SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
INTELIDATA TECHNOLOGIES CORPORATION
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required.
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
( ) Fee paid previously with preliminary materials:
( ) 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.
(1) Amount Previously Paid:
(2) Form, Schedule, or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
August 6, 1999
Dear Stockholder:
We cordially invite you to attend the Annual Meeting of Stockholders of
InteliData Technologies Corporation to be held on Thursday, September 9, 1999 at
9:00 a.m. at the Sheraton Reston Hotel located at 11810 Sunrise Valley Drive,
Reston, Virginia 20191. Enclosed are a proxy statement and a form of proxy.
At this meeting we will ask the Stockholders: (i) to elect one Class II
Director and two Class III Directors; (ii) to approve an amendment to the
Company's 1996 Incentive Plan reserving an additional 900,000 shares of the
Company's Common Stock for issuance thereunder; and (iii) to ratify the
selection of Deloitte & Touche LLP as the Company's independent auditors for the
year ending December 31, 1999.
We value your participation by voting your shares on matters that come
before the meeting. Please follow the instructions on the enclosed proxy to
ensure representation of your shares at the meeting.
Sincerely,
William F. Gorog
Chairman of the Board
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 9, 1999
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of InteliData Technologies
Corporation (the "Company") will be held on Thursday, September 9, 1999 at the
Sheraton Reston Hotel, 11810 Sunrise Valley Drive, Reston, Virginia 20191 at
9:00 a.m. local time, for the following purposes:
1. To elect one Class II member and two Class III members of the Board of
Directors (Proposal 1);
2. To approve an amendment to the Company's 1996 Incentive Plan reserving an
additional 900,000 shares of the Company's Common Stock for issuance
thereunder (Proposal 2);
3. To ratify the selection of Deloitte & Touche LLP as independent auditors
for the Company for the year ending December 31, 1999 (Proposal 3); and
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Only holders of record of the Company's Common Stock at the close of
business on July 29, 1999, the record date fixed by the Company's Board of
Directors, are entitled to notice of and to vote at the Annual Meeting.
By Order of the Board of Directors,
Albert N. Wergley
Vice President and Secretary
Reston, Virginia
August 6, 1999
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 IN THE ENCLOSED POSTAGE PAID ENVELOPE. YOU MAY, IF YOU
WISH, REVOKE YOUR PROXY AT ANY TIME PRIOR TO THE TIME IT IS VOTED.
<PAGE>
INTELIDATA TECHNOLOGIES CORPORATION
11600 Sunrise Valley Drive, Suite 100
Reston, Virginia 20191
PROXY STATEMENT
For the Annual Meeting of Stockholders
to be held September 9, 1999
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
This Proxy Statement is furnished to stockholders in connection with
the solicitation by the Board of Directors of InteliData Technologies
Corporation ("InteliData" or the "Company") of proxies in the accompanying form
for use at the Annual Meeting of Stockholders of the Company to be held at the
Sheraton Reston Hotel, 11810 Sunrise Valley Drive, Reston, Virginia 20191, at
9:00 a.m. on Thursday, September 9, 1999, and at any adjournment thereof. If a
proxy in the accompanying form is duly executed and returned, the shares
represented thereby will be voted at the Annual Meeting and, where a choice is
specified, will be voted in accordance with the specification made. Any
stockholder who gives a proxy may revoke it at any time before it is exercised
by giving a later proxy, by attending the meeting and voting in person, or by
giving notice of revocation to the Company's Secretary.
The Annual Meeting has been called for the following purposes: (1) to
elect one Class II member and two Class III members of the Board of Directors;
(2) to approve an amendment to the Company's 1996 Incentive Plan reserving an
additional 900,000 shares of the Company's Common Stock for issuance thereunder;
(3) to ratify the selection of Deloitte & Touche LLP as the Company's
independent auditors to audit the financial statements of the Company for fiscal
year 1999; and (4) to transact such other business as may properly come before
the meeting or any adjournment thereof. Only holders of record of the Company's
Common Stock at the close of business on July 29, 1999, the record date fixed by
the Company's Board of Directors, are entitled to notice of and to vote at the
Annual Meeting. This proxy statement and the attached form of proxy are first
being sent or given to stockholders on or about August 6, 1999.
If the enclosed form of proxy is properly executed and returned to the
Company in time to be voted at the Annual Meeting, the shares represented
thereby will be voted in accordance with the instructions marked therein.
Executed but unmarked proxies will be voted FOR the election of the Company's
two nominees to the Board of Directors, FOR the approval of the amendment to the
Company's 1996 Incentive Plan, and FOR the ratification of Deloitte & Touche LLP
as the Company's auditors.
The Company's capital stock consists of a single class of Common Stock,
par value $0.001 per share, of which 33,003,551 shares were outstanding and
entitled to vote at the close of business on July 29, 1999.
The presence, in person or by proxy, of at least a majority of the
total number of outstanding shares of Common Stock entitled to vote at the
Annual Meeting is necessary to constitute a quorum at the Annual Meeting, but if
a quorum should not be present, the meeting
<PAGE>
may be adjourned from time to time until a quorum is obtained. Stockholders'
votes will be tabulated by persons appointed by the Board of Directors to act as
inspectors of election for the Annual Meeting. The affirmative vote of a
majority of the shares present or represented and entitled to vote at the
Meeting is required to approve each proposal, other than the election of
directors which requires a plurality of the shares voted affirmatively or
negatively at the Annual Meeting. With respect to the tabulation of votes on any
matter, abstentions are treated as votes against a proposal, while broker
non-votes have no effect on the vote.
A copy of the annual report to stockholders for the fiscal year ended
December 31, 1998 accompanies this Proxy Statement, but does not constitute a
part hereof. The Company is required to file an annual report on Form 10-K for
its 1998 fiscal year with the Securities and Exchange Commission ("SEC").
Stockholders may obtain, free of charge, a copy of the Form 10-K by writing:
InteliData Technologies Corporation, 11600 Sunrise Valley Drive, Suite 100,
Reston, Virginia 20191, Attention: Investor Relations.
On November 7, 1996, US Order, Inc. ("US Order") and Colonial Data
Technologies Corp. ("Colonial Data") merged into InteliData (the "Merger")
pursuant to an Agreement and Plan of Merger, dated as of August 5, 1996 (the
"Merger Agreement"). In the Merger, each common stockholder of US Order or of
Colonial Data received one share of the Company's common stock for each share of
US Order or Colonial Data common stock held. The Company also assumed certain of
US Order's and Colonial Data's employee benefit and stock incentive plans. Where
information is provided as of a date or period prior to November 7, 1996, such
information is provided with respect to US Order or Colonial Data, as
appropriate.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information as of July 29, 1999,
regarding beneficial ownership of the Company's Common Stock by (i) each person
who is known to the Company to own beneficially more than five percent of the
Company's Common Stock, (ii) each director of the Company, (iii) each executive
officer named in the Summary Compensation Table (the "Named Executive Officers")
set forth in this Proxy Statement, and (iv) all current directors and executive
officers of the Company as a group. The information on beneficial ownership in
the table and the footnotes thereto is based upon the Company's records and the
most recent Schedule 13D or 13G filed by each such person or entity and
information supplied to the Company by such person or entity. Unless otherwise
indicated, each person has sole voting power and sole investment power with
respect to the shares shown. Under the proxy rules of the SEC, a person who
directly or indirectly has or shares voting power or investment power with
respect to a security is considered a beneficial owner of the security. Voting
power is the power to vote or to direct the voting of securities, and investment
power is the power to dispose of or to direct the disposition of securities.
Securities as to which voting power or investment power may be acquired within
60 days are also considered as beneficially owned under the proxy rules of the
SEC.
<PAGE>
<TABLE>
OWNERSHIP OF COMMON STOCK
Beneficial Ownership
------------------------------
Number of
Name of Stockholder Shares Percent
------------------- --------- -------
<S> <C> <C>
WorldCorp, Inc. 8,234,273 <F1> 24.9%
13873 Park Center Road
Suite 490
Herndon, Virginia 22071
Morgan Stanley, Dean Witter & Co. 3,039,223 <F2> 9.2%
1585 Broadway
New York, New York 10036
John H. Timmis
28 Hawley Road
North Salem, NY 10560 2,007,000 <F3> 6.1%
William F. Gorog 764,442 <F4> 2.3%
Alfred S. Dominick, Jr. 380,877 <F5> 1.2%
John C. Backus, Jr. 139,909 <F6> *
Albert N. Wergley 36,554 <F7> *
Patrick F. Graham 35,000 <F8> *
L. William Seidman 28,000 <F9> *
Mark L. Baird 24,038 <F10> *
Joseph P. Payne 24,010 <F11> *
John J. McDonnell, Jr. 6,000 <F12> *
Norman J. Tice 6,000 *
Directors and Executive Officers
as a Group (9 persons) 1,438,830 <F13> 4.3%
<FN>
- ---------------
(1) On February 12, 1999, WorldCorp, Inc. filed a Voluntary Petition and a
proposed plan of reorganization under Chapter 11 of the United States
Bankruptcy Code with the United States Bankruptcy Court for the District
of Delaware.
(2) As reported in the Schedule 13G/A filed with the SEC with information as
of February 10, 1999, includes shares held in accounts managed by Morgan
Stanley Dean Witter Investment Management Limited, a wholly owned
subsidiary of Morgan Stanley, Dean Witter & Co.
(3) As reported in the Schedule 13G/A filed with the SEC with information as
of February 16, 1999.
(4) Includes 149,999 shares of Common Stock issuable upon the exercise of
options and 35,000 shares held by Mr. Gorog's wife. Does not include
10,000 shares held by a foundation trust for which Mr. Gorog is trustee.
Mr. Gorog disclaims beneficial ownership of such shares held by his wife
and by the trust.
(5) Includes 66,667 shares of Common Stock issuable upon the exercise of
options and 1,000 shares held by Mr. Dominick's son. Mr. Dominick
disclaims beneficial ownership of shares held by his son.
(6) Includes 100,000 shares of Common Stock issuable upon the exercise of
options.
<PAGE>
(7) Includes 26,554 shares of Common Stock issuable upon the exercise of
options.
(8) Includes 34,500 shares of Common Stock issuable upon the exercise of
options.
(9) Includes 12,000 shares of Common Stock issuable upon the exercise of
options.
(10) Includes 13,100 shares of Common Stock issuable upon the exercise of
options.
(11) Includes 11,813 shares of Common Stock issuable upon the exercise of
options.
(12) Includes 6,000 shares of Common Stock issuable upon the exercise of
options.
(13) Includes 420,633 shares of Common Stock issuable upon the exercise of
options.
* Less than 1%.
</FN>
</TABLE>
ELECTION OF DIRECTORS
(Proposal 1)
The Company's Amended and Restated Certificate of Incorporation
provides that the Board of Directors be divided into three classes as nearly
equal in number as possible. The term of Class I directors expires in 2000, the
term of Class II directors expires in 2001, and the term of Class III directors
expires in 1999. The Class II Director elected at the Annual Meeting will hold
office for a two-year term expiring in 2001 and the Class III Directors elected
at the Annual Meeting will hold office for a three-year term expiring in 2002,
or until their successors are elected and qualified. The other directors will
continue in office for the remainder of their terms as indicated below. The
Board of Directors has recommended one nominee for a new two-year term in Class
II and two nominees for a new three-year term in Class III. No arrangement or
understanding exists with respect to the manner in which the Board, at its
discretion, may fill any remaining vacancy being created or any other vacancies
that may occur during the year. Unless authority so to vote is withheld, proxies
received pursuant to this solicitation will be voted for the election of the
three nominees named below. If any of the nominees should for any reason not be
available for election, proxies will be voted for the election of the remaining
nominees and such substitute nominees as may be designated by the Board of
Directors. The election of each nominee requires the affirmative vote of the
holders of a plurality of the shares of Common Stock cast in the election of
directors.
Nominee for Election as Director for Term Expiring in 2001
Norman J. Tice, age 64, is Chairman Emeritus of the Board of Directors
of MasterCard International, Inc. Global, a brand and payment systems company,
since June, 1996, prior to which he served as Chairman from 1994 to 1996 and a
member of the Board since 1984. He is also Chairman of the Board of Blue Cross
and Blue Shield of Missouri, a health insurer, since 1990, with a break in
service from 1994 to 1996. He serves on the Board of Directors of RightCHOICE
Managed Care, Inc., a managed care company. Mr. Tice has over 40 years
experience in banking as an executive with Boatmen's Bank of St. Louis, City
Bank of St. Louis, Charter Bank, N.A. of St. Louis, and Boatmen's Bancshares,
Inc. From 1985 until his retirement in 1996, Mr. Tice's positions included
service as chairman and chief executive officer of
<PAGE>
Boatmen's Credit Card Bank, chairman and chief executive officer of Boatmen's
Community Development Corporation, and executive vice president of Boatmen's
Bank of St. Louis.
Nominees for Election as Directors for Terms Expiring in 2002
Alfred S. Dominick, Jr., age 53, has served as the President and Chief
Executive Officer of the Company since August 1998. Prior to joining InteliData,
Mr. Dominick had served as president of the Retail Products Delivery Group at
M&I Data Services. Prior to joining M&I Data Services in July 1995, he was
Executive Vice President of Retail Banking and a member of the Executive
Committee for Boatmen's Bancshares Corporation for three years. From 1990 to
1992, Mr. Dominick was an Executive Vice President with Bank One Texas. Prior to
joining Bank One Texas, Mr. Dominick was a Senior Vice President with Fleet
National Bank. Mr. Dominick currently serves as a director of Home Financial
Network, Inc. and FB BanCorp.
Patrick F. Graham, age 59, has served as a director of the Company
since 1996 and was a director of US Order from 1993 until the Merger. Since July
1999, he has been the Director of the Global Strategy Practice of A.T. Kearney,
Inc., a management consulting firm. From 1997 until June 1999, he served as
chief executive officer of WorldCorp, Inc. On February 12, 1999, WorldCorp, Inc.
filed a Voluntary Petition and a proposed plan of reorganization under Chapter
11 of the United States Bankruptcy Code with the United States Bankruptcy Court
for the District of Delaware. He was previously a director of Bain & Company,
Inc., a management consulting firm co-founded by Mr. Graham in 1973. In addition
to his primary responsibilities with Bain clients, he served as Bain's vice
chairman and chief financial officer. Prior to founding Bain, Mr. Graham was a
group vice president with the Boston Consulting Group.
Directors Continuing in Office in the Class of 2000
William F. Gorog, age 73, has served as Chairman and director of the
Company since November 1996. Mr. Gorog had served as Chairman of US Order from
May 1990 to November 1996. From October 1987 until founding US Order in May
1990, he served as chairman of the board of Arbor International, an investment
management firm. From 1982 to 1987, he served as president and chief executive
officer of the Magazine Publishers of America, an association representing the
principal consumer publications in the United States. During the Ford
Administration, Mr. Gorog served as deputy assistant to the President for
Economic Affairs and Executive Director of the Council on International Economic
Policy. Prior to that time, he founded and served as chief executive officer of
DataCorp., which developed the Lexis and Nexis information systems for legal and
media research and which was subsequently sold to the Mead Corporation. He
currently serves as a director of WorldCorp, Inc. On February 12, 1999,
WorldCorp, Inc. filed a Voluntary Petition and a proposed plan of reorganization
under Chapter 11 of the United States Bankruptcy Code with the United States
Bankruptcy Court for the District of Delaware.
L. William Seidman, age 78, has served as a director of the Company
since 1997. He is the publisher of Bank Director magazine and chief commentator
on CNBC-TV. He served on the board of US Order from 1995 until the Merger. Mr.
Seidman served from 1985 to 1991 as the chairman of the Federal Deposit
Insurance Corporation ("FDIC") and from 1989 to 1991 also served as the first
Chairman of the Resolution Trust Corporation. Before joining the FDIC,
<PAGE>
Mr. Seidman served as Dean of the College of Business at Arizona State
University. From 1977 to 1982 he was vice-chairman and chief financial officer
of Phelps Dodge Corporation. Mr. Seidman has also served as managing partner of
Seidman & Seidman, Certified Public Accountants (now BDO Seidman), and as
Assistant to the President for Economic Affairs during the Ford Administration.
Mr. Seidman presently serves as a director of Fiserv, Inc., a data processing
company, Clark/Bardes Holdings, Inc., a services company providing
insurance-financed benefits programs, and quepasa.com, inc., an internet online
service provider.
Directors Continuing in Office in the Class of 2001
John J. McDonnell, Jr., age 61, has served as a director of the Company
since 1997. Since 1990, he has served as President, Chief Executive Officer, and
a director of Transaction Network Services, Inc., a provider of data
communications services for transaction oriented applications. From 1987 to
1989, Mr. McDonnell served as president and chief executive officer of Digital
Radio Networks, Inc., a local access bypass carrier for point-of-sale
transactions. Mr. McDonnell has previously served as group vice president for
the information technologies and telecommunications group of the Electronic
Industries Association; vice president, international operations and vice
president, sales, for Tymnet, Inc. with responsibility for both private network
sales and public network services; and director of technology and
telecommunications for the National Commission on Electronic Funds Transfer. Mr.
McDonnell was one of the founding members of the Electronics Funds Transfer
Association and serves on its board. Mr. McDonnell is also a director of Credit
Management Solutions, Inc., a software development company.
Board of Directors and Committees
The Company's Board of Directors held four regular meetings and two
telephonic meetings during fiscal year 1998. Each incumbent director attended at
least 75 percent of the meetings held during fiscal year 1998 by the Board and
each committee of the Board of which he was a member. The Company's Board of
Directors has a Compensation Committee and an Audit Committee.
The Compensation Committee (consisting of Messrs. Graham and McDonnell)
reviews and recommends to the Board appropriate action with respect to the
compensation of and benefits granted to officers and other key employees of the
Company and administers the Company's 1996 Incentive Plan. The Compensation
Committee held four meetings during fiscal year 1998.
The Audit Committee (currently consisting of Mr. McDonnell and one
vacancy to be filled) nominates the Company's independent auditors, reviews
related party transactions for conflicts of interest, reviews with the Company's
independent auditors matters relating to the scope and plan of the audit, the
adequacy of internal controls, and the preparation of the Company's financial
statements, reports and makes recommendations to the Board with respect thereto.
The Audit Committee did not hold any separate meetings during fiscal year 1998
as the audit issues were addressed in the context of regular Board meetings.
The Company does not have a nominating committee.
<PAGE>
Compensation of Directors
Directors of the Company who are not also executive officers of the
Company or of an affiliate of the Company ("Non-Affiliate Directors") receive a
quarterly payment of $1,250 and $500 for each Board meeting attended, excluding
telephonic meetings. They are also reimbursed for usual and ordinary expenses of
meeting attendance. Under the Non-Employee Directors' Stock Option Plan (the
"Directors' Plan") each Non-Affiliate Director is offered options to purchase
6,000 shares of Common Stock following the Company's Annual Meeting of
Stockholders. The exercise price for any option grants under the Directors' Plan
will be the average closing price of the Common Stock during the 30 trading days
immediately preceding the date of grant. Options granted under the Directors'
Plan vest in 12 equal monthly installments during the Non-Affiliate Director's
continued service on the Board. The option price may be paid in cash, by
surrendering shares of Common Stock or by a combination of cash and Common
Stock. All options expire ten years after their grant. Up to 200,000 shares of
Common Stock may be issued under the Directors' Plan, subject to certain
adjustments.
AMENDMENT TO THE 1996 INCENTIVE PLAN
RESERVING AN ADDITIONAL 900,000 SHARES
OF THE COMPANY'S COMMON STOCK
(Proposal 2)
The stockholders are being asked to approve an amendment to the
Company's 1996 Incentive Plan (the "1996 Plan") reserving an additional 900,000
shares of the Company's Common Stock for issuance thereunder. The Board of
Directors believes that this amendment to the 1996 Plan is important to the
continued functioning of the 1996 Plan, which has proved an effective means of
recruiting, motivating and retaining the most qualified employees. In the past
several years, the labor markets in which the Company operates have become
increasingly more competitive, and recruiting and retaining the highly skilled
employees the Company needs has become increasingly difficult. As a result, the
Board believes that the proposed increase in the number of shares of Common
Stock issuable under the 1996 Plan is necessary to allow grants of new options
to employees whose present options are becoming fully vested, to recruit new
employees and to increase existing employees' current equity stakes in the
Company. For a description of the 1996 Plan, see "Description of the 1996 Plan"
below.
As of the Record Date, and without giving effect to this Proposal 2,
1,500,000 shares have been reserved for issuance under the 1996 Plan, of which
212,689 have been issued pursuant to option exercises or stock awards, 1,245,458
are subject to outstanding options, and 41,853 are available for grant. Proposal
2 was adopted by the Board of Directors on July 12, 1999 subject to stockholder
approval.
As of the Record Date, there were 1,537,960 shares of Common Stock
subject to outstanding but unexercised options under the Company's other stock
option plans.
<PAGE>
Brief Summary of the Amendment to the 1996 Plan
The 1996 Plan currently authorizes the issuance of up to 1,500,000
shares of Common Stock of the Company. On July 12, 1999, the Board of Directors
approved an amendment to the 1996 Plan increasing the number of shares reserved
for issuance under the plan by 900,000 to 2,400,000. Due to prior grants of
stock options, stock appreciation rights ("SARs") and stock awards, as of the
Record Date, only 41,853 shares remained available for issuance under the 1996
Plan.
Purpose of the 1996 Plan
The Board of Directors strongly recommends that the stockholders
approve the amendment to the 1996 Plan. The Board believes that grants of stock
options, SARs, incentive awards and stock awards are extremely important to the
Company's overall compensation package. The 1996 Plan allows the Company to
recruit and retain the most qualified employees by enabling employees to
participate in the future success of the Company and to align their interests
with those of the Company and its stockholders.
Description of the 1996 Plan
The 1996 Plan currently authorizes the issuance of up to 1,500,000
shares of Common Stock and, as amended, will authorize the issuance of up to
2,400,000 shares. The 1996 Plan is administered by the Compensation Committee of
the Board of Directors or any delegate thereof (the "Administrator"). Executive
officers (including the Named Executive Officers) and all other employees of the
Company are eligible to participate in the 1996 Plan. As of July 29, 1999, the
Company had 59 full-time employees and 2 part-time employees. The Board of
Directors cannot make any grants of stock options, SARs, stock awards or
incentive awards after November 7, 2006.
The Board of Directors may amend the 1996 Plan as it deems advisable;
provided, however, that no amendment may become effective until stockholder
approval is obtained if (i) the amendment increases the aggregate number of
shares issuable under the 1996 Plan, (ii) the amendment changes the class of
individuals eligible to participate, or (iii) the amendment materially increases
the benefits provided under the 1996 Plan.
Stock Options. Options to purchase shares of Common Stock granted under
the 1996 Plan may be incentive stock options that qualify for favorable income
tax treatment or nonstatutory stock options. The purchase price of Common Stock
covered by an option may not be less than 85% of the fair market value of the
Common Stock on the date of the option grant, except that in the case of an
incentive stock option the purchase price may not be less than 100% (or, in the
case of an incentive stock option granted to a 10% stockholder, 110%). The value
of incentive stock options, based on the exercise price, that can be exercisable
for the first time in any calendar year under the 1996 Plan or any other similar
plan maintained by the Company is limited to $100,000.
Options may be exercised only at such times as may be specified by the
Administrator in the optionee's stock option agreement. Generally, an incentive
stock option shall not be
<PAGE>
exercisable after ten years (or, in the case of an incentive stock option
granted to a 10% stockholder, five years) from the date on which the incentive
stock option was granted.
Generally, options are not transferable, except upon the death of the
option holder. An option agreement may provide, however, that options that are
not incentive stock options are transferable to certain family members of the
optionee.
Payment of the exercise price of an option must be in cash or a cash
equivalent acceptable to the Administrator, unless the option agreement allows
the optionee to pay by means of surrendering shares of Common Stock. If Common
Stock is used to pay all or a part of the exercise price, the sum of the cash or
cash equivalent and the fair market value of the surrendered Common Stock must
not be less than the exercise price of the shares for which the option is being
exercised. Subject to the option agreement, it is also possible for an optionee
to pay the exercise price in installments.
Optionees do not have rights as stockholders until they exercise their
options.
Stock Appreciation Rights. The Administrator may award SARs to any
eligible employee and shall specify the number of shares of Common Stock covered
by such SARs. Subject to the Administrator's discretion, a SAR may be granted
with a stock option and be exercisable only upon exercise of the related stock
option (as such, a "Corresponding SAR"), or a SAR may be granted and exercised
independent of any stock option. In any calendar year, no employee may be
granted SARs covering more than 250,000 shares, except that any stock options
granted with Corresponding SARs shall be treated as a single award. Furthermore,
no employee may be granted Corresponding SARs (under all Company incentive stock
option plans) that are related to incentive stock options first exercisable in
any calendar year for Common Stock having an aggregate fair market value
exceeding $100,000.
SARs may be exercised only at such times as may be specified by the
Administrator; provided, however, that no SAR shall be exercisable after ten
years (or, in the case of a Corresponding SAR that is related to an incentive
stock option granted to a 10% stockholder, five years) from the date on which
the corresponding option was granted. Furthermore, a Corresponding SAR that is
related to an incentive stock option may be exercised only to the extent that
the related option is exercisable and only when the fair market value of the
Common Stock for which the stock option is exercisable exceeds the exercise
price of the related option.
Generally, the same restrictions on transfer that apply to stock
options also apply to SARs. A holder of a SAR has no rights as a stockholder of
the Company.
Stock Awards. The Administrator may designate certain employees as
recipients of awards of Common Stock and specify the number of shares of Common
Stock covered by such awards; provided, however, that no employee may receive
stock awards in any calendar year covering more than 60,000 shares. The
Administrator may include provisions in a stock award agreement making the
vesting and transferability of the stock award contingent upon the attainment of
certain performance objectives. The Administrator may define such performance
objectives to include objectives based on the Company's, an affiliate's or an
operating unit's
<PAGE>
return on equity, earnings per share, total earnings, earnings growth, return on
capital, return on assets or fair market value.
Prior to forfeiture and while the shares of Common Stock granted
pursuant to a stock award may be forfeited or are transferable, a stock award
bestows the rights of a stockholder on the holder thereof provided that (i) the
grantee does not transfer or otherwise dispose of the shares of the Common Stock
granted pursuant to the stock award, (ii) the Company retains custody of the
stock certificates and (iii) the grantee of the stock award delivers a stock
power to the Company.
Incentive Awards. The Administrator may designate certain employees to
receive incentive awards; provided, however, no employee may receive an
incentive award that exceeds the lesser of (i) 75% of the employee's base salary
or (ii) $350,000. The Administrator makes each incentive award contingent upon
the attainment of certain performance objectives of the Company over a period of
at least one year and may condition an incentive award on an employee's
attainment of certain individual goals. Such terms and conditions shall
prescribe that the incentive award shall be earned only to the extent that the
Company, an affiliate or an operating unit, during a performance period of at
least one year, achieves objectives based on the Company's return on equity,
earnings per share, total earnings, earnings growth, return on capital, return
on assets or fair market value. Generally, incentive awards are not transferable
other than upon death. An incentive award agreement may provide, however, that
an incentive award is transferable to certain family members. The receipt of an
incentive award does not bestow the rights of a stockholder on the grantee.
Adjustments. The Compensation Committee shall adjust (i) the maximum
number of shares of Common Stock as to which stock options, SARs and stock
awards may be granted, (ii) the terms of outstanding stock options, SARs and
stock awards, and (iii) the individual limitations on the number of shares of
Common Stock for which stock options, SARs and stock awards may be granted, in
the event that (a) there is a stock dividend, stock split or similar pro rata
change in the number of outstanding shares of Common Stock, (b) the Company
engages in a transaction governed by Section 424 of the Internal Revenue Code,
or (c) the Compensation Committee believes an adjustment is necessary as the
result of a certain event.
Federal Income Tax Consequences.
Generally federal income tax liability is not incurred when an employee
is granted a nonstatutory stock option or an incentive stock option or when the
employee is granted a stock award comprised of restricted stock. An employee
will be subject to federal income tax on the award of restricted stock when the
restrictions imposed lapse or the stock becomes transferable, unless the
employee makes a Section 83(b) election to have the grant taxed as compensation
income at fair market value on the date of grant, with the result that any
future appreciation (or depreciation) in the value of the stock subject to the
grant will be treated as capital gain (or loss) at the time the stock is sold.
An employee who is eligible to receive a stock award contingent upon attainment
of certain stock performance goals will not incur federal income tax until such
stock award is received.
<PAGE>
Upon exercise of a nonstatutory stock option or a SAR, an employee
generally will recognize compensation income, which is subject to income tax
withholding by the Company, equal to the difference between the fair market
value of the Common Stock on the date of the exercise and the purchase price. An
employee who has received shares of restricted stock pursuant to a stock award,
and has not made a Section 83(b) election, will include in his gross income as
compensation income an amount equal to the fair market value of the shares of
restricted stock at the time the restrictions lapse or the stock becomes
transferable. An employee who receives shares of Common Stock pursuant to a
stock award that is contingent upon the attainment of certain performance goals
will include in his gross income as compensation income an amount equal to the
fair market value of the shares of Common Stock on the date of transfer to the
employee. The compensation income recognized by the employee will be subject to
income tax withholding by the Company.
When an employee exercises an incentive stock option, he generally will
not recognize income subject to tax, unless the employee is subject to the
alternative minimum tax.
If permitted by the applicable stock option agreement, an employee may
deliver shares of Common Stock instead of cash to acquire shares under an
incentive stock option or nonstatutory stock option, without having to recognize
taxable gain (except in some cases with respect to "statutory option stock") on
any appreciation in value of the shares delivered. However, if an employee
delivers shares of "statutory option stock" in satisfaction of all, or any part,
of the exercise price under an incentive stock option, and if the applicable
holding periods for the "statutory option stock" have not been met, he will be
considered to have made a taxable disposition of the "statutory option stock."
"Statutory option stock" is stock acquired upon the exercise of incentive stock
options.
Assuming that the recipient's compensation is otherwise reasonable and
that the statutory limitations on compensation deductions by publicly held
companies (as discussed below) imposed by Section 162(m) of the Internal Revenue
Code do not apply, the Company usually will be entitled to a business expense
deduction at the time and in the amount that the recipient of a stock option,
SAR, stock award or incentive award recognizes ordinary compensation income in
connection therewith. As stated above, this usually occurs upon exercise of
nonstatutory options and SARs and upon the lapsing of restrictions or the
attainment of performance goals related to certain stock awards. Section 162(m)
imposes a $1 million limitation on the amount of the annual compensation
deduction allowable to a publicly-held company in respect of each of its chief
executive officer and its four most highly paid executive officers other than
the chief executive officer. An exception is provided for certain
performance-based compensation if statutory provisions pertaining to stockholder
approval (and related disclosure) and plan administration are satisfied. The
provisions of the 1996 Plan, will satisfy these statutory provisions with
respect to nonstatutory stock options and SARs so that compensation income
recognized upon the exercise of a nonstatutory option or a stock appreciation
right will be performance-based.
No deduction to the company is allowed in connection with an incentive
stock option, unless the employee disposes of Common Stock received upon
exercise before the expiration of the holding period for incentive stock option
stock, subject to the limitations of Section 162(m).
<PAGE>
This summary of federal income tax consequences of nonstatutory stock
options, incentive stock options, SARs, restricted stock and incentive stock
does not purport to be complete. There may also be state and local income taxes
applicable to these items.
New Plan Benefits
The 941,853 shares of Common Stock that, after giving effect to the
amendment, will be available for issuance under the 1996 Plan will be used for
future awards. All such future awards are subject to the discretion of the
Administrator and, therefore, are not determinable at this time.
Common Stock Price
On July 29, 1999, the closing market price of the Company's Common
Stock on the Nasdaq National Market was $3.375.
Vote Required
Directors who are employees of the Company may benefit from adoption of
this amendment, and to that extent may have a conflict of interest in
recommending the amendment. Because approval of this proposal requires the
affirmative vote of the majority of shares of Common Stock present in person or
represented by proxy at the Annual Meeting and entitled to vote on the proposal,
abstentions will have the same effect as a vote against the proposal, and broker
non-votes will have no effect on the outcome of the proposal.
The Board of Directors recommends a vote "FOR" Proposal 2
RATIFICATION OF AUDITORS
(Proposal 3)
Action is to be taken at the Annual Meeting with respect to the
ratification of independent auditors, who were selected by the Board of
Directors, to audit the financial statements of the Company for fiscal year
1999. Unless otherwise directed therein, proxies received pursuant to this
solicitation will be voted for the ratification of Deloitte & Touche LLP, who
served as the Company's auditors for fiscal year 1998. Although the ratification
of independent auditors is not required to be submitted to a vote of the
stockholders, the Board of Directors believes that such ratification is a matter
on which the stockholders should express their opinion. Deloitte & Touche LLP
has advised the Company that no member of its firm has any direct or indirect
material financial interest in the Company. Representatives of Deloitte & Touche
LLP are expected to 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 from the stockholders.
The Board of Directors recommends a vote "FOR" Proposal 3
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning the annual,
long-term and all other compensation for services rendered in all capacities to
the Company, its subsidiaries and predecessors for the years ended December 31,
1998, 1997 and 1996 of (a) the two individuals who served as the Company's Chief
Executive Officer during 1998, and (b) each of the four most highly compensated
executive officers (other than the chief executive officer) of the Company (the
"Named Executive Officers") whose aggregate cash compensation exceeded $100,000
for the fiscal year ended December 31, 1998.
<TABLE>
Long-Term Compensation
----------------------------
Awards
----------------------------
Annual Compensation Restricted Securities
------------------------------------------ Stock Underlying All Other
Year Salary($) Bonus($)<F1> Other($) Awards(#) Options(#) Compensation($)<F2>
---- --------- ------------ -------- --------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Alfred S. Dominick, Jr. 1998 109,617 -- -- -- -- 7,295
President and Chief
Executive Officer
(since 8/98) <F3>
John C. Backus, Jr. 1998 350,000 -- -- -- -- 16,074
President and Chief 1997 301,032 -- -- -- 1,025,000 <F4> 9,025
Executive Officer 1996 250,000 -- -- -- -- 7,180
(prior to 8/98) <F4>
William F. Gorog 1998 256,001 -- -- -- 100,000 <F5> 2,550
Chairman 1997 250,000 -- -- -- 100,000 2,375
1996 250,000 -- -- -- -- --
Mark L. Baird 1998 135,004 25,000 -- -- 87,000 <F6> 7,702
Vice President, 1997 132,308 25,000 -- -- 77,000 3,128
Operations <F6> 1996 114,846 10,000 -- -- 22,000 1,280
Joseph P. Payne 1998 199,405 25,000 -- -- 377,500 <F7> 2,500
President and Chief
Executive Officer,
Telecommunications
Division <F7>
Albert N. Wergley 1998 147,407 25,000 -- -- 120,500 <F8> 1,548
Vice President, General 1997 131,537 25,000 -- -- 94,502 2,375
Counsel and Secretary 1996 121,225 11,500 -- -- 16,000 --
<FN>
- --------------------
<F1> Bonus awards are reported for the year earned but may have been
paid in the subsequent year.
<F2> For 1998, includes: (i) the dollar value of insurance premiums
paid by the Company for the benefit of Mr. Backus ($13,449) and
Mr. Dominick ($7,295); (ii) the amount of Company matching
contributions made on behalf of the named individuals under the
Company's 401(K) Plan as follows: Messrs. Backus ($2,625), Gorog
($2,550), Baird ($1,840), Payne ($2,500) and Wergley ($1,548);
and (iii) automobile allowance for Mr. Baird ($5,862).
For 1997, includes: (i) the dollar value of insurance premiums
paid by the Company for the benefit
<PAGE>
of Mr. Backus ($6,650); (ii) the amount of Company matching
contributions made on behalf of the named individuals under the
Company's 401(K) Plan as follows: Messrs. Backus, Gorog, Baird
and Wergley ($2,375 each); and (iii) automobile allowance for
Mr. Baird ($753).
For 1996, includes the dollar value of insurance premiums paid
by the Company for the benefit of Mr. Backus ($7,180).
<F3> Mr. Dominick joined the Company on August 17, 1998 and succeeded
Mr. Backus as President and Chief Executive Officer.
<F4> Mr. Backus became Chairman of the Executive Committee of the
Board on August 17, 1998 after Mr. Dominick succeeded him as
President and Chief Executive Officer. Mr. Backus resigned from
the Board and as Chairman of the Executive Committee effective
June 30, 1999. Mr. Backus was granted 600,000 options in August
1997. In December 1997, 425,000 of these options were canceled
and 850,000 options previously granted to Mr. Backus were
repriced.
<F5> The 100,000 options granted in 1998 consist of a repricing of
the 100,000 options previously granted in 1997.
<F6> Mr. Baird's employment with the Company ended on March 31, 1999.
Includes 22,000 options previously granted that were repriced in
1997 which were also included in the 87,000 options that were
repriced in 1998.
<F7> Mr. Payne joined the Company on March 22, 1996, became an
executive officer of the Company in 1998, and his employment
with the Company ended on March 31, 1999. Includes 77,500
options previously granted that were repriced in 1998.
Information is not provided for any fiscal year prior to Mr.
Payne becoming an executive officer of the Company.
<F8> Includes 44,502 options previously granted that were repriced
in 1997 which were also included in the 116,000 options that
were repriced in 1998.
</FN>
</TABLE>
Option/SAR Grants in Last Fiscal Year
The following table sets forth information with respect to stock option
grants under the Company's 1996 Incentive Plan or under any stock plan of either
US Order or Colonial Data, which were assumed by the Company pursuant to the
Merger.
<TABLE>
Potential Realizable Value at
Number of % of Total Assumed Annual Rates of Stock
Securities Options/SARs Price Appreciation for Option
Underlying Granted to Exercise or Term <F2>
Options/SARs Employees Base Price Expiration -----------------------------
Name Granted (#)<F1> in Fiscal Year ($/Sh) Date 5% ($) 10% ($)
- ---- --------------- -------------- ----------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Alfred S. Dominick, Jr. -- -- -- -- -- --
John C. Backus, Jr. -- -- -- -- -- --
William F. Gorog 100,000 6.5% $1.00 5/21/05 40,710 94,872
Mark L. Baird 10,000 .07% $1.00 7/6/04 3,401 7,716
5,000 .03% $1.00 5/21/05 2,036 4,744
50,000 3.3% $1.00 8/11/05 20,355 47,436
22,000 1.4% $1.00 11/5/06 10,504 25,159
<PAGE>
Joseph P. Payne 20,000 1.3% $1.00 3/22/04 6,802 15,431
7,500 .05% $1.00 10/1/04 2,551 5,787
50,000 3.3% $1.00 8/11/05 20,355 47,436
300,000 19.6% $1.00 6/9/06 143,237 343,077
Albert N. Wergley 50,000 3.3% $1.00 8/11/05 20,355 47,436
50,000 3.3% $1.00 5/3/03 13,814 30,525
6,000 .04% $1.00 2/13/04 2,041 4,629
10,000 .07% $1.00 10/1/04 3,401 7,716
4,500 .03% $1.03 12/8/06 2,213 5,301
<FN>
- ---------------------
<F1> Options granted in 1998 for the Named Executive Officers, except
for 300,000 options granted to Mr. Payne and 4,500 options
granted to Mr. Wergley, consist of options previously granted
that were repriced on June 9, 1998.
<F2> The actual value, if any, an employee may realize will depend on
the excess of the stock price over the exercise price on the date
the stock option is exercised. Potential Realized Value is net of
the option exercise price. The dollar amounts under these columns
are the result of calculations at the 5% and 10% rates set by the
rules of the SEC and therefore are not intended to forecast
future appreciation, if any, of the Company's stock price.
</FN>
</TABLE>
Option Exercises in Last Fiscal Year and Year-End Value Table
The following table sets forth information regarding the exercise of
stock options and the unexercised stock options as of December 31, 1998 granted
to the Chief Executive Officer and the Named Executive Officers under the
Company's 1996 Incentive Plan or any stock plan of either US Order or Colonial
Data, which were assumed by the Company pursuant to the Merger.
<TABLE>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs Options/SARs
at December 31, 1998(#) at December 31, 1998($)<F2>
------------------------------ ---------------------------
Shares Acquired Value
Name on Exercise (#) Realized($)<F1> Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alfred S. Dominick, Jr. - 0 - - 0 - - 0 - - 0 - - 0 - - 0 -
John C. Backus, Jr. - 0 - - 0 - 625,000 400,000 - 0 - - 0 -
William F. Gorog 300,000 6,000 150,000 50,000 46,500 15,500
Mark L. Baird - 0 - - 0 - 18,583 68,417 5,761 21,209
Joseph P. Payne - 0 - - 0 - 12,055 365,445 3,737 113,288
Albert N. Wergley - 0 - - 0 - 36,331 84,169 11,263 25,957
<FN>
- --------------------
<F1> Value based on last reported sale price of the Company's common stock on
the exercise date minus the exercise price.
<F2> Value based on last reported sale price of the Company's common stock on
December 31, 1998 (the last trading day of the year) on the Nasdaq National
Market minus the exercise price. The last reported sale price at December
31, 1998 was $1.31 per share.
</FN>
</TABLE>
<PAGE>
Ten Year Option/Repricings
<TABLE>
Length of
Number of Original
Securities Market Price Exercise Price Option Term
Underlying of Stock at at Time of Remaining
Options Time of Repricing New at Date of
Repriced or Repricing or or Exercise Repricing or
Amended Amendment Amendment Price Amendment
Name Date (#) ($) ($) ($) (in months)
- ---- -------- ----------- ------------ -------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
John C. Backus, Jr. 12/15/97 850,000 1.625 7.13 1.80 79
Former President and
Chief Executive Officer
William F. Gorog 6/9/98 100,000 1.00 6.00 1.00 83
Chairman of the Board
Mark L. Baird 6/9/98 50,000 1.00 3.00 1.00 86
Vice President, 6/9/98 10,000 1.00 4.9375 1.00 73
Operations 6/9/98 5,000 1.00 5.125 1.00 83
6/9/98 22,000 1.00 6.00 1.00 101
5/21/97 22,000 5.125 8.88 6.00 115
Joseph P. Payne 6/9/98 50,000 1.00 3.00 1.00 86
President and Chief 6/9/98 4,333 1.00 22.00 1.00 69
Executive Officer, 6/9/98 15,667 1.00 6.00 1.00 69
Telecommunications 6/9/98 7,500 1.00 6.00 1.00 76
Division 5/21/97 15,667 5.125 22.00 6.00 82
5/21/97 7,500 5.125 11.44 6.00 89
Albert N. Wergley 6/9/98 50,000 1.00 3.00 1.00 86
Vice President, General 6/9/98 1,499 1.00 20.25 1.00 68
Counsel and Secretary 6/9/98 19,999 1.00 9.50 1.00 59
6/9/98 30,001 1.00 6.00 1.00 59
6/9/98 10,000 1.00 6.00 1.00 76
6/9/98 4,501 1.00 6.00 1.00 68
5/21/97 30,001 5.125 9.50 6.00 72
5/21/97 4,501 5.125 20.25 6.00 82
5/21/97 10,000 5.125 11.44 6.00 89
John W. Hillyard 5/21/97 25,000 5.125 8.38 6.00 92
Former Vice President
and Chief Financial
Officer
</TABLE>
<PAGE>
COMPENSATION COMMITTEE REPORT ON
OPTION REPRICING
In June, 1998, the Compensation Committee approved the repricing of
certain options granted to employees pursuant to the Company's stock option
plans. Because of the decline in the market price of the Common Stock, certain
outstanding options (including options that had been initially repriced to $6.00
in May 1997) were exercisable at prices that significantly exceeded the market
price of Common Stock, thereby substantially impairing the effectiveness of such
options as performance incentives. In view of this decline and consistent with
the Company's philosophy of providing equity incentives to motivate and retain
qualified employees, the Compensation Committee believed it was important to
restore for the Company's employees the performance incentives intended to be
provided by options through the repricing of options with exercise prices in
excess of the market price at the time of repricing. The Committee was
particularly aware of the need to retain and stabilize its employee base during
a period of time when the Company was undergoing significant change with the
wind down of its telecommunications business and a renewed focus in internet
banking. No options issued to non-employee directors of the Company were
repriced.
Pursuant to the terms of the repricing, employees who held options
having an exercise price per share greater than $1.00 were offered the
opportunity to reprice those options to an exercise price of $1.00 per share.
The new exercise price was equal to the closing price of the stock on the date
of the repricing. The vesting schedule for all repriced options was amended to
provide that the options become exercisable in six months as to all options that
had previously been vested at the time of the repricing, with the remaining
options to become exercisable in equal annual increments over three years from
the date of the repricing.
The "Ten-Year Option/Repricing" table set forth above is information
concerning option repricings with respect to the Named Executive Officers who
participated in the repricing, as well as information with respect to options
repriced on behalf of executives in 1997.
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
The Company's Compensation Committee (the "Committee") is comprised of
outside directors whose role is to oversee the development and administration of
the compensation and benefit programs for the Company's executive officers. The
Committee also administers the Company's 1996 Incentive Plan that permits stock
option grants to employees and the Company's Incentive Compensation Plan that
provides for bonuses to employees in management positions based on the
achievement of Company goals. In the case of Mr. Dominick, the Company's
President and Chief Executive Officer, and his predecessor, Mr. Backus, and
Messrs. Baird, Payne and Wergley, the salary levels are set pursuant to
employment agreements entered into between the Company and the executive. The
employment agreements, which are described below, will continue to prescribe the
base salaries and certain other benefits for these executives until these
agreements are terminated or expire.
<PAGE>
The Committee made no awards in 1998 to the Named Executive Officers under
the Company's Incentive Compensation Plan. However, in 1997, the Committee also
implemented a retention plan for certain key employees, including Messrs. Baird,
Payne and Wergley. Pursuant to that plan, each of these three named executives
received a $25,000 bonus payment for continued employment through June 30, 1998.
Mr. Dominick, Mr. Backus and Mr. Gorog were not participants in the retention
plan and no bonuses were paid to them for 1998.
The Compensation Committee
--------------------------
Patrick F. Graham
John J. McDonnell, Jr.
Compensation Committee Interlocks and Insider Participation
The members of the Company's Compensation Committee are Patrick F.
Graham and John J. McDonnell, Jr.
Employment Contracts, Termination of Employment and Change-In-Control
Arrangements
Alfred S. Dominick, Jr.
The Company has entered into an employment agreement with Alfred S.
Dominick, Jr. as of April 5, 1999, providing that Mr. Dominick will serve as
President and Chief Executive Officer of the Company until April 5, 2002, unless
further extended or sooner terminated as set forth in the agreement.
Furthermore, the Company will annually nominate and take such action as may be
appropriate or necessary to seek stockholder election of Mr. Dominick to the
Company's Board of Directors. Mr. Dominick has agreed to resign from the Board
in connection with, and effective upon, termination of his employment with the
Company.
Mr. Dominick is entitled to (i) a base salary of $300,000 per year,
(ii) an annual bonus of up to 25% of his base salary for the period commencing
August 17, 1998 through December 31, 1998, and (iii) an annual bonus of up to
75% of his base salary for the period commencing January 1, 1999 through the
remaining term of the employment agreement. In addition, Mr. Dominick is
entitled to participate in all medical, dental, life, disability, 401(k),
employee stock purchase and such other fringe benefit plans or arrangements
generally made available by the Company to all salaried employees. As an
inducement to his becoming an employee of the Company, Mr. Dominick was granted
options to purchase 1,200,000 shares of Common Stock pursuant to the Company's
1998 CEO Incentive Plan. The option shall become exercisable as to 66,667 option
shares on August 17, 1999, 66,667 option shares on August 17, 2000, and 66,666
option shares on August 17, 2001; the option as to an additional 500,000 option
shares shall become exercisable on August 17, 2005, provided that the option
shall become exercisable earlier in increments of 100,000 option shares based on
the achievement of designated trading prices of the Common Stock; and the option
as to an additional 500,000 option shares shall become exercisable on April 15,
2008; provided that the option shall become exercisable earlier upon the Common
Stock trading above $25.00 per share for sixty consecutive trading days
<PAGE>
during the term of the option. Mr. Dominick has agreed to hold 100,000 shares of
Common Stock for the remaining term of his employment agreement. Upon entering
into the employment agreement, Mr. Dominick purchased 200,000 shares of Common
Stock for an aggregate purchase price of $200.00.
The Company may terminate the agreement for "Cause" (as defined) or if
Mr. Dominick incurs a disability that continues for a period of 180 consecutive
days. Mr. Dominick may terminate the agreement upon prior written notice to the
Company or for "Good Reason" (as defined). If the Company terminates Mr.
Dominick for other than "Cause," or if Mr. Dominick terminates the agreement for
"Good Reason," then Mr. Dominick is entitled to: (i) an amount equal to twelve
months of his base salary then in effect; (ii) any amounts vested or payable
under any deferred salary, bonus compensation or other plan; (iii) an amount
equal to the highest incentive bonus paid to him during the three years
immediately preceding his termination, prorated through his month of
termination; and (iv) a continuation, at the Company's expense, of life,
disability, accident and health insurance benefits for twelve months following
termination. Notwithstanding the above, if, within one year of a Change of
Control (as defined), Mr. Dominick's employment is terminated by the Company for
other than Cause or by Mr. Dominick for Good Reason, then Mr. Dominick is
entitled to: (i) an amount equal to the greater of the undiscounted amount of
twelve months base salary or the undiscounted remainder of his base salary for
the unexpired term of the employment agreement; (ii) any amounts vested or
payable under any deferred salary, bonus compensation or other plan; (iii) an
amount equal to the highest incentive bonus paid to him during the three years
immediately preceding his termination, prorated through his month of
termination; and (iv) a continuation, at the Company's expense, of life,
disability, accident and health insurance benefits for the greater of twelve
months from termination or a period equal to the unexpired term of the
employment agreement. Mr. Dominick's employment agreement terminates
automatically upon his death in which case the Company would have no further
obligation to Mr. Dominick or his estate other than the disposition of life
insurance, accrued and unpaid base salary, accrued vacation and bonuses and
other incentive compensation earned but not paid for periods prior to the date
of death.
The employment agreement also provides that during the term of the
agreement and for one year following his termination (other than in the event of
termination by InteliData other than for Cause or by Mr. Dominick for Good
Reason), Mr. Dominick will not compete, directly or indirectly, with the
Company. Furthermore, pursuant to a non-solicitation provision in the employment
agreement, Mr. Dominick may not solicit certain current or former employees of
the Company during the term of the agreement or for a period of two years
thereafter.
John C. Backus, Jr.
The Company had an employment agreement with John C. Backus, Jr., dated
as of August 11, 1997, that provided that Mr. Backus would serve as President
and Chief Executive Officer of the Company until December 31, 2000, unless
further extended or sooner terminated as set forth in the agreement.
Furthermore, the Company agreed that it would annually nominate and take such
action as may be appropriate or necessary to seek stockholder election of Mr.
Backus to the Company's Board of Directors. Mr. Backus also agreed to resign
from the Board in connection with, and effective upon, termination of his
employment with the Company. Mr. Backus was entitled to a base salary of
$350,000 per year and an annual bonus of up to 75% of
<PAGE>
his base salary and certain fringe benefits. In addition, Mr. Backus was
entitled to participate in retirement benefits and all bonus and incentive
compensation plans or arrangements made available by the Company to its officers
and directors. On August 17, 1998, Mr. Backus resigned his position as President
and Chief Executive Officer of the Company and assumed the position of Chairman
of the Executive Committee.
The Company and John C. Backus, Jr. entered into a severance agreement,
dated June 23, 1999 which terminated Mr. Backus' employment and service as
Chairman of the Executive Committee and as a Director of the Company. The
severance agreement provided for a $450,000 severance payment to Mr. Backus in
satisfaction of a retirement benefit and other obligations. The severance
agreement also canceled all unvested stock options previously granted to Mr.
Backus under the 1996 Incentive Plan, but allowed 125,000 unvested stock options
granted to Mr. Backus under the U.S. Order 1991 Stock Option Plan to remain in
full force and effect through December 31, 1999 in exchange for Mr. Backus'
agreement to provide consulting services to the Company through December 31,
1999. The Company agreed to pay the premiums for Mr. Backus' medical, vision and
dental care through December 31, 2000. Pursuant to the severance agreement, the
Company will also provide directors' and officers' insurance covering events
occurring during Mr. Backus' employment and provision of consulting services,
and will indemnify Mr. Backus for indemnifiable obligations arising during such
period.
Other Named Executive Officers
The Company has an employment agreement with Albert N. Wergley (the
"Executive"), dated as of December 17, 1997, providing that the Executive will
serve as General Counsel of the Company until December 31, 1999, unless further
extended or sooner terminated as set forth in the agreement. The Company had
substantially similar agreements with Mark L. Baird and Joseph P. Payne prior to
their termination of employment with the Company on March 31, 1999.
The Executive is entitled to a base salary per year and annual bonuses.
In addition, he is entitled to participate in all bonus and incentive
compensation plans or arrangements made available by the Company to its officers
and directors and is entitled to receive such benefits as provided to all
salaried employees as well as those established by the Compensation Committee
for the Company's executives. The Executive's employment agreement terminates
automatically upon the Executive's death in which case the Company would have no
further obligation to the Executive or his estate other than the disposition of
life insurance and related benefits and accrued and unpaid base salary, bonus,
unreimbursed expenses and incentive compensation for periods prior to the date
of death (the "Standard Termination Payments"). The Company may terminate the
agreement for "cause" (as defined) or if the Executive incurs a disability that
continues for a period of 180 consecutive days. The Executive may terminate the
agreement for "good reason" (as defined). The Executive may also terminate the
agreement in which case the Company would have no further obligation to the
Executive except for the Standard Termination Payments. If the Company
terminates the Executive for other than "cause" or upon death or total
disability, or if the Executive terminates the agreement because the Company
fails to comply with the agreement or following a "Change in Control" whereby
the Executive's duties are substantially diminished or the Executive is
relocated, then the Executive is entitled to: (i) the Standard Termination
Payment; (ii) any bonus earned but not yet paid under any "Stay Put" or any
other bonus program; (iii) 100% of his annual base salary; and (iv) any and all
options
<PAGE>
granted shall be vested for twelve months and exercisable for the longer of
twelve months after the termination date or period for exercise as provided in
the Executive's option agreement. In addition, if the Company terminates the
Executive following a "Change of Control" for other than "cause," total
disability or upon death, or if the Executive terminates the agreement due to a
substantial change in duties or relocation following a "Change in Control," the
Executive shall have the following additional rights: (i) the Company shall pay
an additional 50% of the Executive's annual base salary, (ii) all granted but
unvested options shall become immediately vested and nonforfeitable and remain
exercisable for their respective remaining terms, and (iii) the Executive shall
have the right to cause the Company to purchase all or a portion of the options
at their fair value on the date of termination.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers and beneficial owners of more than
10% of the Company's Common Stock to file with the SEC initial reports of
ownership and reports of changes in ownership of equity securities of the
Company. Officers, directors and beneficial owners of more than 10% of the
Company's Common Stock are required by SEC regulation to furnish the Company
with copies of all Section 16(a) forms they file. To the Company's knowledge
based solely upon a review of copies of such reports furnished to the Company
and representations that no other reports were required, during the fiscal year
ending December 31, 1998, all Section 16(a) filing requirements applicable to
its officers, directors and beneficial owners of more than 10% of the Company's
common stock were complied with.
PERFORMANCE GRAPH
The following graph compares the cumulative total returns from November
8, 1996 (when the Company's Common Stock commenced public trading) through
December 31, 1998 for the Company, the Nasdaq Market Index and an index
constructed from a peer group of companies in the telephone equipment,
electronic commerce, or interactive services businesses. The peer group consists
of Checkfree Holdings Corp., CIDCO, Inc., Comdial Corp., Edify Corp., and
Security First Network Bank. Smartserv Online, Inc. was included in the table
for prior years but has been deleted from this year's calculation since it is no
longer listed on the Nasdaq Stock Market. Since the Company discontinued its
telecommunications and interactive services business operations in 1998, this
peer group will be revised for future years to include only companies that are
in the electronic commerce field.
<PAGE>
Period Ending 11/8/96 12/31/96 12/31/97 12/31/98
- ------------- ------- -------- -------- --------
InteliData Technologies Corporation 100.00 75.32 19.16 13.64
Peer Group 100.00 95.58 129.77 103.56
Nasdaq Market Index 100.00 105.97 129.63 182.83
<PAGE>
CERTAIN TRANSACTIONS
Pursuant to an Agreement dated as of July 31, 1998, the Company sold to
CDT Corporation certain of the Company's assets and inventories relating to the
Company's discontinued telecommunications repair business. At the time of the
Agreement, Mark L. Baird was an executive officer of the Company and was also
the president and a director of CDT Corporation. The price paid by CDT
Corporation for the assets and inventories was $85,000 in cash. Since the sale
of the telecommunications repair business, the Company leased approximately
5,200 square feet of its Connecticut facility to CDT Corporation. The lease is
terminable by either party on forty-five days notice. During 1998, the Company
received $10,400 in deposits and lease payments relating to this lease.
OTHER MATTERS
No business other than that set forth above is expected to come before
the Annual Meeting or any adjournment thereof. Should other business properly
come before the meeting or any adjournment thereof, the proxy holders will vote
upon the same according to their discretion and best judgment.
To permit the meeting of stockholders to be conducted in an orderly
manner, the Company's Bylaws provide that stockholders seeking to bring business
before an annual meeting of stockholders, or to nominate candidates for election
as directors at an annual or a special meeting of stockholders, must provide
timely notice thereof in writing. To be timely, a stockholder's notice must be
delivered to, or mailed and received at, the principal executive office of the
Company, not less than 60 days prior to the scheduled annual meeting, regardless
of any postponements, deferrals or adjournments of the meeting. The Bylaws also
specify certain requirements pertaining to the form and substance of a
stockholder's notice.
EXPENSES OF SOLICITATION
The cost of solicitation of proxies for the Annual Meeting will be paid
by the Company. In addition to solicitation of proxies by mail, the officers,
directors, and regular employees of the Company may solicit proxies on behalf of
the Board of Directors in person or by telephone, facsimile, telex or telegraph.
No additional compensation will be received by any officer, director or employee
of the Company in connection with any such proxy solicitation. Brokerage houses,
nominees, fiduciaries, and other custodians will be requested by the Company to
forward proxy soliciting material to beneficial owners of shares held of record
by them and, upon request, the Company may reimburse them for reasonable
out-of-pocket expenses incurred in doing so.
STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Exchange Act, stockholders may present
proper proposals for inclusion in the Company's proxy statement and for
consideration at the 1999
<PAGE>
Annual Meeting of Stockholders by submitting their proposals to the Company in a
timely manner. In order to be considered for the 2000 Annual Meeting of
Stockholders, stockholder proposals must be received at the Company's
headquarters, attention of the Secretary, 11600 Sunrise Valley Drive, Suite 100,
Reston, Virginia 20191 no later than April 8, 2000 and have complied with the
requirements of Rule 14a-8 of the Securities Exchange Act of 1934, as amended.
By Order of the Board of Directors,
Albert N. Wergley
Secretary
<PAGE>
INTELIDATA TECHNOLOGIES CORPORATION
Proxy Solicited on Behalf of the Board of Directors
for the Annual Meeting of Stockholders, September 9, 1999
The undersigned hereby appoints William F. Gorog and Albert N. Wergley, as
proxies, each with the power to appoint his substitute and hereby authorizes
such person acting individually, to represent and to vote, as specified on the
reverse side hereof, all of the shares of common stock of InteliData
Technologies Corporation which the undersigned may be entitled to vote at the
Annual Meeting of Stockholders to be held on September 9, 1999 and at any
postponement or adjournment thereof; and in the discretion of the proxies, their
substitutes or delegates, to vote such shares and to represent the undersigned
in respect of other matters properly brought before the meeting.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS SPECIFIED BY THE
SIGNING STOCKHOLDER ON THE REVERSE SIDE HEREOF. UNLESS THE AUTHORITY TO VOTE FOR
ELECTION OF ANY NOMINEE FOR DIRECTOR IS WITHHELD IN ACCORDANCE WITH THE
INSTRUCTIONS ON THE REVERSE SIDE HEREOF, THIS PROXY WILL BE VOTED "FOR" THE
ELECTION OF EACH NOMINEE FOR DIRECTOR, "FOR" PROPOSAL 2, AND "FOR" PROPOSAL 3.
(To Be Signed on Reverse Side.)
- --------------------------------------------------------------------------------
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
INTELIDATA TECHNOLOGIES CORPORATION
September 9, 1999
1. To elect one (1) Class II director and two (2) Class III directors to
the Board of Directors
___ FOR all nominees ___ WITHHOLD authority for all nominee(s)
Nominees: Class II
--------
Norman J. Tice
Class III
---------
Alfred S. Dominick, Jr.
Patrick F. Graham
(INSTRUCTIONS: To withhold authority to vote for any individual
nominee, write the person's name below).
---------------------------------------------
2. Amendment to the 1996 Incentive Plan reserving an additional 900,000
shares of the Company's Common Stock for issuance thereunder.
___ FOR ___ AGAINST ___ ABSTAIN
3. Ratification of Deloitte & Touche LLP as Independent Accountants.
___ FOR ___ AGAINST ___ ABSTAIN
Signature Date SIGNATURE, IF SHARE HELD JOINTLY Date
--------- ------ --------- ----
Instruction: Please sign exactly as your name appears hereon. When shares
are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign in full
corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized
person.
