<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11c or Rule 14a-12
EXCEL COMMUNICATIONS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[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 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials:
-------------------------
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
[LOGO OF EXCEL COMMUNICATIONS, INC. APPEARS HERE]
8750 NORTH CENTRAL EXPRESSWAY
SUITE 2000
DALLAS, TEXAS 75231
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Dallas, Texas
April 13, 1998
To Our Stockholders:
Notice is hereby given that the 1998 Annual Meeting of the stockholders of
EXCEL Communications, Inc., a Delaware corporation (the "Company" or "EXCEL"),
will be held on Friday, May 22, 1998 at 10:30 a.m. local time, at the Crescent
Court Hotel, 400 Crescent Court, Dallas, Texas, for the following purposes:
1. To elect seven (7) directors for the ensuing year and until their
successors are duly elected and qualified; and
2. To transact such other business as properly may come before the meeting
or any adjournment thereof.
Stockholders of record at the close of business on March 23, 1998 (the
"Record Date"), will be entitled to receive notice of, and to vote at the
Meeting. Please note that attendance at the meeting will be limited to
stockholders of EXCEL Communications, Inc. as of the Record Date (or their
authorized representatives). If your shares are held by a bank or broker,
please bring to the meeting your bank or broker statement evidencing your
beneficial ownership of EXCEL stock as of the Record Date. A complete list of
stockholders entitled to vote at the meeting will be maintained in the
Company's offices at 8750 North Central Expressway, Suite 2000, Dallas, Texas
75231 for ten (10) days prior to the meeting and will be open to the
examination of any stockholders during ordinary business hours of the Company.
Please advise the Company's Transfer Agent, Bank Boston, N.A., 220 Royall
Street, Canton, Massachusetts 02021 of any changes in your address.
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING, PLEASE PROMPTLY
MARK, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED RETURN
ADDRESSED ENVELOPE. STOCKHOLDERS WHO DECIDE TO ATTEND THE MEETING MAY REVOKE
THEIR PROXIES PRIOR TO THE MEETING AND VOTE IN PERSON EVEN IF HE OR SHE
PREVIOUSLY RETURNED A PROXY.
By Order of the Board of Directors
/s/ CHRIS DANCE
J. Christopher Dance
Secretary
<PAGE>
EXCEL COMMUNICATIONS, INC.
8750 NORTH CENTRAL EXPRESSWAY
SUITE 2000
DALLAS, TEXAS 75231
------------------------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 22, 1998
------------------------------------------
SOLICITATION OF PROXIES
GENERAL INFORMATION
The enclosed proxy is solicited by the Board of Directors of EXCEL
Communications, Inc., a Delaware corporation ("EXCEL" or the "Company"), for
use at the 1998 Annual Meeting of the Company's stockholders (the "Annual
Meeting" or "Meeting"), to be held at the Crescent Court Hotel, 400 Crescent
Court, Dallas, Texas, on Friday, May 22, 1998, at 10:30 a.m. local time and at
any adjournments thereof for the purposes set forth herein and in the
accompanying Notice of Annual Meeting. Whether or not you expect to attend the
meeting in person, please return your executed proxy in the enclosed envelope
and the shares represented thereby will be voted in accordance with your
wishes. It is anticipated that the first mailing of proxies to stockholders
will occur on April 13, 1998. The Company's annual report for the fiscal year
ended December 31, 1997 is being mailed to all stockholders entitled to vote
at the Annual Meeting. The annual report does not constitute a part of the
soliciting materials. As used herein, the "Company" shall also include any of
Excel Communications, Inc.'s direct or indirect subsidiaries and its
predecessors.
On October 14, 1997, the Company, a newly formed holding company, succeeded
to the businesses of Excelcom, Inc., a Delaware corporation and previously
known as EXCEL Communications, Inc. ("Excelcom"), and Telco Communications
Group, Inc., a Virginia corporation ("Telco"), as a result of mergers of
wholly-owned subsidiaries with and into Excelcom and Telco, pursuant to the
Agreement and Plan of Merger dated as of June 5, 1997 (the "Merger"). At the
closing of the Merger on October 14, 1997: (i) Excelcom and Telco became
wholly-owned subsidiaries of the Company; (ii) each outstanding share of
Excelcom common stock converted into the right to receive one share of common
stock of the Company; (iii) each outstanding share of Telco common stock
converted into the right to receive 0.7595 shares of common stock of the
Company and the right to receive $15.00 in cash; (iv) except for certain
options, each then outstanding and unexercised option to acquire one share of
Telco common stock was assumed by the Company and converted into an option to
acquire 1.5190 shares of the Company common stock, and the exercise price per
share with respect to each such assumed option was adjusted to equal the
exercise price under the original option divided by 1.5190; (v) each then
outstanding and unexercised option to acquire one share of Excelcom common
stock was assumed by the Company and converted into an option to acquire one
share of the Company common stock, and the exercise price per share was
unchanged; (vi) the name of EXCEL Communications, Inc. was changed to
Excelcom, Inc.; and (vii) the name of the Company was changed from New RES,
Inc. to EXCEL Communications, Inc.
RECORD DATE; OUTSTANDING SHARES
Only stockholders of record at the close of business on March 23, 1998 (the
"Record Date") are entitled to receive notice of and to vote at the Meeting.
The outstanding voting securities of the Company as of such date consisted of
131,946,080 shares of common stock, par value $.001 per share (the "Common
Stock"). The Company has no other class of stock outstanding. For information
regarding holders of more than 5% of the
1
<PAGE>
outstanding Common Stock, see "Election of Directors--Security Ownership of
Certain Beneficial Owners and Management."
REVOCABILITY OF PROXIES
The enclosed proxy is revocable at any time before its use by delivery to
the Company of a written notice of revocation or a duly executed proxy bearing
a later date. If a person who has executed and returned a proxy is present at
the Meeting and wishes to vote in person, he or she may elect to do so and
thereby suspend the power of the proxy holders to vote his or her proxy.
VOTING AND SOLICITATION
Every stockholder of record on the Record Date is entitled, for each share
held, to one vote on each proposal or item that comes before the Meeting. Each
stockholder will be entitled to vote for seven (7) nominees in the election of
directors, and the seven (7) nominees with the greatest number of votes will
be elected. There are no cumulative voting rights. All other action proposed
may be taken upon the affirmative vote of a majority of the votes cast by the
stockholders represented at the Annual Meeting, provided a quorum is
constituted.
The cost of this solicitation will be borne by the Company. The Company will
reimburse expenses incurred by brokerage firms and other persons representing
beneficial owners of shares in forwarding solicitation material and the annual
report to beneficial owners. Proxies may be solicited by certain of the
Company's directors, officers and regular employees, without additional
compensation, personally, by telephone, by facsimile or in writing.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting is
a majority of the shares of Common Stock issued and outstanding on the Record
Date. Shares that are voted "FOR," "AGAINST" or "WITHHELD FROM" a matter are
treated as being present at the Meeting for purposes of establishing a quorum
and will be included in determining the number of shares that are represented
and voted at the Annual Meeting (the "Votes Cast") with respect to such
matter.
With regard to the election of directors, votes may be cast in favor of or
withheld from each nominee. Directors will be elected by plurality vote.
Therefore, votes that are withheld will be excluded entirely from the vote and
will have no effect. Shares that were withheld from voting (or abstentions)
may not be specified with respect to the election of directors. With respect
to the other items to be voted upon, shares that were withheld from voting (or
abstentions) are counted for purposes of determining the presence or absence
of a quorum for the transaction of business. Accordingly, shares that were
withheld from voting (or abstentions) will have the same effect as a vote
against a proposal.
Broker non-votes will not be counted for purposes of determining the
presence or absence of a quorum for the transaction of business (in order to
comply with New York Stock Exchange requirements), and will not be counted for
purposes of determining the number of Votes Cast with respect to a proposal
and, therefore, will have no effect on the outcome of the vote.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be presented
by such stockholders at the Company's 1999 Annual Meeting of Stockholders must
be received by the Company, addressed to J. Christopher Dance, Secretary,
Excel Communications, Inc., 8750 North Central Expressway, Suite 2000, Dallas,
Texas 75231 no later than December 14, 1998 so that they may be included in
the proxy statement and form of proxy relating to the 1999 meeting. Such
proposals must comply with the requirements of Regulation 14A of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
2
<PAGE>
With respect to business to be brought before the Annual Meeting to be held
on May 22, 1998, the Company has not received any notices from stockholders
that the Company is required to include in this Proxy Statement.
INDEPENDENT PUBLIC ACCOUNTANT
Arthur Andersen LLP served as the Company's independent public accountant
for the fiscal year ended December 31, 1997 and is serving in such capacity
for the current fiscal year. The appointment of the independent public
accountant is made annually by the Board of Directors. The decision of the
Board of Directors is based on the recommendation of the audit committee,
which reviews both the audit scope and estimated audit fees. Representatives
of Arthur Andersen LLP are expected to be present at the Annual Meeting and
will have the opportunity to make a statement if they desire to do so and to
respond to appropriate questions of stockholders.
REPORT ON FORM 10-K
A COPY OF THE COMPANY'S REPORT ON FORM 10-K FOR THE PERIOD ENDED DECEMBER
31, 1997, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (INCLUDING RELATED
FINANCIAL STATEMENTS AND SCHEDULES) WILL BE PROVIDED BY THE COMPANY TO
STOCKHOLDERS WITHOUT CHARGE, UPON WRITTEN REQUEST TO INVESTOR RELATIONS, ATTN:
MARY BELL, EXCEL COMMUNICATIONS, INC., 8750 NORTH CENTRAL EXPRESSWAY, SUITE
2000, DALLAS, TEXAS 75231.
OTHER BUSINESS
The Company knows of no business to be brought before the Annual Meeting
other than as set forth above. If other matters properly come before the
Meeting, it is the intention of the persons named in the solicited proxy to
vote the proxy on such matters in accordance with their best judgment.
3
<PAGE>
ACTION TO BE TAKEN UNDER PROXY
SHARES WILL BE VOTED AS INSTRUCTED IN THE ACCOMPANYING PROXY ON EACH MATTER
SUBMITTED TO THE VOTE OF STOCKHOLDERS. IF ANY DULY EXECUTED PROXY IS RETURNED
WITHOUT VOTING INSTRUCTIONS, THE PERSONS NAMED AS PROXIES THEREON INTEND TO
VOTE ALL SHARES REPRESENTED BY SUCH PROXY AS FOLLOWS:
(1) FOR the election of the seven (7) directors nominated by the Board of
Directors for the ensuing year and until their successors are duly
elected and qualified; and
(2) At the discretion of the proxy holders with regard to any other
business that may properly come before the Annual Meeting or any
adjournment thereof. The directors do not know of any such other
matters or business at this time.
4
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
A Board of seven (7) directors is to be elected at the meeting. Unless
otherwise instructed, the proxy holders will vote all of the proxies received
by them for the Company's seven (7) nominees named below. In the event that
additional persons are nominated for election as directors, the proxy holders
intend to vote all proxies received by them in such a manner as will ensure
the election of as many of the nominees listed below as possible and, in such
event, the specific nominees to be voted for will be determined by the proxy
holders. In the event that any of the nominees shall become unavailable, the
proxy holders will vote in their discretion for a substitute nominee. All
nominees have indicated their willingness to serve if elected. At the request
of John J. McLaine, the Company elected not to nominate Mr. McLaine as a
director. It is not expected that any nominee will be unavailable. The term of
office of each person elected as a director will continue until the next
Annual Meeting of Stockholders and until his successor has been duly elected
and qualified.
VOTE REQUIRED
Directors are elected by a plurality of the votes cast by the shares
entitled to vote in the election at a meeting of the stockholders at which a
quorum is present. A majority of the votes entitled to be cast in the election
by the voting group constitutes a quorum of that voting group for the
election. The seven (7) nominees receiving the highest number of affirmative
votes of the shares entitled to be voted shall be elected to the Board of
Directors. Each outstanding share of Common Stock is entitled to one vote in
the election. Votes withheld from any director are counted for purposes of
determining the presence or absence of a quorum, but have no other legal
effect under Delaware law.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION AS DIRECTORS OF
THE NOMINEES NAMED HEREIN. UNLESS INDICATED OTHERWISE BY YOUR PROXY VOTE, THE
SHARES WILL BE VOTED FOR THE ELECTION AS DIRECTORS OF SUCH NOMINEES.
The following information sets forth as of the Record Date, the name, age,
principal occupation or employment during the last five years, memberships on
committees of the Board of Directors and directorships in other publicly held
companies of the following nominees:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Kenny A. Troutt.................. 50 Chief Executive Officer, Chairman of
the Board and Director of the Company
Stephen R. Smith................. 53 Executive Vice President of Marketing-
Emeritus and Director of the Company
Stephen G. Canton................ 42 President Commercial Sales Division,
Telco Communications Group, Inc.
J. Christopher Dance............. 33 Executive Vice President, General
Counsel, and Secretary
Nicholas A. Merrick.............. 35 Executive Vice President and Chief
Financial Officer
Ronald A. McDougall.............. 55 Director of the Company, Chairman of
the Compensation Committee of the Board
and Chairman of the Audit Committee of
the Board
T. Allan McArtor................. 55 Director of the Company, Member of the
Compensation Committee of the Board and
Audit Committee of the Board
</TABLE>
KENNY A. TROUTT, 50, Chairman of the Board, Chief Executive Officer and
Director of Excelcom and the Company after the Merger and the founder of the
predecessor of Excelcom, has served as the principal executive officer and a
Director of the predecessor of Excelcom, Excelcom, and the Company since the
predecessor of Excelcom's formation in 1988. In January 1991, Mr. Troutt was
elected as Chairman of the Board of the predecessor of Excelcom and, in July
1995, he was elected as Chief Executive Officer of the predecessor of
5
<PAGE>
Excelcom. Mr. Troutt served as Secretary and Treasurer of the predecessor of
Excelcom from December 1988 until July 1995. In addition, from December 1988
through June 1997, Mr. Troutt served as President of the predecessor of
Excelcom, Excelcom, and the Company. In June 1997, Mr. Troutt relinquished his
position as President and Mr. McLaine was elected as President. Prior to 1988,
Mr. Troutt served as President of SunTex Resources, Inc., an oil and gas
exploration company located in Dallas, Texas, which he founded in 1982. In
1970, Mr. Troutt founded Kenny Troutt Construction, a construction company
located in Omaha, Nebraska, and served as its sole manager until 1982. Mr.
Troutt is a graduate of Southern Illinois University.
STEPHEN R. SMITH, 53, Executive Vice President of Marketing-Emeritus and
Director of Excelcom and the Company after the Merger, served the predecessor
of Excelcom, and Excelcom as an independent consultant from January 1989 until
January 1996. Mr. Smith was elected as Director of the predecessor of Excelcom
in July 1995. Mr. Smith was also elected as Executive Vice President of the
predecessor of Excelcom in July 1995, yet was retained as an independent
consultant and not an employee of the predecessor of Excelcom. Mr. Smith was
elected as Executive Vice President of Marketing of Excelcom in January 1996
and was an employee of Excelcom and the Company following the Merger from
February 1996 through December 31, 1997. Mr. Smith resumed serving as an
independent consultant, effective December 31, 1997 and continues to serve as
a Director of the Company. Mr. Smith helped to develop the Company's network
marketing system. From 1984 through 1988, Mr. Smith served as an independent
representative and consultant for various network marketing organizations,
including Coastal Telephone, a regional long distance company, and Netcom
Information Systems, a voice mail company.
STEPHEN G. CANTON, 42, President Commercial Sales Division, Telco has served
as President Commercial Sales Division, Telco Communications Group, Inc. since
June 1996. Prior to joining Telco, from September 1995 to May 1996, Mr. Canton
was President and CEO of Network Services International, Inc., a
telecommunications reseller in Washington, D.C. From 1988 to September 1995,
Mr. Canton held several positions with Allnet Communications, Inc., a long
distance telecommunications company, including Vice President of the Sales
Division and Regional Sales Director.
J. CHRISTOPHER DANCE, 33, Executive Vice President, General Counsel, and
Secretary, has served as general counsel since May 1995. In January 1996, Mr.
Dance was formally elected as Vice President-Legal Affairs and Assistant
Secretary of the Company. Prior to assuming his present position, Mr. Dance
served as an attorney with Munsch Hardt Kopf Harr & Dinan, P.C. From 1990
until 1994, Mr. Dance served as an attorney with Akin, Gump, Strauss, Hauer &
Feld, L.L.P. Mr. Dance holds a BBA in Accounting & Finance from Texas A&M
University and a JD from the University of Texas School of Law.
NICHOLAS A. MERRICK, 35, Executive Vice President and Chief Financial
Officer, has served as Chief Financial Officer since October 1997. Prior to
the completion of the merger between the Company and Telco, Mr. Merrick served
as Chief Financial Officer for Telco from March 1996 until October 1997. where
he played an integral role in the company's development including the initial
public offering in August 1996 and the acquisition of the Advantis Voice
Network from Sears and IBM in April 1997. Prior to joining Telco, from August
1990 until March 1996, Mr. Merrick held several positions at The Robinson-
Humphrey Company, Inc. in Atlanta, including Vice President, Corporate
Finance. Mr. Merrick received his B.S. in commerce from the University of
Virginia and his MBA from Harvard University.
RONALD A. MCDOUGALL, 55, Director, Chairman of the Audit Committee of the
Board, and Chairman of the Compensation Committee of the Board, has served as
a member of the Board of Directors, the Chairman of the Compensation Committee
of the Board, and the Chairman of the Audit Committee of the Board of Excelcom
and the Company and the Merger since August 1996. Mr. McDougall has served as
President and Chief Executive Officer of Brinker International, Inc., a
publicly-held company engaged in the casual dining segment of the restaurant
business throughout the world, since June 1995, having formerly held the
office of President and Chief Operating Officer since 1986. Mr. McDougall
joined Brinker International, Inc. in 1983 and served as
6
<PAGE>
Executive Vice President-Marketing and Strategic Development until his
promotion to President in 1986. Prior to joining Brinker International, Inc.,
Mr. McDougall held senior management positions at Proctor and Gamble, Sara
Lee, The Pillsbury Company, and S&A Restaurant Corp. Mr. McDougall has served
as a member of the Board of Directors of Brinker International, Inc. since
September 1983 and is a member of the Executive and Nominating Committees of
Brinker International, Inc. In addition, Mr. McDougall serves on a number of
boards for civic, industry, charity, and educational groups.
T. ALLAN MCARTOR, 55, Director, Member of the Audit Committee and Member of
the Compensation Committee of the Board, has served as a member of the Board
of Directors, the Audit Committee, and the Compensation Committee of Excelcom
and the Company after the Merger since June 1997. Mr. McArtor is Founder,
President and Chief Executive Officer of Legend Airlines, Inc., a start-up
commercial airline which he founded in December 1996. From July 1994 until
December 1996, Mr. McArtor was a consultant with McArtor Enterprises, an
aviation and communications consulting company, which he formed in July 1994.
Mr. McArtor served on the senior management team of Federal Express
Corporation ("FedEx") from 1979 to 1994 except for two years, 1987-1989 when
President Reagan appointed Mr. McArtor to serve as the Administrator of the
Federal Aviation Administration ("FAA"). Before the FAA position, Mr. McArtor
was Senior Vice President for Telecommunications at FedEx. Upon his return to
FedEx in 1989, Mr. McArtor was named Senior Vice President of Air Operations
and was responsible for all divisions comprising FedEx's global airline. Mr.
McArtor serves as a member of the Board of Directors of Pilkington Aerospace,
Inc. which manufactures aircraft windshields and fighter aircraft canopies. In
addition, he serves on a number of boards for civic, industry, charity and
educational groups. Previously, Mr. McArtor has served on the Boards of
Learjet, Inc. and Fairchild Space and Defense Company.
7
<PAGE>
INFORMATION CONCERNING BOARD OF DIRECTORS
The composition of the Board changed on October 14, 1997, the effective date
of the Merger, although the committees of the Board remained the same.
Information provided herein regarding meetings of the Board and its committees
relate to Excelcom, Inc. prior to the Merger and to the Company after the
Merger.
MEETINGS OF THE BOARD OF DIRECTORS OF THE COMPANY
During 1997, the Board of Directors held 13 meetings and took action through
unanimous written consents in lieu of meetings of the Board of Directors on 22
occasions. Each director attended at least 75% of the meetings of the Board of
Directors and committees on which such directors served, which were held
during the period such person served as a director.
COMMITTEES OF THE BOARD OF DIRECTORS OF THE COMPANY
The Board of Directors has a standing Audit Committee consisting of Ronald
A. McDougall and T. Allan McArtor. During 1997, the Audit Committee held three
(3) meetings, and both members attended each meeting. The Audit Committee
performs the following functions: (a) review scope and content of the
Company's independent accountant's audit examinations, (b) communication with
independent accountants, (c) review of the Company's internal accounting
controls and financial management practices, (d) recommendation to the Board
of Directors as to the selection of independent accountants, and (e) review
scope, staffing, budget, and schedule of the Company's internal audit
schedule.
The Board of Directors has a standing Compensation Committee consisting of
Ronald A. McDougall and T. Allan McArtor. The Compensation Committee held
three (3) meetings during 1997, and both members attended each meeting and the
Compensation Committee acted through unanimous consent on seven (7) occasions.
The duties of the Compensation Committee are as follows: (a) to review and
recommend to the Board of Directors the annual salaries, fees, bonuses and
other benefits of the executive officers and employees of the Company and the
Company's subsidiaries; and (b) to review and submit to the Board of Directors
recommendations concerning compensation, stock plans and other benefits for
the Company's directors, officers and employees and expense account policies.
COMPENSATION OF DIRECTORS
Currently, the Company's policy is not to pay compensation to directors who
are also employees of the Company, but such employee directors are reimbursed
by the Company for expenses incurred in attending meetings of the Board of
Directors or any Committees thereof. Ronald A. McDougall entered into a stock
option agreement with the Company in August 1996, pursuant to which he
received a non-qualified stock option to acquire 20,000 shares of Common
Stock, subject to vesting requirements. In addition, in July 1997, Mr.
McDougall elected to convert the retainer, paid to him to serve as a director,
of $30,000 for each of 1996 and 1997 into stock options using a Black-Scholes
valuation and accordingly received non-qualified stock options to acquire
4,336 and 3,911 shares of Common Stock with exercise prices of $19.125 and
$12.50, respectively subject to vesting requirements. T. Allan McArtor, in
July 1997, received a non-qualified stock option to acquire 20,000 shares
pursuant to the 1997 Excelcom Director Stock Option Plan, subject to vesting
requirements. In addition, Mr. McArtor, in January 1998, elected to convert
his prorated 1997 retainer, which is paid to him to serve as a director, of
$26,712 into stock options using a Black-Scholes valuation and accordingly
received non-qualified stock options with an exercise price of $16.0625 to
acquire 5,720 shares of Common Stock, subject to vesting requirements.
Further, Mr. McDougall, Mr. McArtor and all non-employee directors elected in
the future will be eligible to participate in the EXCEL Communications, Inc.
1997 Director Stock Option Plan, pursuant to which each will be eligible to
receive non-qualified stock options. (See "Compensation Committee Interlocks
and Insider Participation")
8
<PAGE>
Ronald A. McDougall and T. Allan McArtor, both non-employee directors, have
received compensation of: (i) $1,000 for attending each regular and special
meeting held by the Board of Directors; (ii) an annual retainer of $30,000,
which may be converted, partially or totally, into stock options using a
Black-Scholes valuation; (iii) an option grant of 20,000 shares of Common
Stock (which Mr. McDougall received in August 1996, and which Mr. McArtor
received on July 1997 and both of which are subject to vesting in three equal
installments each year following the date of grant), and (iv) $1,000 for
attending each meeting of the Audit Committee and each meeting of the
Compensation Committee.
RESIGNATION OF DIRECTORS
Donald A. Burns and Henry G. Luken, III each resigned from the Board of
Directors of the Company as of December 17, 1997 to pursue other interests. A
Form 8-K was filed by the Company on December 31, 1997 containing the
Company's press release of December 17, 1997 regarding the resignations.
SIZE OF THE BOARD
As of March 31, 1998, the Company had five (5) directors on its Board and
two (2) vacancies on the Board as a result of the resignations of Messrs.
Burns and Luken.
9
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of March 23, 1998 regarding
the beneficial ownership of Common Stock by (i) each person or group known by
the Company to own more than five (5%) percent of the outstanding shares of
Common Stock, (ii) each director and nominee for director of the Company,
(iii) the Company's Named Executive Officers (as defined under "Executive
Compensation-Summary Compensation Table"), and (iv) all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF EXISTING
NAME AND ADDRESS OF BENEFICIAL OWNERSHIP PERCENT
BENEFICIAL OWNER OF COMMON STOCK (1) OF CLASS (1)(2)
------------------- -------------------- ---------------
<S> <C> <C>
Kenny A. Troutt (3)...................... 63,930,800 48.5%
Troutt Family Trust (3).................. 63,930,000 48.5%
10595 Strait Lane
Dallas, Texas 75229
Troutt Partners, Ltd. (3)(4)............. 53,000,000 40.2%
10595 Strait Lane
Dallas, Texas 75229
Steven J. Troutt (4)..................... 20,326,538 15.4%
Kenny Allan Troutt Children's Trust II
(4)..................................... 20,000,000 15.2%
10595 Strait Lane
Dallas, Texas 75229
Stephen R. and Sarah H. Smith (5)(6)..... 9,276,000 7.0%
Austex Enterprises, Ltd. (6)............. 7,617,933 5.8%
16004 Chateau Avenue
Austin, Texas 78734
William A. Casner........................ 9,144,000 6.9%
13181 Lakeview
Southlake, Texas 76092
John J. McLaine (7)...................... 223,689 *
Ronald A. McDougall(8)................... 17,334 *
c/o Brinker International, Inc.
6820 LBJ Freeway
Dallas, Texas 75240
T. Allan McArtor......................... -- --
c/o Legend Airlines, Inc.
7701 Lemmon Ave.
Dallas, TX 75209
Stephen G. Canton (9).................... 403,468 *
J. Christopher Dance (10)................ 141,907 *
Nicholas A. Merrick (11)................. 210,037 *
Thomas A. Marino......................... 1,500 *
Craig E. Holmes (12)..................... 84,423 *
All directors and executive officers as a
group (13 persons)...................... 74,300,193 56.3%
</TABLE>
- --------
* less than 1%
(1) Based upon 131,946,080 shares of Common Stock issued and outstanding as
of March 23, 1998.
10
<PAGE>
(2) The term "beneficial owner," which is used as defined in Rule 13d-3 of
the Exchange Act, means generally any person who, directly or indirectly,
has or shares voting power or investment power with respect to a
security. All information with respect to the beneficial ownership of any
stockholder has been furnished by such stockholder and the Company
believes that, except as otherwise indicated, each stockholder has sole
voting and investment power with respect to shares listed as beneficially
owned by such stockholder. Except as otherwise indicated, the address of
each of the persons in this table is as follows: c/o EXCEL
Communications, Inc., 8750 North Central Expressway, Suite 2000, Dallas,
Texas 75231.
(3) Kenny A. Troutt does not own of record any shares of Common Stock. The
shares of Common Stock beneficially owned by Kenny A. Troutt represent
800 shares held by Mr. Troutt's children, and the 63,930,000 shares held
beneficially by the Troutt Family Trust. The Troutt Family Trust (the
"Troutt Family Trust") is a trust formed under the laws of the State of
Texas, of which Kenny A. Troutt is the sole trustee. The shares held by
the Troutt Family Trust consists of 10,930,000 shares that are held of
record directly by the Troutt Family Trust and 53,000,000 shares that are
held of record directly by Troutt Partners, Ltd. , a Texas limited
partnership (the "Troutt Family Partnership"), of which the Troutt Family
Trust is the managing general partner. Kenny A. Troutt and the Troutt
Family Trust share voting and investment power with respect to the
10,930,000 shares held of record by the Troutt Family Trust; and Kenny A.
Troutt, the Troutt Family Trust, and the Troutt Family Partnership share
investment power with respect to all of the 53,000,000 shares held of
record by the Troutt Family Partnership. A provision in the partnership
agreement of the Troutt Family Partnership permits, for tax purposes,
each partner (including each limited partner) to direct the voting of
shares held by the Troutt Family Partnership that were contributed to the
Troutt Family Partnership by such partners. As a result, Kenny A. Troutt
and the Troutt Family Trust share voting power with the Troutt Family
Partnership only with respect to the 32,586,326 shares of Common Stock of
Excelcom now of the Company contributed by the Troutt Family Trust to the
Troutt Family Partnership in exchange for general and limited partnership
interests in the Troutt Family partnership. In addition, Kenny A. Troutt
may be deemed to share voting power with Steven J. Troutt, his brother,
with respect to certain shares over which Steven J. Troutt exercises
voting control in his capacity as sole trustee of several trusts
established for the benefit of Kenny A. Troutt's children, as described
in footnote (4) below.
(4) Steven J. Troutt does not own of record any shares of Common Stock. The
shares of Common Stock beneficially owned by Steven J. Troutt represent
14,864 shares held by the Excel Communications, Inc. Employee Ownership
Plan (the "ESOP") and allocated to Mr. Troutt's account, 81,837 shares
that were contributed to the Troutt Family Partnership in exchange for a
general partnership interest by the Kenny Allan Troutt Children's Trust
(the "KAT Trust"), 81,837 shares that were contributed to the Troutt
Family partnership in exchange for a limited partnership with interest
with voting rights by the Lisa Elaine Troutt Children's Trust (the "LET
Trust"), and 20,000,000 shares that were contributed to the Troutt Family
Partnership in exchange for a limited partnership interest with voting
rights by the Kenny Allan Troutt Children's Trust (the "KAT Trust II").
The KAT Trust II does not own of record any shares of Common Stock.
Steven J. Troutt is the sole trustee of the KAT Trust, the LET Trust, and
the KAT Trust II. Steven J. Troutt has shared voting power with respect
to the 14,864 shares allocated to his ESOP account. Steven J. Troutt, the
KAT Trust II, and the Troutt Family Partnership share voting power with
respect to the 20,000,000 shares contributed by the KAT Trust II to the
Troutt Family Partnership. Steven J. Troutt and the Troutt Family
Partnership share voting power with respect to the 81,837 shares
contributed by the KAT Trust and the 81,837 shares contributed by the LET
Trust to the Troutt Family Partnership. The above discussion regarding
various contributions of shares occurred prior to the Merger and as a
result involved shares of Excelcom which have been exchanged for shares
of stock of the Company as a result of the Merger. Neither Steven J.
Troutt nor the KAT Trust II has investment power with respect to the
shares beneficially held by them, except that Steven J. Troutt has
investment power with respect to the following: (i) 49,000 shares of
Common Stock issuable upon exercise of currently exercisable options and
(ii) 99,000 shares of Common Stock issuable upon exercise of options that
will be exercisable within 60 days of March 23, 1998.
(5) Represents 829,321 shares of Common Stock held by Stephen R. Smith,
828,746 shares of Common Stock held by Sarah H. Smith, and 7,617,933
shares of Common Stock held by Austex Enterprises, Ltd. Stephen
11
<PAGE>
R. Smith and Sarah H. Smith are married; as a consequence, each may be
deemed to be the beneficial owner of all the shares.
(6) Austex Enterprises, Ltd., which is the record owner of 7,617,933 shares
of Common Stock, is a Texas limited partnership of which Stara
Corporation, a Texas corporation, is the general partner. Stephen R.
Smith is the President of Stara Corporation and he and Sarah H. Smith are
each directors of Stara Corporation and each owns 50% of the outstanding
common stock of Stara Corporation; as a result, each of them has shared
voting, investment, and dispositive power with respect to the 7,617,933
shares held by Austex Enterprises, Ltd. The limited partner interests in
Austex Enterprises, Ltd. are either held individually by Stephen R. Smith
or Sarah H. Smith or by trusts of which he or she, as the case may be, is
the trustee. Stephen R. Smith and Sarah H. Smith are married; as a
consequence, each may be deemed to be the beneficial owner of all the
shares held by Austex Enterprises, Ltd.
(7) Represents 25,689 shares of Common Stock held by the ESOP and allocated
to Mr. McLaine's account and 198,000 shares of Common Stock issuable upon
exercise of options that will be exercisable within 60 days of March 23,
1998.
(8) Includes 15,334 shares of Common Stock (i) 6,667 of which are issuable
upon exercise of currently exercisable options, and (ii) 6,667 of which
are issuable upon exercise of options that will be exercisable within 60
days of March 23, 1998.
(9) Represents 403,648 shares of Common Stock issuable upon exercise of
currently exercisable options.
(10) Represents 13,907 shares of Common Stock held by the ESOP and allocated
to Mr. Dance's account, 15,000 shares of Common Stock directly owned by
Mr. Dance, 14,000 shares of Common Stock issuable upon exercise of
currently exercisable options, and 99,000 shares of Common Stock issuable
upon exercise of options that will be exercisable within 60 days of March
23, 1998.
(11) Represents 179,213 shares of Common Stock issuable upon exercise of
currently exercisable options, 30,247 shares of Common Stock directly
owned by Mr. Merrick, and 577 shares of Common Stock held for the benefit
of Mr. Merrick's children under The Uniform Gifts to Minors Act.
(12) Represents 10,623 shares of Common Stock held by the ESOP and allocated
to Mr. Holmes' account, 4,500 shares of Common Stock directly owned by
Mr. Holmes, and 69,300 shares of Common Stock issuable upon exercise of
options that will be exercisable within 60 days of March 23, 1998.
12
<PAGE>
MANAGEMENT
The following table sets forth certain information regarding the Company's
executive officers. Officers are elected annually by the Board of Directors
and serve at its discretion.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Kenny A. Troutt...... 50 Chief Executive Officer, Chairman of the Board, and
Director of the Company
John J. McLaine...... 48 President and Chief Operating Officer and
Director of the Company
Stephen R. Smith..... 53 Executive Vice President of Marketing-- Emeritus
and Director of the Company
Stephen G. Canton.... 42 President Commercial Sales Division, Telco
Communications
Group, Inc.
J. Christopher Dance. 33 Executive Vice President, General Counsel, and
Secretary
Kenneth L. Hilton.... 45 Executive Vice President, Consumer Marketing
Lester M. Lichter.... 51 Executive Vice President and Chief Information
Officer
Thomas A. Marino..... 56 Executive Vice President, Network Operations
Nicholas A. Merrick.. 35 Executive Vice President and Chief Financial Officer
Paul D. Fletcher..... 39 Vice President and Treasurer
Craig E. Holmes...... 40 Vice President and Chief Accounting Officer
</TABLE>
- --------
See "Proposal No. 1--Election of Directors" for biographical information
regarding Messrs. Troutt, Smith, Canton, Dance and Merrick.
JOHN J. MCLAINE, 48, President, Chief Operating Officer, and Director, has
served as President and Chief Operating Officer of Excelcom and the Company
after the Merger since June 1997. From August 1994 through June 1997, he
served as Executive Vice President, Chief Financial Officer and Director of
the predecessor of Excelcom, Excelcom and the Company after the Merger. In
July 1995, Mr. McLaine was also elected as Secretary and a Director of the
predecessor to Excelcom, and in January 1996, he was formally elected as
Executive Vice President and Chief Financial Officer of Excelcom. Mr. McLaine
served as Vice President and Treasurer of the predecessor to Excelcom from
July 1995 until January 1996. Prior to August 1994, Mr. McLaine served as
President of McLaine Associates, Inc., a consulting firm providing consulting
services with respect to mergers and acquisitions and business turnarounds,
which he founded in 1990. From June 1991 until September 1992, Mr. McLaine
provided services to, and served as Chairman of the Board and Chief Executive
Officer of, HPC Laboratories, Inc. and its subsidiary Hunt Products Company,
Inc., which were clients of McLaine Associates, Inc. Hunt Products Company was
a distributor of private label personal care products. After Mr. McLaine's
resignation, a change of control of such companies occurred and, in February
1994, the subsidiary company was put into involuntary bankruptcy. From 1989
until 1990, Mr. McLaine served as the Chief Financial Officer and President of
International Operations for Pearle Vision, Inc., a retail optical chain.
Prior to 1989, Mr. McLaine served as Vice President of Finance and Control for
American National Can Company, an international packaging company. Mr. McLaine
holds an MBA from DePaul University and a BS degree the University of Scranton
and is a Certified Public Accountant.
KENNETH L. HILTON, 45, Executive Vice President, Consumer Marketing, has
served as Executive Vice President, Consumer Marketing since November 1997.
Prior to joining Excel, Mr. Hilton was Executive Vice President, Strategic
Business Units at PageMart Wireless, Inc. based in Dallas from October 1994
until November 1997. Before PageMart, Mr. Hilton was Vice President, Sales and
marketing at Visual Information
13
<PAGE>
Technologies, Inc. also based in Dallas from October 1990 to September 1994.
Mr. Hilton holds a BS in Business Administration from the University of
Missouri.
LESTER M. LICHTER, 51, Executive Vice President and Chief Information
Officer has served as Executive Vice President and Chief Information Officer
since October 1997. Prior to joining Excel, Mr. Lichter served as Senior Vice
President and Chief Information Officer of Cable & Wireless, Inc. from June
1996 until October 1997. Prior to joining Cable & Wireless, Mr. Lichter served
as Vice President and Chief Information Officer of AT&T's Business
Communications Services division from December 1993 until May 1996, Vice
President of Software Engineering at MCI from March 1991 until December 1993,
and Vice President of Corporate Systems Development at Sprint from February
1987 until October 1989. Mr. Lichter holds a BS in Business Administration
from the University of California Coast.
THOMAS A. MARINO, 56, Executive Vice President, Network Operations, has
served as Executive Vice President, Network Operations since April 1997. His
responsibilities include provisioning, network management, monitoring call and
carrier activities. He also oversees the design, engineering and building of
Excel's switching networks. Prior to joining Excel, Mr. Marino was Vice
President, Network Operations of MIDCOM Communications, Inc. from June 1996
until April 1997. Before joining MIDCOM, Mr. Marino was Vice President,
Network Operations and Engineering of Allnet Communications Services, Inc.
from 1986 until May 1996. Mr. Marino attended the American University and the
University of Maryland.
PAUL D. FLETCHER, 39, Vice President and Treasurer, has served as Vice
President and Treasurer of the Company since May 1996. From February 1987
until May 1996, Mr. Fletcher served as Senior Vice President for Lomas
Financial Corporation, a diversified financial services company. Lomas
Financial Corporation in October 1995 filed voluntary petitions pursuant to
Chapter 11 of the United States Bankruptcy Code. At such time, Mr. Fletcher
served as Senior Vice President--Finance for Lomas Financial Corporation. Mr.
Fletcher's duties included corporate finance, bank relations, and cash
management. Mr. Fletcher holds a BA from Albion College and an MBA from
Northwestern University.
CRAIG E. HOLMES, 40, Vice President and Chief Accounting Officer, has served
as Chief Accounting Officer since September 1995. In January 1996, Mr. Holmes
was formally elected Vice President and Chief Accounting Officer of the
Company. From 1982 until September 1995, Mr. Holmes was with Arthur Andersen
LLP, and he was elected as a Partner in the Audit and Business Advisory
Services unit at Arthur Andersen LLP in 1995. Mr. Holmes' practice focused in
the areas of financial audits, corporate finance, and business consulting. Mr.
Holmes holds BBA and MS degrees from Texas Tech University and is a Certified
Public Accountant.
14
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation of the Chief Executive
Officer and the five (5) other highly compensated named executive officers
(the "Named Executive Officers") of the Company, all of whose total
compensation exceeded $100,000 during the year ended December 31, 1997.
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------ SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTION/SARS (#) COMPENSATION
- --------------------------- ---- ---------- --------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
Kenny A. Troutt.......... 1997 1,500,000 840,000(1) -- 13,794(2)
Chief Executive Officer, 1996 1,500,000(3) 1,500,000(4) -- 672(2)
Chairman of the Board 1995 1,365,278 2,000,000(5) -- 168(2)
John J. McLaine.......... 1997 497,738 252,000(1) -- 43,789(7)(2)
President and Chief
Operating 1996 320,177 340,000(4) -- 106,088(8)(2)
Officer 1995 225,000 76,950(5) 990,000(9) 66,351(10)(2)
Stephen R. Smith......... 1997 -- -- -- 6,515,214(6)(2)
Executive Vice President
of 1996 -- -- -- 8,828,246(6)
Marketing-Emeritus 1995 -- -- -- 3,938,000(6)
J. Christopher Dance..... 1997 227,750 84,000(1) -- 41,671(7)(2)
Executive Vice
President, 1996 145,192 105,000(4) -- 103,760(8)(2)
General Counsel, and
Secretary 1995 81,731 27,952(5) 495,000(9) 36,407(10)(2)
Thomas A. Marino......... 1997 204,784(11) 59,656(1) 200,000(12) 37,216(7)(2)
Executive Vice
President,
Network Operations
Craig E. Holmes.......... 1997 166,118 39,900(1) -- 40,907(7)(2)
Vice President and 1996 152,077 47,700(4) -- 102,542(8)(2)
Chief Accounting Officer 1995 35,192(13) -- 346,500(9) 19,423(10)(2)
</TABLE>
- --------
(1) Represents bonus amount earned in fiscal year 1997 and paid in fiscal
year 1998.
(2) Represents, in part, life insurance premiums paid for benefit of such
officer. The amounts of such life insurance premiums for the following
named executive officers in the following years are as follows: (i) Mr.
Troutt: in 1995, $168, in 1996, $672 and in 1997, $3,062; (ii) Mr.
McLaine: in 1995, $89, in 1996, $358, and in 1997, $1,305; (iii) Mr.
Dance: in 1995, $37 and in 1996, $148, and in 1997, $135; (iv) Mr.
Holmes: in 1995, $33, in 1996, $134, and in 1997, $222; and (v) Mr.
Marino: in 1997, $1,466. Also represents, in part, long term disability
insurance premiums, accidental death and disability insurance premiums,
medical and dental insurance premiums, and payments for tax planning for
the following named executive officers in 1997: (i) Mr. Troutt: $10,732,
(ii) Mr. Smith: $13,794, (iii) Mr. McLaine: $12,489, (iv) Mr. Dance:
$11,541, (v) Mr. Holmes: $10,690, and (vi) Mr. Marino, $5,755.
(3) Represents 1996 salary, $124,889 of which was paid in fiscal year 1997.
(4) Represents bonus amount earned in fiscal year 1996 and paid in fiscal
year 1997.
(5) Represents bonus amount earned in fiscal year 1995 and paid in fiscal
year 1996.
(6) Represents amounts earned through commissions pursuant to a written
agreement between the Company and Mr. Smith that was entered into on May
1, 1989. Although Mr. Smith was elected as Executive Vice President of
the Company in July 1995, Mr. Smith served the Company principally as an
independent consultant in 1995. Mr. Smith was elected as Executive Vice
President of Marketing of Excelcom in January 1996 and was an employee of
Excelcom and the Company after the Merger from February 1996 through
December 31, 1997. Mr. Smith resumed serving as an independent
consultant, effective December 31, 1997.
(7) Represents shares of Common Stock, valued at $14.50 per share as of
December 31, 1997, allocated through 1997 to the participant's account
and cash allocated in 1997 to the participant's account under the
15
<PAGE>
ESOP. Each named executive officer's amount of the cash and shares
allocated in 1997 is as follows: (i) Mr. McLaine: $328 and 2,046 shares;
(ii) Mr. Dance: $328 and 2,046 shares; (iii) Mr. Holmes: $328 and 2,046
shares; and (iv) Mr. Marino: $328 and 2,046 shares.
(8) Represents shares of Common Stock, valued at $21.125 per share as of
December 31, 1996, allocated through 1996 to the participant's account
and a cash dividend allocated in 1996 to the participant's account under
the ESOP. Each named executive officer's amount of the cash dividend and
shares allocated in 1996 is as follows: (i) Mr. McLaine: $4,804 and
4,778 shares; (ii) Mr. Dance: $2,686 and 4,778 shares; (iii) Mr. Holmes:
$1,482 and 4,778 shares.
(9) Represents stock options granted pursuant to the Excelcom 1995 Stock
Option Plan and assumed by the Company in the Merger, which have an
exercise price of $4.55 and are subject to vesting requirements and
which were converted into options to acquire the same number of shares
of the Company at the same exercise price as part of the Merger.
(10) Represents, in part, shares of Common Stock, valued at $5.17 per share,
allocated in 1995 to the participant's account under the ESOP. Each
officer's amount of shares allocated in 1995 is as follows: (i) Mr.
McLaine: 12,823 shares; (ii) Mr. Dance: 7,035 shares; and (iii) Mr.
Holmes: 3,751 shares.
(11) Represents wages earned from Mr. Marino's hire date of May 5, 1997
through December 31, 1997.
(12) Represents stock options granted pursuant to the Excelcom 1995 Stock
Option Plan and assumed by the Company in the Merger, which have an
exercise price of $18.75 per share, and are subject to vesting
requirements and which were converted into options to acquire the same
number of shares of the Company at the same exercise price as part of
the Merger.
(13) Represents wages earned from Mr. Holmes' hire date of September 11, 1995
through December 31, 1995.
OPTION GRANTS DURING 1997 FISCAL YEAR
The following table contains certain information concerning the grant of
stock options to the executive officers named in the above compensation table
during the Company's last fiscal year:
<TABLE>
<CAPTION>
REALIZABLE VALUE
% OF TOTAL OF ASSUMED ANNUAL
NUMBER OF OPTIONS RATES OF STOCK PRICE
SECURITIES GRANTED APPRECIATION FOR
UNDERLYING TO EMPLOYEES PER SHARE OPTION TERM (1)
OPTIONS IN FISCAL EXERCISE EXPIRATION --------------------------
NAME GRANTED YEAR PRICE DATE 5% 10%
---- ---------- ------------ --------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas A. Marino........ 200,000(2) 10.28% $18.75(3) 6/4/07 $2,480,522 $6,171,065
</TABLE>
- --------
(1) The dollar amounts under these columns are the result of calculations at
the 5% and 10% rates set by the Securities and Exchange Commission and,
therefore, are not intended to forecast possible future appreciation, if
any, of the Company's stock price.
(2) Represents stock options granted pursuant to the Excelcom 1995 Stock
Option Plan and assumed by the Company in the Merger, and are subject to
vesting 25% on June 4, 1998 with the remaining options vesting at 25% per
year over a three (3) year period thereafter. All of the options were
unexercisable on December 31, 1997.
(3) Options were granted at a price at least equal to the fair market value of
the common stock on the date of grant.
16
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NO. OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END(1)(2)(3)
ACQUIRED VALUE -------------------------------- ------------------------------
OPTIONEE ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------- ----------- ---------- ------------- --------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
John J. McLaine......... 198,000 $2,441,261 0 792,000(1) 0 $ 7,880,400(1)
J. Christopher Dance.... 85,000 $1,384,798 14,000 396,000(1) $ 139,300 $ 3,940,200(1)
Craig E. Holmes......... 69,300 $ 817,304 0 277,200(1) 0 $ 2,758,140(1)
Thomas A. Marino........ -- -- 0 200,000(2) 0 -- (3)
</TABLE>
- --------
(1) Represents stock options granted pursuant to the Excelcom 1995 Stock
Option Plan, and assumed by the Company in the Merger, which have an
exercise price of $4.55 and are subject to vesting 20% on May 1, 1997 with
the remaining options vesting at varying rates over a five year period
thereafter and which were converted into options to acquire the same
number of shares at the same exercise price of the Company as part of the
Merger. All of the options were unexcercisable on December 31, 1997,
except that 14,000 shares of Mr. Dance's options are currently
exercisable.
(2) Calculated on the basis of the closing price of the Company's Common Stock
on the New York Stock Exchange on December 31, 1997 of $14.50 per share.
(3) Represents stock options granted pursuant to the Excelcom 1995 Stock
Option Plan and assumed by the Company after the Merger, which have an
exercise price of $18.75 and are subject to vesting 25% on June 4, 1998
with the remaining options vesting at 25% per year over a three (3) year
period thereafter. All of the options were unexercisable on December 31,
1997.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires directors, executive officers and
10% or greater stockholders of the Company ("Reporting Persons") to file with
the Securities and Exchange Commission (the "SEC"), the New York Stock
Exchange, and the Company initial reports of ownership and reports of changes
in ownership of equity securities of the Company. To the Company's knowledge,
based solely on its review of the copies of such reports furnished to the
Company and written representations that certain reports were not required,
during the year ended December 31, 1997, all Section 16(a) filing requirements
applicable to Reporting Persons were complied with.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Merger
On October 14, 1997, the Company succeeded to the businesses of Excelcom and
Telco as a result of the Merger. At the closing of the Merger on October 14,
1997: (i) Excelcom and Telco became wholly-owned subsidiaries of the Company:
(ii) each outstanding share of Excelcom common stock converted into the right
to receive one share of common stock of the Company; (iii) each outstanding
share of Telco common stock converted into the right to receive 0.7595 shares
of common stock of the Company and $15.00 in cash; (iv) except for certain
options, each then outstanding and unexercised option to acquire one share of
Telco common stock was assumed by the Company and converted into an option to
acquire 1.5190 shares of the Company's common stock, and the exercise price
per share with respect to each such assumed option was adjusted to equal the
exercise price under the original option divided by 1.5190; and (v) each then
outstanding unexercised option to acquire one share of Excelcom common stock
was assumed by the Company and converted into an option to acquire one share
of the Company's common stock, and the exercise price per share was unchanged.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Effective October 14, 1997, the Company entered into employment agreements
with Nicholas A. Merrick, Executive Vice President and Chief Financial Officer
of the Company, and Stephen G. Canton, President of
17
<PAGE>
Commercial Sales Division of Telco, providing for a base salary of $300,000
and $325,000, respectively, and for payments upon a termination without cause
and a termination following a change of control.
Effective January 1, 1996, Excelcom entered into an employment agreement
with Kenny A. Troutt, the Company's Chief Executive Officer, President,
Chairman of the Board and a Director, providing for a base salary of $1.5
million per year and payments upon a termination following a change of
control. See "Compensation Committee Interlocks and Insider Participation."
Effective May 1, 1989, Excelcom, through EXCEL Telecommunications, Inc., its
predecessor, entered into an agreement (which was amended on January 8, 1996,
effective August 1, 1992, the date the parties verbally amended the Agreement)
with Stephen R. Smith, a Director and Executive Vice President of Marketing-
Emeritus of the Company, whereby he receives payment for all independent
representatives in the network marketing program of the Company, and trainers
enrolling with the Company as well as payments for certain subscribers' long
distance usage. See "Compensation Committee Interlocks and Insider
Participation."
All of the Named Executive Officers other than Mr. Troutt and Mr. Smith hold
stock options that have been granted under the stock option plans ("Plans")
which have been converted into options of the Company in connection with the
Merger. Generally, under their option agreements, these options vest in
installments of varying percentages over three to seven year periods from the
date of grant. However, under their option agreements, in the event (i) a
merger or consolidation of the Company or transfer of voting stock of the
Company as a result of which the holders of all of the voting stock of the
Company prior to such event do not continue to hold either directly or
indirectly at least a majority of the Company's voting stock after such event,
(ii) a sale of all or substantially all of the assets of the Company, or (iii)
certain changes in the majority of the Board of Directors during any twelve
consecutive month period after the Company has registered securities under the
Securities Act of 1933, as amended (the "Securities Act"), which registration
has occurred, the options may be exercised in whole or in part without regard
to the installment vesting provisions thereof.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the consummation of the initial public offering on May 9, 1996 of
Excelcom, the Company's predecessor, the Company did not have a Compensation
Committee (or other committee of the Board of Directors performing similar
functions) and accordingly, the Board of Directors determined the compensation
for the executive officers and other related matters. Prior to the
consummation of Excelcom's initial public offering, Messrs. Troutt, Smith, and
McLaine participated in such deliberations of the Board of Directors
concerning executive officer compensation. Effective August 19, 1996, Excelcom
formed a Compensation Committee, of which Ronald A. McDougall was the initial
member. Effective June 25, 1997, T. Allan McArtor was elected to the Board of
Directors and appointed to the Compensation Committee. The members of the
Compensation Committee of Excelcom became the members of the Compensation
Committee of the Company following the Merger. No executive officer of the
Company served as a director or as member of the Compensation Committee (or
equivalent) of another entity, one of whose executive officers served on the
Compensation Committee (or equivalent) or as a director of the Company.
Excelcom, through EXCEL Telecommunications, Inc., its predecessor, has an
agreement with Stephen R. Smith, a Director and the Executive Vice President
of Marketing-Emeritus of the Company, whereby Mr. Smith receives $5.00 for
each IR who enters the Company's network marketing program prior to the date
of his death and $5.00 for each person who enrolls as a trainer in EXCEL's
training program prior to the date of his death. In addition, Mr. Smith
receives 0.5% of the long distance charges paid by each subscriber using the
Company's long distance service as a result of its network marketing program.
This agreement with Mr. Smith, which is dated May 1, 1989, was amended January
8, 1996, with such amendment being effective as of August 1, 1992 (the time at
which the parties verbally amended the agreement). Prior to August 2, 1992,
the payments to Mr. Smith were based upon new subscribers as well as on long
distance usage and were calculated using higher rates. These payments were
$1.3 million, $3.9 million, $6.7 million, and $6.5 million respectively, for
the fiscal years ended December 31, 1994, 1995, 1996, and 1997. All payments
under the agreement must be made until Mr.
18
<PAGE>
Smith's death. Thereafter, the Company will no longer be required to make
payments for new IRs or IR trainers, but will still be required to pay long
distance usage commissions to Mr. Smith's heirs and assigns indefinitely on
the Company's subscribers who are using the Company's long distance service at
the date of Mr. Smith's death.
The EXCEL Telecommunications, Inc. 1996 Management Incentive Plan (the
"Incentive Plan") was adopted by the Board of Directors of Excelcom on
February 5, 1996 and replaced the previous incentive plan, which had been
adopted in July 1995, and continued to be in effect as of December 31, 1997.
The Incentive Plan provides for the payment of cash compensation to eligible
participants upon the achievement of individual and corporate performance
targets, which performance targets are reviewed by the Compensation Committee
of the Board of the Company based on the recommendations of senior management.
The chief executive officer, vice presidents, departmental directors, and such
other officers of the Company who are primarily responsible for the growth and
profitability of the Company are eligible to be participants in the Incentive
Plan. The performance measurement periods are each twelve months.
Effective January 1, 1996, Excelcom entered into an employment agreement
with Kenny A. Troutt, the Company's Chief Executive Officer, Chairman of the
Board, and a Director, providing for a base salary of $1,500,000 per year,
subject to such increases as the Board of Directors may approve. In addition,
Mr. Troutt is eligible for such bonuses as the Board of Directors may
determine. The employment agreement is scheduled to terminate on December 31,
2000, although it will automatically renew for successive one-year periods
unless either Mr. Troutt or Excelcom provides notice, at least 30 days prior
to the scheduled termination date, to the other of his or its desire to
terminate the agreement. Mr. Troutt may also terminate the agreement in his
sole discretion upon 30 days' notice. If the agreement is voluntarily
terminated by Mr. Troutt, in his sole discretion, or if the agreement is
terminated because either party chooses not to renew it, Mr. Troutt will not
be entitled to any severance payments under the agreement. The agreement
automatically terminates upon the death of Mr. Troutt, although Excelcom will
be obligated to pay his estate his base salary for one year after death.
Excelcom may not terminate the agreement except for cause, as defined in the
agreement. Mr. Troutt will be entitled to receive all amounts that would have
been due to him through the scheduled termination of the agreement or, if such
a termination occurs within one year after a change of control (as defined in
the agreement), the greater of such amounts and two times the base salary for
the year during which such termination occurs ("Severance Payment").
Furthermore, if Mr. Troutt terminates his employment within one year after a
change of control that is followed by either a material increase or decrease
in his duties from those that were required of him prior to the change of
control or the imposition of duties that are inconsistent with his executive
status, he will be entitled to the Severance Payment. A change of control is
deemed to have occurred if a majority of the directors of the Company have not
been voted for or approved by Mr. Troutt or by other directors he has so voted
for or approved. A change of control did not occur as a result of the Merger.
The agreement further provides that the Board of Directors may delegate their
authority under the agreement to a compensation committee.
In January 1997, the Board of Directors of Excelcom approved the adoption of
the Excelcom 1997 Director Stock Option Plan and reserved 400,000 shares of
Common Stock for issuance thereunder, under which Mr. McArtor received 20,000
options in July 1997.
In August and September 1997, in connection with the Merger, the
Compensation Committee of the Company, as well as the Board of Directors of
the Company, Excelcom, and Telco, approved the 1997 Director Stock Option Plan
of the Company and reserved 400,000 shares of Common Stock for issuance
thereunder subject to the approval of the stockholders of each company, which
was obtained on October 11, 1997.
In January 1997, the Board of Directors of Excelcom adopted the Second
Amendment to its 1995 Stock Option Plan whereby an optionee may exercise and
satisfy withholding tax obligations by, in addition to paying cash or check as
previously approved by the stockholders, delivering shares, withholding shares
or any other form of legal consideration acceptable to the Compensation
Committee. Mr. McLaine is on the Board of Directors and holds stock options
granted under the 1995 Stock Option Plan.
19
<PAGE>
In September 1997, in connection with the Merger, the Compensation Committee
of the Company as well as the Board of Directors of the Company, Excelcom, and
Telco adopted and approved the 1997 Stock Option Plan of the Company and
reserved 4,000,000 shares of common shares of common stock for issuance
thereunder, subject to the approval of the stockholders of each company, which
was obtained on October 11, 1997.
At the effective time and as a result of the Mergers (the "Effective Time"),
all options to acquire shares of the common stock of Excelcom under the
Excelcom, Inc. 1995 Stock Option Plan, the Excelcom, Inc. 1997 Director Stock
Option Plan, and the Excelcom, Inc. Director Stock Option Agreement with
Ronald A. McDougall, and all options to acquire shares of common stock of
Telco under the Telco Communications Group, Inc. Amended and Restated 1994
Stock Option Plan, respectively, were converted into options to acquire shares
of Common Stock of the Company in accordance with the terms and conditions of
the Agreement and Plan of Merger dated as of June 5, 1997, among the Company,
Excelcom, Telco and the merger subsidiaries which were parties thereto (the
"Merger Agreement"). Accordingly, the Company amended its Registration
Statement on Form S-4 (No. 333-35377), which was declared effective, by filing
a Post-Effective Amendment No. 1 on Form S-8 relating to an aggregate of
9,223,313 shares of Common Stock issuable upon the exercise of options granted
under the Excelcom, Inc. 1995 Stock Option Plan, as amended, the Excelcom,
Inc. 1997 Director Stock Option Plan, the Excelcom, Inc. Director Stock Option
Agreement with Ronald A. McDougall, and the Telco Communications Group, Inc.
Amended and Restated 1994 Stock Option Plan (collectively, the "Plans"). As
used herein, the "Plans" shall also include the Excel Communications, Inc.
1997 Stock Option Plan and the Excel Communications, Inc. 1997 Director Stock
Option Plan.
In December 1996, January 1997, and December 1997 the Board of Directors
amended the Excel Communications, Inc. Employee Ownership Plan (the "ESOP
Plan") such that (i) an employee of Excelcom as of September 30, 1996 could
participate in the ESOP portion of the ESOP Plan irrespective of the six
months of continuous service requirement; (ii) Employee Securities (as defined
in the ESOP Plan) held in a suspense account pursuant to Section 16.01 of the
ESOP Plan were allocated to employees of Excelcom who were actively employed
on the accounting date and had met certain eligibility requirements including
the number of hours of service during such ESOP Plan year; (iii) the
definition of Employee Securities was clarified to mean Common Stock and non-
callable preferred stock, which is convertible into Common Stock; (iv) within
the ESOP Contribution Account (as defined in the ESOP Plan), Employee
Securities will be forfeited only after other assets of Excelcom; (v) certain
administration provisions were clarified; (vi) certain changes in the law were
reflected; and (vii) a new recordkeeper for the Plan was appointed.
Through February 28, 1998, Henry G. Luken, a former Executive Vice President
and Director of the Company, until his resignation from such positions
effective December 17, 1997, had outstanding loans from Telco which amounted
to $111,512.96 in principal and interest. The indebtedness was incurred from
Telco or its predecessors beginning in November 1991 through May 1996 and the
rate of interest on these loans is 8%. The transactions relating to the
indebtedness involved primarily cash advances.
In October 1997, pursuant to the Telco Shareholders Agreement, dated June 5,
1997, among Excelcom, Messrs. Burns, Canton, Cirrito, Luken, Merrick, Rachlin
and Gold & Appel Transfer, S.A., Telco repurchased 354,167 vested options from
Mr. Canton and 128,387 vested options from Mr. Merrick and 177,083 and
70,833.5 options, which vested as a result of the consummation of the Merger,
from Messrs. Canton for $15,518,178 and Merrick for $5,819,382.
Effective October 14, 1997, the Company entered into an employment agreement
with Mr. Luken, and Telco entered into an employment agreement with Mr. Burns,
with both agreements providing for a base salary of $400,000 per year. Upon
the voluntary resignation of Messrs. Luken and Burns and the consent of such
resignations by the Board of Directors of the Company, (Messrs. Burns and
Luken did not participate and were not present at this meeting), the Company,
pursuant to these employment agreements is paying to each of Messrs. Luken and
Burns severance compensation of $400,000 payable in weekly installments, which
payments began on December 17, 1997 and will end on December 16, 1998.
20
<PAGE>
The following is the Report of the Compensation Committee of the Company,
describing the compensation policies and rationale applicable to the Company's
officers with respect to the compensation paid to the officers for the year
ended December 31, 1997. The information contained in the Report of the
Compensation Committee 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 filing under the Securities Act or the Exchange Act
except to the extent that the Company specifically incorporates it by
reference into such filing.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
As the Compensation Committee, it is our duty to administer the executive
compensation program for the Company. The Compensation Committee is
responsible for establishing appropriate compensation goals for the executive
officers of the Company and evaluating the performance of such executive
officers in meeting such goals. The elements of the executive compensation
program described below are implemented and periodically reviewed and adjusted
by the Compensation Committee.
The goals of the Compensation Committee in establishing the Company's
executive compensation program are as follows:
(1) To fairly compensate the executive officers of the Company for their
contributions to the Company's short-term and long-term performance.
The elements of the Company's compensation program are (i) annual
base salaries, (ii) annual cash bonuses, and (iii) equity
incentives.
(2) To allow the Company to attract, motivate, and retain the best-
qualified executive personnel.
(3) To provide an executive compensation program with incentives linked
to the financial performance of the Company. Under such program,
incentive compensation for executive officers is linked to the
general financial performance of the Company as measured by such
items as revenues and income from operations.
BASE SALARIES
The annual base salary of Nicholas A. Merrick, Executive Vice President and
Chief Financial Officer of the Company, and Stephen G. Canton, President of
the Commercial Sales Division of Telco, are determined pursuant to negotiated
employment agreements between the Company and such executive officers entered
into in connection with the Merger.
The annual base salary of Kenny A. Troutt as Chairman of the Board and Chief
Executive Officer of the Company was predetermined pursuant to an employment
agreement that was entered into between Excelcom and Mr. Troutt prior to the
appointment of the Compensation Committee and was negotiated prior to
Excelcom's initial public offering. See "Report of Compensation Committee--
Compensation of Chief Executive Officer" and See "Compensation Committee
Interlocks and Insider Participation".
Stephen R. Smith receives no base salary as substantially all of his
compensation is paid pursuant to a commission agreement entered into in May
1989 and which was amended in January 1996 (effective August 1, 1992 the date
the parties verbally amended the agreement) with EXCEL Telecommunications,
Inc., the predecessor to Excelcom. This agreement continues until Mr. Smith's
death. The Compensation Committee has not made any review or evaluation of the
amounts paid to Mr. Smith. See "Compensation Committee Interlocks and Insider
Participation."
The Compensation Committee has reviewed and approved the base salaries of
the newly hired executive officers, as well as Messrs. Luken and Burns, each
of whom resigned on December 17, 1997, and the raises given to each of the
current executive officers in light of corporate performance, individual
performance, experience, and a comparison with salary ranges and midpoints
reflecting similar positions, duties, and levels of
21
<PAGE>
responsibility of other companies in similar industries and with comparable
revenues and has found them to be reasonable.
ANNUAL BONUSES
For the year ended December 31, 1997, bonuses were paid to executive
officers other than Stephen R. Smith pursuant to the Incentive Plan, adopted
by the Board of Directors of Excelcom in February 1996 and assumed by the
Company in connection with the Merger. The Incentive Plan provides for the
payment of annual compensation to key exempt employees who have achieved
critical annual operating and financial goals of the Company and individual
objectives. During 1997, the Incentive Plan was administered by the Chief
Executive Officer, Chief Financial Officer, and Vice President--Human
Resources (with each receiving bonuses under the Incentive Plan). Prior to the
payment of these bonuses, the Compensation Committee reviewed and approved
these bonuses in light of individual and corporate performance and found them
to be reasonable, in the best interest of the Company, and at a level
comparable to the amounts paid to those in like positions in similar
companies, in similar industries, and with comparable revenues.
LONG-TERM INCENTIVE COMPENSATION
The Committee believes that long-term incentive compensation in the form of
stock options is the most direct way of making executive compensation
dependent upon increases in stockholder value. The Company's 1997 Stock Option
Plan provides the means through which executive officers can build an
investment in the Company's Common Stock which will align such officers'
economic interests with the interests of stockholders. The value of the stock
options historically has increased as a result of increases in the price of
the Common Stock, and such options are highly valued by employees. The
Committee believes that the grant of stock options has been a particularly
important component of its success in retaining talented management employees.
The exercise price of each option has generally been the market price of the
Common Stock on the date of grant. The Committee believes that stock options
give the executive officers greater incentives throughout the term of the
options to strive to operate the Company in a manner that directly affects the
financial interests of the stockholders both on a long-term, as well as a
short-term, basis.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Kenny A. Troutt's compensation as Chief Executive Officer of the Company
consisted principally of a base salary of $1,500,000 and a bonus of $840,000
during 1997. Mr. Troutt's base salary was predetermined pursuant to an
employment agreement that was entered into between Excelcom and Mr. Troutt
prior to the appointment of the Compensation Committee and prior to Excelcom's
initial public offering. Mr. Troutt's bonus was paid under the Incentive Plan
and was reviewed and approved by the Compensation Committee in light of the
Chief Executive Officer's performance and the Company's performance and found
to be reasonable, in the best interest of the Company, and at a level
comparable to the amounts paid to of other Chief Executive Officers in similar
companies, in similar industries, and with comparable revenues.
SECTION 162(M)
Section 162(m) of the Code provides that, in the case of a publicly held
corporation, no deduction shall be allowed for "applicable employee
remuneration" with respect to any "covered employee" to the extent that the
amount of such remuneration for a taxable year exceeds $1,000,000. The term
"covered employee" means the chief executive officer of the taxpayer
corporation and any other employee of the taxpayer corporation whose total
compensation for the taxable year is required to be reported to stockholders
under the Exchange Act by reason of such employee being among the four highest
compensated officers (other than the chief executive officer). The term
"applicable employee remuneration" generally means the aggregate amount
allowable as a deduction under the Code for such taxable year for remuneration
for services performed by a covered employee (whether or not such services are
performed during the taxable year). Certain types of remuneration are excluded
22
<PAGE>
from the definition of "applicable employee remuneration" and, therefore, are
not subject to the deduction limit. If a corporation pays remuneration
pursuant to a compensation plan or arrangement that existed during the period
the corporation was not publicly held and if certain other conditions are met,
the deduction limit does not apply to amounts paid during a stated relief
period. This relief period generally lasts until the first meeting of
stockholders at which directors are to be elected that occurs after the close
of the third calendar year following the calendar year in which an initial
public offering occurs or the earlier occurrence of several other events. The
Company has considered these requirements and believes that Excelcom will
satisfy the requirements of this exception with respect to amounts payable to
Kenny A. Troutt pursuant to the Company's employment agreement with Mr. Troutt
for the 1997, 1998, and 1999 fiscal years and believes that any compensation
for the year ended December 31, 1997 received by a covered employee of the
Company pursuant to the Plans, including the Excel Communications, Inc. 1997
Stock Option Plan, would also qualify for such exception. In addition, if
Section 162(m) would otherwise apply to the commissions paid for the year
ended December 31, 1997 to Stephen R. Smith, the Company's Executive Vice
President of Marketing-Emeritus, pursuant to the agreement between him and the
predecessor to Excelcom that was entered into on May 1, 1989, the Company
believes that, with respect to payments received by Mr. Smith through December
31, 1997, there is an exception under the Code relating to amounts paid to
employees under a written binding contract that was in effect on or prior to
February 23, 1993 that should apply to prevent such payments from being
subject to the deduction limit.
CONCLUSION
Overall, the Committee believes that the executive officers of the Company
are being appropriately compensated in a manner that relates to performance of
the Company and in the stockholders' long-term interests.
Compensation Committee
/s/ RONALD A. MCDOUGALL
Ronald A. McDougall, Committee
Chairman
/S/ T. ALLAN MCARTOR
T. Allan McArtor
23
<PAGE>
COMPARISON OF 20 MONTH CUMULATIVE TOTAL RETURN AMONG EXCEL COMMUNICATIONS,
INC., THE S&P 500 INDEX AND THE S&P TELECOMMUNICATIONS (LONG DISTANCE) INDEX
The graph sets forth below the cumulative total return on the Common Shares
for the period commencing with the initial issuance of the Common Shares on May
9, 1996, and ending on December 31, 1997, as compared with the S&P 500 Index
("S&P" 500) and the S&P Telecommunications (Long Distance) Index ("S&P
Telecommunications"). The information on these indices has been provided by
Research Data Group.
The total return for the Company is based upon an initial $100 investment at
the Company's initial public offering ("IPO") price of $15.00 per share, and
the market price of $14.50 per share as of December 31, 1997. The calculation
of the cumulative total return on Common Shares does not include reinvestment
of dividends because the Company did not pay dividends during the measurement
period. The calculation of total return for each indices assumes the
reinvestment of dividends. The stock price performance on the following graph
is not necessarily indicative of future stock performance.
[PERFORMANCE GRAPH APPEARS HERE]
COMPARISON OF CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
5/09/96 12/31/96 12/31/97
------- -------- --------
<S> <C> <C> <C> <C>
EXCEL COMMUNICATIONS INC. NEW................... ECI 100.00 140.83 96.67
S & P 500....................................... I500 100.00 115.00 153.37
S & P TELECOMMUNICATIONS (LONG DIST)............ ITLD 100.00 102.65 145.36
</TABLE>
The results presented in the above chart prior to October 14,1997 represent
those related to the common stock of Excelcom, which is the predecessor in
interest to the Company. Results after October 14,1997, represent those related
to the common stock of the Company, the newly formed holding company that
succeeded the businesses of Excelcom and Telco as a result of the Merger. See
"General Information."
24
<PAGE>
1693-PS98
<PAGE>
DETACH HERE
PROXY
EXCEL Communications, Inc.
8750 North Central Expressway
Suite 2000
Dallas, Texas 75231
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE 1998 ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints Kenny A. Troutt and J. Christopher
Dance, and each of their proxies and attorneys-in-fact, each with the power to
appoint his or her substitute, and hereby authorizes them to represent and to
vote, as designated on the reverse side, all shares of common stock of EXCEL
Communications, Inc. (the "Company") held of record by the undersigned on March
23, 1998 at the Annual Meeting of Stockholders to be held on May 22, 1998 at
10:30 a.m., local time, at the Crescent Court Hotel, 400 Crescent Court, Dallas,
Texas, and any adjournments thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS MARKED BY YOU.
HOWEVER, IF THIS PROXY IS RETURNED UNMARKED WITH RESPECT TO A PARTICULAR
PROPOSAL, THIS PROXY WILL BE VOTED FOR SUCH PROPOSAL.
PLEASE MARK, DATE, SIGN, AND RETURN THIS PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
- ----------- -----------
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
- ----------- -----------
<PAGE>
DETACH HERE
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE.
1. Election of Directors.
NOMINEES: Kenny A. Troutt, Stephen R. Smith, Stephen G. Canton,
J. Christopher Dance, Nicholas A. Merrick,
Ronald A. McDougall and T. Allan McArtor
FOR WITHHOLD AUTHORITY
ALL TO VOTE FOR
NOMINEES ALL NOMINEES
[ ] [ ]
[ ]
---------------------------------------------------------------
(If you desire to withhold authority to vote for any individual
nominee, write that nominee(s) name on the line above.)
2. In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the meeting
or any adjournments thereof.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
MARK HERE IF YOU PLAN TO ATTEND THE MEETING ON MAY 22, 1998 [ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Please date and sign exactly as your name appears hereon. Joint owners
should each sign. Executors, administrators, trustees, guardians or other
fiduciaries should give their full title as such. If for a corporation,
please sign in the full corporate name by a duly authorized officer.
Signature: Date: Signature: Date:
------------- --------- ------------ --------
