SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the 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
International Telecommunication Data Systems, Inc.
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(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other than the 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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
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<PAGE>
[ ] 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:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
225 High Ridge Road
Stamford, Connecticut 06905
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 19, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of
International Telecommunication Data Systems, Inc., a Delaware corporation (the
"Corporation"), will be held on Wednesday, May 19, 1999 at 10:00 a.m. at the
offices of the Corporation, 225 High Ridge Road, Stamford, Connecticut (the
"Meeting") for the purpose of considering and voting upon the following
matters:
1. To elect two Class III Directors for the ensuing three years;
2. To ratify the selection of Ernst & Young LLP as the Corporation's
independent auditors for the current year; and
3. To transact such other business as may properly come before the Meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on Wednesday, March
31, 1999 as the record date for the determination of stockholders entitled to
notice of and to vote at the Meeting and at any adjournments thereof.
By order of the Board of Directors,
PETER L. MASANOTTI, Secretary
April 12, 1999
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE PROMPTLY COMPLETE, DATE,
SIGN AND RETURN THE ENCLOSED PROXY AND MAIL IT IN THE ENCLOSED ENVELOPE IN
ORDER TO ENSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF
THE PROXY IS MAILED IN THE UNITED STATES.
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
225 High Ridge Road
Stamford, Connecticut 06905
PROXY STATEMENT
For Annual Meeting of Stockholders
To Be Held May 19, 1999
----------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of International Telecommunication Data
Systems, Inc. (the "Corporation") at the Annual Meeting of Stockholders to be
held on Wednesday, May 19, 1999 at 10:00 a.m. at the offices of the
Corporation, 225 High Ridge Road, Stamford, Connecticut and at any adjournment
of that meeting (the "Meeting").
All proxies will be voted in accordance with the instructions of the
stockholder. If no choice is specified, the proxies will be voted in favor of
the matters set forth in the accompanying Notice of Meeting. Any proxy may be
revoked by a stockholder at any time before its exercise by delivery of a
written revocation or a subsequently dated proxy to the Secretary of the
Corporation or by voting in person at the Meeting. Attendance at the Meeting
will not itself be deemed to revoke a Proxy unless the stockholder gives
affirmative notice at the Meeting that the stockholder intends to revoke the
Proxy and vote in person.
On March 31, 1999, the record date for determination of stockholders
entitled to vote at the Meeting, there were outstanding and entitled to vote an
aggregate of 17,341,894 shares of Common Stock of the Corporation, $.01 par
value per share (the "Common Stock"). Each share entitles the record holder to
one vote on each of the matters to be voted upon at the Meeting.
A copy of the Corporation's Annual Report to Stockholders for the year
ended December 31, 1998, which contains financial statements and other
information of interest to stockholders and accompanies this Notice and Proxy
Statement, is being mailed to stockholders on or about April 12, 1999.
Votes Required
The holders of a majority of the shares of Common Stock issued and
outstanding and entitled to vote at the Meeting shall constitute a quorum for
the transaction of business at the Meeting. Shares of Common Stock present in
person or represented by proxy (including shares which abstain or do not vote
with respect to one or more of the matters presented for stockholder approval)
will be counted for purposes of determining whether a quorum exists at the
Meeting.
The affirmative vote of the holders of a plurality of the votes cast by
the stockholders entitled to vote at the Meeting is required for the election
of the Class III Directors. The affirmative vote of the holders of a majority
of the shares of Common Stock present or represented by proxy and voting on the
matter is required for the ratification of the appointment of the Corporation's
independent auditors.
Shares which abstain from voting as to a particular matter, and shares
held in "street name" by brokers or nominees who indicate on their proxies that
they do not have discretionary authority to vote such shares as to a particular
matter, will not be counted as votes in favor of such matter, and will also not
be counted as votes cast or shares voting on such matter. Accordingly,
abstentions and "broker non-votes" will have no effect on the voting on the
election of the Class III Directors or the ratification of the appointment of
independent auditors.
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of December 31, 1998
with respect to the beneficial ownership of shares of Common Stock by (i) each
person known to the Corporation to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) the directors and director nominees of
the Corporation, (iii) the Chief Executive Officer and the other executive
officers listed in the Summary Compensation Table below, and (iv) the directors
and executive officers of the Corporation as a group.
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial Ownership(2)
--------------------------------------
Name and Address(1)
of Beneficial Owner Number of Shares Percent of Class
- -------------------------------------------------------------------------- ------------------ -----------------
<S> <C> <C>
Essex Investment Management Company (3) .................................. 1,123,680 6.5%
125 High Street
Boston, MA 02110
Dresdner RCM Global Investors LLC (4) .................................... 1,255,875 7.3%
Dresdner Bank AG
4 Embarcadero Center
San Francisco, CA 94111
Peter P. Bassermann (5) .................................................. 46,875 *
Lewis D. Bakes (6) ....................................................... 803,433 4.6%
Stuart L. Bell (7) ....................................................... 52,500 *
Samuel L. Jacob .......................................................... 1,500 *
Harvey M. Krueger (8) .................................................... 600,000 3.4%
Paul K. Kothari (9) ...................................................... 28,125 *
Peter L. Masanotti (10) .................................................. 89,608 *
Stephen J. Saft (11) ..................................................... 11,625 *
Susan L. Yezzi (12) ...................................................... 18,750 *
All directors and executive officers as a group (10 persons) (13) ........ 1,705,600 9.7%
</TABLE>
- ----------------
* Less than 1%
(1) The address of each person for whom no address is included in the table is
225 High Ridge Road, Stamford, Connecticut 06905.
(2) The number of shares beneficially owned by each director and executive
officer is determined under rules promulgated by the Securities and
Exchange Commission, and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under such rules, beneficial
ownership includes any shares as to which the individual has sole or
shared voting power or investment power and also any shares which the
individual has the right to acquire within 60 days after December 31, 1998
through the exercise of any stock option or other right. The inclusion
herein of such shares, however, does not constitute an admission that the
named stockholder is the beneficial owner of such shares. Unless otherwise
indicated, each person or entity named in the table has sole voting power
and investment power (or shares such power with his or her spouse) with
respect to all shares of capital stock listed as owned by such person or
entity. Percentage of Class is based on 17,313,231 shares of Common Stock
outstanding as of December 31, 1998, plus any shares which the person in
question has the right to acquire within 60 days after December 31, 1998.
(3) According to Schedule 13G/A filed with the Securities and Exchange
Commission, Essex Investment Management Company has sole voting power over
945,569 shares and sole disposition power over 1,123,680 shares.
(4) According to Schedule 13G filed with the Securities and Exchange
Commission, Dresdner RCM Global Investors LLC ("Dresdner"), which has sole
voting power over 833,675 shares and sole investment power over 1,255,875
2
<PAGE>
shares, is an investment adviser and wholly owned subsidiary of Dresdner
Bank AG, also an investment advisor. Dresdner Bank AG has beneficial
ownership of the shares only to the extent that it is deemed to
beneficially own shares beneficially owned by Dresdner.
(5) Represents 46,875 shares issuable pursuant to outstanding options
exercisable within 60 days after December 31, 1998.
(6) Includes 792,868 shares beneficially owned by Mr. Bakes's wife, including
40,000 shares held in trust of which Mr. Bakes is a contingent beneficiary
and 10,565 shares held by or in trust for the benefit of his children. Mr.
Bakes disclaims beneficial ownership of all of such shares.
(7) Includes 22,500 shares issuable pursuant to outstanding options exercisable
within 60 days after December 31, 1998.
(8) Represents 600,000 shares beneficially owned by Lehman Brothers, Inc. as to
which shares Mr. Krueger disclaims beneficial ownership. Mr. Krueger is the
Vice Chairman of Lehman Brothers, Inc.
(9) Represents 28,125 shares issuable pursuant to outstanding options
exercisable within 60 days after December 31, 1998. Mr. Kothari resigned
as Chief Financial Officer of the Corporation effective February 16, 1999.
(10) Includes 29,608 shares beneficially owned by Mr. Masanotti's wife, as to
which shares Mr. Masanotti disclaims beneficial ownership and 55,000
shares issuable pursuant to outstanding options exercisable within 60 days
after December 31, 1998.
(11) Includes 2,250 shares beneficially owned by Mr. Saft's wife, as to which
shares Mr. Saft disclaims beneficial ownership and 9,375 shares issuable
pursuant to outstanding options exercisable within 60 days after December
31, 1998.
(12) Represents 18,750 shares issuable pursuant to outstanding options
exercisable within 60 days after December 31, 1998.
(13) Includes 211,375 shares issuable pursuant to outstanding options
exercisable within 60 days after December 31, 1998.
ELECTION OF DIRECTORS
The Corporation has a classified Board of Directors consisting of two
Class I Directors, three Class II Directors, and two Class III Directors. The
term of office of the Class III Directors expires at the 1999 Annual Meeting.
The Class I and Class II Directors will serve until the annual meeting of
stockholders to be held in 2000 and 2001, respectively, and until their
successors are elected and qualified. The Board of Directors proposes that the
nominees described below, both of whom are currently serving as Class III
Directors, be elected to a new term of three years and until their successors
are elected and qualified.
The persons named in the enclosed proxy will vote to elect, as Class III
Directors, Samuel L. Jacob and Peter L. Masanotti, the nominees named below,
unless the proxy is marked otherwise. Each of the nominees has indicated his
willingness to serve, if elected; however, if any nominee should be unable to
serve, the person acting under the proxy may vote the proxy for a substitute
nominee. The Board of Directors has no reason to believe that any of the
nominees will be unable to serve if elected.
For each member of the Board of Directors, including those who are
nominees for election as Class III Directors, listed below is information given
by each concerning his principal occupation and business experience for the
past five years, the names of other publicly held companies of which he serves
as a director, his age as of March 1, 1999 and length of service as a director
of the Corporation.
3
<PAGE>
<TABLE>
<CAPTION>
Director Principal Occupation, Other Business Experience
Name Age Since During Past Five Years and Other Directorships
- --------------------- ----- --------- ---------------------------------------------------------------
<S> <C> <C> <C>
Directors Whose Terms Expire in 1999 (Class III Directors)
Peter L. Masanotti 44 1997 Acting Chief Financial Officer since 1999; Executive Vice
President since 1998; Vice President and General Counsel of
the Corporation since 1996; Attorney with Kleban & Samor,
P.C. from 1980 to 1996.
Samuel L. Jacob 43 1998 Managing Director of Banker's Trust Company and head of BT
Alex. Brown Incorporated, its investment banking arm; held
various positions in Sales and Trading, Derivatives and Global
Institutional Services since joining Banker's Trust in 1983.
Directors Whose Terms Expire in 2001 (Class II Directors)
Lewis D. Bakes 41 1990 Chairman of the Board since February 1998; Executive Vice
President, Chief Operating Officer and Secretary of the
Corporation from its inception until February 16, 1999.
Peter P. Bassermann 49 1997 President and Chief Executive Officer of the Corporation since
1997; President of SNET Mobility of Southern New England
Telecommunications Corporation, a wireless carrier, from 1987
to 1997.
Harvey M. Krueger 69 1998 Vice Chairman of Lehman Brothers, Inc. and its predecessor
company since 1959; Director of each of Automatic Data
Processing, Inc., a payroll processing company, R.G. Barry
Corporation, a footwear company, Chaus, Inc., a women's
apparel company, Electric Fuel Corporation and Stockton
Group, an investment company.
Directors Whose Terms Expire in 2000 (Class I Directors)
Stuart L. Bell 45 1996 Director of Harbinger Corporation, an electronic commerce
company, since 1995; Chairman of the Board of Innovative
Medical Research, Inc., a medical research company, from 1995
to 1998; Executive Vice President, Office of the President, of
Cendant Corporation, formerly CUC International, a
membership services company from 1981 to 1995.
Stephen J. Saft 54 1997 Attorney with Kleban & Samor, P.C. since 1979.
</TABLE>
For information relating to shares of Common Stock owned by each of the
directors, see "Security Ownership of Certain Beneficial Owners and
Management."
Board and Committee Meetings
The Board of Directors met four times during 1998. Each director attended
at least 75% of the aggregate of the number of Board meetings and the number of
meetings held by all committees on which he then served.
The standing Audit Committee of the Board of Directors is responsible for
reviewing financial reports, accounting procedures and the scope and results of
the annual audit of the Corporation's financial statements. The Audit Committee
met three times during 1998. The current members of the Audit Committee are
Messrs. Bell, Saft, Krueger and Jacob.
The standing Compensation Committee of the Board of Directors is
responsible for reviewing compensation issues and making decisions concerning
the compensation (including stock option grants) of the Corporation's executive
officers. The
4
<PAGE>
Compensation Committee met twice during 1998, in addition to participating in
discussions concerning compensation with the entire Board of Directors. The
current members of the Compensation Committee are Messrs. Bell, Saft, Krueger
and Jacob.
Director Compensation
Directors who are employees of the Corporation are not entitled to
compensation in their capacities as directors but are reimbursed for their
expenses incurred in connection with their attendance at Board and committee
meetings. "Non-employee directors" are compensated at the rate of $2,500 per
quarter. For 1998, Messrs. Saft and Bell were entitled to receive $10,000 each
and Messrs. Jacobs and Krueger were entitled to $5,000 each. Non-employee
directors are not entitled to additional expense reimbursement.
On April 13, 1998, the Corporation granted to each of Messrs. Bell and
Saft an option to purchase up to 25,000 shares of Common Stock at an exercise
price of $26.75 per share. The options become exercisable in four equal annual
installments beginning April 13, 1999. On April 13, 1998, the Corporation also
granted to Mr. Bakes an option to purchase up to 170,000 shares of Common
Stock, Mr. Bassermann an option to purchase up to 100,000 shares of Common
Stock and Mr. Masanotti an option to purchase up to 75,000 shares of Common
Stock each at an exercise price of $26.75 per share. The options become
exercisable in four equal annual installments beginning April 13, 1999.
On June 16, 1998, the Corporation granted to each of Messrs. Krueger and
Jacob an option to purchase up to 25,000 shares of Common Stock at an exercise
price of $24.375 per share. The options become exercisable in four equal annual
installments beginning June 16, 1999.
Compensation of Executive Officers
Employment Agreements
The Corporation has an employment agreement with Lewis D. Bakes, Chairman
of the Board, dated January 1, 1998 which is effective until December 31, 2000
unless earlier terminated or automatically renewed for additional one-year
terms. The agreement provides for an annual base salary of $275,000 (plus
increases determined in the discretion of the Corporation and performance
bonuses to be determined in the discretion of the Board of Directors). Mr.
Bakes is bound by a covenant not to compete during his employment with the
Corporation and for one year thereafter. Upon a Change in Control, as defined
in the agreement, Mr. Bakes is entitled to receive a lump sum payment equal to
36 months of base salary and immediate vesting of all outstanding stock
options.
The Corporation has an employment agreement with Peter P. Bassermann,
President and Chief Executive Officer, dated September 3, 1997, as amended on
January 1, 1998. The agreement provides for an annual base salary of $275,000
per annum (plus performance bonuses to be determined in the discretion of the
Board of Directors). The agreement will continue in full force and effect until
December 31, 2000 unless sooner terminated or renewed for additional one-year
terms by agreement of the parties. The agreement contains a covenant not to
compete which is effective during Mr. Bassermann's employment with the
Corporation and for one year thereafter. Upon execution of the agreement, Mr.
Bassermann was granted options to purchase 150,000 shares of Common Stock. Upon
a Change in Control, as defined in the agreement, Mr. Bassermann is entitled to
receive a lump sum payment in an amount equal to 36 months of base salary and
immediate vesting of all outstanding stock options.
The Corporation, through its wholly-owned subsidiary ITDS Intelicom
Services, Inc., has an employment agreement, dated as of December 23, 1997, as
amended, with Susan L. Yezzi, Chief Operating Officer. The agreement, which is
effective until January 31, 2001, unless sooner terminated as provided therein,
provides for an annual base salary of $225,000 per year (plus performance
bonuses to be determined in the discretion of the Board of Directors). The
agreement also provides for an initial grant of an option to purchase 75,000
shares of Common Stock and a signing bonus of $125,000. The agreement also
contains a non-competition provision pursuant to which Ms. Yezzi is prohibited
from competing with the Corporation during her employment with the Corporation
and for one year thereafter. Upon a Change in Control of the Corporation, as
defined in the agreement, Ms. Yezzi is entitled to receive a lump sum payment
equal to 36 months of base salary and immediate vesting of all outstanding
stock options.
5
<PAGE>
The Corporation has entered into an employment agreement with Peter L.
Masanotti, Executive Vice President, General Counsel and acting Chief Financial
Officer, dated July 5, 1996, as amended on August 1, 1997 and January 1, 1998.
The agreement is effective until December 31, 2000 unless earlier terminated or
automatically renewed for additional one-year terms, and provides that Mr.
Masanotti will receive an annual base salary of $250,000 (plus increases
determined in the discretion of the Corporation and performance bonuses to be
determined in the discretion of the Board of Directors). Mr. Masanotti may not
compete with the Corporation during his employment with the Corporation and for
one year thereafter. Upon a Change in Control of the Corporation, as defined in
the agreement, Mr. Masanotti is entitled to receive a lump sum payment in an
amount equal to 36 months of base salary and immediate vesting of all
outstanding stock options.
The Corporation, through its wholly-owned subsidiary, ITDS Intelicom
Services, Inc. has an employment agreement with Paul K. Kothari, Chief
Financial Officer, dated as of December 29, 1997. The agreement, which would
have been effective until February 8, 2000 but for its early termination,
provided for an annual base salary of $230,000 per year (plus performance
bonuses to be determined in the discretion of the Board of Directors). The
agreement also provided for an initial grant of an option to purchase 112,500
shares of Common Stock and a signing bonus of $200,000. The agreement also
contains a non-competition provision pursuant to which Mr. Kothari is
prohibited from competing with the Corporation until
February 16, 2000. Mr. Kothari resigned from his position as Chief Financial
Officer effective February 16, 1999.
Summary Compensation Table
The following table sets forth the compensation for the fiscal years ended
December 31, 1996, 1997 and 1998 for the Corporation's Chief Executive Officer
and its four most highly compensated executive officers (other than the Chief
Executive Officer) whose total annual salary and bonus exceeded $100,000 in
1998 (the Chief Executive Officers and such other executive officers are
hereinafter referred to as the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation Awards
-------------------------- ---------------------------------
Restricted Securities All Other
Fiscal Stock Underlying Compensation
Name and Principal Position Year Salary ($) Bonus ($) Awards ($) Options (#) ($)
- ------------------------------ -------- ------------ ----------- ----------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Peter P. Bassermann .......... 1998 $275,000 $260,990 -- 100,000 --
President, Chief Executive 1997 55,000 -- -- 150,000 --
Officer and Director (1)
Lewis D. Bakes ............... 1998 275,000 262,354 -- 170,000 --
Chairman of the Board 1997 150,000 -- -- --
and Director (2) 1996 376,647 87,083 -- -- --
Peter L. Masanotti ........... 1998 250,000 251,823 -- 75,000 --
Executive Vice President, 1997 133,250 -- -- 84,000 --
General Counsel, Acting Chief 1996 51,442 -- $ 629,117(3) 21,000 --
Financial Officer, Secretary
and Director
Paul K. Kothari .............. 1998 205,673 200,000 -- 25,000 --
Chief Financial Officer (4) 1997 -- -- -- 112,500 --
Susan L. Yezzi ............... 1998 221,105 125,000 -- 25,000 --
Chief Operating Officer (5) 1997 -- -- -- 75,000 --
</TABLE>
- ----------------
(1) Mr. Bassermann began serving as Chief Executive Officer in September 1997.
(2) Mr. Bakes resigned as Executive Vice President, Chief Operating Officer and
Secretary effective February 16, 1999.
6
<PAGE>
(3) Represents 42,652 shares of restricted stock which were valued at $629,117
as of December 31, 1998. To the extent dividends are paid on shares of
Common Stock, dividends will be paid on all shares of restricted stock.
(4) Mr. Kothari joined the Corporation in December 1997 and resigned as Chief
Financial Officer effective February 16, 1999.
(5) Ms. Yezzi joined the Corporation in December 1997.
Option Grants Table
The following table sets forth certain information concerning grants of
stock options made during fiscal 1998 to each of the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------------------------
Potential Realizable
Value at Assumed
Number of Percentage of Annual Rates of Stock
Securities Total Options Exercise Price Appreciation for
Underlying Granted to Price Per Option Term (2)
Options Employees in Share Expiration --------------------------------
Name Granted (#) Fiscal Year ($/Sh) Date (1) 5% ($) 10% ($)
- ----------------------------- ---------------- --------------- ---------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Peter P. Bassermann ......... 100,000(3) 9.7% $ 26.75 04/13/08 $1,682,293 $4,263,261
Lewis D. Bakes .............. 170,000(3) 16.5% 26.75 04/13/08 2,859,898 7,247,544
Peter L. Masanotti .......... 75,000(3) 7.3% 26.75 04/13/08 1,261,720 3,197,445
Paul K. Kothari ............. 25,000(3) 2.4% 26.75 04/13/08 420,573 1,065,815
Susan L. Yezzi .............. 25,000(3) 2.4% 26.75 04/13/08 420,573 1,065,815
</TABLE>
- ----------------
(1) The expiration date of an option is the tenth anniversary of the date on
which the option was originally granted.
(2) The amounts shown in these columns represent hypothetical gains that could
be achieved for the respective options if exercised at the end of the
option term. These gains are based on assumed rates of stock appreciation
of 5% and 10%, compounded annually from the date the respective options
were granted to their expiration date. The gains shown are net of the
option exercise price, but do not include deductions for taxes or other
expenses associated with the exercise. Actual gains, if any, on stock
option exercises will depend on the future performance of the Common
Stock, the optionholders' continued employment, and the date on which the
options are exercised.
(3) Options become exercisable in four equal annual installments beginning on
April 13, 1999.
7
<PAGE>
Aggregated Option Exercises and Year-End Option Table
The following table sets forth certain information concerning each
exercise of a stock option during the fiscal year ended December 31, 1998 by
each of the Named Executive Officers and the number and value of unexercised
options held by each of the Named Executive Officers on December 31, 1998:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Shares Value of Unexercised
Underlying Option at in the Money Options
Fiscal Year-End (#) at Fiscal Year-End($)(1)
---------------------- -------------------------
Shares
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
- ----------------------------- -------------- -------------- ---------------------- -------------------------
<S> <C> <C> <C> <C>
Peter P. Bassermann ......... -- -- 46,875/203,125 0/0
Lewis D. Bakes .............. -- -- 0/170,000 0/0
Peter L. Masanotti .......... 5,500 $38,750 55,000/115,500 $246,625/$145,125
Paul K. Kothari ............. -- -- 28,125/109,375 0/0
Susan L. Yezzi .............. -- -- 18,750/81,250 0/0
</TABLE>
- ----------------
(1) Based on the difference between each option exercise price and the fair
market value of the Common Stock as of December 31, 1998 ($14.75 per
share, as quoted on the Nasdaq National Market) multiplied by the number
of shares underlying the options.
Report of the Board of Directors on Executive Compensation
The Corporation's Compensation Committee, which was comprised of Messrs.
Bell and Saft for the entire fiscal year and Messrs. Jacob and Krueger since
June of 1998, was responsible for establishing compensation for 1998 with
respect to the Corporation's executive officers, including the Chief Executive
Officer. The Compensation Committee sought to achieve two primary goals in
connection with the Corporation's executive compensation programs and decisions
regarding individual compensation. First, the Board of Directors structured
executive compensation programs in a manner that it believed would enable the
Corporation to attract and retain key executives. In order to ensure continuity
of certain key members of management, the Board of Directors has approved
multi-year employment contracts for executive officers. Second, the
Corporation's executive compensation programs are intended to provide
executives with an equity interest in the Corporation so as to link a portion
of the compensation of the Corporation's executives with the performance of the
Corporation's Common Stock.
The compensation programs for the Corporation's executives established by
the Compensation Committee consist of a base salary, an annual cash bonus
and/or stock-based equity incentive awards.
In establishing base salaries for the executive officers, including the
Chief Executive Officer, the Compensation Committee monitored salaries at other
companies, particularly those that are in the same industry as the Corporation
or related industries, considered historic salary levels of the individual and
the nature of the individual's responsibilities and compared the individual's
base salary with those of other executives at the Corporation. To the extent
determined to be appropriate, the Board of Directors also considered the
Corporation's financial performance and the individual's performance.
In establishing bonuses for the executive officers, including the Chief
Executive Officer, the Compensation Committee considered a combination of
individual and corporate performance during the past year.
A number of the executive officers hold a substantial security interest in
the Corporation. For those executive officers who do not hold such an interest,
the Compensation Committee has used stock options as a significant element of
the compensation package. It is not currently the policy of the Compensation
Committee to grant stock options to executives
8
<PAGE>
annually, and the timing of grants to executives, if any, will depend upon a
number of factors, including new hires of executives, the executives' current
stock and option holdings and such other factors as the Compensation Committee
deems relevant. When granting stock options, it has generally been the policy
of the Board of Directors to fix the exercise price of such options at 100% of
the fair market value of the Common Stock on the date of grant.
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
disallows a tax deduction to public companies for compensation over $1,000,000
paid to its chief executive officer and its four other most highly compensated
executive officers. Qualifying performance-based compensation will not be
subject to the deduction limit if certain requirements are met. In this regard,
the Corporation has limited the number of shares subject to stock options which
may be granted to Corporation employees under the 1998 Stock Incentive Plan in
a manner that complies with the performance-based requirements of Section
162(m). It does not appear that the Section 162(m) limitation will have a
significant impact on the Corporation in the near term. While the Committee
does not currently intend to qualify its annual bonus awards as
performance-based compensation, it will continue to monitor the impact of
Section 162(m) on the Corporation.
COMPENSATION COMMITTEE
Stuart L. Bell
Samuel L. Jacob
Harvey M. Krueger
Stephen J. Saft
Compensation Committee Interlocks and Insider Participation
The Corporation's Compensation Committee, was responsible for establishing
compensation for 1998 with respect to the Corporation's executive officers,
including the Chief Executive Officer. The current members of the Corporation's
Compensation Committee are Messrs. Bell and Saft and Messrs. Jacob and Krueger,
who joined the Committee in June of 1998. No executive officer of the
Corporation has served as a director or member of the Compensation Committee
(or other committee serving an equivalent function) of any other entity, whose
executive officers served as a director of or member of the Compensation
Committee of the Corporation.
Certain Transactions
Since January 1, 1998, the Corporation has entered into or engaged in the
following transactions with the following directors, officers and stockholders
who beneficially own more than 5% of the outstanding Common Stock of the
Corporation ("5% Stockholders"), and affiliates of such directors, officers and
5% Stockholders:
Mr. Jacob is the Managing Director of Bankers Trust Company, and head of
BT Alex. Brown Incorporated which acted as co-lead manager of the Corporation's
secondary offering of its equity securities in June of 1998.
Mr. Krueger is the Vice Chairman of Lehman Brothers which acted as co-lead
manager of the Corporation's secondary offering of its equity securities in
June of 1998 and provides investment banking services to the corporation.
The Corporation loaned Mr. Masanotti, a director and executive officer of
the Corporation, and his wife $50,000 on December 19, 1996 and $110,000 on
April 10, 1997. The loans were used for the payment of taxes, have an annual
interest rate of 8.5% and are secured by a pledge in favor of the Corporation
of Common Stock held by Mrs. Masanotti. As of March 1, 1999, $138,969 of
indebtedness was outstanding.
On December 31, 1996 and January 1, 1997, the Corporation loaned Mr.
Juliano, an executive officer of the Corporation, an aggregate of $106,000, at
an interest rate of 8.5% per annum pursuant to three promissory notes. Of the
total amount, $40,000 was repaid in February 1997. Of the remaining $66,000
outstanding, $12,000 plus interest was forgiven and as of December 31, 1998,
Mr. Juliano owed $53,426. The remaining loan is secured by a pledge in favor of
the Corporation of 27,000 shares of restricted Common Stock held by Mr.
Juliano.
On December 1, 1997 the Corporation loaned Mr. Kevin Pitz, who became an
executive officer in February of 1999, $100,000 at an interest rate of 6% per
annum with interest payable monthly commencing January 1, 1998. As of December
31, 1998, $100,000 was outstanding.
9
<PAGE>
On January 3, 1998 the Corporation made personal loans to each of Messrs.
Bakes, Bassermann and Masanotti, each a director and executive officer of the
Corporation, for $137,500, $125,000 and $125,000, respectively. In May 1998,
the amounts were repaid in full.
For a description of employment agreements between the Corporation and
Named Executive Officers, see "Compensation of Executive Officers--Employment
Agreements" above. For a description of stock options granted to certain
directors of the Corporation, see "Director Compensation" above.
Stock Performance Graph
The following graph compares the cumulative total stockholder return on
the Common Stock of the Corporation between October 24, 1996 (the date the
Corporation's Common Stock commenced public trading) and December 31, 1998 with
the cumulative total return of (i) the Standard & Poor's 500 Index (the "S&P
500 Index") and (ii) the Standard and Poor's Computers Index (Software and
Services) (the "S&P Computers Index"), over the same period. This graph assumes
the investment of $100.00 on October 24, 1996 in the Corporation's Common
Stock, the S&P 500 Index and the S&P Computers Index, and assumes any dividends
are reinvested.
COMPARISON OF CUMULATIVE TOTAL RETURN*
Among International Telecommunication Data Systems, Inc.,
The S&P 500 Index and the S&P Computers Index
[Line Chart]
*$100 INVESTED ON 10/24/96 IN STOCK OR ON 9/30/96 IN THE INDICES--INCLUDING
REINVESTMENT OF DIVIDENDS, FISCAL YEAR ENDED DECEMBER 31.
[Tabular representation of Line Chart]
<TABLE>
<CAPTION>
Oct. 24, 1996 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1998
--------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
INTERNATIONAL TELECOMMUNICATION DATA
SYSTEMS, INC. $100 $152 $200 $138
S&P 500 INDEX $100 $108 $144 $186
S&P COMPUTERS INDEX $100 $111 $155 $281
</TABLE>
10
<PAGE>
RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected the firm of Ernst & Young LLP as the
Corporation's independent auditors for the current fiscal year. Ernst & Young
LLP served as the Corporation's independent auditors for the year ended
December 31, 1998. Although stockholder approval of the Board of Directors'
selection of Ernst & Young LLP is not required by law, the Board of Directors
believes that it is advisable to give stockholders an opportunity to ratify
this selection. If this proposal is not approved at the Annual Meeting, the
Board of Directors may reconsider its selection.
A representative of Ernst & Young LLP is expected to be present at the
Annual Meeting and will have the opportunity to make a statement if he or she
desires to do so and will also be available to respond to appropriate questions
from stockholders.
11
<PAGE>
OTHER MATTERS
Matters to be Considered at the Meeting
The Board of Directors knows of no other business which will be presented
for consideration at the Meeting other than that described above. However, if
any other business should come before the Meeting, it is the intention of the
persons named in the enclosed Proxy to vote, or otherwise act, in accordance
with their best judgment on such matters.
Solicitation of Proxies
The Corporation will bear the costs of soliciting proxies. In addition to
solicitations by mail, the Corporation's directors, officers and regular
employees may, without additional remuneration, solicit proxies by telephone,
telegraph, facsimile and personal interviews. The Corporation will also request
brokerage houses, custodians, nominees and fiduciaries to forward copies of the
proxy material to those persons for whom they hold shares and request
instructions for voting the proxies. The Corporation will reimburse such
brokerage houses and other persons for their reasonable expenses in connection
with this distribution.
Stockholder Proposals for 2000 Annual Meeting
Any proposal that a stockholder intends to present at the 2000 Annual
Meeting of Stockholders must be submitted to the Secretary of the Corporation
at its offices, 225 High Ridge Road, Stamford, Connecticut 06905, no later than
December 14, 1999 in order to be considered for inclusion in the proxy
statement relating to that meeting.
Pursuant to the Corporation's by-laws, the Corporation must be given
advance notice of stockholder nominations for election to the Corporation's
Board of Directors and of other matters which stockholders wish to present for
action at an annual meeting of stockholders (other than stockholder matters
included in the Corporation's proxy statement). The required notice must be (i)
made in writing, (ii) delivered to or mailed and received by the Secretary of
the Corporation at the principal offices of the Corporation, and, if relating
to a nomination of directors, by first class United States mail, postage
prepaid, and (iii) received not less than 60 days nor more than 90 days prior
to the Annual Meeting, provided, however, that if less than 70 days' notice or
prior public disclosure of the date of the meeting is given to stockholders,
such notice must be received by the Corporation not later than the close of
business on the 10th day following the date on which the notice of the date of
the meeting was mailed or such public disclosure was made, whichever occurs
first.
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely on its review of copies of reports filed by the Corporation's
directors and executive officers and persons beneficially owning more than 10%
of the Corporation's Common Stock pursuant to Section 16(a) of the Securities
Exchange Act of 1934, as amended, or written representations from certain
Reporting Persons, the Corporation believes that, except as disclosed below,
during 1998 all filings required to be made by its Reporting Persons were
timely made. Messrs. Krueger and Jacob, who became directors on June 16, 1998,
filed late Forms 3 and Mr. Masanotti filed a late Form 4 for one transaction in
September of 1998.
By Order of the Board of Directors,
Peter L. Masanotti, Secretary
April 12, 1999
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. YOUR PROMPT RESPONSE
WILL GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION IS
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK
PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
12
<PAGE>
PROXY PROXY
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
ANNUAL MEETING OF STOCKHOLDERS--May 19, 1999
The undersigned, having received notice of the meeting and management's
Proxy Statement therefor, and revoking all prior proxies, hereby appoint(s)
Peter P. Bassermann, Stuart L. Bell and John H. Chory, Esq., and each of them
(with full power of substitution), as proxies of the undersigned to attend the
Annual Meeting of Stockholders of International Telecommunication Data Systems,
Inc. (the "Company") to be held on Wednesday, May 19, 1999, and any adjourned
sessions thereof, and there to vote and act upon the following matters in
respect of all shares of Common Stock of the Company which the undersigned
would be entitled to vote or act upon, with all powers the undersigned would
possess if personally present.
Attendance of the undersigned at the meeting or at any adjourned session
thereof will not be deemed to revoke this proxy unless the undersigned shall
affirmatively indicate thereat the intention of the undersigned to vote said
shares in person. If the undersigned hold(s) any of the shares of the Company
in a fiduciary, custodial or joint capacity or capacities, this proxy is signed
by the undersigned in every such capacity as well as individually.
In their discretion, the named Proxies are authorized to vote upon such
other matters as may properly come before the meeting, or any adjournment
thereof.
PLEASE SIGN AND DATE THIS PROXY ON THE REVERSE SIDE
<PAGE>
A [X] Please mark your votes as in this example.
WITHHOLD
FOR AUTHORITY Nominees: Samuel L. Jacob
[ ] [ ] Peter L. Masanotti
1. To elect
Class III
Directors
(INSTRUCTION: To withhold authority for any individual nominee, write the
nominee's name in the space provided below.)
- ----------------------------------------
<TABLE>
<S> <C> <C> <C>
FOR AGAINST ABSTAIN
2. To ratify the selection of Ernst & Young LLP as the Company's
independent auditors for the current fiscal year [ ] [ ] [ ]
</TABLE>
The shares represented by this proxy will be voted as directed by the
undersigned. If no direction is given with respect to any election to office or
proposal specified above, this proxy will be voted for such election to office
or proposal.
This proxy is solicited on behalf of the Board of Directors of the
Company.
Neither of the matters to be voted upon is conditioned on or related to
the approval of the other. Both are proposed by the Company.
Signature(s): ---------------------- Signature(s): ----------------------
Dated: ----------------
NOTE: Please sign name(s) exactly as appearing hereon. When signing as
attorney, executor, administrator or other fiduciary, please give your
full title as such. Joint owners should each sign personally. If a
corporation, sign in full corporate name, by authorized officer. If a
partnership, please sign in partnership name, by authorized person.
