INTELLICALL, INC.
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby (1) acknowledges receipt of the Notice of Annual Meeting
of Stockholders of Intellicall, Inc. (the "Company") will be held at the Addison
Conference and Theatre Centre, 15650 Addison Road, Addison, Texas 75248, on
Thursday, May 6, 1999, 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 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 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 ratify the appointment of independent public
accountants.
FOR|_| AGAINST|_| ABSTAIN|_|
3. IN THE DISCRETION OF THE PROXIES, ON ANY OTHER MATTER WHICH MAY PROPERLY
COME BEFORE THE MEETING.
Please date this proxy and sign your name exactly as it
appears hereon. Where there is more than one owner, each
should sign. When signing as an attorney, administrator,
executor guardian or trustee, please add your title as such.
If executed by a corporation, the proxy should be signed by
a duly authorized officer.
Dated:______________________________, 1999
___________________________________________
Signature of Stockholder
___________________________________________
Signature of Stockholder
Please Mark, Date, Sign and Mail Your Proxy Promptly in the Envelope Provided.
<PAGE>
INTELLICALL(R), INC.
2155 Chenault, Suite 410 Carrollton, Texas 75006-5023
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 6, 1999
To the Holders of Common Stock of
INTELLICALL, INC.:
Notice is hereby given that the 1999 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 6, 1999, at 10:00 a.m., Dallas time, for the following
purposes:
(1) To elect seven persons to serve as directors until the 2000 Annual
Meeting of Stockholders or until their successors are duly elected and
qualified. (2) To act upon a proposal to ratify the appointment of
independent public accountants. (3) To transact any other proper
business brought before the meeting or any adjournments or
postponements thereof.
The Board of Directors has fixed March 12, 1999, 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
April 1, 1999 R. Phillip Boyd,
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 6, 1999
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 1, 1999, 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 6, 1999 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, and (ii) the ratification of the appointment of independent public
accountants.
All properly executed, unrevoked proxies received before the meeting
will be voted in accordance with the directions contained therein. When no
direction has been given by a stockholder returning a proxy, the proxy will be
voted FOR the election as directors of the nominees named in this Proxy
Statement, 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, 1999 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 12,074,385
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 March 1, 1999, 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 9,
(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.
Shares of
Common Stock
Name and Address Beneficially Percentage
of Beneficial Owner(1) Owned(2) of Class
William O. Hunt (3) 962,000 7.5%
2155 Chenault, Suite 450
Carrollton, Texas 75006
Banca Del Gottardo(4) 2,340,068 16.3%
viale S. Franscini 8
6901 Lugano
Switzerland
B. Michael Adler (5) 669,313 5.5%
2155 Chenault, Suite 450
Carrollton, Texas 75006
T.J. Berthel Investments, 671,407 5.5%
L.P. (6)
100 Second St. S.E.
Cedar Rapids, Iowa 52407-4250
Neuberger & Berman, LLC(7) 1,027,100 8.5%
605 Third Avenue
New York, New York 10158
Thomas J. Berthel(6)(8) 701,407 5.7%
Lewis E. Brazelton III(9) 116,373 *
Arthur Chavoya (10) 30,000 *
Richard B. Curran(11) 103,600 *
John J. McDonald, Jr.(12) 188,800 1.5%
-2-
<PAGE>
Shares of
Common Stock
Name and Address Beneficially Percentage
of Beneficial Owner(1) Owned(2) of Class
All officers and directors as a
group (7 persons)(13) 2,771,493 20.7%
- - -------------------------
* less than one percent
(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 2,290,068 shares of common stock issuable upon conversion of
subordinated debt and 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) 192,500 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 275,000 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 30,000 shares of common stock issuable upon exercise of options.
(11) 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.
(12) Includes 180,000 shares of common stock issuable upon exercise of options.
-3-
<PAGE>
(13) Includes 1,162,500 shares of common stock issuable upon exercise of
options, 160,000 shares of common stock issuable upon conversion of a
convertible debenture held by T.J. Berthel Investments, L.P. , an affiliate
of Mr. Berthel.
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, 65 Chairman of the Board of 1992
Directors
B. Michael Adler, 52 Director 1984
Thomas J. Berthel, 47 Director (1) 1995
Lewis E. Brazelton III, 58 Director (2) 1992
Richard B. Curran, 63 Director (3) 1992
Arthur Chavoya, 51 Director(4) 1997
John J. McDonald, Jr., 49 President, Chief Executive 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.
-4-
<PAGE>
(3) Chairman of the Audit Committee and member of Organization and Compensation
Committee of the Board of Directors.
(4) Member of Organization and Compensation Committee of the Board of Directors.
</FN>
</TABLE>
William O. Hunt joined the Company in December 1992 as Chairman of the
Board, Chief Executive Officer and President. In May 1998 Mr. Hunt resigned his
position as Chief Executive Officer and President. From June 1986 to July 1992,
he was Chairman of the Board and Chief Executive Officer of Alliance
Telecommunications Corporation, a wireless telecommunications company. Mr. Hunt
serves on the boards of Optel, Inc., American Homestar Corporation and Internet
America, Inc..
B. Michael Adler is a founder of the Company and was Vice Chairman of the
Board of Directors of the Company from December 1992 until November 1993. Prior
to that time he was Chairman of the Board of Directors from the Company's
inception in November 1984. He served as Chief Executive Officer of the Company
from November 1984 to January 1988. From November 1984 to April 1987, he was
also President of the Company. For the last five years, Mr. Adler has been
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, a position he has held for the last five years. 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 Aegis 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 Executive Officer
in May 1998. Prior to that time, he was Chief Operating Officer from July 1997
and Senior Vice President - Sales and Marketing from 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
-5-
<PAGE>
Organization and Compensation Committee (the "Compensation Committee"),
currently composed of Messrs. Berthel, Brazelton, Chavoya and Curran, met four
times (in addition to actions undertaken by unanimous consent) during the fiscal
year ended December 31, 1998. This committee reviews and approves salaries and
bonuses of executive officers and administers the Company's stock option and
purchase plans. The Audit Committee, currently composed of Messrs. Berthel,
Curran and Brazelton, met four times during the fiscal year ended December 31,
1998. 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 six meetings, either in person or by telephonic
conference, during the fiscal year ended December 31, 1998. None of the
Company's directors attended fewer than 75% of the meetings of (i) the Board of
Directors and (ii) the committees on which they served, during their tenure in
calendar year 1998.
Director Compensation. During 1998 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, 1999
with respect to the executive officers of the Company.
Served as
Name and Age Position Officer Since
------------ -------- -------------
William O. Hunt, 65 Chairman of the Board 1992
of Directors
John J. McDonald, Jr., 49 President and 1997
Chief Executive Officer
R. Phillip Boyd, 41 Chief Financial Officer 1997
and Secretary
William O. Hunt and John J. McDonald, Jr. See "Election of Directors"above.
R. Phillip Boyd has been Chief Financial Officer and Secretary of the
Company since October 1998. Prior to such time, Mr. Boyd was Vice President of
Business Planning after joining the Company in November 1997 as Executive
Director of Finance. From November 1989 to August 1997, Mr. Boyd
-6-
<PAGE>
served in various executive capacities with Kemper National Services, Inc. in
Ft. Lauderdale, Florida. Mr. Boyd is a Certified Management Accountant and a
CPA.
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, 1998, The Payphone Company, Ltd. ("Payphone") owed the
Company $269,887 for trade receivables. In December 1998, management of the
Company completed the establishment of a full reserve for such amount. B.
Michael Adler is a director of Payphone and of the Company. Mr. Adler and other
members of Mr. Adler's family own the majority of 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 1998 the Company paid $100,000 in interest on
such note.
EXECUTIVE COMPENSATION
Organization and Compensation Committee Report on Executive Compensation
The Company's executive compensation plans have been designed to attract,
retain and reward high caliber executives who will formulate and execute the
business plans of the Company in a manner that will provide the stockholders of
the Company with a higher than average return on the Company's common stock
while ensuring that the Company's compensation levels are fair and appropriate
to both its executives and stockholders. With these goals in mind, the Company's
compensation plans and policies have been designed to have total compensation
linked significantly with the operating performance of the Company. Although the
Compensation Committee recognizes that the improvement of operating performance
of the Company and higher stock prices do not necessarily move in tandem over
the short term, the Compensation Committee believes that the two criteria will
correlate over the long term.
The Compensation Committee does not expect to pay above-average base
salaries to its executive officers, but does expect to utilize
performance-oriented and equity-based compensation to reward positive
performance and results. For the fiscal year 1998 the Company paid bonuses of
$71,250 to Mr. McDonald.
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
-7-
<PAGE>
intended to strengthen their identification with the stockholders of the Company
and make increasing stockholder value an even more important focus for the
Company's management group. In addition, the Compensation Committee believes
that the use of equity-based compensation combined with a focus on the operating
performance of the Company will create a balance of these two long-term
objectives.
CEO Compensation
John J. McDonald, Jr. is the President and Chief Executive Officer of the
Company.
Mr. McDonald's compensation package was established by the Compensation
Committee and the Board of Directors in May 1998. The Compensation Committee and
the Board were advised by an independent compensation consulting firm.
In accordance with Mr. McDonald's stated goal of building stockholder value
and consistent with the Compensation Committee's compensation philosophy
described above, a compensation package involving a lower base salary,
participation in a performance-based bonus plan and a stock option grant was
agreed upon.
Mr. McDonald's base salary in 1998 was set at $285,000 and it was agreed
that he would participate in a bonus plan. Based upon the advice of its
independent compensation consultant, the Compensation Committee concluded that
Mr. McDonald's proposed salary and bonus arrangements were reasonable and were
well within the range of similar arrangements made by comparable companies.
In 1998 Mr. McDonald was granted options to purchase 180,000 shares of the
Company's common stock under the Company's 1991 Stock Option Plan. The options
vest in accordance with the Company's standard vesting schedule under the 1991
Incentive Stock Option Plan. The Compensation Committee concluded that this
stock option grant was justified given Mr. McDonald'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
Arthur Chavoya
Richard B. Curran
-8-
<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, 1998 and (ii) the
other four most highly compensated executive officers of the Company during
1998, for services rendered during the fiscal years ended December 31, 1998,
1997 and 1996.
<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 1998 $ 99,908 -- -- -- $1,499
Chairman of the 1997 $202,500 -- -- -- $1,012
Board of Directors, 1996 $202,500 -- -- -- $981
and Chief Executive
Officer to May 1998
John J. McDonald, Jr. 1998 $260,156 71,250 -- 180,000 $2,500
President and Chief 1997 $185,896 46,800 -- 120,000 $2,375
Executive Officer from 1996 -- -- -- --
May 1998, Senior Vice
President - Sales and
Marketing
- - --------------------
<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>
-9-
<PAGE>
1998 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.
<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) 1998 Price Date 5% 10%
---- ---------- ---- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
William O. Hunt -- -- -- -- -- --
John J. McDonald, Jr. 180,000 75.8% $4.625 2/19/08 $1,356,055 $2,159,291
<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>
1998 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 1998 and
unexercised options held as of December 31, 1998.
<TABLE>
<CAPTION>
Value of
Number Unexercised
Shares of Unexercised In-the-Money
Acquired Options at Options at
on Value December 31, 1998 December 31, 1998(1)
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William O. Hunt -- -- 670,000 -- $ 0 $ 0
John J. McDonald, Jr. -- -- 180,000 120,000 $ 0 $ 0
- - --------------------
<FN>
(1) Market value of underlying securities at December 31, 1998 less the exercise
price.
</FN>
</TABLE>
Director Compensation
See "Election of Directors - Director Compensation" for a discussion of
director compensation.
-10-
<PAGE>
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 1,995,000 shares of common stock are
authorized to be issued under the Incentive Stock Option Plan. The purpose of
the Incentive Stock Option Plan is to provide a means whereby the Company may,
through the grant of options, attract and retain persons of ability as
employees. The Incentive Stock Option Plan is also intended to motivate such
persons to exert their best efforts on behalf of the Company.
The Incentive Stock Option Plan is administered by the Compensation
Committee. Options for the purchase of common stock under the Incentive Stock
Option Plan may be granted to key employees selected from time to time by the
Compensation Committee. Only directors who are employees are eligible to receive
options under the Incentive Stock Option Plan. The Compensation Committee
determines the exercise price of such options at the time of grant. The exercise
price of any options granted pursuant to the Incentive Stock Option Plan will be
at least equal to the fair market value of the common stock on the date the
options are granted. Each option has a term of up to 10 years and is exercisable
only at such times as the Compensation Committee determines at the time of
grant. The option period automatically terminates three months following the
date the holder ceases to be an employee of the Company for any reason. No cash
consideration is paid by the employee upon the grant of an option to him. To
exercise the options, grantees must pay the exercise price in cash or common
stock, or any combination of cash or common stock.
Options granted under the Incentive Stock Option Plan may be "Incentive
Stock Options" within the meaning of Section 422 of the Internal Revenue Code of
1986 (the "Code"), non-qualified options (options which do not meet the
requirements of Section 422 of the Code), or both. The Incentive Stock Option
Plan contains various provisions to ensure that Incentive Stock Options comply
with Section 422.
At March 1, 1999, the Company and its subsidiaries had approximately 139
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 1,229,205 shares of common stock.
-11-
<PAGE>
Non-Qualified Stock Option Plan. The Board of Directors of the Company
adopted the Non-Qualified Stock Option Plan for officers, directors and key
employees of the Company and its subsidiaries. The Non-Qualified Stock Option
Plan has been approved by the stockholders of the Company. Up to 600,000 shares
of common stock are authorized to be issued under the Non-Qualified Stock Option
Plan. The purpose of the Non-Qualified Stock Option Plan is to provide a means
whereby the Company may, through the grant of options, attract and retain
persons of ability as officers, directors and employees. The Non-Qualified Stock
Option Plan is also intended to motivate such persons to exert their best
efforts on behalf of the Company.
The Non-Qualified Stock Option Plan is administered by the Compensation
Committee of the Board of Directors. Options for the purchase of common stock
under the Non-Qualified Stock Option Plan may be granted to key individuals
selected from time to time by the Compensation Committee. No director is
eligible to receive options under the Non-Qualified Stock Option Plan while such
director is a member of the Compensation Committee. Furthermore, only directors
who are employees are eligible to receive options under the Non-Qualified Stock
Option Plan. The exercise price for any options granted pursuant to the
Non-Qualified Stock Option Plan is determined by the Compensation Committee on
the date the options are granted and must be at least equal to 85% of the fair
market value of the common stock on the date of grant. Each option has a term of
up to 10 years and is exercisable only at such times as the Compensation
Committee determines at the time of grant. The option period automatically
terminates three months following the date the holder ceases to be an employee
of the Company for any reason. No cash consideration is paid by the employee
upon the grant of an option to him. To exercise the options, grantees must pay
the exercise price in cash, common stock, a promissory note or any combination
of the foregoing.
At March 1, 1999 the Company and its subsidiaries had approximately 139
employees who were eligible to participate in the Non-Qualified Stock Option
Plan. At present, William O. Hunt holds options granted under the Non-Qualified
Stock Option Plan to purchase an aggregate of 430,000 shares of common stock,
and B. Michael Adler holds options granted under the Non-Qualified Stock Option
Plan to purchase an aggregate of 170,000 shares of common stock.
Directors' Stock Option Plan. The Board of Directors of the Company adopted
the Directors' Stock Option Plan for non-employee directors of the Company. Up
to 350,000 shares are authorized to be issued under the Director's Stock Option
Plan. The purpose of the Directors' Stock Option Plan is to provide a means
whereby the Company may, through the grant of options, attract, motivate and
retain qualified, non-employee directors.
The Directors' Stock Option Plan is administered by the Compensation
Committee of the Board of Directors. Options for the purchase of common stock
under the Directors' Stock Option Plan are automatically granted to each
non-employee director. In December 1992, the Board of Directors amended the
Directors' Stock Option Plan to provide the automatic grant as follows:
(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
-12-
<PAGE>
(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, 1998, the Company and its subsidiaries had 7 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 245,000 shares of common stock.
Employee Stock Purchase Plan
The Board of Directors of the Company adopted the 1995 Employee Stock
Purchase Plan for employees of the Company and its subsidiaries. The
stockholders of the Company approved the plan in 1996. Up to 300,000 shares of
common stock are authorized to be issued under the Employee Stock Purchase Plan.
The purpose of the Employee Stock Purchase Plan is to provide employees of the
Company and its designated subsidiaries with an opportunity to purchase common
stock of the Company at a discount through accumulated payroll deductions. The
Employee Stock Purchase Plan is also intended to motivate such persons to exert
their best efforts on behalf of the Company.
The Employee Stock Purchase Plan is administered by the Compensation
Committee of the Board of Directors. Participating employees are entitled to
enroll during one or both of two six month offering periods during each calendar
year. Eligible employees may elect to have payroll deductions made on each
payday during each offering period in an amount not exceeding ten percent (10%)
of the compensation which he or she receives on each such payday. At the end of
each offering period the accumulated payroll deductions are utilized to purchase
shares of common stock from the Company pursuant to the exercise of options
granted at the beginning of each offering period. The purchase price for the
shares purchased with the payroll deductions is equal to eighty-five percent
(85%) of the fair market value of a share of common stock on the first trading
day or the last trading day of each offering period, whichever is lower.
At March 1, 1999, the Company and its subsidiaries had approximately 139
employees who are eligible to participate in the Employee Stock Purchase Plan,
of which 4 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.
-13-
<PAGE>
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 1998.
-14-
<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, 1998, with the cumulative total return of (i)
Standard & Poors--500 Stock Index, (ii) the Standard & Poors Small Cap 600 Index
and (iii) the Standard & Poors Telephone Manufacturers Index. The comparison
assumes $100 was invested on December 31, 1993 in the Company's common stock and
in each of the other indices and assumes reinvestment of dividends. The Company
paid no dividends during the five year period.
<TABLE>
<CAPTION>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN AMONG INTELLICALL,
S&P 500 INDEX, S&P SMALL CAP 600 INDEX, AND
S&P TELEPHONE MANUFACTURER'S INDEX.
S&P
Measurement Period S&P Small Cap 600 Telephone Manufacturer's
(Fiscal Year Covered) Intellicall 500 Index Index Composite Index
- - --------------------- ----------- --------- ----- ---------------
<S> <C> <C> <C> <C>
Measurement Pt-12/31/93 $100 $100 $100 $100
FYE 12/31/94 $ 50 $101 $ 95 $ 96
FYE 12/31/95 $ 50 $139 $124 $144
FYE 12/31/96 $ 78 $171 $150 $146
FYE 12/31/97 $ 68 $229 $189 $204
FYE 12/31/98 $ 29 $294 $194 $300
** Assumes $100 invested on Devember 31, 1993 in Intellicall Common Stock, the
S&P 500 Index, the S&P Smallcap 600, and the S&P Telephone Index
* Total return assumes re-investment of dividents
</TABLE>
-15-
<PAGE>
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors of the Company has selected the firm of
PriceWaterhouseCoopers 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, 1999 and recommends to the shareholders that such
selection be ratified and approved at the meeting. The firm of
PriceWaterhouseCoopers LLP examined the financial statements of the Company for
the year ended December 31, 1998 and is considered by the Board of Directors to
be well qualified.
Representatives of PriceWaterhouseCoopers 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 PriceWaterhouseCoopers LLP as independent public accountants of the
Company.
STOCKHOLDER PROPOSALS
In order for stockholder proposals to receive consideration for inclusion
in the Company's 2000 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, 1999.
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 $4,000.00.
-16-
<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/ R. Phillip Boyd
dated R. Phillip Boyd
4-1-99 Secretary
Carrollton, Texas
April 1, 1999
-17-
