INNODATA INC
10-Ks and 10-Qs
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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
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:
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¨
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Preliminary
Proxy Statement
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¨
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Confidential, for Use of the
Commission Only (as permitted by Rule
14a-6(e)(2))
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x
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Definitive
Proxy Statement
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¨
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Definitive
Additional Materials
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¨
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Soliciting
Material Pursuant to §240.14a-12
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Innodata Isogen, Inc.
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(Name
of Registrant as Specified In Its
Charter)
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(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
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No
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computed on table below per Exchange Act Rules 14a-6(i)(1) and
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Three
University Plaza
Hackensack,
New Jersey 07601
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD JUNE 9, 2010
To
the Stockholders of Innodata Isogen, Inc.:
The Annual Meeting of Stockholders of
Innodata Isogen, Inc. (the "Company") will be held at Innodata Isogen, Inc.,
Three University Plaza, Hackensack, New Jersey 07601 at 11:00 A.M. on June 9,
2010, for the following purposes:
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(1)
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To
elect six directors of the Company to hold office until the next Annual
Meeting of Stockholders and until their successors have been duly elected
and qualified;
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(2)
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To
ratify the selection and appointment by the Company's Board of Directors
of J.H. Cohn LLP, independent auditors, as auditors for the Company for
the year ending December 31, 2010;
and
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(3)
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To
consider and transact such other business as may properly come before the
meeting or any adjournments
thereof.
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A Proxy Statement, form of Proxy, and
the Annual Report to Stockholders of the Company for the year ended December 31,
2009 are enclosed herewith. Only holders of record of Common Stock of
the Company at the close of business on April 15, 2010 will be entitled to
notice of, and to vote at, the Annual Meeting and any adjournments
thereof. A complete list of the stockholders entitled to vote will be
available for inspection by any stockholder during the meeting; in addition, the
list will be open for examination by any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least ten days
prior to the meeting at the office of the Secretary of the Company, located at
Three University Plaza, Hackensack, New Jersey 07601.
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By
Order of the Board of Directors
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Amy
R. Agress
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Vice
President, General Counsel and
Secretary
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Hackensack,
New Jersey
April 26,
2010
All stockholders are cordially invited
to attend the Meeting. If you do not expect to be present, please
sign and date the enclosed form of Proxy and return it promptly using the
enclosed envelope. No postage is required if mailed in the United
States. Any person giving a Proxy has the power to revoke it at any
time prior to its exercise and if present at the Meeting may withdraw it and
vote in person.
Voting
in Person at the Meeting
Registered holders can vote in person.
Beneficial owners must obtain a proxy from their brokerage firm, bank, or other
holder of record and present it to the inspector of elections with their ballot
in order to be able to vote shares in person at the meeting. Voting
in person will replace any previous votes submitted by Proxy.
Attendance at the Meeting is limited to stockholders, their proxies and invited
guests of the Company.
Important
Notice Regarding the Availability of Proxy Materials for the
2010
Annual Meeting of Stockholders to be held on June 9, 2010
We have
elected to provide access to our Proxy materials both by sending you this full
set of Proxy materials, including a Proxy card, and by notifying you of the
availability of our Proxy materials on the Internet.
This
Proxy Statement and the 2009 Annual Report are available on the Internet at:
http://www.innodata-isogen.com/proxy
2
INNODATA
ISOGEN, INC.
Three
University Plaza
Hackensack,
New Jersey 07601
PROXY
STATEMENT
This Proxy Statement is furnished in
connection with the solicitation by the Board of Directors of Innodata Isogen,
Inc. (the "Company") of Proxies in the form enclosed. Such Proxies will be voted
at the Annual Meeting of Stockholders of the Company to be held at Innodata
Isogen, Inc., Three University Plaza, Hackensack, New Jersey 07601 at 11:00 A.M.
on June 9, 2010 (the "Meeting") and at any adjournments thereof for the purposes
set forth in the accompanying Notice of Annual Meeting of
Stockholders.
This Proxy Statement and accompanying
Proxy are being mailed on or about May 7, 2010 to all stockholders of record on
April 15, 2010 (the "Record Date").
Any stockholder giving a Proxy has the
power to revoke the same at any time before it is voted. The cost of soliciting
Proxies will be borne by the Company. Following the mailing of the
Proxy materials, solicitation of Proxies may be made by officers and employees
of the Company by mail, telephone, facsimile, electronic communication or
personal interview. Properly executed Proxies will be voted in
accordance with instructions given by stockholders at the places provided for
such purpose in the accompanying Proxy and, as to any other matter properly
coming before the Meeting (none of which is presently known to the Board of
Directors), in accordance with the judgment of the persons designated as
proxies. Unless contrary instructions are given by stockholders, persons named
in the Proxy intend to vote the shares represented by such Proxies for the election of the six
nominees for director named herein, and for the selection of J.H.
Cohn LLP as independent auditors. The current members of the Board of Directors
presently hold voting authority for Common Stock representing an aggregate of
2,476,776 votes, or approximately 9.7% of the total number of votes eligible to
be cast at the Meeting. The members of the Board of Directors have indicated
their intention to vote affirmatively on all of the proposals.
VOTING
SECURITIES
Stockholders of record as of the close
of business on the Record Date will be entitled to notice of, and to vote at,
the Meeting or any adjournments thereof. On the Record Date there
were 25,419,246 outstanding shares of common stock, par value $.01 per share
(the "Common Stock"). Each holder of Common Stock is entitled to one vote for
each share held by such holder. The presence, in person or by Proxy, of the
holders of a majority of the outstanding shares of Common Stock is necessary to
constitute a quorum at the Meeting. Proxies submitted which contain
abstentions or broker non-votes will be deemed present at the Meeting in
determining the presence of a quorum.
3
PROPOSAL
1. ELECTION OF DIRECTORS
It is the intention of the persons
named in the enclosed form of Proxy, unless such form of Proxy specifies
otherwise, to nominate and to vote the shares represented by such Proxy for the election as directors
of Jack S. Abuhoff, Haig S. Bagerdjian, Louise C. Forlenza, Stewart R.
Massey, Todd H. Solomon and Anthea C. Stratigos to hold office until the next
Annual Meeting of Stockholders and until their respective successors shall have
been duly elected and qualified. Each of the nominees named below currently
serves as a director of the Company and each was elected at the Annual Meeting
of Stockholders held on June 12, 2009. The Company has no reason to believe that
any of the nominees will become unavailable to serve as director for any reason
before the Meeting. However, in the event that any of them shall become
unavailable, each of the persons designated as proxy reserves the right to
substitute another person of his or her choice when voting at the Meeting. Below
is the biographical and other information about the nominees. Following each
nominee’s biographical information, we have provided information concerning the
particular experience, qualifications, attributes and/or skills that led the
Nominating Committee and the Board of Directors to determine that each nominee
should serve as a director.
Jack S. Abuhoff, age 49, has
been President and Chief Executive Officer of the Company since September 15,
1997, and a director of the Company since its founding in 1988. Mr. Abuhoff has
been the Chairman of the Company’s Board of Directors since May 2001. From 1995
to 1997 he was Chief Operating Officer of Charles River Corporation, an
international systems integration and outsourcing firm. From 1992 to 1994, Mr.
Abuhoff was employed by Chadbourne & Parke, LLP, in connection with its
joint venture with Goldman Sachs to develop capital projects in
China. Mr. Abuhoff is a trustee on the Board of Trustees of the
Harvard Law School Association of New Jersey. He practiced international
corporate law at White & Case LLP from 1986 to 1992. Mr. Abuhoff holds an
A.B. degree in English from Columbia College (1983) and a J.D. degree from
Harvard Law School (1986).
Key
Experience, Attributes and Skills:
Mr.
Abuhoff has knowledge of the Company, its clients and the industries the Company
serves, both from an historical and a current perspective, as well as leadership
and management skills, international experience, and experience in providing
outsourced services.
Haig S. Bagerdjian, age 53,
has served as one of the Company’s directors since June 2001. He has also been
Chairman of the Board of Point.360 (Nasdaq: PTSX), a provider of video and film
asset management services to owners, producers and distributors of entertainment
and advertising content, since September 2001, and its President and Chief
Executive Officer since October 2002. From 1991 to 2002, Mr.
Bagerdjian served in various executive management positions at Syncor
International Corporation (Nasdaq: SCOR), a leading provider of
radiopharmaceuticals, comprehensive nuclear pharmacy services and medical
imaging services, including: Executive Vice President, President and Chief
Executive Officer of Syncor Overseas, Ltd., Chairman and Chief Executive Officer
of Syncor Pharmaceuticals, Inc., Chief Legal Officer, and Senior Vice President,
Business Development. Mr. Bagerdjian also served as a director of
Advanced Machine Vision Corporation (Nasdaq: AMVC) from 1997 until
2001. Mr. Bagerdjian received a B.A. degree in International
Relations and Slavic Languages and Literature, and Certificates in Russian
Studies, Strategic Defense and National Security, from the University of
Southern California (1983), and a J.D. degree from Harvard Law School
(1986). He is admitted to the State Bar of California.
Key
Experience, Attributes and Skills:
Mr.
Bagerdjian has leadership experience as a Chairman, CEO and President of a
public company. He has public company board experience, as well as experience in
international operations, mergers and acquisitions, compensation and governance,
and provides diversity of background and viewpoint.
4
Louise C. Forlenza, age 60,
has served as one of the Company’s directors since October 2002. From
1994 to the present, Ms. Forlenza has been providing audit consultancy,
management advisory, and tax planning services to a diverse group of corporate
clients. From 1987 through 1992, she was the Chief Financial Officer
and Chief Operating Officer of Intercontinental Exchange Partners, an
international foreign exchange company, and served as a director and as chair of
its International Audit Committee. Prior to joining Intercontinental,
Ms. Forlenza was Chief Financial Officer of Bierbaum-Martin, a foreign exchange
firm. Ms. Forlenza participates actively in various not-for-profit
and philanthropic organizations including as benefit chair for Greenwich
Hospital and as Director and Treasurer of The Acting Company, a New York
City-based promoter of arts and literacy founded in 1972 by actor John Houseman.
Ms. Forlenza also serves on the executive, compensation and finance committees
of The Acting Company. She is a Certified Public Accountant and served on the
faculty of the accounting department of Iona College from 1981 to 1982. Ms.
Forlenza received a B.B.A. degree in Accounting from Iona College
(1971).
Key
Experience, Attributes and Skills:
Ms.
Forlenza satisfies the financial literacy requirements of Nasdaq and has been
determined to be an “audit committee financial expert” under the SEC’s rules and
regulations. A Certified Public Accountant and a former CFO, she has a
background in accounting, audit, tax planning and foreign exchange planning, and
provides diversity of background and viewpoint.
Stewart R. Massey, age
53, has served as
one of the Company’s directors since March 2009. Mr. Massey is a partner and
director of Massey, Quick and Co. LLC, an investment consulting and wealth
advisory firm, which he co-founded in 2004, after a 24-year career on Wall
Street. He joined Morgan Stanley’s Private Client group in 1983 after four years
with Dean Witter Reynolds. From 1988 through 1993, he led Morgan Stanley’s
private client businesses in Asia, Australia, and Japan. Mr. Massey was Head of
Japanese Equity Sales in New York from 1993 through 1996, and returned to Tokyo
as Head of Institutional Equity Sales and Global Head of Japanese Equities in
1996. He served as President and CEO of Robert Fleming, Inc. in 1997 and
1998. At Fleming, he had regional responsibility for equity sales and
trading, research, capital markets, investment banking, and asset management in
the Americas, serving on the Board of Directors and Executive Committee of the
parent company in London. Mr. Massey returned to Morgan Stanley in September of
1998 as a Managing Director and Head of Institutional Sales, Marketing, and
Product Development for the firm’s prime brokerage business. Mr. Massey holds a
B.A. degree in History from The College of Wooster (1974). He is an
Emeritus Life Trustee of the College. As a member of Wooster’s Board of
Trustees, he was chair of the Investment Committee and a member of the Executive
Committee for 15 years. Mr. Massey also serves on the investment committee
of the Visiting Nurse Association of Somerset Hills. He is a director of Team
Capital Bank and First Santa Fe Wealth Advisors.
Key
Experience, Attributes and Skills:
Mr.
Massey has leadership experience as a CEO and a senior executive
officer. He has financial management expertise, as well as
compensation, mergers and acquisitions, investment advisory, board, governance
and international experience, and provides diversity of background and
viewpoint.
Todd H. Solomon, age 48, has served as one of the
Company’s directors since October 2008. Since founding Innodata Isogen in 1988,
Mr. Solomon served as a director and officer of the company at various times
through 2005. He is a private investor, investment manager and venture
capitalist and divides his time between Las Vegas, the Philippines and Bali,
Indonesia. Mr. Solomon holds an A.B. degree in History and Physics from Columbia
College (1986).
Key
Experience, Attributes and Skills:
As former
CEO of the Company, Mr. Solomon has leadership experience, international
operations experience, and knowledge about the industries the Company serves. In
addition, he brings investment, foreign exchange and compensation experience, as
well as financial expertise.
5
Anthea C. Stratigos, age
49, has served as
one of the Company’s directors since March 2009. Ms. Stratigos is co-founder and
CEO of Outsell, Inc. (founded in 1994), a leading research and advisory firm
that focuses exclusively on the information and publishing industries, providing
analysis and recommendations for high-level executives regarding markets,
trends, benchmarks and best practices. She is Outsell’s primary spokesperson,
and chairs Outsell’s Leadership Council, a member-service for CEOs and senior
executives of publishing and information-provider firms. Ms. Stratigos holds a
B.S. degree in Communication from Stanford University (1983) and graduated from
the Executive Marketing Program at Harvard University (1992).
Key
Experience, Attributes and Skills:
As CEO
and founder of Outsell, Ms. Stratigos brings significant current knowledge about
the direction and needs of the information and publishing industries, the
Company’s primary market, leadership, marketing and entrepreneurial skills, and
provides diversity of background and viewpoint.
There are no family relationships
between or among any directors of the Company. Directors are elected
to serve until the next annual meeting of stockholders and until their
successors are elected and qualified.
Director
Independence
The Board of Directors has determined
that Haig S. Bagerdjian, Louise C. Forlenza, Stewart R. Massey, Todd H. Solomon
and Anthea C. Stratigos are independent directors. The independent directors
comprise a majority of the Board. The only director who is not independent is
Jack S. Abuhoff, the Company’s Chairman, President and Chief Executive Officer
(“CEO”). The Company defines independence as meeting the requirements to be
considered as an independent director as set forth in the Nasdaq Marketplace
Rule 5605(a)(2). To assist in determining director independence, the Board of
Directors also considers any business relationship with any independent
director, including any business entity with which any independent director is
affiliated, to determine if there is any material relationship that would impair
a director’s independence. In making its determination, the Board of Directors
reviewed information provided by each of the directors and information gathered
by the Company.
Board
Leadership Structure
Chairman
of the Board and Chief Executive Officer Positions
The Board
of Directors believes that having a combined Chairman of the Board/Chief
Executive Officer, independent directors with strong leadership and management
experience, an independent director serving as the lead director and Board of
Directors committees being comprised solely of independent directors, provides
an effective and efficient leadership structure that is appropriate for the
Company at the present time. The Chairman/CEO has primary responsibility for
managing the business. Combining the leadership role avoids duplication of
efforts while strengthening the Chairman/CEO’s ability to provide insight and
direction on important strategic initiatives to both management and the
independent directors.
Lead
Independent Director
The Board
of Directors has appointed Todd H. Solomon as the Company’s Lead Independent
Director. The principal responsibilities of the Lead Independent
Director are to:
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Schedule
and preside over executive sessions of the independent
directors;
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Preside
over Board of Directors meetings in the absence of the
Chairman;
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Provide
input to the Chairman in the preparation of agendas for Board of Directors
meetings; and
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Enhance
the effective functioning of the independent directors by facilitating
communications and collaboration between and among
them.
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6
The
Board’s Role in Risk Oversight
The Board
of Directors believes that the goal of risk oversight is to identify and assess
risks which may affect the Company’s ability to fulfill its business objectives,
and to formulate plans to mitigate potential effects. The Board of Directors
administers its oversight function directly, through both its Audit and
Compensation Committees, and through executive management of the Company, as
follows:
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Through
Board of Directors discussion on general business strategy and risks that
could drive tactical and strategic decisions in the near and long
term;
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Through
the Audit Committee with respect to financial risks and risks that may
affect the financial situation of the
Company;
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Through
the Compensation Committee with respect to risks associated with executive
compensation plans and
arrangements;
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Through
executive management of the Company with respect to risks which may arise
in the ordinary course of business, such as operational, managerial,
business, legal, regulatory and reputational risks;
and
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Through
the CEO, in the CEO’s combined role as Chairman, via updates to the Board
of Directors during Board of Directors meetings with respect to potential
material risks identified by executive management, as is deemed
appropriate based on the
circumstances.
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The Board
of Directors believes the various roles of the board committees and executive
management in risk oversight described above complement the Board of Directors’
leadership structure described above, including the combination of the Chairman
of the Board and Chief Executive Officer positions.
Meetings
of the Board of Directors
The Board of Directors meets throughout
the year on a set schedule. The Board of Directors also holds special meetings
and acts by unanimous written consent from time to time as appropriate. The
Board of Directors held ten meetings during the year ended December 31, 2009.
Each director attended at least (i) 75% of all of the meetings of the Board of
Directors held during the period they served as Director; and (ii) 75% of the
meetings of all committees on which he or she served, except for Ms. Stratigos.
The Company does not have a policy requiring incumbent directors and director
nominees to attend the Company’s annual meeting of stockholders. Two directors
attended last year’s annual meeting.
The Board of Directors meets in
executive sessions without management, as needed, during or immediately
following its regularly scheduled meetings. The Board of Directors also
schedules executive sessions during the year for the independent directors
only.
Committees
of the Board of Directors
Audit
Committee
The Company has a separately designated
standing Audit Committee established in accordance with Section 3(a)(58)(A) of
the Exchange Act. The Audit Committee operates under a written charter adopted
by the Board of Directors. A copy of the charter is available on our website at
www.innodata-isogen.com.
Serving on the Committee are Ms. Forlenza and Messrs. Bagerdjian and Solomon.
The Board of Directors has determined that it has an audit committee financial
expert serving on the audit committee: Ms. Forlenza. The functions of the Audit
Committee are, among other things, to make recommendations concerning the
selection each year of independent auditors of the Company, to assist the Board
of Directors in fulfilling its oversight responsibilities relating to the
quality and integrity of the Company's financial reports and financial reporting
processes and systems of internal controls, to consider whether the
Company's principal auditor’s provision of non-audit services is compatible with
maintaining the principal accountant’s independence and to determine through
discussions with the independent auditors whether any instructions or
limitations have been placed upon them in connection with the scope of their
audit or its implementation. To carry out its responsibilities, the Audit
Committee met five times during fiscal 2009. The Company defines independence as
meeting the standards to be considered as an independent director as set forth
in the Nasdaq Marketplace Rule 5605(a)(2), and the Board of Directors has
determined that all the members of the Audit Committee are "independent" as
defined in the Nasdaq Marketplace Rule 5605(c)(2)(A).
7
Compensation
Committee
The Company has a standing Compensation
Committee comprised of Messrs. Massey and Solomon and Ms. Forlenza. The
Compensation Committee operates under a written charter adopted by the Board of
Directors. A copy of the charter is available on our website at www.innodata-isogen.com.
The function of the Compensation Committee is to discharge the responsibilities
of the Board of Directors regarding executive and director compensation,
including determining and approving the compensation packages of the Company’s
executive officers, including its Chief Executive Officer. The Compensation
Committee also reviews and approves stock option grants to non-executive officer
employees. The Chief Executive Officer recommends to the Compensation Committee
proposed compensation for the executive officers other than the Chief Executive
Officer. The Compensation Committee engages the services of an independent
compensation consultant on an as-needed basis to provide market data and advice
regarding executive compensation and proposed compensation programs and amounts.
To carry out its responsibilities, the Compensation Committee met four times
during fiscal 2009. The Company defines independence as meeting the standards to
be considered as an independent director as set forth in the Nasdaq Marketplace
Rule 5605(a)(2), and the Board of Directors has determined that all the members
of the Compensation Committee are "independent" as defined in the Nasdaq
Marketplace Rule 5605(a)(2).
Compensation Committee Interlocks
and Insider Participation. The Compensation Committee is currently
comprised of Messrs. Massey and Solomon and Ms. Forlenza. Mr. Solomon was
formerly an officer of the Company serving as its President and Chief Executive
Officer until September 1997.
Nominating
Committee
The
Company has a standing Nominating Committee comprised of Messrs. Solomon and
Bagerdjian, and Ms. Forlenza. The Company does not have a Nominating Committee
charter. The primary responsibilities of the Nominating Committee include
assisting the Board of Directors in identifying and evaluating qualified
candidates to serve as directors; recommending to the Board of Directors
candidates for election or re-election to the Board of Directors or to fill
vacancies on the Board of Directors; and assisting in attracting qualified
candidates to serve on the Board of Directors. Director nominees are selected by
Board of Director resolution. All of the nominees recommended for election to
the Board of Directors at the Meetings are directors standing for re-election.
Although the Nominating Committee does not have a formal policy with respect to
the consideration of diversity, when considering director candidates the
Nominating Committee seeks individuals with backgrounds and qualities that, when
combined with those of the Company’s existing directors, provide a blend of
skills and experience that will further enhance the Board of Directors’
effectiveness at the time the consideration is made. When considering potential
director candidates, the Nominating Committee considers the candidate's
character, judgment, diversity, skills, including financial literacy, and
experience in the context of the needs of the Company and the Board of
Directors. The Nominating Committee has not established any minimum
qualifications for director candidates. To carry out its responsibilities, the
Nominating Committee met two times during fiscal 2009 and one time in fiscal
2010 to date. The Company defines independence as meeting the standards to be
considered as an independent director as set forth in the Nasdaq Marketplace
Rule 5605(a)(2), and the Board of Directors has determined that all the members
of the Nominating Committee are "independent" as defined in the Nasdaq
Marketplace Rule 5605(a)(2). In 2009 the Company did not pay any fees to any
third party to assist in identifying or evaluating potential
nominees.
The
Company's by-laws include a procedure whereby its stockholders can nominate
director candidates, as more fully described below under “Stockholder Proposals
for the 2011 Annual Meeting.” The Board of Directors will consider director
candidates recommended by the Company's stockholders in a similar manner as
those recommended by members of management or other directors, provided the
stockholder submitting such nomination has complied with the procedures set
forth in the Company’s by-laws. To date, the Company has not received any
recommended nominees from any non-management stockholder or group of
stockholders that beneficially owns five percent or more of its voting
stock.
8
Stockholder
Communications with the Board of Directors
Generally, stockholders who have
questions or concerns regarding the Company should contact our Investor
Relations department at 201-371-8000. However, stockholders may communicate with
the Board of Directors by sending a letter to: Board of Directors of Innodata
Isogen, Inc., c/o Corporate Secretary, 3 University Plaza, Hackensack, New
Jersey 07601. Any communications must contain a clear notation indicating that
it is a "Stockholder—Board Communication" or a "Stockholder—Director
Communication" and must identify the author as a stockholder. The office of the
Corporate Secretary will receive the correspondence and forward appropriate
correspondence to the Chairman of the Board or to any individual director or
directors to whom the communication is directed. The Company reserves the right
not to forward to the Board of Directors any communication that is hostile,
threatening, illegal, does not reasonably relate to the Company or its business,
or is otherwise inappropriate. The office of the Corporate Secretary has
authority to discard or disregard any inappropriate communication or to take any
other action that it deems to be appropriate with respect to any inappropriate
communications.
REPORT
OF THE AUDIT COMMITTEE
The following report of the Audit
Committee does not constitute soliciting material and should not be deemed filed
or incorporated by reference into any other Company filing under the Securities
Act of 1933 or the Securities Exchange Act of 1934, except to the extent the
Company specifically incorporates this Report by reference therein.
The responsibilities of the Audit
Committee, which are set forth in the Audit Committee Charter, include providing
oversight to the Company’s financial reporting process through periodic meetings
with the Company’s independent auditors and management to review accounting,
auditing, internal controls and financial reporting matters. The Audit Committee
is also responsible for the appointment, compensation and oversight of the
Company’s independent auditors. The management of the Company is responsible for
the preparation and integrity of the financial reporting information and related
systems of internal controls. The Audit Committee, in carrying out its role,
relies on the Company’s senior management, including senior financial
management, and its independent auditors.
The Audit
Committee has implemented procedures to ensure that during the course of each
fiscal year it devotes the attention that it deems necessary or appropriate to
each of the matters assigned to it under the Audit Committee's
charter. To carry out its responsibilities, the Audit Committee met
five times during fiscal 2009.
The primary purpose of the Audit
Committee is to assist the Board of Directors in fulfilling its oversight
responsibilities relating to the quality and integrity of the Company's
financial reports and financial reporting processes and systems of internal
controls. Management of the Company has primary responsibility for
the Company's financial statements and the overall reporting process, including
maintenance of the Company's system of internal controls. The Company
retains independent auditors who are responsible for conducting independent
audits of the Company's financial statements and internal control over financial
reporting, in accordance with standards of the Public Company Accounting
Oversight Board (United States), and issuing reports thereon.
The Audit
Committee has reviewed and discussed the Company’s consolidated audited
financial statements as of and for the year ended December 31, 2009 with
management and the independent auditors. The Audit Committee has discussed with
the independent auditors the matters required to be discussed under standards
established by the Public Company Accounting Oversight Board (United States),
including those matters set forth in Statement on Auditing Standards No. 61
(Communication with Audit Committees), as amended, as adopted by the Public
Company Accounting Oversight Board in rule 3200T. The independent auditors have
provided to the Audit Committee the written disclosures and the letter required
by applicable requirements of the Public Company Accounting Oversight Board
regarding the independent auditor’s communication with the Audit Committee
concerning independence, and the Audit Committee has discussed with the auditors
their independence from the Company. The Audit Committee has concluded that the
independent auditors are independent from the Company and its
management.
9
On the basis of the foregoing reviews
and discussions, the Audit Committee recommended to the Board of Directors that
the consolidated audited financial statements be included in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2009, for
filing with the Securities and Exchange Commission. The Audit Committee has also
recommended, subject to stockholder approval, the selection of the Company's
independent auditors.
The
Members of the Audit Committee
Louise C.
Forlenza, Chair
Haig S.
Bagerdjian
Todd H.
Solomon
Fiscal
2009 and 2008 Accounting Firm Fee Summary
Set forth
below is certain information concerning fees billed to the Company by (i) J.H.
Cohn LLP; and (ii) Grant Thornton LLP and its international affiliates, in
respect of professional services rendered to the Company for the audit of the
annual financial statements for the years ended December 31, 2009 and December
31, 2008; the reviews of the financial statements included in reports on Form
10-Q for periods within 2009 and 2008; related regulatory filings for periods
within 2009 and 2008; and other services. The Audit Committee has
determined that the provision of all services is compatible with maintaining the
independence of J.H. Cohn LLP and Grant Thornton LLP.
|
J.H. Cohn LLP
|
Grant Thornton LLP
|
|||||||||||||||
|
2009 ($)
|
2008 ($)
|
2009 ($)
|
2008 ($)
|
|||||||||||||
|
Audit
Fees
|
434,000 | 340,000 | 165,000 | 244,000 | ||||||||||||
|
Audit-Related
Fees
|
-0- | -0- | -0- | 18,000 | ||||||||||||
|
Tax
Fees
|
-0- | -0- | -0- | -0- | ||||||||||||
|
All
Other Fees
|
5,500 | -0- | -0- | -0- | ||||||||||||
Audit fees consist of fees for the
audit of the Company’s financial statements and internal control over financial
reporting under Section 404 of the Sarbanes Oxley Act, the review of the
interim financial statements included in the Company’s quarterly reports on Form
10-Q and other professional services provided in connection with statutory and
regulatory filings or engagements.
Audit-related
fees consist of fees for assurance and related services that are reasonably
related to the performance of the audit and the review of the Company’s
financial statements and which are not reported under “Audit Fees”. These
services relate to consultations concerning financial accounting and reporting
standards and are not required by statute or regulation.
Audit
Committee Pre-Approval Policy
All
audit, audit-related services, tax services and other services provided by J.H.
Cohn LLP or Grant Thornton LLP must be pre-approved by the Audit Committee. The
Audit Committee may delegate to its Chair the authority to pre-approve otherwise
permissible non-audit services, provided that any decision made pursuant to such
delegation must be presented to the full Audit Committee for informational
purposes at its next scheduled meeting.
10
EXECUTIVE
OFFICERS
Set forth below is information
concerning the Executive Officers who are not directors.
|
Name
|
Age
|
Position
|
||
|
Ashok
Mishra
|
54
|
Executive
Vice President and Chief Operating Officer
|
||
|
O’Neil
Nalavadi
|
50
|
Senior
Vice President and Chief Financial
Officer
|
Ashok Mishra has been the
Company’s Executive Vice President and Chief Operating Officer since January
2007. Mr. Mishra has held senior level positions with the Company and its
subsidiaries for more than nine years. Mr. Mishra has served as Senior Vice
President since May 2004, after serving as Vice President, Project Delivery from
October 2001 through April 2004. Prior thereto, Mr. Mishra served as
Assistant Vice President, Project Delivery from November 2000 to September 2001,
and as General Manager and Head of the Facility of the Company’s India
operations from 1997 to October 2000. Mr. Mishra holds a Bachelor of Technology
degree in Mechanical Engineering from Pantnagar University (1976). He also has
Component Manufacturing Technical Training from Alcatel France (1985) and
completed a condensed MBA course from Indian Institute of Management Bangalore
(1995).
O’Neil Nalavadi has been the
Company’s Senior Vice President and Chief Financial Officer since November 2009.
Prior to joining the Company Mr. Nalavadi was the Chief Financial Officer and a
Director of R Systems International Ltd since January 2000 and January 2001,
respectively. R Systems is a provider of outsourced software product
development and business process outsourcing services. Prior to R Systems, Mr.
Nalavadi served as a Senior Vice President at UB Group, a $5 billion diversified
conglomerate from 1984 to 1997, and served as Chief Financial Officer of UB
Group’s outsourced IT services company from August 1997 to January 2000. Mr.
Nalavadi was awarded a Bachelor of Commerce and Economics degree from the
University of Mumbai (1980) and qualified as a Chartered Accountant with
National Honor Roll (1981).
The Company’s Executive Officers are
elected by, and serve at, the discretion of our Board of Directors. There are no
family relationships between or among any of the Company’s Executive
Officers.
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
Overview
This
compensation discussion and analysis describes and analyzes the material
elements of compensation awarded, earned by, or paid to each of our Executive
Officers who served as Named Executive Officers during the last completed fiscal
year. This compensation discussion and analysis focuses on the information
contained in the following tables and related footnotes and narrative for
primarily the last completed fiscal year, but we also describe compensation
actions taken before or after the last completed fiscal year to the extent it
enhances the understanding of our executive compensation
disclosure.
Executive
Compensation Objectives and Philosophy
The
Compensation Committee of the Board of Directors is responsible for overseeing
and administering our executive compensation program and for establishing our
executive compensation philosophy. The objectives of our compensation
program are to:
11
|
|
·
|
Attract,
motivate and retain qualified, talented and dedicated
executives
|
|
|
·
|
Motivate
executives to achieve business and financial objectives that will enhance
stockholder value
|
|
|
·
|
Align
the interests of our executives with the long term interests of
stockholders through stock-based
incentives
|
|
|
·
|
Maintain
a strong link between pay and performance by placing a portion of the
executive’s total pay at risk
|
The
Committee applies these objectives in selecting the specific elements of
compensation. The Committee also reviews and considers:
|
|
·
|
Company
performance, both separately and in relation to similar
companies
|
|
|
·
|
The
individual executive’s performance, experience and scope of
responsibilities
|
|
|
·
|
Historical
compensation levels and stock option awards at the
Company
|
|
|
·
|
Competitive
market and peer company data
|
|
|
·
|
Internal
equity among executive officers
|
|
|
·
|
The
recommendations of management
|
Executive
Officer Compensation Processes
The
Committee uses the following processes, procedures and resources to help it
perform its responsibilities:
|
|
·
|
Executive
sessions without management present to discuss various compensation
matters, including the compensation of our
CEO
|
|
|
·
|
The
services of an independent compensation consultant, who advises the
Committee on an as-needed basis
|
|
|
·
|
A
periodic review of all executive compensation and benefit programs for
reasonableness and cost
effectiveness
|
|
|
·
|
The
recommendations of the CEO on compensation for the other executive
officers
|
Competitive
Benchmarking / Peer Group Analysis
Although the Company has no policy
regarding the retention of independent consultants to conduct competitive
benchmarking and/or a peer group analysis, it has, from time to time, engaged
such consultants to assist the Committee in the review and determination of
various executive compensation matters.
In
January 2009 the Committee engaged an independent compensation consultant,
Frederic W. Cook & Co., Inc. (the “Consultant”) for the primary purpose of
reviewing the CEO’s then existing employment agreement in advance of its
expiration in February 2009. The agreement was reviewed to assess its market
competitiveness relative to employment agreements of other CEOs at 19
publicly-traded small cap technology and business services companies. The
companies in the peer group were: APAC Customer Services, Inc., Computer
Programs and Systems, Inc., Double-Take Software, Inc., Edgewater Technology,
Inc., EastLink Services International Corporation, eLoyalty Corporation, ICT
Group, Inc., Intelligroup Inc., LionBridge Technologies, Inc., Monotype Imaging
Inc., Online Resources Corporation, Perficient, Inc., NaviSite, Inc., Streamline
Health Solutions, Inc., StarTek Inc., TechTeam Global, Inc., Transcend Services
Inc., United American Healthcare Inc. and Virtusa Corporation. On March 25,
2009 the Company and the CEO executed an employment agreement with an effective
date of February 1, 2009 as more fully described below in the Narrative
Disclosure to Summary Compensation Table.
12
Components
of the Executive Compensation Program
The
primary elements of the Company’s Executive Compensation Program
are:
|
|
·
|
Base
salary
|
|
|
·
|
Performance-based
cash incentives
|
|
|
·
|
Stock-based
incentives
|
|
|
·
|
Benefits
and perquisites
|
|
|
·
|
Severance
and change-of-control compensation
|
The
Committee does not use a pre-set formula to allocate a percentage of total
compensation to each compensation component, and the percentage of total
compensation allocated to each compensation component varies among the executive
officers. Instead, the Committee relies on the processes and factors described
in this discussion and analysis and takes into account the current and
historical compensation components, and amount of each component, for each
executive officer.
Base
Salary
The base
salaries of our executive officers are designed to attract and retain a high
performing and dedicated leadership team. The Committee reviews the performance
evaluations and salary recommendations provided to the Committee by the CEO for
each executive officer other than himself. Increases to the CEO’s base salary
are determined by the Committee without a recommendation by Company
management. Adjustments to base salaries are determined based on the
individual’s responsibility levels, performance, contribution and length of
service, after considering competitive market data and the Company’s financial
performance, as well as any requirements set forth in the executive officer’s
employment agreement for those executive officers with an employment agreement.
No executive officer received a base salary increase in calendar year
2009.
Performance-Based
Cash Incentives
Performance-based
cash incentives provide the Company with a means of rewarding performance based
upon the attainment of individual goals and corporate financial goals. The
Committee reviews Company financial performance and individual performance, as
well as recommendations provided to the Committee by the CEO for each executive
officer other than the CEO. Cash incentives may be paid pursuant to an incentive
compensation plan or as cash bonuses. Pursuant to the terms of Mr. Nalavadi’s
employment agreement with the Company, Mr. Nalavadi received a $30,000 cash
bonus for the year ended 2009. Based on the Company’s financial performance in
2009, including the achieved level of revenues, bookings, gross margins and
earnings before interest and taxes, in March 2010 the Committee awarded a cash
bonus of $55,444 to Mr. Mishra. At the request of Mr. Abuhoff no cash incentive
or bonus was awarded by the Committee to Mr. Abuhoff for calendar year
2009.
Stock-Based
Incentives
The
Company uses stock option grants as the primary vehicle for employee stock-based
incentives. The Company also uses restricted share grants as a form of
stock-based incentives. The Committee believes stock-based incentives align the
executive officers’ interests with those of stockholders in building shareholder
value, offer executive officers an incentive for the achievement of superior
performance over time, and foster the retention of key management personnel. The
number of stock options or restricted shares the Committee awards each executive
officer is based on his relative position, responsibilities and performance,
including anticipated future performance, potential and responsibilities, and
performance over the previous fiscal year, to the extent applicable. The
Committee also reviews and considers prior stock-based grants to each executive
officer. The size of stock-based grants is not directly related to the Company’s
performance. The Committee also uses data on stock-based grants granted by
companies that are comparable by industry and revenue. In March 2010
Mr. Nalavadi received a restricted share grant of 40,000 shares and a stock
option grant of 100,000 shares, which grants were made pursuant to the terms of
Mr. Nalavadi’s employment agreement with the Company, as well as an additional
stock option grant of 50,000 shares.
13
Benefits
and Perquisites
The
Company offers retirement, health, life, and disability benefits, as well as
medical and dependent care reimbursement plans to all full-time employees. These
plans do not discriminate in scope, terms or operation in favor of executive
officers. In addition, in calendar year 2009, the Company reimbursed Mr. Abuhoff
$13,658 for the cost of life and disability insurance premiums and related taxes
pursuant to his employment agreement, and paid $5,000 for legal expenses
incurred by Mr. Abuhoff in connection with the negotiation of his employment
agreement. The Company also provided Mr. Mishra, in connection with his foreign
assignment, benefits totaling $39,251 for an apartment rental, utilities,
medical insurance, related fringe benefit taxes, and spousal travel, and
provided Mr. Nalavadi, in connection with his relocation to New Jersey, benefits
totaling $4,024 for an apartment rental, lease of a Company car, utilities and
travel.
Severance
and Change-of-Control
The
Company uses severance and change-of-control agreements to attract and retain
qualified, talented and dedicated executives and to help it remain competitive
in the marketplace.
COMPENSATION
COMMITTEE REPORT
The Compensation Committee has reviewed
and discussed the Compensation Discussion and Analysis required by Item 402(b)
of Regulation S-K with management. Based on such review and discussion, the
Compensation Committee recommended to the Board of Directors that the
Compensation Discussion and Analysis be included in this Proxy
Statement.
The
Members of the Compensation Committee
Stewart
R. Massey, Chair
Louise C.
Forlenza
Todd H.
Solomon
14
SUMMARY
COMPENSATION TABLE
The
following table sets forth information regarding compensation paid or accrued to
Named Executive Officers.
|
Name and Position
|
Year
|
Salary ($)
|
Bonus ($)
|
Non-Equity
Incentive Plan
Compensation ($) (1)
|
All Other
Compensation ($)
|
Total ($)
|
|||||||||||||
| Jack S. Abuhoff | |||||||||||||||||||
|
Chairman,
President and Chief Executive Officer
|
2009
|
424,350 | - | - | 18,658 | (2) | 443,008 | ||||||||||||
|
2008
|
424,350 | - | 244,206 | 29,085 | 697,641 | ||||||||||||||
|
2007
|
369,000 | 477,707 | - | 24,085 | 870,792 | ||||||||||||||
| Steven L. Ford | |||||||||||||||||||
|
Executive
Vice President and Chief Financial Officer (3)
|
2009
|
155,250 | - | - | 23,885 | (4) | 179,135 | ||||||||||||
|
2008
|
310,500 | - | 72,464 | - | 382,964 | ||||||||||||||
|
2007
|
300,000 | 94,606 | - | - | 394,606 | ||||||||||||||
| Ashok Mishra | |||||||||||||||||||
|
Executive
Vice President and Chief Operating Officer
|
2009
|
220,000 | 55,444 | - | 39,251 | (5) | 314,695 | ||||||||||||
|
2008
|
220,000 | - | 84,404 | 41,268 | 345,672 | ||||||||||||||
|
2007
|
175,000 | 183,433 | (6) | - | 45,172 | 403,605 | |||||||||||||
| O’Neil Nalavadi | |||||||||||||||||||
|
Senior
Vice President and Chief Financial Officer (7)
|
2009
|
35,000 | 30,000 | - | 4,024 | (8) | 69,024 | (9) | |||||||||||
| Jurgen C. Tanpho | |||||||||||||||||||
|
Vice
President- HR, Facilities and Administration (10)
|
2009
|
147,000 |
18,162
|
- | - | 165,162 | |||||||||||||
|
(1)
|
The
amounts in this column reflect the cash payment made to the named
executive in respect of an incentive compensation plan covering the 2008
performance period and paid in March
2009.
|
|
(2)
|
Includes
the cost of employer-provided executive life and disability insurance in
the amount of $7,860, reimbursement for related federal and state income
taxes in the amount of $5,798, and the payment of $5,000 for legal
expenses incurred by the CEO in connection with the negotiation of his
employment agreement.
|
|
(3)
|
Mr.
Ford served as CFO through April 27,
2009.
|
|
(4)
|
Represents
payment of accrued but unused vacation upon termination of
employment.
|
|
(5)
|
Includes,
in connection with the Executive’s foreign assignment, $25,891 for
apartment rental, as well as utilities, medical insurance and spousal
travel, and $6,765 for related fringe benefit
taxes.
|
|
(6)
|
Includes
a $30,000 signing bonus.
|
|
(7)
|
Mr.
Nalavadi was appointed as CFO effective November 9,
2009.
|
15
|
(8)
|
Includes,
in connection with the Executive’s relocation to New Jersey, $4,024 for
apartment rental, lease of a Company car, utilities and
travel.
|
|
(9)
|
Excludes
the value of stock options and restricted stock granted to Mr. Nalavadi in
March 2010 pursuant to his employment agreement with the Company as
discussed in the section of the Compensation Discussion and Analysis
entitled “Stock-Based Incentives.”
|
|
(10)
|
Mr.
Tanpho is included in this table as he served as Interim CFO from April
27, 2009 through November 9, 2009.
|
Narrative
Disclosure to Summary Compensation Table
Employment
Agreements
On March
25, 2009 the Company and Mr. Jack S. Abuhoff, the President and Chief Executive
Officer of the Company, executed an employment Agreement with an effective date
of February 1, 2009 (the “Agreement”). The Agreement will continue until
terminated by the Company or Mr. Abuhoff.
The
Agreement provides for: annual base salary compensation of $424,350 subject to
cost of living adjustments and annual discretionary increases as determined by
the Company’s Board of Directors; additional cash incentive or bonus
compensation for each calendar year determined by the Compensation Committee of
the Board of Directors in its discretion and conditioned on the attainment of
certain quantitative objectives to be established by the Compensation Committee
with a target bonus of not less than 60% of Mr. Abuhoff’s base salary for the
year; and stock options and/or other equity-based and/or non-equity-based awards
and incentives as determined by the Compensation Committee in its sole and
absolute discretion. The Agreement also provides for indemnification, insurance
and other fringe benefits, and contains confidentiality, non-compete and
non-interference provisions.
In the
event Mr. Abuhoff is terminated by the Company other than for cause (as
defined), death or disability, or Mr. Abuhoff resigns his employment with the
Company for good reason (as defined), Mr. Abuhoff is entitled to receive an
amount equal to (i) 200% of his (A) base salary and (B) the greater of his most
recently declared bonus (as defined) or the average of his three most recently
declared bonuses to be paid in substantially equal payments over a period of 24
months; (ii) the continuation of his medical, dental, life, and disability
insurance until the earlier of the end of the maximum applicable COBRA coverage
period or for the 24 month period immediately following Mr. Abuhoff’s
termination (and if the COBRA period is shorter than the applicable 24 month
period, pay Mr. Abuhoff an amount equal to the monthly cost charged by the
Company for COBRA coverage during the period beginning upon the expiration of
the maximum COBRA coverage period and the end of the 24 month continuation
period); and (iii) the removal of any vesting, transfer, lock-up, performance or
other restrictions or requirements on his stock options and other equity-based
and non-equity-based awards and incentives. In the event Mr. Abuhoff is
terminated by the Company coincident with or following a change-of-control (as
defined), Mr. Abuhoff is entitled to receive an amount equal to (i) 300% of his
(A) base salary and (B) the greater of his most recently declared bonus (as
defined) or the average of his three most recently declared bonuses to be paid
in a lump sum payout within 30 days of the date of his termination; (ii) the
continuation of his medical, dental, life, and disability insurance until the
earlier of the end of the maximum applicable COBRA coverage period or for the 36
month period immediately following Mr. Abuhoff’s termination (and if the COBRA
period is shorter than the applicable 36 month period, pay Mr. Abuhoff an amount
equal to the monthly cost charged by the Company for COBRA coverage during the
period beginning upon the expiration of the maximum COBRA coverage period and
the end of the 36 month continuation period; and (iii) the removal of any
vesting, transfer, lock-up, performance or other restrictions or requirements on
his stock options and other equity and non-equity-based awards and
incentives.
In the
event Mr. Abuhoff is a “specified employee” as defined in Section 409A of the
Code at the time of his termination of employment, the payments referenced above
shall be delayed until the date that is six months and one day following his
termination of employment (or, if earlier, the earliest other date as is
permitted under Section 409A of the Code). The amount payable on such
date shall include all amounts that would have been payable to Mr. Abuhoff prior
to that date but for the application of Section 409A and the remaining payments
shall be made in substantially equal installments until fully
paid. Notwithstanding the foregoing, the six month delay shall not
apply to any such payments made (A) during the short term deferral period set
forth in Treasury Regulation Section 1.409A-1(b)(4), or (B) after
said short term deferral period, payable solely on account of an involuntary
separation from service (as defined in Section 409A of the Code) and in an
amount less than the Section 409A Severance Exemption Amount. The Agreement also
provides for potential tax gross-up payments in respect of taxes, penalties
and/or interest that may be incurred by Mr. Abuhoff under Section 409A of the
Code.
16
On May
18, 2007, the Company and Mr. Ashok Mishra, the Executive Vice President and
Chief Operating Officer of the Company, entered into a three year agreement with
an effective date of January 1, 2007 whereby the Company agreed to cause one or
more of its wholly-owned subsidiaries to offer employment to Mr. Mishra. Mr.
Mishra’s agreement automatically renews for one year periods unless the Company
either provides a notice of non-renewal by June 30 of the then current term or
the Company and Mr. Mishra execute a new agreement prior to the end of the then
current term. The agreement provides for annual base compensation of $175,000
per annum, subject to annual reviews for discretionary annual increases;
incentive compensation pursuant to an incentive compensation plan; and a signing
bonus of $30,000. The agreement also provides for insurance and other fringe
benefits, and contains confidentiality, non-compete and non-interference
provisions. In the event the Company terminates the agreement without cause, Mr.
Mishra is entitled to receive his then base salary for 12 months following the
date of termination.
On
October 11, 2009 the Company and Mr. O’Neil Nalavadi, the Senior Vice President
and Chief Financial Officer of the Company, entered into a three year employment
agreement (the “Agreement”) commencing on November 9, 2009. The Agreement
provides for Mr. Nalavadi’s continued employment by the Company post the
Agreement term, for a period of time which will in no event exceed six months,
if notice of non-renewal of the Agreement is not provided to Mr. Nalavadi on or
before May 8, 2012. The Agreement provides for annual base compensation of
$240,000, subject to annual discretionary increases as determined by the
Company’s Board of Directors; eligibility to receive a cash bonus for each
calendar year in an amount to be determined pursuant to a written bonus plan
which shall provide for a target bonus equal to 30% of Mr. Nalavadi’s base
salary for the year, and bonus compensation of not less than $30,000 for the
portion of the term of the Agreement ending on December 31, 2009; stock options
and/or other equity-based and/or non-equity- based awards and incentives as
determined by the Compensation Committee of the Company’s Board of Directors in
its sole and absolute discretion; and subject to the authority of the
Compensation Committee of the Company’s Board of Directors (i) an incentive
stock option grant of 100,000 shares of the Company’s common stock, vesting at
the rate of 25% of the shares per year following the date of award; and (ii) an
award of a number of shares of the Company’s common stock, equal in number to
the lesser of (A) the number of such shares having an aggregate fair market
value of $230,000, or (B) 40,000 of such shares, subject to transfer
restrictions and forfeitability provisions which will lapse at a rate of 25% per
year following the date of award. The Agreement also provides for
indemnification, insurance and other fringe benefits and contains
confidentiality, non-compete and non-interference provisions.
In the
event Mr. Nalavadi’s employment is terminated by the Company other than for
cause (as defined), death or disability, or Mr. Nalavadi resigns his employment
for good reason (as defined) Mr. Nalavadi will be entitled to (i) an amount
equal to his (A) Base Salary (as defined) and (B) any amount of Earned Bonus (as
defined), to be paid in substantially equal payments over a period of 12 months;
and (ii) the continuation of his and his dependents’ medical and dental
insurance until the earlier of the end of the maximum applicable COBRA coverage
period or for the 12 month period immediately following Mr. Nalavadi’s
termination (and if the COBRA period is shorter than the applicable 12 month
period, pay Mr. Nalavadi an amount equal to the monthly cost charged by the
Company for COBRA coverage during the period beginning upon the expiration of
the maximum COBRA coverage period and the end of the 12 month continuation
period); and (iii) have 25% of all Company stock options and all other Company
equity and non-equity based awards and incentives and related compensation
rights, or entitlements, but exclusive of any Bonus, to become vested (to the
extent that 25% have not yet vested), and to the extent applicable, exercisable,
regardless of the otherwise applicable vesting/exercise schedules in connection
therewith, and be relieved to such extent of otherwise applicable transfer
restrictions, lock-up or performance requirements and other restrictions and/or
contingencies of any kind. In the event Mr. Nalavadi is terminated by the
Company coincident with or within 12 months following the occurrence of a
change-of-control (as defined), Mr. Nalavadi is entitled to receive an amount
equal to (i) 200% of his (A) base salary and (B) Earned Bonus (as defined) to be
paid in substantially equal payments for the 24 month period immediately
following the date of termination; (ii) the continuation of his medical and
dental insurance until the earlier of the end of the maximum applicable COBRA
coverage period or for the 24 month period immediately following Mr. Nalavadi’s
termination (and if the COBRA period is shorter than the applicable 24 month
period, pay Mr. Nalavadi an amount equal to the monthly cost charged by the
Company for COBRA coverage during the period beginning upon the expiration of
the maximum COBRA coverage period and the end of the 24 month continuation
period; and (iii) the removal of any vesting, transfer, lock-up, performance
requirements or other restrictions or contingencies on his stock options and
other equity and non-equity-based compensation awards, rights or
entitlements.
17
In the
event Mr. Nalavadi is a “specified employee” as defined in Section 409A of the
Code at the time of his termination of employment, the payments referenced above
shall be delayed until the date that is six months and one day following his
termination of employment (or, if earlier, the earliest other date as is
permitted under Section 409A of the Code). The amount payable on such date shall
include all amounts that would have been payable to Mr. Nalavadi prior to that
date but for the application of Section 409A and the remaining payments shall be
made in substantially equal installments until fully
paid. Notwithstanding the foregoing, the six month delay shall not
apply to any such payments made (A) during the short term deferral period set
forth in Treasury Regulation Section 1.409A-1(b)(4), or (B) after said short
term deferral period, payable solely on account of an involuntary separation
from service (as defined in Section 409A of the Code) and in an amount less than
the Section 409A Severance Exemption Amount.
OUTSTANDING
EXECUTIVE EQUITY AWARDS AT FISCAL YEAR-END
The
following table summarizes the outstanding equity awards held by each Named
Executive Officer at
December
31, 2009.
|
Number of Securities Underlying
|
|||||||||||||
|
Unexercised Options (#)
|
Option
|
Option
|
|||||||||||
|
Name
|
Exercisable
|
Unexercisable
|
Exercise Price ($)
|
Expiration Date
|
|||||||||
|
Jack
S. Abuhoff
|
154,000 | - | 2.59 |
09/30/2011
|
|||||||||
| 44,000 | - | 2.59 |
05/31/2012
|
||||||||||
| 154,000 | - | 2.59 |
09/30/2012
|
||||||||||
| 44,000 | - | 2.59 |
05/31/2013
|
||||||||||
| 31,500 | - | 0.50 |
06/02/2013
|
||||||||||
| 126,000 | - | 0.50 |
07/01/2013
|
||||||||||
| 154,000 | - | 2.59 |
03/31/2014
|
||||||||||
| 180,000 | - | 0.67 |
06/08/2014
|
||||||||||
| 100,000 | - | 3.75 |
08/18/2014
|
||||||||||
| 80,000 | - | 3.46 |
12/30/2015
|
||||||||||
|
Total
|
1,067,500 | ||||||||||||
18
|
Number of Securities Underlying
|
|||||||||||||
|
Unexercised Options (#)
|
Option
|
Option
|
|||||||||||
|
Name
|
Exercisable
|
Unexercisable
|
Exercise Price ($)
|
Expiration Date
|
|||||||||
|
Ashok
Mishra
|
90,000 | - | 3.35 |
11/09/2013
|
|||||||||
| 50,000 | - | 3.46 |
12/30/2015
|
||||||||||
|
Total
|
140,000 | ||||||||||||
|
Jurgen
C. Tanpho
|
40,000 | - | 3.35 |
11/09/2013
|
|||||||||
| 15,000 | - | 3.46 |
12/30/2015
|
||||||||||
|
Total
|
55,000 | ||||||||||||
OPTION
EXERCISES AND STOCK VESTED
The
following table sets forth information regarding options exercised during fiscal
year 2009 for each of the Named
Executive
Officers.
|
Option Awards
|
||||||||
|
Name
|
Number of Shares Acquired on
Exercise (#)
|
Value Realized on Exercise ($)
|
||||||
|
Jack
S. Abuhoff
|
396,000 | 1,701,390 | ||||||
|
Ashok
Mishra
|
26,000 | 113,703 | ||||||
|
Steven
L. Ford
|
250,000 | 354,312 | ||||||
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE-OF-CONTROL
Estimated
Termination or Change-of-Control Benefits at Year-End 2009
The
following table summarizes the estimated value of payments to each of the Named
Executive Officers assuming
different
termination events occurred at December 31, 2009.
|
Name
|
Cash Compensation ($)
|
Welfare Benefits ($)
|
Aggregate Payments ($)
|
|||||||||
|
Jack
S. Abuhoff
|
||||||||||||
|
Termination
for cause
|
- | 48,963 | 48,963 | |||||||||
|
Termination
without cause (1)
|
1,519,655 | 115,990 | 1,635,645 | |||||||||
|
Change-of-Control
(2)
|
2,279,483 | 149,503 | 2,428,986 | |||||||||
|
Death
(3)
|
- | 48,963 | 48,963 | |||||||||
|
Disability
(3)
|
106,088 | 48,963 | 155,051 | |||||||||
19
|
Name
|
Cash Compensation ($)
|
Welfare Benefits ($)
|
Aggregate Payments ($)
|
|||||||||
|
Ashok
Mishra
|
||||||||||||
|
Termination
for cause
|
- | - | - | |||||||||
|
Termination
without cause (1)
|
220,000 | - | 220,000 | |||||||||
|
Change-of-Control
|
- | - | - | |||||||||
|
Death
|
- | - | - | |||||||||
|
Disability
|
55,000 | - | 55,000 | |||||||||
|
O’Neil
Nalavadi
|
||||||||||||
|
Termination
for cause
|
- | 1,202 | 1,202 | |||||||||
|
Termination
without cause (1)
|
270,000 | 19,329 | 289,329 | |||||||||
|
Change-of-Control
(4)
|
540,000 | 37,455 | 577,455 | |||||||||
|
Death
|
30,000 | 1,202 | 31,202 | |||||||||
|
Disability
|
90,000 | 1,202 | 91,202 | |||||||||
|
(1)
|
Includes
resignation by the executive with good reason (as described
below).
|
|
(2)
|
Assumes
the Company’s termination of the executive’s employment coincident with or
following a change-of-control (as described
below).
|
|
(3)
|
Does
not include any bonus payment, as at the request of Mr. Abuhoff no cash
incentive or bonus was awarded to Mr. Abuhoff for calendar year 2009. See
the section of the Compensation Discussion and Analysis entitled
“Performance-Based Cash
Incentives.”
|
|
(4)
|
Assumes
the Company’s termination of the executive’s employment coincident with or
within 12 months following the occurrence of a change-of-control (as
described below).
|
Payments
on Change-of-Control
Pursuant
to Messrs. Abuhoff and Nalavadi’s employment agreements, a change-of-control
shall be deemed to have occurred as of the earliest of any of the following
events:
|
|
·
|
The
closing of a transaction by the Company or any person (other than the
Company, any subsidiary of the Company or any employee benefit plan of the
Company or of any subsidiary of the Company) (a “Person”),
together with all “affiliates and “associates” (within the meanings of
such terms under Rule 12b-2 of the Securities Exchange Act of 1934, as
amended) (the “Exchange Act”)
of such Person, shall be the beneficial owner of thirty percent (30%) or
more of the Company’s then outstanding voting stock (“Beneficial
Ownership”);
|
|
|
·
|
A
change in the constituency of the Board such that, during any period of
thirty-six (36) consecutive months, at least a majority of the entire
Board shall not consist of Incumbent Directors. For purposes of
this Paragraph 5(c)(ii), “Incumbent
Directors” shall mean individuals who at the beginning of such
thirty-six (36) month period constitute the Board, unless the election or
nomination for election by the shareholders of the Company of each such
new director was approved by a vote of a majority of the Incumbent
Directors;
|
|
|
·
|
The
closing of a transaction involving the merger, consolidation, share
exchange or similar transaction between the Company and any other
corporation other than a transaction which results in the Company’s voting
stock immediately prior to the consummation of such transaction continuing
to represent (either by remaining outstanding or by being converted into
voting stock of the surviving entity) at least two-thirds (2/3rds) of the
combined voting power of the Company’s or such surviving entity’s
outstanding voting stock immediately after such
transaction;
|
|
|
·
|
The
closing of a transaction involving the sale or disposition by the Company
(in one transaction or a series of transactions) of all or substantially
all of the Company’s assets; or
|
|
|
·
|
A
plan of liquidation or dissolution of the Company goes into
effect.
|
20
Upon the
Company’s termination of Mr. Abuhoff’s employment coincident or following a
change-of-control, Mr. Abuhoff will receive:
|
|
·
|
300%
of his base salary to be paid in a lump sum payout within 30 days of the
date of his termination;
|
|
|
·
|
300%
of the greater of his most recently declared bonus (as defined) or the
average of the his three most recently declared bonuses to be paid in a
lump sum payout within 30 days of the date of his
termination;
|
|
|
·
|
Continuation
of his, and his dependents’, medical benefits, dental benefits, life
insurance and disability insurance until the earlier of the end of the
maximum applicable COBRA coverage period or for the 36 month period
immediately following Mr. Abuhoff’s termination (and if the COBRA period
is shorter than the applicable 36 month period, pay Mr. Abuhoff an amount
equal to the monthly cost charged by the Company for COBRA coverage during
the period beginning upon the expiration of the maximum COBRA coverage
period and the end of the 36 month continuation
period);
|
|
|
·
|
The
removal of any vesting, transfer, lock-up, performance or other
restrictions or requirements on his stock options and other equity-based
and non-equity-based awards and incentives;
and
|
|
|
·
|
Payment
of up to six weeks’ accrued but unused
vacation.
|
Upon the
occurrence of a change-of-control without a termination of Mr. Abuhoff’s
employment, Mr. Abuhoff will receive:
|
|
·
|
The
removal of any vesting, transfer, lock-up, performance or other
restrictions or requirements on his stock options and other equity-based
and non-equity-based awards and
incentives.
|
Upon the
Company’s termination of Mr. Nalavadi’s’s employment coincident with or within
12 months following the occurrence of a change-of-control, Mr. Nalavadi will
receive:
|
|
·
|
200%
of his base salary to be paid in substantially equal payments for the 24
month period immediately following the date of
termination;
|
|
|
·
|
200%
of any amount of Earned Bonus (as defined) to be paid in substantially
equal payments for the 24 month period immediately following the date of
termination;
|
|
|
·
|
Continuation
of his, and his dependents’, medical benefits and dental benefits until
the earlier of the end of the maximum applicable COBRA coverage period or
for the 24 month period immediately following Mr. Nalavadi’s termination
(and if the COBRA period is shorter than the applicable 24 month period,
pay Mr. Nalavadi an amount equal to the monthly cost charged by the
Company for COBRA coverage during the period beginning upon the expiration
of the maximum COBRA coverage period and the end of the 24 month
continuation period);
|
|
|
·
|
The
removal of any vesting, transfer, lock-up, performance requirements or
other restrictions or contingencies on his stock options and other
equity-based and non-equity-based compensation awards, rights or
entitlements; and
|
|
|
·
|
Payment
of up to six weeks’accrued but unused
vacation.
|
Upon the
occurrence of a change-of-control without a termination of Mr. Nalavadi’s
employment, Mr. Nalavadi will receive:
|
|
·
|
The
removal of any vesting, transfer, lock-up, performance requirements or
other restrictions or contingencies on his stock options and other
equity-based and non-equity-based compensation awards, rights or
entitlements.
|
21
Payments
on Termination (other than upon Change-of-Control)
Pursuant
to Mr. Abuhoff’s employment agreement, if Mr. Abuhoff’s employment is terminated
by the Company other than for cause, death or disability, or Mr. Abuhoff resigns
his employment for good reason (including the Company’s breach of its material
obligations under the Agreement, the Company, without Mr. Abuhoff’s prior
consent, relocating Mr. Abuhoff’s regular office location by more than 50 miles
from its present location, the Company assigning duties to Mr. Abuhoff which
represent a material diminution of his authorities, duties or responsibilities,
or requiring him to report to any person or entity other than the Board of
Directors, and the Company does not revoke or reasonably cure any such action
within 30 days of receipt of notice from Mr. Abuhoff and Mr. Abuhoff resigns his
employment within 30 days thereafter) Mr. Abuhoff will be entitled to (i) 200%
of his (A) base salary and (B) the greater of his most recently declared bonus
(as defined) or the average of the his three most recently declared bonuses to
be paid in substantially equal payments over a period of 24 months; (ii) the
continuation of his and his dependents’ medical, dental, life, and disability
insurance until the earlier of the end of the maximum applicable COBRA coverage
period or for the 24 month period immediately following Mr. Abuhoff’s
termination (and if the COBRA period is shorter than the applicable 24 month
period, pay Mr. Abuhoff an amount equal to the monthly cost charged by the
Company for COBRA coverage during the period beginning upon the expiration of
the maximum COBRA coverage period and the end of the 24 month continuation
period); (iii) payment of up to six weeks’ accrued but unused vacation and (iv)
the removal of any vesting, transfer, lock-up, performance or other restrictions
or requirements on his stock options and other equity-based and non-equity-based
awards and incentives. If Mr. Abuhoff’s employment is terminated for death, his
estate will receive payment of his base salary through the date of termination,
a pro-rated bonus based on his performance of his objectives through the date of
termination, and payment of up to six weeks’ accrued but unused vacation. If Mr.
Abuhoff’s employment is terminated for disability he will receive payment of his
base salary for a 90 day period following the date of termination, a pro-rated
bonus based on active duty with the Company and conditioned on attainment of
quantitative objectives, and payment of up to six weeks’ accrued but unused
vacation. If Mr. Abuhoff’s employment is terminated for cause, Mr. Abuhoff will
receive his base salary through the date of termination, and payment of up to
six weeks’ accrued but unused vacation. In return for the benefits described
above, Mr. Abuhoff is required to sign a separation agreement and general
release, and agreed, for a 12 month period following termination of his
employment, not to compete or interfere with the Company, and not to employ or
retain the services of an employee of the Company.
The
Agreement also provides for potential tax gross-up payments in respect of taxes,
penalties and/or interest that may be incurred by Mr. Abuhoff under Section 409A
of the Code.
In the
event Mr. Abuhoff is a “specified employee” as defined in Section 409A of the
Code at the time of his termination of employment, the payments referenced above
(for both change-of-control and other than upon change-of-control) shall be
delayed until the date that is six months and one day following his termination
of employment (or, if earlier, the earliest other date as is permitted under
Section 409A of the Code). The amount payable on such date shall include all
amounts that would have been payable to Mr. Abuhoff prior to that date but for
the application of Section 409A and the remaining payments shall be made in
substantially equal installments until fully paid. Notwithstanding
the foregoing, the six month delay shall not apply to any such payments made (A)
during the short term deferral period set forth in Treasury Regulation Section
1.409A-1(b)(4), or (B) after said short term deferral period, payable solely on
account of an involuntary separation from service (as defined in Section 409A of
the Code) and in an amount less than the Section 409A Severance Exemption
Amount. The Agreement also provides for potential tax gross-up payments in
respect of taxes, penalties and/or interest that may be incurred by Mr. Abuhoff
under Section 409A of the Code.
Pursuant
to Mr. Mishra’s agreement, if the agreement is terminated without cause or by
Mr. Mishra with good reason (including the Company’s material breach of its
obligations, reduction of base salary below the amount forth in the agreement
without Mr. Mishra’s consent, and assignment of duties to Mr. Mishra
inconsistent with his position, and the Company does not reasonably cure such
event after receipt of written notice from Mr. Mishra that he intends to resign
his employment), he will be entitled to his base salary for 12 months following
the date of his termination or resignation with good reason, any earned but
unpaid incentive compensation, and payment for up to six weeks’ accrued but
unused vacation. If the agreement is terminated due to Mr. Mishra’s death, his
estate will receive payment of his base salary through the date of termination,
any earned but unpaid incentive compensation, and payment for up to six weeks’
accrued but unused vacation. If the agreement is terminated due to Mr. Mishra’s
disability he will receive payment of his base salary for a 90 day period
following the date of termination, any earned but unpaid incentive compensation,
and payment for up to six weeks’ accrued but unused vacation. If this
agreement is terminated for cause, Mr. Mishra will receive his base salary
through the date of termination, and payment for up to six weeks’ accrued but
unused vacation. In return for the benefits described above, Mr. Mishra is
required to sign a separation agreement and general release, and agreed not to
compete with the Company for a 12 month period following termination of his
employment, and not to solicit the customers of the Company or to solicit or
employ the services of an employee of the Company for a 24 month period
following termination of employment.
22
Pursuant
to Mr. Nalavadi’s employment agreement, if Mr. Nalavadi’s employment is
terminated by the Company other than for cause, death or disability, or Mr.
Nalavadi resigns his employment for good reason (including the Company’s breach
of its material obligations under the Agreement, the Company assigning duties to
Mr. Nalavadi which represent a material diminution of his authorities, duties or
responsibilities, or requiring him to report to any person or entity other than
the CEO, or the Company no longer permitting Mr. Nalavadi to work from El Dorado
Hills, CA approximately one week per calendar month, and the Company does not
reasonably cure any such action or event within 30 days of the date of notice
from Mr. Nalavadi and Mr. Nalavadi resigns his employment within 30 days
thereafter) Mr. Nalavadi will be entitled to (i) an amount equal to his (A) Base
Salary (as defined) and (B) any amount of Earned Bonus (as defined), to be paid
in substantially equal payments over a period of 12 months; and (ii) the
continuation of his and his dependents’ medical and dental insurance until the
earlier of the end of the maximum applicable COBRA coverage period or for the 12
month period immediately following Mr. Nalavadi’s termination (and if the COBRA
period is shorter than the applicable 12 month period, pay Mr. Nalavadi an
amount equal to the monthly cost charged by the Company for COBRA coverage
during the period beginning upon the expiration of the maximum COBRA coverage
period and the end of the 12 month continuation period); (iii) payment of up to
six weeks’ accrued but unused vacation and (iv) have 25% of all Company stock
options and all other Company equity-based and non-equity based awards and
incentives and related compensation rights, or entitlements, but exclusive of
any Bonus, to become vested (to the extent that 25% have not yet vested), and to
the extent applicable, exercisable, regardless of the otherwise applicable
vesting/exercise schedules in connection therewith, and be relieved to such
extent of otherwise applicable transfer restrictions, lock-up or performance
requirements and other restrictions and/or contingencies of any kind.
If Mr. Nalavadi’s employment is terminated for death, his estate will receive
payment of his base salary, any Earned Bonus (as defined), and reimbursement of
all his incurred but unreimbursed reasonable business expenses, in each case
through the date of termination, and payment of up to six weeks’ accrued but
unused vacation. If Mr. Nalavadi’s employment is terminated for disability he
will receive payment of his base salary for a 90 day period following the date
of termination, a pro-rated bonus based on active duty with the Company and
conditioned on attainment of quantitative objectives, reimbursement of all his
incurred but unreimbursed reasonable business expenses and payment of up to six
weeks’ accrued but unused vacation. If Mr. Nalavadi’s employment is terminated
for cause, Mr. Nalavadi will receive his base salary through the date of
termination, reimbursement of all his incurred but unreimbursed reasonable
business expenses and payment of up to six weeks’ accrued but unused vacation.
In return for the benefits described above, Mr. Nalavadi is required to sign a
separation agreement and general release, and agreed, for a 12 month period
following termination of his employment, not to compete or interfere with the
Company, and not to employ or retain the services of an employee of the
Company.
In the
event Mr. Nalavadi is a “specified employee” as defined in Section 409A of the
Code at the time of his termination of employment, the payments referenced above
(for both change-of-control and other than upon change-of-control) shall be
delayed until the date that is six months and one day following his termination
of employment (or, if earlier, the earliest other date as is permitted under
Section 409A of the Code). The amount payable on such date shall include all
amounts that would have been payable to Mr. Nalavadi prior to that date but for
the application of Section 409A and the remaining payments shall be made in
substantially equal installments until fully paid. Notwithstanding
the foregoing, the six month delay shall not apply to any such payments made (A)
during the short term deferral period set forth in Treasury Regulation Section
1.409A-1(b)(4), or (B) after said short term deferral period, payable solely on
account of an involuntary separation from service (as defined in Section 409A of
the Code) and in an amount less than the Section 409A Severance Exemption
Amount.
QUALIFICATION
BY REFERENCE
The matters
described in the sections titled "Narrative Disclosure to Summary Compensation
Table" and "Potential Payments Upon Termination or Change-of-Control" are
qualified in their entirety by reference to agreements previously
filed by the Company in reports with the Securities and Exchange
Commission.
23
DIRECTOR
COMPENSATION
Summary
Director Compensation Table
The
following table sets forth information regarding compensation paid or accrued to
directors in fiscal year ended
December
31, 2009 for service as a Director.
|
Name
|
Fees Earned or
Paid in Cash ($)
|
Option Awards ($)
|
All Other
Compensation ($)
|
Total ($)
|
||||||||||||
|
Haig
S. Bagerdjian
|
30,000 | (1) | - | 30,000 | ||||||||||||
|
Louise
C. Forlenza
|
40,000 | (1) | - | 40,000 | ||||||||||||
|
John
R. Marozsan (2)
|
18,000 | - | 18,000 | (3) | 36,000 | |||||||||||
|
Stewart
R. Massey
|
28,500 | - | - | 28,500 | ||||||||||||
|
Todd
H. Solomon
|
30,000 | - | - | 30,000 | ||||||||||||
|
Anthea
C. Stratigos
|
25,000 | - | - | 25,000 | ||||||||||||
|
Peter
H. Woodward (2)
|
15,000 | - | - | 15,000 | ||||||||||||
| 186,500 | - | 18,000 | 204,500 | |||||||||||||
|
(1)
|
As
of December 31, 2009 Mr. Bagerdjian and Ms. Forlenza held options to
acquire 83,000 shares of common stock. The options were granted in prior
periods and are fully vested.
|
|
(2)
|
Served
as a
director through June 12, 2009.
|
|
(3)
|
Represents
payment for consulting services after the conclusion of Mr. Marozsan’s
service as a director.
|
Narrative
Disclosure to Director Compensation Table
Each
non-employee director is compensated at the rate of $2,500 per month, plus
out-of-pocket expenses for each Board of Directors meeting they attend. The
Chair of the Audit Committee receives an additional $833.34 per month, and the
Chair of the Compensation Committee and Lead Independent Director receive an
additional $500 per month. The directors do not receive any compensation for
serving as a member of a Committee of the Board of Directors.
TRANSACTIONS
WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL PERSONS
The Company maintains a written policy
and procedures for the review, approval, or ratification of any related party
transactions that the Company is required to report under this section of the
Proxy Statement. A related party, for purposes of the Company’s policy,
means any (1) person who is or was (since the beginning of the last
fiscal year for which the Company has filed a Form 10-K and Proxy statement,
even if they do not presently serve in that role) an executive officer, director
or nominee for election as a director; (2) greater than five percent beneficial
owner of the Company’s common stock; or (3) immediate family member of any of
the foregoing. Immediate family member includes a person’s spouse, parents,
stepparents, children, stepchildren, siblings, mothers- and fathers-in-law,
sons- and daughters-in-law, and brothers- and sisters-in-law and anyone residing
in such person’s home (other than a tenant or employee).
Under the related party transaction
policy, any transaction, arrangement or relationship or series of transactions,
arrangements or relationships in which the aggregate amount involved will or may
be expected to exceed $120,000 in any calendar year between the Company and a
related party must be approved by the Audit Committee, unless the transaction,
arrangement or relationship is pre-approved under the policy.
As set forth in the policy, in the
course of its review, approval or ratification of a related party transaction
the Audit Committee considers, among other factors it deems appropriate, whether
the transaction is on terms no less favorable to the Company than terms
generally available to an unaffiliated third party under the same or similar
circumstances and the extent of the related party’s interest in the
transaction.
24
No director shall participate in any
discussion or approval of a related party transaction for which he or she is a
related party, except that the director shall provide all material information
concerning the transaction to the Audit Committee and, if a member of the Audit
Committee, may be counted in determining the presence of a quorum at any meeting
at which the transaction is discussed and/or approved.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of
March 31, 2010, certain information regarding the beneficial ownership (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934) of the
Company's Common Stock based upon the most recent information available to the
Company for (i) each person known by the Company to own beneficially more than
five (5%) percent of the Company's outstanding Common Stock, (ii) each director
and nominee for director of the Company, (iii) each of the Company’s Named
Executive Officers, and (iv) all Executive Officers and directors of the Company
as a group. Unless otherwise indicated, each stockholder's address is
c/o the Company, Three University Plaza, Hackensack, New Jersey
07601.
|
Name and Address of
Beneficial Owner
|
Amount and Nature
of Beneficial
Ownership (1)
|
Percent of Class
|
||||||
|
Directors:
|
||||||||
|
Jack
S. Abuhoff (2)
|
1,747,639 | 6.6 | % | |||||
|
Haig
S. Bagerdjian (3)
|
101,690 | * | ||||||
|
Louise
C. Forlenza (3)
|
99,000 | * | ||||||
|
Stewart
R. Massey
|
- | - | ||||||
|
Todd
H. Solomon
|
1,761,947 | 6.9 | % | |||||
|
Anthea
C. Stratigos
|
- | - | ||||||
|
Named
Executive Officers:
|
||||||||
|
Ashok
Mishra (4)
|
140,000 | * | ||||||
|
O’Neil
Nalavadi
|
40,000 | * | ||||||
|
Jurgen
C. Tanpho (5)
|
55,000 | * | ||||||
|
Steven
L. Ford
|
- | - | ||||||
|
All
Executive Officers and Directors
|
||||||||
|
as
a Group (8 persons) (6)
|
3,890,276 | 14.5 | % | |||||
|
Known
Beneficial Holders of More Than 5%
|
||||||||
|
FMR
LLC (7)
|
1,600,760 | 6.3 | % | |||||
* Less
than 1%.
|
(1)
|
Unless
otherwise indicated, (i) each person has sole investment and voting power
with respect to the shares indicated; and (ii) the shares indicated are
currently outstanding shares. For purposes of this table, a
person or group of persons is deemed to have "beneficial ownership" of any
shares as of a given date which such person has the right to acquire
within 60 days after such date. For purposes of computing the
percentage of outstanding shares held by each person or group of persons
named above on a given date, any security which such person or persons has
the right to acquire within 60 days after such date is deemed to be
outstanding for the purpose of computing the percentage ownership of such
person or persons, but is not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person. Subject
to the foregoing, the percentages are calculated based on 25,419,246
shares outstanding.
|
25
|
(2)
|
Includes
currently exercisable options to purchase 1,067,500 shares of Common
Stock.
|
| (3) | Includes currently exercisable options to purchase 83,000 shares of Common Stock. |
| (4) | Includes currently exercisable options to purchase 140,000 shares of Common Stock |
| (5) | Includes currently exercisable options to purchase 55,000 shares of Common Stock. |
| (6) | Includes currently exercisable options to purchase 1,373,500 shares of Common Stock. |
| (7) |
Based
on Form SC 13G dated February 12, 2010, Pyramis Global Advisors, LLC
("PGALLC"), 900 Salem Street, Smithfield, Rhode Island, 02917, an indirect
wholly-owned subsidiary of FMR LLC and an investment adviser registered
under Section 203 of the Investment Advisers Act of 1940, is the
beneficial owner of 50,000 shares or 0.197% of the outstanding Common
Stock of INNODATA ISOGEN INC as a result of its serving as investment
adviser to institutional accounts, non-U.S. mutual funds, or investment
companies registered under Section 8 of the Investment Company Act of 1940
owning such shares. Edward C. Johnson 3d and FMR LLC, through its control
of PGALLC, each has sole dispositive power over 50,000 shares and sole
power to vote or to direct the voting of 50,000 shares of Common Stock
owned by the institutional accounts or funds advised by PGALLC as reported
above. Pyramis Global Advisors Trust Company ("PGATC"), 900 Salem Street,
Smithfield, Rhode Island, 02917, an indirect wholly-owned subsidiary of
FMR LLC and a bank as defined in Section 3(a)(6) of the Securities
Exchange Act of 1934, is the beneficial owner of 1,550,760 shares or
6.111% of the outstanding Common Stock of the INNODATA ISOGEN INC as a
result of its serving as investment manager of institutional accounts
owning such shares. Edward C. Johnson 3d and FMR LLC, through its control
of Pyramis Global Advisors Trust Company, each has sole dispositive power
over 1,550,760 shares and sole power to vote or to direct the voting of
1,388,600 shares of Common Stock owned by the institutional accounts
managed by PGATC as reported above. Members of the family of Edward C.
Johnson 3d, Chairman of FMR LLC, are the predominant owners, directly or
through trusts, of Series B voting common shares of FMR LLC, representing
49% of the voting power of FMR LLC. The Johnson family group
and all other Series B shareholders have entered into a shareholders'
voting agreement under which all Series B voting common shares will be
voted in accordance with the majority vote of Series B voting common
shares. Accordingly, through their ownership of voting common
shares and the execution of the shareholders' voting agreement, members of
the Johnson family may be deemed, under the Investment Company Act of
1940, to form a controlling group with respect to FMR
LLC.
|
Compliance
with Section 16(a) of the Exchange Act
Section 16(a) of the Securities
Exchange Act of 1934 requires the Company’s directors, certain of its officers,
and any person owning more than ten (10%) percent of the Company’s securities to
file reports of ownership and changes of ownership with the Securities and
Exchange Commission. The Company has procedures in place to assist its directors
and officers in preparing and filing these reports on a timely
basis. Based solely on a review of the forms filed, upon our records,
and upon representations furnished by the Company’s officers and directors that
no Form 5s were required, the Company believes that during the period from
January 1, 2009 through December 31, 2009 all officers and directors complied
with Section 16(a) filing requirements.
PROPOSAL
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Subject to approval by the
stockholders, the Board of Directors has appointed J.H. Cohn LLP as the
independent auditors to audit the financial statements of the Company for the
fiscal year ending December 31, 2010. J.H. Cohn LLP has served as the Company's
auditors since September 2008. A representative of J.H. Cohn LLP is
expected to be present at the Meeting and will have the opportunity to make a
statement if he desires to do so. A representative of J.H. Cohn LLP is also
expected to be available to respond to appropriate questions at the
meeting.
In the event that the stockholders fail
to ratify this appointment, other independent auditors will be considered upon
recommendation of the Audit Committee. Even if this appointment is ratified, our
Board of Directors, in its discretion, may direct the appointment of a new
independent accounting firm at any time during the year, if the Board believes
that such a change would be in the best interest of the Company and its
stockholders.
26
THE BOARD OF DIRECTORS
RECOMMENDS THAT YOU VOTE FOR RATIFICATION OF THE
APPOINTMENT OF J.H. COHN LLP
AS INDEPENDENT AUDITORS
VOTE
REQUIRED
Election of
Directors. Directors will be elected at the meeting by a
plurality of the votes cast (i.e., the six nominees receiving the greatest
number of votes will be elected as directors).
Ratification of the Appointment of
Independent Auditors. The appointment of J.H. Cohn LLP as
independent auditors requires the affirmative vote of a majority of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the matter.
EXPENSE
OF SOLICITATION
The cost of soliciting Proxies, which
also includes the preparation, printing and mailing of the Proxy Statement, will
be borne by the Company. Solicitation will be made by the Company primarily
through the mail, but regular employees of the Company may solicit Proxies
personally, by telephone, facsimile or electronic communication. The Company
will request brokers and nominees to obtain voting instructions of beneficial
owners of the stock registered in their names and will reimburse them for any
expenses incurred in connection therewith.
HOUSEHOLDING
We have
adopted a procedure approved by the SEC called “householding.” Under this
procedure, multiple shareowners who share the same last name and address and do
not participate in electronic delivery will receive only one copy of the annual
Proxy materials or notice regarding the internet availability of Proxy
materials. If the household received a printed set of Proxy materials by mail,
each shareowner will receive his or her own Proxy card by mail. We have
undertaken householding to reduce our printing costs and postage
fees.
If you
wish to opt out of householding and continue to receive multiple copies of the
Proxy materials or notice regarding the internet availability of Proxy materials
at the same address, you may do so at any time prior to thirty days before the
mailing of Proxy materials or notice regarding the internet availability of
Proxy materials, which typically are mailed in May of each year, by notifying us
in writing or by telephone at: Innodata Isogen, Inc. Investor Relations, 3
University Plaza, Hackensack, New Jersey 07601, (201) 371-8000. You also
may request additional copies of the Proxy materials or notice regarding the
internet availability of Proxy materials by notifying us in writing or by
telephone at the same address or telephone number.
STOCKHOLDER
PROPOSALS FOR THE 2011 ANNUAL MEETING
Notice
Required to Include Proposals in Our Proxy Statement
We will review for inclusion in next
year's proxy statement shareholder proposals received by December 31, 2010. All
proposals must meet the requirements set forth in the rules and regulations of
the SEC in order to be eligible for inclusion in the proxy
statement. Proposals should be sent to Innodata Isogen, Inc., Three
University Plaza, Hackensack, New Jersey 07601, Attention: Corporate
Secretary.
Notice
Required to Bring Business Before an Annual Meeting
Our by-laws establish an advance notice
procedure for stockholders to make nominations of candidates for election of
director or to bring other business before an annual meeting. Under
these procedures, a stockholder who proposes to nominate a candidate for
director or propose other business at the 2011 annual meeting of stockholders,
must give us written notice of such nomination or proposal not less than 60 days
and not more than 90 days prior to the scheduled date of the meeting (or, if
less than 70 days' notice or prior public disclosure of the date of the meeting
is given, then not later than the 15th day following the earlier of (i) the date
such notice was mailed; or (ii) the day such public disclosure was
made). Such notice must provide certain information as specified in
our by-laws and must be received at our principal executive offices by the
deadline specified above.
27
ANNUAL
REPORT ON FORM 10-K
A copy of the Company’s Annual Report
on Form 10-K for the fiscal year ended December 31, 2009, as filed with the SEC,
excluding exhibits, is being mailed to you concurrently herewith. The exhibits to the Annual Report on
Form 10-K are available upon payment of charges that approximate our cost of
reproduction by written request addressed to Investor Relations, Innodata
Isogen, Inc., 3 University Plaza, Hackensack, New Jersey
07601.
OTHER
MATTERS
The Company knows of no items of
business that are expected to be presented for consideration at the Meeting
which are not enumerated herein. However, if other matters properly come before
the Meeting, it is intended that the person named in the accompanying Proxy will
vote thereon in accordance with his best judgment.
PLEASE DATE, SIGN AND RETURN THE PROXY
CARD AT YOUR EARLIEST CONVENIENCE IN THE ENCLOSED RETURN ENVELOPE. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES. A PROMPT RETURN OF YOUR PROXY CARD WILL
BE APPRECIATED AS IT WILL SAVE THE EXPENSE OF FURTHER MAILINGS.
|
Hackensack,
New Jersey
|
By
Order of the Board of Directors
|
|
April
26, 2010
|
|
|
Amy
R. Agress
|
|
|
Vice
President, General Counsel and
Secretary
|
28
TABLE OF CONTENTS