANNUAL MEETING AND DESIRE THEIR STOCK TO BE VOTED ARE URGED
TO DATE, SIGN AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED SELF-ADDRESSED
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.

-32-

DEF 14A 36th Page of 43 TOC 1st Previous Next ↓Bottom Just 36th
LEGEND -

[ ] Indicates language proposed to be deleted.
* * Indicates language proposed to be added.

ANNEX A
TO
PROXY STATEMENT FOR 1997 ANNUAL MEETING OF STOCKHOLDERS OF
U.S. LONG DISTANCE CORP.

-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

1993 NON-EMPLOYEE DIRECTOR PLAN OF
U.S. LONG DISTANCE CORP.
INCLUDING PROPOSED AMENDMENTS

1. PURPOSE. The purpose of this Plan is to advance the interests of U.S.
Long Distance Corp., a Delaware corporation (the "Company"), by providing an
additional incentive to attract and retain qualified and competent directors,
upon whose efforts and judgment the success of the Company is largely dependent,
through the encouragement of stock ownership in the Company by such persons.

2. DEFINITIONS. As used herein, the following terms shall have the
meaning indicated:

(a) "Annual Director Fee" shall mean a fee payable annually to each
Eligible Person on the business day on or immediately after December 15 of each
year ("Payment Date"), at the election of the Eligible Person, in either cash of
$15,000 or an Option granted pursuant to Section 5 or partly in cash and partly
in an Option granted pursuant to Section 5.

(b) "Board" shall mean the Board of Directors of U.S. Long Distance
Corp.

(d) "Date of Grant" shall mean the date on which an Option is granted
to an Eligible Person pursuant to [Section 4(c) hereof] *this Plan*.

(e) "Director" shall mean a member of the Board.

(f) "Eligible Person(s)" shall mean those persons who are Directors
of the Company and who are not employees of the Company or a Subsidiary.

(g) "Fair Market Value" of a Share on any date of reference shall be
the closing price on the business day immediately preceding such date. For this
purpose, the closing price of the Shares on any business day shall be (i) if the
Shares are listed or admitted for trading on any United States national
securities exchange, the last reported sale price of Shares on such exchange,
as reported in any newspaper of general circulation, (ii) if actual transactions
in the Shares are included in the *Nasdaq Stock Market's* National [Association
of Securities Dealers Automated Quotation] *Market ("Nasdaq* National Market
[System ("NASDAQ-NMS")]*")* or are reported on a consolidated transaction
reporting system, the last sales price of the Shares on such system, (iii) if
Shares are otherwise quoted on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"), or any similar system of automated
dissemination of quotations of securities prices in common use, the mean between
the closing high bid and low asked quotations for such day of Shares on such
system, (iv) if none of clause (i), (ii) or (iii) is applicable, the mean
between the high bid and low asked quotations for Shares as reported by the
National Daily Quotation Service if at least two securities dealers have
inserted both bid and asked quotations for Shares on at least five (5) of the
ten (10) preceding days.

(h) "Internal Revenue Code" or "Code" shall mean the Internal Revenue
Code of 1986, as it now exists or may be amended from time to time.

(i) "Nonqualified Stock Option" shall mean an option that is not an
incentive stock option as defined in Section 422 of the Internal Revenue Code.

DEF 14A 37th Page of 43 TOC 1st Previous Next ↓Bottom Just 37th
(j) "Option" (when capitalized) shall mean any option granted under
Section 4*, 5* or [5] *6* of this Plan.

(k) "Optionee" shall mean a person to whom a stock option is granted
under this Plan or any successor to the rights of such person under this Plan by
reason of the death of such person.
(l) "Payment Date" shall have the meaning set forth in Section 2(a).

(m) "Plan" shall mean this 1993 Non-Employee Director Plan of U.S.
Long Distance Corp.

(n) "Share(s)" shall mean a share or shares of the common stock, par
value one cent ($0.01) per share, of the Company.

(o) "Subsidiary" shall mean any corporation (other than the Company)
in any unbroken chain of corporations beginning with the Company if, at the time
of the granting of the Option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing more than fifty percent
(50%) of the total combined voting power of all classes of stock in one of the
other corporations in such chain.

3. SHARES AND OPTIONS. *(a)* The maximum number of Shares to be issued
pursuant to Options under this Plan, including shares issued on the exercise
of Shares granted to Eligible Persons prior to the adoption of the Plan under
the [Company] *Company's* outside [the] director option plan adopted in
February 1991, shall be [TWO] *SEVEN* HUNDRED FIFTY THOUSAND [(250,000)]
*(750,000)* Shares. Shares issued pursuant to Options granted under this Plan
may be issued from Shares held in the Company's treasury or from authorized
and unissued Shares. If any Option granted under this Plan shall terminate,
expire, or be cancelled or surrendered as to any Shares, new Options may
thereafter be granted covering such Shares.

[Any Option granted hereunder shall be a Nonqualified Stock Option.]

[4. Automatic Grant of Options. (a) Options shall automatically be granted
to Eligible Persons as provided in this Section 4.]*(b)* Each Option *granted
hereunder* shall be evidenced by an option agreement (an "Option Agreement")
and shall contain such terms as are not inconsistent with this Plan or any
applicable law. Any person who files with the Committee, in a form satisfactory
to the Committee, a written waiver of eligibility to receive any Option under
this Plan shall not be eligible to receive any Option under this Plan for the
duration of such waiver. *Any Option granted hereunder shall be a Nonqualified
Stock Option.*

*(c)*[(b) The Options automatically granted to Directors under this
Plan shall be in addition to regular director's fees or other benefits with
respect to the Director's position with the Company or its Subsidiaries.]
Neither the Plan nor any Option granted under the Plan shall confer upon any
person any right to continue to serve as a Director.

[(c)] *4. Automatic Grant of Options. (a)* Options shall [be]
automatically *be* granted *to Eligible Persons* as follows:

(i) Each Director who is an Eligible Person shall automatically
receive an Option for [FIFTEEN] *THIRTY* THOUSAND [(15,000)]*(30,000)*
Shares on the date such Eligible Person is initially appointed or elected
[a] *an outside* Director of the Company, and such Option will vest as to
[FIVE] *TEN* THOUSAND [(5,000)]*(10,000)* Shares on each of the first
three anniversaries of the Date of Grant; and

(ii) Each Director who is an Eligible Person will receive, on the
first business date after the date of each annual meeting of stockholders
of the Company, commencing with the annual meeting of stockholders
immediately following the full vesting of any previously granted Director
Option, an option to purchase [FIFTEEN] *THIRTY* THOUSAND [(15,000)]
*(30,000)* Shares, and such Option will vest as to [FIVE] *TEN* THOUSAND
[(5,000)] *(10,000)* Shares on each of the first three anniversaries of the
Date of Grant.

*(b) The Options automatically granted to Directors under this Plan
shall be in addition to regular director's fees, discretionary Option grants
under Section 6 or other benefits with respect to the Director's position with
the Company or its Subsidiaries.*

-2-

DEF 14A 38th Page of 43 TOC 1st Previous Next ↓Bottom Just 38th
*(c)*[(d)] Any Option that may be granted pursuant to subparagraph
(c)(a) of this Section 4 prior to the approval of this Plan by the stockholders
of the Company may be exercised on or after the Date of Grant subject to the
approval of this Plan by the stockholders of the Company within twelve (12)
months after the effective date of this Plan. If any Optionee exercises an
Option prior to such stockholder approval, the Optionee must tender the exercise
price at the time of exercise and the Company shall hold the Shares to be issued
pursuant to such exercise until the stockholders approve this Plan. If this
Plan is approved by the stockholders, the Company shall issue and deliver the
Shares as to which the Option has been exercised. If this Plan is not approved
by the stockholders, the Company shall return the exercise price to the
Optionee.

[(e) Except for the automatic grants of Options under subparagraph (c) of this
Section 4 and grants of Options to Eligible Persons under Section 5 below, no
Options shall otherwise be granted hereunder, and neither the Board nor the
Committee, if any, shall have any discretion with respect to the grant of
Options within the meaning of Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended, or any successor rule.]

5. ELECTION WITH RESPECT TO ANNUAL DIRECTOR FEE. Each Eligible Person
may elect to receive the Annual Director Fee in cash or an Option or partly in
cash and partly in an Option. Any election to receive an Option shall be in
writing and must be made [no less than eleven (11) months prior to the Payment
Date in 1996, and thereafter such election shall be made] not later than
December 31 of each year with respect to the Annual Director Fee to be made on
the Payment Date in the subsequent year. The election may not be revoked or
changed after it is made. For purposes of this election and subject to Section
[9] *10*, in lieu of receipt of the Annual Director Fee in cash, as elected by
the Eligible Person, each $2 of cash compensation shall be converted into an
Option, granted as of the Payment Date, to purchase one (1) share of Common
Stock. If an Eligible Person so elects to receive an Option, the Company shall
promptly deliver to such Eligible Person an Option Agreement. *Options granted
pursuant to this Section 5 shall vest immediately.* To be eligible to receive
the Annual Director Fee, for any year, the Eligible Person must be a Director
on the Payment Date for that Annual Director Fee. Any person who files with
the Committee, in a form satisfactory to the Committee, a written waiver of
eligibility to receive any Option under this Plan shall not be eligible to
receive any Option under this Plan for the duration of such waiver.

6*. DISCRETIONARY GRANTS OF OPTIONS. (a) At any time and from time
to time during the duration of this Plan and subject to the provisions herein,
Options may be granted by the Board to any Eligible Person for such number of
Shares as the Board in its discretion shall deem to be in the best interest of
the Company and which will serve to further the purposes of the Plan. Upon the
grant of an Option, the Company shall promptly deliver to such Eligible Person
an Option Agreement. Options granted pursuant to this Section 6 shall vest
according to the vesting schedule provided in the Option Agreement.*

*(b) The Options granted to Directors pursuant to this Section 6
shall be in addition to regular directors' fees, automatic grants of Options
under Section 4 herein or any other benefits with respect to the Director's
position with the Company or its Subsidiaries.*

*7*. OPTION PRICE. The option price per Share of any Option granted
pursuant to this Plan shall be one hundred percent (100%) of the Fair Market
Value per Share on the Date of Grant.

[7] *8*. EXERCISE OF OPTIONS. Options may be exercised at any time after
the date on which the Options, or any portion thereof, are vested until the
Option expires pursuant to Section [8] *9*; provided, however, that [no Option
shall be exercisable prior to six (6) months] *at least six months must elapse*
from the [Date of Grant] *date of the acquisition of the Option to the date of
disposition of the Option (other than upon exercise or conversion) or its
underlying Common Stock.* An Option shall be deemed exercised when (i) the
Company has received written notice of such exercise in accordance with the
terms of the Option Agreement, (ii) full payment of the aggregate option price
of the Shares as to which the Option is exercised has been made and (iii)
arrangements that are satisfactory to the Committee in its sole discretion have
been made for the Optionee's payment to the Company of the amount, if any, that
the Committee determines to be necessary for the Company to withhold in
accordance with applicable federal or state income tax withholding requirements.
Pursuant to procedures approved by the Committee, tax withholding requirements,
at the option of an Optionee, may be met by withholding Shares otherwise
deliverable to the Optionee upon the exercise of an Option. Unless further
limited by the Committee in any Option Agreement, the Option price of any Shares
purchased shall be paid solely in cash, by certified or cashier's check, by
money order, with Shares (but with Shares only if permitted by the Option
Agreement or otherwise permitted by the Committee in its sole discretion at the
time of exercise) or by a combination of the above; provided, however, that the
Committee in its sole discretion may accept a personal check in full or partial
payment of any Shares. If the exercise price is paid in whole or in

-3-

DEF 14A 39th Page of 43 TOC 1st Previous Next ↓Bottom Just 39th
part with Shares, the value of the Shares surrendered shall be their Fair
Market Value on the date the Shares are received by the Company.

[8] *9*. TERMINATION OF OPTION PERIOD. The unexercised portion of an
Option shall automatically and without notice terminate and become null and
void at the time of the earliest to occur of the following:

(a) with respect to Options granted automatically pursuant to Section
[4(c)] *4(a)*, thirty (30) days after the date that an Optionee ceases to
be a Director regardless of the reason therefor other than as a result of
such termination by death of the Optionee;

(b) with respect to Options granted automatically pursuant to Section
[4(c)] *4(a)*, (y) one (1) year after the date that an Optionee ceases to
be a Director by reason of death of the Optionee or (z) six (6) months
after the Optionee shall die if that shall occur during the thirty-day
period described in Subsection [8(a)] *9(a)*; or

[9] *10*. ADJUSTMENT OF SHARES. (a) If at any time while this Plan is in
effect or unexercised Options are outstanding, there shall be any increase or
decrease in the number of issued and outstanding Shares through the declaration
of a stock dividend or through any recapitalization resulting in a stock
split-up, combination or exchange of Shares, then and in such event:

(i) appropriate adjustment shall be made in the maximum number
of Shares then subject to being optioned under this Plan, so that the
same proportion of the Company's issued and outstanding Shares shall
continue to be subject to being so optioned; and

(ii) appropriate adjustment shall be made in the number of Shares
and the exercise price per Share thereof then subject to any
outstanding Option, so that the same proportion of the Company's
issued and outstanding Shares shall remain subject to purchase at the
same aggregate exercise price.

In addition, the Committee shall make such adjustments in the Option
price and the number of shares covered by outstanding Options that are required
to prevent dilution or enlargement of the rights of the holders of such Options
that would otherwise result from any reorganization, recapitalization, stock
split, stock dividend, spin-off, combination of shares, merger, consolidation,
issuance of rights or any other change in capital structure of the Company.

(b) Except as otherwise expressly provided herein, the issuance by
the Company of shares of its capital stock of any class, or securities
convertible into shares of capital stock of any class, either in connection with
a direct sale or upon the exercise of rights or warrants to subscribe therefor,
or upon conversion of shares or obligations of the Company convertible into such
shares or other securities, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number of or exercise price of Shares
then subject to outstanding Options granted under this Plan.

(c) Without limiting the generality of the foregoing, the
existence of outstanding Options granted under this Plan shall not affect in any
manner the right or power of the Company to make, authorize or consummate (i)
any or all adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business; (ii) any merger or
consolidation of the Company; (iii) any issue by the Company of debt securities,
or preferred or preference stock that would rank above the Shares subject to
outstanding Options; (iv) the dissolution or liquidation of the Company; (v) any
sale, transfer or assignment of all or any part of the assets or business of the
Company; or (vi) any other corporate act or proceeding, whether of a similar
character or otherwise.

[10] *11*. TRANSFERABILITY OF OPTIONS. Each Option Agreement shall
provide that such Option shall not be transferable by the Optionee otherwise
than by will or the laws of descent and distribution or pursuant to a qualified
domestic relations order and that so long as an Optionee lives, only such
Optionee or his or her guardian or legal representative shall have the right
to exercise the related Option.

[11] *12*. ISSUANCE OF SHARES. No person shall be, or have any of the
rights or privileges of, a stockholder of the Company with respect to any of the
Shares subject to an Option unless and until certificates representing such
Shares shall

-4-

DEF 14A 40th Page of 43 TOC 1st Previous Next ↓Bottom Just 40th
have been issued and delivered to such person. As a condition of any transfer
of the certificate for Shares, the Committee may obtain such agreements or
undertakings, if any, as it may deem necessary or advisable to assure
compliance with any provision of this Plan, any Option Agreement or any law or
regulation, including, but not limited to, the following:

(i) A representation, warranty or agreement by the Optionee to
the Company, at the time any Option is exercised, that he or she is
acquiring the Shares to be issued to him or her for investment and not
with a view to, or for sale in connection with, the distribution of
any such Shares; and

(ii) A representation, warranty or agreement to be bound by any
legends that are, in the opinion of the Committee, necessary or
appropriate to comply with the provisions of any securities law deemed
by the Committee to be applicable to the issuance of the Shares and
are endorsed upon the Share certificates.

Share certificates issued to an Optionee who is a party to any stockholder
agreement or a similar agreement shall bear the legends contained in such
agreements.

[12] *13*. ADMINISTRATION OF THE PLAN. (a) This Plan shall be
administered by a stock option committee (the "Committee") consisting of not
fewer than three (3) members of the Board; provided, however, that if no
Committee is appointed, the Board shall administer this Plan and in such case
all references to the Committee shall be deemed to be references to the Board.
The Committee shall have all of the powers of the Board with respect to this
Plan. Any member of the Committee may be removed at any time, with or without
cause, by resolution of the Board, and any vacancy occurring in the membership
of the Committee may be filled by appointment by the Board.

(b) The Committee, from time to time, may adopt rules and regulations
for carrying out the purposes of this Plan. The determinations and the
interpretation and construction of any provision of this Plan by the Committee
shall be final and conclusive.

(c) Any and all decisions or determinations of the Committee shall be
made either (i) by a majority vote of the members of the Committee at a meeting
or (ii) without a meeting by the written approval of a majority of the members
of the Committee.

(d) This Plan is intended and has been drafted to comply with Rule
16b-3, as amended, under the Securities Exchange Act of 1934, as amended. If
any provision of this Plan does not comply with Rule 16b-3, as amended, this
Plan shall be automatically amended to comply with Rule 16b-3, as amended.

[(e) This Plan shall not be amended more than once every six (6)
months, other than to comport with applicable changes to the Internal Revenue
Code, the Employee Retirement Income Security Act of 1974, as amended, or the
rules thereunder.]

[13] *14*. INTERPRETATION. (a) If any provision of this Plan is held invalid
for any reason, such holding shall not affect the remaining provisions hereof,
but instead this Plan shall be construed and enforced as if such provision had
never been included in this Plan.

(b) THIS PLAN SHALL BE GOVERNED BY THE SUBSTANTIVE LAWS OF THE STATE
OF DELAWARE, WITHOUT REFERENCE TO DELAWARE CONFLICT OF LAW PROVISIONS.

(d) Any reference to the masculine, feminine or neuter gender shall
be a reference to such other gender as is appropriate.

[14] *15*. SECTION 83(b) ELECTION. If as a result of exercising an Option
an Optionee receives Shares that are subject to a "substantial risk of
forfeiture" and are not "transferable" as those terms are defined for purposes
of Section 83(a) of the Code, then such Optionee may elect under Section 83(b)
of the Code to include in his gross income, for his taxable year in

-5-

DEF 14A 41st Page of 43 TOC 1st Previous Next ↓Bottom Just 41st
which the Shares are transferred to such Optionee, the excess of the Fair
Market Value of such Shares at the time of transfer (determined without regard
to any restriction other than one which by its terms will never lapse), over
the amount paid for the Shares. If the Optionee makes the Section 83(b)
election described above, the Optionee shall (i) make such election in a
manner that is satisfactory to the Committee, (ii) provide the Company with a
copy of such election, (iii) agree to promptly notify the Company if any
Internal Revenue Service or state tax agent, on audit or otherwise, questions
the validity or correctness of such election or of the amount of income
reportable on account of such election, and (iv) agree to such withholding as
the Committee may reasonably require in its sole and absolute discretion.

[15] *16*. EFFECTIVE DATE AND TERMINATION DATE. The effective date of
this Plan or any amendment thereto is the date on which the Board adopted this
Plan or such amendment; provided, however, if this Plan is not approved by the
stockholders of the Company within twelve (12) months after the effective date,
then, in such event, this Plan and all Options granted pursuant to this Plan
shall be null and void. This Plan shall terminate on September 17, 2000, and
any Option outstanding on such date will remain outstanding until it has either
expired or has been exercised.

[20532.1H]

-6-

DEF 14A 42nd Page of 43 TOC 1st Previous Next ↓Bottom Just 42nd
U.S. LONG DISTANCE CORP.

9311 San Pedro, Suite 100
San Antonio, Texas 78216

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Larry M. James, W. Audie Long, Phillip J.
Storin and each or any of them, as Proxies, each with the power to appoint his
substitute, and hereby authorizes each of them to represent and vote, as
designated below, all of the shares of the Common Stock, par value $.01 per
share, of U.S. Long Distance Corp. (the "Company") held of record by the
undersigned at the close of business on January 10, 1997, at the Annual Meeting
of Stockholders to be held on February 25, 1997, or any adjournment(s) thereof.

[Enlarge/Download Table]

1. PROPOSAL TO ELECT TWO DIRECTORS TO HOLD OFFICE UNTIL THE 2000 ANNUAL MEETING OF STOCKHOLDERS OR
UNTIL THE ELECTION AND QUALIFICATION OF THEIR RESPECTIVE SUCCESSORS.
/ / FOR both the nominees listed below / / WITHHOLD AUTHORITY to vote for both
(except as marked to the contrary below) nominees listed below
2000 CLASS-TERM EXPIRING AT 2000 ANNUAL MEETING:
PARRIS H. HOLMES, JR. F. GARDNER PARKER
INSTRUCTION: To withhold authority to vote for either individual nominee, write that nominee's name
on the line provided:

----------------------------------------------

2. PROPOSAL TO APPROVE AMENDMENTS TO THE COMPANY'S 1993 NON-EMPLOYEE
DIRECTOR PLAN (i) TO INCREASE THE AGGREGATE NUMBER OF SHARES OF COMMON
STOCK SUBJECT TO ISSUANCE UNDER THIS PLAN FROM 250,000 TO 750,000,
(ii) TO INCREASE THE NUMBER OF SHARES SUBJECT TO STOCK OPTIONS
AUTOMATICALLY GRANTED TO ELIGIBLE DIRECTORS PERIODICALLY UNDER THE
PLAN FROM 15,000 TO 30,000, (iii) TO PROVIDE FOR THE DISCRETIONARY
GRANT OF STOCK OPTIONS TO NON-EMPLOYEE DIRECTORS AND (iv) TO DELETE
THE LIMITATION THAT THE PLAN NOT BE AMENDED MORE FREQUENTLY THAN ONCE
EVERY SIX MONTHS.
/ / FOR / / AGAINST / / ABSTAIN
3. PROPOSAL TO RATIFY THE GRANT OF A CURRENTLY OUTSTANDING STOCK OPTION
TO A NON-EMPLOYEE DIRECTOR OF THE COMPANY.
/ / FOR / / AGAINST / / ABSTAIN
4. PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS
INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY FOR THE FISCAL YEAR
ENDING SEPTEMBER 30, 1997.
/ / FOR / / AGAINST / / ABSTAIN

(PLEASE COMPLETE AND SIGN ON OTHER SIDE)

DEF 14A Last Page of 43 TOC 1st Previous Next ↓Bottom Just 43rd
(CONTINUED FROM FRONT)

5. SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR
ANY ADJOURNMENT(S) THEREOF. THE BOARD OF DIRECTORS IS PRESENTLY
UNAWARE OF ANY OTHER BUSINESS TO BE PRESENTED TO A VOTE OF THE
STOCKHOLDERS AT THE ANNUAL MEETING.
/ / FOR / / AGAINST / / ABSTAIN

This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder(s). IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES UNDER PROPOSAL 1, "FOR" THE
PROPOSAL TO APPROVE THE AMENDMENTS TO THE COMPANY'S 1993 NON-EMPLOYEE DIRECTOR
PLAN UNDER PROPOSAL 2, "FOR" THE PROPOSAL TO RATIFY THE GRANT OF A CURRENTLY
OUTSTANDING STOCK OPTION TO A NON-EMPLOYEE DIRECTOR OF THE COMPANY UNDER
PROPOSAL 3, "FOR" THE PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP
AS INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY UNDER PROPOSAL 4, and in the
discretion of the Proxies with respect to any other matter that is properly
presented at the meeting.

Please execute this proxy as your name appears hereon.When shares are held
by joint tenants, both should sign.When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by the president or other
authorized officer. If a partnership, please sign in partnership name by
authorized person. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING
THE ENCLOSED ENVELOPE.

DATED: , 1997
------------------------

----------------------------------------
Signature

----------------------------------------
Signature If Held Jointly

DEF 14A	1st Page of 43	TOC	↑Top	Previous	Next	↓Bottom	Just 1st

DEF 14A	2nd Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 2nd

DEF 14A	3rd Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 3rd

DEF 14A	4th Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 4th

DEF 14A	5th Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 5th

DEF 14A	6th Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 6th

DEF 14A	7th Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 7th

DEF 14A	8th Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 8th

DEF 14A	9th Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 9th

DEF 14A	10th Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 10th

DEF 14A	11th Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 11th

DEF 14A	12th Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 12th

DEF 14A	13th Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 13th

DEF 14A	14th Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 14th

DEF 14A	15th Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 15th

DEF 14A	16th Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 16th

DEF 14A	17th Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 17th

DEF 14A	18th Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 18th

DEF 14A	19th Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 19th

DEF 14A	20th Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 20th

DEF 14A	21st Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 21st

DEF 14A	22nd Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 22nd

DEF 14A	23rd Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 23rd

DEF 14A	24th Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 24th

DEF 14A	25th Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 25th

DEF 14A	26th Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 26th

DEF 14A	27th Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 27th

DEF 14A	28th Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 28th

DEF 14A	29th Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 29th

DEF 14A	30th Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 30th

DEF 14A	31st Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 31st

DEF 14A	32nd Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 32nd

DEF 14A	33rd Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 33rd

DEF 14A	34th Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 34th

DEF 14A	35th Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 35th

DEF 14A	36th Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 36th

DEF 14A	37th Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 37th

DEF 14A	38th Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 38th

DEF 14A	39th Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 39th

DEF 14A	40th Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 40th

DEF 14A	41st Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 41st

DEF 14A	42nd Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 42nd

DEF 14A	Last Page of 43	TOC	1st	Previous	Next	↓Bottom	Just 43rd

Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘DEF 14A’ Filing	Date	First	Last	Other Filings

	11/27/00	24	25
	9/17/00	10	41
	10/4/98	24
	12/31/97	32		11-K
	12/15/97	16
	11/1/97	19
	10/4/97	24
	9/30/97	3	42	10-K405
	9/19/97	35
	8/1/97	32
	4/13/97	19	24
For Period End:	2/25/97	2	42
	2/21/97	2		S-3, S-8
Filed on:	1/17/97	2	35
	1/10/97	3	42
	12/31/96	8	30	10-Q, 11-K
	12/18/96	34
	12/17/96	8
	11/1/96	19
	10/4/96	24
	10/1/96	33
	9/30/96	4	34	10-K405
	8/5/96	11
	8/2/96	5		8-K
	8/1/96	22
	7/18/96	34
	7/16/96	19	22
	7/10/96	33
	7/2/96	18	22
	6/25/96	19	33
	4/13/96	19	24
	3/8/96	19	22
	2/29/96	8	29
	2/1/96	22	23
	1/30/96	34
	1/26/96	19	22
	1/1/96	28	33
	12/14/95	19	22
	12/12/95	18
	11/28/95	19
	10/4/95	25
	10/1/95	33	34
	8/1/95	29
	5/30/95	34
	4/13/95	19	24
	2/1/95	22	23
	1/1/95	28
	3/24/94	23
	3/1/94	22	23
	2/24/94	8	16
	1/1/94	29	32
	12/15/93	29
	3/9/93	8	28
	1/1/92	28
				List all Filings

↑Top

Filing Submission 0000912057-97-001187 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Usld Communications Corp – ‘DEF 14A’ for 2/25/97

As of: Friday, 1/17/97 · For: 2/25/97 · Accession #: 912057-97-1187 · File #: 0-18195

Definitive Proxy Solicitation Material — Schedule 14AFiling Table of Contents

Document Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

Definitive Proxy Solicitation Material — Schedule 14A
Filing Table of Contents