INTELLICALL, INC.
2155 Chenault, Suite 410
Carrollton, Texas 75006-5023
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 11, 1995
To the Holders of Common Stock of
INTELLICALL, INC.:
Notice is hereby given that the 1995 Annual Meeting of Stockholders of
Intellicall, Inc., a Delaware corporation (the "Company"), will be held at the
Addison Conference and Theatre Centre, 15650 Addison Road, Addison, Texas 75248,
on Thursday, May 11, 1995, at 10:00 a.m., Dallas time, for the following
purposes:
(1) To elect six persons to serve as directors until the 1996 Annual
Meeting of Stockholders or until their successors are duly elected and
qualified.
(2) To act upon a proposal to increase the number of shares reserved
for issuance under the Company's 1991 Stock Option Plan pursuant to the grant of
Incentive Stock Options from 1,275,000 shares to 1,525,000 shares.
(3) To consider and act upon a proposal to amend the Company's
Certificate of Incorporation to decrease the amount of its authorized common
stock, par value $.01 per share, from 50,000,000 shares to 20,000,000 shares.
(4) To act upon a proposal to ratify the appointment of independent
public accountants.
(5) To transact any other proper business brought before the meeting or
any adjournments or postponements thereof.
The Board of Directors has fixed April 13, 1995, at the close of
business, as the record date for the determination of stockholders entitled to
notice of, and to vote at, the meeting and any adjournment or postponement
thereof. Only holders of record of the Company's common stock on that date are
entitled to vote on matters coming before the meeting and any adjournment or
postponement thereof. A complete list of stockholders entitled to vote at the
meeting will be maintained in the Company's offices at 2155 Chenault, Suite 410,
Carrollton, Texas 75006 for ten days prior to the meeting and will be open to
the examination of any stockholder during ordinary business hours of the
Company.
Please advise the Company's Transfer Agent, Chemical Shareholder
Services Group, Inc., 2323 Bryan Street, Suite 2300, Dallas, Texas 75201, of any
change in your address.
Your vote is important. Whether or not you plan to attend the meeting
in person, please mark, sign, date and return the enclosed proxy in the envelope
provided, which requires no postage if mailed within the United States.
By Order of the Board of Directors,
Carrollton, Texas
April 20, 1995 Michael H. Barnes,
Secretary
<PAGE>
INTELLICALL, INC.
2155 Chenault, Suite 410
Carrollton, Texas 75006-5023
--------------------
PROXY STATEMENT
--------------------
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 11, 1995
The accompanying proxy, which has been mailed together with the Notice
of Annual Meeting and this Proxy Statement to stockholders on or about April 20,
1995, is solicited by the Board of Directors of Intellicall, Inc. (the
"Company") in connection with the Annual Meeting of Stockholders to be held at
the Addison Conference and Theatre Centre, 15650 Addison Road, Addison, Texas
75248, on May 11, 1995 at 10:00 a.m., Dallas time. The proxy may be revoked by
the stockholder at any time prior to its exercise by executing and returning a
proxy bearing a later date, by giving written notice of revocation to the
Secretary of the Company, or by attending the meeting and voting in person.
As stated in the Notice to which this Proxy Statement is attached,
matters to be acted upon at the meeting include the election to the Board of
Directors of six directors to serve as directors until the 1996 Annual Meeting
of Stockholders or until their successors are duly elected and qualified, a
proposal to increase the number of shares of common stock reserved for issuance
under the Company's 1991 Stock Option Plan, a proposal to reduce the number of
authorized shares of common stock of the Company and the ratification of the
appointment of independent public accountants.
All properly executed, unrevoked proxies received before the meeting
will be voted in accordance with the directions contained therein. When no
direction has been given by a stockholder returning a proxy, the proxy will be
voted FOR the election as directors of the nominees named in this Proxy
Statement, FOR the resolution increasing the number of shares of common stock
reserved for issuance under the Company's 1991 Stock Option Plan, FOR the
amendment to the Company's Certificate of Incorporation to decrease the amount
of its authorized common stock, FOR the ratification of the selection of Price
Waterhouse as independent public accountants of the Company, and in the
discretion of persons named in the proxy with respect to any other business
which may properly come before the meeting. Votes will be tabulated by
inspectors of election appointed by the Company. An abstention from voting on a
proposal will be tabulated as a vote withheld on the proposal, but will be
included in computing the number of shares present for purposes of determining
the presence of a quorum for the meeting.
The close of business on April 13, 1995 has been set as the record date
for determination of stockholders entitled to notice of, and to vote at, the
meeting. Holders of the common stock are entitled to one vote per share on all
matters which come before the meeting.
On the record date, there were outstanding and entitled to vote
7,661,543 shares of common stock. The presence, in person or by proxy, of a
majority of the outstanding shares of common stock entitled to vote at the
meeting will constitute a quorum.
1
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of February 28, 1995, the number and
percentage of outstanding shares of common stock beneficially owned by (i) each
of the executive officers named in the Summary Compensation Table on page 12,
(ii) each person known by the Company to be the beneficial owner of more than 5%
of the Company's common stock, (iii) each director and each person nominated to
be elected a director of the Company, and (iv) all officers and directors as a
group.
<TABLE>
<CAPTION>
Shares of
Name and Address Common Stock Percentage
of Beneficial Owner(1) Beneficially Owned(2) of Class
<S> <C> <C>
William O. Hunt (3) 663,824 8.1%
2155 Chenault, Suite 450
Carrollton, Texas 75006
B. Michael Adler (4) 1,097,250 14.0%
2155 Chenault, Suite 450
Carrollton, Texas 75006
T.J. Berthel Enterprises, 696,407 8.9%
Inc. (5)
100 Second St. S.E.
Cedar Rapids, Iowa 52407-4250
Nomura Holding America Inc.(6) 550,000 6.7%
2 World Financial Center,
Bldg. B - 22nd Floor
New York, New York 10281
Dimension Fund Advisors,
Inc. (7) 426,949 5.6%
1299 Ocean Avenue,
11th Floor
Santa Monica, California 90401
Hugh E. Humphrey, Jr.(8) 82,000 1.1%
Lewis E. Brazelton III(9) 66,373 *
Richard B. Curran (10) 95,600 1.3%
Ray S. Naeini (11) 73,750 1.0%
Michael H. Barnes (12) 82,750 1.1%
Dennis J. Stoutenburgh(13) 58,500 *
Stanley J. Jasinski(14) 27,000 *
G. James Bracknell(15) 35,100 *
Richard E. Hanlon 20,000 *
All officers and directors as a 2,282,147 26.0%
- -------------------------
* less than one percent
2
<PAGE>
<FN>
(1) The persons named in the table have sole voting and investment power
with respect to all shares of common stock shown as beneficially owned
by them, subject to community property laws, where applicable, and the
information contained in the footnotes to the table.
(2) Includes shares issuable upon the conversion of subordinated debt or
shares issuable upon exercise of options that will vest within 60 days.
Such options become exercisable immediately upon vesting.
(3) Includes 66,985 shares as to which Mr. Hunt has shared voting and
investment power and 533,824 shares of common stock issuable upon
exercise of options.
(4) Includes (i) 37,000 shares held in the name of Adler Computer Systems,
Inc., a company wholly owned by B. Michael Adler, a member of the Board
of Directors of the Company, (ii) 150,000 shares held by a partnership
in which Mr. Adler serves as the general partner and (iii) 200,000
shares of common stock issuable upon exercise of options.
(5) Includes a convertible debenture held by T.J. Berthel Investments,
L.P., an affiliate, which debenture is convertible into approximately
160,000 shares of common stock.
(6) Includes 550,000 shares of common stock issuable upon exercise of a
warrant.
(7) Reflects Dimensional, a registered investment advisor, is
deemed to have beneficial ownership of 426,949 shares of the
Company's stock as of December 31, 1994, all of which shares
are held in portfolios of DFA Investment Dimensions Group
Inc., a registered open-end investment company, or in series
of the DFA Investment Trust Company, a Delaware business
trust, or the DFA Group Trust and DFA Participation Group
Trust, investment vehicles for qualified employee benefit
plans, all of which Dimensional Fund Advisors Inc. serves as
investment manager. Dimensional disclaims beneficial ownership
of all such shares.
3
<PAGE>
(8) Includes 80,000 shares of common stock issuable upon exercise of
options.
(9) Includes 5,091 shares owned by Mr. Brazelton's wife, as to which Mr.
Brazelton disclaims beneficial ownership, and 20,000 shares of common
stock issuable upon exercise of options.
(10) Includes 53,600 shares held by Mr. Curran's wife and a trust of which
Mr. Curran's wife is a beneficiary, as to which Mr. Curran disclaims
beneficial ownership, and 20,000 shares of common stock issuable upon
exercise of options.
(11) Includes 73,750 shares of common stock issuable upon exercise of
options.
(12) Includes 68,750 shares of common stock issuable upon exercise of
options.
(13) Includes 56,000 shares of common stock issuable upon exercise of
options.
(14) Includes 25,000 shares of common stock issuable upon exercise of
options.
(15) Includes 34,500 shares of common stock issuable upon exercise of
options.
(16) Includes 1,111,824 shares of common stock issuable upon exercise of
options.
</FN>
</TABLE>
4
<PAGE>
ELECTION OF DIRECTORS
Six directors are to be elected at the Annual Meeting, to hold office
until the next annual meeting or until their successors have been elected and
qualified, or they have sooner resigned or been removed. The Board of Directors
proposes the election of the persons listed below, five of which are currently
directors. It is not contemplated that any of the nominees will be unable or
unwilling to serve as a director; however, if that should occur, the proxies
will be voted for the election of such other person or persons as are nominated
by the board of directors, unless the board reduces the number of directors. The
six nominees for director receiving a plurality of the votes cast at the Annual
Meeting in person or by proxy shall be elected. Proxies cannot be voted for a
greater number of persons than the number of nominees named below.
The following table sets forth certain information as to the nominees
for director.
<TABLE>
<CAPTION>
Served as
Name and Age Positions Director Since
<S> <C> <C>
William O. Hunt, 61 Chairman of the Board of 1992
Directors, Chief Executive
Officer, and President
B. Michael Adler, 48 Director 1984
Lewis E. Brazelton III, 54 Director (1) 1992
Richard B. Curran, 59 Director (2) 1992
Hugh E. Humphrey,Jr.,69 Director (3) 1987
Richard E. Hanlon,47 Nominee N/A
- --------------
<FN>
(1) Member of Audit Committee and Chairman of Organization and Compensation
Committee of the Board of Directors.
(2) Chairman of the Audit Committee and member of Organization and
Compensation Committee of the Board of Directors.
(3) Member of Audit Committee and Organization and Compensation Committee
of the Board of Directors.
</FN>
</TABLE>
5
<PAGE>
William O. Hunt joined the Company in December 1992 as Chairman of the
Board, Chief Executive Officer and President. From June 1986 to July 1992, he
was Chairman and Chief Executive Officer of Alliance Telecommunications
Corporation, a wireless telecommunications company. Mr. Hunt serves on the
boards of The Allen Group Inc., Dr. Pepper Bottling Holdings, Inc., Hogan
Systems, Inc., American Homestead Corporation, and Michaels Stores, Inc.
B. Michael Adler is a founder of the Company and was Vice Chairman of
the Board of Directors of the Company from December 1992 until November 1993.
Prior to that time he was Chairman of the Board of Directors from the Company's
inception in November 1984. He served as Chief Executive Officer of the Company
from November 1984 to January 1988. From November 1984 to April 1987, he was
also President of the Company. Mr. Adler is the President and sole stockholder
of Adler Computer Systems, Inc., a personal holding company.
Lewis E. Brazelton III has been Senior Vice President of Rauscher
Pierce Refsnes, Inc., an investment banking company, for more than the last five
years.
Richard B. Curran is an attorney and has been an investor in a number
of privately held companies since 1989 in which he has also served in either
director capacities or senior management positions. Since February 1990 he has
been Chief Financial Officer of Earth Satellite Corporation, a corporation that
sells and analyzes digitally enhanced satellite imagery to a variety of private
and governmental users.
Hugh E. Humphrey, Jr. is President and Chief Executive Officer of the
Algiers Homestead Association, a Louisiana savings and loan association. Mr.
Humphrey has been with the Algiers Homestead Association since 1963.
Richard E. Hanlon is the Vice President for Investor Relations for
America Online Incorporated, a position he began in February 1995. Prior to
joining America Online, Mr. Hanlon was the founder and president of Hanlon &
Company, a consulting firm for software and technology companies and venture
capital and investment banking firms. From 1988 to March 1993 Mr. Hanlon was the
Vice President of Corporate Communications and Secretary of the Legent
Corporation, a software concern. Mr. Hanlon serves on the board of Michaels
Stores, Inc.
The Board of Directors recommends a vote FOR the election of all six
nominees to the Board.
Committees and Meetings of the Board of Directors. The Board of
Directors has established two committees, the Organization and Compensation
Committee and the Audit Committee. The Organization and Compensation Committee
(the "Compensation Committee"), currently composed of Messrs. Brazelton,
Humphrey and Curran, met one time (in addition to meetings held as a part of
certain Board of Directors meetings) during the fiscal year ended December 31,
1994. This committee reviews and approves salaries and bonuses of executive
officers and administers the Company's stock option plans. The Audit Committee,
currently composed of Messrs. Curran, Humphrey and Brazelton met four times
during the fiscal year ended December 31, 1994. This committee recommends to the
Board of Directors the appointment of independent auditors, reviews the plan and
scope of audits, reviews the Company's significant accounting policies and
6
<PAGE>
internal controls, and has general responsibility for related matters. The
Company does not have a standing nominating committee of the Board of Directors;
however, the Compensation Committee has performed services as a nominating
committee.
The Board of Directors held nine meetings, either in person or by
telephonic conference, during the fiscal year ended December 31, 1994.
Additionally, the Board of Directors adopted various resolutions during 1994 by
unanimous consent. None of the directors attended fewer than 75% of the meetings
of (i) the Board of Directors and (ii) the committees on which they served,
during their tenure.
Director Compensation. During 1994 each member of the Board of
Directors who was not an officer or employee of the Company received an annual
$13,500 director's retainer for serving on the board. Additionally each director
was paid a fee of $675 for each directors' meeting he attended and a $675 fee
for each committee meeting he attended other than committee meetings held on the
same day as a directors' meeting. Directors were also reimbursed for expenses
relating to attendance at meetings. All 1994 amounts were reduced by ten percent
(10%) by the directors from prior amounts paid.
MANAGEMENT
The following table sets forth certain information as of
February 28, 1994 with respect to the executive officers of the Company.
<TABLE>
<CAPTION>
Name and Age Position Officer Since
<S> <C> <C>
William O. Hunt, 6 Chairman of the Board 1992
of Directors, Chief
Executive Officer and
President
Michael H. Barnes, Senior Vice President, 1993
Corporate Staff, Chief
Financial Officer and
Secretary
Ray S. Naeini, 42 President 1991
Global Telecom Group
Dennis Stoutenburg President 1991
Communications Group
</TABLE>
7
<PAGE>
William O. Hunt See "Election of Directors" above.
Michael H. Barnes joined the Company in September 1993 as Senior Vice
President, Corporate Staff, Chief Financial Officer and Secretary. From March
1987 to July 1992, Mr. Barnes was the Chief Financial Officer of Alliance
Telecommunications Corporation.
Ray S. Naeini was appointed President of the Global Telecom Group of
the Company in January 1995. From February 1993 to December 1994, he was Group
Vice President--Technology and Operations. He was Senior Vice President and
Managing Director of the Company's Engineering and International Technology
Center from October 1991 to February 1993. He was Vice President of Research and
Development for Network Access Corporation, a company that designs and
manufactures intelligent network platforms for the Regional Bell Operating
Companies and other telephone companies, from 1988 to October 1991.
Dennis Stoutenburgh was appointed President of the Communications Group
of the Company in January 1995. From February 1992 to December 1994 he was Group
Vice President-Technology and Operations. He served as Vice President--Billing
Services for the Company from March 1991 to February 1993. From September 1989
to March 1991 he was Director of Billing Services for the Company. From April
1988 to August 1989 he was Director--Finance for the Company.
The Company's officers are elected by the Board of Directors and serve
at the discretion of the Board.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal year ended December 31, 1994, Adtel Communications, Inc.
("ACI"), purchased and licensed equipment from the Company totaling $1,212,000
and reduced amounts owed to the Company by $752,000, which included
approximately $46,000 in interest related to license fees and leases. As of
December 31, 1994, ACI owed the Company $798,000 for trade receivables,
equipment leases and license fees. B. Michael Adler, is a director of Adtel
Communications, Inc. and of the Company. Mr. Adler owns 10% of ACI's stock and
other members of Mr. Adler's family own 80% of ACI's stock.
T.J. Berthel Enterprises, Inc., a beneficial holder of 8.9% of the
Company's common stock, is owned by Thomas J. Berthel and Berthel Fisher &
Company. Thomas J. Berthel is a stockholder, director and President of Berthel
Fisher & Company. Thomas J. Berthel is also a stockholder, director and
President of Paycom Systems Corporation. During the fiscal year ended December
31, 1994, Paycom Systems Corporation purchased and licensed equipment from the
Company totaling $100 and reduced amounts owed the Company by $25,000 which
included $2,000 of interest. As of December 31, 1994, Paycom Systems Corporation
owed the Company $9,000 for trade receivables and license fees.
8
<PAGE>
Thomas J. Berthel is President of Berthel Fisher Leasing, Inc., a
wholly-owned subsidiary of Berthel Fisher & Company. During 1994 Berthel Fisher
Leasing, Inc. purchased equipment from the Company in the amount of $857,000 and
reduced amounts owed the Company by $1,310,000 to $87,000. The equipment was
purchased by Berthel Fisher Leasing, Inc. in connection with the provision of
equipment lease financing for the Company's customers.
Thomas J. Berthel and Berthel Fisher Leasing serve as general partners
of Telecommunications Limited Partnership No. 7. During 1994 Telecommunications
Limited Partnership No.7 paid the Company $76,000 including interest of $3,000,
to reduce the balance owed for a note receivable to $0.
On February 15, 1994 the Company issued a $1 million, 10%, convertible
subordinated note to T.J. Berthel Investments, L.P. Interest is payable
quarterly with the entire principal amount maturing on March 31, 1999. The note
may be converted into 160,000 shares of common stock at any time.
EXECUTIVE COMPENSATION
Organization and Compensation Committee Report on Executive Compensation
The Company's executive compensation plans have been designed to
attract, retain and reward high caliber executives who will formulate and
execute the business plans of the Company in a manner that will provide the
stockholders of the Company with a higher than average return on the Company's
common stock while ensuring that the Company's compensation levels are fair and
appropriate to both its executives and stockholders. With these goals in mind,
the Company's compensation plans and policies have been designed to have total
compensation linked significantly with the operating performance of the Company.
Although the Compensation Committee recognizes that the improvement of operating
performance of the Company and higher stock prices do not necessarily move in
tandem over the short term, the Compensation Committee believes that the two
criteria will correlate over the long term.
The Compensation Committee does not expect to pay above-average base
salaries to its executive officers, but does expect to utilize
performance-oriented and equity-based compensation to reward positive
performance and results.
For 1994 and thereafter Mr. Hunt and the Compensation Committee
recommended and the Board of Directors adopted a discretionary bonus plan for
corporate officers and other managers. Maximum bonus levels under the plan range
from 60% to 100% of base salary and are based primarily on the aggregate
performance of all business segments and departments of the Company. Under the
new plan, the principal share of the bonus will be based on the Company
achieving a level of net income in excess of the Company's weighted average cost
of capital (as defined in the new plan) and up to 12.5% of base salary will be
based on discretionary factors considered by the Compensation Committee
(including Mr. Hunt's recommendations with respect to other officers and
managers), such as management effectiveness as exhibited through relationships
with customers, vendors, employees and stockholders, new product development,
special problem handling, and planning and execution of operations. No bonuses
were paid pursuant to this bonus plan in 1994.
9
<PAGE>
The Compensation Committee also supports the position that stock
ownership by the Company's executive officers, encouraged by equity-based
compensation plans, aligns the interests of the executive officers with the
stockholders of the Company. By using equity-based compensation over a period of
time, the executive officers of the Company should become larger holders of
Company stock. This is intended to strengthen their identification with the
stockholders of the Company and make increasing stockholder value an even more
important focus for the Company's management group. In addition, the
Compensation Committee believes that the use of equity-based compensation
combined with a focus on the operating performance of the Company will create a
balance of these two long-term objectives.
CEO Compensation
William O. Hunt is the Chief Executive Officer, Chairman of the Board and
President of the Company.
Mr. Hunt's compensation package was the result of arm's length
negotiations conducted in 1992 between members of the Board of Directors and Mr.
Hunt, and was approved by the Compensation Committee and the Board of Directors.
The Compensation Committee and the Board were advised by an independent
compensation consulting firm.
In accordance with Mr. Hunt's stated goal of building stockholder value
and consistent with the Compensation Committee's compensation philosophy
described above, a compensation package involving a relatively low base salary,
participation in a performance-based bonus plan and a relatively large stock
option grant was agreed upon.
Mr. Hunt's base salary was set at $225,000 and it was agreed that he
would participate in a bonus plan such as the Company's discretionary plan
described above. Based upon the advice of its independent compensation
consultant, the Compensation Committee concluded that Mr. Hunt's proposed salary
and bonus arrangements were reasonable and were well within the range of similar
arrangements made by comparable companies. On January 1, 1994 Mr. Hunt
voluntarily reduced his base salary to $202,500.
10
<PAGE>
Mr. Hunt was granted options to purchase 670,000 shares of the
Company's common stock under the Company's 1991 Stock Option Plan. The options
vest over a period of three years. Based upon the advice of its independent
consultant, the Compensation Committee determined that, although the amount of
the stock option grant was above average principally in terms of the percentage
of shares involved, a number of comparable grants have been made by other
companies that have recruited senior executives in "turnaround" or start-up
situations. The Compensation Committee concluded that this stock option grant
was justified given Mr. Hunt's qualifications and the Company's need to install
a new chief executive who could build stockholder value.
Respectfully submitted,
Lewis E. Brazelton III, Chairman
Richard B. Curran
Hugh E. Humphrey, Jr.
11
<PAGE>
Summary Compensation Table
The following table sets forth information with respect to the
compensation to (i) the Company's chief executive officer at December 31, 1994
and (ii) the other five most highly compensated executive officers of the
Company during 1994, for services rendered during the fiscal years ended
December 31, 1992, 1993 and 1994.
<TABLE>
<CAPTION>
Stock
Annual Compensation Options(1) All Other
Name Year Salary Bonus Other (shares) Compensation(2)
<S> <C> <C> <C> <C> <C> <C>
William O. Hunt(3) 1994 $202,500 -- -- -- $970
Chairman of the 1993 $224,080 -- -- -- --
Board of Directors, 1992 $9,375 -- -- 670,000 --
Chief Executive
Officer, President
Michael H. Barnes(3) 1994 $150,000 -- -- 25,000 $1,922
Senior Vice President 1993 $63,731 -- -- 75,000 --
Corporate Staff, 1992 -- -- -- -- --
Chief Financial
Officer and Secretary
Ray S. Naeini(3) 1994 $180,000 -- -- 25,000 $975
President 1993 $196,684 -- -- 55,000 --
Global Telecom Group 1992 $175,080 -- -- 20,000 --
Dennis J.Stoutenburgh 1994 $150,000 -- -- 25,500 $1,748
President 1993 $120,355 -- -- 25,000 $2,249
Communions Group 1992 $82,917 -- -- -- $2,075
G. James Brackknell 1994 $161,667 -- -- -- $1,820
Group Vice President 1993 $185,000 -- -- 30,000 --
1992 $27,965 -- -- 20,000 --
Stanley Jasinski 1994 $156,345 -- -- -- $965
Group Vice President 1993 $99,777 -- -- 50,000 --
1992 -- -- -- -- --
- ----------------------
<FN>
(1) The compensation described in the table does not include the cost to
the Company of benefits furnished to certain officers, including
premiums for life and health insurance, and other personal benefits
provided to such individuals that are extended in connection with the
conduct of the Company's business. No executive officer names above
received other compensation in excess of the lesser of $50,000 or 10%
of such officer's salary and bonus compensation.
(2) All Other Compensation consists of matching payments by the Company
pursuant to its 401(k) Plan.
(3) On January 1, 1994, Messrs. Hunt, Barnes and Naeini voluntarily reduced
their respective base salaries by ten percent.
</FN>
</TABLE>
12
<PAGE>
1994 Option Grants
The following table sets forth the number, percent of total options
granted to named employees, exercise price and duration of options granted to
the named executive officers, and the hypothetical gain that would result from
assumed annual rates of stock price appreciation over the term of the options.
See "Compensation Plans" below.
<TABLE>
<CAPTION>
Percent
of Total Potential Realizable
Options Value at Assumed
Granted to Annual Rates of
Employees Appreciation
Options in Fiscal Exercise Expiration For Option Term
Name Granted(1) 1994 Price Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Michael H. Barnes 25,000 14.6% $8.00 03/23/04 $325,779 $518,749
Ray S. Naeini 25,000 14.6% $8.00 03/23/04 $325,779 $518,749
Dennis J. Stoutenburgh 25,500 14.9% $8.00 03/23/04 $332,295 $529,124
<FN>
(1) Options granted are exercisable generally for a period of ten years at
the price of the Company's common stock on the date of grant. The
options vest as follows: 50% on December 31 of the year of grant and
25% on December 31 of each following year.
</FN>
</TABLE>
1994 Year-end Value of Stock Options
The following table sets forth information with respect to the named
executive officers concerning the exercise of options during 1994 and
unexercised options held as of December 31, 1994.
<TABLE>
<CAPTION>
Value of
Number Unexercised
Shares of Unexercised In-the-Money
Acquired Options at Options at
on Value December 31, 1994 December 31, 1994(1)
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C>
William O. Hunt -- -- 488,410 181,590 $ 61,051 $ 22,699
Michael H. Barnes -- -- 68,750 31,250 $ -- $ --
Ray S. Naeini -- -- 73,750 26,250 $ -- $ --
Dennis J. Soutenburgh -- -- 56,000 19,000 $ -- $ --
G. James Bracknell -- -- 34,500 -- $ 6,000 $ --
Stanley J. Jasinski -- -- 25,000 -- $ -- $ --
- --------------------
<FN>
(1) Market value of underlying securities at December 31, 1994, less the
exercise price.
</FN>
</TABLE>
13
<PAGE>
Director Compensation
See "Election of Directors - Director Compensation" for a discussion of
director compensation.
Indemnification Arrangements
The Company's Bylaws provide for the indemnification of its executive
officers and directors, and the advancement to them of expenses in connection
with proceedings and claims, to the fullest extent permitted by the Delaware
General Corporation Law. The Company has also entered into indemnification
agreements with its executive officers and directors that contractually provide
for indemnification and expense advancement and include related provisions meant
to facilitate the indemnitees' receipt of such benefits.
Compensation Plans
Prior to 1991 the stock option plans described below were administered
as separate plans. In 1991 the plans were restated in their entirety in a single
document and are known as the "Intellicall, Inc. 1991 Stock Option Plan". Each
separate plan was previously approved by the Company's stockholders.
Incentive Stock Option Plan. The Board of Directors of the Company
adopted the Incentive Stock Option Plan for key employees of the Company and its
subsidiaries. The Incentive Stock Option Plan has been approved by the
stockholders of the Company. Up to 1,275,000 shares of common stock are
authorized to be issued under the Incentive Stock Option Plan. See "Proposal to
Amend the Company's 1991 Stock Option Plan" regarding a proposal to increase the
number of shares authorized to be issued under the Incentive Stock Option Plan.
The purpose of the Incentive Stock Option Plan is to provide a means whereby the
Company may, through the grant of options, attract and retain persons of ability
as employees. The Incentive Stock Option Plan is also intended to motivate such
persons to exert their best efforts on behalf of the Company.
The Incentive Stock Option Plan is administered by the Compensation
Committee. Options for the purchase of common stock under the Incentive Stock
Option Plan may be granted to key employees selected from time to time by the
Compensation Committee. Only directors who are employees are eligible to receive
options under the Incentive Stock Option Plan. The Compensation Committee
determines the exercise price of such options at the time of grant. The exercise
price of any options granted pursuant to the Incentive Stock Option Plan will be
at least equal to the fair market value of the common stock on the date the
options are granted. Each option has a term of up to 10 years and is exercisable
only at such times as the Compensation Committee determines at the time of
grant. The option period automatically terminates three months following the
date the holder ceases to be an employee of the Company for any reason. No cash
consideration is paid by the employee upon the grant of an option to him. To
exercise the options, grantees must pay the exercise price in cash or common
stock, or any combination of cash or common stock.
Options granted under the Incentive Stock Option Plan may be "Incentive
Stock Options" within the meaning of Section 422 of the Internal Revenue Code of
1986 (the "Code"), non-qualified options (options which do not meet the
requirements of Section 422 of the Code), or both. The Incentive Stock Option
Plan contains various provisions to ensure that Incentive Stock Options comply
with Section 422.
14
<PAGE>
At February 28, 1995, the Company and its subsidiaries had
approximately 234 employees who were eligible to participate in the Incentive
Stock Option Plan. At present, such persons hold options granted under the
Incentive Stock Option Plan to purchase an aggregate of 1,047,215 shares of
common stock. See "Proposal to Amend the Company's 1991 Stock Option Plan".
Non-Qualified Stock Option Plan. The Board of Directors of the Company
adopted the Non- Qualified Stock Option Plan for officers, directors and key
employees of the Company and its subsidiaries. The Non-Qualified Stock Option
Plan has been approved by the stockholders of the Company. Up to 600,000 shares
of common stock are authorized to be issued under the Non-Qualified Stock Option
Plan. The purpose of the Non-Qualified Stock Option Plan is to provide a means
whereby the Company may, through the grant of options, attract and retain
persons of ability as officers, directors and employees. The Non-Qualified Stock
Option Plan is also intended to motivate such persons to exert their best
efforts on behalf of the Company.
The Non-Qualified Stock Option Plan is administered by the Compensation
Committee of the Board of Directors. Options for the purchase of common stock
under the Non-Qualified Stock Option Plan may be granted to key individuals
selected from time to time by the Compensation Committee. No director is
eligible to receive options under the Non-Qualified Stock Option Plan while such
director is a member of the Compensation Committee. Furthermore, only directors
who are employees are eligible to receive options under the Non-Qualified Stock
Option Plan. The exercise price for any options granted pursuant to the
Non-Qualified Stock Option Plan is determined by the Compensation Committee on
the date the options are granted and must be at least equal to 85% of the fair
market value of the common stock on the date of grant. Each option has a term of
up to 10 years and is exercisable only at such times as the Compensation
Committee determines at the time of grant. The option period automatically
terminates three months following the date the holder ceases to be an employee
of the Company for any reason. No cash consideration is paid by the employee
upon the grant of an option to him. To exercise the options, grantees must pay
the exercise price in cash, common stock, a promissory note or any combination
of the foregoing.
At February 28, 1995 the Company and its subsidiaries had approximately
234 employees who were eligible to participate in the Non-Qualified Stock Option
Plan. At present, William O. Hunt holds options granted under the Non-Qualified
Stock Option Plan to purchase an aggregate of 430,000 shares of common stock,
and B. Michael Adler holds options granted under the Non-Qualified Stock Option
Plan to purchase an aggregate of 170,000 shares of common stock.
Directors' Stock Option Plan. The Board of Directors of the Company
adopted the Directors' Stock Option Plan for non-employee directors of the
Company. Up to 350,000 shares are authorized to be issued under the Director's
Stock Option Plan. The purpose of the Directors' Stock Option Plan is to provide
a means whereby the Company may, through the grant of options, attract, motivate
and retain qualified, non-employee directors.
15
<PAGE>
The Directors' Stock Option Plan is administered by the Compensation
Committee of the Board of Directors. Options for the purchase of common stock
under the Directors' Stock Option Plan are automatically granted to each
non-employee director. In December 1992, the Board of Directors amended the
Directors' Stock Option Plan to provide the automatic grant as follows:
(i) each non-employee director as of February 1, 1993, who had not
previously received Director Options was granted an option to purchase 20,000
shares of common stock on February 1, 1993, and was automatically entitled to
receive a grant of an option to purchase 10,000 shares of common stock as of
February 1, 1994; and
(ii) each person who becomes a non-employee director subsequent to
February 1, 1993 will receive an option to purchase 20,000 shares of common
stock on the first business day of February after he becomes a director and an
option to purchase 10,000 shares of common stock on the first business day of
the next succeeding February.
The exercise price for all options granted pursuant to the Directors'
Stock Option Plan will be at least equal to the fair market value of the common
stock on the date the options are granted. Each option has a term of up to ten
years. The options granted under the first installment vest immediately upon
grant and the options granted under the second installment vest on December 31
of the calendar year in which they are granted. No cash consideration is paid by
the grantee upon the grant of an option to him. To exercise the options,
grantees must pay the exercise price in cash or common stock of the Company.
At December 31, 1994, the Company and its subsidiaries had four
directors who were eligible to participate in the Directors' Stock Option Plan.
At present, such persons hold options granted under the Directors' Stock Option
Plan to purchase an aggregate of 160,000 shares of common stock.
Change in Control Arrangements. Pursuant to the Company's 1991 Stock
Option Plan, in the event of an impending merger, liquidation, sale of all or
substantially all of the Company's assets, or if at any time, two-thirds of the
Company's directors are not "Continuing Directors" as defined in the Plan, 100%
of the options granted pursuant to the Incentive, Non-Qualified and Directors'
Stock Option Plans automatically become immediately and fully exercisable.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and the New York Stock Exchange. Officers, directors and 10% stockholders are
required by regulations promulgated by the Securities and Exchange Commission to
furnish the Company copies of all Section 16(a) reports they file.
Based solely on a review of the copies of Forms 3, 4 and 5, and all
amendments thereto, furnished to the Company, or written representations that no
Forms 5 were required, the Company believes all Section 16(a) filing
requirements applicable to its officers, directors and 10% beneficial owners
were complied with during 1994.
16
<PAGE>
STOCK PERFORMANCE CHART
The following chart compares the yearly percentage change in the
cumulative total stockholder return on the Company's common stock during the
five years ended December 31, 1994, with the cumulative total return of (i)
Standard & Poors--500 Stock Index, (ii) the Standard & Poors High Tech Composite
Index and (iii) the Standard & Poors Telephone Manufacturers Index. The
comparison assumes $100 was invested on December 31, 1988 in the Company's
common stock and in each of the other indices and assumes reinvestment of
dividends. The Company paid no dividends during the five year period.
17
<PAGE>
General
In 1991 the Incentive Stock Option Plan (the "Incentive Plan") was restated
in its entirety, along with previously adopted Non-Qualified Stock Option Plan
("NSO Plan") and Directors' Stock Option Plan ("Directors' Plan"), in a single
document which in the aggregate became known as the "Intellicall, Inc. 1991
Stock Option Plan" (the "1991 Stock Option Plan").
The description in this Proxy Statement of the 1991 Stock Option Plan is
included solely as a summary, does not purport to be complete, and is qualified
in its entirety by the full text of the 1991 Stock Option Plan attached hereto
as Exhibit A. For a description of the Incentive Plan, NSO Plan and the
Directors' Plan, see "Executive Compensation - Compensation Plans."
The 1991 Stock Option Plan is an arrangement under which certain
individuals may be granted awards (the "Awards") for incentive stock options,
non-qualified stock options and directors' options as described in "Executive
Compensation - Compensation Plans". The purpose of the 1991 Stock Option Plan is
to provide incentives to officers, directors and employees of the Company, to
attract individuals with a high degree of training, experience, expertise and
ability, to provide an opportunity to such individuals to acquire a proprietary
interest in the success of the Company, to increase their interest in the
Company's welfare, to align their interests with those of the Company's
stockholders and to encourage them to remain with the Company.
The Amendment
The proposed amendment to the 1991 Stock Option Plan (the "Amendment")
would increase the aggregate number of shares of common stock that may be issued
as Incentive Stock Options under the Incentive Plan from 1,275,000 shares to
1,525,000 shares. No other amendments to the 1991 Stock Option Plan are
currently contemplated.
Administration of the 1991 Plan
The Option Plan is administered by the Compensation Committee composed of
non-employee directors of the Company who meet the requirements of
"disinterested person" in Section 16b of the Securities Exchange Act of 1934.
Eligibility
Awards may be granted under the 1991 Stock Option Plan to employees of the
Company, including officers and directors, and in accordance with the
nondiscretionary formula mentioned above, non-employee directors of the Company.
However, only employees of the Company are entitled to receive incentive stock
option Awards. The Compensation Committee, in its discretion as outlined in the
1991 Stock Option Plan, determines which individuals are eligible to receive
Awards under the 1991 Stock Option Plan.
18
<PAGE>
The approximate number of individuals who are officers or employees of
the Company as of February 28, 1995 is approximately 234.
Grant, Term, and Restrictions on Awards
Awards granted under the 1991 Stock Option Plan may include incentive
stock options, which are qualified under Section 422A of the Internal Revenue
Code of 1986 (the "Code"), non-qualified stock options, which are not qualified
under section 422A of the Code, and directors' options.
In the event common stock purchased upon exercise of incentive options
is disposed within a two year period after the options are granted under the
1991 Stock Option Plan or within one year after the option is exercised, the
optionee is required to so notify the Company and deliver to the Company the
amount of any applicable withholding taxes. In either such event, the options
lose their status as incentive options under Section 422A of the Code and are
treated as non-qualified options under the 1991 Stock Option Plan. The maximum
value of incentive options that can become first exercisable in any one year can
be no more than $100,000.
Each Award is to be granted under an agreement (an "Agreement") between
the Company and the individual receiving the Award. Each Agreement specifies the
exercise periods of options. The Company receives no consideration upon the
grant of an Award. The rights under the Agreement are not transferable by the
individual receiving an Award except under the laws of descent and distribution.
During the lifetime of the individual receiving an Award, only the individual or
his legal representative may exercise the Award.
Purchase Price for Incentive Options
The purchase price for each share of common stock subject to an
incentive option granted under the 1991 Stock Option Plan may not be less than
the greater of the par value of such share and 100% of the fair market value of
such share on the date that the incentive option is granted (110% in the case of
an incentive option granted to a person who owns more than ten percent of the
total combined voting power of all classes of stock of the Company). The
purchase price of common stock may be paid by cash, check, or shares of common
stock which have been held for at least six months.
On February 28, 1995, the closing sales price of the Company's Common
Stock as reported on the New York Stock Exchange was $3.75.
Termination of Awards
Awards of incentive options granted under the 1991 Stock Option Plan
generally terminate with respect to any portion of the incentive option not
previously exercised by an individual after ten years from the date that the
incentive option is granted (five years in the case of an incentive option
granted to a person who owns more than ten percent of the total combined voting
power of all classes of stock of the Company), unless the option terminates
sooner by reason of termination of employment, disability, or death. The
unexercised or restricted portion of an Award shall terminate immediately if an
individual's employment is terminated for cause. If termination of employment is
voluntary or by the Company for reasons other than cause, such portion of the
Award shall terminate three (3) months after employment terminates. The
unexercised or restricted portion of an Award will terminate twelve months after
the occurrence of the disability or death of an individual.
19
<PAGE>
Certain Events
The 1991 Stock Option Plan contains antidilution provisions applicable
in the event of any change in the number of outstanding shares of common stock
of the Company or any change in the character or rights of the common stock
which occurs by reason of a reclassification, recapitalization, merger,
consolidation, reorganization, stock dividend, stock split or reverse stock
split, combination or exchange of shares or other similar events. In any such
event, appropriate adjustments will be made in the maximum number of shares
which may be issued under the 1991 Stock Option Plan and the number of shares
under and exercise price of outstanding Awards.
In addition, in the case of (i) a dissolution or liquidation of the
Company or (ii) a merger or consolidation of the Company the 1991 Stock Option
Plan and all options granted thereunder shall continue in effect and each holder
of an option shall be entitled to receive in respect of each share of common
stock subject to an outstanding Award, upon exercise of such Award, the same
number and kind of stock, securities, cash, property or other consideration that
each holder of common stock was entitled to receive in such transaction in
respect of a share of common stock.
In the event of a Change in Control of the Company (as defined in the
1991 Stock Option Plan), all outstanding Awards shall become immediately and
fully exercisable.
Amendments
The Board or the Compensation Committee may at any time, without the
consent of the holders of Awards, alter, amend, revise, suspend, or discontinue
the 1991 Stock Option Plan, provided that such action shall not adversely affect
Awards previously granted. Any amendments to the 1991 Stock Option Plan that
would (i) materially increase the benefits accruing to individuals participating
in the 1991 Stock Option Plan, (ii) materially increase the number of shares of
Common Stock subject to the 1991 Stock Option Plan, or (iii) materially modify
the requirements as to eligibility for participation in the 1991 Stock Option
Plan must be approved by the holders of a majority of shares of Common Stock
represented and entitled to vote thereon at a meeting of the stockholders of the
Company.
20
<PAGE>
Options Granted in 1994
<TABLE>
<CAPTION>
Name Dollar Value(1) Number of Options
<S> <C> <C>
William O. Hunt $ 0 --
Michael H. Barnes $ 0 25,000
Ray S. Naeini $ 0 25,000
Dennis J. Stoutenburgh $ 0 25,500
All Officers $ 0 75,500
All Non-officer Directors $ 0 20,000
All Employees $ 0 170,900
- ---------------
<FN>
(1) At the grant date exercise price equalled fair market value of the shares
available under this plan.
</FN>
</TABLE>
Federal Income Tax Consequences
An optionee who receives an incentive stock option under the 1991
Stock Option Plan will ordinarily not recognize any income for federal income
tax purposes as a result of the receipt or exercise of such option. However, the
exercise of an incentive stock option will give rise to an increase in the
optionee's alternative minimum taxable income for purposes of the alternative
minimum tax in an amount equal to the excess of the fair market value of the
common stock at the time the optionee's rights to the stock are freely
transferable or are not subject to a substantial risk of forfeiture over the
exercise price. The Company will not be entitled to a compensation deduction for
federal income tax purposes with respect to either the grant of an incentive
stock option under the 1991 Stock Option Plan or the exercise of such an option
by the optionee. If the optionee does not dispose of the shares of common stock
acquired through the exercise of the incentive stock option within two years of
the date of the grant of such option, and within one year after the exercise
date, and if the optionee is employed by the Company (or certain related
entities) from the time the option is granted until three months before its
exercise, any gain or loss recognized upon the disposition will constitute a
long-term capital gain or loss, and the Company will not be entitled to a
deduction. If an optionee disposes of the shares prior to the expiration of such
holding periods (a "disqualified disposition"), the optionee will recognize, at
the time of such disposition, ordinary income equal to the difference between
the exercise price and the lower of (i) the fair market value of the shares
subject to the option on the date of exercise or (ii) the amount realized by the
optionee on the sale of such shares, any remaining gain shall be taxed as a
capital gain. In the event of a disqualified disposition, the Company will be
entitled to a deduction in an amount equal to the income recognized by the
optionee.
If an optionee pays the exercise price of an incentive stock option
solely with common stock, and if the shares surrendered are (i) shares not
21
<PAGE>
received pursuant to the exercise of an incentive stock option and not subject
to a substantial risk or forfeiture or (ii) the result of the optionee's
exercise of another incentive stock option, the exercise of which satisfied the
above stated holding period requirements, the optionee will not recognize income
and the basis and holding period of the surrendered common stock shall be
transferred to that number of new shares equal to the number of old shares
surrendered. If more shares are received than were surrendered, the additional
shares' basis will be zero. If these conditions are not met, the payment of the
exercise price with shares of common stock may be treated as a disqualified
disposition or otherwise taxable disposition.
Vote Required and Recommendation for Approval of
the Proposed Amendment to the 1991 Stock Option Plan
To be approved by the stockholders, the Amendment must receive the
approval of stockholders holding at least a majority of the outstanding shares
of common stock. The enclosed form of proxy provides a means for stockholders to
vote for the Amendment, to vote against the Amendment, or to abstain from voting
with respect to the Amendment. Each properly executed proxy received in time for
the meeting will be voted as specified therein.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF
THE AMENDMENT. SINCE THE AMENDMENT WILL INCREASE THE NUMBER OF OPTIONS THAT MAY
BE GRANTED TO ALL DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY, CERTAIN OF
THE DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY HAVE AN INTEREST IN, AND MAY
BENEFIT FROM, THE ADOPTION OF THE AMENDMENT.
AMENDMENT TO DECREASE THE AMOUNT OF AUTHORIZED STOCK
The Board of Directors has adopted, subject to stockholder approval, a
resolution to amend the Company's Certificate of Incorporation ("Charter") to
decrease the authorized common stock from 50,000,000 shares to 20,000,000
shares. The Charter currently provides that the aggregate number of shares of
all classes of stock that the Company has authority to issue is 51,000,000
shares, divided into two classes consisting of 50,000,000 shares of common
stock, par value $.01 per share, and 1,000,000 shares of preferred stock, par
value $.01 per share. As of February 28, 1995, there were 7,661,543 shares of
the common stock issued and outstanding, with an additional 2,083,500 shares of
common stock reserved for issuance under the Company's Incentive Stock Option
Plan, Non-Qualified Stock Option Plan and Directors' Stock Option Plan, and upon
exercise of an outstanding warrant of the Company. No shares of preferred stock
are outstanding.
All authorized but unissued shares of common stock may be issued, at
the discretion of the Board of Directors, for any proper corporate purpose, and
without further action by the stockholders other than as may be required by
applicable law or by the rules of any stock exchange on which the Company's
securities may then be listed. The Board of Directors has proposed the decrease
in the number of authorized shares of common stock (i) to establish the
Company's capital structure in accordance with management's anticipation of the
Company's need to issue common stock in the near term and (ii) to minimize
franchise taxes due to the state of Delaware, which franchise taxes are based,
in part, on the number of authorized shares.
22
<PAGE>
No holder of common stock has any preemptive right to subscribe to any
kind or class of securities of the Company.
Attached hereto as Exhibit B is a copy of the Certificate of Amendment
to the Certificate of Incorporation which will be filed, upon stockholder
approval, with the Secretary of State of the State of Delaware to decrease the
amount of authorized stock of the Company.
The Board of Directors recommends a vote FOR the approval of the
amendment to the Charter. Adoption of the proposal to amend the Charter to
decrease the authorized common stock will require the affirmative vote of the
holders of a majority of the outstanding shares of common stock entitled to vote
thereon.
RATIFICATION OF SELECTION OF AUDITORS
Ernst & Young LLP acted as the Company's independent auditors for the
fiscal year ended December 31, 1992.
On April 6, 1993 the Board of Directors of the Company, at the
recommendation of the Company's Audit Committee, voted to dismiss Ernst & Young
LLP as the Company's independent accountants and to appoint Price Waterhouse LLP
as the Company's independent accountants, effective April 8, 1993.
During the Company's two fiscal years ended December 31, 1991 and 1992,
Ernst & Young LLP's reports on the Company's financial statements contained no
adverse opinion or disclaimer of opinion, nor were they qualified or modified as
to unceretainty, audit scope, or accounting principles, except as follows:
Ernst & Young LLP's report on the Company's financial statements for
the three years ended December 31, 1991, contained the following paragraph:
As described in Note 9 to the consolidated financial statements, the
Company became a defendant in a class action lawsuit alleging violations of
certain securities laws. The ultimate outcome of this matter cannot presently be
determinted. Accordingly, no provision for any liability that may result has
been made in the accompanying consolidated financial statements. The outcome of
this litigation could impact the Company's recently restructured bank and senior
note arrangements, which are described in Note. 2.
Since the date of such report the referenced litigation has been
resolved.
23
<PAGE>
During the Company's two fiscal years ended December 31, 1991 and 1992,
there were no disagreements with Ernst & Young LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of Ernst &
Young LLP, would have caused it to make reference to the subject matter of the
disagreement in connection with its report.
During the Company's two fiscal years ended December 31, 1991 and 1992,
there were no reportable events relating to Ernst & Young LLP, except as
follows:
On March 18, 1992, after they discovered that the Company had breached
certain financial ratio covenants in its loan agreements, and had not publicly
disclosed the breaches, representatives of Ernst & Young LLP informed the Audit
Committee of the Company's Board of Directors that Ernst & Yount LLP was not
prepared to accept management representation letters essential to the completion
of their audit and certification of the Company's financial statements for the
fiscal year ended December 31, 1991, unless and until the Company either (1)
permitted the auditors to investigate the facts and circumstances surrounding
the covenant noncompliance, including management's knowledge of the problem, or
(2) caused the Audit Committee to conduct such an investigation and report the
results to the auditors. The Audit Committee, after consulting counsel,
determined to conduct the investigation. As a result of the investigation, four
senior members of management including the Company's chief executive officer,
its chief financial officer, its vice president of corporate development and its
former controller, were either dismissed or resigned. The Company hired a new
chief financial officer and an interim chief executive officer and Ernst & Young
LLP subsequently accepted new management's representations and issued its
opinion dated August 5, 1992, on the Company's financial statements for the
three years ended December 31, 1991.
Ernst & Young LLP has funished the Company with a letter addressed to the
Securities and Exchange Commission stating that Ernst & Young LLP agrees with
the statements in the preceding paragraphs.
On April 8, 1993, the Company engaged Price Waterhouse LLP as its principal
accountants to audit the Company's financial statements. During the Company's
two fiscal years ended December 31, 1991 and 1992, the Company did not consult
with Price Waterhouse LLP on items which (1) concerned the application of
accounting principles to a specified transaction, either completed or proposed,
or the type of audit opinion that might be rendered on the Company's financial
statements or (2) concerned the subject matter of a disagreement or reportable
event with Ernst & Young LLP. Since April 8, 1993 there have been no
disagreements between the Company and Price Waterhouse LLP.
Representatives of Price Waterhouse LLP will be present at the meeting with
the opportunity to make a statement if they desire to do so and to be available
to respond to appropriate questions.
The Board of Directors recommends a vote FOR ratification of the selection
of Price Waterhouse LLP as independent public accountants of the Company.
24
<PAGE>
STOCKHOLDER PROPOSALS
In order for stockholder proposals to receive consideration for inclusion
in the Company's 1995 Proxy Statement, such proposals must be received at the
Company's offices at 2155 Chenault, Suite 410, Carrollton, Texas 75006-5023,
Attention: Secretary, by December 15, 1995.
SOLICITATION OF PROXIES
The Company will pay the expense of this proxy solicitation. In addition to
solicitation by mail, some of the officers and regular employees of the Company
may solicit proxies personally or by telephone, if deemed necessary. The Company
will request brokers and other fiduciaries to forward proxy soliciting material
to the beneficial owners of shares which are held of record by the brokers and
fidusicries, and the Company may reimburse them for reasonable out-of-pocket
expenses incurred by them in connection therewith. The Company has retained
Chemical Bank to solicit proxies for the meeting from brokers, banks and
nominees. For such services the Company has agreed to pay Chemical Shareholder
Services a fee of $4,500.00.
OTHER BUSINESS
The Board of Directors is not aware of any matter, other than the matters
described above, to be presented for action at the meeting. However, if other
proper items of business should come before the meeting, it is the intention of
the person or persons acting under the enclosed form of proxy to vote in
accordance with their best judgment on such matters.
By Order of the Board of Directors,
Michael H. Barnes
Secretary
Carrollton, Texas
April 20, 1995
25
EXHIBIT A
AS AMENDED THROUGH MAY 20, 1994
INTELLICALL, INC.
1991 STOCK OPTION PLAN
WHEREAS, the Company previously adopted the Intellicall, Inc. Incentive
Stock Option Plan, the Intellicall, Inc. Non-Qualified Stock Option Plan and the
Intellicall, Inc. Directors' Stock Option Plan (collectively, the "Plans"), and
WHEREAS, the Plans were previously approved by shareholders in accordance
with Rule 16b-3 promulgated under the Securities Exchange Act of 1934, and
WHEREAS, the Company wishes to administer the Plans as a single Plan in
compliance with Rule 16b-3;
NOW, THEREFORE, the Plans are restated in their entirety in a single
document and shall be known as the Intellicall, Inc. 1991 Stock Option Plan.
1. Purpose. The purpose of this Plan is to strengthen Intellicall, Inc. by
providing an incentive to its key employees and directors thereby encouraging
them to devote their abilities and industry to the success of the Company's
business enterprise. It is intended that this purpose be achieved by extending
to key employees and directors of the Company an added long-term incentive for
high levels of performance and unusual efforts through the grant of options to
purchase shares of the Company's common stock under the Intellicall, Inc. 1991
Stock Option Plan.
2. Definitions. For purposes of the Plan:
(a) "Agreement" means the written agreement between the Company and an
Optionee evidencing the grant of an Option and setting forth the terms and
conditions thereof.
(b) "Board" means the Board of Directors of the Company.
(c ) "Cause" means (i) intentional failure to perform reasonably assigned
duties, (ii) dishonesty or willful misconduct in the performance of an
Optionee's duties, (iii) any act of (A) fraud or intentional misrepresentation,
or (B) embezzlement, misappropriation or conversion of assets or opportunities
of the Company or (iv) willful violation of any law, rule or regulation in
connection with the performance of an Optionee's duties (other than traffic
violations or similar offenses).
(d) "Change in Capitalization" means any increase or reduction in the
number of Shares, or any change (including, but not limited to, a change in
value) in the Shares or exchange of Shares for a different number or kind of
shares or other securities of the Company, by reason of a reclassification,
recapitalization, merger, consolidation, reorganization, stock dividend, stock
split or reverse stock split, combination or exchange of shares or other similar
events.
<PAGE>
(e) A "Change in Control" shall be deemed to have occurred when the first
of the following events occurs:
(i) when the Company acquires actual knowledge that any person or group (as
such terms are used in Sections 13(d) and 14(d) (2) of the Exchange Act), other
than an employee benefit plan established or maintained by the Company or any of
its subsidiaries or the current largest stockholder, is or becomes the
beneficial owner (as defined under Rule 13d-3 of the Exchange Act) directly or
indirectly, of securities of the Company representing 30 percent or more of the
combined voting power of the Company's then outstanding securities entitled
generally to vote for the election of the Company's directors; (ii) upon the
approval by the Company's stockholders of (A) a merger or consolidation of the
Company with or into another Corporation (other than a merger or consolidation
in which the Company is the surviving corporation and which does not result in
any capital reorganization or reclassification or other change in the Company's
then outstanding shares of common stock), (B) a sale or disposition of all or
substantially all of the Company's assets of (C) a plan of liquidation or
dissolution of the Company; or (iii) if, at any time, two-thirds of the members
of the Board are not "Continuing Directors." For this purpose "Continuing
Directors" shall mean the members of the Board of Directors as of May 1, 1991,
and any individual who becomes a member of the Board thereafter if his or her
election or nomination for election as a director was approved by a vote or at
least two-thirds of the Continuing Directors then in office.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Committee" means a committee consisting of at least two (2)
Disinterested Directors appointed by the Board to administer the Plan and to
perform the functions set forth herein.
(h) "Company" means Intellicall, Inc., a Delaware corporation.
(i) "Director Option" means an Option granted to a Nonemployee Director
pursuant to Section 5.
(j) "Disability" means a physical or mental infirmity which impairs the
Optionee's ability to perform substantially his or her duties for a period of
one hundred eighty (180) consecutive days.
(k) "Disinterested Director" means a director of the Company who is
"disinterested" within the meaning of Rule 16b-3 under the Exchange Act.
(l) "Eligible Employee" means any officer or other key employee of the
Company or a Subsidiary designated by the Committee as eligible to receive
Options subject to the conditions set forth herein.
<PAGE>
(m) "Employee Options" means an Option granted to an Eligible Employee
pursuant to Section 6.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(o) "Fair Market Value" on any date means the closing price of the Shares
on such date on the principal national securities exchange on which such Shares
are listed or admitted to trading, or if such Shares are not so listed or
admitted to trading, the arithmetic mean of the per Share closing bid price and
per Share closing asked price on such date as quoted on the National Association
of Securities Dealers Automated Quotation System or such then market in which
such prices are regularly quoted, or, if there have been no published bid or
asked quotations with respect to Shares on such date, the Fair Market Value
shall be the value established by the Board in good faith and in accordance with
Section 422 of the Code.
(p) "Incentive Stock Option" means an Option satisfying the requirements of
Section 422 of the Code and designated by the Committee as an Incentive Stock
Option.
(q) "Nonqualified Stock Option" means an Option which is not an Incentive
Stock Option.
(r) "Nonemployee Director" means a director of the Company who is not an
employee of the Company or any Subsidiary.
(s) "Option" means an Employee Option, a Director Option, or either or both
of them.
(t) "Optionee" means a person to whom an Option has been granted under the
Plan.
(u) "Parent" means any corporation which is a parent corporation (within
the meaning of Section 424(e) of the Code) with respect to the Company.
(v) "Plan" means the Intellicall, Inc. 1991 Stock Option Plan.
(w) "Shares" means the common stock, par value $.01 per share, of the
Company.
(x) "Subsidiary" means any corporation which is a subsidiary corporation
(within the meaning of Section 424(f) of the Code) with respect to the Company.
(y) "Successor Corporation" means a corporation, or a parent or subsidiary
thereof within the meaning of section 424(a) of the Code, which issues or
assumes a stock option in a transaction to which Section 424(a) of the Code
applies.
<PAGE>
(z) "Ten-Percent Stockholder" means an Eligible Employee, who, at the time
an Incentive Stock Option is to be granted to him or her, owns (within the
meaning of Section 422(b) (6) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company, or of a Parent or a Subsidiary.
3. Administration.
(a) The Plan shall be administered by the Committee which shall hold
meetings at such times as may be necessary for the proper administration of the
Plan. The Committee shall keep minutes of its meetings. A quorum shall consist
of not less than two members of the Committee and a majority of a quorum may
authorize any action. Any decision or determination reduced to writing and
signed by a majority of all of the members shall be as fully effective as if
made by a majority vote at a meeting duly called and held. Each member of the
Committee shall be a Disinterested Director. No member of the Committee shall be
liable for any action, failure to act, determination or interpretation made in
good faith with respect to this Plan or any transaction hereunder, except for
liability arising from his or her own willful misfeasance, gross negligence or
reckless disregard of his or her duties. The Company hereby agrees to indemnify
each member of the Committee for all costs and expenses and, to the extent
permitted by applicable law, any liability incurred in connection with defending
against, responding to, negotiation for the settlement of or otherwise dealing
with any claim, cause of action or dispute of any kind arising in connection
with any actions in administering this Plan or in authorizing or denying
authorization to any transaction hereunder.
(b) Subject to the express terms and conditions set forth herein, the
Committee shall have the power from time to time to determine those Eligible
Employees to whom Employee Options shall be granted under the Plan and the
number of Incentive Stock Options and/or Nonqualified Stock Options to be
granted to each Eligible Employee and to prescribe the terms and conditions
(which need not be identical) of each Employee Option, including the purchase
price per Share subject to each Employee Option, and make any amendment or
modification to any Agreement consistent with the terms of the Plan;
(c) Subject to the express terms and conditions set forth herein, the
Committee shall have the power from time to time:
(1) to construe and interpret the Plan and the Options granted thereunder
and to establish, amend and revoke rules and regulations for the administration
of the Plan, including, but not limited to, correcting any defect or supplying
any omission, or reconciling any inconsistency in the Plan or in any Agreement,
in the manner and to the extent it shall deem necessary or advisable to make the
Plan fully effective, and all decisions and determinations by the Committee in
the exercise of this power shall be final, binding and conclusive upon the
Company, its Subsidiaries, the Optionees and all other persons having any
interest therein;
<PAGE>
(2) to determine the duration and purposes for leaves of absence which may
be granted to an Optionee on an individual basis without constituting a
termination of employment or service for purposes of the Plan;
(3) to exercise its discretion with respect to the powers and rights
granted to it as set forth in the Plan;
(4) generally, to exercise such powers and to perform such acts as are
deemed necessary or advisable to promote the best interests of the Company with
respect to the Plan.
4. Stock Subject to Program.
(a) The maximum number of Shares that may be made the subject of Options
granted under the Plan is as follows: 1,275,000 Shares [1,525,000 per proposed
Amendment] with respect to Incentive Stock Options; 600,000 Shares with respect
to Nonqualified Stock Options; and 350,000 Shares with respect to Director
Options (or, in each case, the number and kind of shares of stock or other
securities to which such Shares are adjusted upon a Change in Capitalization
pursuant to Section 8) and the Company shall reserve for the purposes of the
Plan, out of its authorized but unissued Shares or out of Shares held in the
Company's treasury, or partly out of each, such number of Shares as shall be
determined by the Board.
(b) Whenever any outstanding Option or portion thereof expires, is
cancelled or is otherwise terminated for any reason (other than upon the
surrender of the Option pursuant to Section 7(e) hereof), the Shares allocable
to the cancelled or otherwise terminated Option or portion thereof may again be
the subject of Options granted hereunder.
5. Options Grants for Nonemployee Directors.
(a) Grant. Each Nonemployee Director as of February 1, 1993 who has not
previously been granted any Director Options or who has surrendered for
cancellation all Director Options previously granted to him shall receive a
grant of Director Options in respect of (i) 20,000 Shares on February 1, 1993
and (ii) 10,000 Shares on February 1, 1994. Thereafter, each person who first
becomes a Nonemployee Director subsequent to February 1, 1993 shall receive a
grant of Director Options in respect of (i) 20,000 Shares on the first business
day of February subsequent to the date such Nonemployee Director first becomes a
Nonemployee Director (the "Election Date") and (ii) 10,000 Shares on the first
business day of February of the year next succeeding the Election Date. The
purchase price therefor of each Director Option shall be as provided in this
Section 5 and such Director Options shall be exercisable, in whole or in part,
in four equal installments as follows: (i) with respect to the first
installment, immediately upon execution and delivery of the Director Option (the
"Grant"), (ii) with respect to the second installment, on December 31, of the
year of the Grant, (iii) with respect to the third installment, on December 31
of the year next succeeding the year of the Grant, and (iv) with respect to the
last installment, on December 31 of the year two years after the date of the
Grant. Such Director
<PAGE>
Options shall be evidenced by an Agreement containing such other terms and
conditions not inconsistent with the provisions of this Plan as determined by
the Board.
(b) Purchase Price. The purchase price for Shares under each Director
Option shall be at least equal to 100% of the Fair Market Value of a Share on
the date the Director Option is granted.
(c) Duration. Director Options shall be for a term of ten (10) years.
(d) Amendment. The provisions in this Section 5 shall not be amended more
than once every six months, other than to comport with changes in the Code or
the rules and regulations thereunder.
6. Option Grants for Eligible Employees.
(a) Grant. Subject to the provisions of the Plan and to Section 4 (a)
above, the Committee shall have full and final authority to select those
Eligible Employees who will receive Employee Options, the terms and conditions
of which shall be set forth in an Agreement; provided, however, that no Eligible
Employee shall receive any Incentive Stock Options unless he is an employee of
the Company, a Parent or a Subsidiary at the time the Incentive Stock Option is
granted.
(b) Purchase Price. The purchase price or the manner in which the purchase
price is to be determined for Shares under each Employee Option shall be
determined by the Committee and set forth in the Agreement, provided that the
purchase price per Share under each Employee Option shall not be less than 100%
of the Fair Market Value of a Share on the date the Employee Option is granted
(110% in the case of an Incentive Stock Option granted to a Ten-Percent
Stockholder).
(c) Duration. Employee Options granted hereunder shall be for such term as
the Committee shall determine, provided that no Employee Option shall be
exercisable after the expiration of ten (10) years from the date it is granted
(five (5) years in the case of an Incentive Stock Option granted to a
Ten-Percent Stockholder). The Committee may, subsequent to the granting of any
Employee Option, extend the term thereof but in no event shall the term as so
extended exceed the maximum term provided for in the preceding sentence.
(d) Modification or Substitution. The Committee may, in its discretion,
modify outstanding Employee Options or accept the surrender or outstanding
Employee Options (to the extent not exercised) and grant new Options in
substitution for them. Notwithstanding the foregoing, no modification of an
Employee Option shall adversely alter or impair any rights or obligations under
the Employee Option without the Optionee's consent.
<PAGE>
7. Terms and Conditions Applicable to All Options
(a) Non-transferability. No Option granted hereunder shall be transferable
by the Optionee to whom granted otherwise than by will or the laws of descent
and distribution, and an Option may be exercised during the lifetime of such
Optionee only by the Optionee or his or her guardian or legal representative.
The terms of such Option shall be final, binding and conclusive upon the
beneficiaries, executors, administrators, heirs and successors of the Optionee.
(b) Vesting and Method of Exercise.
(1) Subject to Section 7(e) hereof, each Option shall become exercisable in
the manner, including installments (which need not be equal), and at such times
as may be designated by the Committee and set forth in the Agreement. To the
extent not exercised, installment shall accumulate and be exercisable, in whole
or in part, at any time after becoming exercisable, but not later than the date
the Option expires; provided, however, that the Agreement may provide for the
forfeiture of vested and non-vested Options upon the occurrence of specified
events. The Committee may accelerate the exercisability of any Option or portion
thereof at any time.
(2) The exercise of an Option shall be made only by a written notice
delivered in person or by mail to the Secretary of the Company at the Company's
principal executive office, specifying the number of Shares to be purchased and
accompanied by payment therefor and otherwise in accordance with the Agreement
pursuant to which the Option was granted. The purchase price for any Shares
purchased pursuant to the exercise of an Option shall be paid in full upon such
exercise, by any one or a combination of the following: (i) cash or (ii)
transferring Shares to the Company upon such terms and conditions as determined
by the Committee. The written notice pursuant to this Section 7(b)(2) may also
provide instructions from the Optionee to the Company that upon receipt of the
purchase price in cash from the Optionee's broker or dealer, designated as such
on the written notice, in payment for any Shares purchased pursuant to the
exercise of an Option, the Company shall issue such Shares directly to the
designated broker or dealer. Any Shares transferred to the Company as payment of
the purchase price under an Option shall be valued at their Fair Market Value on
the day preceding the date of exercise of such Option. If requested by the
Committee, the Optionee shall deliver the Agreement evidencing the Option to the
Secretary of the Company who shall endorse thereon a notation of such exercise
and return such Agreement to the Optionee. No fractional Shares (or cash in lieu
thereof) shall be issued upon exercise of an Option and the number of Shares
that may be purchased upon exercise shall be rounded to the nearest number of
whole Shares.
(c) Rights of Optionees. No Optionee shall be deemed for any purpose to be
the owner of any Shares subject to any Option unless and until (i) the Option
shall have been exercised pursuant to the terms thereof, (ii) the Company shall
have issued and delivered the Shares to the Optionee and (iii) the Optionee's
name shall have been entered as a stockholder of record on the books of the
Company. Thereupon, the Optionee shall have full voting, dividend and other
ownership rights with respect to such Shares.
<PAGE>
(d) Termination of Employment or Service. Unless otherwise provided in the
Agreement evidencing the Option, an Option shall terminate upon or following an
Optionee's termination of employment with the Company and its Subsidiaries or
service as a director of the Company and its Subsidiaries as follows:
(1) if an Optionee's employment or service as a director terminates for any
reason other than death, Disability or Cause, the Optionee may at any time
within three (3) months after his or her termination of employment or service as
a director, exercise an Option to the extent, and only to the extent, that the
Option or portion thereof was exercisable on the date of termination;
(2) in the event the Optionee's employment or service as a director
terminates as a result of Disability, the optionee may at any time within one
(1) year after such termination exercise such Option to the extent, and only to
the extent, the Option or portion thereof was exercisable at the date of such
termination;
(3) if an Optionee's employment or service as a director terminates for
Cause, the Option shall terminate immediately and no rights thereunder may be
exercised;
(4) if an Optionee dies while a director or an employee of the Company or
any Subsidiary or within three months after termination as described in clause
(1) of this Section 7(d) or within one (1) year after termination as a result of
Disability as described in clause (2) of this Section 7(d), the Option may be
exercised at any time within one (1) year after the Optionee's death by the
person or persons to whom such rights under the Option shall pass by will or by
the laws of descent and distribution; provided, however, that an Option may be
exercised to the extent, and only to the extent, that the Option or portion
thereof was exercisable on the date of death or earlier termination.
Notwithstanding the foregoing, (i) in no event may any Option be exercised
by anyone after the expiration of the term of the Option and (ii) a termination
of service as a director shall not be deemed to occur so long as the director
continues to serve the Company as either a director or director emeritus.
(e) Effect of Change in Control.
Notwithstanding anything contained in the Plan or an Agreement to the
contrary, in the event of a Change in Control, all Options outstanding on the
date of such Change in Control shall become immediately and fully exercisable.
8. Adjustment Upon Changes in Capitalization.
(a) Subject to Section 9, in the event of a Change in Capitalization, the
maximum number and class of Shares or other stock or securities with respect to
which Options may be granted under the Plan, the number and class of Shares or
other stock or securities which
<PAGE>
are subject to outstanding Options granted under the Plan, and the purchase
price therefor, if applicable shall be appropriately and equitable adjusted.
(b) Any such adjustment in the Shares or other stock or securities subject
to outstanding Incentive Stock Options (including any adjustments in the
purchase price) shall be made in such manner as not to constitute a modification
as defined by Section 424(h) (3) of the Code and only to the extent otherwise
permitted by Sections 422 and 424 of the Code.
(c) If, by reason of a change in Capitalization, an Optionee shall be
entitled to exercise an Option with respect to new, additional or different
shares of stock or securities, such new, additional or different shares shall
thereupon be subject to all of the conditions which were applicable to the
Shares subject to the Option, as the case may be, prior to such Change in
Capitalization.
9. Effect of Certain Transactions.
Subject to Section 7(e), in the event of (i) the liquidation or dissolution
of the Company or (ii) a merger or consolidation of the Company (a "Transaction
"), the Plan and the Options issued hereunder shall continue in effect in
accordance with their respective terms and each Optionee shall be entitled to
receive in respect of each Share subject to any outstanding Options, as the case
may be, upon exercise of any Option, the same number and kind of stock,
securities, cash, property, or other consideration that each holder of a Share
was entitled to receive in the Transaction in respect of a Share. In the event
that, after a Transaction, there occurs any change of a type described in
Section 2(d) hereof with respect to the shares of the surviving or resulting
corporation, then adjustments similar to, and subject to the same conditions as,
those in Section 8 hereof shall be made by the Committee.
10. Termination and Amendment of the Plan.
(a) The Plan shall terminate on the day preceding the tenth anniversary of
the date of its adoption by the Board and no Option may be granted thereafter.
The Board may sooner terminate or amend the Plan at any time and from time to
time; provided, however, that to the extent necessary under Section 16(b) of the
Exchange Act and the rules and regulations promulgated thereunder or other
applicable law, no amendment shall be effective unless approved by the
stockholders of the Company in accordance with applicable law and regulations at
an annual or special meeting held within twelve (12) months after the date of
adoption of such amendment.
(b) Except as provided in Sections 8 and 9 hereof, rights and obligations
under any Option granted before any amendment or termination of the Plan shall
not be adversely altered or impaired by such amendment or termination, except
with the consent of the Optionee, nor shall any amendment or termination deprive
any Optionee of any Shares which he may have acquired through or as a result of
the Plan.
<PAGE>
11. Non-Exclusivity of the Plan. The Adoption of the Plan by the Board
shall not be construed as amending, modifying or rescinding any previously
approved incentive arrangement or as creating any limitations on the power of
the Board to adopt such other incentive arrangements as it may deem desirable,
including, without limitation, the granting of stock options otherwise than
under the Plan, and such arrangements may be either applicable generally or only
in specific cases.
12. Limitation of Liability. As illustrative of the limitations of
liability of the Company, but not intended to be exhaustive thereof, nothing in
the Plan shall be construed to:
(a) give any person any right to be granted an Option other than at the
sole discretion of the Committee;
(b) give any person any rights whatsoever with respect to Shares except as
specifically provided in the Plan;
(c) limit in any way the right of the Company to terminate the employment
of any person at any time; or
(d) be evidence of any agreement or understanding, expressed or implied,
that the Company will employ any person at any particular rate of compensation
or for any particular period of time.
13. Regulations and Other Approvals; Governing Law.
(a) This Plan and the rights of all persons claiming hereunder shall be
construed and determined in accordance with the laws of the State of Texas.
(b) The obligation of the Company to sell or deliver Shares with respect to
Options granted under the Plan shall be subject to all applicable laws, rules
and regulations, including all applicable federal and state securities laws, and
the obtaining of all such approvals by governmental agencies as may be deemed
necessary or appropriate by the Committee.
(c) The Plan is intended to comply with Rule 16b-3 promulgated under the
Exchange Act and the Committee shall interpret and administer the provisions of
the Plan or any Agreement in a manner consistent therewith. Any provisions
inconsistent with such Rule shall be inoperative and shall not affect the
validity of the Plan.
(d) The Board may make such changes as may be necessary or appropriate to
comply with the rules and regulations of any government authority, or to obtain
for Eligible Employees granted Incentive Stock Options the tax benefits under
the applicable provisions of the Code and regulations promulgated thereunder.
<PAGE>
(e) Each Option is subject to the requirement that, if at any time the
Committee determines, in its discretion, that the listing, registration or
qualification of Shares issuable pursuant to the Plan is required by any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the grant of an Option or the issuance of
Shares, no Options shall be granted or payment made or Shares issued, in whole
or in part, unless listing, registration, qualification, consent or approval has
been effected or obtained free of any conditions as acceptable to the Committee.
(f) Notwithstanding anything contained in the Plan to the contrary, in the
event that the disposition of Shares acquired pursuant to the Plan is not
covered by a then current registration statement under the Securities Act of
1933, as amended, and is not otherwise exempt from such registration, such
Shares shall be restricted against transfer to the extent required by the
Securities Act of 1933, as amended, and rule 144 or other regulations
thereunder. The Committee may require any individual receiving Shares pursuant
to the Plan, as a condition precedent to receipt of such Shares upon exercise of
an Option, to represent and warrant to the Company in writing that the Shares
acquired by such individual are acquired without a view to any distribution
thereof and will not be sold or transferred other than pursuant to an effective
registration thereof under said Act or pursuant to an exemption applicable under
the Securities Act of 1933, as amended, or the rules and regulations promulgated
thereunder. The certificates evidencing any of such Shares shall be
appropriately amended to reflect their status as restricted securities as
aforesaid.
14. Miscellaneous.
(a) Multiple Agreements. The terms of each Option may differ from other
Options granted under the Plan at the same time, or at some other time. The
Committee may also grant more than one Option to a given Eligible Employee
during the term of the Plan, either in addition to, or in substitution for, one
or more Options previously granted to that Eligible Employee.
(b) Withholding of Taxes.
(1) The Company shall have the right to deduct from any distribution of
cash to any Optionee, an amount equal to the federal, state and local income
taxes and other amounts as may be required by law to be withheld (the
"Withholding Taxes") with respect to any Option. If an Optionee is entitled to
receive Shares upon exercise of an Option, the Optionee shall pay the
Withholding Taxes to the Company prior to the issuance, or release from escrow,
of such Shares. In satisfaction of the Withholding Taxes to the company, the
Optionee may make a written election (the "Tax Election"), which may be accepted
or rejected in the discretion of the Committee, to have withheld a portion of
the Shares issuable to him or her upon exercise of the Option having an
aggregate Fair Market Value, on the date preceding the date of exercise, equal
to the Withholding Taxes, provided that in respect of an Optionee who may be
subject to liability under Section 16(b) of the Exchange Act either (i) (A) the
Optionee makes the Tax
<PAGE>
Election at least six (6) months after the date the Option was granted, (B)
the Option is exercised during the ten day period beginning on the third
business day and ending on the twelfth business day following the release for
publication of the Company's quarterly or annual statements of earnings (a
"Window Period") and (C) the Tax Election is made during the window Period in
which the Option is exercised or prior to such Window Period and subsequent to
the immediately preceding Window Period or (ii) (A) the Tax Election is made at
least six (6) months prior to the date the Option is exercised and (B) the Tax
Election is irrevocable with respect to the exercise of all Options which are
exercised prior to the expiration of six (6) months following an election to
revoke the Tax Election. Notwithstanding the foregoing, the Committee may, by
the adoption of rules or otherwise, (i) modify the provisions in the preceding
sentence or impose such other restrictions or limitations on Tax Elections as
may be necessary to ensure that the Tax Elections will be exempt transactions
under Section 16(b) of the Exchange Act, and (ii) permit Tax Elections to be
made at such other times and subject to such other conditions as the Committee
determines will constitute exempt transactions under Section 16b of the Exchange
Act.
(2) If an Optionee makes a disposition, within the meaning of Section
424(c) of the Code and regulations promulgated thereunder, of any Share or
Shares issued to such Optionee pursuant to the exercise of an Incentive Stock
Option within the two-year period commencing on the day after the date of the
grant or within the one-year period commencing on the day after the date of
transfer of such Share or Shares to the Optionee pursuant to such exercise, the
Optionee shall, within ten (10) days of such disposition, notify the Company
thereof, by delivery of written notice to the Company at its principal executive
office, and immediately deliver to the Company the amount of Withholding Taxes.
15. Effective Date. The effective date of the Plan shall be the date of its
adoption by the Board.
<PAGE>
[TYPE] EX-99
[DESCRIPTION] Additional exhibit
EXHIBIT B
CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF
INTELLICALL, INC.
Pursuant to the provisions of Section 242 of the Delaware General
Corporation Law, the undersigned corporation hereby adopts the following
Certificate of Amendment to the Certificate of Incorporation:
ARTICLE ONE
The name of the corporation is Intellicall, Inc. (the "Corporation").
ARTICLE TWO
The following amendment to Article FOURTH of the Certificate of
Incorporation was adopted by the Board of Directors of the Corporation on
__________ ___, 1995 and by the stockholders of the Corporation on _________
___, 1995.
"FOURTH: The total number of shares which the Corporation
shall have authority to issue is 21,000,000 shares, of which
20,000,000 shares shall be common stock, par value $.01 per share
("Common Shares"), and 1,000,000 shares of preferred stock, par
value $.01 per share ("Preferred Stock").
IN WITNESS WHEREOF, the undersigned corporation has executed this
Certificate of Amendment as of _________ ___, 1995.
INTELLICALL, INC.
By:__________________________________
ATTEST:
_________________________
Secretary
