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") to be held at the Addison
Conference and Theatre Centre, 15650 Addison Road, Addison, Texas 75248, on
Thursday, May 7, 1998, at 10:00 a.m., Dallas time, and the Proxy Statement in
connection therewith and (2) appoints William O. Hunt and John J. McDonald, Jr.,
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, FOR the increase in the number of shares
of Common Stock reserved for issuance under the Company's 1991 Stock Option Plan
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,
ARTHUR CHAVOYA, RICHARD B. CURRAN, and JOHN J. MCDONALD, JR.
(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 increase the number of shares of Common Stock
reserved for issuance under the Company's 1991Stock Option Plan.
FOR|_| AGAINST|_| ABSTAIN|_|
3. To act upon a proposal to ratify the appointment of independent public
accountants.
FOR|_| AGAINST|_| ABSTAIN|_|
4. 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:______________________________, 1998
-------------------------------------------
Signature of Stockholder
-------------------------------------------
Signature of Stockholder
Please Mark, Date, Sign and Mail Your Proxy Promptly in the Envelope Provided.
INTELLICALL(R), INC.
2155 Chenault, Suite 410
Carrollton, Texas 75006-5023
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 7, 1998
To the Holders of Common Stock of
INTELLICALL, INC.:
Notice is hereby given that the 1998 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 7, 1998, at 10:00 a.m., Dallas time, for the following
purposes:
(1) To elect seven persons to serve as directors until the 1999 Annual
Meeting of Stockholders or until their successors are duly elected and
qualified.
(2) To consider and 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 1,525,000 shares to 1,995,000
shares.
(3) To act upon a proposal to ratify the appointment of independent
public accountants. (4) To transact any other proper business brought
before the meeting or any adjournments or postponements thereof.
The Board of Directors has fixed March 12, 1998, 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/ John M. Carradine
April 3, 1998 John M. Carradine,
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 7, 1998
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 April 3, 1998, 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 7, 1998 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 seven directors to serve as directors until the 1999 Annual Meeting
of Stockholders or until their successors are duly elected and qualified, (ii) a
proposal to increase the number of shares of common stock reserved for issuance
under the Company's 1991 Stock Option Plan, and (iii) 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 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 12, 1998 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 9,471,312
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, 1998, 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) 962,000 9.5%
2155 Chenault, Suite 450
Carrollton, Texas 75006
Banca Del Gottardo(4) 850,000 8.2%
viale S. Franscini 8
6901 Lugano
Switzerland
B. Michael Adler (5) 676,813 7.0%
2155 Chenault, Suite 450
Carrollton, Texas 75006
T.J. Berthel Investments, 671,407 7.0%
L.P. (6)
100 Second St. S.E.
Cedar Rapids, Iowa 52407-4250
Neuberger & Berman, LLC(7) 655,000 6.5%
605 Third Avenue
New York, New York 10158
Thomas J. Berthel(6)(8) 701,407 7.2%
Lewis E. Brazelton III(9) 116,373 1.2%
John M. Carradine(10) 44,781 *
Arthur Chavoya (11) 20,000 *
Richard B. Curran(12) 96,600 1.0%
Thomas R. Kessler(13) 37,445 *
-2-
<PAGE>
Shares of
Common Stock
Name and Address Beneficially Percentage
of Beneficial Owner(1) Owned(2) of Class
- ---------------------- -------- --------
John J. McDonald, Jr.(14) 65,000 *
All officers and directors as a 2,720,419 25.4%
group (9 persons)(15)
- -------------------------
* 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 175,825 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) Includes shares of common stock held in numerous accounts of clients of
Neuberger & Berman, LLC over which Neuberger & Berman, LLC has shared
dispositive power. Also includes shares of common stock held by
principals of Neuberger & Berman, LLC in their personal securities
account over which Neuberger & Berman, LLC disclaims beneficial
ownership.
(8) Includes 30,000 shares of common stock issuable upon exercise of
options and the stock beneficially held by T.J. Berthel Investments,
L.P..
(9) 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.
(10) Includes 39,375 shares of common stock issuable upon exercise of
options.
(11) Includes 20,000 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 15,000 shares of common stock issuable upon exercise of
options.
(14) Includes 60,000 shares of common stock issuable upon exercise of
options.
(15) Includes 1,094,375 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
Seven 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
seven 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, 64 Chairman of the Board of 1992
Directors and Chief Executive
Officer
B. Michael Adler, 51 Director 1984
Thomas J. Berthel, 46 Director (1) 1995
Lewis E. Brazelton III, 57 Director (2) 1992
Richard B. Curran, 62 Director (3) 1992
Arthur Chavoya, 50 Director 1997
John J. McDonald, Jr., 48 President, Chief Operating Officer 1997
and Director
- --------------
<FN>
(1) Chairman of Organization and Compensation Committee and member of Audit
Committee of the Board of Directors.
(2) Member of Audit Committee and Organization and Compensation Committee
of the Board of Directors.
(3) Chairman of the Audit Committee and member of 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., American Homestar Corporation, DSC
Communications Corporation and Dr. Pepper Bottling Company of Texas.
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 a consultant 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. Mr. Curran is also President
and Executive Director of Folkers Foundation for Biomedical & Clinical Research.
Mr. Curran serves on the board of TCC Industries, Inc.
Arthur Chavoya is President of The Chavoya Group, Inc., a management
consulting firm. From September 1996 to October 1997, Mr. Chavoya was President
and Chief Executive Officer of ATC Communications Group, Inc., a provider of
inbound and outbound telemarketing services. Prior to September 1996 Mr. Chavoya
spent ten years at Electronic Data Systems in a number of executive positions
culminating in the presidency of EDS' Global Travel Services Industry strategic
business unit.
John J. McDonald, Jr. was appointed President and Chief Operating Officer
in July 1997 and 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.
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 and
Curran, met 10 times (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, 1997. This committee reviews and approves
salaries and bonuses of executive officers and administers the Company's stock
option and purchase plans. The Audit Committee,
-6-
<PAGE>
currently composed of Messrs. Berthel, Curran and Brazelton met 4 times during
the fiscal year ended December 31, 1997. 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.
The Board of Directors held 12 meetings, either in person or by telephonic
conference, during the fiscal year ended December 31, 1997. Additionally, the
Board of Directors adopted various resolutions during 1997 by unanimous consent.
Messrs. Adler and Chavoya 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 1997 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, 1998
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, 64 Chairman of the Board 1992
of Directors and Chief
Executive Officer
John J. McDonald, Jr., 48* President and 1997
Chief Operating Officer
John M. Carradine, 39 Chief Financial Officer 1994
and Secretary
</TABLE>
*Pursuant to a succession plan adopted by the Board of Directors in
February 1998, the Board intends to appoint Mr. McDonald Chief Executive Officer
of the Company effective the date of the meeting.
William O. Hunt and John J. McDonald, Jr. See "Election of Directors"
above.
John M. Carradine has been Chief Financial Officer and Secretary of the
Company since July 1997. Prior to such time he was Vice President of Finance and
Controller of the Company 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
-7-
<PAGE>
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.
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, 1997, Adtel Communication, Inc. ("ACI") and The Payphone
Company, Ltd. ("Payphone") owed the Company $267,000 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.
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 amount
maturing on March 31, 1999. The note may be converted into 160,000 shares of
common stock at any time. During 1997 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
Organization and Compensation Committee (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 1997 to
executive officers.
For 1998 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 objectives set forth for each such officer, including profitability of the
Company and other discretionary factors considered by the Compensation
Committee, such as management effectiveness as exhibited through relationships
with customers, vendors, employees
-8-
<PAGE>
and stockholders, new product development, special problem handling, and
planning and execution of operations.
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,
Thomas J. Berthel, Chairman
Lewis E. Brazelton, III
Richard B. Curran
-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, 1997
and (ii) the other four most highly compensated executive officers of the
Company during 1997, for services rendered during the fiscal years ended
December 31, 1997, 1996 and 1995.
<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 1997 $202,500 -- -- -- $1,012
Chairman of the 1996 $202,500 -- -- -- $1,012
Board of Directors, 1995 $202,500 -- -- -- $981
and Chief Executive
Officer
John J. McDonald, Jr. 1997 $185,896 $46,800 -- 120,000 $2,375
President and Chief 1996 -- -- -- -- --
Operating Officer, 1995 -- -- -- -- --
Senior Vice President -
Sales and Marketing
John M. Carradine 1997 $126,875 $ 8,000 -- 17,500 $1,458
Chief Financial Officer 1996 $114,975 -- -- 7,500 $1,284
and Secretary, 1995 $108,339 -- -- 6,000 $1,217
Vice President of Finance
and Controller
Thomas R. Kessler 1997 $135,000 -- -- -- $1,860
Vice President of 1996 $145,000 -- -- 7,500 $2,069
Operations 1995 $102,288 -- -- 25,000 $1,441
- ---------------------
<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>
1997 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) 1997 Price Date 5% 10%
---- ---------- ---- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
William O. Hunt -- -- -- -- -- --
John J. McDonald, Jr. 50,000 20.1% $5.50 2/18/07 $447,947 $713,280
70,000 29.2% $4.06 7/31/07 $462,932 $737,142
John M. Carradine 17,500 7.3% $4.06 7/31/07 $115,733 $184,286
Thomas R. Kessler -- -- -- -- -- --
<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>
1997 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 1997 and
unexercised options held as of December 31, 1997.
<TABLE>
<CAPTION>
Value of
Number Unexercised
Shares of Unexercised In-the-Money
Acquired Options at Options at
on Value December 31, 1997 December 31, 1997(1)
----------------- --------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William O. Hunt -- -- 670,000 -- $1,005,000 $ --
John J. McDonald, Jr. -- -- 60,000 60,000 $ 37,275 $ 37,275
John M. Carradine -- -- 39,375 10,625 $ 22,194 $ 9,319
Thomas R. Kessler -- -- 30,625 1,875 $ 25,000 $ --
- --------------------
<FN>
(1) Market value of underlying securities at December 31, 1997 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. See "Proposal to
Amend The Company's 1991 Stock Option Plan" for 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
-13-
<PAGE>
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.
At February 28, 1998, the Company and its subsidiaries had approximately
166 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 1,170,815 shares of common stock.
Non-Qualified Stock Option Plan. The Board of Directors of the Company
adopted the NonQualified 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
NonQualified 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, 1998 the Company and its subsidiaries had approximately 166
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
-14-
<PAGE>
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 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, 1997, 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 220,000 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.
-15-
<PAGE>
At February 28, 1998, the Company and its subsidiaries had approximately
166 employees who are eligible to participate in the Employee Stock Purchase
Plan, of which 11 employees are actually participating in the Employee Stock
Purchase Plan.
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 1997.
-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, 1997, 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, 1992 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 TOTAL 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-12/31/92 $100 $100 $100 $100
FYE 12/31/93 $143 $110 $116 $123
FYE 12/31/94 $ 71 $112 $111 $143
FYE 12/31/95 $ 71 $154 $167 $207
FYE 12/31/96 $112 $189 $169 $237
FYE 12/31/97 $ 98 $252 $235 $268
<FN>
** Assumes $100 invested on December 31, 1992 in Intellicall Common Stock,
the S&P Index, the S&P Telephone Manufacturer's Indexand the S&P High Tech
Composite Index
* Total return assumes reinvestment of dividends
</FN>
</TABLE>
-17-
<PAGE>
PROPOSAL TO AMEND THE COMPANY'S 1991 STOCK OPTION PLAN
General
In 1991 the Incentive Stock Option Plan (the "Incentive Plan") was restated
in its entirety, along with the 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 1,525,000 shares to
1,995,000 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, 1998 is approximately 166.
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 27, 1998, the closing sales price of the Company's Common Stock
as reported on the New York Stock Exchange was $4.75.
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
- 19 -
<PAGE>
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.
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 1997
<TABLE>
<CAPTION>
Name Dollar Value(1) Number of Options
---- --------------- -----------------
<S> <C> <C>
William O. Hunt $ 0 --
John J. McDonald, Jr. $ 0 120,000
John M. Carradine $ 0 17,500
All Officers $ 0 137,500
All Non-officer Directors $ 0 --
All Employees $ 0 239,880
- ---------------
<FN>
(1) At the grant date exercise price equalled fair market value of the
shares available under this plan. In addition, subject to the increase
contemplated by this Amendment, the Compensation Committee in February
1998 granted to Mr. McDonald options to purchase 180,000 shares of
common stock.
</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 received
pursuant to the exercise of an incentive stock option and
- 21 -
<PAGE>
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.
- 22 -
<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, 1998 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, 1997 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, 1998.
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 Shareholder Services, L.L.C. 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.
- 23 -
<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/ John M. Carradine
John M. Carradine
Secretary
Carrollton, Texas
April 3, 1998
- 24 -
EXHIBIT A
AS AMENDED MAY 11, 1995
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.
- 2 -
<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.
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(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;
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(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: 1,525,000 Shares (1,995,000 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
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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.
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<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.
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<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.
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<PAGE>
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 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.
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<PAGE>
(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.
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.
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<PAGE>
(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.
(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
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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 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.
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