UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A
(Rule 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Innodata Isogen, Inc.
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[LOGO](TM) INNODATA
ISOGEN
Three University Plaza
Hackensack, New Jersey 07601
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 7, 2005
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 7, 2005, 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, 2005; 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, 2004 are enclosed herewith. Only
holders of record of Common Stock of the Company at the close of business on
April 11, 2005 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 19, 2005
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 7, 2005
(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 6, 2005 to all stockholders of record on April 11, 2005 (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 2,377,144 votes, or approximately 10.5% 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 22,696,238 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
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 2005, 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 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.
Shares Owned Beneficially (1)
Amount and Nature
Name and Address of of Beneficial
Beneficial Owner Ownership Percent of Class
Directors:
Todd Solomon (2) 3,158,413 13.4%
Jack Abuhoff (3) 2,632,644 10.4%
Charles Goldfarb (4) 114,487 *
Haig S. Bagerdjian (5) 41,751 *
John R. Marozsan (5) 31,251 *
Louise C. Forlenza (6) 13,753 *
Named Executive Officers:
Stephen Agress (7) 672,850 2.9%
George Kondrach (8) 225,407 *
All Executive Officers and Directors
as a Group (8 persons) (9) 6,890,556 26.6%
------------------------
* 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 22,693,138 shares outstanding.
2. Includes currently exercisable options to purchase 930,253 shares of
Common Stock.
3. Includes currently exercisable options to purchase 2,496,660 shares of
Common Stock.
4. Includes currently exercisable options to purchase 114,487 shares of
Common Stock.
5. Includes currently exercisable options to purchase 31,251 shares of Common
Stock.
6. Includes currently exercisable options to purchase 11,253 shares of Common
Stock.
7. Includes (i) currently exercisable options held by Mr. Agress to purchase
383,004 shares of Common Stock and (ii) currently exercisable options held
by his wife to purchase 81,004 shares of Common Stock. Mr. Agress
disclaims any beneficial ownership in the shares issuable upon the
exercise of options held by his wife.
8. Includes currently exercisable options to purchase 190,632 shares of
Common Stock.
9. Includes currently exercisable options to purchase 4,269,795 shares of
Common Stock.
2
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, Todd Solomon, Haig S. Bagerdjian, Louise C. Forlenza, and John R.
Marozsan, to hold office until the next Annual Meeting of Stockholders or 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 15, 2004. 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 or her choice when voting at the Annual Meeting.
Name Age Position
---- --- --------
Jack S. Abuhoff 44 Chairman of the Board of Directors, Chief Executive
Officer and President
Todd Solomon 43 Vice Chairman of the Board of Directors and Consultant
Haig S. Bagerdjian 48 Director
Louise C. Forlenza 55 Director
John R. Marozsan 63 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. 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).
Todd Solomon has been the Vice Chairman of the Company's Board of
Directors and a consultant to the Company since his resignation as President and
Chief Executive Officer on September 15, 1997. He served as the Company's
President and one of the Company's Directors since the Company's founding by him
in 1988, and had been the Company's Chief Executive Officer since August 1995.
Mr. Solomon was President of Ruck Associates, an executive recruiting firm, from
1986 until 1987. Mr. Solomon holds an A.B. degree in history and physics from
Columbia University (1986).
3
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.
From 1991 to 2002, Mr. Bagerdjian served in various executive management
positions at Syncor International Corporation (Nasdaq: SCOR), an international
provider of high-technology healthcare services primarily for radiopharmacy and
medical imaging segments of the healthcare industry, 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.
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).
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.
4
Independent Directors
The Board of Directors is currently comprised of six (6) members, of
which four (4) are classified as "independent" as defined in the Nasdaq National
Market's Marketplace Rule 4200. The independent directors comprise a majority of
the Board. The four independent directors are Haig S. Bagerdjian, Louise C.
Forlenza, Charles F. Goldfarb and John R. Marozsan.
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 seven
meetings during the year ended December 31, 2004. 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 each committee on which he or she served.
The Company does not have a policy requiring incumbent directors and director
nominees to attend the Company's annual meeting of stockholders. One incumbent
director 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. Serving
on the Committee are Messrs. Marozsan and Bagerdjian and Ms. Forlenza. 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 Item 7(d)(3)(iv) of Schedule 14A. 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 eight times during fiscal 2004. The Board of Directors
has determined that the members of the Audit Committee are "independent" as
defined in the Nasdaq National Market's Marketplace Rule 4200.
The Company has a standing Compensation Committee comprised of Messrs.
Bagerdjian and Marozsan and Ms. Forlenza. The function of the Compensation
Committee is to discharge the responsibilities of the Board of Directors
regarding executive compensation, including determining the compensation
packages of the Company's Executive Officers, including its Chief Executive
Officer. To carry out its responsibilities, the Compensation Committee met three
times during fiscal 2004. The Board of Directors has determined that the members
of the Compensation Committee are "independent" as defined in the Nasdaq
National Market's Marketplace Rule 4200.
5
The Company does not have a standing Nominating Committee. 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 2004 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 2006 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 its 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.
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 eight times
during fiscal 2004.
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 an independent audit of the Company's financial statements, in
accordance with generally accepted auditing standards, 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, including with respect to (i) their
responsibility under auditing standards generally accepted in the United States
of America, (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, 2004, 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.
Audit Committee
John R. Marozsan - Chairman
Haig S. Bagerdjian
Louise C. Forlenza
Fiscal 2004 and 2003 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
services provided for 2004 and 2003. The Audit Committee has determined that the
provision of all services is compatible with maintaining the independence of
Grant Thornton LLP.
7
Audit Fees. Grant Thornton LLP and its international affiliates billed
the Company aggregate fees of approximately $260,000 for professional services
rendered for (1) the audit of the annual financial statements for 2004, (2) the
reviews of the financial statements included in reports on Form 10-Q for periods
within 2004 and (3) related regulatory filings; and approximately $150,000 for
professional services rendered for (1) the audit of the annual financial
statements for 2003 and (2) the reviews of the financial statements included in
reports on Form 10-Q for periods within 2003.
Audit Related Fees. Grant Thornton LLP and its international affiliates
billed the Company aggregate fees of approximately $11,000 and $5,000 for audit
related services rendered in 2004 and 2003, respectively.
Tax Fees. Grant Thornton LLP and its international affiliates billed
the Company aggregate fees of approximately $16,000 and $5,000 for tax related
services rendered in 2004 and 2003 respectively.
Other Fees. Grant Thornton LLP and its international affiliates did not
provide any other services to the Company in 2004 or 2003.
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.
Compliance with Section 16(a) of the Exchange Act
The Company believes that during the period from January 1, 2004
through December 31, 2004 all officers, directors and greater than ten-percent
beneficial owners complied with Section 16(a) filing requirements.
Stockholders Communications with the Board of Directors
Generally, stockholders who have questions or concerns regarding the
Company should contact our Investor Relations department at 201-488-1200.
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 similarly 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.
8
EXECUTIVE OFFICERS
Set forth below is information concerning the Executive Officers who
are not Directors.
Name Age Position
---- --- --------
George Kondrach 52 Executive Vice President
Stephen Agress 43 Vice President - Finance
Mr. George Kondrach has been the Company's Executive Vice President
since May 2003. From December 2001 to May 2003, he served as President of Isogen
International, LLC, a wholly-owned subsidiary of the Company. Mr. Kondrach, who
in 1991 co-founded Isogen International, served as its Chairman until April
1999, when it was acquired by DataChannel, Inc. From 1999 until the Company
acquired the Isogen International division of DataChannel, Inc. in December
2001, Mr. Kondrach served in various executive management capacities at
DataChannel, Inc., most recently as Senior Vice President of Solutions
Architecture. Mr. Kondrach holds a B.S. degree in biology from Southern
Methodist University (1975).
Mr. Stephen Agress has been the Company's Vice President - Finance
since March 1998. Before that, he served as Corporate Controller since joining
the Company in August 1995. Mr. Agress is a certified public accountant and was
a senior audit manager at Deloitte & Touche LLP for more than five years prior
to his resignation in 1995. Mr. Agress holds a B.S. degree in accounting from
Yeshiva University (1982).
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. Stephen Agress, the Company's
Vice President-Finance, is the husband of the Company's Vice President and
General Counsel, who is not an Executive Officer.
9
EXECUTIVE AND DIRECTOR COMPENSATION
The following table sets forth information with respect to compensation
paid by the Company for services to the Company during the three fiscal years
ended December 31, 2004 to the Chief Executive Officer and to all other
Executive Officers whose total annual salary and bonuses exceeded $100,000 in
2004.
SUMMARY COMPENSATION TABLE
Annual Compensation
-------------------
Calendar Stock Options
Name and Position Year Salary Bonus Awarded
Jack Abuhoff 2004 $355,650 $284,520 100,000
Chairman of the Board of 2003 315,600 63,120 337,500 (a)
Directors, Chief Executive 2002 315,600 -- 1,139,160 (b)
Officer and President
George Kondrach 2004 $250,000 $86,250 --
Executive Vice President 2003 216,667 68,333 200,000
2002 200,000 10,660 150,000
Stephen Agress 2004 $184,900 $88,421 --
Vice President - Finance 2003 169,000 25,350 168,000 (a);
40,000
2002 169,000 -- --
(a) Represents options granted in prior years for which the expiration date
was extended for 10 years.
(b) Represents options granted in 1997 for which the expiration date was
extended from 2002 to 2007.
The above compensation does not include certain other personal benefits, the
total value of which does not exceed as to any Executive Officer, the lesser of
$50,000 or 10% of such person's cash compensation. The Company has not granted
any stock appreciation rights nor does it have any "long-term incentive plans,"
other than its stock option plans.
10
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
Potential Realized
Number of Value at Assumed
Securities Percent of Annual Rates of
Underlying Total Options Exercise Stock Appreciation
Options Granted to Employees Price Expiration For Option Term
Name Granted In Fiscal Year Per Share Date 5% 10%
Jack Abuhoff 100,000 47% $3.75 8/14 $235,835 $597,653
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR;
FISCAL YEAR END OPTION VALUES
Shares Number of Unexercised Value of Unexercised In-the-
Acquired Value Options at Fiscal Year End Money Options at Fiscal Year End
Name on Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
Jack Abuhoff -- -- 2,496,660/100,000 $24,567,134/$984,000
George Kondrach -- -- 154,180/195,820 $1,517,131/$1,926,869
Stephen Agress -- -- 376,743/31,257 $3,707,151/$307,569
Employment Agreements
On January 1, 2004, the Company entered into a four year employment
agreement with Mr. George Kondrach to serve as Executive Vice President of the
Company. Pursuant to the agreement, Mr. Kondrach will be compensated at a rate
of $250,000 per annum for the first year, subject to annual review for
discretionary annual increases thereafter, and will be eligible to receive an
annual cash bonus, the amount of which will be based upon meeting certain goals.
Directors Compensation
Messrs. Bagerdjian and Marozsan and Ms. Forlenza are compensated at the
rate of $1,250 per month, plus out-of-pocket expenses for each Board of
Directors meeting they attend.
Dr. Charles F. Goldfarb is compensated at a rate of $1,250 per month,
plus out-of-pocket expenses for each Board of Directors meeting he attends. Dr.
Goldfarb also receives $750 per month for additional services he renders to the
Company.
The Company has an arrangement with Mr. Todd Solomon, its former
President and Chief Executive Officer, that provides for a salary of $75,000 per
annum.
11
The Directors do not receive any compensation for serving on a
Committee of the Board of Directors.
Compensation Committee Interlocks and Insider Participation
In 2004 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.
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
The Executive Compensation Committee (the "Committee") sets and
administers the policies governing annual compensation of the Chief Executive
Officer and the other Executive Officers. The Committee consists of three
directors who meet the independence requirements of the Nasdaq Stock Market. The
Committee acts under a charter that was approved by the full Board of Directors
on December 16, 2002. The Committee met three times in 2004.
Compensation Principles
The Committee seeks to establish an appropriate relationship between
executive compensation and the creation of shareholder value. To achieve this
goal, the Company's executive compensation consists of a combination of annual
salary, bonuses based upon targeted financial goals, and stock-based incentives.
The Committee determines compensation annually by considering (a) the
level of compensation necessary to attract and retain executive talent in light
of compensation paid by peer companies and the overall competitive environment,
(b) Company performance, both separately and in relation to similar companies,
(c) individual performance, (d) historical compensation levels and stock awards
at the Company, (e) recommendations by an independent compensation consulting
firm, and (f) any other factors the Committee may deem relevant. The Committee
also considers the recommendations of the Chief Executive Officer on
compensation for other Executive Officers.
Base Salary
The Company provides competitive base salaries that allow it to attract
and retain a high performing leadership team. Base salaries for Executive
Officers are determined based on an assessment of the factors set forth above
under Compensation Principles.
Annual Bonuses
In 2004, the Company's Executive Officers, including its Chief
Executive Officer, were eligible to receive an annual bonus in accordance with
executive management incentive compensation plans adopted for calendar year 2004
(the "Plans"). Each Plan participant's bonus was based on either or both of:
earnings before interest, taxes and executive incentives (EBITe), and sales
performance as measured by bookings and revenues (bookings and revenues). The
bonus paid to the each participant was based on the variance in the Company's
results above or below the goals set for each performance factor.
12
See the "Summary Compensation Table" for amounts paid to Named Executive
Officers in 2004, including salary and bonus.
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
Executives Officers' interests with those of stockholders in building share
value, offer Executive Officers an incentive for the achievement of superior
performance over time, and foster the retention of key management personnel. The
Committee typically grants stock options on an annual basis, and occasionally
makes supplemental grants. Stock options have an exercise price equal to current
market price at time of grant, and vest over time to encourage Executive
Officers to remain employed with the Company. The number of stock options the
Committee awards each Executive Officer is based on his or her relative
position, responsibilities and performance over the previous fiscal year and his
or her anticipated future performance, potential and responsibilities. The
Committee also reviews prior stock option grants to each Executive Officer and
others, including the number of stock options that continue to be subject to
vesting under their respective grants. 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-based incentives were paid to Named Executive Officers, other than the
Chief Executive Officer, in 2004.
Chief Executive Officer Compensation
For 2004, the Committee determined the salary, bonus and stock-based
incentives of the Chief Executive Officer substantially in conformance with the
policies described above for all Executive Officers of the Company. On August
19, 2004 the Committee approved an increase in the Chief Executive Officer's
base salary from $315,600 to $369,000, retroactive to April 1, 2004, and awarded
to the Chief Executive Officer stock options to purchase 100,000 shares of the
Company's common stock. In addition, based on the Company's earnings before
interest, taxes and executive incentives (EBITe), the Chief Executive Officer
received a bonus of $284,520 under his executive management incentive
compensation plan.
Executive Compensation Committee
Haig S. Bagerdjian, Chairman
Louise Forlenza
John R. Marozsan
13
STOCK PRICE PERFORMANCE GRAPH
The following performance graph compares the cumulative total return
(assuming reinvestment of dividends) of an investment of $100 in Innodata
Isogen, Inc. on January 1, 2000 through its fiscal year ended December 31, 2004,
to the Nasdaq Market Index and the Industry Index for SIC Code 7374, Information
Retrieval Services.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG INNODATA ISOGEN, INC.,
NASDAQ MARKET INDEX AND SIC CODE INDEX
[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE GRAPH IN THE PRINTED MATERIAL]
1999 2000 2001 2002 2003 2004
INNODATA ISOGEN, INC 100.00 277.16 149.67 48.38 201.57 495.87
SIC CODE INDEX 100.00 89.39 91.83 70.37 83.76 92.00
NASDAQ MARKET INDEX 100.00 62.85 50.10 34.95 52.55 56.97
ASSUMES $100 INVESTED ON JAN. 1, 2000
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 2004
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In May 2001, the Company entered into an agreement with Mr. Barry
Hertz, then the Chairman of the Board of Directors, pursuant to which Mr. Hertz
is continuing to serve as a part-time employee of the Company at a salary of
$2,000 per month for five years. In addition, the Company paid Mr. Hertz at that
time $400,000 for entering into a six-year non-competition agreement with the
Company.
14
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, 2005. Grant
Thornton LLP has served as the Company's auditors for each of the fiscal years
ended since December 31, 1997. 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.
15
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 2006 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, 2005. 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
2006 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.
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.
16
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 19, 2005
Amy R. Agress
Vice President, General Counsel and Secretary
17
ANNUAL MEETING OF STOCKHOLDERS OF
INNODATA ISOGEN, INC.
June 7, 2005
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
Please detach along perforated line and mail in the envelope provided.
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PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE |X|
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1. Election of Directors:
NOMINEES:
|_| FOR ALL NOMINEES o Jack Abuhoff
o Todd Solomon
o Haig S. Bagerdjian
|_| WITHHOLD AUTHORITY o Louise C. Forlenza
FOR ALL NOMINEES o John R. Marozsan
|_| FOR ALL EXCEPT
(See instructions below)
INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark
"FOR ALL EXCEPT" and fill in the circle next to each nominee you
wish to withhold, as shown here: *
FOR AGAINST ABSTAIN
2. Ratification of the selection of Grant Thornton |_| |_| |_|
LLP as independent auditors.
THE SHARES REPRESENTED BY THIS PROXY, DULY EXECUTED, WILL BE VOTED IN ACCORDANCE
WITH THE SPECIFICATIONS MADE. IF NO SPECIFICATION IS MADE, THE SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED IN FAVOR OF EACH OF THE ABOVE NOMINEES,
FOR SELECTION OF GRANT THORNTON LLP AS INDEPENDENT AUDITORS, AND FOR SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING AS THE PROXYHOLDERS DEEM
ADVISABLE.
TO ASSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, PLEASE MARK, SIGN AND DATE
THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
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To change the address on your account, please check the box |_|
at right and indicate your new address in the address space
above. Please note that changes to the registered name(s) on
the account may not be submitted via this method.
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Signature of Stockholder Date:
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Signature of Stockholder Date:
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Note: Please sign exactly as your name or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing as
executor, administrator, attorney, trustee or guardian, please give
full title as such. If the signer is a corporation, please sign full
corporate name by duly authorized officer, giving full title as such.
If signer is a partnership, please sign in partnership name by
authorized person.
INNODATA ISOGEN, INC.
ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned Stockholder of Common Stock of Innodata Isogen, Inc.
(the "Company") hereby revokes all previous proxies, acknowledges receipt of the
Notice of the Meeting of Stockholders to be held on June 7, 2005, and hereby
appoints Jack S. Abuhoff and Amy R. Agress, and each of them, as proxies of the
undersigned, with full power of substitution, to vote and otherwise represent
all of the shares of the undersigned in the Company at said meeting and at any
adjournments thereof with the same effect as if the undersigned were present and
voting the shares. The shares represented by this proxy shall be voted on the
following matters and, in their discretion, upon any other business which may
properly come before said meeting.
(Continued and to be signed on the reverse side)
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