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 o
Check
the
appropriate box:
o
Preliminary
Proxy Statement
o
Confidential,
for Use of the
Commission Only (as permitted by Rule 14a-6(e)(2))
x
Definitive
Proxy Statement
o
Definitive
Additional
Materials
o
Soliciting
Material Pursuant to
§240.14a-12
Innodata
Isogen, Inc.
(Name
of
Registrant as Specified In Its Charter)
(Name
of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
x
No
fee required.
o
Fee
computed on table below per Exchange
Act Rules 14a-6(i)(1) and 0-11.
1)
Title
of each class of securities to which transaction applies:
______________________________________________________________________________________
2)
Aggregate number of securities to which transaction applies:
______________________________________________________________________________________
3)
Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
______________________________________________________________________________________
4) Proposed
maximum aggregate value of transaction:
______________________________________________________________________________________
5) Total
fee
paid:
______________________________________________________________________________________
| o |
Fee
paid previously with preliminary
materials.
|
______________________________________________________________________________________
| o |
Check
box if any part of the fee is offset as provided by Exchange Act
Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid
previously. Identify the previous filing by registration statement
number,
or the Form or Schedule and the date of its
filing.
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| 1) |
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Previously Paid:
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| 2) |
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Schedule or Registration Statement
No.:
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Party
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| 4) |
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Filed:
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Three
University Plaza
Hackensack,
New Jersey 07601
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD JUNE 5, 2008
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 5, 2008, for the following purposes:
|
(1)
|
To
elect five Directors of the Company to hold office until the next
Annual
Meeting of Stockholders and until their successors have been duly
elected
and qualified;
|
|
(2)
|
To
ratify the selection and appointment by the Company's Board of
Directors
of Grant Thornton LLP, independent auditors, as auditors for the
Company
for the year ending December 31, 2008;
and
|
|
(3)
|
To
consider and transact such other business as may properly come
before the
meeting or any adjournments
thereof.
|
A
Proxy
Statement, form of Proxy, and the Annual Report to Stockholders of the Company
for the year ended December 31, 2007 are enclosed herewith. Only holders
of
record of Common Stock of the Company at the close of business on April 9,
2008
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.
| By Order of the Board of Directors | ||
|
Amy
R. Agress
Vice
President, General Counsel and
Secretary
|
||
Hackensack,
New Jersey
April
22,
2008
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. Attendance at the Meeting is limited to stockholders, their proxies
and
invited guests of the Company.
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 5, 2008 (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 8,
2008
to all stockholders of record on April 9, 2008 (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.
The
Company has no contract or arrangement with any party in connection with
the
solicitation of Proxies. 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.
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 five nominees for director named herein, and for
the
selection of Grant Thornton LLP as independent auditors. The current members
of
the Board of Directors presently hold voting authority for Common Stock
representing an aggregate of 785,878 votes, or approximately 3.18% of the
total
number of votes eligible to be cast at the Annual 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 24,725,791 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.
1
ITEM
I. 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, John R. Marozsan, and Peter H. Woodward 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 7, 2007.
The
Company has no reason to believe that any of the nominees will become
unavailable to serve as director for any reason before the Annual 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 choice when voting at the Annual Meeting.
|
Name
|
Age
|
Position
|
||
|
Jack
S. Abuhoff
|
47
|
Chairman
of the Board of Directors, Chief Executive Officer and
President
|
||
|
Haig
S. Bagerdjian
|
51
|
Director
|
||
|
Louise
C. Forlenza
|
58
|
Director
|
||
|
John
R. Marozsan
|
66
|
Director
|
||
|
Peter
H. Woodward
|
35
|
Director
|
Jack
S. Abuhoff
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 also serves on the board of directors of the Software Information
Industry Association, and 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).
Haig
S. Bagerdjian
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.
2
Louise
C. Forlenza
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).
John
R. Marozsan
has
served as one of the Company’s directors since June 2001. In 1999, Mr. Marozsan
retired as President, Chief Executive Officer and as a member of the Executive
Committee of CCH Incorporated, a leading provider of tax and business law
information. He was a member of the board of directors of Wolters Kluwer
U.S.,
of which CCH is a wholly-owned subsidiary, until June 1999. From 1986 until
joining CCH in 1996, Mr. Marozsan was President and Chief Executive Officer
of
Aspen Publishers, Inc., also a Wolters Kluwer U.S. company. Before that, he
spent 10 years in a number of management positions at Aspen Publishers, Inc.,
including Editor-in-Chief and Publisher. Mr. Marozsan received a B.S. degree
in
physics from Trenton State College (1967), and an M.A. degree from Harvard
University (1970).
Peter
H. Woodward has
served as one of the Company’s directors since December 2006. Mr. Woodward is
General Partner and Founder of MHW Capital Management, LLC, a hedge fund
firm, a
position he has held since 2005. From
1995
until founding MHW Capital Management in 2005, Mr. Woodward was Managing
Director and Analyst for Regan Fund Management, LLC, a hedge fund
firm. Mr.
Woodward also served as a director of Zomax Corporation (Nasdaq: ZOMX) from
July
through December 2006. Mr. Woodward is a Chartered Financial Analyst and
received a B.A. degree in Economics from Colgate University (1995), and a
Masters of International Affairs from Columbia University (2002).
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.
3
Director
Independence
The
Board
of Directors has determined that Haig
S.
Bagerdjian, Louise C. Forlenza, John R. Marozsan, and Peter H. Woodward 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. The Company defines
independence as meeting the requirements to be considered as an independent
director as set forth in the Nasdaq National Market’s Marketplace Rule 4200. 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.
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, 2007. Each director attended at least (i) 75% of all of
the
meetings of the Board of Directors held during the period; and (ii) 75% of
the
meetings of all committees on which he or she served, except for Mr. Bagerdjian.
The Company does not have a policy requiring incumbent directors and director
nominees to attend the Company’s annual meeting of stockholders. All 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
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. Marozsan and Bagerdjian. The
Board
of Directors has determined that it has an audit committee financial expert
serving on the audit committee, Ms. Forlenza. Ms. Forlenza is an independent
director as defined in Nasdaq National Market’s Marketplace Rule 4200. 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 review the effectiveness of the Company's internal accounting
methods and procedures, to consider whether the Company's principal accountant’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
2007. The Company defines independence as meeting the standards to be considered
as an independent director as set forth in the Nasdaq National Market’s
Marketplace Rule 4200, and the Board of Directors has determined that all
the
members of the Audit Committee are "independent" as defined in the Nasdaq
National Market’s Marketplace Rule 4350(d)(2)(A)(i) and (ii).
4
The
Company has a standing Compensation
Committee
comprised of Messrs. Marozsan and Woodward 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 five times during
fiscal 2007. The Company defines independence as meeting the standards to
be
considered as an independent director as set forth in the Nasdaq National
Market’s Marketplace Rule 4200, and the Board of Directors has determined that
all the members of the Compensation Committee are "independent" as defined
in
the Nasdaq National Market’s Marketplace Rule 4200.
Compensation
Committee Interlocks and Insider Participation
The
Compensation Committee is currently comprised of Messrs. Marozsan and Woodward
and Ms. Forlenza, none of whom are or were officers or employees of the Company.
Prior to February 2007 the Compensation Committee was comprised of Messrs.
Bagerdjian and Marozsan and Ms. Forlenza, none of whom are or were officers
or
employees of the Company.
The
Company does not have a standing Nominating
Committee or
a
Nominating Committee charter. Due to the size of the Company and the resulting
efficiency of a Board of Directors that is also limited in size, as well
as the
minimal turnover in the Company’s Board of Directors, the Board of Directors has
determined that it is not necessary or appropriate at this time to establish
a
separate Nominating Committee. Potential candidates for director are reviewed
by
the entire Board of Directors, and director nominees are selected by Board
of
Director resolutions subject to the approval of a majority of the independent
directors. All of the nominees recommended for election to the Board of
Directors at the Annual Meetings are directors standing for re-election.
Although the Board of Directors has not established any minimum qualifications
for director candidates, when considering potential director candidates,
the
Board of Directors 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. In 2007 the Company did not pay
any
fees to any third party to assist in identifying or evaluating potential
nominees.
5
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 2009 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.
Stockholders
Communications with the Board of Directors
Generally,
stockholders who have questions or concerns regarding the Company should
contact
our Investor Relations department at 201-371-2828. 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
accountants 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
accountants.
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
2007.
6
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 audit(s)
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 a report thereon.
In
performing its duties, the Audit Committee has reviewed and discussed the
audited financial statements with management and the Company's independent
auditors. The Audit Committee has also discussed with the Company’s independent
auditors, the matters required to be discussed by Statement of Auditing
Standards (“SAS”) No. 61, “Communications with Audit Committee”. SAS No. 61
requires the independent auditors to provide the Audit Committee with additional
information regarding the scope and results of their audit of the Company’s
financial statements and internal control over financial reporting, including
with respect to (i) their responsibility under auditing standards of the
Public
Company Oversight Board (United States), (ii) significant accounting policies,
(iii) management judgments and estimates, (iv) any significant audit
adjustments, (v) any disagreements with management, and (vi) any difficulties
encountered in performing the audit. In
addition, the Audit Committee received written disclosures and the letter
from
the independent auditors required by Independence Standards Board Statement
No.
1, "Independence Discussions with Audit Committees". The independent auditors
have discussed its independence with the Audit Committee, and have confirmed
to
the Audit Committee that, in its professional judgment, it is independent
of the
Company within the meaning of the federal securities laws.
On
the
basis of the foregoing reviews and discussions, the Audit Committee recommended
to the Board of Directors that the audited financial statements be included
in
the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 2007, for filing with the Securities and Exchange Commission. The Audit
Committee has also recommended, subject to shareholder approval, the selection
of the Company's independent auditors.
The
Members of the Audit Committee
Louise
C.
Forlenza - Chair
Haig
S.
Bagerdjian
John
R.
Marozsan
7
Fiscal
2007 and 2006 Accounting Firm Fee Summary
Set
forth
below is certain information concerning fees billed to the Company by 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, 2007 and December 31, 2006; the
reviews of the financial statements included in reports on Form 10-Q for
periods
within 2007 and 2006; related regulatory filings for periods within 2007
and
2006; and other services. The Audit Committee has determined that the provision
of all services is compatible with maintaining the independence of Grant
Thornton LLP.
|
2007
|
2006
|
||||||
|
Audit
Fees
|
|
$588,000
|
|
$265,000
|
|||
|
Audit-related
Fees
|
25,000
|
-0-
|
|||||
|
Tax
Fees
|
-0-
|
-0-
|
|||||
|
All
Other Fees
|
-0-
|
-0-
|
|||||
Audit
fees consist of fees for the audit of the Company’s financial
statements and management’s report on internal controls 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
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.
EXECUTIVE
OFFICERS
Set
forth
below is information concerning the Executive Officers who are not directors.
|
Name
|
Age
|
Position
|
||
|
Steven
L. Ford
|
56
|
Executive
Vice President and Chief Financial Officer
|
||
|
Ashok
Mishra
|
53
|
Executive
Vice President and Chief Operating
Officer
|
8
Steven
L. Ford has
been
the Company’s Executive Vice President and Chief Financial Officer since
December 2005. Before that he served as Chief
Financial and Operating Officer of Medley Global Advisors LLC from December
2004
to September 2005. From June 2002 until November 2004, Mr. Ford served as
Chief
Financial Officer and Executive Vice President of Kroll Inc. Previously,
Mr.
Ford served as Executive Vice President and Chief Financial Officer of Telscape
International, Inc., a telecommunications company in Atlanta. From 1994 to
2000,
he was Vice President, International Chief Financial Officer, and Controller
for
Equifax, Inc., serving in London from 1998 to 2000 as European Finance Director.
Earlier, he held a variety of finance, treasurer and controller positions
at
publicly-held middle market companies in the manufacturing, computer and
software industries. Mr. Ford is also a Certified Public Accountant (inactive)
and a member of the American Institute of Certified Public Accountants. Mr.
Ford
began his career in 1974 at Arthur Young (now Ernst & Young).
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 Banglore (1995).
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.
9
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:
|
·
|
Attract,
motivate and retain qualified, talented and dedicated executive
officers
|
|
·
|
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 Chairman, President
and Chief
Executive Officer (“CEO”)
|
|
·
|
The
services of an independent compensation consultant, who advises
the
Committee on an as-needed basis
|
|
·
|
An
annual 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
In
2007
the Company engaged an independent compensation consultant, Frederic W. Cook
& Co., Inc. The primary purpose of the engagement was to review our current
compensation program, and evaluate how our executive compensation program
compares to the competitive market. Competitive comparisons were primarily
based
on a peer group of 16 publicly-traded business process outsourcing (BPO)
and
business-to-business information technology companies selected by the Consultant
in consultation with the Committee and Company management. The companies
in the
peer group were Answerthink, APAC Customer Services, Inc., AXS-One Inc.,
Computer Programs and Systems, Inc., DATATRAK International, Inc., Document
Sciences Corporation, Edgewater Technology, Inc., eLoyalty Corporation, Kintera,
Inc., LionBridge Technologies, Inc., Manatron, Inc., PeopleSupport, Inc.
Streamline Health Solutions, Inc., StarTek Inc., TechTeam Global, Inc., and
United American Healthcare Inc. The Company was positioned near the median
of
the peer group in terms of revenues, net income, and market capitalization,
in
the upper quadrant in terms of size, and at the top in terms of annualized
shareholder return.
10
The
Consultant did not make specific recommendations on individual pay levels,
but
rather provided and analyzed competitive data for review and use by the
Committee and the Company.
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 in control compensation
|
In
order
to determine the compensation packages of the executive officers, the Committee
reviewed the total compensation package of each executive officer against
the
total compensation packages of named executive officers at the peer group
companies referenced in the section entitled “Competitive Benchmarking / Peer
Group Analysis”. 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.
11
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. The CEO’s base salary is 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 2007. In February 2008 the Committee increased
the annual base salaries of the executive officers effective as of January
1,
2008. Mr. Abuhoff’s base salary was increased from $369,000 to $424,350; Mr.
Ford’s base salary was increased from $300,000 to $310,500; and Mr. Mishra’s
base salary was increased from $175,000 to $220,000. The increases were based
on
a review of the data from the peer group competitive comparisons discussed
in
the section entitled “Competitive Benchmarking / Peer Group Analysis” and the
factors outlined above.
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. Based on the Company’s financial
performance in 2007, including the achieved level of revenues, new business,
bookings and net income, and on individual performance, in February 2008
the
Committee awarded a cash bonus to each executive officer for the year ended
2007
as follows: $477,707 to Mr. Abuhoff, $94,606 to Mr. Ford, and $153,433 to
Mr.
Mishra.
Stock-Based
Incentives
The
Company uses stock option grants as the primary vehicle for employee stock-based
incentives. The Committee believes stock options 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 the Committee awards each executive officer is based on his relative
position, responsibilities and performance over the previous fiscal year,
and
his anticipated future performance, potential and responsibilities. The
Committee also reviews and considers prior stock option grants to each executive
officer. The size of stock option grants is not directly related to the
Company’s performance. The Committee also uses data on stock options granted by
companies that are comparable by industry and revenue, and takes into
consideration recommendations asserted by an independent compensation consulting
firm. No stock options were granted to any executive officer in calendar
year
2007.
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 2007 the Company reimbursed the CEO
$24,085 for the cost of life and disability insurance premiums and related
taxes
pursuant to his employment agreement, and provided the COO, in connection
with
his foreign assignment, benefits totaling $45,172 for an apartment rental,
utilities, medical insurance, security guard at home country residence, related
fringe benefit taxes, and spousal travel.
12
Severance
and Change in Control
The
Company enters into severance and change of control agreements with its key
executives as it is vitally important to the Company that the key executives
continue working in the interests of our stockholders in the event of a
potential change in control of the Company.
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 discussions, 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
John
R.
Marozsan, Chair
Louise
C.
Forlenza
Peter
H.
Woodward
SUMMARY
COMPENSATION TABLE
The
following table sets forth information regarding compensation paid or accrued
to
Named Executive Officers.
|
Name
and Position
|
Year
|
Salary
|
Bonus
|
All
Other Compensation
|
Total
Compensation
|
|||||||||||
|
Jack
S. Abuhoff
|
2007
|
|
$369,000
|
|
$477,707
|
|
$24,085
|
(1)
|
|
$870,792
|
||||||
|
Chairman,
President and Chief Executive Officer
|
2006
|
369,000
|
-
|
21,114
|
(1)
|
390,114
|
||||||||||
|
Steven
L. Ford
|
2007
|
300,000
|
94,606
|
-
|
394,606
|
|||||||||||
|
Executive
Vice President and Chief Financial Officer
|
2006
|
300,000
|
-
|
-
|
300,000
|
|||||||||||
|
Ashok
Mishra (2)
|
2007
|
175,000
|
183,433
|
(3)
|
45,172
|
(4)
|
403,605
|
|||||||||
|
Executive
Vice President and Chief Operating Officer
|
||||||||||||||||
(1) Includes
the cost of employer provided executive life and disability insurance in
the
amount of $13,861 and $12,151 in 2007 and 2006, respectively and reimbursement
for related federal and state income taxes in the amount of $10,224 and $8,963
in 2007 and 2006, respectively.
13
(2)
Mr.
Mishra was appointed as an executive officer effective as of January 1,
2007.
(3) Includes
a $30,000 signing bonus.
(4)
Includes,
in connection with the Executive’s foreign assignment, $28,320 for apartment
rental, and utilities, medical insurance, security guard at home country
residence, related fringe benefit taxes and spousal travel.
Narrative
Disclosure to Summary Compensation Table
Employment
Agreements
On
April
26, 2006, the Company and Mr. Jack S. Abuhoff, the Chief Executive Officer
and
President of the Company, executed a three year employment agreement with
an
effective date of February 1, 2006. The Agreement provides for: annual base
compensation of $369,000 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 50% of Mr. Abuhoff’s base salary for the year; and equity based incentive
compensation in such amounts as shall be determined by the Compensation
Committee, which, if granted, shall have an exercise price equal to the fair
market value of the shares at the time of the grant. The Agreement also provides
for insurance and other fringe benefits, and contains confidentiality,
non-compete and non-interference provisions. In the event Mr. Abuhoff is
terminated without cause (as defined) or, if upon expiration of the term
of the
Agreement the Company does not offer to enter into a successor agreement
on
substantially similar terms, Mr. Abuhoff is entitled to receive payments
in an
amount equal to the greater of (i) his then base salary for 24 months or
(ii)
the number of months remaining in the term of the Agreement; the continuation
of
his health, life, disability and non-qualified retirement plan benefits for
the
greater of (i) 24 months or (ii) the number of months remaining in the term
of
the Agreement; twice Mr. Abuhoff’s then bonus target; and the removal of any
vesting, transfer, lock up, performance or other restrictions or requirements
on
his stock options or other equity based compensation. In the event Mr. Abuhoff
resigns after the six month anniversary of a change of control (as defined),
Mr.
Abuhoff is entitled to receive severance payments in an amount equal to the
greater of (i) his then base salary for 36 months or (ii) the number of months
remaining in the term of the Agreement; the continuation of his health, life,
disability and non-qualified retirement plan benefits for the greater of
(i) 36
months or (ii) the number of months remaining in the term of the Agreement;
three times his then bonus target; and the removal of any vesting, transfer,
lock up, performance or other restrictions or requirements on his stock options
or other equity based compensation. The Agreement also provides for potential
tax gross-up payments in respect of income taxes and penalties that may be
imposed on Mr. Abuhoff under Section 409A of the Internal Revenue Code, and
in
respect of excise taxes and penalties that may be imposed on Mr. Abuhoff
under
Section 4999 of the Internal Revenue Code.
On
December 22, 2005, the Company entered into a three year employment agreement
with Mr. Steven Ford to serve as Chief Financial Officer and Executive Vice
President. Mr. Ford’s employment 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. Ford execute a new employment
agreement prior to the end of the then current term. The
Agreement provides for annual base compensation of $300,000 per
annum, subject to annual review for discretionary annual increases,
and
additional short term incentive compensation for each calendar year as
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 30% of Mr. Ford’s
base
salary for the year. The Agreement also provides for insurance and other
fringe
benefits, and contains confidentiality, non-compete and non-interference
provisions. In the event Mr. Ford
is
terminated without cause (as defined), Mr. Ford
is
entitled to receive payments in an amount equal to his then base salary for
(i)
six months following the date of termination if the termination occurs prior
to
the one year anniversary of employment; or (ii) 12 months following the date
of
termination if the termination occurs on or after the one year anniversary
of
employment (24 months in the event of a termination without Cause within
12
months of a Change in Control (as defined)). The Agreement also provides,
that
in the event that any portion of any severance payment payable under his
employment agreement constitutes an "excess parachute payment" within the
meaning of Section 280G of the Internal Revenue Code (the "Code"), then the
Company shall pay Mr. Ford an additional gross-up payment to reimburse Mr.
Ford
on an after tax basis for any excise tax imposed on such payments under Section
4999 of the Code.
14
On
May
18, 2007, the Company and Mr. Ashok Mishra, the Chief Operations Officer
and
Executive Vice President 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.
15
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, 2007.
|
Number
of securities underlying
unexercised
options
|
Option
Exercise
Price
|
Option
Expiration
Date
|
|||||||||||
|
Name
and
|
(#)
|
(#)
|
|||||||||||
|
Principal
Position
|
Exercisable
|
Unexercisable
|
|||||||||||
|
Jack
S. Abuhoff
|
31,500
|
-
|
|
$0.5000
|
06/02/2013
|
||||||||
|
Chairman,
President and CEO
|
126,000
|
-
|
|
$0.5000
|
07/01/2013
|
||||||||
|
180,000
|
-
|
|
$0.6700
|
06/08/2014
|
|||||||||
|
154,000
|
-
|
|
$2.5900
|
03/31/2014
|
|||||||||
|
44,000
|
-
|
|
$2.5900
|
05/31/2009
|
|||||||||
|
44,000
|
-
|
|
$2.5900
|
05/31/2010
|
|||||||||
|
44,000
|
-
|
|
$2.5900
|
05/31/2011
|
|||||||||
|
44,000
|
-
|
|
$2.5900
|
05/31/2012
|
|||||||||
|
44,000
|
-
|
|
$2.5900
|
05/31/2013
|
|||||||||
|
154,000
|
-
|
|
$2.5900
|
09/30/2009
|
|||||||||
|
154,000
|
-
|
|
$2.5900
|
09/30/2010
|
|||||||||
|
154,000
|
-
|
|
$2.5900
|
09/30/2011
|
|||||||||
|
154,000
|
-
|
|
$2.5900
|
09/30/2012
|
|||||||||
|
80,000
|
(1) |
-
|
|
$3.4600
|
12/30/2015
|
||||||||
|
100,000
|
-
|
|
$3.7500
|
08/18/2014
|
|||||||||
|
Total
|
1,507,500
|
||||||||||||
|
Steven
L. Ford
|
250,000
|
(2) |
-
|
|
$3.2800
|
12/21/2015
|
|||||||
|
Executive
Vice President and CFO
|
|||||||||||||
|
Ashok
Mishra
|
10,000
|
-
|
|
$2.00
|
09/29/2014
|
||||||||
|
Executive
Vice President and COO
|
16,000
|
-
|
|
$2.59
|
10/03/2010
|
||||||||
|
50,000
|
(1) |
-
|
|
$3.46
|
12/30/2015
|
||||||||
|
90,000
|
-
|
|
$3.35
|
11/09/2013
|
|||||||||
|
Total
|
166,000
|
||||||||||||
(1)
Granted
on December 31, 2005. Shares
issuable upon exercise of the option are subject to the following restrictions:
no shares may be sold during the first year after the date of grant; no more
than 25% of the shares may be sold during the second year after the date
of
grant; no more than a total of 50% of the shares may be sold during the second
and third years after the date of grant; and no more than a total of 75%
of the
shares may be sold during the second, third and fourth years after the date
of
grant. No restrictions on sales apply after the fourth anniversary of the
date
of grant.
(2)
Granted
on December 22, 2005. Shares
issuable upon exercise of the option are subject to the following restrictions:
no shares may be sold during the first year after the date of grant; no more
than 25% of the shares may be sold during the second year after the date
of
grant; no more than a total of 50% of the shares may be sold during the second
and third years after the date of grant; and no more than a total of 75%
of the
shares may be sold during the second, third and fourth years after the date
of
grant. No restrictions on sales apply after the fourth anniversary of the
date
of grant.
16
OPTIONS
EXERCISED AND STOCK VESTED
The
following table sets forth information regarding options exercised during
fiscal
year 2007 for each of the Named Executive Officers.
|
Option
Awards
|
Stock
Awards
|
||||||||||||
|
Name
|
Number
of Shares Acquired on Exercise (#)
|
Value
Realized on Exercise ($)
|
Number
of Shares Acquired on Vesting (#)
|
Value
Realized on Vesting ($)
|
|||||||||
|
Jack
S. Abuhoff (1)
|
1,139,160
|
|
$3,502,922
|
-
|
-
|
||||||||
|
Steven
L. Ford
|
-
|
-
|
-
|
-
|
|||||||||
|
Ashok
Mishra
|
-
|
-
|
-
|
-
|
|||||||||
(1)
Mr.
Abuhoff exercised 1,139,160 stock options on September 12, 2007, with an
exercise price of $0.25 with respect to 123,996 stock options; $0.42 with
respect to 6,672 stock options; $0.50 with respect to 248,496 stock options;
$0.58 with respect to 360,000 stock options; and $1.29 with respect to 399,996
stock options and a market price of $3.85. Mr. Abuhoff paid the exercise
price
by surrendering to the Company 229,310 of the shares of common stock he would
have otherwise received on the option exercise. In addition, Mr. Abuhoff
surrendered 395,695 shares to the Company in consideration of the payment
by the
Company on his behalf of $1,523,426 of the Company’s minimum withholding tax
requirement payable in respect of the option exercise. In connection with
this
transaction, the Company issued a net total of 514,155 shares of common stock
to
Mr. Abuhoff.
17
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL
Estimated
Termination or Change in Control Benefits at Year-End 2007
The
following table summarizes the estimated value of payments to each of the
named
executive officers assuming different termination events occurred at December
31, 2007.
|
Name
|
Cash
Compensation
|
Welfare
Benefits
|
Excise
Tax and Gross-Up (5)
|
Aggregate
Payments(6)
|
|||||||||
|
Jack
S. Abuhoff
|
|||||||||||||
|
Change
in Control (1)
|
|
$1,660,500
|
|
$126,386
|
|
$585,000
|
|
$2,371,886
|
|||||
|
Termination
without cause (2)
|
1,107,000
|
94,625
|
-
|
1,201,625
|
|||||||||
|
Termination
for cause
|
-
|
31,103
|
-
|
31,103
|
|||||||||
|
Death
|
-
|
31,103
|
-
|
31,103
|
|||||||||
|
Disability
|
92,250
|
31,103
|
-
|
123,353
|
|||||||||
|
Steven
L. Ford
|
|||||||||||||
|
Change
in Control (3)
|
600,000
|
25,287
|
-
|
625,287
|
|||||||||
|
Termination
without cause (4)
|
300,000
|
25,287
|
-
|
325,287
|
|||||||||
|
Termination
for cause
|
-
|
25,287
|
-
|
25,287
|
|||||||||
|
Death
|
-
|
25,287
|
-
|
25,287
|
|||||||||
|
Disability
|
75,000
|
25,287
|
-
|
100,287
|
|||||||||
|
Ashok
Mishra
|
|||||||||||||
|
Change
in Control
|
-
|
8,792
|
-
|
8,792
|
|||||||||
|
Termination
without cause (4)
|
175,000
|
8,792
|
-
|
183,792
|
|||||||||
|
Termination
for cause
|
-
|
8,792
|
-
|
8,792
|
|||||||||
|
Death
|
-
|
8,792
|
-
|
8,792
|
|||||||||
|
Disability
|
43,750
|
8,792
|
-
|
52,542
|
|||||||||
|
(1)
|
Assumes
a termination of employment by the executive on 30 days notice
at any time
after the 6 month anniversary of a change in control. Assumes a
bonus
target of 50% of the executive’s annual base
salary.
|
|
(2)
|
Assumes
a bonus target of 50% of the executive’s annual base
salary.
|
|
(3)
|
Assumes
termination of the executive by the Company without cause, or resignation
by the executive with good reason, within 12 months of a change
in
control.
|
|
(4)
|
Includes
resignation by the executive with good reason (as described
below).
|
|
(5)
|
Assumes
for illustration only that there is a 20% excise tax on the change
in
control payment and on the income and excise
taxes.
|
|
(6)
|
Assumes
for illustration only that 409A tax is not applicable to the termination
or change in control payments.
|
18
Payments
on Change in Control
Pursuant
to Mr. Abuhoff’s employment agreement, 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 of Directors of the Company shall not consist of Incumbent
Directors. For purposes of this paragraph, "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
Company enters into an agreement of merger, consolidation, share
exchange
or similar transaction with 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
Board approves a plan of liquidation or dissolution of the Company
or an
agreement for 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.
|
Upon
Mr.
Abuhoff’s termination of his employment on
30
days notice at any time after the six month anniversary of a change in control,
Mr. Abuhoff will receive:
|
·
|
His
base salary for the greater of 36 months and
the number of months then remaining in the term of his employment
agreement.
Payment will be made in equal periodic payments on a monthly basis.
|
|
·
|
300%
of his then bonus target.
|
|
·
|
Continuation
of his, and his dependents’, medical benefits, dental benefits, life
insurance, long-term disability insurance and non-qualified retirement
plan benefit accruals for the greater of 36 months and the number
of
months then remaining in the term of his employment agreement,
or in the
event that the Company’s underwriting or other plan terms do not permit
this, payment in lieu thereof, with periodic payments over 36 months,
with
the amounts the Company otherwise would have paid for the insurance
premiums or benefit contributions had he met such underwriting
or other
plan requirements.
|
|
·
|
Acceleration
of vesting of all options (and other equity-based or equity related
compensation), and removal of applicable transfer, lock-up or performance
requirements or restrictions.
|
19
|
·
|
Payment
of up to six weeks of accrued but unused
vacation.
|
Upon
the
occurrence of a change of control without a termination of employment by
Mr.
Abuhoff, Mr. Abuhoff will receive:
|
·
|
Acceleration
of vesting of all options (and other equity-based or equity related
compensation), and removal of applicable transfer, lock-up or performance
requirements or restrictions.
|
Pursuant
to Mr. Ford’s Employment Agreement, a Change of Control shall be deemed to have
occurred as of the earliest of any of the following events:
|
·
|
The
Company enters into an agreement of merger, consolidation, share
exchange
or similar transaction with 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
Board of Directors of the Company approves a plan of liquidation
or
dissolution of the Company or an agreement for 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.
|
|
·
|
The
public announcement by the Company or any person (other than the
Company,
any subsidiary of the Company or an employee benefit plan of the
Company
or of any subsidiary of the Company) (a "Person") that such 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 50% or more of the Company's then outstanding voting
stock.
|
Upon
the
occurrence of a change of control Mr. Ford will be relieved of the restrictions
imposed by a lock-up agreement on 250,000 stock options awarded to Mr. Ford
in
December 2006.
Upon
the
termination of Mr. Ford by the Company without cause, or resignation by the
executive with good reason, within 12 months of a change in control, Mr.
Ford
will receive his base salary for 24 months and payment of up to six weeks
of
accrued but unused vacation.
Payments
on Termination (other than upon Change in Control)
Pursuant
to Mr. Abuhoff’s employment agreement, if Mr. Abuhoff’s employment is terminated
without cause (including the failure of the Company to tender to Mr. Abuhoff
a
new employment agreement at least comparable in the aggregate in its terms
to
his existing employment agreement to be effective within a reasonable period
of
time following the end of the term of the existing employment agreement),
he
will be entitled to his base
salary in equal periodic payments on a monthly basis for the greater of 24
months and the number of months then remaining in the term of his employment
agreement, 200% of his then bonus target, continuation
of his, and his dependents’, medical benefits, dental benefits, life insurance,
long-term disability insurance and non-qualified retirement plan benefit
accruals for the greater of 24 months and the number of months then remaining
in
the term of his employment agreement, or in the event that the Company’s
underwriting or other plan terms do not permit this, payment in lieu thereof,
with periodic payments over 24 months, with the amounts the Company otherwise
would have paid for the insurance premiums or benefit contributions had he
met
such underwriting or other plan requirements, and acceleration of vesting
of all
options (and other equity-based or equity related compensation), and removal
of
applicable transfer, lock-up or performance requirements or restrictions.
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
active duty with the Company and conditioned on attainment of quantitative
objectives, and payment of up to six weeks of 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 of 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 for
up to
six weeks of 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.
20
The
agreement also provides for potential tax gross-up payments in respect of
income
taxes and penalties that may be imposed on Mr. Abuhoff under Section 409A
of the
Internal Revenue Code, and in respect of excise taxes and penalties that
may be
imposed on Mr. Abuhoff under Section 4999 of the Internal Revenue
Code.
Pursuant
to Mr. Ford’s employment agreement, if Mr. Ford’s employment is terminated
without cause or by Mr. Ford with good reason (including the Company’s material
breach of its obligations, reduction of base salary below that set forth
in the
employment agreement without Mr. Ford’s consent, and assignment of duties to Mr.
Ford inconsistent with his position and the Company does not reasonably cure
such event after receipt of written notice from Mr. Ford 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
of
accrued but unused vacation. If
Mr.
Ford’s employment is terminated for 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
of
accrued but unused vacation.
If Mr.
Ford’s employment is terminated for 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
of
accrued but unused vacation.
If Mr.
Ford’s employment is terminated for cause, Mr. Ford will receive his base salary
through the date of termination, and payment for up to six weeks of accrued
but
unused vacation. In return for the benefits described above, Mr. Ford 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.
21
The
agreement also provides, that in the event that any portion of any severance
payment payable to Mr. Ford under his employment agreement constitutes an
"excess parachute payment" within the meaning of Section 280G of the Internal
Revenue Code (the "Code"), then the Company shall pay Mr. Ford an additional
gross-up payment to reimburse Mr. Ford on an after tax basis for any excise
tax
imposed on such payments under Section 4999 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 that set 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 of 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
of
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
of
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 of 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.
QUALIFICATION
BY REFERENCE
The matters
described in the sections titled "Narrative Disclosure to Summary Compensation
Table" and "Potential Payments Upon Termination or Change-in-Control" are
qualified in their entirety by reference to agreements previously
filed by the Company in reports with the Securities and Exchange
Commission.
22
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, 2007.
|
Name
and Principal Position
|
Fees
Earned or Paid in Cash
|
Option
Awards (1)
|
All
Other Compensation
|
Total
|
|||||||||
|
Haig
S. Bagerdjian
|
|||||||||||||
|
Director
|
|
$15,000
|
|
$-
|
|
$-
|
|
$15,000
|
|||||
|
Louise
C. Forlenza
|
|||||||||||||
|
Director
|
|
$15,000
|
|
$-
|
|
$-
|
|
$15,000
|
|||||
|
John
R. Marozsan
|
|||||||||||||
|
Director
|
|
$15,000
|
|
$-
|
|
$-
|
|
$15,000
|
|||||
|
Peter
H. Woodward
|
|||||||||||||
|
Director
|
|
$15,000
|
|
$-
|
|
$-
|
|
$15,000
|
|||||
|
|
$60,000
|
|
$-
|
|
$-
|
|
$60,000
|
||||||
(1) All
directors’ stock options were fully vested prior to 2007. As a result, no
expense was recognized in accordance with FAS 123R in 2007. At December 31,
2007
each of Messrs. Bagerdjian and Marozsan and Ms. Forlenza has an option to
purchase 55,000 shares of common stock. The grant date fair value was $193,000
per grant.
Narrative
Disclosure to Director Compensation Table
In
2007
Messrs. Bagerdjian, Marozsan and Woodward and Ms. Forlenza were compensated
at
the rate of $1,250 per month, plus out-of-pocket expenses for each Board
of
Directors meeting they attended. The directors did not receive any compensation
for serving on a Committee of the Board of Directors. Commencing January
2008,
Messrs. Bagerdjian, Marozsan and Woodward and Ms. Forlenza are 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
receives an additional $500 per month. The directors do not receive any
compensation for serving as a member on a Committee of the Board of
Directors.
23
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.
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.
24
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth, as of March 31, 2008, 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 Named 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.
|
Shares
Owned Beneficially (1)
|
|||||||
|
Name
and Address of
Beneficial
Owner
|
Amount
and Nature
of
Beneficial
Ownership
|
Percent
of Class
|
|||||
|
Directors:
|
|||||||
|
Jack
S. Abuhoff (2)
|
2,187,639
|
8.34
|
%
|
||||
|
Haig
S. Bagerdjian (3)
|
73,690
|
*
|
|||||
|
John
R. Marozsan (3)
|
63,700
|
*
|
|||||
|
Louise
C. Forlenza (3)
|
60,500
|
*
|
|||||
|
Peter
H. Woodward (4)
|
72,849
|
*
|
|||||
|
Named
Executive Officers:
|
|||||||
|
Steven
L. Ford (5)
|
270,000
|
1.08
|
%
|
||||
|
Ashok
Mishra (6)
|
166,000
|
*
|
|||||
|
All
Executive Officers and Directors
|
|||||||
|
as
a Group (7 persons) (7)
|
2,894,378
|
10.79
|
%
|
||||
|
Known
Beneficial Holders of More Than 5%:
|
|||||||
|
Todd
Solomon
|
1,987,444
|
8.04
|
%
|
||||
|
Eliot
Rose Asset Management and Gary S. Siperstein (8)
|
1,802,869
|
7.29
|
%
|
||||
*
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 24,725,791 shares outstanding.
|
|
(2)
|
Includes
currently exercisable options to purchase 1,507,500 shares of Common
Stock.
|
|
(3)
|
Includes
currently exercisable options to purchase 55,000 shares of Common
Stock.
|
25
|
(4)
|
Represents
shares owned by MHW Partners, L.P. Mr. Woodward is the Managing
Member of
the general partner of MHW Partners, L.P. Mr. Woodward disclaims
beneficial ownership of these shares except to the extent of his
pecuniary
interest therein.
|
|
(5)
|
Includes
currently exercisable options to purchase 250,000 shares of Common
Stock.
|
|
(6)
|
Represents
currently exercisable options to purchase 166,000 shares of Common
Stock.
|
|
(7)
|
Includes
currently exercisable options to purchase 2,088,500 shares of Common
Stock.
|
|
(8)
|
Based
on a statement set forth in Form SC 13G/A dated January 17, 2008,
filed
with the SEC, Eliot Rose Management in its capacity as investment
advisor
is deemed to be beneficial owner of these shares, which are owned
by
certain persons, and Gary S. Siperstein is deemed to be beneficial
owner
of these shares pursuant to his ownership interest in Eliot Rose
Management, on January 17, 2008.
|
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 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, 2007 through December 31,
2007
all officers, directors and greater than ten-percent beneficial owners complied
with Section 16(a) filing requirements.
26
ITEM
II. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Subject
to approval by the stockholders, the Board of Directors has appointed Grant
Thornton LLP as the independent auditors to audit the financial statements
of
the Company for the fiscal year ending December 31, 2008. Grant Thornton
LLP has
served as the Company's auditors for each of the fiscal years ended since
December 31, 1998. A representative of Grant Thornton LLP is expected to
be
present at the Annual Meeting and to have the opportunity to make a statement
if
they desire to do so. A representative of Grant Thornton 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 certified
public accountants 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.
THE
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR RATIFICATION OF THE APPOINTMENT
OF GRANT THORNTON 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 five nominees receiving the greatest number of votes will be elected
as
directors).
Ratification
of the Appointment of Independent Auditors.
The
appointment of Grant Thornton 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. Abstentions will
have
the same effect as a vote against such ratification, whereas broker non-votes
and shares not represented at the meeting will not be counted for purposes
of
determining whether such ratification has been approved.
27
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.
STOCKHOLDER
PROPOSALS FOR THE 2009 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, 2008. 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 that proposes
to
nominate a candidate for director or propose other business at the 2009 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.
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, 2007, 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.
28
OTHER
MATTERS
The
Company knows of no items of business that are expected to be presented for
consideration at the Annual 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 22, 2008 | |||
|
Amy
R. Agress
Vice
President, General Counsel and
Secretary
|
29
