EXECUTIVE TELECARD LTD, DEF 14A, 1998-01-29

EXECUTIVE TELECARD LTD
DEF 14A, 1998-01-29
BUSINESS SERVICES, NEC

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|

Check the appropriate box:

|_| Preliminary Proxy Statement
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

EXECUTIVE TELECARD, LTD.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):

|X| No fee required.
|_| $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-6(j)(2).
|_| $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

1) Title of each class of securities to which transaction applies:

-----------------------------------------------------------------------------

2) Aggregate number of securities to which transaction applies:

-----------------------------------------------------------------------------

3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*

-----------------------------------------------------------------------------

4) Proposed maximum aggregate value of transaction:

-----------------------------------------------------------------------------

|_| Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or schedule
and the date of its filing.

1) Amount previously paid: _________________________________________________

2) Form, Schedule or Registration No. ______________________________________

3) Filing party: ___________________________________________________________

4) Date filed: _____________________________________________________________

___________
*Set forth the amount on which the filing fee is calculated and state how it was
determined.

<PAGE>

EXECUTIVE TELECARD, LTD.
1720 S. BELLAIRE STREET
10TH FLOOR
DENVER, COLORADO 80222

January 29, 1998

Dear Stockholder:

You are cordially invited to attend the 1997 Annual Meeting of Stockholders
of Executive TeleCard, Ltd., to be held on Thursday, February 26, 1998 at 9:00
a.m., local time, at the Embassy Suites, 7525 E. Hampden Avenue, Denver,
Colorado.

The matters to be acted upon at the Annual Meeting, as well as other
important information, are set forth in the accompanying Notice of Annual
Meeting and Proxy Statement which you are urged to review carefully.

Regardless of your plans for attending in person, it is important that your
shares be represented and voted at the Annual Meeting. Accordingly, you are
requested to complete, sign, date, and return the enclosed proxy card in the
enclosed postage paid envelope. Signing this proxy will not prevent you from
voting in person should you be able to attend the meeting, but will assure that
your vote is counted if, for any reason, you are unable to attend.

We hope that you can attend the 1997 Annual Meeting of Stockholders. Your
interest and support in the affairs of Executive TeleCard, Ltd. are appreciated.

Sincerely,

CHRISTOPHER J. VIZAS
Chairman and Chief Executive Officer

Denver, Colorado
January 29, 1998

<PAGE>

EXECUTIVE TELECARD, LTD.

1720 S. BELLAIRE STREET
10TH FLOOR
DENVER, COLORADO 80222
(303) 691-2115

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 26, 1998

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting) of Executive TeleCard, Ltd., a Delaware corporation (the "Company")
will be held on Thursday, February 26, 1998, at 9:00 a.m., local time, at the
Embassy Suites, 7525 E. Hampden Avenue, Denver, Colorado, and thereafter as it
may from time to time be adjourned for the purposes stated below:

1. elect eight directors to the Board of Directors to serve until the next
annual meeting of stockholders and until their successors have been duly
elected and qualified (Proposal 1, see page 6);

2. approve the adoption of amendments to the Company's 1995 Employee Stock
Option and Appreciation Rights Plan, including an increase from 1,000,000
to 1,750,000 in the number of shares authorized to be issued pursuant to
options granted under such plan (Proposal 2, see page 18);

3. approve the adoption of amendments to the Company's 1995 Directors Stock
Option and Appreciation Rights Plan (Proposal 3, see page 24);

4. ratify the appointment by the Board of Directors of the firm of BDO
Seidman, LLP as independent accountants of the Company for the fiscal year
ending March 31, 1998 (Proposal 4, see page 29);

5. ratify the change in the Company's fiscal year from a fiscal year ending
March 31 to a fiscal year ending December 31, commencing with the fiscal
year beginning April 1, 1998 (Proposal 5, see page 30); and

6. to transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.

All stockholders of the Company are cordially invited to attend the Annual
Meeting. Only holders of record of the Company's common stock, par value $.001,
at the close of business on January 23, 1998, will be entitled to notice of and
to vote at the Annual Meeting and any adjournment or adjournments thereof. The
stock transfer books of the Company will not be closed.

BY ORDER OF THE BOARD OF DIRECTORS

ANTHONY BALINGER
Secretary

January 29, 1998

IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR
NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, DATE, SIGN, AND
RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES. YOU MAY, IF YOU WISH, REVOKE YOUR PROXY
AT ANY TIME PRIOR TO THE TIME IT IS VOTED.

<PAGE>

EXECUTIVE TELECARD, LTD.
1720 S. BELLAIRE STREET
10TH FLOOR
DENVER, COLORADO 80222

PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 26, 1998

This Proxy Statement ("Proxy Statement") is furnished to stockholders of
Executive TeleCard, Ltd. (the "Company" or "Executive TeleCard") in connection
with the solicitation by the Board of Directors of the Company of proxies to be
used at the 1997 Annual Meeting of Stockholders of the Company (the "Annual
Meeting") and at any adjournments thereof. The Annual Meeting will be held on
Thursday, February 26, 1998 at 9:00 a.m., local time, at the Embassy Suites,
7525 E. Hampden Avenue, Denver, Colorado, and thereafter as it may from time to
time be adjourned, for the purposes stated below.

The Company has generally held its annual meetings of stockholders during
July or August. For the Company's fiscal year ended March 31, 1997, the Company
has delayed holding the 1997 Annual Meeting of Stockholders because of various
changes in the Company's management and direction starting in June 1997,
including the termination of employment of certain executive officers, the
resignation of certain directors and the appointment of three new directors, and
ending with the engagement of a new chief executive officer in December 1997.
The Company filed an amendment to its Annual Report on Form 10-K for its fiscal
year ended March 31, 1997 (the "Form 10-K Amendment") with the Securities and
Exchange Commission ("SEC"), which Form 10-K Amendment is incorporated herein by
reference, and included therein the required information which normally would be
contained in the Company's proxy statement with respect to the fiscal year ended
March 31, 1997. Copies of such Form 10-K Amendment are available from the
Company upon request, as indicated below. This Proxy Statement updates such
information to reflect the recent changes in management. The Company intends
following the Annual Meeting to hold its next annual meeting during August or
September 1998. Thereafter, because of the change in the Company's fiscal year
from a fiscal year ending March 31 to a fiscal year ending December 31 (see
"Ratification of Change in the Company's Fiscal Year" below), the Company
intends to hold annual meetings in May.

At the Annual Meeting, stockholders will be asked to:

1. elect eight directors to the Board of Directors to serve until the next
annual meeting of stockholders and until their successors have been duly
elected and qualified (Proposal 1, see page 6);

3. approve the adoption of amendments to the Company's 1995 Directors Stock
Option and Appreciation Rights Plan (the "Directors Stock Option Plan")
(Proposal 3, see page 24);

4. ratify the appointment by the Board of Directors of the firm of BDO
Seidman, LLP as independent accountants of the Company for the fiscal year
ending March 31, 1998 (Proposal 4, see page 29);

6. to transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.

<PAGE>

All Proxies in the enclosed form of proxy that are properly executed and
returned to the Company prior to commencement of voting at the Annual Meeting
will be voted at the Annual Meeting or any adjournments or postponements thereof
in accordance with the instructions thereon. EXECUTED BUT UNMARKED PROXIES WILL
BE VOTED FOR APPROVAL OF THE PROPOSALS SET FORTH IN THIS PROXY STATEMENT. The
management of the Company does not know of any matters other than those set
forth herein which may come before the Annual Meeting. If any other matters
should properly come before the Annual Meeting, Proxies will be voted in the
discretion of the proxy holders.

The approximate date on which this Proxy Statement and form of proxy are
first being sent or given to stockholders is January 29, 1998.

The cost of soliciting Proxies in the form enclosed herewith will be borne
entirely by the Company. In addition to the solicitation of Proxies by mail,
Proxies may be solicited by officers and directors and regular employees of
Executive TeleCard, without additional remuneration, by personal interviews,
telephone, telegraph or otherwise. Executive TeleCard may also utilize the
services of its transfer agent, American Stock Transfer & Trust Company, to
provide broker search and proxy distribution services at an estimated cost of
$2,500. Copies of solicitation material may be furnished to brokers, custodians,
nominees and other fiduciaries for forwarding to beneficial owners of shares of
the Company's $.001 par value common stock ("Common Stock"), and normal handling
charges may be paid for such forwarding service.

A COPY OF THE ANNUAL REPORT TO STOCKHOLDERS FOR THE FISCAL YEAR ENDED MARCH
31, 1997 ACCOMPANIES THIS PROXY STATEMENT. EXECUTIVE TELECARD HAS FILED AN
ANNUAL REPORT ON FORM 10-K FOR ITS FISCAL YEAR ENDED MARCH 31, 1997, INCLUDING
THE FORM 10-K AMENDMENT, WITH THE SEC. STOCKHOLDERS MAY OBTAIN, FREE OF CHARGE,
A COPY OF THE ANNUAL REPORT ON FORM 10-K, INCLUDING THE FORM 10-K AMENDMENT, BY
WRITING TO EXECUTIVE TELECARD, LTD., 1720 S. BELLAIRE STREET, 10TH FLOOR,
DENVER, COLORADO 80222, ATTENTION: ANTHONY BALINGER, SECRETARY.

THE BOARD OF DIRECTORS OF EXECUTIVE TELECARD RECOMMENDS THAT STOCKHOLDERS
VOTE FOR APPROVAL OF THE PROPOSALS SET FORTH IN THIS PROXY STATEMENT.

2
<PAGE>

SHARES OUTSTANDING AND VOTING RIGHTS

All voting rights are vested exclusively in the holders of the Company's
Common Stock, and only stockholders of record at the close of business on
Friday, January 23, 1998, are entitled to notice of and to vote at the Annual
Meeting or any adjournment thereof. On January 23, 1998, the Company had
18,015,653 shares of its Common Stock outstanding, each share of which is
entitled to one vote on all matters to be voted upon at the Annual Meeting,
including the election of Directors. Cumulative voting in the election of
Directors is not permitted.

A majority of the Company's outstanding Common Stock represented in person
or by Proxy and entitled to vote will constitute a quorum at the Annual Meeting.
Any stockholder present in person or by Proxy who abstains from voting on any
particular matter described herein will be counted for purposes of determining a
quorum. For purposes of voting on the matters described herein, at any meeting
of stockholders at which a quorum is present, the required vote is as follows:
(i) the affirmative vote of a plurality of the shares of Common Stock present or
represented by Proxy at the Annual Meeting is required to elect the eight
nominees for Directors and (ii) the affirmative vote of a majority of the shares
present or represented by Proxy at the Annual Meeting will be required to
approve the other matters at the Annual Meeting. In such a case, the aggregate
number of votes cast by all stockholders present in person or by Proxy will be
used to determine whether a motion will carry. Accordingly, an abstention from
voting on a matter by a stockholder present in person or by Proxy at the Annual
Meeting will have no effect on the item on which the stockholder abstains from
voting. In addition, although broker "non-votes" will be counted for purposes of
determining a quorum, they will have no effect on the vote on matters at the
Annual Meeting. All valid Proxies received may be voted at the discretion of the
Proxies named therein for adjournments or postponements or other matters that
may properly come before the Annual Meeting. The Proxies may exercise their
discretion to vote all valid Proxies for an adjournment or postponement in the
absence of a quorum, to the extent necessary to facilitate the tabulation
process or in other cases.

SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth the number and percentage of shares of the
Company's Common Stock owned beneficially, as of December 31, 1997, by each
Director and Executive Officer of the Company, and by all Directors and
Executive Officers of the Company as a group. Information as to beneficial
ownership is based upon statements furnished to the Company by such persons.

<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME AND ADDRESS OWNED OF RECORD COMMON STOCK
OF BENEFICIAL OWNER AND BENEFICIALLY (1) OUTSTANDING (2)
- -------------------------------- ---------------------- ----------------
<S> <C> <C>
Christopher J. Vizas ......... 90,000(3) *
2000 Pennsylvania Avenue, N.W.
Suite 4800
Washington, D.C. 20006
Edward J. Gerrity, Jr. ......... 86,791(4) *
7 Sunset Lane Rye,
New York 10580
Anthony Balinger ............... 95,310(5) *
450 Tappan Road
Norwood, New Jersey 07648
David W. Warnes ............... 21,000(6) *
1330 Charleston Road
Mountain View, California 94043
Richard A. Krinsley ............ 65,182(7) *
201 West Lyon Farm
Greenwich, Connecticut 06831
</TABLE>

3
<PAGE>

<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME AND ADDRESS OWNED OF RECORD COMMON STOCK
OF BENEFICIAL OWNER AND BENEFICIALLY (1) OUTSTANDING (2)
- ---------------------------------------------- ---------------------- ----------------
<S> <C> <C>
Martin L. Samuels ........................... 62,000(8) *
3675 Delmont Avenue
Oakland, California 94605
Donald H. Sledge ........................... 20,000(9) *
2033 N. Main Street
Suite 340
Walnut Creek, California 94043
James O. Howard .............................. 0 0%
2601 Airport Drive, Suite 370
Torrance, California 90505
Allen Mandel ................................. 116,901(10) *
9362 S. Mountain Brush Street
Highlands Ranch, Colorado 80126
All Named Executive Officers and
Directors as a Group (9 persons) (11) ...... 557,184 3.2%
</TABLE>

- ----------
* Less than 1%

(1) In accordance with Rule 13d-3 under the Exchange Act, a person is deemed to
be a "beneficial owner" of a security if he or she has or shares the power
to vote or direct the voting of such security or the power to dispose or
direct the disposition of such security. A person is also deemed to be a
beneficial owner of any securities of which that person has the right to
acquire beneficial ownership within 60 days from December 31, 1997. More
than one person may be deemed to be a beneficial owner of the same
securities. All persons shown in the table above have sole voting and
investment power, except as otherwise indicated. This table includes shares
of Common Stock subject to outstanding options granted pursuant to the
Company's option plans.

(2) For the purpose of computing the percentage ownership of each beneficial
owner, any securities which were not outstanding but which were subject to
options, warrants, rights or conversion privileges held by such beneficial
owner exercisable within 60 days were deemed to be outstanding in
determining the percentage owned by such person, but were not deemed
outstanding in determining the percentage owned by any other person.

(3) Includes options to purchase 50,000 shares of Common Stock exercisable
within 60 days from December 31, 1997. Does not include options to purchase
450,000 shares of Common Stock which are not exercisable within such
period.

(4) Includes 1,100 shares held by Mr. Gerrity as a trustee and options to
purchase 75,691 shares of Common Stock exercisable within 60 days from
December 31, 1997. Does not include options to purchase 10,000 shares of
Common Stock which are not exercisable within such period.

(5) Includes options to purchase 74,310 shares of Common Stock exercisable
within 60 days from December 31, 1997. Does not include options to purchase
10,000 shares of Common Stock which are not exercisable within such period.

(6) Consists solely of options to purchase Common Stock exercisable within 60
days from December 31, 1997. Does not include options to purchase 10,000
shares of Common Stock which are not exercisable within such period.

(7) Includes options to purchase 21,000 shares of Common Stock exercisable
within 60 days from December 31, 1997. Does not include options to purchase
10,000 shares of Common Stock which are not exercisable within such period.

(8) Includes 57,000 shares held by Mr. Samuels as an estate executor and
options to purchase 5,000 shares of Common Stock exercisable within 60 days
from December 31, 1997. Does not include options to purchase 10,000 shares
of Common Stock which are not exercisable within such period.

(9) Consists solely of options to purchase Common Stock exercisable within 60
days from December 31, 1997. Does not include options to purchase 10,000
shares of Common Stock which are not exercisable within such period.

(10) Consists solely of options to purchase Common Stock exercisable within 60
days from December 31, 1997.

(11) Includes options to purchase 383,902 shares of Common Stock exercisable
within 60 days from December 31, 1997. Does not include options to purchase
510,000 shares of Common Stock not exercisable within such period.

<PAGE>

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table sets forth the number and percentage of shares of the
Company's Common Stock owned beneficially, as of December 31, 1997, by any
person who is known to the Company to be the beneficial owner of 5% or more of
such Common Stock. Information as to beneficial ownership is based upon
statements furnished to the Company by such persons.

- ----------
(1) In accordance with Rule 13d-3 under the Exchange Act, a person is deemed to
be a "beneficial owner" of a security if he or she has or shares the power
to vote or direct the voting of such security or the power to dispose or
direct the disposition of such security. A person is also deemed to be a
beneficial owner of any securities of which that person has the right to
acquire beneficial ownership within 60 days from December 31, 1997. More
than one person may be deemed to be a beneficial owner of the same
securities. All persons shown in the table above have sole voting and
investment power, except as otherwise indicated.

(3) Includes options to purchase 200,000 shares of Common Stock. Also includes
440,121 shares of the Company's Common Stock owned by Residual Corporation
("Residual") (64.8% of 679,199 shares). NDS is the stockholder of record of
64.8% of the outstanding shares of Residual. If all of the 679,199 shares of
the Company owned by Residual were included, the number of shares held by
NDS would increase to 1,910,349 (10.8%). NDS has disclaimed beneficial
ownership of all of the shares owned by Residual in its statement filed with
the Company. If none of the shares owned by Residual were included, NDS
would beneficially own 1,231,150 shares (7.0%).

<PAGE>

MATTERS TO BE ACTED UPON

ELECTION OF DIRECTORS
(PROPOSAL 1)

The Board of Directors recommends the election as Directors of the eight
(8) nominees listed below. The eight nominees, if elected, will hold office
until the next annual meeting of stockholders and until their successors are
elected and qualified or until their earlier death, resignation or removal. IT
IS INTENDED THAT SHARES REPRESENTED BY PROXIES IN THE ACCOMPANYING FORM WILL BE
VOTED "FOR" THE ELECTION OF THE NOMINEES NAMED BELOW UNLESS A CONTRARY DIRECTION
IS INDICATED. If at the time of the Annual Meeting any of the nominees named
below should be unable to serve, which event is not expected to occur, the
discretionary authority provided in the Proxy will be exercised to vote for such
substitute nominee or nominees, if any, as shall be designated by the Board of
Directors.

The following table sets forth the name and age of each nominee for
Director, indicating all positions and offices with the Company currently held
by him, and the period during which he has served as a Director:

<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE (1) AGE POSITION WITH THE COMPANY SINCE
- ------------------------------ ----- ---------------------------------------- ---------
<S> <C> <C> <C>
Christopher J. Vizas ......... 47 Chairman of the Board and Chief Execu- 1997
tive Officer
Edward J. Gerrity, Jr. ...... 74 Director 1987
Anthony Balinger ............ 44 Vice Chairman, and Secretary, Director 1995
David W. Warnes ............ 51 Director 1995
Richard A. Krinsley ......... 67 Director 1995
Martin L. Samuels ............ 54 Director 1997
Donald H. Sledge ............ 57 Director 1997
James O. Howard ............ 55 Director 1998
</TABLE>

- ----------
(1) Two former directors, Ronald L. Jensen and Ronald W. Howard, served as
members of the Board from June 1997 until their resignation in September
1997. Arthur H. Fredston, a former director, served as a member of the Board
from August 1997 until his resignation in September 1997. They are not
standing for election.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.

<PAGE>

DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

Set forth below are the names of all Directors and Executive Officers of
the Company, all positions and offices held by each such person, the period
during which he has served as such, and the principal occupations and employment
of each such Person during the last five years:

CHRISTOPHER J. VIZAS has been a Director of the Company since October 25,
1997 and the Chairman of the Board of Directors since November 10, 1997. Mr.
Vizas served as the Company's acting Chief Executive Officer from November 10,
1997 to December 5, 1997, on which date he became the Company's Chief Executive
Officer. Prior to joining the Company, Mr. Vizas was a co-founder of, and since
October 1995, has served as Chief Executive Officer of Quo Vadis International,
an investment and financial advisory firm. Prior to forming Quo Vadis
International, he was Chief Executive Officer of Millennium Capital Development,
a merchant banking firm, and of its predecessor Kouri Telecommunications &
Technology. From April 1987 to 1992, Mr. Vizas served as Vice Chairman of Orion
Network Systems, Inc., a satellite communications company, and served as a
Director of Orion Network Systems, Inc. from 1982 until 1992. Mr. Vizas has held
various positions in the United States government.

EDWARD J. GERRITY, JR. has been a Director of the Company since its
inception. He is a business consultant and President of Ned Gerrity &
Associates, a consulting firm, begun in 1985. Mr. Gerrity has also served as
Chairman of the Company's Board of Directors. Mr. Gerrity served as an officer
of ITT Corp. from 1961 to 1985. While at ITT Corp., he was a member of the
Management Policy Committee, Director of Corporate and Government Relations on a
worldwide basis and a Director of several ITT Corp. subsidiaries. He retired
from ITT Corp. in February 1985. Mr. Gerrity was the President of American
National Collection Corp., a New York corporation, from 1993 to 1995 and he was
a director of Residual Corporation from 1987 until October 1994. See "Certain
Relationships and Related Transactions" below.

ANTHONY BALINGER has been a Director of the Company since March 15, 1995.
He served as the Company's President from April 25, 1995 to November 10, 1997
and he also served as the Company's Chief Executive Officer from January 3, 1997
to November 10, 1997. On November 10, 1997, he was appointed Senior Vice
President and Vice Chairman of the Company. He has held a variety of positions
at the Company since his arrival in September 1993, including Chief Operating
Officer and Director of the Company's Asia-Pacific Operations. Mr. Balinger
started his career in 1971 with British Telecom as a digital systems design
engineer. In 1983, he joined the Cable & Wireless Federation, an international
alliance of companies that provide telephone, cable and wireless operations in
over 50 countries, where he performed much of the early design work for the
Mercury Communications Optical Fiber National Digital Network. In 1989, Mr.
Balinger moved to New York where he headed the Banking and Finance division for
Cable & Wireless Americas, Inc. from 1989 to 1992. In 1992, while still at Cable
& Wireless, Mr. Balinger was appointed International Product Manager for Optus
Communications, where he remained until he joined the Company. Mr. Balinger is a
Director and 45% stockholder of Executive Card Services HK Ltd. which provides
printing services to an affiliate of the Company in Hong Kong. See "Certain
Relationships and Related Transactions" below.

DAVID W. WARNES has been a Director since June 30, 1995. He currently holds
the positions of President and Chief Executive Officer of Vitacom, which
provides satellite communications in the Far East and Latin America, a company
he joined in October 1995 as Chief Operating Officer. From August 1994 until
October 1995 he was Assistant Managing Director (Deputy CEO) of Tele2, Sweden, a
member of the Cable & Wireless Federation. From 1992 to 1994, Mr. Warnes was
Vice President Operations of Tele2, and in that role launched card services for
Tele2 with the Company. Mr. Warnes has been in the telecommunications industry
since 1962. From 1962 to 1992, he held various management positions at Mercury
Communications Ltd., Cable & Wireless and Commonwealth Telecommunications
Organization. Mr. Warnes is a Chartered Engineer, is a Fellow of the Institute
of Electrical Engineers and has extensive telecommunications engineering
experience.

RICHARD A. KRINSLEY has been a Director of the Company since June 30, 1995.
Mr. Krinsley retired in 1991 as the Executive Vice President and Publisher of
Scholastic Inc., a publicly held company traded on the Nasdaq Stock Market. He
is presently, and has been since 1991, a member of Scholastic's

<PAGE>

Board of Directors. While employed by Scholastic between 1983 and 1991, Mr.
Krinsley, among many other duties, served on that company's management
committee. From 1961 to 1983, Mr. Krinsley was employed by Random House where he
held, among other positions, the post of Executive Vice President. At Random
House, Mr. Krinsley also served on that company's executive committee.

JAMES O. HOWARD has been a Director of the Company since January 16, 1998.
Since 1990, Mr. Howard has served as the Chief Financial Officer and a member of
the management committee of Benton International, Inc., a wholly owned
subsidiary of Perot Systems Corporation. From 1981 to 1990, Mr. Howard was
employed by Benton International, Inc. as a consultant and sector manager. Prior
to joining Benton International, Inc., Mr. Howard held a number of legal
positions in the federal government, including General Counsel of the National
Commission on Electronic Funds Transfer.

MARTIN SAMUELS has been a Director of the Company since October 25, 1997.
Mr. Samuels is an entrepreneur, strategic business planner and professional
investor with over twenty years of experience. Mr. Samuels' current project is
Y2K Strategies Corp. ("YSC"), a liaison company that Mr. Samuels co-founded in
1997. Mr. Samuels is a principal, director and senior vice president of YSC. Mr.
Samuels' responsibilities at YSC include identifying, negotiating with and
contracting with the Year 2000 service providers and systems integrators that
YSC assists with their marketing, proposal development and ongoing business
relationship management. YSC also works with significant public and private
sector institutions in identifying, coordinating and fulfilling their Year 2000
remediation requirements.

DONALD H. SLEDGE has been a Director of the Company since November 10,
1997. Mr. Sledge has served as vice chairman, President and Chief Executive
Officer of TeleHub Communications Corp., a privately held technology development
company, since 1996. Mr. Sledge served as President and Chief Operating Officer
of West Coast Telecommunications, Inc., a long distance company, from 1994 to
1995. From 1993 to 1994, Mr. Sledge was employed by New T&T, a Hong Kong-based
company, as its head of operations. Mr. Sledge was Chairman and Chief Executive
Officer of Telecom New Zealand International from 1991 to 1993 and the Managing
Director of Telecom New Zealand International's largest local carrier from 1988
to 1991. Mr. Sledge is currently Chairman of the Board of United Digital
Network, a small interexchange carrier that operates primarily in Texas,
Oklahoma, Arizona and California. Mr. Sledge is a member of the Board of
Advisors of DataProse and serves as a director of AirCell Communications, Inc.
He also serves as advisor and board member to several small technology-based
start-up companies.

ALLEN MANDEL, age 59, was named Senior Vice President in 1991 and a
Director of the Company in 1990. He resigned from the Board of Directors on
March 29, 1995 and as Senior Vice President on August 18, 1995 in connection
with the then ongoing proxy contest. Mr. Mandel was engaged to serve as a
consultant to the Company concerning accounting and financial matters on August
18, 1995 and was renamed an officer of the Company on September 27, 1995, when
he became Executive Vice President - Finance and Administration and Chief
Financial Officer, in which post he served until December 31, 1997. Mr. Mandel
currently serves as a Senior Vice President, Corporate Affairs of the Company
and continues to act as the Company's Chief Financial Officer until a
replacement is appointed. Mr. Mandel is a Certified Public Accountant. He was an
officer of Residual Corporation from 1991 to March 1995. See "Certain
Relationships and Related Transactions" below.

Directors are elected annually and hold office until the next annual
meeting of stockholders and until their successors are elected and qualified.
Executive Officers serve at the pleasure of the Board or until the next annual
meeting of stockholders. There are no family relationships between the Company's
Directors and Executive Officers.

During the fiscal year ending March 31, 1997, other persons served as
executive officers or directors of the Company in addition to those listed
above. Biographical information for such persons is contained in the Form 10-K
Amendment, which is available from the Company upon request, as indicated above.

<PAGE>

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

The Board is entrusted with managing the business and affairs of the
Company. Pursuant to the powers bestowed upon the Board by the Company's bylaws
(the "Bylaws"), the Board may establish committees from among its members. In
addition, the Bylaws provide that the Board must annually appoint officers of
the Company to manage the affairs of the Company on a day to day basis as set
forth in the Bylaws or as otherwise directed by the Board. The Company does not
have a Nominating Committee. During fiscal 1997, there were a total of four
meetings held by the Board of Directors. All of the Directors attended at least
75% of the meetings held by the Board of Directors during fiscal 1997.

In November 1997, the Board reconstituted the then-existing committees of
the Company as three standing committees of the Board: the Executive Committee,
the Audit & Finance Committee and the Compensation Committee.

The Executive Committee oversees activities in those areas not assigned to
other committees of the Board and has the full power and authority of the Board
to the extent permitted by Delaware law. The Company's Executive Committee is
presently comprised of Messrs. Warnes, Sledge and Vizas.

In November 1997, the Audit & Finance Committee assumed the duties of the
previous Board committee, the Audit Committee. The Audit & Finance Committee's
duties include selection of the firm of certified public accountants to audit
and report on the financial statements of the Company for the fiscal year for
which they are appointed, monitoring the effectiveness of the audit and the
Company's financial and accounting organization and financial reporting, and
consulting with the independent auditors concerning the adequacy of internal
controls. The Company's Audit & Finance Committee is presently comprised of
Messrs. Krinsley, Samuels and Vizas (in an ex officio capacity).

The Compensation Committee is responsible for approving all compensation
for senior officers and employees, makes recommendations to the Board with
respect to the grant of stock options and eligibility requirements, including
grants under and the requirements of the Company's stock option plans and may
make grants to directors under the Directors Stock Option Plan. The Company's
Compensation Committee is presently comprised of Messrs. Vizas (in an ex officio
capacity), Krinsley and Gerrity.

During fiscal 1997, the Company had four Board committees, the Executive
Committee, the Audit Committee, the Compensation Committee and the Stock Option
Committee. The Executive Committee held one meeting in fiscal 1997. The
Compensation Committee held two meetings during fiscal 1997. The Audit Committee
held one meeting during fiscal 1997. In June 1996 the Compensation Committee was
merged into the Stock Option Committee and the combined committee became known
as the Compensation Committee and assumed the functions formerly performed by
both committees. The Stock Option Committee held no meetings during fiscal 1997.
Additional information regarding such committees and their activity during
fiscal 1997 is set forth in the Form 10-K Amendment, which is available from the
Company upon request, as indicated above.

<PAGE>

EXECUTIVE COMPENSATION AND OTHER INFORMATION

The following table summarizes the compensation for the three fiscal years
ended March 31, 1997, 1996 and 1995 of the Company's Chief Executive Officer and
next mostly highly compensated Executive Officers whose salary and bonus exceed
$100,000.

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------------------------- ----------------------------
SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING
NAME AND SALARY BONUS COMPENSATION STOCK OPTIONS/SARS
PRINCIPAL POSITION YEAR ($) ($) ($) AWARDS($) (#)
- -------------------------------------- --------------- ---------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
PRESENT EXECUTIVE OFFICERS
Christopher J. Vizas
CEO(1) ............................... 1997 0 0 0 0 0
1996 0 0 0 0 0
1995 0 0 0 0 0
Anthony Balinger
President (and former CEO)(2) ........ 1997 $109,612 $8,000 $28,500 $7,875 50,000
1996 86,673 0 27,000 0 11,000
1995 70,000 0 27,000 0 0
Allen Mandel
Executive Vice President and Chief
Financial Officer .................... 1997 $105,404 $0 $0 $0 40,000
1996 101,635 0 0 0 55,000
1995 (3) 100,000 0 0 7,260
Former Executive Officers
Daryl Engelman
Former President and COO(4) .......... 1997 $0 $0 $0 $0 0
1996 15,846 0 0 0 25,000
1995 (3) 91,981 0 2,126 0 3,300
Robert N. Schuck
Former Executive Vice President(5) ... 1997 $105,404 $0 $0 $0 40,000
1996 101,635 0 0 0 55,000
1995 (3) 100,000 0 0 0 9,680
William H. Sheils
Former Senior Vice President and
COO(6) ............................... 1997 $106,038 $0 $60,390 $0 0
1996 $0 $0 $0 0 11,000
1995 $0 $0 $0 0 0
</TABLE>

- ----------

(1) Mr. Vizas has served as the Company's Chief Executive Officer since December
5, 1997. From November 10, 1997 to December 5, 1997, Mr. Vizas served as the
Company's acting Chief Executive Officer. Mr. Vizas' employment agreement
provides for a base salary of $200,000, performance based bonuses of up to
50% of base salary and options to purchase up to 500,000 shares, subject to
various performance criteria. See "Employment Agreements and Termination of
Employment and Change in Control Arrangements."

(2) Mr. Balinger served as the Company's President from April 1995 until
November 10, 1997. Mr. Balinger served as Chief Executive Officer from
January 3, 1997 through November 10, 1997. Amounts shown as Other Annual
Compensation consist of an annual housing allowance paid to Mr. Balinger
while he resided in Hong Kong and while he resides in the United States. In
fiscal 1995, Mr. Balinger's salary was paid by a Hong Kong subsidiary of the
Company, which received funds from Service 800, S.A., a subsidiary of
Residual, that was acquired by the Company from Residual on March 31, 1995
pursuant to an Asset Purchase Agreement. See "Certain Relationships and
Related Transactions" below.

(3) In fiscal 1995, the salaries of Messrs. Schuck, Mandel and Engelman were
paid by Fintel Services, Inc. pursuant to a Service Agreement between the
Company and Residual. See "Certain Relationships and Related Transactions"
below.

(4) Mr. Engelman's employment was terminated by the Company on April 25, 1995.
The options received by Mr. Engelman in fiscal 1996 were based on an
arbitration award after Mr. Engelman's termination and expired on or about
April 3, 1996. In addition, the options received in fiscal 1995 expired
after Mr. Engelman's termination.

(5) Mr. Shuck's retirement from the Company was effective as of September 20,
1997.

(6) Mr. Sheils' employment by the Company was terminated on July 15, 1997.
Amounts shown as Other Annual Compensation consist of reimbursements of
$3,211 for day care expenses, $5,688 for a car lease and insurance, and
$51,491 for relocation and temporary living costs.

10
<PAGE>

OPTION/SAR GRANTS IN LAST FISCAL YEAR

The following table sets forth the information concerning individual grants
of stock options and stock appreciation rights ("SARs") during the last fiscal
year to each of the named Executive Officers during such period.

INDIVIDUAL GRANTS

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMABLE
ANNUAL RATES OF
PERCENT OF STOCK
NUMBER OF TOTAL PRICE APPRECIATION
SECURITIES OPTIONS/SARS FOR
UNDERLYING GRANTED TO EXERCISE OF OPTION TERM
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION --------------------
NAME GRANTED(#)(1) FISCAL YEAR(2) ($/SHARE) DATE 5%($) 10%($)
- --------------------------- ----------------- ---------------- ------------ ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Present Executive Officers
- ---------------------------
Christopher J. Vizas ...... 0 (3) N/A N/A N/A N/A N/A
Anthony Balinger ......... 40,000 (4) 14.3% $5.75 12/18/06 $144,900 $365,700
10,000 (4) $6.25 12/20/06 $ 39,375 $ 99,375
Allen Mandel ............ 40,000 (4) 11.5% $5.75 12/18/06 $144,900 $365,700
Former Executive Officers
- ----------------------------
Daryl Engelman ............ 0 N/A N/A N/A N/A N/A
Robert N. Schuck ......... 40,000 (4) 11.5% $5.75 12/18/06 $144,900 $365,700
William H. Sheils ......... 0 N/A N/A N/A $ 34,363 $ 86,727
</TABLE>

- ----------
(1) All of the options and related SARs granted in fiscal 1997 to the named
Executive Officers have a ten year term and were not exercisable until June
1997.

(2) A total of 348,500 options were granted to employees of the Company in
fiscal 1997.

(3) On December 5, 1997, in connection with his employment agreement, Mr. Vizas
has been granted a total of 500,000 options with a five year term, subject
to various performance criteria. See "Employment Agreements and Termination
of Employment and Change in Control Arrangements."

(4) The options granted to Messrs. Balinger, Schuck and Mandel were granted in
tandem with SARs.

11
<PAGE>

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES

The following table sets forth information concerning each exercise of
stock options during the last fiscal year by each of the named Executive
Officers during such fiscal year and the fiscal year end value of unexercised
options.

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES UNDERLYING "IN-THE-MONEY"
UNEXERCISED OPTIONS/SARS AT OPTIONS AT FISCAL
SHARES FISCAL YEAR-END(#)(1)(2) YEAR-END($)(2)
ACQUIRED ON VALUE --------------------------------- --------------------------------
NAMES EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- ------------- ------------ ----------------- --------------- ----------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Present Executive Officers
- ---------------------------
Christopher J. Vizas ...... 0 $0 0 0 $ 0 $ 0
Anthony Balinger ......... 0 $0 24,310 50,000 $ 1,375 $15,000
Allen Mandel ............ 0 $0 76,901 40,000 $ 6,875 $15,000

Former Executive Officers
- ----------------------------
Daryl Engelman ............ 0 $0 0 0 $ 0 $ 0
Robert N. Schuck ......... 0 $0 84,446 40,000 $ 6,875 $15,000
William H. Sheils ......... 0 $0 11,000 (3) 0 $ 7,376 (3) $ 0
</TABLE>

- ----------
(1) Represents the aggregate number of stock options held as of March 31, 1997,
including those which can and those which cannot be exercised pursuant to
the terms and provisions of the Company's current stock option plans.

(2) Values were calculated by multiplying the closing transaction price of the
Common Stock as reported on the Nasdaq National Market on March 31, 1997 of
$6.125 by the respective number of shares of Common Stock and subtracting
the exercise price per share, without any adjustment for any termination or
vesting contingencies.

(3) Mr. Sheils' option expired immediately upon termination of his employment on
July 15, 1997.

COMPENSATION OF DIRECTORS

Effective November 10, 1997, and contingent upon the Company experiencing a
fiscal quarter of profitability, each member of the Board receives a Director's
fee of $500 for each regular Board meeting and committee meeting attended. All
Directors of the Company are also reimbursed for expenses incurred in connection
with attendance at Board meetings.

On November 10, 1997, each of Messrs. Gerrity, Warnes, Krinsley, Balinger,
Sledge and Samuels received an option to purchase 10,000 shares of Common Stock
exercisable at $2.625 per share, the fair market value on the date of the grant.
These options vest on October 1, 1998 if the Company achieves a 20% increase in
annual gross revenues for the period October 1, 1997 through September 30, 1998
and are for a term of five years. In addition, Mr. Sledge was granted an option
on November 10, 1997 to purchase 20,000 shares of Common Stock at $2.625 per
share, the fair market value on the date of the grant, which vested on the grant
date and has a term of five years. Also on November 10, 1997, Mr. Balinger was
granted new options to purchase 74,310 shares of Common Stock exercisable at
$2.625 per share, the fair market value on the date of the grant, in exchange
for the surrender of options previously issued to Mr. Balinger to purchase the
same number of shares of Common Stock. On December 5, 1997, Mr. Samuels was
granted an option to purchase 5,000 shares of Common Stock at $2.625 per share,
the fair market value on the date of the grant, which vested on the grant date
and has a term of five years.

<PAGE>

Such option grants to Directors are subject to approval by the stockholders of
the amendment of the Directors Stock Option Plan, which changes such plan from
one of automatic grants to one where grants are subject to the discretion of the
Board or Compensation Committee. See "Adoption of Amendments to Directors Stock
Option Plan" below.

In connection with his new employment agreement with the Company, on
December 5, 1987, Mr. Vizas was granted options to purchase an aggregate of
500,000 shares of Common Stock that superseded all other option grants that Mr.
Vizas received as either an officer or director of the Company. See "Employment
Agreements and Termination of Employment and Change in Control Arrangements"
below.

During the fiscal years ended 1995, 1996 and 1997, under the Directors
Stock Option Plan, which then provided for automatic annual grants, each
Director received an annual grant of ten year options to purchase 10,000 shares
at an exercise price equal to the fair market value of the Company's Common
Stock on the date of grant. Commencing with the amendment to the Directors Stock
Option Plan on November 10, 1997, options to Directors may be made at the
discretion of the Board of Directors or Compensation Committee and there are no
automatic grants. Such amendment is subject to approval by the stockholders of
the Company. See "Adoption of Amendments to Directors Stock Option Plan" below.

For more information regarding compensation of Directors during fiscal
1997, see the Form 10-K Amendment, which is available from the Company upon
request, as indicated above.

EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS

Effective December 5, 1997, the Company entered into a three year
employment agreement with Christopher J. Vizas, the Chief Executive Officer of
the Company. Mr. Vizas' employment agreement provides for a minimum salary of
$200,000 per annum, reimbursement of certain expenses, annual bonuses based on
financial performance targets to be adopted by the Company and Mr. Vizas, and
the grant of options to purchase an aggregate of 500,000 shares of Common Stock.
The options granted to Mr. Vizas pursuant to his employment agreement are
comprised of options to purchase 50,000 shares of Common Stock at an exercise
price of $2.32 which vested upon their grant, options to purchase 50,000 shares
of Common Stock at an exercise price of $2.32 which vest on December 5, 1998
(contingent upon Mr. Vizas' continued employment as of such date), options to
purchase up to 100,000 shares of Common Stock at an exercise price of $2.32
which vest on December 5, 1998 (contingent upon Mr. Vizas' continued employment
as of such date and the attainment of certain financial performance targets),
options to purchase 50,000 shares at an exercise price of $3.50 which vest on
December 5, 1999 (contingent upon Mr. Vizas' continued employment as of such
date), options to purchase up to 100,000 shares of Common Stock at an exercise
price of $3.50 which vest on December 5, 1999 (contingent upon Mr. Vizas'
continued employment as of such date and the attainment of certain financial
performance targets), options to purchase 50,000 shares at an exercise price of
$4.50 which vest on December 5, 2000 (contingent upon Mr. Vizas' continued
employment as of such date), and options to purchase up to 100,000 shares of
Common Stock at an exercise price of $4.50 which vest on December 5, 2000
(contingent upon Mr. Vizas' continued employment as of such date and the
attainment of certain financial performance targets). Each of the options have a
term of five years.

Mr. Vizas' employment agreement provides that, if the Company terminates
Mr. Vizas' employment other than pursuant to a "termination for cause", Mr.
Vizas shall continue to receive, for one year commencing on the date of such
termination, his full base salary, any bonus that is earned after the
termination of employment, and all other benefits and compensation that Mr.
Vizas would have been entitled to under his employment agreement in the absence
of termination of employment (the "Vizas Severance Amount"). "Termination for
cause" is defined as termination by the Company because of Mr. Vizas' personal
dishonesty, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties, willful violation of any
law, rule, or regulation (other than traffic violations or similar offenses), or
material breach of any provision of his employment agreement.

In the event there is an early termination of Mr. Vizas' employment
following a "change of control," Mr. Vizas would be entitled to a lump cash
payment equal to the Vizas Severance Amount. Additionally, if during the term of
Mr. Vizas' employment agreement there is a "change in control" of

13
<PAGE>

the Company and in connection with or within two years after such change of
control the Company terminates Mr. Vizas' employment other than "termination for
cause," all of the options described above will vest in full to the extent and
at such time that such options would have vested if Mr. Vizas had remained
employed for the remainder of the term of his employment agreement. A "change of
control" is deemed to have taken place under Mr. Vizas employment agreement,
among other things, if (i) any person becomes the beneficial owner of 20% or
more of the total number of voting shares of the Company; (ii) any person
becomes the beneficial owner of 10% or more, but less than 20%, of the total
number of voting shares of the Company, if the Board of Directors makes a
determination that such beneficial ownership constitutes or will constitute
control of the Company; or (iii) as the result of any business combination, the
persons who were directors of the Company before such transaction shall cease to
constitute at least two-thirds of the Board of Directors.

On September 22, 1997, the Company entered into a new three year employment
agreement with Anthony Balinger. Pursuant to his new employment agreement, Mr.
Balinger served as the Company's President and Chief Executive Officer until
November 10, 1997 when he resigned that position and was appointed Senior Vice
President and Vice Chairman of the Company. Mr. Balinger's employment agreement
provides for a minimum salary of $150,000 per annum, reimbursement of certain
expenses, a $1,600 per month housing allowance, and payment for health, dental
and disability insurance and various other benefits.

Mr. Balinger's employment agreement also provides for payment of one year
severance pay paid out over time, relocation to the Philippines, buy-out of his
auto lease and a 90 day exercise period for his vested options after termination
if the Company terminates Mr. Balinger without "cause." "Cause" is defined as
any criminal conviction for an offense by Mr. Balinger involving dishonesty or
moral turpitude, any misappropriation of Company funds or property or a willful
disregard of any directive of the Company's Board of Directors. This employment
agreement superseded a prior employment agreement which is described in the Form
10-K Amendment, copies of which are available from the Company upon request, as
indicated above.

On September 22, 1997, the Company entered into a three year employment
agreement with Allen Mandel pursuant to which Mr. Mandel agreed to serve as an
Executive Vice President of the Company. Mr. Mandel's employment agreement
provides for a minimum salary of $105,000 per annum, reimbursement of certain
expenses and payment for health, dental and disability insurance and various
other benefits. Mr. Mandel's employment agreement also provides for payment of
one year severance pay paid out over time and a 90 day exercise period for his
vested options after termination if Mr. Mandel is terminated without "cause." In
addition, if Mr. Mandel is terminated without "cause," his obligation to repay a
1991 loan from the Company in the amount of $25,000 would be forgiven. "Cause"
is defined as any criminal conviction for an offense by Mr. Mandel involving
dishonesty or moral turpitude, any misappropriation of Company funds or property
or a willful disregard of any directive of the Company's Board of Directors.
This employment agreement superseded a prior employment agreement which is
described in the Form 10-K Amendment, copies of which are available from the
Company upon request, as indicated above.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

None.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The July 1997 report of the Company's Compensation Committee is included in
the Form 10-K Amendment, copies of which are available from the Company upon
request, as indicated above. The following represents an interim updated report
on compensation arrangements through December 31, 1997.

Employment Agreements: In September 1997, the Compensation Committee
authorized new employment agreements with Messrs. Mandel and Balinger. In
exchange for three year commitments to the Company, the new agreements provide
these two officers with varying degrees of specified benefits, including life,
disability, health and dental insurance, retirement benefits, post-employment
relocation

14
<PAGE>

costs and travel expense reimbursements. The agreements with both officers are
described above under "Employment Agreements and Termination of Employment and
Change in Control Arrangements" above. The salaries and other cash compensation
were based upon the officers' previous employment agreements and negotiations
with the officers.

In December 1997, the Compensation Committee authorized an employment
agreement with Mr. Vizas in connection with his retention as Chief Executive
Officer. The compensation levels reflected in Mr. Vizas' employment agreement
were based on negotiations with Mr. Vizas and information on appropriate
compensation levels for the position obtained from an executive search firm
retained by the Company to help locate a chief executive officer. Mr. Vizas'
employment agreement reflects the increased emphasis placed by the Compensation
Committee on stock options that are tied to performance as a component of
executive officer compensation. Mr. Vizas' employment agreement provides for the
grant of options to purchase up to 500,000 shares of Common Stock, of which 60%
are tied to the attainment of certain financial performance targets.

Salary Increases and Bonus Awards: The Compensation Committee expects that
future salary increases and bonuses will be based on performance, either by the
Company or individual performance by the executive officer.

Stock Options and Stock Appreciation Rights: As noted above, the
Compensation Committee expects that stock options will continue to play an
important role in executive officer compensation. The Compensation Committee has
decided not to grant any more tandem stock appreciation rights with stock
options. The members of the Committee believe that stock options not only
encourage performance by the Company's executive officers but they align the
interests of the Company's executive officers with the interests of the
Company's stockholders.

Edward Gerrity, Jr.
Richard A. Krinsley
Christopher J. Vizas (ex officio member)

Dated: January 23, 1998

STOCK PERFORMANCE CHART

The following chart graphs the performance of the cumulative total return
to stockholders (stock price appreciation plus the assumed reinvestment and
dividends) during the five years prior to fiscal 1997 in comparison to returns
of the Standard & Poor's Composite stock price index (the "S&P 500 Index") and a
peer group index (weighted by average market capitalization). The peer group
index is the Standard & Poor's Telecommunications (Long Distance) Index (the
"S&P Telecom (Long Distance)"), which consists of American Telephone and
Telegraph, MCI Communications and Sprint Corp. The Company believes that the
companies constituting the selected peer group are companies of comparable focus
with the Company. The line graph and table cover the five year period from March
1992 through March 1997 and an additional nine month period through December
1997 and represent the total value of a $100 investment in each security/market
index on the last trading day of March 1992.

15
<PAGE>

COMPARATIVE FIVE-YEAR TOTAL CUMULATIVE RETURNS
EXECUTIVE TELECARD, LTD., S&P 500 INDEX AND
S&P TELECOMMUNICATIONS (LONG DISTANCE) INDEX

[ADD CHART]

<TABLE>
<CAPTION>
COMPANY/INDEX MAR-92 MAR-93 MAR-94 MAR-95 MAR-96 MAR-97 DEC-97
<S> <C> <C> <C> <C> <C> <C> <C>
Executive Telecard, Ltd. 100 184.71 292.84 146.44 305.18 228.46 86.81
S&P Telecom
(Long Distance) 100 142.01 136.85 136.81 174.94 168.02 237.93
S&P 500 Index 100 115.23 116.93 135.13 178.51 213.89 285.26
</TABLE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company was formed in 1987 as a wholly-owned subsidiary of
International 800 Telecom Corp., a publicly traded company, which changed its
name to Residual Corporation in February 1994. The Company became a public
company in March 1989 by way of a dividend in kind of Residual's common stock.

In January 1989, the Company entered into a ten year agreement with
Residual (the "Service Agreement") pursuant to which Residual provided the
Company with essentially all personnel, office space and other facilities
required by the Company for general and operational administrative purposes,
excluding attorneys fees, accounting fees, marketing expenses, advertising and
promotion, stockholder relations and certain other items. Salaries of the
Company's executive officers in the United States in fiscal 1995 were paid by
Fintel Services, Inc. ("Fintel"), which was then a wholly-owned subsidiary of
Residual. Pursuant to the Service Agreement, the Company was obligated to pay
Residual 10% of its annual gross revenue per year until 1999.

16
<PAGE>

Pursuant to an Agreement for Sale and Purchase of Assets dated as of March
31, 1995 between the Company and Residual (the "Asset Purchase Agreement"), the
Company acquired substantially all of the subsidiaries of Residual, including
Fintel, and certain intellectual property rights including trademarks and
service marks relating to those companies. Because the Asset Purchase Agreement
effected a transfer of the Service Agreement to a wholly owned subsidiary of the
Company, the Company, through its subsidiary, became responsible for payment of
salaries and bonuses to its Executive Officers. The Asset Purchase Agreement
prohibited Residual from competing with the Company for six years and from
soliciting the Company's employees for three years. Under the terms of the Asset
Purchase Agreement, the Company transferred 697,828 shares of the Company's
restricted stock to Residual. In connection with the transaction, the Company,
through its acquisition of Service 800, SA, also assumed approximately
$12,722,000 in indebtedness due to the Company as of March 31, 1995 incurred by
Residual and/or Service 800, SA. The Company received a fairness opinion on the
transaction from Griffin Capital Management Corporation.

Allen Mandel, Executive Vice President, and a former Director and Senior
Vice President of the Company, formerly served as a Senior Vice President of
Residual. Edward J. Gerrity, Jr., the former Chairman of the Board and a present
Director, was a Director of Residual until October 1994.

During fiscal 1997, Executive Card Services HK Ltd. ("Executive Card") was
paid $321,000 by the Company for producing calling cards for an affiliate of the
Company. Anthony Balinger is a Director and 45% stockholder of Executive Card,
but he is not involved in the day-to-day operations of the Company.

Additional information regarding certain relationships and related
transactions of the Company during fiscal 1997 with former directors or
executive officers and their affiliates is set forth in the Form 10-K Amendment,
which is available from the Company upon request, as indicated above.

COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT

Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who own more than ten percent of the common stock of
the Company, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission and the exchange on which the common stock is
listed for trading. Those persons are required by regulations promulgated under
the Exchange Act to furnish the Company with copies of all reports filed
pursuant to Section 16(a). Certain of the Company's Executive Officers failed to
make timely filings of ownership reports required by Section 16(a) with the
Securities and Exchange Commission. Messrs. Balinger and Mandel failed to file
timely reports on Form 5 for their grants of options to purchase Common Stock in
December 1996. All of these reports were filed in July 1997.

Additional information regarding such compliance with Section 16 of the
Exchange Act during fiscal 1997 by former directors or executive officers is set
forth in the Form 10-K Amendment, which is available from the Company upon
request, as indicated above.

17
<PAGE>

ADOPTION OF AMENDMENTS TO EMPLOYEE STOCK OPTION PLAN
(PROPOSAL 2)

On October 25, 1997 and January 17, 1998, the Board of Directors approved
and is presently proposing for stockholder approval amendments to the Employee
Stock Option Plan. The Employee Stock Option Plan was originally adopted by the
Board of Directors on December 14, 1995 and approved by stockholders at the
annual meeting of stockholders held on July 26, 1996. Pursuant to the Employee
Stock Option Plan, eligible persons receive grants of options or stock
appreciation rights, although the Board has announced an intention not to grant
tandem stock appreciation rights in the future. The Employee Stock Option Plan
provides for the grant of both "incentive stock options," as defined in the
Code, and nonqualified stock options.

The affirmative vote of a majority of the shares present or represented by
Proxy at the Annual Meeting will be required to approve the amendments to the
Employee Stock Option Plan. Unless otherwise indicated, properly executed
Proxies will be voted in favor of Proposal 2 to approve the amendments to the
Employee Stock Option Plan.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2.

PURPOSE AND EFFECT OF PROPOSED AMENDMENTS TO THE EMPLOYEE STOCK OPTION PLAN

The amendments to the Employee Stock Option Plan are designed to take
advantage of recent changes in 17 C.F.R. 240-16b-3 ("Rule 16b-3"), under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to permit
greater flexibility in administration of the Employee Stock Option Plan, and to
increase the number of shares reserved under the Employee Stock Option Plan from
1,000,000 to 1,750,000 shares. Among other things, these amendments would
eliminate the requirement that members of the Compensation Committee
administering the Employee Stock Option Plan be "disinterested persons" as had
been previously required by Rule 16b-3; (ii) permit the Board of Directors to
make grants of stock options or otherwise administer the Employee Stock Option
Plan if and to the extent such administration would be consistent with
applicable law (although the Compensation Committee is expected to continue to
administer the Employee Stock Option Plan for the foreseeable future); (iii)
permit the Board of Directors or the Compensation Committee to determine the
fair market value of the Company's Common Stock for purposes of the Employee
Stock Option Plan by averaging the price over a period of up to 90 days
preceding the grant of any option or stock appreciation right; (iv) permit the
Board of Directors or the Compensation Committee to make grants of nonqualified
stock options or stock appreciation rights with exercise prices of less than the
fair market value of the Company's Common Stock; (v) require stockholder
approval of amendments to the Employee Stock Option Plan only if the amendment
would (A) increase the total number of shares of Common Stock authorized for
issuance pursuant to the Employee Stock Option Plan or (B) require stockholder
approval under applicable law; (vi) give the Board of Directors or the
Compensation Committee administering the Employee Stock Option Plan the
discretion to permit a participant to effect a net exercise of an option without
tendering shares of the Company's stock as payment for the option; and (vii)
include in the amount which may be loaned to participants exercising options the
amount of any tax liability incurred by them in connection with such exercise.

The Company's Board of Directors and its Compensation Committee believe
that these changes are important to permit the Company to continue to attract
and retain key employees of, and advisors and consultants to, the Company or any
of its subsidiaries or other entities in common control with the Company, to
encourage stock ownership by employees and management and to give the
Compensation Committee flexibility in administering the Employee Stock Option
Plan to provide incentives and promote the financial success and progress of the
Company.

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Below is a summary description of the Employee Stock Option Plan, as
amended:

DESCRIPTION OF THE EMPLOYEE STOCK OPTION PLAN

Administration

The Employee Stock Option Plan is administered by the Compensation
Committee of the Board of Directors of the Company. Subject to the Employee
Stock Option Plan, the Compensation Committee has the authority to determine to
whom stock options or stock appreciation rights may be granted, the time or
times at which options and rights are granted, the number of shares covered by
each such grant, and the duration of the options or rights. All decisions,
determinations and interpretations made by the Compensation Committee are
binding on participants in the Employee Stock Option Plan.

Prior to the proposed amendments, all members of the Compensation Committee
were required to be "disinterested persons" as that term had been defined in
Rule 16b-3 under the Exchange Act. Since Rule 16b-3 has been amended to delete
this requirement, the Employee Stock Option Plan is being amended to remove the
requirement. In addition, the Employee Stock Option Plan is being amended to
permit the Board of Directors to administer the Employee Stock Option Plan to
the extent that such administration would be consistent with applicable law.

Underlying Securities

The securities underlying stock options and stock appreciation rights under
the Employee Stock Option Plan are shares of the Company's $.001 par value
Common Stock. Pursuant to the Employee Stock Option Plan, as amended, the
maximum number of shares of Common Stock that may be issued upon exercise or
payment will not exceed 1,750,000 shares, an increase of 750,000 shares.
Pursuant to the terms of the Employee Stock Option Plan, shares subject to stock
options or stock appreciation rights which for any reason expire or are
terminated unexercised as to such shares may again be the subject of a grant
under the Employee Stock Option Plan. In addition, with respect to stock
appreciation rights counting against the maximum number of shares which may be
issued under the Employee Stock Option Plan, only shares actually issued as a
result of the exercise of stock appreciation rights are counted against the
maximum number.

The market value of the 1,750,000 total shares authorized as of December
31, 1997 assuming approval of the amendments was $4,156,250 (based on a December
31, 1997 closing price on the Nasdaq National Market of $2.375 per share of
Common Stock).

Eligible Employees and Others

Stock options and stock appreciation rights may be granted under the
Employee Stock Option Plan to key employees of, and advisors and consultants to,
the Company or any of its subsidiaries or other entities in common control with
the Company. Options granted under the Employee Stock Option Plan that are
incentive stock options ("ISOs") within the meaning of Section 422 of the Code
may only be granted to employees (including employee-directors) of the Company.
Advisors and consultants may receive grants only if they provide bona fide
services that are not rendered in connection with the offer or sale of
securities or in a capital-raising transaction. No employee may be granted more
than 500,000 options over any two year period under the Employee Stock Option
Plan. As of December 31, 1997, the Company had approximately 130 employees and
other persons eligible to receive grants under the Employee Stock Option Plan.

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Option Price and Duration

Upon approval of the proposed amendments, for nonqualified options, the
option price may be less than the fair market value of the stock on the date of
grant. For ISOs, the exercise price per share is 100% of the fair market value
of the Common Stock on the valuation date, or in the case of ISOs granted to
employees holding more than 10% of the total combined voting power of all
classes of stock of the Company, 110% of the fair market value of the Common
Stock on the date of grant.

Pursuant to the proposed amendments, "fair market value" means (a) if there
is an established market for the Company's Common Stock on a stock exchange, in
an over-the-counter market or otherwise, the closing price of shares of Common
Stock on such exchange or in such market (the highest such closing price if
there is more than one such exchange or market) on the valuation date, or (b) if
there were no such sales on the valuation date, then in accordance with Treas.
Reg. Sec. 20.2031-2 or successor regulations. Unless otherwise specified by the
Compensation Committee at the time of grant or in the Employee Stock Option
Plan, the valuation date for purposes of determining fair market value is the
grant date. The Compensation Committee may, however, specify in any grant of an
option or stock appreciation right that, instead of the date of the grant, the
valuation date shall be a valuation period of up to ninety (90) days prior to
the date of grant, and fair market value for purposes of such grant shall be the
average over the valuation period of the closing price of the shares of Common
Stock on such exchange or in such market (the highest such closing price if
there is more than one such exchange or market) on each date on which sales were
made in the valuation period. Prior to the proposed amendments, the exercise
price per share of all options granted under the Employee Stock Option Plan was
always the fair market value of the Common Stock determined by a single quoted
price on the grant date.

Unless otherwise prescribed by the Compensation Committee, options granted
under the Employee Stock Option Plan expire ten (10) years from the date of
grant, or in the case of ISOs granted to employees holding more than 10% of the
total combined voting power of all classes of stock of the Company, five (5)
years from the date of grant. Most new grants (since November 1997) have been
for five year terms, and the Company expects this practice to continue.

Exercise of Options and Payment for Stock

Options are exercisable in accordance with the terms and conditions of the
grant to the participant, as provided in the stock option agreement. The
exercise price of options may be paid in cash or, if so provided in the option
agreement, in shares of the Company's Common Stock (valued at the fair market
value of the shares on the date of exercise) or by a combination thereof. An
option may also be exercised by tender to the Company of written notice together
with advice of the delivery of an order to a registered securities broker-dealer
to sell part or all of the shares of Common Stock subject to such exercise
notice and an irrevocable order to such broker to deliver to the Company (or its
transfer agent) sufficient proceeds from the sale of such shares to pay the
exercise price and any withholding taxes. If the proposed amendments are
approved, the Compensation Committee may, in its discretion and subject to
ratification by the entire Board of Directors, lend to one or more participants
all or a portion of the exercise price, together with the amount of any tax
liability incurred by the participant as a result of the exercise of the option,
for up to three (3) years with interest payable at the prime rate quoted in the
Wall Street Journal on the date of exercise. With respect to loans made to
officers or directors of the Company, approval of the amendments to the Employee
Stock Option Plan will be deemed to be preapproval by, and/or prior notification
of, the stockholders for all loans permitted by, and subsequently made pursuant
to, the Employee Stock Option Plan for purposes of Delaware Corporation Law. The
Employee Stock Option Plan did not previously expressly permit loans to cover a
participant's tax liability.

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and the number of options exercised. Members of the Committee may effect a net
exercise of their options only with the approval of the Board. Prior to the
proposed amendments, a participant who desired to use shares of the Company's
stock in payment of the exercise price for the option being exercised was
required to tender a stock certificate for the appropriate number of shares of
the Company's stock sufficient to pay the exercise price.

Stock Appreciation Rights

Stock appreciation rights may be granted by the Compensation Committee only
in connection with an option granted under the Employee Stock Option Plan and
any rights so granted will be alternative to the related option. A stock
appreciation right is exercisable at the same time or times that the related
option is exercisable. The exercise of a stock appreciation right automatically
results in the cancellation of the related option on a share-for-share basis. A
stock appreciation right entitles its holder to receive in shares of Common
Stock the excess of the fair market value (at the date of exercise) of a share
of Common Stock over the option price provided for in the related option,
payable in shares of Common Stock. While the Compensation Committee has
routinely granted stock appreciation rights in tandem with stock options in the
past, the present intention of the Board and the Compensation Committee is not
to grant stock appreciation rights in tandem with stock options.

Nontransferability

During a participant's lifetime, an option may be exercisable only by the
participant and options granted under the Employee Stock Option Plan and the
rights and privileges conferred thereby are not subject to execution, attachment
or similar process and may not be transferred, assigned, pledged or hypothecated
in any manner (whether by operation of law or otherwise) other than by will or
by the applicable laws of descent and distribution.

Effect of Changes in Capitalization

If the number of outstanding shares of Common Stock is increased or
decreased or changed into or exchanged for a different number or kind of shares
or securities of the Company, by reason of merger, consolidation,
reorganization, recapitalization, reclassification, stock split-up, combination
of shares, exchange of shares, stock dividend or other distribution payable in
capital stock, or other increase or decrease in such shares without receipt of
consideration by the Company, occurring after the effective date of the Employee
Stock Option Plan, a proportionate and appropriate adjustment will be made in
the number and kinds of shares for which options or appreciation rights are
outstanding, so that the proportionate interest of the participant immediately
following such event, will, to the extent practicable, be the same as
immediately prior to such event. Any such adjustment in outstanding options
shall not change the aggregate option price payable with respect to shares
subject to the unexercised portion of the option outstanding but shall include a
corresponding proportionate adjustment in the option price per share. Similar
adjustments shall be made to the terms of stock appreciation rights.

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appreciation rights theretofore granted will continue in the manner and under
the terms so provided. In the event of any such termination of the Employee
Stock Option Plan, each participant will have the right (subject to the general
limitations on exercise set forth therein and except as otherwise specifically
provided in the option agreement relating to such option or stock appreciation
right), immediately prior to the occurrence of such termination and during such
period occurring prior to such termination as the Compensation Committee in its
sole discretion will designate, to exercise such option or stock appreciation
right in whole or in part, whether or not such option or stock appreciation
right was otherwise exercisable at the time such termination occurs, but subject
to any additional provisions that the Compensation Committee may, in its sole
discretion, include in any option agreement. The Compensation Committee will
send written notice of an event that will result in such a termination to all
participants not later than the time at which the Company gives notice thereof
to its stockholders.

Amendment, Suspension and Termination

The Board of Directors may at any time terminate the Employee Stock Option
Plan or make such amendments as it deems advisable and in the best interests of
the Company, except that, without the approval of the stockholders, (i) the
total number of shares available for grants under the Employee Stock Option Plan
may not be increased, and (ii) no change may be made that requires stockholder
approval under applicable law. No termination or amendment will, without the
participant's consent, affect or impair any of the rights under any option or
stock appreciation right granted prior that that termination or amendment.
Unless earlier terminated by the Compensation Committee, the Employee Stock
Option Plan will terminate on December 14, 2005, and no stock option or stock
appreciation right may be granted after that date.

Prior to the proposed amendments, only the Compensation Committee had the
authority to amend the Employee Stock Option Plan and stockholder approval was
required for any amendment which materially modified the benefits to
participants or the eligibility requirements for grants under the Employee Stock
Option Plan.

Federal Income Tax Consequences

A. INCENTIVE STOCK OPTIONS. The following general rules are applicable for
Federal income tax purposes under existing law to employees of the Company who
receive and exercise ISOs granted under the Employee Stock Option Plan:

1. Generally, no taxable income results to the optionee upon the grant
of an ISO or upon the issuance of shares to him or her upon exercise of the
ISO.

2. No tax deduction is allowed to the Company upon either grant or
exercise of an ISO under the Employee Stock Option Plan.

3. If shares acquired upon exercise of an ISO are not disposed of
prior to the later of two years following the date the Option was granted
or one year following the date the shares are transferred to the optionee
pursuant to the exercise of the Option, the difference between the amount
realized on any subsequent disposition of the shares and the exercise price
will generally be treated as long-term gain or loss to the optionee.

4. If shares acquired upon exercise of an ISO are disposed of before
the expiration of one or both of the requisite holding periods (a
"disqualifying disposition"), then in most cases the lesser of any excess
of the fair market value of the shares at the time of exercise of the
Option over the exercise price or the actual gain on disposition, will be
treated as compensation to the optionee and will be taxed as ordinary
income in the year of such disposition.

5. In any year that an optionee recognizes compensation income on a
disqualifying disposition of shares acquired by exercising an ISO, the
Company will generally be entitled to a corresponding deduction for income
tax purposes.

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6. Any excess of the amount realized by the optionee as the result of
a disqualifying disposition over the sum of the exercise price and the
amount of ordinary income recognized under the above rules will be treated
as either long-term or short-term capital gain, depending upon the time
elapsed between receipt and disposition of such shares.

7. The bargain element at the time of exercise of an ISO, i.e., the
amount by which the fair market value of the Common Stock acquired upon
exercise of the ISO exceeds the exercise price, may be taxable to the
optionee under the "alternative minimum tax" provisions of the Code.

B. NONQUALIFIED OPTIONS. Nonqualified Options are taxed in accordance with
Section 83 of the Code and the Regulations issued thereunder. The following
general rules are applicable to United States holders of such options and to the
Company for Federal income tax purposes under existing law:

1. The optionee does not realize any taxable income upon the grant of
a Nonqualified Option, and the Company is not allowed a business expense
deduction by reason of such grant.

2. The optionee will recognize ordinary compensation income at the
time of exercise of a Nonqualified Option in an amount equal to the excess,
if any, of the fair market value of the shares on the date of exercise over
the exercise price. The Company will require employees to make appropriate
arrangements for the withholding of taxes on this amount.

3. When the optionee sells the shares, he or she will recognize a
capital gain or loss in an amount equal to the difference between the
amount realized upon the sale of the shares and his or her basis in the
shares (i.e., the exercise price plus the amount taxed to the optionee as
compensation income). If the optionee holds the shares for longer than one
year, this gain or loss will be a long-term capital gain or loss.

4. In general, the Company will be entitled to a tax deduction in the
year in which compensation income is recognized by the optionee.

The foregoing summary of the Employee Stock Option Plan does not purport to
be complete, and is subject to and qualified in its entirety by reference to the
complete text of the Employee Stock Option Plan, which is attached hereto as
Attachment A and is incorporated herein by reference.

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ADOPTION OF AMENDMENTS TO DIRECTORS STOCK OPTION PLAN
(PROPOSAL 3)

On October 25, 1997 and January 17, 1998, the Board of Directors approved
and is presently proposing for stockholder approval amendments to the Directors
Stock Option Plan. The Directors Stock Option Plan was originally adopted by the
Board of Directors on December 14, 1995 and approved by stockholders at the
annual meeting of stockholders held on July 26, 1996. Pursuant to the Directors
Stock Option Plan, members of the Board of Directors (including Directors who
are employees) receive grants of options or stock appreciation rights, although
the Board has announced an intention not to grant tandem stock appreciation
rights in the future. The Employee Stock Option Plan provides for the grant of
both "incentive stock options," as defined in the Code, and nonqualified stock
options.

The affirmative vote of a majority of the shares present or represented by
Proxy at the Annual Meeting will be required to approve the amendments to the
Directors Stock Option Plan. Unless otherwise indicated, properly executed
Proxies will be voted in favor of Proposal 2 to approve the amendments to the
Directors Stock Option Plan.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 3.

PURPOSE AND EFFECT OF PROPOSED AMENDMENTS TO THE DIRECTORS STOCK OPTION PLAN

The amendments to the Directors Stock Option Plan are designed to take
advantage of recent changes in Rule 16b-3 to permit greater flexibility in
administration of the Directors Stock Option Plan. Among other things, these
amendments would eliminate the requirement that members of the Compensation
Committee administering the Directors Stock Option Plan be "disinterested
persons" as had been previously required by Rule 16b-3; (ii) permit the Board of
Directors to make grants of stock options or otherwise administer the Directors
Stock Option Plan if and to the extent such administration would be consistent
with applicable law (although the Compensation Committee is expected to continue
to administer the Directors Stock Option Plan for the foreseeable future); (iii)
permit the Board of Directors or the Compensation Committee to determine the
fair market value of the Company's Common Stock for purposes of the Directors
Stock Option Plan by averaging the price over a period of up to 90 days
preceding the grant of any option or stock appreciation right; (iv) permit the
Board of Directors or the Compensation Committee to make grants of nonqualified
stock options or stock appreciation rights with exercise prices of less than the
fair market value of the Company's Common Stock; (v) require stockholder
approval of amendments to the Directors Stock Option Plan only if the amendment
would (A) increase the total number of shares of Common Stock authorized for
issuance pursuant to the Directors Stock Option Plan or (B) require stockholder
approval under applicable law; (vi) include in the amount which may be loaned to
participants exercising options the amount of any tax liability incurred by them
in connection with such exercise; (vi) delete automatic option grants to
Directors; and (viii) give the Board of Directors or the Compensation Committee
administering the Directors Stock Option Plan the discretion to permit a
participant to effect a net exercise of an option without tendering shares of
the Company's stock as payment for the option.

The Company's Board of Directors and its Compensation Committee believe
that these changes are important to permit the Company to encourage stock
ownership by members of the Board of Directors, to give the Compensation
Committee flexibility in administering the Directors Stock Option Plan, to
promote the financial success and progress of the Company and to induce such
persons to continue to serve as members of the Board of Directors in the future.

Below is a summary description of the Directors Stock Option Plan, as
amended:

DESCRIPTION OF THE DIRECTORS STOCK OPTION PLAN

Administration

The Directors Stock Option Plan is administered by the Compensation
Committee of the Board of Directors of the Company. Subject to the Directors
Stock Option Plan, the Compensation Committee has the authority to determine to
whom stock options or stock appreciation rights may be granted, the

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time or times at which options or rights are granted, the number of shares
covered by each such grant, and the duration of the options or rights. All
decisions, determinations and interpretations made by the Compensation Committee
are binding on participants in the Directors Stock Option Plan.

Prior to the proposed amendments, all members of the Compensation Committee
were required to be "disinterested persons" as that term had been defined in
Rule 16b-3 under the Exchange Act. Since Rule 16b-3 has been amended to delete
this requirement, the Directors Stock Option Plan is being amended to remove the
requirement. In addition, the Directors Stock Option Plan is being amended to
permit the Board of Directors to administer the Directors Stock Option Plan to
the extent that such administration would be consistent with applicable law.

Underlying Securities

The securities underlying stock options and stock appreciation rights under
the Directors Stock Option Plan are shares of the Company's Common Stock.
Pursuant to the Directors Stock Option Plan, the maximum number of shares of
Common Stock that may be issued upon exercise or payment will not exceed 870,000
shares. Pursuant to the terms of the Directors Stock Option Plan, shares subject
to stock options or stock appreciation rights which for any reason expire or are
terminated unexercised as to such shares may again be the subject of a grant
under the Directors Stock Option Plan. In addition, with respect to stock
appreciation rights counting against the maximum number of shares which may be
issued under the Directors Stock Option Plan, only shares actually issued as a
result of the exercise of stock appreciation rights are counted against the
maximum number.

The market value of the 870,000 total shares authorized as of December 31,
1997 was $2,066,250 (based on a December 31, 1997 closing price on the Nasdaq
National Market of $2.375 per share of Common Stock).

Eligible Directors

Stock options and stock appreciation rights may be granted under the
Directors Stock Option Plan to members of the Board of Directors of the Company
(including Directors who are employees). Options granted under the Directors
Stock Option Plan that are ISOs within the meaning of Section 422 of the Code
may only be granted to Directors who are employees of the Company. Directors who
are not employees may only be granted nonqualified stock options. Subject to the
Directors Stock Option Plan, no Director who is an employee may be granted
options to purchase more than 300,000 shares of Common Stock in any two year
period under the Directors Stock Option Plan. As of December 31, 1997, seven
persons, including two employees, were eligible to receive grants under the
Directors Stock Option Plan.

Option Grants to Directors

Effective November 10, 1997, each Director who continued to serve on the
Board after subsequent stockholder meetings (other than members of the
Compensation Committee) was granted two options under the Directors Stock Option
Plan, each to purchase 10,000 shares of Common Stock with each option being
effective for five years terms commencing on April 1, 1998 and 1999,
respectively, with each such option vesting only upon the achievement of certain
corporate economic and financial goals to be set by the Board and having an
exercise price per share equal to the market price per share at the close of
trading on the date they become effective. Such option grants are subject to
stockholder approval of the amendment of the Directors Stock Option Plan. Prior
to the proposed amendment, each Director received an automatic grant of ten year
options and tandem stock appreciation rights to purchase 10,000 shares of Common
Stock on the third Friday in December in each calendar year.

Option Price and Duration

Upon approval of the proposed amendments, for nonqualified options, the
option price may be less than the fair market value of the stock on the date of
grant. For ISOs, the exercise price per share is 100% of the fair market value
of the Common Stock on the valuation date, or in the case of ISOs granted to
Directors who are employees holding more than 10% of the total combined voting
power of all classes of stock of the Company, 110% of the fair market value of
the Common Stock on the date of grant.

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Pursuant to the proposed amendments, "fair market value" means (a) if there
is an established market for the Company's Common Stock on a stock exchange, in
an over-the-counter market or otherwise, the closing price of shares of Common
Stock on such exchange on in such market (the highest such closing price if
there is more than one such exchange or market) on the valuation date, or (b) if
there were no such sales on the valuation date, then in accordance with Treas.
Reg. Sec. 20.2031-2 or successor regulations. Unless otherwise specified by the
Compensation Committee at the time of grant or in the Directors Stock Option
Plan, the valuation date for purposes of determining fair market value is the
grant date. The Compensation Committee may, however, specify in any grant of an
option or stock appreciation right that, instead of the date of the grant, the
valuation date shall be a valuation period of up to ninety (90) days prior to
the date of grant, and fair market value for purposes of such grant shall be the
average over the valuation period of the closing price of the shares of Common
Stock on such exchange or in such market (the highest such closing price if
there is more than one such exchange or market) on each date on which sales were
made in the valuation period. Prior to the proposed amendments, the exercise
price per share of all options granted under the Directors Stock Option Plan was
always the fair market value of the Common Stock determined by a single quoted
price on the grant date.

Unless otherwise prescribed by the Compensation Committee options granted
under the Directors Stock Option Plan expire ten (10) years from the date of
grant, or in the case of ISOs granted to Directors who are employees holding
more than 10% of the total combined voting power of all classes of stock of the
Company, five (5) years from the date of grant. Most new grants (since November
1997) have been for five year terms, and the Company expects this practice to
continue.

Exercise of Options and Payment for Stock

Options are exercisable in accordance with the terms and conditions of the
grant to the participant, as provided in the stock option agreement. The
exercise price of options may be paid in cash or, if so provided in the option
agreement, in shares of the Company's Common Stock (valued at the fair market
value of the shares on the date of exercise) or by a combination thereof. An
option may also be exercised by tender to the Company of written notice together
with advice of the delivery of an order to a registered securities broker-dealer
to sell part or all of the shares of Common Stock subject to such exercise
notice and an irrevocable order to such broker to deliver to the Company (or its
transfer agent) sufficient proceeds from the sale of such shares to pay the
exercise price and any withholding taxes. If the proposed amendments are
approved, the Compensation Committee may, in its discretion and subject to
ratification by the entire Board of Directors, lend to one or more participants
all or a portion of the exercise price, together with the amount of any tax
liability incurred by the participant as a result of the exercise of the option,
for up to three (3) years with interest payable at the prime rate quoted in the
Wall Street Journal on the date of exercise. With respect to loans made to
officers or Directors of the Company, approval of the amendments to the
Directors Stock Option Plan will be deemed to be preapproval by, and/or prior
notification of, the stockholders for all loans permitted by, and subsequently
made pursuant to, the Directors Stock Option Plan for purposes of Delaware
Corporation Law. The Directors Stock Option Plan did not previously expressly
permit loans to cover a participant's tax liability.

In addition, pursuant to the amendments, the Compensation Committee or the
Board of Directors may elect to permit a participant to effect a net exercise of
an option without tendering shares of the Company's stock as payment for the
option. In such an event, the participant would be deemed to have paid for the
exercise of the option with shares of the Company's stock and would receive from
the Company a number of shares equal to the difference between the shares that
would have been tendered and the number of options exercised. Members of the
Committee may effect a net exercise of their options only with the approval of
the Board. Prior to the proposed amendments, a participant who desired to use
shares of the Company's stock in payment of the exercise price for the option
being exercised was required to tender a stock certificate for the appropriate
number of shares of the Company's stock sufficient to pay the exercise price.

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Stock Appreciation Rights

Stock appreciation rights may be granted by the Compensation Committee only
in connection with an option granted under the Directors Stock Option Plan and
any rights so granted will be alternative to the related option. A stock
appreciation right is exercisable at the same time or times that the related
option is exercisable. The exercise of a stock appreciation right automatically
results in the cancellation of the related option on a share-for-share basis. A
stock appreciation right entitles its holder to receive in shares of Common
Stock the excess of the fair market value (at the date of exercise) of a share
of Common Stock over the option price provided for in the related option. While
the Compensation Committee has routinely granted stock appreciation rights in
tandem with stock options in the past, the present intention of the Board and
the Compensation Committee is not to grant stock appreciation rights in tandem
with stock options.

Nontransferability

During a participant's lifetime, an option may be exercisable only by the
participant and options granted under the Directors Stock Option Plan and the
rights and privileges conferred thereby are not subject to execution, attachment
or similar process and may not be transferred, assigned, pledged or hypothecated
in any manner (whether by operation of law or otherwise) other than by will or
by the applicable laws of descent and distribution.

Effect of Changes in Capitalization

If the number of outstanding shares of Common Stock is increased or
decreased or changed into or exchanged for a different number or kind of shares
or other securities of the Company by reason of merger, consolidation,
reorganization, recapitalization, reclassification, stock split-up, combination
of shares, exchange of shares, stock dividend or other distribution payable in
capital stock, or other increase or decrease in such shares without receipt of
consideration by the Company, occurring after the effective date of the
Directors Stock Option Plan, a proportionate and appropriate adjustment will be
made in the number and kinds of shares for which options or stock appreciation
rights are outstanding, so that the proportionate interest of the participant
immediately following such event will, to the extent practicable, be the same as
immediately prior to such event. Any such adjustment in outstanding options will
not change the aggregate option price payable with respect to shares subject to
the unexercised portion of the option outstanding but will include a
corresponding proportionate adjustment in the option price per share. Similar
adjustments will be made to the terms of stock appreciation rights.

Upon the dissolution or liquidation of the Company, or upon a merger,
consolidation or reorganization of the Company with one or more other entities
in which the Company is not the surviving entity, or upon a sale of
substantially all of the assets of the Company to another person or entity, or
upon any transaction (including, without limitation, a merger or reorganization
in which the Company is the surviving entity) approved by the Board that results
in any person or entity (other than persons who are holders of stock of the
Company at the time the Directors Stock Option Plan is approved by the
Stockholders and other than an affiliate) owning 80 percent or more of the
combined voting power of all classes of stock of the Company, the Directors
Stock Option Plan and all options and stock appreciation rights outstanding
thereunder will terminate, except to the extent provision is made in connection
with such transaction for the continuation of the Directors Stock Option Plan
and/or the assumption of the options and stock appreciation rights theretofore
granted, or for the substitution for such options and stock appreciation rights
of new options and stock appreciation rights covering the stock of a successor
entity, or a parent or subsidiary thereof, with appropriate adjustments as to
the number and kinds of shares and exercise prices, in which event the Directors
Stock Option Plan, options and stock appreciation rights theretofore granted
will continue in the manner and under the terms so provided. In the event of any
such termination of the Directors Stock Option Plan, each participant will have
the right (subject to the general limitations on exercise set forth therein and
except as otherwise specifically provided in the option agreement relating to
such option or stock appreciation right), immediately prior to the occurrence of
such termination and during such period occurring prior to such termination as
the Compensation Committee in its sole discretion will designate, to exercise
such option or stock appreci-

27
<PAGE>

ation right in whole or in part, whether or not such option or stock
appreciation right was otherwise exercisable at the time such termination
occurs, but subject to any additional provisions that the Compensation Committee
may, in its sole discretion, include in any option agreement. The Compensation
Committee will send written notice of an event that will result in such a
termination to all participants not later than the time at which the Company
gives notice thereof to its stockholders.

Amendment, Suspension and Termination

The Board of Directors may at any time terminate the Directors Stock Option
Plan or make such amendments as it deems advisable and in the best interests of
the Company, except that, without the approval of the stockholders, (i) the
total number of shares available for grants under the Directors Stock Option
Plan may not be increased, and (ii) no change may be made that requires
stockholder approval under applicable law. No termination or amendment will,
without the participant's consent, affect or impair any of the rights under any
option or stock appreciation granted prior to that termination or amendment.
Unless earlier terminated by the Compensation Committee, the Directors Stock
Option Plan will terminate on December 14, 2005, and no stock option or stock
appreciation right may be granted after that date.

Federal Income Tax Consequences

See "Federal Tax Consequences" under the "Adoption of Amendments to
Employee Stock Option Plan" above for a description of federal tax consequences
for incentive stock options and nonqualified stock options.

The foregoing summary of the Directors Stock Option Plan does not purport
to be complete, and is subject to and qualified in its entirety by reference to
the complete text of the Directors Stock Option Plan, which is attached hereto
as Attachment B and is incorporated herein by reference.

<PAGE>

RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
(PROPOSAL 4)

The Board of Directors has appointed BDO Seidman, LLP ("BDO Seidman") as
the Company's independent accountants for the fiscal year ending March 31, 1998,
subject to ratification by stockholders at the Annual Meeting. Representatives
of BDO Seidman will be present at the Annual Meeting, will have the opportunity
to make a statement if they so desire, and will be available to respond to
appropriate questions. Unless otherwise indicated, properly executed Proxies
will be voted in favor of ratifying the appointment of BDO Seidman to audit the
books and accounts of the Company for the fiscal year ending March 31, 1998. No
determination has been made as to what action the Board would take if the
stockholders do not ratify the appointment.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 4.

<PAGE>

RATIFICATION OF CHANGE IN THE COMPANY'S FISCAL YEAR
(PROPOSAL 5)

The Board of Directors has changed the Company's fiscal year from a fiscal
year ending March 31 to a fiscal year ending December 31. The change would take
effect upon the end of the Company's present fiscal year, March 31, 1998, so
that the next fiscal year would be a short year covering a nine month period
from April 1, 1998 through December 31, 1998. The following fiscal year would
cover the full 1999 calendar year, from January 1, 1999 to December 31, 1999.
The change in the Company's fiscal year means that in the future the Company's
annual report will be available in April and that annual meetings will be held
in May. Unless otherwise indicated, properly executed Proxies will be voted in
favor of ratifying the change in the Company's fiscal year to a fiscal year
ending December 31. Stockholder ratification of the change in the Company's
fiscal year is not necessary for the change to take effect.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 5.

<PAGE>

STOCKHOLDER PROPOSALS AND OTHER MATTERS

Any proposals by stockholders of Executive TeleCard to be considered for
inclusion in the Company's proxy statement relating to the 1998 Annual Meeting
of Stockholders must be in writing and received by the Company, at its principal
office, not earlier than the close of business on the 90th day prior to such
annual meeting and not later than the close of business on the later of the 60th
day prior to such annual meeting or the close of business on the 10th day
following the day on which public announcement of the date of such meeting is
first made by the Company. Nothing in this paragraph shall be deemed to require
the Company to include in the Proxy Statement and proxy relating to the 1998
Annual Meeting of Stockholders any stockholder proposal that does not meet all
of the requirements for such inclusion in effect at that time.

Management of the Company knows of no other business presented for action
by the stockholders at the Annual Meeting. If, however, any other matters should
properly come before the Annual Meeting, the enclosed proxy authorizes the
persons named therein to vote the shares represented thereby in their
discretion.

By Order of the Board of Directors

ANTHONY BALINGER
Secretary

January 28, 1998

31
<PAGE>

ATTACHMENT A

EXECUTIVE TELECARD, LTD.
1995 EMPLOYEE STOCK OPTION AND
APPRECIATION RIGHTS PLAN

AS AMENDED AND RESTATED

A-1
<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
1. Purpose ............................................................... A-3

2. General Provisions ................................................... A-3

3. Eligibility ......................................................... A-3

4. Number of Shares Subject to Plan .................................... A-3

5. Stock Options ......................................................... A-4

6. Stock Appreciation Rights ............................................. A-6

7. Effect of Changes in Capitalization ................................. A-7

8. Nontransferability ................................................... A-8

9. Amendment, Suspension, or Termination of Plan ........................ A-9

10. Effective Date ...................................................... A-9

11. Termination Date ...................................................... A-9

12. Resale of Shares Purchased .......................................... A-9

13. Acceleration of Rights and Options .................................... A-9

14. Written Notice Required; Tax Withholding .............................. A-10

15. Compliance with Securities Laws ....................................... A-10

16. Waiver of Vesting Restrictions by Committee ........................... A-10

17. Reports to Participants ............................................. A-10

18. No Employee Contract ................................................ A-10

</TABLE>

A-2
<PAGE>

EXECUTIVE TELECARD, LTD.
1995 EMPLOYEE STOCK OPTION AND
APPRECIATION RIGHTS PLAN
AS AMENDED AND RESTATED

1. Purpose. Executive TeleCard, Ltd. hereby establishes its 1995 Employee
Stock Option and Appreciation Rights Plan (the "Plan"). The purpose of the Plan
is to advance the interests of Executive TeleCard, Ltd. and its subsidiaries
(collectively "the Company") and the Company's stockholders by providing a means
by which the Company shall be able to attract and retain competent employees,
officers, consultants and advisors by providing them with an opportunity to
participate in the increased value of the Company which their effort,
initiative, and skill have helped produce.

2. General Provisions.

(a) The Plan will be administered by the Compensation Committee of the
Board of Directors of the Company (the "Committee"), provided, however,
that except as otherwise expressly provided in this Plan or in order to
comply with Rule 16b-3 under the Securities Exchange Act of 1934, as now in
effect or as hereafter amended (the "Exchange Act"), the Board of Directors
of the Company (the "Board") may exercise any power or authority granted to
the Committee under this Plan. The Committee shall be comprised of two or
more directors designated by the Board.

(b) The Committee shall have full power to construe and interpret the
Plan and to establish and amend rules and regulations for its
administration. Any action of the Committee with respect to the Plan shall
be taken by majority vote or by the unanimous written consent of the
Committee members.

(c) The Committee shall determine, in its sole discretion, which
participants under the Plan shall be granted stock options or stock
appreciation rights, the time or times at which options or rights are
granted, as well as the number and the duration of the options or rights
which are granted to participants; provided, however, that no participant
may be granted options to purchase more than 500,000 shares of common stock
of the Company ("Common Stock") under the Plan in any two (2) year period.

(d) The Committee shall also determine any other terms and conditions
relating to options and rights granted under the Plan as the Committee may
prescribe, in its sole discretion.

(e) The Committee shall make all other determinations and take all
other actions which it deems necessary or advisable for the administration
of the Plan.

(f) All decisions, determinations and interpretations made by the
Committee shall be binding and conclusive on all participants in the Plan
and on their legal representatives, heirs and beneficiaries.

(g) The Board of Directors (with members of the Committee abstaining)
shall have the authority to make grants under this Plan to members of the
Committee who are eligible to receive grants under the Plan or the Board
may create a formula by which grants will automatically be made to eligible
members of the Committee. The Committee shall have the authority to make
grants hereunder to eligible members of the Board other than Committee
members and may also establish a formula by which grants will automatically
be made to Board members.

3. Eligibility. The Company's employees and advisors and consultants to the
Company shall be eligible to participate in the Plan and to receive options and
rights hereunder, provided, however, that Incentive Stock Options may only be
granted to employees of the Company or its subsidiaries. Employees of the
Company who are also directors of the Company shall be eligible to participate
in the Plan. Directors who are not employees but who provide consulting or
advisory services outside of their role as directors of the Company shall be
eligible to participate in the Plan.

4. Number of Shares Subject to Plan. The aggregate number of shares of the
Company's Common Stock which may be granted to participants shall be 1,750,000
shares, subject to adjustment only as provided in Sections 5(h) and 7 hereof.
These shares may consist of shares of the Company's authorized

A-3
<PAGE>

but unissued Common Stock or shares of the Company's authorized and issued
Common Stock reacquired by the Company and held in its treasury or any
combination thereof. If an option granted under this Plan is surrendered, or for
any other reason ceases to be exercisable in whole or in part, the shares as to
which the option ceases to be exercisable shall be available for options to be
granted to the same or other participants under the Plan, except to the extent
that an option is deemed surrendered by the exercise of a tandem stock
appreciation right and that right is paid by the Company in stock, in which
event the shares issued in satisfaction of the right shall not be available for
new options or rights under the Plan.

5. Stock Options.

(a) Type of Options. Options granted may be either Nonqualified Stock
Options or Incentive Stock Options as determined by the Committee in its
sole discretion and as reflected in the Notice of Grant issued by the
Committee. "Incentive Stock Option" means an option intended to qualify as
an incentive stock option within the meaning of (section) 422 of the
Internal Revenue Code of 1986 (the "Code"). "Nonqualified Stock Option"
means an option not intended to qualify as an Incentive Stock Option or an
Incentive Stock Option which is converted to a Nonqualified Stock Option
under Section 5(f) hereof.

(b) Option Price. The price at which options may be granted under the
Plan shall be determined by the Committee at the time of grant as follows:

(i) For Incentive Stock Options the option price shall be equal
to 100% of the Fair Market Value of the stock on the date the option is
granted; provided, however, that for Incentive Stock Options granted to
any person who, at the time such option is granted, owns (as defined in
(section) 422 of the Code) shares possessing more than 10% of the total
combined voting power of all classes of shares of the Company or its
parent or subsidiary corporation, the option price shall be 110% of the
Fair Market Value.

(ii) For Nonqualified Stock Options the option price shall be equal
to the Fair Market Value of the stock on the date the option is granted.

(iii) For purposes of this Plan, and except as otherwise set forth
herein, "Fair Market Value" shall mean: (A) if there is an established
market for the Company's Common Stock on a stock exchange, in an
over-the-counter market or otherwise, shall be the closing price of the
shares of Common Stock on such exchange or in such market (the highest
such closing price if there is more than one such exchange or market) on
the valuation date, or (B) if there were no such sales on the valuation
date, then in accordance with Treas. Reg. (section) 20.2031-2 or
successor regulations. Unless otherwise specified by the Committee at
the time or grant (or in the formula proposed for such grant, if
applicable), the valuation date for purposes of determining Fair Market
Value shall be the date of grant. The Committee (or the Board of
Directors with respect to grants to Committee members pursuant to
Section 5(g) hereof may specify in any grant of an option or stock
appreciation right that, instead of the date of grant, the valuation
date shall be a valuation period of up to ninety (90) days prior to the
date of grant, and Fair Market Value for purposes of such grant shall be
the average over the valuation period of the closing price of the shares
of Common Stock on such exchange or in such market (the highest such
closing price if there is more than one such exchange or market) on each
date on which sales were made in the valuation period, provided,
however, that if the Committee (or the Board of Directors) fails to
specify a valuation period and there were no sales on the date of grant
then Fair Market Value shall be determined as if the Committee had
specified a thirty (30) day valuation period for such determination,
unless there is no established market for the Company's Common Stock in
which case the determination of Fair Market Value shall be in accordance
with clause (B) above.

(c) Exercise of Option. The right to purchase shares covered by any
option under this Plan shall be exercisable only in accordance with the
terms and conditions of the grant to the participant. Such terms and
conditions may include a time period or schedule whereby some of the
options

A-4
<PAGE>

granted may become exercisable, or "vested", over time and certain
conditions, such as continuous service or specified performance criteria or
goals, must be satisfied for such vesting. The determination as to whether
to impose any such vesting schedule or performance criteria, and the terms
of such schedule or criteria, shall be within the sole discretion of the
Committee. These terms and conditions may be different for different
participants so long as all options satisfy the requirements of the Plan.

The exercise of options shall be paid for in cash or in shares of the
Company's Common Stock, or any combination thereof. Shares tendered as payment
for option exercises shall, if acquired from the Company, have been held for at
least six months and shall be valued at the Fair Market Value of the shares on
the date of exercise. The Committee may, in its discretion, agree to a loan by
the Company to one or more participants of a portion of the exercise price (not
to exceed the exercise price minus the par value of the shares to be acquired,
if any) for up to three (3) years with interest payable at the prime rate quoted
in the Wall Street Journal on the date of exercise. Members of the Committee may
receive such loans from the Company for the exercise of their options, if any,
only with approval by the Board.

The Committee may also permit a participant to effect a net exercise of an
option without tendering any shares of the Company's stock as payment for the
option. In such an event, the participant will be deemed to have paid for the
exercise of the option with shares of the Company's stock and shall receive from
the Company a number of shares equal to the difference between the shares that
would have been tendered and the number of options exercised. Members of the
Committee may effect a net exercise of their options only with the approval of
the Board.

The Committee may also cause the Company to enter into arrangements with
one or more licensed stock brokerage firms whereby participants may exercise
options without payment therefor but with irrevocable orders to such brokerage
firm to immediately sell the number of shares necessary to pay the exercise
price for the option and the withholding taxes, if any, and then to transmit the
proceeds from such sales directly to the Company in satisfaction of such
obligations.

The Committee may prescribe forms which must be completed and signed by a
participant and tendered with payment of the exercise price in order to exercise
an option.

(d) Duration of Options. Unless otherwise prescribed by the Committee
or this Plan, options granted hereunder shall expire ten (10) years from
the date of grant, subject to early termination as provided in Section 5(f)
hereof.

(e) Incentive Stock Options Limitations. In no event shall an
Incentive Stock Option be granted to any person who, at the time such
option is granted, owns (as defined in (section) 422 of the Code) shares
possessing more than 10% of the total combined voting power of all classes
of shares of the Company or of its parent or subsidiary corporation, unless
the option price is at least 110% of the Fair Market Value of the stock
subject to the Option, and such Option is by its terms not exercisable
after the expiration of five (5) years from the date such Option is
granted. Moreover, the aggregate Fair Market Value (determined as of the
time that option is granted) of the shares with respect to which Incentive
Stock Options are exercisable for the first time by any individual employee
during any single calendar year under the Plan shall not exceed $100,000.
In addition, in order to receive the full tax benefits of an Incentive
Stock Option, the employee must not resell or otherwise dispose of the
stock acquired upon exercise of the Incentive Stock Option until two (2)
years after the date the option was granted and one (1) year after it was
exercised.

(f) Early Termination of Options. In the event a participant's
employment with or service to the Company shall terminate as the result of
total disability, as defined below, or the result of retirement at 65 years
of age or later, then any options granted to such participant shall expire
and may no longer be exercised three (3) months after such termination. If
the participant dies while employed or engaged by the Company, to the
extent that the option was exercisable at the time of the participant's
death, such option may, within one year after the participant's death, be
exercised by the person or persons to whom the participant's rights under
the option shall pass by will or by the applicable laws of descent and
distribution; provided, however, that an option may not be

A-5

<PAGE>

exercised to any extent after the expiration of the option as originally
granted. In the event a participant's employment or engagement by the
Company shall terminate as the result of any circumstances other than those
referred to above, whether terminated by the participant or the Company,
with or without cause, then all options granted to such participant under
this Plan shall terminate and no longer be exercisable as of the date of
such termination, provided, however, that if an employee with an Incentive
Stock Option terminates employment prior to its exercise, but
notwithstanding such termination becomes or remains a non-employee advisor,
consultant or director eligible for Nonqualified Stock Options hereunder or
any other stock option plan of the Company, then the Incentive Stock Option
shall be converted to a Nonqualified Stock Option on the date the Incentive
Stock Option would otherwise have terminated. A change in a participant's
status from one eligible category to another (e.g., from an employee to a
consultant) without a break in service shall not be considered a
termination of that participant's employment or engagement for purposes
hereof. A non-employee director who is no longer providing consulting or
advisory services beyond service as a director will not be deemed to have
terminated his or her engagement with the Company so long as he or she
continues to serve as a director.

An employee who is absent from work with the Company because of total
disability, as defined below, shall not by virtue of such absence alone be
deemed to have terminated such participant's employment with the Company. All
rights which such participant would have had to exercise options granted
hereunder will be suspended during the period of such absence and may be
exercised cumulatively by such participant upon his return to the Company so
long as such rights are exercised prior to the expiration of the option as
originally granted. For purposes of this Plan, "total disability" shall mean
disability, as a result of sickness or injury, to the extent that the
participant is prevented from engaging in any substantial gainful activity and
is eligible for and receives a disability benefit under Title II of the Federal
Social Security Act.

Notwithstanding the foregoing, the Committee may, in its discretion, permit
the exercise of an option after termination of a participant's employment or
engagement by the Company.

(g) Grants to Committee Members. In accordance with Section 2(h)
hereof, the Committee shall have no authority to make grants to its members
hereunder, rather the Board of Directors (with members of the Committee
abstaining) shall have the authority to make grants under this Plan to
members of the Committee. Any designation of such grants may be by means of
a formula specified by the Board of Directors to award grants automatically
at a stated time. The option price of any such option shall be calculated
in accordance with the grant or formula designation based on the Fair
Market Value (determined in accordance with Section 5(b)(iii) above) on the
valuation date or valuation period specified by the Board of Directors in
the grant or designation. Nothing in this Section 5(g) shall be interpreted
to prohibit the Board of Directors from granting options or rights to its
members if the Board of Directors is administering the Plan in accordance
with Section 2(a) above.

6. Stock Appreciation Rights.

(a) Grant. Stock appreciation rights may be granted by the Committee
under this Plan upon such terms and conditions as it may prescribe. A stock
appreciation right may be granted in connection with an option previously
granted to or to be granted under this Plan or may be granted by itself.
Each stock appreciation right related to an option (a "Tandem Right") shall
become nonexercisable and be forfeited if the option to which it relates
(the "Related Option") is exercised. "Stock appreciation right" as used in
this Plan means a right to receive the excess of Fair Market Value, on the
date of exercise, of a share of the Company's Common Stock on which an
appreciation right is exercised over the option price provided for in the
related option and is issued in consideration of services performed for the
Company or for its benefit by the participant. Such excess is hereafter
called "the differential."

(b) Exercise of Stock Appreciation Rights. Stock appreciation rights
shall be exercisable and be payable in the following manner:

A-6
<PAGE>

(i) A stock appreciation right not issued with a Related Option
(a "Separate Right") shall be exercisable at the time or times
prescribed by the Committee. A Tandem Right shall be exercisable by
the participant at the same time or times that the Related Option
could be exercised. A participant wishing to exercise a stock
appreciation right shall give written notice of such exercise to the
Company. Upon receipt of such notice, the Company shall determine, in
its sole discretion, whether the participant's stock appreciation
rights shall be paid in cash or in shares of the Company's Common
Stock or any combination of cash and shares and thereupon shall,
without deducting any transfer or issue tax, deliver to the person
exercising such right an amount of cash or shares of the Company's
Common Stock or a combination thereof with a value equal to the
differential. The date the Company receives the written notice of
exercise hereunder is the exercise date. The shares issued upon the
exercise of a stock appreciation right may consist of shares of the
Company's authorized but unissued Common Stock or of its authorized
and issued Common Stock reacquired by the Company and held in its
treasury or any combination thereof. No fractional share of Common
Stock shall be issued; rather, the Committee shall determine whether
cash shall be given in lieu of such fractional share or whether such
fractional share shall be eliminated.

(ii) The exercise of a Tandem Right shall automatically result in
the surrender of the Related Option by the participant on a share for
share basis. Likewise, the exercise of a stock option shall
automatically result in the surrender of the related Tandem Right.
Shares covered by surrendered options shall be available for granting
further options under this Plan except to the extent and in the amount
that such rights are paid by the Company with shares of stock, as more
fully discussed in Section 4 hereof.

(iii) The Committee may impose any other terms and conditions it
prescribes upon the exercise of a stock appreciation right, which
conditions may include a condition that the stock appreciation right
may only be exercised in accordance with rules and regulations adopted
by the Committee from time to time.

(c) Limitation on Payments. Notwithstanding any other provision of
this Plan, the Committee may from time to time determine, including at the
time of exercise, the maximum amount of cash or stock which may be given
upon exercise of any stock appreciation right in any year; provided,
however, that all such amounts shall be paid in full no later than the end
of the year immediately following the year in which the participant
exercised such stock appreciation rights. Any determination under this
paragraph may be changed by the Committee from time to time provided that
no such change shall require the participant to return to the Company any
amount theretofore received or to extend the period within which the
Company is required to make full payment of the amount due as the result of
the exercise of the participant's stock appreciation rights.

(d) Expiration or termination of stock appreciation rights.

(i) Each Tandem Right and all rights and obligations thereunder
shall expire on the date on which the Related Option expires or
terminates. Each Separate Right shall expire on the date prescribed by
the Committee.

7. Effect of Changes in Capitalization

(a) Changes in Common Stock. If the number of outstanding shares of
Common Stock is increased or decreased or changed into or exchanged for a
different number or kind of shares or other securities of the Company by
reason of any recapitalization, reclassification, stock split-up,
combination of shares, exchange of shares, stock dividend or other
distribution payable in capital stock, or other increase or decrease in
such shares effected without receipt of consideration by the Company,
occurring after the effective date of the Plan, a proportionate and
appropriate adjustment shall be made by the Company in the number and kind
of shares for which options or stock appreciation rights are outstanding,
so that the proportionate interest of the participant immediately following
such event shall, to the extent practicable, be the same as immediately
prior to such event. Any such adjustment in outstanding options shall not
change the aggregate option price

A-7
<PAGE>

payable with respect to shares subject to the unexercised portion of the
option outstanding but shall include a corresponding proportionate
adjustment in the option price per share. Similar adjustments shall be made
to the terms of stock appreciation rights.

(b) Reorganization with the Company Surviving. Subject to Section 7(c)
hereof, if the Company shall be the surviving entity in any reorganization,
merger or consolidation of the Company with one or more other entities, any
option theretofore granted pursuant to the Plan shall pertain to and apply
to the securities to which a holder of the number of shares of Common Stock
subject to such option would have been entitled immediately following such
reorganization, merger or consolidation, with a corresponding proportionate
adjustment of the option price per share so that the aggregate option price
thereafter shall be the same as the aggregate option price of the shares
remaining subject to the option immediately prior to such reorganization,
merger or consolidation. Similar adjustments shall be made to the terms of
stock appreciation rights.

(c) Other Reorganizations, Sale of Assets or Common Stock. Upon the
dissolution or liquidation of the Company, or upon a merger, consolidation
or reorganization of the Company with one or more other entities in which
the Company is not the surviving entity, or upon a sale of substantially
all of the assets of the Company to another person or entity, or upon any
transaction (including, without limitation, a merger or reorganization in
which the Company is the surviving entity) approved by the Board that
results in any person or entity (other than persons who are holders of
stock of the Company at the time the Plan is approved by the Stockholders
and other than an Affiliate) owning 80 percent or more of the combined
voting power of all classes of stock of the Company, the Plan and all
options and stock appreciation rights outstanding hereunder shall
terminate, except to the extent provision is made in connection with such
transaction for the continuation of the Plan and/or the assumption of the
options and stock appreciation rights theretofore granted, or for the
substitution for such options and stock appreciation rights of new options
and stock appreciation rights covering the stock of a successor entity, or
a parent or subsidiary thereof, with appropriate adjustments as to the
number and kinds of shares and exercise prices, in which event the Plan,
options and stock appreciation rights theretofore granted shall continue in
the manner and under the terms so provided. In the event of any such
termination of the Plan, each participant shall have the right (subject to
the general limitations on exercise set forth in Section 5(d) hereof and
except as otherwise specifically provided in the option agreement relating
to such option or stock appreciation right), immediately prior to the
occurrence of such termination and during such period occurring prior to
such termination as the Committee in its sole discretion shall designate,
to exercise such option or stock appreciation right in whole or in part,
whether or not such option or stock appreciation right was otherwise
exercisable at the time such termination occurs, but subject to any
additional provisions that the Committee may, in its sole discretion,
include in any option agreement. The Committee shall send written notice of
an event that will result in such a termination to all participants not
later than the time at which the Company gives notice thereof to its
stockholders.

(d) Adjustments. Adjustments under this Section 7 relating to stock or
securities of the Company shall be made by the Committee, whose
determination in that respect shall be final and conclusive. No fractional
shares of Common Stock or units of other securities shall be issued
pursuant to any such adjustment, and any fractions resulting from any such
adjustment shall be eliminated in each case by rounding downward to the
nearest whole share or unit.

(e) No Limitations on Company. The grant of an option or stock
appreciation right pursuant to the Plan shall not affect or limit in any
way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, consolidate, dissolve or liquidate, or to sell or
transfer all or any part of its business or assets.

A-8
<PAGE>

extent permitted by applicable law and, if the Company has a class of securities
registered under the Exchange Act, by Exchange Act Rule 16b-3, the Committee
may, in its sole discretion, (i) permit a recipient of a Nonqualified Stock
Option to designate in writing during the participant's lifetime a beneficiary
to receive and exercise the participant's Nonqualified Stock Options in the
event of such participant's death (as provided in Section 5(f)), (ii) grant
Nonqualified Stock Options that are transferable to the immediate family, a
family trust of the participant or a partnership in which immediate family
members are the only partners, and (iii) modify existing Nonqualified Stock
Options to be transferable to the immediate family, a family trust or a family
partnership of the participant. Any other attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of any option or right under the Plan, or of
any right or privilege conferred thereby, contrary to the provisions of the Plan
shall be null and void.

9. Amendment, Suspension, or Termination of Plan. The Committee or the
Board of Directors may at any time suspend or terminate the Plan and may amend
it from time to time in such respects as the Committee may deem advisable in
order that options and rights granted hereunder shall conform to any change in
the law, or in any other respect which the Committee or the Board may deem to be
in the best interests of the Company; provided, however, that no such amendment
shall, without the participant's consent, alter or impair any of the rights or
obligations under any option or stock appreciation rights theretofore granted to
him or her under the Plan; and provided further that no such amendment shall,
without shareholder approval: increase the total number of shares available for
grants of options or rights under the Plan (except as provided by Section 7
hereof); or effect any change to the Plan which is required by law to be
approved by shareholders, including without limitation the regulations
promulgated under (section) 422 of the Code and any applicable rules of the
Nasdaq Stock Market or any stock exchange on which the Company's common stock is
principally quoted or listed.

10. Effective Date. The effective date of the Plan is December 14, 1995.

11. Termination Date. Unless this Plan shall have been previously
terminated by the Committee, this Plan shall terminate on December 14, 2005,
except as to stock, options and rights theretofore granted and outstanding under
the Plan at that date, and no stock, option or right shall be granted after that
date.

12. Resale of Shares Purchased. All shares of stock acquired under this
Plan may be freely resold, subject to applicable state and federal securities
laws restricting their transfer. As a condition to exercise of an option,
however, the Company may impose various conditions, including a requirement that
the person exercising such option represent and warrant that, at the time of
such exercise, the shares of Common Stock being purchased are being purchased
for investment and not with a view to resale or distribution thereof. In
addition, the resale of shares purchased upon the exercise of Incentive Stock
Options may cause the employee to lose certain tax benefits if the employee
fails to comply with the holding period requirements described in Section 5(e)
hereof.

13. Acceleration of Rights and Options. If the Company or its shareholders
enter into an agreement to dispose of all or substantially all of the assets or
stock of the Company by means of a sale, merger or other reorganization,
liquidation, or otherwise, any right or option granted pursuant to the Plan
shall become immediately and fully exercisable during the period commencing as
of the date of the agreement to dispose of all or substantially all of the
assets or stock of the Company and ending when the disposition of assets or
stock contemplated by that agreement is consummated or the option is otherwise
terminated in accordance with its provisions or the provisions of the Plan,
whichever occurs first; provided that no option or right shall be immediately
exercisable under this Section on account of any agreement of merger or other
reorganization where the shareholders of the Company immediately before the
consummation of the transaction will own 50% or more of the total combined
voting power of all classes of stock entitled to vote of the surviving entity
(whether the Company or some other entity) immediately after the consummation of
the transaction. In the event the transaction contemplated by the agreement
referred to in this section is not consummated, but rather is terminated,
canceled or expires, the options and rights granted pursuant to the Plan shall
thereafter be treated as if that agreement had never been entered into. If the
transaction contemplated hereby is expressly conditioned

A-9
<PAGE>

upon the availability of "pooling of interests" accounting and such accounting
treatment will not, in the opinion of the Company's independent certified public
accounting firm, be available if the options are accelerated as provided herein,
then the Committee may elect to void such acceleration in favor of a substitute
plan with substantially identical rights for participants in the new combined
entity.

14. Written Notice Required; Tax Withholding. Any option or right granted
pursuant to the Plan shall be exercised when written notice of that exercise by
the participant has been received by the Company at its principal office and,
with respect to options, when full payment for the shares with respect to which
the option is exercised has been received by the Company. By accepting a grant
under the Plan, each participant agrees that, if and to the extent required by
law, the Company shall withhold or require the payment by participant of any
state, federal or local taxes resulting from the exercise of an option or right;
provided, however, that to the extent permitted by law, the Committee (or, for
Committee members, the Board) may in its discretion, permit some or all of such
withholding obligation to be satisfied by the delivery by the participant of, or
the retention by the Company of, shares of its Common Stock.

15. Compliance with Securities Laws. Shares shall not be issued with
respect to any option or right granted under the Plan unless the exercise of
that option and the issuance and delivery of the shares pursuant thereto shall
comply with all relevant provisions of state and federal law, including without
limitation the Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder and the requirements of any stock exchange or automated
quotation system upon which shares of the Company's stock may then be listed or
traded, and shall be further subject to the approval of counsel for the Company
with respect to such compliance. Further, each participant must consent to the
imposition of a legend on the certificate representing the shares of Common
Stock issued upon the exercise of the option or right restricting their
transferability as may be required by law, the option or right, or the Plan.

16. Waiver of Vesting Restrictions by Committee. Notwithstanding any
provision of the Plan, in the event a participant dies, becomes totally or
partially disabled, retires (before or after the age of 65) as an employee,
officer or director of the Company, the Committee shall have the discretion to
waive any vesting restrictions on the participant's options or rights, or the
early termination thereof.

17. Reports to Participants. The Company shall furnish to each participant
a copy of the annual report, if any, sent to the Company's shareholders. Upon
written request, the Company shall furnish to each participant a copy of its
most recent annual report and each quarterly report to shareholders issued since
the end of the Company's most recent fiscal year.

18. No Employee Contract. The grant of restricted stock or an option or
right under the Plan shall not confer upon any participant any right with
respect to continuation of employment by, or the rendition of advisory or
consulting services to, the Company, nor shall it interfere in any way with the
Company's right to terminate the participant's employment or services at any
time.

As adopted by the Board of Directors of the Company on December 14, 1995,
as approved by stockholders on _________, as amended and restated by the Board
of Directors on October 25, 1997, as amended and restated by the Board of
Directors on January __, 1998 and as approved by stockholders (with respect to
the increase in the number of shares) on ________, 1998.

EXECUTIVE TELECARD, LTD.

By: -------------------------

A-10
<PAGE>

ATTACHMENT B

EXECUTIVE TELECARD, LTD.
1995 DIRECTORS STOCK OPTION AND
APPRECIATION RIGHTS PLAN

AS AMENDED AND RESTATED

B-1

<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
1. Purpose ............................................................... B-3

2. General Provisions ................................................... B-3

3. Eligibility ......................................................... B-3

4. Number of Shares Subject to Plan .................................... B-3

5. Stock Options ......................................................... B-4

6. Stock Appreciation Rights ............................................. B-6

7. Effect of Changes in Capitalization ................................. B-7

8. Nontransferability ................................................... B-8

9. Amendment, Suspension, or Termination of Plan ........................ B-9

10. Effective Date ...................................................... B-9

11. Termination Date ...................................................... B-9

12. Resale of Shares Purchased .......................................... B-9

13. Acceleration of Rights and Options .................................... B-9

14. Written Notice Required; Tax Withholding .............................. B-9

15. Compliance with Securities Laws ....................................... B-10

16. Waiver of Vesting Restrictions by Committee ........................... B-10

17. Reports to Participants ............................................. B-10

18. No Employee Contract ................................................ B-10

</TABLE>

B-2
<PAGE>

EXECUTIVE TELECARD, LTD.
1995 DIRECTORS STOCK OPTION AND
APPRECIATION RIGHTS PLAN
AS AMENDED AND RESTATED

1. Purpose. Executive TeleCard, Ltd. hereby establishes its 1995 Directors
Stock Option and Appreciation Rights Plan (the "Plan"). The purpose of the Plan
is to advance the interests of Executive TeleCard, Ltd. ("the Company") and the
Company's stockholders by providing a means by which the Company shall be able
to attract and retain the highest caliber of persons to serve on its Board of
Directors by providing them with an opportunity to participate in the increased
value of the Company which their effort, initiative, skill and guidance have
helped produce.

2. General Provisions.

(c) The Committee shall determine, in its sole discretion, which
participants under the Plan shall be granted stock options or stock
appreciation rights, the time or times at which options or rights are
granted, as well as the number and the duration of the options or rights
which are granted to participants; provided, however, that no participant
may be granted options to purchase more than 300,000 shares of common stock
of the Company ("Common Stock") under the Plan in any two (2) year period.

(d) The Committee shall also determine any other terms and conditions
relating to options and rights granted under the Plan as the Committee may
prescribe, in its sole discretion.

(e) The Committee shall make all other determinations and take all
other actions which it deems necessary or advisable for the administration
of the Plan.

(g) The Board of Directors (with members of the Committee abstaining)
shall have the authority to make grants under this Plan to members of the
Committee under the Plan or the Board may create a formula by which grants
will automatically be made to eligible members of the Committee. The
Committee shall have the authority to make grants hereunder to eligible
members of the Board other than Committee members and may also establish a
formula by which grants will automatically be made to Board members.

3. Eligibility. All of the members of the Company's Board of Directors
shall be eligible to participate in the Plan and to receive options and rights
hereunder, provided, however, that Incentive Stock Options may only be granted
to directors who are also employees of the Company or its subsidiaries at all
times during the period beginning on the date of granting of the option and
ending on the day three months before the date of exercise. Employees of the
Company who are also directors of the Company shall be eligible to participate
in the Plan in addition to any other similar plans for which they may be
eligible because of their status as directors.

4. Number of Shares Subject to Plan. The aggregate number of shares of the
Company's Common Stock which may be granted to participants shall be 870,000
shares, subject to adjustment only as provided in Sections 5(h) and 7 hereof.
These shares may consist of shares of the Company's authorized but

B-3

<PAGE>

unissued Common Stock or shares of the Company's authorized and issued Common
Stock reacquired by the Company and held in its treasury or any combination
thereof. If an option granted under this Plan is surrendered, or for any other
reason ceases to be exercisable in whole or in part, the shares as to which the
option ceases to be exercisable shall be available for options to be granted to
the same or other participants under the Plan, except to the extent that an
option is deemed surrendered by the exercise of a tandem stock appreciation
right and that right is paid by the Company in stock, in which event the shares
issued in satisfaction of the right shall not be available for new options or
rights under the Plan.

5. Stock Options.

(b) Option Price. The price at which options may be granted under the
Plan shall be determined by the Committee at the time of grant as follows:

(i) For Incentive Stock Options the option price shall be equal
to 100% of the Fair Market Value of the stock on the date the option
is granted; provided, however, that for Incentive Stock Options
granted to any person who, at the time such option is granted, owns
(as defined in (section) 422 of the Code) shares possessing more than
10% of the total combined voting power of all classes of shares of the
Company or its parent or subsidiary corporation, the option price
shall be 110% of the Fair Market Value.

(ii) For Nonqualified Stock Options the option price shall be
equal to the Fair Market Value of the stock on the date the option is
granted.

(iii) For purposes of this Plan, and except as otherwise set
forth herein, "Fair Market Value" shall mean: (A) if there is an
established market for the Company's Common Stock on a stock exchange,
in an over-the-counter market or otherwise, shall be the closing price
of the shares of Common Stock on such exchange or in such market (the
highest such closing price if there is more than one such exchange or
market) on the valuation date, or (B) if there were no such sales on
the valuation date, then in accordance with Treas. Reg. (section)
20.2031-2 or successor regulations. Unless otherwise specified by the
Committee at the time or grant (or in the formula proposed for such
grant, if applicable), the valuation date for purposes of determining
Fair Market Value shall be the date of grant. The Committee (or the
Board of Directors with respect to grants to Committee members
pursuant to Section 5(g) hereof may specify in any grant of an option
or stock appreciation right that, instead of the date of grant, the
valuation date shall be a valuation period of up to ninety (90) days
prior to the date of grant, and Fair Market Value for purposes of such
grant shall be the average over the valuation period of the closing
price of the shares of Common Stock on such exchange or in such market
(the highest such closing price if there is more than one such
exchange or market) on each date on which sales were made in the
valuation period, provided, however, that if the Committee (or the
Board of Directors) fails to specify a valuation period and there were
no sales on the date of grant then Fair Market Value shall be
determined as if the Committee had specified a thirty (30) day
valuation period for such determination, unless there is no
established market for the Company's Common Stock in which case the
determination of Fair Market Value shall be in accordance with clause
(B) above.

B-4

<PAGE>

The exercise of options shall be paid for in cash or in shares of the
Company's Common Stock, or any combination thereof. Shares tendered as
payment for option exercises shall, if acquired from the Company, have been
held for at least six months and shall be valued at the Fair Market Value
of the shares on the date of exercise. The Committee may, in its
discretion, agree to a loan by the Company to one or more participants of a
portion of the exercise price (not to exceed the exercise price minus the
par value of the shares to be acquired, if any) for up to three (3) years
with interest payable at the prime rate quoted in the Wall Street Journal
on the date of exercise. Members of the Committee may receive such loans
from the Company for the exercise of their options, if any, only with
approval by the Board.

The Committee may also permit a participant to effect a net exercise
of an option without tendering any shares of the Company's stock as payment
for the option. In such an event, the participant will be deemed to have
paid for the exercise of the option with shares of the Company's stock and
shall receive from the Company a number of shares equal to the difference
between the shares that would have been tendered and the number of options
exercised. Members of the Committee may effect a net exercise of their
options only with the approval of the Board.

The Committee may also cause the Company to enter into arrangements
with one or more licensed stock brokerage firms whereby participants may
exercise options without payment therefor but with irrevocable orders to
such brokerage firm to immediately sell the number of shares necessary to
pay the exercise price for the option and the withholding taxes, if any,
and then to transmit the proceeds from such sales directly to the Company
in satisfaction of such obligations.

The Committee may prescribe forms which must be completed and signed
by a participant and tendered with payment of the exercise price in order
to exercise an option.

(f) Early Termination of Options. In the event a participant's service
to the Company shall terminate as the result of total disability, as
defined below, or the result of retirement at 65 years of age or later,
then any options granted to such participant shall expire and may no longer
be exercised three (3) months after such termination. If the participant
dies while still in the service of the Company, to the extent that the
option was exercisable at the time of the participant's death, such option
may, within one year after the participant's death, be exercised by the
person or persons to whom the participant's rights under the option shall
pass by will or by the applicable laws of descent

B-5

<PAGE>

and distribution; provided, however, that an option may not be exercised to
any extent after the expiration of the option as originally granted. In the
event a participant's service to the Company shall terminate as the result
of any circumstances other than those referred to above, whether terminated
by the participant or the Company, with or without cause, then all options
granted to such participant under this Plan shall terminate and no longer
be exercisable as of the date of such termination, provided, however, that
if an employee with an Incentive Stock Option terminates employment prior
to its exercise, but notwithstanding such termination becomes or remains a
non-employee advisor, consultant or director eligible for Nonqualified
Stock Options hereunder or any other stock option plan of the Company, then
the Incentive Stock Option shall be converted to a Nonqualified Stock
Option on the date the Incentive Stock Option would otherwise have
terminated. A change in a participant's status from a director to an
eligible category under another stock option plan (e.g., from a director to
a consultant) without a break in service shall not be considered a
termination of that participant's service for purposes hereof.

Notwithstanding the foregoing, the Committee may, in its discretion, permit
the exercise of an option after termination of a participant's service by the
Company.

6. Stock Appreciation Rights.

(b) Exercise of Stock Appreciation Rights. Stock appreciation rights
shall be exercisable and be payable in the following manner:

B-6

<PAGE>

exercised. A participant wishing to exercise a stock appreciation
right shall give written notice of such exercise to the Company. Upon
receipt of such notice, the Company shall determine, in its sole
discretion, whether the participant's stock appreciation rights shall
be paid in cash or in shares of the Company's Common Stock or any
combination of cash and shares and thereupon shall, without deducting
any transfer or issue tax, deliver to the person exercising such right
an amount of cash or shares of the Company's Common Stock or a
combination thereof with a value equal to the differential. The date
the Company receives the written notice of exercise hereunder is the
exercise date. The shares issued upon the exercise of a stock
appreciation right may consist of shares of the Company's authorized
but unissued Common Stock or of its authorized and issued Common Stock
reacquired by the Company and held in its treasury or any combination
thereof. No fractional share of Common Stock shall be issued; rather,
the Committee shall determine whether cash shall be given in lieu of
such fractional share or whether such fractional share shall be
eliminated.

(d) Expiration or termination of stock appreciation rights.

7. Effect of Changes in Capitalization

B-7
<PAGE>

ant to the Plan shall pertain to and apply to the securities to which a
holder of the number of shares of Common Stock subject to such option would
have been entitled immediately following such reorganization, merger or
consolidation, with a corresponding proportionate adjustment of the option
price per share so that the aggregate option price thereafter shall be the
same as the aggregate option price of the shares remaining subject to the
option immediately prior to such reorganization, merger or consolidation.
Similar adjustments shall be made to the terms of stock appreciation
rights.

(c) Other Reorganizations, Sale of Assets or Common Stock. Upon the
dissolution or liquidation of the Company, or upon a merger, consolidation
or reorganization of the Company with one or more other entities in which
the Company is not the surviving entity, or upon a sale of substantially
all of the assets of the Company to another person or entity, or upon any
transaction (including, without limitation, a merger or reorganization in
which the Company is the surviving entity) approved by the Board that
results in any person or entity (other than persons who are holders of
stock of the Company at the time the Plan is approved by the Stockholders
and other than an Affiliate) owning 80 percent or more of the combined
voting power of all classes of stock of the Company, the Plan and all
options and stock appreciation rights outstanding hereunder shall
terminate, except to the extent provision is made in connection with such
transaction for the continuation of the Plan and/or the assumption of the
options and stock appreciation rights theretofore granted, or for the
substitution for such options and stock appreciation rights of new options
and stock appreciation rights covering the stock of a successor entity, or
a parent or subsidiary thereof, with appropriate adjustments as to the
number and kinds of shares and exercise prices, in which event the Plan,
options and stock appreciation rights and stock appreciation rights
theretofore granted shall continue in the manner and under the terms so
provided. In the event of any such termination of the Plan, each
participant shall have the right (subject to the general limitations on
exercise set forth in Section 5(d) hereof and except as otherwise
specifically provided in the option agreement relating to such option or
stock appreciation right), immediately prior to the occurrence of such
termination and during such period occurring prior to such termination as
the Committee in its sole discretion shall designate, to exercise such
option or stock appreciation right in whole or in part, whether or not such
option or stock appreciation right was otherwise exercisable at the time
such termination occurs, but subject to any additional provisions that the
Committee may, in its sole discretion, include in any option agreement. The
Committee shall send written notice of an event that will result in such a
termination to all participants not later than the time at which the
Company gives notice thereof to its stockholders.

8. Nontransferability. During a participant's lifetime, a right or an
option may be exercisable only by the participant. Options and rights granted
under the Plan and the rights and privileges conferred thereby shall not be
subject to execution, attachment or similar process and may not be transferred,
assigned, pledged or hypothecated in any manner (whether by operation of law or
otherwise) other than by will or by the applicable laws of descent and
distribution. Notwithstanding the foregoing, to the extent permitted by
applicable law and, if the Company has a class of securities registered under
the Exchange Act, by Exchange Act Rule 16b-3, the Committee may, in its sole
discretion, (i) permit a recipient of a Nonqualified Stock Option to designate
in writing during the participant's lifetime a beneficiary to receive and
exercise the participant's Nonqualified Stock Options in the event of such
participant's death (as provided in Section 5(f)), (ii) grant Nonqualified Stock
Options that are transfer-

B-8

<PAGE>

able to the immediate family, a family trust of the participant or a partnership
in which immediate family members are the only partners, and (iii) modify
existing Nonqualified Stock Options to be transferable to the immediate family,
a family trust or a family partnership of the participant. Any other attempt to
transfer, assign, pledge, hypothecate or otherwise dispose of any option or
right under the Plan, or of any right or privilege conferred thereby, contrary
to the provisions of the Plan shall be null and void.

10. Effective Date. The effective date of the Plan is December 14, 1995.

14. Written Notice Required; Tax Withholding. Any option or right granted
pursuant to the Plan shall be exercised when written notice of that exercise by
the participant has been received by the

B-9

<PAGE>

Company at its principal office and, with respect to options, when full payment
for the shares with respect to which the option is exercised has been received
by the Company. By accepting a grant under the Plan, each participant agrees
that, if and to the extent required by law, the Company shall withhold or
require the payment by participant of any state, federal or local taxes
resulting from the exercise of an option or right; provided, however, that to
the extent permitted by law, the Committee (or, for Committee members, the
Board) may in its discretion, permit some or all of such withholding obligation
to be satisfied by the delivery by the participant of, or the retention by the
Company of, shares of its Common Stock.

As adopted by the Board of Directors of the Company on December 14, 1995,
as approved by stockholders on __________________, as amended and restated by
the Board of Directors on October 25, 1997, as amended and restated by the Board
of Directors on January __, 1998, and as approved by stockholders on
___________, 1998.

EXECUTIVE TELECARD, LTD.

By:
-----------------------------------

B-10

<PAGE>

REVOCABLE PROXY EXECUTIVE TELECARD, LTD.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned stockholder of Executive TeleCard, Ltd. (the "Company")
hereby appoints Christopher J. Vizas and Anne Haas, or either of them, attorneys
and proxies of the undersigned, with full power of substitution and with
authority in each of them to act in the absence of the other, to vote and act
for the undersigned stockholder at the Annual Meeting of Stockholders to be held
at 9:00 a.m., local time, on February 26, 1998, at the Embassy Suites, 7525 E.
Hampden Avenue, Denver, Colorado, and at any adjournments thereof, upon the
following matters:

Proposal One: Election of eight directors to the Board of Directors to
serve until the next annual meeting of stockholders and
until their successors have been duly elected and
qualified:

[ ] FOR the nominees listed in the proxy statement Nominees: Christopher J. Vizas Anthony Balinger Richard A. Krinsley
Donald H. Sledge Edward J. Gerrity, Jr.
David W. Warnes Martin L. Samuels James O. Howard
[ ] WITHHOLD AUTHORITY to vote for the nominees at right
Nominees: -------------------

(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL NOMINEE, CROSS OUT THAT NOMINEE'S NAME AT RIGHT.)
</TABLE>

Proposal Two: Approval of the amendments to the Company's 1995 Employee
Stock Option and Appreciation Rights Plan, including an
increase from 1,000,000 to 1,750,000 in the number of
shares authorized to be issued pursuant to options granted
under such plan.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

Proposal Three: Approval of the amendments to the Company's 1995 Directors
Stock Option and Appreciation Rights Plan.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

Proposal Four: Ratification of the appointment of BDO Seidman, LLP as
independent accountants of the Company for the fiscal year
ending March 31, 1998.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

Proposal Five: Ratification of the change in the Company's fiscal year
from a fiscal year ending March 31 to a fiscal year ending
December 31, commencing with the fiscal year beginning
April 1, 1998

[ ] FOR [ ] AGAINST [ ] ABSTAIN

(Continued and to be dated and signed on reverse side)

<PAGE>
(CONTINUED FROM OTHER SIDE)

In their discretion, on any other matters that may properly come before the
Annual Meeting, or any adjournments thereof, in accordance with the
recommendations of a majority of the Board of Directors.

This proxy will be voted as directed by the undersigned stockholder. UNLESS
CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSALS ONE THROUGH
FIVE.

If you receive more than one proxy card, please sign and return all cards
in the accompanying envelope.

[ ] I PLAN TO ATTEND THE FEBRUARY 26, 1998 ANNUAL STOCKHOLDERS MEETING

Date:
-------------------------------, 1998.

--------------------------------------------
(Signature of Stockholder or Authorized
Representative)

--------------------------------------------
(Print name)

Please date and sign exactly as name appears
hereon. Each executor, administrator,
trustee, guardian, attorney-in-fact and
other fiduciary should sign and indicate his
or her full title. In the case of stock
ownership in the name of two or more
persons, both persons should sign.

PLEASE MARK, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY TO ENSURE A QUORUM
AT THE ANNUAL MEETING. IT IS IMPORTANT WHETHER YOU OWN FEW OR MANY SHARES. DELAY
IN RETURNING YOUR PROXY MAY SUBJECT THE COMPANY TO ADDITIONAL EXPENSE.