INTELLICALL, INC.
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby (1) acknowledges receipt of the Notice of Annual Meeting
of Stockholders of Intellicall, Inc. (the "Company") will be held at the Addison
Conference and Theatre Centre, 15650 Addison Road, Addison, Texas 75248, on
Thursday, May 1, 1997, at 10:00 a.m., Dallas time, and the Proxy Statement in
connection therewith and (2) appoints William O. Hunt and Michael H. Barnes, and
each of them, his proxy with full power of substitution for and in the name,
place and stead of the undersigned, to vote upon and act with respect to all of
the shares of Common Stock of the Company standing in the name of the
undersigned, or with respect to which the undersigned is entitled to vote and
act, at the meeting and at any adjournment thereof.
This proxy will be voted as specified on the reverse side. If no
specification is made, this proxy will be voted FOR the election of the director
nominees in item 1 on the reverse side and FOR ratification of the appointment
of independent public accountants.
The undersigned hereby revokes any proxy heretofore given to vote or
act with respect to the Common Stock of the Company and hereby ratifies and
confirms all that the proxies, their substitutes, or any of them may lawfully do
by virtue hereof.
If more than one of the proxies named shall be present in person or by
substitute at the meeting or at any adjournment thereof, the majority of the
proxies so present and voting, either in person or by substitute, shall exercise
all of the powers hereby given.
Please date, sign and mail this proxy in the enclosed envelope. No postage
is required. (Continued and to be dated and signed on the other side.)
- - -------------------------------------------------------------------------------
Please mark box o or |_| in blue or black ink. The undersigned directs that his
proxy be voted as follows:
1. ELECTION OF DIRECTORS
|_|FOR all nominees listed below |_|WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed below
WILLIAM O. HUNT, B. MICHAEL ADLER, THOMAS J. BERTHEL,
LEWIS E. BRAZELTON III, RICHARD B. CURRAN, and RICHARD E. HANLON
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the line provided below.)
- - -------------------------------------------------------------------------------
2. To act upon a proposal to ratify the appointment of independent public
accountants.
FOR|_| AGAINST|_| ABSTAIN|_|
3. IN THE DISCRETION OF THE PROXIES, ON ANY OTHER MATTER WHICH MAY PROPERLY
COME BEFORE THE MEETING.
Please date this proxy and sign your name exactly as it appears hereon.
Where there is more than one owner, each should sign. When signing as an
attorney, administrator, executor guardian or trustee, please add your title as
such. If executed by a corporation, the proxy should be signed by a duly
authorized officer.
Dated:______________________________, 1997
-------------------------------------------
Signature of Stockholder
-------------------------------------------
Signature of Stockholder
Please Mark, Date, Sign and Mail Your Proxy Promptly in the Envelope Provided.
<PAGE>
INTELLICALL(R), INC.
2155 Chenault, Suite 410
Carrollton, Texas 75006-5023
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 1, 1997
To the Holders of Common Stock of
INTELLICALL, INC.:
Notice is hereby given that the 1997 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 1, 1997, at 10:00 a.m., Dallas time, for the following
purposes:
(1) To elect six persons to serve as directors until the 1998 Annual
Meeting of Stockholders or until their successors are duly elected and
qualified.
(2) To act upon a proposal to ratify the appointment of independent
public accountants.
(3) To transact any other proper business brought before the meeting or any
adjournments or postponements thereof.
The Board of Directors has fixed March 10, 1997, 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, ChaseMellon Shareholder
Services, L.L.C., 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 /s/ Michael H. Barnes
March 27, 1997 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 1, 1997
The accompanying proxy, which has been mailed together with the Notice
of Annual Meeting of Stockholders and this Proxy Statement to stockholders on or
about March 27, 1997, 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 1, 1997 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: (i) the election to the Board
of Directors of six directors to serve as directors until the 1998 Annual
Meeting of Stockholders or until their successors are duly elected and
qualified, and (ii) 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 and 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 March 10, 1997 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
9,159,847 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, 1997, 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 11,
(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
Common Stock
Name and Address Beneficially Percentage
of Beneficial Owner(1) Owned(2) of Class
- - ---------------------- -------- --------
<S> <C> <C>
William O. Hunt (3) 886,275 9.0%
2155 Chenault, Suite 450
Carrollton, Texas 75006
Banca Del Gottardo(4) 850,000 8.5%
viale S. Franscini 8
6901 Lugano
Switzerland
B. Michael Adler (5) 727,813 7.8%
2155 Chenault, Suite 450
Carrollton, Texas 75006
T.J. Berthel Investments, 671,407 7.2%
L.P. (6)
100 Second St. S.E.
Cedar Rapids, Iowa 52407-4250
Neuberger & Berman, LLC(7) 514,900 5.6%
605 Third Avenue
New York, New York 10158
Michael H. Barnes(8) 160,821 1.7%
Thomas J. Berthel(6)(9) 701,407 7.6%
Lewis E. Brazelton III(10) 91,373 *
John M. Carradine(11) 32,071 *
Richard B. Curran(12) 106,600 1.2%
Richard E. Hanlon(13) 49,000 *
-2-
<PAGE>
Shares of
Common Stock
Name and Address Beneficially Percentage
of Beneficial Owner(1) Owned(2) of Class
- - ---------------------- -------- --------
Thomas R. Kessler(14) 28,952 *
Dennis J. Stoutenburgh(15) 110,500 1.2%
All officers and directors as a 2,894,812 27.3%
group (12 persons)(16)
- - -------------------------
* less than one percent
<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 or warrants that have vested
or will vest within 60 days.
(3) Includes 117,215 shares as to which Mr. Hunt has shared voting and
investment power and 670,000 shares of common stock issuable upon
exercise of options.
(4) Includes 850,000 shares of common stock issuable upon exercise of a
warrant.
(5) Includes (i) 37,000 shares held in the name of Adler Computer Systems,
Inc., a company wholly owned by Mr. Adler and (ii) 200,000 shares of
common stock issuable upon exercise of options.
(6) Includes a convertible debenture which is convertible into
approximately 160,000 shares of common stock.
(7) Represents shares outstanding held in numerous accounts of clients of
Neuberger & Berman, LLC over which Neuberger & Berman, LLC has shared
dispositive power.
(8) Includes 128,750 shares of common stock issuable upon exercise of
options.
(9) Includes 30,000 shares of common stock issuable upon exercise of
options and the stock beneficially held by T.J. Berthel Investments,
L.P..
(10) Includes 5,091 shares owned by Mr. Brazelton's wife, as to which Mr.
Brazelton disclaims beneficial ownership, and 30,000 shares of common
stock issuable upon exercise of options.
(11) Includes 27,250 shares of common stock issuable upon exercise of
options.
-3-
<PAGE>
(12) 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 30,000 shares of common stock issuable upon
exercise of options.
(13) Includes 30,000 shares of common stock issuable upon exercise of
options.
(14) Includes 22,500 shares of common stock issuable upon exercise of
options.
(15) Includes 103,750 shares of common stock issuable upon exercise of
options.
(16) Includes 1,272,250 shares of common stock issuable upon exercise of
options, 160,000 shares of common stock issuable upon conversion of a
convertible debenture and shares held by T.J.
Berthel Investments, L.P. , an affiliate of Mr. Berthel.
</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, all of whom 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, 63 Chairman of the Board of 1992
Directors, Chief Executive
Officer, and President
B. Michael Adler, 50 Director 1984
Thomas J. Berthel, 45 Director (1) 1995
Lewis E. Brazelton III, 56 Director (2) 1992
Richard B. Curran, 61 Director (3) 1992
Richard E. Hanlon, 49 Director (1) 1994
- - --------------
<FN>
(1) Member of Organization and Compensation Committee of the Board of
Directors.
(2) Member of Audit Committee and Chairman of Organization and Compensation
Committee of the Board of Directors.
(3) Chairman of the Audit Committee and member of Organization and Compen-
sation 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. and American Homestar Corporation.
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 Chairman of the Board of The
Payphone Company Limited, a Sri Lankan company, and Chief Executive Officer of
WorldQuest Networks, L.L.C., a Delaware limited liability company.
Thomas J. Berthel is Chief Executive Officer and Chairman of the Board of
Directors of Berthel Fisher & Company, a financial services holding company
based in Cedar Rapids, Iowa. He is also the Chief Executive Officer and Chairman
of the Board of Directors for various subsidiaries of Berthel Fisher and Company
including Berthel Fisher Leasing, Inc.
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.
Richard E. Hanlon is Vice-President of Investor Relations of America
Online, Inc. He is also a member of the board of directors of Michael's Stores,
Inc. Prior to joining America Online, Mr. Hanlon was the founder of Hanlon &
Company in 1993, a consultancy to software and technology companies, and venture
capital and investment banking firms. From 1987 to 1993 he was Vice President of
Corporate Communications and Secretary of Legent Corporation. He earlier held
senior management positions at UCCEL Corp. and Docutel Corp. in Dallas, Texas.
The Board of Directors recommends a vote FOR the election of all seven
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. Berthel, Brazelton,
Curran and Hanlon, met one time (in addition to meetings held as a part of
certain Board of Directors meetings and to actions undertaken by unanimous
consent) during the fiscal year ended December 31, 1996. This committee reviews
and approves salaries and bonuses of executive officers and administers the
Company's stock option and purchase plans. The Audit Committee, currently
composed of Messrs. Curran and Brazelton and Mr. Hugh Humphrey (a director who
is not standing for re-election) met three times during the fiscal year ended
December 31, 1996. 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 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
-6-
<PAGE>
services as a nominating committee in connection with the nominees to be elected
at the 1997 Annual Meeting.
The Board of Directors held ten meetings, either in person or by telephonic
conference, during the fiscal year ended December 31, 1996. Additionally, the
Board of Directors adopted various resolutions during 1996 by unanimous consent.
None of the directors, other than Mr. Hanlon, 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 1996 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.
MANAGEMENT
The following table sets forth certain information as of February 28, 1997
with respect to the executive officers of the Company.
<TABLE>
<CAPTION>
Served As
Name and Age Position Officer Since
- - ------------ -------- -------------
<S> <C> <C>
William O. Hunt, 63 Chairman of the Board 1992
of Directors, Chief
Executive Officer and
President
Michael H. Barnes, 54 Senior Vice President, 1993
Corporate Staff, Chief
Financial Officer and
Secretary
Dennis Stoutenburgh, 34 President 1991
Communications Group
John J. McDonald, Jr., 47 Senior Vice President - 1997
Sales and Marketing
John M. Carradine, 38 Vice President of Finance 1994
and Controller
Thomas R. Kessler, 38 Vice President of 1995
Operations
</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.
Dennis Stoutenburgh was appointed President of the Communications Group of
the Company in January 1995. 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.
John J. McDonald, Jr. was appointed Senior Vice President - Sales and
Marketing in February 1997. From June 1994 to January 1997, Mr. McDonald was
Senior Vice President of Intecom, Inc. Prior to Intecom he was Vice President,
Business Communications, of Ericsson Business Communications.
John M. Carradine has been Vice President of Finance and Controller of
Intellicall since September 1995. From May 1994 to September 1995 he served as
Treasurer of the Company. From October 1990 to May 1994 he was Director of
Finance and Investor Relations. From February 1983 to October 1990 Mr. Carradine
served in various executive capacities with Computer Language Research, Inc. in
Carrollton, Texas. Mr. Carradine is a CPA licensed in the State of Texas.
Thomas R. Kessler joined the Company in April 1995 as Vice President of
Operations. From July 1989 to September 1995 he was President of Cherokee
Electronica S.A. de C.V. in Guadalajara, Jalisco Mexico. From February 1987 to
July 1989 he was Engineering Manager for American Shizuki Corp., Mexico.
The Company's officers are elected by the Board of Directors and serve at
the discretion of the Board.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of December 31, 1996, Adtel Communication, Inc. ("ACI") and The Payphone
Company, Ltd. ("Payphone") owed the Company $272,000 for trade receivables. B.
Michael Adler is a director of ACI and Payphone and of the Company. Mr. Adler
and other members of Mr. Adler's family own the majority of ACI's and Payphone's
stock.
Thomas J. Berthel, a director of the Company, is President of Berthel
Fisher Leasing, Inc., a wholly-owned subsidiary of Berthel Fisher & Company.
During 1996 Berthel Fisher Leasing, Inc. purchased equipment from the Company in
the amount of $213,000 and as of December 31, 1996 has no open receivables. The
equipment was purchased by Berthel Fisher Leasing, Inc. in connection with the
provision of equipment lease financing for the Company's customers.
On February 15, 1994 the Company issued a $1 million, 10% convertible
subordinated note to T.J. Berthel Investments, L.P., an affiliate of Thomas J.
Berthel, a director of the Company. An amended and restated note was issued on
August 9, 1994. Interest is payable quarterly with the entire principal
-8-
<PAGE>
amount maturing on March 31, 1999. The note may be converted into 160,000 shares
of common stock at any time. During 1996 the Company paid $100,000 in interest
on such note.
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. No bonuses were paid by the Company in 1996 to
executive officers.
For 1997 Mr. Hunt recommended and the Compensation Committee adopted a
discretionary bonus plan for corporate officers (other than Mr. Hunt). Maximum
bonus levels under the plan range from 40% to 50% of base salary and are based
on the Company achieving $4.8 million of operating income (as defined in the
plan) in 1997. Seventy-five percent of the bonus amount is based on the Company
achieving increasing levels of profitability and twenty-five percent is based on
discretionary factors considered by the Compensation Committee (including Mr.
Hunt's recommendations with respect to such 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 bonus is payable under
the plan if operating income in 1997 is less than $4.0 million.
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.
-9-
<PAGE>
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.
As noted above, in 1992 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 were fully vested as of December 31, 1995. 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
Thomas J. Berthel
Richard B. Curran
Richard E. Hanlon
-10-
<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, 1996
and (ii) the other four most highly compensated executive officers of the
Company during 1996, for services rendered during the fiscal years ended
December 31, 1996, 1995 and 1994.
<TABLE>
<CAPTION>
Stock
Annual Compensation(1) Options All Other
Name Year Salary Bonus Other (shares) Compensation(2)
---- ---- ------ ----- ----- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
William O. Hunt 1996 $202,500 -- -- -- $1,012
Chairman of the 1995 $202,500 -- -- -- $981
Board of Directors, 1994 $202,500 -- -- -- $970
Chief Executive
Officer, President
Michael H. Barnes 1996 $150,000 -- -- 20,000 $2,250
Senior Vice President 1995 $150,000 -- -- 25,000 $2,250
Corporate Staff, 1994 $150,000 -- -- 25,000 $1,922
Chief Financial
Officer and Secretary
Dennis J. Stoutenburgh 1996 $150,000 -- -- 20,000 $2,250
President 1995 $150,000 -- -- 25,000 $1,748
Communications Group 1994 $150,000 -- -- 25,500 $1,748
John M. Carradine 1996 $114,975 -- -- 7,500 $1,284
Vice President of Finance 1995 $108,339 -- -- 6,000 $1,217
and Controller 1994 $107,800 -- -- 11,000 --
Thomas R. Kessler 1996 $145,000 -- -- 7,500 $2,069
Vice President of 1995 $102,288 -- -- 25,000 $1,441
Operations 1994 -- -- -- -- --
- - ---------------------
<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.
</FN>
</TABLE>
-11-
<PAGE>
1996 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) 1996 Price Date 5% 10%
---- ---------- ---- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Michael H. Barnes 20,000 14.1% $5.625 03/06/06 $183,251 $291,796
Dennis J. Stoutenburgh 20,000 14.1% $5.625 03/06/06 $183,251 $291,796
John M. Carradine 7,500 5.3% $5.625 03/06/06 $68,719 $109,424
Thomas R. Kessler 7,500 5.3% $5.625 03/06/06 $68,719 $109,424
<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>
1996 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 1996 and
unexercised options held as of December 31, 1996.
<TABLE>
<CAPTION>
Value of
Number Unexercised
of Unexercised In-the-Money
Shares Options at Options at
Acquired December 31, 1996 December 31, 1996(1)
on Value ----------------- --------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William O. Hunt -- -- 670,000 -- $ 1,507,500 $ --
Michael H. Barnes -- -- 128,750 16,250 $ 35,313 $ 13,438
Dennis J. Stoutenburgh -- -- 103,750 16,250 $ 48,375 $ 13,438
John M. Carradine -- -- 27,250 5,250 $ 26,438 $ 3,563
Thomas R. Kessler -- -- 22,500 10,000 $ 33,750 $ 11,875
- - --------------------
<FN>
(1) Market value of underlying securities at December 31, 1996 less the exercise
price.
</FN>
</TABLE>
-12-
<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.
Stock Option 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 1,525,000 shares of common stock are
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.
-13-
<PAGE>
At February 28, 1997, the Company and its subsidiaries had
approximately 221 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 1,166,240 shares of
common stock.
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, 1997 the Company and its subsidiaries had approximately
221 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.
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:
-14-
<PAGE>
(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 vest in four equal installments. 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, 1996, the Company and its subsidiaries had five
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 200,000 shares of common stock.
Employee Stock Purchase Plan
The Board of Directors of the Company adopted the 1995 Employee Stock
Purchase Plan for employees of the Company and its subsidiaries. The
stockholders of the Company approved the plan in 1996. Up to 300,000 shares of
common stock are authorized to be issued under the Employee Stock Purchase Plan.
The purpose of the Employee Stock Purchase Plan is to provide employees of the
Company and its designated subsidiaries with an opportunity to purchase common
stock of the Company at a discount through accumulated payroll deductions. The
Employee Stock Purchase Plan is also intended to motivate such persons to exert
their best efforts on behalf of the Company.
The Employee Stock Purchase Plan is administered by the Compensation
Committee of the Board of Directors. Participating employees are entitled to
enroll during one or both of two six month offering periods during each calendar
year. Eligible employees may elect to have payroll deductions made on each
payday during each offering period in an amount not exceeding ten percent (10%)
of the compensation which he or she receives on each such payday. At the end of
each offering period the accumulated payroll deductions are utilized to purchase
shares of common stock from the Company pursuant to the exercise of options
granted at the beginning of each offering period. The purchase price for the
shares purchased with the payroll deductions is equal to eighty-five percent
(85%) of the fair market value of a share of common stock on the first trading
day or the last trading day of each offering period, whichever is lower.
At February 28, 1997, the Company and its subsidiaries had
approximately 221 employees who are eligible to participate in the Employee
Stock Purchase Plan, of which 21 employees are actually participating in the
Employee Stock Purchase Plan.
-15-
<PAGE>
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 1996.
-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, 1996, 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, 1991 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.
<TABLE>
<CAPTION>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN**
AMONG INTELLICALL, S&P 500 INDEX, S&P TELEPHONE MANUFACTURER'S INDEX, AND
S&P HIGH TECHNOLOGY COMPOSITE INDEX*
Telephone S&P
Measurement Period S&P Manufacturer's High Technology
(Fiscal Year Covered) Intellicall 500 Index Index Composite Index
- - --------------------- ----------- --------- ----- ---------------
<S> <C> <C> <C> <C>
Measurement Pt-12/31/91 $100 $100 $100 $100
FYE 12/31/92 $102 $108 $110 $104
FYE 12/31/93 $146 $118 $127 $128
FYE 12/31/94 $ 73 $120 $121 $149
FYE 12/31/95 $ 73 $165 $183 $215
FYE 12/31/96 $115 $203 $185 $246
<FN>
** Assumes $100 invested on December 31, 1991 in Intellicall Common Stock,
the S&P 500 ndex, the S&P Telephone Manufacturer's Index and the S&P High Tech
Composite Index
* Total return assumes reinvestment of dividends
</FN>
</TABLE>
-17-
<PAGE>
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors of the Company has selected the firm of Price
Waterhouse LLP as the independent accountants and auditors to examine the
financial statements and books and records of the Company for the year ending
December 31, 1997 and recommends to the shareholders that such selection be
ratified and approved at the meeting. The firm of Price Waterhouse LLP examined
the financial statements of the Company for the year ended December 31, 1996 and
is considered by the Board of Directors to be well qualified.
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.
STOCKHOLDER PROPOSALS
In order for stockholder proposals to receive consideration for
inclusion in the Company's 1997 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 1, 1997.
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 fiduciaries, and the Company may reimburse them for
reasonable out-of-pocket expenses incurred by them in connection therewith. The
Company has retained ChaseMellon Bank to solicit proxies for the meeting from
brokers, banks and nominees. For such services the Company has agreed to pay
ChaseMellon Shareholder Services, L.L.C. a fee of $4,000.
-18-
<PAGE>
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,
/s/ Michael H. Barnes
Michael H. Barnes
Secretary
Carrollton, Texas
March 27, 1997
-19-
