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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| x | Definitive Proxy Statement |
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| ¨ | Soliciting Material Pursuant to §240.14a-12 |
Innodata Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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55 Challenger Road
Ridgefield Park, New Jersey 07660
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 8, 2017
To the Stockholders of Innodata Inc.:
The Annual Meeting of Stockholders of Innodata Inc. (the "Company") will be held at Innodata Inc., 55 Challenger Road, Ridgefield Park, New Jersey 07660 at 11:00 A.M. on June 8, 2017, for the following purposes:
| (1) | To elect seven 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 CohnReznick LLP, independent registered public accounting firm, as auditors for the Company for the year ending December 31, 2017; |
| (3) | To approve, on an advisory basis, the Company’s executive compensation; |
| (4) | To hold an advisory vote on the frequency of holding future advisory votes on executive compensation; and |
| (5) | 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, 2016 are enclosed herewith. Only holders of record of Common Stock of the Company at the close of business on April 12, 2017 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 55 Challenger Road, Ridgefield Park, New Jersey 07660.
| By Order of the Board of Directors | |
| /s/ Amy R. Agress | |
| Amy R. Agress | |
| Senior Vice President, General Counsel and Secretary |
Ridgefield Park, New Jersey
April 25, 2017
All stockholders are cordially invited to attend the Meeting. If you do not expect to be present, please sign and date the enclosed form of Proxy and return it promptly using the enclosed envelope. No postage is required if mailed in the United States. Any person giving a Proxy has the power to revoke it at any time prior to its exercise and if present at the Meeting may withdraw it and vote in person.
Voting in Person at the Meeting
Registered holders can vote in person. Beneficial owners must obtain a legal proxy from their brokerage firm, bank, or other holder of record and present it to the inspector of elections with their ballot in order to be able to vote shares in person at the meeting. Voting in person will replace any previous votes submitted by Proxy.
Attendance at the Meeting is limited to stockholders, their proxies and invited guests of the Company. Directions to the meeting may be found at www.mapquest.com.
Important Notice Regarding the Availability of Proxy Materials for the
2017 Annual Meeting of Stockholders to be held on June 8, 2017
We have elected to provide access to our Proxy materials both by sending you this full set of Proxy materials, including a Proxy card, and by notifying you of the availability of our Proxy materials on the Internet.
This Proxy Statement and the 2016 Annual Report are available on the Internet at: http://www.innodata.com/proxy
INNODATA INC.
55 Challenger Road
Ridgefield Park, New Jersey 07660
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by the Board of Directors of Innodata 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 Inc., 55 Challenger Road, Ridgefield Park, New Jersey 07660 at 11:00 A.M. on June 8, 2017 (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 5, 2017 to all stockholders of record on April 12, 2017 (the "Record Date").
Any stockholder giving a Proxy has the power to revoke the same at any time before it is voted. The cost of soliciting Proxies will be borne by the Company. Following the mailing of the Proxy materials, solicitation of Proxies may be made by officers and employees of the Company by mail, telephone, facsimile, electronic communication or personal interview. Properly executed Proxies will be voted in accordance with instructions given by stockholders at the places provided for such purpose in the accompanying Proxy and, as to any other matter properly coming before the Meeting (none of which is presently known to the Board of Directors), in accordance with the judgment of the persons designated as proxies. Unless contrary instructions are given by stockholders, persons named in the Proxy intend to vote the shares represented by such Proxies for the election of the seven nominees for director named herein, for the selection of CohnReznick LLP as independent auditors, for the approval, on an advisory basis, of the Company’s executive compensation as disclosed in these materials, and for the frequency of every one year for conducting future advisory votes on executive compensation. The current members of the Board of Directors presently hold voting authority for Common Stock representing an aggregate of 1,210,035 votes, or approximately 4.7% of the total number of votes eligible to be cast at the Meeting. The members of the Board of Directors have indicated their intention to vote affirmatively on all of the proposals.
VOTING SECURITIES
Stockholders of record as of the close of business on the Record Date will be entitled to notice of, and to vote at, the Meeting or any adjournments thereof. On the Record Date there were 25,877,454 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.
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PROPOSAL 1. ELECTION OF DIRECTORS
It is the intention of the persons named in the enclosed form of Proxy, unless such form of Proxy specifies otherwise, to nominate and to vote the shares represented by such Proxy for the election as directors of Jack S. Abuhoff, Haig S. Bagerdjian, Louise C. Forlenza, Stewart R. Massey, Michael J. Opat, Anthea C. Stratigos and Andargachew S. Zelleke 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 was elected at the Annual Meeting of Stockholders held on June 7, 2016. The Company has no reason to believe that any of the nominees will become unavailable to serve as director for any reason before the Meeting. However, in the event that any of them shall become unavailable, each of the persons designated as proxy reserves the right to substitute another person of his or her choice when voting at the Meeting. Below is the biographical and other information about the nominees. Following each nominee’s biographical information, we have provided information concerning the particular experience, qualifications, attributes and/or skills that led the Nominating Committee and the Board of Directors to determine that each nominee should serve as a director.
Jack S. Abuhoff, age 56, has been President and Chief Executive Officer of the Company since September 15, 1997, and a director of the Company since its founding in 1988. Mr. Abuhoff has been the Chairman of the Company’s Board of Directors since May 2001. From 1995 to 1997 he was Chief Operating Officer of Charles River Corporation, an international systems integration and outsourcing firm. From 1992 to 1994, Mr. Abuhoff was employed by Chadbourne & Parke, LLP, in connection with its joint venture with Goldman Sachs to develop capital projects in China. Mr. Abuhoff is a trustee on the Board of Trustees of the Harvard Law School Association of New Jersey. He practiced international corporate law at White & Case LLP from 1986 to 1992. Mr. Abuhoff holds an A.B. degree in English from Columbia College (1983), and a J.D. degree from Harvard Law School (1986).
Key Experience, Attributes and Skills
Mr. Abuhoff has knowledge of the Company, its clients and the industries the Company serves, both from an historical and a current perspective, as well as leadership and management skills, international experience, and experience in providing outsourced services.
Haig S. Bagerdjian, age 60, has served as one of the Company’s directors since June 2001. He has also been Chairman of the Board of Point.360 (OCTQX: 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. Mr. Bagerdjian has also served as a director of Destiny Media Technologies Inc. (TSXV: DSY.V; OCTQX: DSNY), a provider of services that enable content owners to securely display and distribute their audio and video content digitally through the internet, from January 2015 to February 2017, and as a director of CarbonOne Technologies Inc. (TSXV: CX) a developer and manufacturer of advanced composite materials, from July 2015 to July 2016. 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 received a B.A. degree in International Relations and Slavic Languages and Literature, and Certificates in Russian Studies, Strategic Defense and National Security, from the University of Southern California (1983), and a J.D. degree from Harvard Law School (1986). He is admitted to the State Bar of California.
Key Experience, Attributes and Skills
Mr. Bagerdjian has leadership experience as a Chairman, CEO and President of a public company. He has public company board experience, as well as experience in international operations, mergers and acquisitions, compensation and governance, and provides diversity of background and viewpoint.
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Louise C. Forlenza, age 67, 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. 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). Ms. Forlenza attended the Harvard Executive Program for Board Governance and Audit in 2015, and the Harvard Executive Compensation Program in 2016.
Key Experience, Attributes and Skills
Ms. Forlenza satisfies the financial literacy requirements of Nasdaq and has been determined to be an “audit committee financial expert” under the SEC’s rules and regulations. A Certified Public Accountant and a former CFO, she has a background in accounting, audit, tax planning and foreign exchange planning, and provides diversity of background and viewpoint.
Stewart R. Massey, age 60, has served as one of the Company’s directors since March 2009. Mr. Massey co-founded Massey, Quick and Co. LLC in 2004 after a 24-year career on Wall Street. Massey Quick provides investment advisory and financial planning services for endowments, foundations and wealthy families. Mr. Massey joined Morgan Stanley’s Private Client Group in 1983 after four years with Dean Witter Reynolds. From 1988 through 1993, he was based in Hong Kong and led Morgan Stanley’s private client businesses in Asia, Australia, and Japan. Mr. Massey was Head of Japanese Equity Sales in New York from 1993 through 1996, and returned to Tokyo as Head of Institutional Equity Sales and Global Head of Japanese Equities in 1996. Mr. Massey served as President and CEO of Robert Fleming, Inc. in 1997 and 1998. At Fleming, he had regional responsibility for equity sales and trading, research, capital markets, investment banking, and asset management in the Americas, serving on the Board of Directors and Executive Committee of the parent company in London. Mr. Massey returned to Morgan Stanley in September of 1998 as a Managing Director and Head of Institutional Sales, Marketing, and Product Development for the firm’s prime brokerage business. He later served as the senior relationship manager for a number of Morgan Stanley’s most prominent institutional global clients. Mr. Massey holds a B.A. degree in History from The College of Wooster (1979), where he has served as a Trustee since 1987. As an Emeritus Trustee he serves on the Trustee and Governance, Finance and Investment committees. Mr. Massey also serves on the investment committees of Hobart and William Smith Colleges and St. Mary’s Abbey Delbarton. Mr. Massey was honored as one of the top 100 independent investment advisors in America by Barron’s Magazine in 2010, 2011, 2012, 2013 and 2014.
Key Experience, Attributes and Skills
Mr. Massey has leadership experience as a CEO and a senior executive officer. He has financial management expertise, as well as compensation, mergers and acquisitions, investment advisory, board, governance and international experience, and provides diversity of background and viewpoint.
Michael J. Opat, age 56, has served as one of the Company’s directors since June 2016. Mr. Opat has been a Commissioner on the Hennepin County (Minnesota) Board of Commissioners since 1993, and was Chair of the Board of the Commissioners from 2001 to 2003 and from 2009 to 2014. Hennepin County is Minnesota’s largest county with 1.1 million residents. Mr. Opat represents a County district with more than 160,000 residents in six suburban cities. Mr. Opat has also served on the Board of Sun Country Airlines since April 2012, and has been a member of the corporate advisory board of Alerus Financial Services Company (OTXQX: ALRS) since June 2015. He was employed by Hennepin County Adult Correction Facility as a correctional officer from 1981 to 1989, and as a corrections supervisor from 1990 to 1993. He holds a B.S. degree in Management from the University of Minnesota (1983), and a Masters of Public Policy from Harvard University, John F. Kennedy School of Government (1989).
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Key Experience, Attributes and Skills
Mr. Opat has leadership, financial management, budgeting, and communications experience, and provides diversity of background and viewpoint.
Anthea C. Stratigos, age 56, has served as one of the Company’s directors since March 2009. Ms. Stratigos is co-founder and CEO of Outsell, Inc. (founded in 1994), a leading research and advisory firm that focuses exclusively on the information and publishing industries, providing analysis and recommendations for high-level executives regarding markets, trends, benchmarks and best practices. She is Outsell’s primary spokesperson and chairs Outsell’s Leadership Council, a member-service for CEOs and senior executives of publishing and information-provider firms. Ms. Stratigos holds a B.S. degree in Communication from Stanford University (1983) and graduated from the Executive Marketing Program at Harvard University (1992).
Key Experience, Attributes and Skills
As CEO and founder of Outsell, Ms. Stratigos brings significant current knowledge about the direction and needs of the information and publishing industries, the Company’s primary market, leadership, marketing and entrepreneurial skills, and provides diversity of background and viewpoint.
Andargachew S. Zelleke, age 56, has served as one of the Company’s directors since June 2012. In July 2011 Dr. Zelleke was appointed the MBA Class of 1962 Senior Lecturer of Business Administration at the Harvard Business School, and presently serves in that role. From July 2007 through June 2011, he was a lecturer in public policy at the Harvard Kennedy School, serving for two of those years as Co-Director of the Harvard Kennedy School’s Center for Public Leadership. From July 2003 through June 2007, Dr. Zelleke was a lecturer at the University of Pennsylvania's Wharton School. While a member of the Wharton faculty, Dr. Zelleke was Project Director and a Steering Committee member of the American Academy of Arts and Sciences' Corporate Responsibility initiative, and coeditor of its 2005 book Restoring Trust in American Business (MIT Press). Dr. Zelleke has written several articles on corporate governance and op-eds on topics in leadership, corporate governance and foreign affairs. He has served as a consultant to leading law firms in relation to three major business litigations and is formerly a business lawyer who practiced law for six years at two large international law firms. Dr. Zelleke received an A.B. in Government from Harvard College (1983) and a J.D. degree from Harvard Law School (1986). He also received an A.M. in Sociology (2000) and a Ph.D. in Organizational Behavior (2003), both from Harvard University. Dr. Zelleke is a member of the State Bar of New York and the Council on Foreign Relations.
Key Experience, Attributes and Skills
Dr. Zelleke has expertise in corporate governance and negotiation as well as experience in corporate law, organizational strategy and leadership development, and provides diversity of background and experience.
There are no family relationships between or among any nominees for director of the Company. Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF THE DIRECTOR NOMINEES.
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CORPORATE GOVERNANCE MATTERS
Director Independence
The Board of Directors has determined that Haig S. Bagerdjian, Louise C. Forlenza, Stewart R. Massey, Michael J. Opat, Anthea C. Stratigos and Andargachew S. Zelleke are independent directors. The independent directors comprise a majority of the Board. The only director who is not independent is Jack S. Abuhoff, the Company’s Chairman, President and Chief Executive Officer (“CEO”). The Company defines independence as meeting the requirements to be considered as an independent director as set forth in the Nasdaq Marketplace Rule 5605(a)(2). To assist in determining director independence, the Board of Directors also considers any business relationship with any independent director, including any business entity with which any independent director is affiliated, to determine if there is any material relationship that would impair a director’s independence. In making its determination, the Board of Directors reviewed information provided by each of the directors and the nominee for director, and information gathered by the Company.
Board Leadership Structure
Chairman of the Board and Chief Executive Officer Positions
The Board of Directors believes that having a combined Chairman of the Board/Chief Executive Officer, independent directors with strong leadership and management experience, an independent director serving as the Lead Independent Director and Board of Directors committees being comprised solely of independent directors, provides an effective and efficient leadership structure that is appropriate for the Company at the present time. The Chairman/CEO has primary responsibility for managing the business. Combining the leadership role avoids duplication of efforts while strengthening the Chairman/CEO’s ability to provide insight and direction on important strategic initiatives to both management and the independent directors.
Lead Independent Director
Stewart R. Massey currently serves as the Company’s Lead Independent Director. The principal responsibilities of the Lead Independent Director are to:
| · | Schedule and preside over executive sessions of the independent directors; |
| · | Preside over Board of Directors meetings in the absence of the Chairman; |
| · | Provide input to the Chairman in the preparation of agendas for Board of Directors meetings; and |
| · | Enhance the effective functioning of the independent directors by facilitating communications and collaboration between and among them. |
The Board’s Role in Risk Oversight
The Board of Directors believes that the goal of risk oversight is to identify and assess risks which may affect the Company’s ability to fulfill its business objectives and to formulate plans to mitigate potential effects. The Board of Directors administers its oversight function directly, through both its Audit and Compensation Committees, and through executive management of the Company, as follows:
| · | Through Board of Directors discussion on general business strategy and risks that could drive tactical and strategic decisions in the near and long term; |
| · | Through the Audit Committee with respect to financial risks and risks that may affect the financial situation of the Company; |
| · | Through the Compensation Committee with respect to risks associated with executive compensation plans and arrangements; |
| · | Through executive management of the Company with respect to risks which may arise in the ordinary course of business, such as operational, managerial, business, legal, regulatory and reputational risks; |
| · | Through the Compliance Committee of the Company with respect to risks which may arise with respect to global compliance and ethical conduct; and |
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| · | Through the CEO, in the CEO’s combined role as Chairman, via updates to the Board of Directors during Board of Directors meetings with respect to potential material risks identified by executive management, as is deemed appropriate based on the circumstances. |
The Board of Directors believes the various roles of the board committees, compliance committee and executive management in risk oversight described above complement the Board of Directors’ leadership structure described above, including the combination of the Chairman of the Board and Chief Executive Officer positions.
Meetings of the Board of Directors
The Board of Directors meets throughout the year on a set schedule. The Board of Directors also holds special meetings and acts by unanimous written consent from time to time as appropriate. The Board of Directors held twelve meetings during the year ended December 31, 2016. Each director, except for Haig Bagerdjian attended at least 75% of all of the meetings of the Board of Directors held during the period they served as Director, and each director, except for Haig Bagerdjian attended at least 75% of the meetings of all committees 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. Six directors attended last year’s annual meeting.
The Board of Directors meets in executive sessions without management, as needed, immediately prior or during its regularly scheduled meetings. The Board of Directors also schedules executive sessions during the year for the independent directors only.
Committees of the Board of Directors
Audit Committee
The Company has a separately designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The Audit Committee operates under a written charter adopted by the Board of Directors. A copy of the charter is available on our website at www.innodata.com. Serving on the Committee are Ms. Forlenza and Messrs. Bagerdjian and Massey. The Board of Directors has determined that it has an audit committee financial expert serving on the audit committee: Ms. Forlenza. The functions of the Audit Committee are, among other things, to make recommendations concerning the selection each year of independent auditors of the Company, to assist the Board of Directors in fulfilling its oversight responsibilities relating to the quality and integrity of the Company's financial reports and financial reporting processes and systems of internal controls, to consider whether the Company's principal 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. To carry out its responsibilities, the Audit Committee met ten times during fiscal 2016. The Company defines independence as meeting the standards to be considered as an independent director as set forth in the Nasdaq Marketplace Rule 5605(a)(2), and the Board of Directors has determined that all the members of the Audit Committee are "independent" as defined in the Nasdaq Marketplace Rule 5605(c)(2)(A).
Compensation Committee
The Company has a standing Compensation Committee comprised of Mr. Massey, Ms. Forlenza and Dr. Zelleke. 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.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 seven times during fiscal 2016. The Company defines independence as meeting the standards to be considered as an independent director as set forth in the Nasdaq Marketplace Rule 5605(a)(2), and the Board of Directors has determined that all the members of the Compensation Committee are "independent" as defined in the Nasdaq Marketplace Rule 5605(a)(2).
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Compensation Committee Interlocks and Insider Participation. The Compensation Committee is comprised of Mr. Massey, Ms. Forlenza and Dr. Zelleke, none of whom are or were officers or employees of the Company.
Nominating Committee
The Company has a standing Nominating Committee comprised of Dr. Zelleke, Mr. Bagerdjian and Ms. Forlenza. The Company does not have a Nominating Committee charter. The primary responsibilities of the Nominating Committee include assisting the Board of Directors in identifying and evaluating qualified candidates to serve as directors; recommending to the Board of Directors candidates for election or re-election to the Board of Directors or to fill vacancies on the Board of Directors; and assisting in attracting qualified candidates to serve on the Board of Directors. Director nominees are selected by Board of Director resolution. All of the nominees recommended for election to the Board of Directors at the Meeting are directors standing for re-election. Although the Nominating Committee does not have a formal policy with respect to the consideration of diversity, when considering director candidates the Nominating Committee seeks individuals with backgrounds and qualities that, when combined with those of the Company’s existing directors, provide a blend of skills and experience that will further enhance the Board of Directors’ effectiveness at the time the consideration is made. When considering potential director candidates, the Nominating Committee considers the candidate's character, judgment, diversity, skills, including financial literacy, and experience in the context of the needs of the Company and the Board of Directors. The Nominating Committee has not established any minimum qualifications for director candidates. To carry out its responsibilities, the Nominating Committee met one time during fiscal 2016. The Company defines independence as meeting the standards to be considered as an independent director as set forth in the Nasdaq Marketplace Rule 5605(a)(2), and the Board of Directors has determined that all the members of the Nominating Committee are "independent" as defined in the Nasdaq Marketplace Rule 5605(a)(2). In 2016 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 2018 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 who beneficially owns five percent or more of its voting stock.
Stockholder Communications with the Board of Directors
Generally, stockholders who have questions or concerns regarding the Company should contact our Investor Relations department at 201-371-8000. However, stockholders may communicate with the Board of Directors by sending a letter to: Board of Directors of Innodata Inc., c/o Corporate Secretary, 55 Challenger Road, Ridgefield Park, New Jersey 07660. 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.
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REPORT OF THE AUDIT COMMITTEE
The following report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this Report by reference therein.
The responsibilities of the Audit Committee, which are set forth in the Audit Committee Charter, include providing oversight to the Company’s financial reporting process through periodic meetings with the Company’s independent auditors and management to review accounting, auditing, internal controls and financial reporting matters. The Audit Committee is also responsible for the appointment, compensation and oversight of the Company’s independent auditors. The management of the Company is responsible for the preparation and integrity of the financial reporting information and related systems of internal controls. The Audit Committee, in carrying out its role, relies on the Company’s senior management, including senior financial management, and its independent auditors.
The Audit Committee has implemented procedures to ensure that during the course of each fiscal year it devotes the attention that it deems necessary or appropriate to each of the matters assigned to it under the Audit Committee's charter. To carry out its responsibilities, the Audit Committee met ten times during fiscal 2016.
The primary purpose of the Audit Committee is to assist the Board of Directors in fulfilling its oversight responsibilities relating to the quality and integrity of the Company's financial reports and financial reporting processes and systems of internal controls. Management of the Company has primary responsibility for the Company's financial statements and the overall reporting process, including maintenance of the Company's system of internal controls. The Company retains independent auditors who are responsible for conducting independent audits of the Company's financial statements and internal control over financial reporting, in accordance with standards of the Public Company Accounting Oversight Board (United States), and issuing reports thereon.
The Audit Committee has reviewed and discussed the Company’s consolidated audited financial statements as of and for the year ended December 31, 2016 with management and the independent auditors. The Audit Committee has discussed with the independent auditors the matters required to be discussed under standards established by the Public Company Accounting Oversight Board (United States), including those matters set forth in Statement on Auditing Standard No. 1301 (Communications with Audit Committees). The independent auditors have provided to the Audit Committee the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditor’s communication with the Audit Committee concerning independence, and the Audit Committee has discussed with the auditors their independence from the Company. The Audit Committee has concluded that the independent auditors are independent from the Company and its management.
On the basis of the foregoing reviews and discussions, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2016, for filing with the Securities and Exchange Commission. The Audit Committee has also recommended, subject to stockholder approval, the selection of the Company's independent auditors.
The Members of the Audit Committee
Louise C. Forlenza, Chair
Haig S. Bagerdjian
Stewart R. Massey
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Fiscal 2016 and 2015 Accounting Firm Fee Summary
Set forth below is certain information concerning fees billed to the Company by CohnReznick LLP in respect of professional services rendered to the Company for the audit of the annual financial statements for the years ended December 31, 2016 and December 31, 2015; the reviews of the financial statements included in reports on Form 10-Q for periods within 2016 and 2015; related regulatory filings for periods within 2016 and 2015; and other services. The Audit Committee has determined that the provision of all services is compatible with maintaining the independence of CohnReznick LLP.
| 2016 ($) | 2015($) | |||||||
| Audit Fees | 434,697 | 372,016 | ||||||
| Audit-Related Fees | - | - | ||||||
| Tax Fees | - | - | ||||||
| All Other Fees | - | - | ||||||
Audit fees consist of fees for the audit of the Company’s financial statements and internal control over financial reporting under Section 404 of the Sarbanes Oxley Act, the review of the interim financial statements included in the Company’s quarterly reports on Form 10-Q, and other professional services provided in connection with statutory and regulatory filings or engagements.
Audit-related fees consist of fees for assurance and related services that are reasonably related to the performance of the audit and the review of the Company’s financial statements and which are not reported under “Audit Fees.” These services relate to consultations concerning financial accounting and reporting standards and are not required by statute or regulation.
Audit Committee Pre-Approval Policy
All audit, audit-related services, tax services and other services provided by CohnReznick 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.
PROPOSAL 2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Subject to approval by the stockholders, the Board of Directors has appointed CohnReznick LLP as the independent auditors to audit the financial statements of the Company for the fiscal year ending December 31, 2017. CohnReznick LLP has served as the Company's auditors since September 2008. A representative of CohnReznick LLP is expected to be present at the Meeting and will have the opportunity to make a statement if he desires to do so. A representative of CohnReznick LLP is also expected to be available to respond to appropriate questions at the meeting.
In the event that the stockholders fail to ratify this appointment, other independent auditors will be considered upon recommendation of the Audit Committee. Even if this appointment is ratified, our Board of Directors, in its discretion, may direct the appointment of a new independent accounting firm at any time during the year, if the Board believes that such a change would be in the best interest of the Company and its stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF COHNREZNICK LLP AS INDEPENDENT AUDITORS.
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EXECUTIVE OFFICERS
Set forth below is information concerning the executive officers who are not directors.
| Name | Age | Position | ||
| Ashok Mishra | 62 | Executive Vice President and Chief Operating Officer | ||
| O’Neil Nalavadi | 57 | Senior Vice President and Chief Financial Officer |
Ashok Mishra has been the Company’s Executive Vice President and Chief Operating Officer since January 2007. Prior to 2007 Mr. Mishra held senior level positions with the Company and its subsidiaries for more than nine years. Mr. Mishra has served as Senior Vice President since May 2004, after serving as Vice President, Project Delivery from October 2001 through April 2004. Prior thereto, Mr. Mishra served as Assistant Vice President, Project Delivery from November 2000 to September 2001, and as General Manager and Head of the Facility of the Company’s India operations from 1997 to October 2000. Mr. Mishra holds a Bachelor of Technology degree in Mechanical Engineering from Pantnagar University (1976). He also has Component Manufacturing Technical Training from Alcatel France (1985) and completed a condensed MBA course from Indian Institute of Management Bangalore (1995).
O’Neil Nalavadi has been the Company’s Senior Vice President and Chief Financial Officer since November 2009. Prior to joining the Company, Mr. Nalavadi was the Chief Financial Officer and a Director of R Systems International Ltd. from January 2000 and January 2001, respectively. R Systems is a provider of outsourced software product development and business process outsourcing services. Prior to R Systems, Mr. Nalavadi served as a Senior Vice President at UB Group, a $5 billion diversified conglomerate, from 1984 to 1997, and served as Chief Financial Officer of UB Group’s outsourced IT services company from August 1997 to January 2000. Mr. Nalavadi was awarded a Bachelor of Commerce and Economics degree from the University of Mumbai (1980) and qualified as a Chartered Accountant with National Honor Roll (1981).
The Company’s executive officers are elected by, and serve at the discretion of, our Board of Directors. There are no family relationships between or among any of the Company’s Executive Officers.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Overview
This compensation discussion and analysis describes and analyzes the material elements of compensation awarded, earned by, or paid to each of our executive officers who served as named executive officers during the last completed fiscal year. This compensation discussion and analysis focuses on the information contained in the following tables and related footnotes and narrative for primarily the last completed fiscal year. However, 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 for such completed fiscal year.
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:
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| · | Attract, motivate and retain qualified, talented and dedicated executives |
| · | Motivate executives to achieve business and financial objectives that will enhance stockholder value |
| · | Align the interests of our executives with the long term interests of stockholders through stock-based incentives |
| · | Maintain a strong link between pay and performance by placing a significant 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 |
| · | Internal equity among executive officers |
| · | The recommendations of management |
| · | The recommendations of an independent compensation consultant, to the extent compensation consultants are utilized |
| · | Competitive market and peer company data |
Executive Officer Compensation Processes
The Committee uses the following processes, procedures and resources to help it perform its responsibilities:
| · | Executive sessions without management present to discuss various compensation matters, including the compensation of our CEO |
| · | A periodic review of executive compensation and benefit programs for reasonableness and cost effectiveness |
| · | The recommendations of the CEO on compensation for the other executive officers |
| · | On an as-needed basis, the services of an independent compensation consultant |
Competitive Benchmarking / Peer Group Analysis
Although the Company has no policy regarding the retention of independent consultants to conduct competitive benchmarking and/or a peer group analysis, it has, from time to time, engaged such consultants to assist the Committee in the review and determination of various compensation matters.
In August 2015 the Committee engaged an independent compensation consultant, Frederic W. Cook & Co., Inc. (“Cook”) to conduct an independent review of the Company’s executive compensation program and non-employee director compensation program, and to analyze how the Company’s executive compensation and non-employee director programs compare to the competitive market. As part of the review a group of 15 publicly-traded peer companies were selected and used for competitive benchmarking. The peer companies were selected by Cook and approved by the Committee. The selected companies are broadly similar to the Company in industry and/or scope of business operations and are within a reasonable size range of the Company. The companies in the peer group were: Cartesian, Inc., Computer Programs & Systems, Inc. CSP Inc., Edgewater Technology Inc., FalconStor Software Inc., The Hackett Group, Inc., Hooper Holmes, Inc., Information Services Group, Inc. Mattersight Corporation, PFSweb Inc., PRGX Global, Streamline Health Solutions, Inc., Sysorex Global Holdings Corp, WidePoint Corporation and Zix Corporation. The Company was positioned below the median of the peer group in terms of revenue for the last fiscal year, EBITDA for the trailing four quarters, and market capitalization.
In March 2016 the Committee engaged Cook to perform modelling and competitive benchmarking with respect to the Company’s 2013 Stock Plan, as amended. Cook used the same peer group of companies as set forth above for benchmarking.
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Use of Compensation Consultants
As mentioned above, the Committee engaged Frederic W. Cook & Co. as its independent compensation consultant. Cook did not perform any services for the Company other than as directed by the Committee. Cook reports directly to the Committee. Prior to engaging Cook the Committee reviewed the firm’s qualifications and assessed its independence from management and any potential conflicts of interest. The Committee retains the authority in its sole discretion to retain Cook, approve Cook’s compensation, determine the nature and the scope of its services, evaluate its performance, and terminate its engagement.
Components of the Executive Compensation Program
The primary elements of the Company’s Executive Compensation Program are:
| · | Base salary |
| · | Performance-based cash incentives |
| · | Stock-based incentives |
| · | Benefits and perquisites |
| · | Severance and change-of-control compensation |
The Committee does not use a pre-set formula to allocate a percentage of total compensation to each compensation component, and the percentage of total compensation allocated to each compensation component varies among the executive officers. Instead, the Committee relies on the processes and factors described in this discussion and analysis and takes into account the current and historical compensation components, and amount of each component, for each executive officer.
Base Salary
The base salaries of our executive officers are designed to attract and retain a high performing and dedicated leadership team. The Committee reviews the performance evaluations and salary recommendations provided to the Committee by the CEO for each executive officer other than himself. Increases to the CEO’s base salary are determined by the Committee without a recommendation by Company management. Adjustments to base salary are determined based on the individual’s responsibility level, performance, contribution and length of service, after considering the Company’s financial performance, as well as any requirements set forth in the executive officer’s employment agreement. In April 2016 the Committee increased the annual base salary of Mr. Mishra from $280,000 to $300,000, effective April 1, 2016. The amount of the base salary increase was based on the review of the Company’s executive compensation program performed by the independent compensation consultant on behalf of the Committee. No other executive officer received a base salary increase in calendar year 2016.
Performance-Based Cash Incentives
Performance-based cash incentives provide the Company with a means of rewarding performance based upon the attainment of corporate financial goals, individual goals, and individual accomplishments and contributions to the Company. The Committee reviews Company financial performance, individual performance, accomplishments and contributions, 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. There were no incentive compensation plans in place for the executive officers in 2016. In December 2016 the Committee awarded a cash bonus of $60,000 to Mr. Nalavadi. The cash bonus was in recognition of Mr. Nalavadi’s successful efforts in sourcing the Agility acquisition closed by the Company in 2016, and cultivating a strategic partnership between Agility and a global newswire provider. No other cash incentives were awarded by the Committee in 2016.
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Stock-Based Incentives
The Company uses stock option grants as the primary vehicle for employee stock-based incentives. The Company also uses restricted share grants as a form of stock-based incentives. The Committee believes stock-based incentives align the executive officers’ interests with those of stockholders in building shareholder value, offer executive officers an incentive for the achievement of superior performance over time, and foster the retention of key management personnel. The number of stock options or restricted shares the Committee awards each executive officer is based on his relative position, responsibilities and performance, including anticipated future performance, potential and responsibilities, and performance over the previous fiscal year, to the extent applicable. The Committee also reviews and considers prior stock-based grants to each executive officer, including the extent to which any prior stock option grants remained unexercised upon expiration due to an underwater stock price at the time of expiration. The size of stock-based grants is not directly related to the Company’s performance. In December 2016 the Committee awarded the following stock option grants to the executive officers: 290,000 shares to Mr. Abuhoff, 150,000 shares to Mr. Mishra and 100,000 shares to Mr. Nalavadi. The stock options have a term of ten years from the date of grant and vest in three equal installments on December 30, 2017, December 30, 2018 and December 30, 2019. In determining the size of the grant to each executive officer the Committee considered the data from the peer group competitive analysis discussed in the section entitled “Competitive Benchmarking / Peer Group Analysis”. The Committee also took into account that no cash incentives were awarded to Mr. Abuhoff or Mr. Mishra in 2016, and that Mr. Abuhoff and Mr. Nalavadi did not receive a base salary increase in 2016.
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 2016, the Company (i) reimbursed Mr. Abuhoff $12,222 for the cost of life and disability insurance premiums and related taxes pursuant to his employment agreement; (ii) provided Mr. Mishra benefits totaling $44,576 consisting of apartment rental, utilities, car rental and security in connection with his foreign assignment, health insurance, and related fringe benefit taxes; and (iii) provided Mr. Nalavadi, in connection with his relocation to New Jersey, benefits totaling $36,313 for an apartment rental, moving expenses, utilities, and travel.
Severance and Change-of-Control
The Company uses severance and change-of-control agreements to attract and retain qualified, talented and dedicated executives and to help it remain competitive in the marketplace.
Results of 2016 Advisory Vote on Executive Compensation
At the 2016 Annual Meeting of Stockholders held in June 2016, the Company’s stockholders approved the 2015 compensation of the Company’s named executive officers by a majority of the votes cast. Although the vote cast represented majority support for the named executive officer compensation, the percentage of the votes cast voting in favor of the Company’s executive compensation is less than what the Company and the Compensation Committee deem satisfactory. The Compensation Committee values the stockholder feedback provided through the vote as well as the feedback received through conversations with stockholders subsequent to the vote. The Compensation Committee will continue to review the Company’s executive compensation programs and consider ways to further align these programs with stockholder interests.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based on such review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
The Members of the Compensation Committee
Stewart R. Massey, Chair
Louise C. Forlenza
Andargachew S. Zelleke
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Summary Compensation Table 2016
The following table sets forth information regarding compensation paid or accrued to named executive officers in 2016.
| Name
and Position | Year | Salary ($) | Bonus
($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Non-Equity Incentive Plan Compensation Declined by the Executive ($) (1) | All
Other Compensation ($) | Total ($) | ||||||||||||||||||||||
Jack S. Abuhoff
Chairman, President and Chief Executive Officer | 2016 | 500,000 | - | 336,400 | (2) | - | - | 12,222 | (3) | 848,622 | ||||||||||||||||||||
| 2015 | 500,000 | - | 397,300 | (4) | - | - | 15,584 | 912,884 | ||||||||||||||||||||||
| 2014 | 500,000 | - | 339,205 | (5) | 107,403 | 107,403 | 14,678 | 961,286 | (6) | |||||||||||||||||||||
Ashok Mishra
Executive Vice President and Chief Operating Officer | 2016 | 295,000 | - | 174,000 | (2) | - | - | 44,576 | (7) | 513,576 | ||||||||||||||||||||
| 2015 | 280,000 | - | 246,600 | (4) | - | - | 46,024 | 572,624 | ||||||||||||||||||||||
| 2014 | 280,000 | - | 274,014 | (5) | 50,122 | 50,122 | 52,106 | 656,242 | (6) | |||||||||||||||||||||
O’Neil Nalavadi
Senior Vice President and Chief Financial Officer | 2016 | 280,000 | 60,000 | 116,000 | (2) | - | - | 36,313 | (8) | 492,313 | ||||||||||||||||||||
| 2015 | 280,000 | - | 157,550 | (4) | - | - | 36,536 | 474,086 | ||||||||||||||||||||||
| 2014 | 280,000 | - | 150,314 | (5) | 40,097 | 40,097 | 31,108 | 501,519 | (6) | |||||||||||||||||||||
| (1) | Represents the amount of non-equity incentive plan compensation voluntarily declined by each named executive officer. |
| (2) | Represents the dollar amount of the aggregate grant date fair value of stock options granted in 2016. The aggregate grant date fair value is the amount the Company expects to expense in its financial statements over the award’s vesting schedule. This amount reflects the Company’s accounting expense and does not correspond to the actual value that will be realized by the Executive. For stock options, grant date fair value is calculated using the Black-Scholes option pricing model and is based on the value of the option on the grant date, which was $1.16 on December 30, 2016. For information on the valuation assumptions, see Note 10 in the Notes to Consolidated Financial Statements filed with the Annual Report on Form 10-K for year-end 2016. |
| (3) | Represents the cost of employer-provided executive life and disability insurance in the amount of $7,860, and reimbursement for related federal and state income taxes in the amount of $4,362. |
| (4) | Represents the dollar amount of the aggregate grant date fair value of stock options granted in 2015. The aggregate grant date fair value is the amount the Company expects to expense in its financial statements over the award’s vesting schedule. This amount reflects the Company’s accounting expense and does not correspond to the actual value that will be realized by the Executive. For stock options, grant date fair value is calculated using the Black-Scholes option pricing model and is based on the value of the option on the grant date, which was $1.37 on December 31, 2015. For information on the valuation assumptions, see Note 10 in the Notes to Consolidated Financial Statements filed with the Annual Report on Form 10-K for year-end 2015. |
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| (5) | Represents the dollar amount of the aggregate grant date fair value of stock options granted in 2014. The aggregate grant date fair value is the amount the Company expects to expense in its financial statements over the award’s vesting schedule. This amount reflects the Company’s accounting expense and does not correspond to the actual value that will be realized by the Executive. For stock options, grant date fair value is calculated using the Black-Scholes option pricing model and is based on the value of the option on the grant date, which was $1.55 on March 13, 2014 and $1.33 on April 7, 2014. For information on the valuation assumptions, see Note 10 in the Notes to Consolidated Financial Statements filed with the Annual Report on Form 10-K for year-end 2014. |
| (6) | Includes the amount of non-equity incentive plan compensation voluntarily declined by each named executive officer. After subtracting the amount of non-equity incentive plan compensation declined by each named executive officer, total compensation for each named executive officer is $853,883 for Mr. Abuhoff, $606,120 for Mr. Mishra, and $461,422 for Mr. Nalavadi. |
| (7) | Includes $33,185 for apartment rental, utilities, car rental and security in connection with the executive’s foreign assignment, $5,820 for health insurance, and $5,571 for related fringe benefit taxes. |
| (8) | Includes, in connection with the executive’s relocation to New Jersey, $29,400 for apartment rental and $6,913 for moving expenses, utilities and travel. |
GRANTS OF PLAN-BASED AWARDS 2016
The following table summarizes the non-equity incentive plan awards granted to named executive officers in 2016.
| Name | Grant Date | All
Other Option Awards: Number of Securities Underlying Options (#) (2) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($) (1) | ||||||||||
| Jack S. Abuhoff | December 30, 2016 | 290,000 | 2.45 | 336,400 | ||||||||||
| Ashok Mishra | December 30, 2016 | 150,000 | 2.45 | 174,000 | ||||||||||
| O’Neil Nalavadi | December 30, 2016 | 100,000 | 2.45 | 116,000 | ||||||||||
| (1) | Represents the dollar amount of the aggregate grant date fair value of stock options granted in 2016. The aggregate grant date fair value is the amount the Company expects to expense in its financial statements over the award’s vesting schedule. This amount reflects the Company’s accounting expense and does not correspond to the actual value that will be realized by the Executive. For stock options, grant date fair value is calculated using the Black-Scholes option pricing model and is based on the value of the option on the grant date, which was $1.16 on December 30, 2016. For information on the valuation assumptions, see Note 10 in the Notes to Consolidated Financial Statements filed with the Annual Report on Form 10-K for year-end 2016. |
| (2) | Granted on December 30, 2016. The stock options vest and become exercisable in three equal installments on December 30, 2017, December 30, 2018 and December 30, 2019. The stock options have a term of ten years from the date of grant. |
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
Employment Agreements
Jack S. Abuhoff
On March 25, 2009 the Company and Mr. Jack S. Abuhoff, the President and Chief Executive Officer of the Company, executed an employment Agreement with an effective date of February 1, 2009 (the “Agreement”). The Agreement will continue until terminated by the Company or Mr. Abuhoff.
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The Agreement provides for: annual base salary compensation of $424,350 subject to cost of living adjustments and annual discretionary increases as determined by the Company’s Board of Directors; additional cash incentive or bonus compensation for each calendar year determined by the Compensation Committee of the Board of Directors in its discretion and conditioned on the attainment of certain quantitative objectives to be established by the Compensation Committee with a target bonus of not less than 60% of Mr. Abuhoff’s base salary for the year; and stock options and/or other equity-based and/or non-equity-based awards and incentives as determined by the Compensation Committee in its sole and absolute discretion. The Agreement also provides for indemnification, insurance and other fringe benefits, and contains confidentiality, non-compete and non-interference provisions.
In the event Mr. Abuhoff is terminated by the Company other than for cause (as defined), death or disability, or Mr. Abuhoff resigns his employment with the Company for good reason (as defined), Mr. Abuhoff is entitled to receive (i) an amount equal to 200% of his (A) base salary and (B) the greater of his most recently declared bonus (as defined) or the average of his three most recently declared bonuses to be paid in substantially equal payments over a period of 24 months; (ii) the continuation of his (and as applicable, his dependents’) medical and dental insurance until the earlier of the end of the maximum applicable COBRA coverage period or for the 24 month period immediately following Mr. Abuhoff’s termination (and if the COBRA period is shorter than the applicable 24 month period, pay to Mr. Abuhoff an amount equal to the monthly cost charged by the Company for COBRA coverage during the period beginning upon the expiration of the maximum COBRA coverage period and the end of the 24 month continuation period); (iii) the continuation of his life and long-term disability insurance for the 24 month period immediately following Mr. Abuhoff’s termination and (iv) the removal of any vesting, transfer, lock-up, performance or other restrictions or requirements on his stock options and other equity-based and non-equity-based awards and incentives. In the event Mr. Abuhoff is terminated by the Company coincident with or following a change-of-control (as defined), Mr. Abuhoff is entitled to receive (i) an amount equal to 300% of his (A) base salary and (B) the greater of his most recently declared bonus (as defined) or the average of his three most recently declared bonuses to be paid in a lump sum payout within 30 days of the date of his termination; (ii) the continuation of his (and as applicable, his dependents’) medical and dental insurance until the earlier of the end of the maximum applicable COBRA coverage period or for the 36 month period immediately following Mr. Abuhoff’s termination (and if the COBRA period is shorter than the applicable 36 month period, pay to Mr. Abuhoff an amount equal to the monthly cost charged by the Company for COBRA coverage during the period beginning upon the expiration of the maximum COBRA coverage period and the end of the 36 month continuation period); and (iii) the continuation of his life and long-term disability insurance for the 36 month period immediately following Mr. Abuhoff’s termination; and (iv) the removal of any vesting, transfer, lock-up, performance or other restrictions or requirements on his stock options and other equity and non-equity-based awards and incentives.
In the event Mr. Abuhoff is a “specified employee” as defined in Section 409A of the Code at the time of his termination of employment, the payments referenced above shall be delayed until the date that is six months and one day following his termination of employment (or, if earlier, the earliest other date as is permitted under Section 409A of the Code). The amount payable on such date shall include all amounts that would have been payable to Mr. Abuhoff prior to that date but for the application of Section 409A and the remaining payments shall be made in substantially equal installments until fully paid. Notwithstanding the foregoing, the six month delay shall not apply to any such payments made (A) during the short term deferral period set forth in Treasury Regulation Section 1.409A-1(b)(4), or (B) after said short term deferral period, payable solely on account of an involuntary separation from service (as defined in Section 409A of the Code) and in an amount less than the Section 409A Severance Exemption Amount. The Agreement also provides for potential tax gross-up payments in respect of taxes, penalties and/or interest that may be incurred by Mr. Abuhoff under Section 409A of the Code.
Ashok Mishra
On May 18, 2007, the Company and Mr. Ashok Mishra, the Executive Vice President and Chief Operating Officer of the Company, entered into a three year agreement with an effective date of January 1, 2007 whereby the Company agreed to cause one or more of its wholly-owned subsidiaries to offer employment to Mr. Mishra. Mr. Mishra’s agreement automatically renews for one year periods unless the Company either provides a notice of non-renewal by June 30 of the then current term or the Company and Mr. Mishra execute a new agreement prior to the end of the then current term. The agreement provides for annual base compensation of $175,000 per annum, subject to annual reviews for discretionary annual increases; and incentive compensation pursuant to an incentive compensation plan. The agreement also provides for insurance and other fringe benefits, and contains confidentiality, non-compete and non-interference provisions. In the event the Company terminates the agreement without cause, Mr. Mishra is entitled to receive his then base salary for 12 months following the date of termination.
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O’Neil Nalavadi
The Company’s employment agreement with Mr. O’Neil Nalavadi, the Senior Vice President and Chief Financial Officer of the Company, expired on November 8, 2015. The Agreement contains indemnification, confidentiality, non-compete and non-interference provisions which survive the expiration of the Agreement.
Outstanding Equity Awards at fiscal year-end 2016
The following table summarizes the outstanding equity awards held by each named executive officer at
December 31, 2016.
| Option Awards | ||||||||||||||
| Name | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price ($) | Option Expiration Date | ||||||||||
| Jack S. Abuhoff | 175,000 | - | 2.59 | 05/01/2018 | ||||||||||
| 137,434 | - | 3.39 | 03/03/2020 | |||||||||||
| - | 100,000 | (1) | 3.39 | 03/03/2020 | ||||||||||
| - | 255,000 | (2) | 2.75 | 04/06/2021 | ||||||||||
| 96,666 | 193,334 | (3) | 2.85 | 12/30/2025 | ||||||||||
| - | 290,000 | (4) | 2.45 | 12/29/2026 | ||||||||||
| Total | 409,100 | 838,334 | ||||||||||||
| Ashok Mishra | 100,000 | - | 2.59 | 05/01/2018 | ||||||||||
| 94,133 | - | 3.39 | 03/03/2020 | |||||||||||
| - | 80,000 | (5) | 3.21 | 03/12/2021 | ||||||||||
| - | 113,000 | (2) | 2.75 | 04/06/2021 | ||||||||||
| 60,000 | 120,000 | (3) | 2.85 | 12/30/2025 | ||||||||||
| - | 150,000 | (4) | 2.45 | 12/29/2026 | ||||||||||
| Total | 254,133 | 463,000 | ||||||||||||
| O’Neil Nalavadi | 100,000 | - | 2.59 | 05/01/2018 | ||||||||||
| 100,000 | - | 5.62 | 03/14/2020 | |||||||||||
| 50,000 | - | 4.37 | 03/14/2020 | |||||||||||
| 80,013 | - | 3.39 | 03/03/2020 | |||||||||||
| - | 113,000 | (2) | 2.75 | 04/06/2021 | ||||||||||
| 38,333 | 76,667 | (3) | 2.85 | 12/30/2025 | ||||||||||
| - | 100,000 | (4) | 2.45 | 12/29/2026 | ||||||||||
| Total | 368,346 | 289,667 | ||||||||||||
| (1) | The exercise of these stock options is contingent on a minimum market price of $6.00 per share at the time of exercise. |
| (2) | Granted on April 7, 2014. 100% of the stock options vested and became exercisable on April 7, 2017, but were unvested as of December 31, 2016. |
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| (3) | Granted on December 31, 2015. One-third of the stock options vested and became exercisable on December 31, 2016. The balance of the stock options vest in two equal installments on December 31, 2017 and December 31, 2018. |
| (4) | Granted on December 30, 2016. The stock options vest and become exercisable in three equal installments on December 30, 2017, December 30, 2018 and December 30, 2019. |
| (5) | Granted on March 13, 2014. 100% of the stock options vested and became exercisable on March 13, 2017, but were unvested as of December 31, 2016. |
Potential Payments Upon Termination or Change-OF-Control
Estimated Termination or Change-of-Control Benefits at Year-End 2016
The following table summarizes the estimated value of payments to each of the named executive officers assuming different termination events occurred at December 31, 2016.
| Name | Cash Compensation ($) | Stock-based Compensation ($) | Welfare
Benefits ($) | Aggregate Payments ($) | ||||||||||||
| Jack S. Abuhoff | ||||||||||||||||
| Termination for cause | - | - | 57,692 | 57,692 | ||||||||||||
| Termination without cause (1) | 1,071,602 | (2) | 150,314 | 1,221,916 | ||||||||||||
| Change-of-Control (3) | 1,607,403 | (2) | 196,626 | 1,804,029 | ||||||||||||
| Death | - | - | 57,692 | 57,692 | ||||||||||||
| Disability | 125,000 | - | 57,692 | 182,692 | ||||||||||||
| Ashok Mishra | ||||||||||||||||
| Termination for cause | - | - | - | - | ||||||||||||
| Termination without cause (1) | 300,000 | - | - | 300,000 | ||||||||||||
| Change-of-Control | - | - | - | - | ||||||||||||
| Death | - | - | - | - | ||||||||||||
| Disability | 75,000 | - | - | 75,000 | ||||||||||||
| O’Neil Nalavadi | ||||||||||||||||
| Termination for cause | - | - | 32,307 | 32,307 | ||||||||||||
| Termination without cause | - | - | 32,307 | 32,307 | ||||||||||||
| Change-of-Control | - | - | - | - | ||||||||||||
| Death | - | - | 32,307 | 32,307 | ||||||||||||
| Disability | - | - | 32,307 | 32,307 | ||||||||||||
| (1) | Includes resignation by the executive with good reason (as described below). |
| (2) | No value is included for stock options that vest upon the termination date where the exercise price for the stock option equals or exceeds the closing price on December 30, 2016. |
| (3) | Assumes the Company’s termination of the executive’s employment coincident with or following a change-of-control (as described below). |
Payments on Change-of-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”); |
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| · | A change in the constituency of the Board such that, during any period of thirty-six (36) consecutive months, at least a majority of the entire Board shall not consist of Incumbent Directors. For purposes of this Paragraph 5(c)(ii), “Incumbent Directors” shall mean individuals who at the beginning of such thirty-six (36) month period constitute the Board, unless the election or nomination for election by the shareholders of the Company of each such new director was approved by a vote of a majority of the Incumbent Directors; |
| · | The closing of a transaction involving the merger, consolidation, share exchange or similar transaction between the Company and any other corporation other than a transaction which results in the Company’s voting stock immediately prior to the consummation of such transaction continuing to represent (either by remaining outstanding or by being converted into voting stock of the surviving entity) at least two-thirds (2/3rds) of the combined voting power of the Company’s or such surviving entity’s outstanding voting stock immediately after such transaction; |
| · | The closing of a transaction involving the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all of the Company’s assets; or |
| · | A plan of liquidation or dissolution of the Company goes into effect. |
Upon the Company’s termination of Mr. Abuhoff’s employment coincident or following a change-of-control, Mr. Abuhoff will receive:
| · | 300% of his base salary to be paid in a lump sum payout within 30 days of the date of his termination; |
| · | 300% of the greater of his most recently declared bonus (as defined) or the average of his three most recently declared bonuses to be paid in a lump sum payout within 30 days of the date of his termination; |
| · | Continuation of his (and as applicable, his dependents’) medical and dental insurance until the earlier of the end of the maximum applicable COBRA coverage period or for the 36 month period immediately following Mr. Abuhoff’s termination (and if the COBRA period is shorter than the applicable 36 month period, pay Mr. Abuhoff an amount equal to the monthly cost charged by the Company for COBRA coverage during the period beginning upon the expiration of the maximum COBRA coverage period and the end of the 36 month continuation period); |
| · | Continuation of his life and long-term disability insurance for the 36 month period immediately following Mr. Abuhoff’s termination; |
| · | The removal of any vesting, transfer, lock-up, performance or other restrictions or requirements on his stock options and other equity-based and non-equity-based awards and incentives; and |
| · | Payment of up to six weeks’ accrued but unused vacation. |
Upon the occurrence of a change-of-control without a termination of Mr. Abuhoff’s employment, Mr. Abuhoff will receive:
| · | The removal of any vesting, transfer, lock-up, performance or other restrictions or requirements on his stock options and other equity-based and non-equity-based awards and incentives. |
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Payments on Termination (other than upon Change-of-Control)
Jack S. Abuhoff
Pursuant to Mr. Abuhoff’s employment agreement, if Mr. Abuhoff’s employment is terminated by the Company other than for cause, death or disability, or Mr. Abuhoff resigns his employment for good reason (including the Company’s breach of its material obligations under the Agreement, the Company, without Mr. Abuhoff’s prior consent, relocating Mr. Abuhoff’s regular office location by more than 50 miles from its present location, the Company assigning duties to Mr. Abuhoff which represent a material diminution of his authorities, duties or responsibilities, or requiring him to report to any person or entity other than the Board of Directors, and the Company does not revoke or reasonably cure any such action within 30 days of receipt of notice from Mr. Abuhoff and Mr. Abuhoff resigns his employment within 30 days thereafter) Mr. Abuhoff will be entitled to (i) 200% of his (A) base salary and (B) the greater of his most recently declared bonus (as defined) or the average of the his three most recently declared bonuses to be paid in substantially equal payments over a period of 24 months; (ii) the continuation of his (and as applicable, his dependents’) medical and dental insurance until the earlier of the end of the maximum applicable COBRA coverage period or for the 24 month period immediately following Mr. Abuhoff’s termination (and if the COBRA period is shorter than the applicable 24 month period, pay Mr. Abuhoff an amount equal to the monthly cost charged by the Company for COBRA coverage during the period beginning upon the expiration of the maximum COBRA coverage period and the end of the 24 month continuation period); (iii) the continuation of his life and long-term disability insurance for the 24 month period immediately following Mr. Abuhoff’s termination; (iv) payment of up to six weeks’ accrued but unused vacation and (v) the removal of any vesting, transfer, lock-up, performance or other restrictions or requirements on his stock options and other equity-based and non-equity-based awards and incentives. If Mr. Abuhoff’s employment is terminated for death, his estate will receive payment of his base salary through the date of termination, a pro-rated bonus based on his performance of his objectives through the date of termination, and payment of up to six weeks’ accrued but unused vacation. If Mr. Abuhoff’s employment is terminated for disability he will receive payment of his base salary for a 90 day period following the date of termination, a pro-rated bonus based on active duty with the Company and conditioned on attainment of quantitative objectives, and payment of up to six weeks’ accrued but unused vacation. If Mr. Abuhoff’s employment is terminated for cause, Mr. Abuhoff will receive his base salary through the date of termination, and payment of up to six weeks’ accrued but unused vacation. In return for the benefits described above, Mr. Abuhoff is required to sign a separation agreement and general release, and agreed, for a 12 month period following termination of his employment, not to compete or interfere with the Company, and not to employ or retain the services of an employee of the Company.
In the event Mr. Abuhoff is a “specified employee” as defined in Section 409A of the Code at the time of his termination of employment, the payments referenced above (for both change-of-control and other than upon change-of-control) shall be delayed until the date that is six months and one day following his termination of employment (or, if earlier, the earliest other date as is permitted under Section 409A of the Code). The amount payable on such date shall include all amounts that would have been payable to Mr. Abuhoff prior to that date but for the application of Section 409A and the remaining payments shall be made in substantially equal installments until fully paid. Notwithstanding the foregoing, the six month delay shall not apply to any such payments made (A) during the short term deferral period set forth in Treasury Regulation Section 1.409A-1(b)(4), or (B) after said short term deferral period, payable solely on account of an involuntary separation from service (as defined in Section 409A of the Code) and in an amount less than the Section 409A Severance Exemption Amount. The Agreement also provides for potential tax gross-up payments in respect of taxes, penalties and/or interest that may be incurred by Mr. Abuhoff under Section 409A of the Code.
Ashok Mishra
Pursuant to Mr. Mishra’s agreement, if the agreement is terminated without cause or by Mr. Mishra with good reason (including the Company’s material breach of its obligations, reduction of base salary below the amount 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’ accrued but unused vacation. If the agreement is terminated due to Mr. Mishra’s death, his estate will receive payment of his base salary through the date of termination, any earned but unpaid incentive compensation, and payment for up to six weeks’ accrued but unused vacation. If the agreement is terminated due to Mr. Mishra’s disability he will receive payment of his base salary for a 90 day period following the date of termination, any earned but unpaid incentive compensation, and payment for up to six weeks’ accrued but unused vacation. If this agreement is terminated for cause, Mr. Mishra will receive his base salary through the date of termination, and payment for up to six weeks’ accrued but unused vacation. In return for the benefits described above, Mr. Mishra is required to sign a separation agreement and general release, and agreed not to compete with the Company for a 12 month period following termination of his employment, and not to solicit the customers of the Company or to solicit or employ the services of an employee of the Company for a 24 month period following termination of employment.
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QUALIFICATION BY REFERENCE
The matters described in the sections titled "Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table" and "Potential Payments Upon Termination or Change-of-Control" are qualified in their entirety by reference to agreements previously filed by the Company in reports with the Securities and Exchange Commission.
DIRECTOR COMPENSATION FOR 2016
Summary Director Compensation Table
The following table sets forth information regarding compensation paid or accrued to directors in fiscal year ended December 31, 2016 for service as a Director.
| Name | Fees Earned or Paid in Cash ($) | Option Awards ($) (1); (2) | All Other Compensation ($) | Total ($) | ||||||||||||
| Haig S. Bagerdjian (3); (4) | 30,000 | 32,100 | - | 62,100 | ||||||||||||
| Louise C. Forlenza (3); (5) | 90,000 | (6) | 32,100 | - | 122,100 | |||||||||||
| Stewart R. Massey (3) | 42,000 | 32,100 | - | 74,100 | ||||||||||||
| Michael J. Opat | 17,500 | 32,100 | 62,100 | |||||||||||||
| Anthea C. Stratigos (3) | 30,000 | 32,100 | - | 62,100 | ||||||||||||
| Andargachew S. Zelleke | 30,000 | 32,100 | - | 49,600 | ||||||||||||
| 239,500 | 192,600 | - | 432,100 | |||||||||||||
| (1) | Represents the dollar amount of the aggregate grant date fair value of 30,000 stock options granted in 2016. 100% of the stock options vested and became exercisable on December 30, 2016. The aggregate grant date fair value is the amount the Company expects to expense in its financial statements over the award’s vesting schedule. This amount reflects the Company’s accounting expense and does not correspond to the actual value that will be realized by the Director. For stock options, grant date fair value is calculated using the Black-Scholes option pricing model and is based on the value of the option on the grant date, which was $1.07 on December 30, 2016. For information on the valuation assumptions, see Note 10 in the Notes to Consolidated Financial Statements filed with the Annual Report on Form 10-K for year-end 2016. |
| (2) | As of December 31, 2016 each of the directors other than Mr. Opat also held stock options to acquire (i) 47,066 shares of common stock that were granted in 2013 and are fully vested; (ii) 30,000 shares of common stock that were granted in 2014 and become exercisable in 2017; and (iii) 40,000 shares of common stock that were granted in 2015 and are fully vested. |
| (3) | As of December 31, 2016 Messrs. Bagerdjian and Massey and Mses. Forlenza and Stratigos each also held stock options to acquire 60,000 shares of common stock. These options were granted in 2011 and are fully vested. |
| (4) | As of December 31, 2016 Mr. Bagerdjian also held stock options to acquire 28,000 shares of common stock. The options were granted in prior years and are fully vested. |
| (5) | As of December 31, 2016 Ms. Forlenza also held stock options to acquire 23,232 shares of common stock. The options were granted in prior years and are fully vested. |
| (6) | Includes an additional one-time fee of $50,000 paid to Ms. Forlenza in her capacity as Chair of the Audit Committee, for the additional time commitment in connection with the internal investigation conducted by the Audit Committee in 2016. |
Narrative Disclosure to Director Compensation Table
Each non-employee director is compensated at the rate of $2,500 per month, plus out-of-pocket expenses for each Board of Directors meeting they attend. Employees who are directors receive no compensation for serving on the Board of Directors. The Chair of the Audit Committee receives an additional $833.34 per month, the Chair of the Compensation Committee receives an additional $500 per month and the Lead Independent Director receives an additional $500 per month. Directors do not receive any compensation for serving as a member of a Committee of the Board of Directors.
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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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 15, 2017, 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, 55 Challenger Road, Ridgefield Park, New Jersey 07660.
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Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership (1) | Percent of Class | ||||||
| Directors and Nominees | ||||||||
| Jack S. Abuhoff (2) | 1,744,295 | 6.6 | % | |||||
| Haig S. Bagerdjian (3) | 298,756 | 1.1 | % | |||||
| Louise C. Forlenza (4) | 259,148 | 1.0 | % | |||||
| Stewart R. Massey (5) | 227,566 | * | ||||||
| Michael J. Opat (6) | 39,300 | * | ||||||
| Anthea C. Stratigos (7) | 207,066 | * | ||||||
| Andargachew S. Zelleke (8) | 154,566 | * | ||||||
| Named Executive Officers (who are not also directors) | ||||||||
| Ashok Mishra (9) | 481,630 | 1.8 | % | |||||
| O’Neil Nalavadi (10) | 512,361 | 1.9 | % | |||||
| All Executive Officers and Directors as a Group (9 persons) (11) | 3,924,688 | 13.8 | % | |||||
| Known Beneficial Holders of More Than 5% | ||||||||
| None | ||||||||
* Less than 1%.
| (1) | Unless otherwise indicated, (i) each person has sole investment and voting power with respect to the shares indicated; and (ii) the shares indicated are currently outstanding shares. For purposes of this table, a person or group of persons is deemed to have "beneficial ownership" of any shares as of a given date which such person has the right to acquire within 60 days after such date. For purposes of computing the percentage of outstanding shares held by each person or group of persons named above on a given date, any security which such person or persons has the right to acquire within 60 days after such date is deemed to be outstanding for the purpose of computing the percentage ownership of such person or persons, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. Subject to the foregoing, the percentages are calculated based on 25,877,454 shares outstanding. |
| (2) | Includes currently exercisable options to purchase 664,100 shares of Common Stock. Excludes 100,000 vested options as the exercise of these options is contingent on a minimum market price of $6.00 per share at the time of exercise. |
| (3) | Includes currently exercisable options to purchase 235,066 shares of Common Stock. |
| (4) | Includes indirect ownership of 2,850 shares and currently exercisable options to purchase 230,298 shares of Common Stock. |
| (5) | Includes indirect ownership of 10,500 shares and currently exercisable options to purchase 207,066 shares of Common Stock. |
| (6) | Includes indirect ownership of 400 shares and currently exercisable options to purchase 30,000 shares of Common Stock. |
| (7) | Includes currently exercisable options to purchase 207,066 shares of Common Stock |
| (8) | Includes indirect ownership of 3,000 shares and currently exercisable options to purchase 147,066 shares of Common Stock. |
| (9) | Includes currently exercisable options to purchase 447,133 shares of Common Stock. |
| (10) | Includes currently exercisable options to purchase 481,346 shares of Common Stock. |
| (11) | Includes currently exercisable options to purchase 2,649,141 shares of Common Stock. |
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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 (10%) 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, 2016 through December 31, 2016 all officers and directors complied with Section 16(a) filing requirements.
PROPOSAL 3. APPROVAL OF THE COMPANY’S EXECUTIVE COMPENSATION ON AN ADVISORY BASIS
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act") enables stockholders to vote to approve, on an advisory and non-binding basis, the compensation of the Company’s named executive officers. Accordingly, you may vote on the following resolution at the 2017 annual meeting:
“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion is hereby approved.”
The Company’s executive compensation program is designed to attract, motivate and retain individuals with the skills required to formulate and drive the Company’s strategic direction and achieve annual and long-term performance goals necessary to create shareholder value. Consistent with this philosophy, a significant percentage of the total compensation opportunity for each executive officer is based on measurable financial performance of the Company on an annual basis, and on the performance of the Company’s stock on a long-term basis.
The Compensation Discussion and Analysis section of this Proxy Statement as well as the compensation tables and related narrative that follows it provides detailed information on the Company’s executive compensation programs and the compensation of the Company’s named executive officers.
Although this vote is non-binding, the Board of Directors and the Compensation Committee value the opinion of the stockholders and will consider the outcome of the vote when making future compensation decisions.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS.
PROPOSAL 4. ADVISORY VOTE ON THE FREQUENCY OF HOLDING FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION
The Dodd-Frank Act also enables the Company’s stockholders to vote, on an advisory and non-binding basis, on how frequently they would like to cast an advisory vote on the compensation of the Company’s named executive officers. By voting on this proposal, stockholders may indicate whether the advisory vote on executive compensation should be held every one, two or three years. Stockholders also may, if they wish, abstain from casting a vote on this proposal.
The Company’s stockholders voted on a similar proposal in 2011 with the majority voting to hold this vote every year. The Board of Directors believes that a frequency of “every year” for the advisory vote on executive compensation is the optimal interval for conducting and responding to a vote on executive compensation. This enables stockholders to provide feedback concerning the Company’s executive compensation philosophy, policies and practices for evaluation by the Compensation Committee of the Board of Directors on an annual basis, fostering dialogue between the Company and its stockholders.
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The proxy card provides stockholders with the opportunity to choose among four options (holding the vote every one, two or three years, or abstaining) and, therefore, stockholders will not be voting to approve or disapprove the recommendation of the Board of Directors.
Although this vote is non-binding, the Board of Directors and the Compensation Committee value the opinion of the stockholders and will consider the outcome of the vote when considering the frequency of future advisory votes on executive compensation.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR”
THE OPTION OF “EVERY YEAR” FOR THE FREQUENCY OF FUTURE ADVISORY VOTES ON THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS.
VOTE REQUIRED
Election of Directors. Directors will be elected at the meeting by a plurality of the votes cast (i.e., the seven nominees receiving the greatest number of votes “for” their election will be elected as directors). “Withhold” votes, and broker non-votes are not considered votes cast for the foregoing purpose, and will have no effect on the election of the nominees.
Ratification of the Appointment of Independent Auditors. The appointment of CohnReznick 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 this proposal.
Approval of the Company’s Executive Compensation on an Advisory Basis. The compensation of the named executive officers will be approved, on an advisory basis, if it receives 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 approval, whereas broker non-votes and shares not represented at the meeting will not be counted for purposes of determining whether such approval has been received.
Frequency of the Advisory Vote on Executive Compensation. The alternative receiving the highest number of votes (one year, two years or three years) will be the frequency the stockholders approve. Broker non-votes and shares not represented at the meeting will have no effect on this proposal.
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.
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HOUSEHOLDING
We have adopted a procedure approved by the SEC called “householding.” Under this procedure, multiple shareowners who share the same last name and address and do not participate in electronic delivery will receive only one copy of the annual Proxy materials or notice regarding the internet availability of Proxy materials. If the household received a printed set of Proxy materials by mail, each shareowner will receive his or her own Proxy card by mail. We have undertaken householding to reduce our printing costs and postage fees.
If you wish to opt out of householding and continue to receive multiple copies of the Proxy materials or notice regarding the internet availability of Proxy materials at the same address, you may do so at any time prior to thirty days before the mailing of Proxy materials or notice regarding the internet availability of Proxy materials, which typically are mailed in May of each year, by notifying us in writing or by telephone at: Innodata Inc. Investor Relations, 55 Challenger Road, Ridgefield Park, New Jersey 07660, (201) 371-8000. You also may request additional copies of the Proxy materials or notice regarding the internet availability of Proxy materials by notifying us in writing or by telephone at the same address or telephone number.
STOCKHOLDER PROPOSALS FOR THE 2017 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 January 7, 2018. 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 Inc., 55 Challenger Road, Ridgefield Park, New Jersey 07660, 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 as director or to bring other business before an annual meeting. Under these procedures, a stockholder who proposes to nominate a candidate for director or propose other business at the 2018 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, 2016, 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 Inc., 55 Challenger Road, Ridgefield Park, New Jersey 07660.
OTHER MATTERS
The Company knows of no items of business that are expected to be presented for consideration at the Meeting which are not enumerated herein. However, if other matters properly come before the Meeting, it is intended that the person named in the accompanying Proxy will vote thereon in accordance with his best judgment.
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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.
| Ridgefield Park, New Jersey | By Order of the Board of Directors |
| April 25, 2017 | |
| /s/ Amy R. Agress | |
| Amy R. Agress | |
| Senior Vice President, General Counsel and Secretary |
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