INNODATA
CORPORATION
95 ROCKWELL PLACE
BROOKLYN, NEW YORK 11217
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 7, 1996
TO THE STOCKHOLDERS OF INNODATA CORPORATION:
The Annual Meeting of Stockholders of Innodata Corporation (the "Company")
will be held at 56 Pine Street, New York, New York 10005, Second Floor
Conference Room, at 10:00 A.M. on Thursday, November 7, 1996, for the
following purposes:
(1) To elect eight 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 approve the 1996 Stock Option Plan authorizing the Company to issue
options to acquire up to 500,000 shares of Common Stock to officers,
directors, employees and consultants;
(3) To ratify the selection and appointment by the Company's Board of
Directors of Margolin, Winer & Evens LLP, independent auditors, as auditors
for the Company for the year ended December 31, 1996; and
(4) To consider and transact such other business as may properly come before
the meeting or any adjournments thereof.
A Proxy Statement, form of Proxy, the Annual Report to Stockholders of the
Company for the year ended December 31, 1995 and the Financial Report for the
six months ended June 30, 1996 and 1995 are enclosed herewith. Only holders
of record of Common Stock of the Company at the close of business on October
1, 1996 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 95 Rockwell Place, Brooklyn, New York 11217.
By Order of the Board of Directors,
Martin Kaye
Secretary
Brooklyn, New York
October 3, 1996
<PAGE>
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. IF YOU DO NOT
EXPECT TO BE PRESENT, PLEASE SIGN AND DATE THE ENCLOSED FORM OF PROXY AND
RETURN IT PROMPTLY USING THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF
MAILED IN THE UNITED STATES. ANY PERSON GIVING A PROXY HAS THE POWER TO
REVOKE IT AT ANY TIME PRIOR TO ITS EXERCISE AND IF PRESENT AT THE MEETING MAY
WITHDRAW IT AND VOTE IN PERSON. ATTENDANCE AT THE MEETING IS LIMITED TO
STOCKHOLDERS, THEIR PROXIES AND INVITED GUESTS OF THE COMPANY.
<PAGE>
INNODATA CORPORATION
95 ROCKWELL PLACE
BROOKLYN, NEW YORK 11217
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Innodata Corporation (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 56 Pine Street, New York, New York
10005, Second Floor Conference Room, at 10:00 A.M. on Thursday, November 7,
1996 (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
October 3, 1996 to all stockholders of record on October 1, 1996 (the "Record
Date").
Any stockholder giving a Proxy has the power to revoke the same at any time
before it is voted. The cost of soliciting Proxies will be borne by the
Company. The Company has no contract or arrangement with any party in
connection with the solicitation of proxies. Following the mailing of the
Proxy materials, solicitation of Proxies may be made by officers and employees
of the Company by mail, telephone, telegram or personal interview. Properly
executed Proxies will be voted in accordance with instructions given by
stockholders at the places provided for such purpose in the accompanying
Proxy. Unless contrary instructions are given by stockholders, it is intended
to vote the shares represented by such Proxies FOR the election of the eight
nominees for director named herein, FOR the 1996 Stock Option Plan and FOR the
selection of Margolin, Winer & Evens LLP as independent auditors. The current
members of the Board of Directors presently hold voting authority for Common
Stock representing an aggregate of 1,848,772 votes, or approximately 40.9% of
the total number of votes eligible to be cast at the Annual Meeting. The
members of the Board of Directors have indicated their intention to vote
affirmatively on all of the proposals.
VOTING SECURITIES
Stockholders of record as of the close of business on the Record Date will be
entitled to notice of, and to vote at, the Meeting or any adjournments
thereof. On the Record Date there were 4,523,710 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.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of September 15, 1996, information
regarding the beneficial ownership 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 of the Company's officers and
directors and (iii) all officers and directors of the Company as a group.
Unless otherwise indicated, each stockholder's address is c/o the Company, 95
Rockwell Place, Brooklyn, NY 11217.
SHARES OWNED BENEFICIALLY (1)
-----------------------------
NAME AND AMOUNT OF PERCENT
ADDRESS OF BENEFICIAL OF
BENEFICIAL OWNER OWNERSHIP CLASS
- ------------------------------- ----------- -------
Track Data Corporation (2) 1,369,825 30.3%
Barry Hertz (2)(3) 1,398,825 30.7%
Todd Solomon (4) 609,263 13.1%
Martin Kaye (5) 17,166 *
Jack Abuhoff (5)
263 W. 93 Street
New York, NY 10025 18,550 *
Albert Drillick (5) 5,325 *
Dr. E. Bruce Fredrikson (5)
Syracuse University
School of Management
Syracuse, NY 13244 24,500 *
Morton Mackof (5) 5,325 *
Stanley Stern (5) 5,325 *
All Officers and Directors
as a Group (8 persons)
(2)(3)(4)(5) 2,084,279 43.8%
- ----------------------
* Less than 1%.
(1)Except as noted otherwise, all shares are owned beneficially and of record.
Includes shares pursuant to options presently exercisable or which are
exercisable within 60 days.
(2)Consists of 1,244,244 shares owned by Track Data Corporation, which is
controlled by Mr. Hertz, and 125,581 shares which are owned by the Track Data
Corporation Employee 401K Savings Plan ("Plan"), of which Mr. Hertz is
trustee. Mr. Hertz disclaims beneficial ownership of the shares owned by the
Plan.
(3)Includes currently exercisable options to purchase 29,000 shares of Common
Stock.
(4)Includes currently exercisable options to purchase 130,316 shares of Common
Stock.
(5)Consists of shares issuable upon exercise of currently exercisable options
granted under the Company's Stock Option Plans.
ITEM I. ELECTION OF DIRECTORS
It is the intention of the persons named in the enclosed form of Proxy, unless
such form of Proxy specifies otherwise, to nominate and to vote the shares
represented by such Proxy FOR the election of Barry Hertz, Todd Solomon, Jack
Abuhoff, Albert Drillick, Dr. E. Bruce Fredrikson, Martin Kaye, Morton Mackof
and Stanley Stern to hold office until the next Annual Meeting of Stockholders
or until their respective successors shall have been duly elected and
qualified. All of the nominees are presently directors of the Company. The
Company has no reason to believe that any of the nominees will become
unavailable to serve as directors for any reason before the Annual Meeting.
However, in the event that any of them shall become unavailable, the person
designated as proxy reserves the right to substitute another person of his
choice when voting at the Annual Meeting.
OFFICERS AND DIRECTORS
The officers and directors of the Company are as follows:
NAME AGE POSITION
- ------------------------ --- --------------------------------------
Barry Hertz 46 Chairman of the Board of Directors
Todd Solomon 34 President, Chief Executive
Officer and Director
Martin Kaye 49 Vice President - Finance,
Secretary and Director
Jack Abuhoff 34 Director
Dr. Albert Drillick 50 Director
Dr. E. Bruce Fredrikson 58 Director
Morton Mackof 48 Director
Stanley Stern 46 Director
BARRY HERTZ has been Chairman since 1988 and Chief Executive Officer of the
Company until August 1995. He is involved in the strategic planning and
management of the Company. He founded Track Data Corporation ("Track") in
1981. He was Track's sole stockholder and Chief Executive Officer until its
merger (the "Merger") on March 31, 1996 with Global Market Information, Inc.
("Global"), a public company co-founded by Mr. Hertz, who was its Chairman and
Chief Executive Officer. Track was a principal stockholder of Global, a
company engaged in the financial information services market. Upon
consummation of the Merger, Global changed its name to Track Data Corporation
("TDC"). Mr. Hertz holds a B.S. degree in mathematics from Brooklyn College
(1971) and an M.S. degree in computer science from New York University (1973).
TODD SOLOMON has been President and a Director of the Company since its
founding by him in 1988. He was appointed as Chief Executive Officer in
August 1995. He is responsible for the day to day operations of the Company
world wide. Mr. Solomon was President of Ruck Associates, an executive
recruiting firm from 1986 until 1987. Mr. Solomon holds an A.B. in history
and physics from Columbia University (1986). He is also a director of TDC.
MARTIN KAYE has been Chief Financial Officer of the Company since October 1993
and was elected Vice President - Finance in August 1995. He was appointed as
a Director in March 1995. He is a certified public accountant and serves as
Vice President of Finance and a Director of TDC. Mr. Kaye had been an audit
partner with Deloitte & Touche for more than five years until his resignation
in 1993. Mr. Kaye holds a B.B.A. in accounting from Baruch College (1970).
JACK ABUHOFF has been a Director of the Company since 1990. He is currently
Managing Director of CRC, an international computer technology consulting
firm. Until 1994, he was employed as an attorney by Chadbourne & Parke. He
has practiced law for more than the past five years. He holds an A.B. degree
from Columbia College (1983) and a J.D. degree from Harvard Law School (1986).
DR. ALBERT DRILLICK has been a Director of the Company since 1990. He has
served as a director of applications and senior systems analyst for TDC for
more than the past five years. He holds a Ph.D. degree in mathematics from
New York University Courant Institute (1971).
DR. E. BRUCE FREDRIKSON has been a Director of the Company since August 1993.
He is currently a professor of finance at Syracuse University School of
Management where he has taught since 1966 and has previously served as
chairman of the finance department. Dr. Fredrikson has a B.A. in economics
from Princeton University and a M.B.A. and a Ph.D. in finance from Columbia
University. He is an independent general partner of Fiduciary Capital
Partners, L.P. and Fiduciary Capital Pension Partners, L.P. He is also a
director of TDC.
MORTON MACKOF has been a Director of the Company since April 1993. He had
been executive vice president of Track since February 1991 and was elected its
President in December 1994, and since the Merger serves as President of TDC.
From 1986 to 1991, he was president of Medical Leasing of America, Inc. From
1981 to 1986 he was vice president of sales with Fonar Corp. He holds a B.S.
degree in electrical engineering from Rensselaer Polytechnic Institute (1970)
and did graduate work in computer science. He is also a director of TDC.
STANLEY STERN has been a Director of the Company since August 1988. He has
served as chief operating officer of Track, and in predecessor positions, for
more than five years and since the Merger serves as Executive Vice President
of TDC. Mr. Stern holds a B.B.A. from Baruch College (1973). He is also a
director of TDC.
There are no family relationships between or among any directors or officers
of the Company. A.S. Goldmen & Co., Inc., the underwriter of the Company's
initial public offering, is entitled to designate one member of the Board of
Directors until August 9, 1998. No such member has been elected to date.
Directors are elected to serve until the next annual meeting of stockholders
and until their successors are elected and qualified. Officers serve at the
discretion of the Board.
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors held five meetings during the year ended December 31,
1995. Each director attended at least 75% of all of the meetings of the Board
of Directors held during the period in 1995 such person served as director.
The Company's Audit Committee is composed of Dr. Fredrikson and Mr. Abuhoff.
The function of the Audit Committee is to make recommendations concerning the
selection each year of independent auditors of the Company, to review the
effectiveness of the Company's internal accounting methods and procedures, and
to determine through discussions with the independent auditors whether any
instructions or limitations have been placed upon them in connection with the
scope of their audit or its implementation. The Audit Committee did not meet
separately during 1995. The Board of Directors does not have a Compensation
or Nominating Committee. The Board of Directors has designated Messrs.
Abuhoff and Fredrikson to serve as administrators of the Company's 1994 and
1995 Stock Option Plans.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The Company believes that during the period from January 1, 1995 through
December 31, 1995 all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten-percent beneficial owners were
complied with, except that Mr. Hertz filed a late Form 4 related to a
transaction of the Track Data pension plan of which he is trustee, and Messrs.
Hertz, Foxman, Kaye, Drillick, Mackof and Stern filed a late Form 4 in
connection with options granted to them by the Company in December 1995.
EXECUTIVE COMPENSATION
The following table sets forth information with respect to compensation paid
by the Company for services to the Company during the three fiscal years ended
December 31, 1995 to those executive officers whose aggregate cash and cash
equivalent compensation exceeded $100,000. To date, Barry Hertz, the
Company's Chairman and Chief Executive Officer, has not been paid any cash
compensation by the Company. He will, however, receive $50,000 as
compensation during 1996.
SUMMARY COMPENSATION TABLE
NUMBER OF
ANNUAL COMPENSATION STOCK
NAME AND PRINCIPAL CALENDAR ------------------- OPTIONS
POSITION YEAR SALARY BONUS AWARDED
- ------------------ ------ -------- ------- ---------
Barry Hertz 1995 $ - $ - 45,000
Chairman 1994 - - 45,000
- - 21,000(A)
1993 - - 21,000
Todd Solomon 1995 $222,814 $ - 31,000
President, CEO 1994 175,000 - 74,350
- - 78,750(A)
1993 169,950 11,030 78,750
Noah Foxman (B) 1995 $150,000 $ - 20,000
Executive Vice 1994 130,000 - 21,000
President - - 52,500(A)
1993 110,868 40,953 52,500
(A) Options granted 1993 and repriced in 1994.
(B) Terminated employment in June 1996.
The above compensation does not include certain insurance and other personal
benefits, the total value of which does not exceed as to any named officer,
the lesser of $50,000 or 10% of such person's cash compensation. The Company
has not granted any stock appreciation rights nor does it have any "long-term
incentive plans", other than its stock option plans.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
NUMBER PERCENT OF TOTAL
OF OPTIONS GRANTED EXERCISE EXPIR-
OPTIONS TO EMPLOYEES IN PRICE ATION
NAME GRANTED FISCAL YEAR PER SHARE DATE
- ------------ -------- ---------------- --------- --------
Barry Hertz 45,000 16.4% $3.8125 12/2000
Todd Solomon 31,000 11.3% $4.625 10/2000
Noah Foxman 20,000 7.3% $3.8125 12/2000
The options become exercisable one-third on each of the first three
anniversary dates.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR;
FISCAL YEAR END OPTION VALUES
VALUE OF
UNEXERCISED
IN-THE-MONEY
NUMBER OF UNEXERCISED OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR YEAR FISCAL
ACQUIRED END EXERCISABLE/ END EXERCISABLE/
NAME ON EXERCISE UNEXERCISABLE UNEXERCISABLE
- ------------- ----------- ---------------------- -----------------
Barry Hertz None 29,000/82,000 $26,250/$77,812
Todd Solomon None 77,283/106,817 $135,245/$132,680
Noah Foxman None 56,000/37,500 $51,450/$35,188
DIRECTORS COMPENSATION
Dr. E. Bruce Fredrikson and Jack Abuhoff are compensated at the rate of
$15,000 and $10,000 per annum, respectively, plus out-of-pocket expenses for
each meeting attended. No other director is compensated for his services as
director. Further, Messrs. Fredrikson and Abuhoff each receive options to
purchase 7,000 and 3,500 shares, respectively, annually as additional
compensation.
EMPLOYMENT AGREEMENT
On August 23, 1995 the Company entered into an employment agreement with Todd
Solomon to continue as President and also assume the responsibilities of Chief
Executive Officer. The agreement expires on September 30, 1999. Mr.
Solomon's annual compensation consists of $231,000 plus a bonus of up to an
additional 15% based on performance criteria established by the Board of
Directors. Further, he is to receive options to purchase 31,000 shares in
each year and is eligible to receive up to an additional 30,000 shares in each
year based on performance, as determined by the Board of Directors. In
addition, if Mr. Solomon is employed on September 30, 1999, and provided the
Company has achieved certain earnings criteria during the four years ended
September 30, 1999, then during the month of October 1999, Mr. Solomon may
"put" up to 400,000 shares of the Company's common stock owned by him to the
Company at $5.00 per share to be paid over a three-year period.
<PAGE>
STOCK OPTION PLANS
The Company adopted, with stockholder approval, 1993, 1994 and 1995 Stock
Option Plans (the "1993 Plan," "1994 Plan," "1994 DD Plan" and the "1995
Plan") which provide for the granting of options to purchase not more than an
aggregate of 262,500, 315,000, 52,500 and 600,000 shares of common stock,
respectively, subject to adjustment under certain circumstances. Such options
may be incentive stock options ("ISOs") within the meaning of the Internal
Revenue Code of 1986, as amended, or options that do not qualify as ISOs
("Non-Qualified Options"). The 1994 and 1995 Plans are intended to meet the
qualifying requirements of Rule 16b-3 in effect at the time the Plans were
adopted and, accordingly, are administered by disinterested directors, as
defined in Rule 16b-3. The 1994 DD Plan is solely for the disinterested
directors who administer the 1994 and 1995 Plans. Each administrator
presently receives 3,500 options per annum.
The option exercise price per share may not be less than the fair market value
per share of common stock on the date of grant (110% of such fair market value
for an ISO, if the grantee owns stock possessing more than 10% of the combined
voting power of all classes of the Company's stock). Options may be granted
under the Stock Option Plan to all officers, directors and employees of the
Company and, in addition, Non-Qualified Options may be granted to other
parties who perform services for the Company. No options may be granted under
the 1993 Plan after April 30, 2003, under the 1994 Plan and 1994 DD Plan,
after May 19, 2004 and under the 1995 Plan, after May 16, 2005.
The Plans may be amended from time to time by the Board of Directors of the
Company. However, the Board of Directors may not, without stockholder
approval, amend the Plans to increase the number of shares of common stock
which may be issued under the Plans (except upon changes in capitalization as
specified in the Plans), decrease the minimum exercise price provided in the
Plans or change the class of persons eligible to participate in the Plans.
The following is a summary of stock option transactions:
1993 SHARES PRICE PER SHARE
Options granted and balance
December 31, 1993 262,763 $4.76 - $7.38
1994
Options cancelled (8,400) $4.76
-------
Repriced options* 254,363 $2.625 - $5.63
Options granted 298,600 $2.625 - $5.95
Balance December 31, 1994 552,963 $2.625 - $5.95
1995
Options cancelled (24,275) $2.625 - $4.63
Options granted 274,550 $3.375 - $4.625
Balance December 31, 1995 803,238 $2.625 - $5.95
Options exercisable December 31, 1995 360,295 $2.625 - $5.95
Options becoming exercisable
during year ending December 31,
1996 255,156 $2.625 - $5.63
1997 125,784 $2.625 - $5.15
1998 62,003 $3.375 - $4.625
* In December 1994, the Company reduced the exercise price for a majority
of option holders by $1.75 per share. Adjusted exercise prices were not
less than the market price at date of adjustment.
The options have a term of ten years for 1993 grants and five years for 1994
and 1995 grants and the majority become exercisable one-third on each of the
first three anniversary dates. No options were exercised through December 31,
1995. The above table includes options to purchase 21,000 shares granted to
the Company's Chairman in 1993, which were not granted pursuant to any of the
Plans.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1995, 1994 and 1993, the Company paid Track Data Corporation $39,200,
$90,000 and $91,000, respectively, as reimbursement for certain common costs
and shared employees. The Company's New York City offices are located in
approximately 3,000 square feet of space for a monthly rent of $3,400 and
other customary terms, and such space is leased from Track Data Corporation.
The Company believes that each of the transactions set forth above involving
affiliates, officers or directors of the Company was on terms at least as
favorable to the Company as could have been obtained from an unaffiliated
third party at the time of the transaction. The Company has adopted a policy
that any transactions or loans between the Company and its directors,
officers, principal stockholders or affiliates must be approved by a majority
of the directors of the Company and must be on terms no less favorable to the
Company than those obtainable from unaffiliated third parties.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Deloitte & Touche ("D&T") was the principal auditor of the Company from its
inception through the December 31, 1993 fiscal year. During this period, D&T
also served as the principal auditor for Track Data Corporation ("Track"), the
Company's principal stockholder. In August, 1994, Track dismissed D&T as its
principal auditor. On September 9, 1994, D&T resigned as principal auditor of
the Company. D&T orally advised the Company that it was declining to audit
the Company unless D&T was the principal auditor for Track.
D&T reports on the financial statements of the Company for the Company's
fiscal year ended December 31, 1993 contained no adverse opinion, disclaimer
of opinion, modification, or qualification. During the two years ended
December 31, 1993 and the six months ended June 30, 1994, there were no
disagreements with D&T on any matter of accounting principles and practices,
financial statement disclosure, or audit scope and procedure, which
disagreement, if not resolved to the satisfaction of D&T, would have caused it
to make reference to the subject matter of the disagreement in connection with
its reports.
On January 9, 1995, the Company selected Margolin, Winer & Evens LLP as its
auditor for the fiscal year ended December 31, 1994.
ITEM II. APPROVAL OF THE COMPANY'S 1996 STOCK OPTION PLAN
The Board of Directors has determined that the Company should adopt a new
Stock Option Plan in order to make options available to employees, officers,
directors and others who render services to the Company. Accordingly, the
Board has adopted the 1996 Stock Option Plan (the "1996 Plan"). The Board
recommends to the shareholders that the 1996 Plan be approved.
SUMMARY OF THE 1996 STOCK OPTION PLAN
The purpose of the Plan is to provide additional incentive to the officers,
employees, and others who render services to the Company, who are responsible
for the management and growth of the Company, or otherwise contribute to the
conduct and direction of its business, operations and affairs. It is intended
that Options granted under the Plan strengthen the desire of such persons to
join and remain in the employ of the Company and stimulate their efforts on
behalf of the Company.
The Company may grant to its officers, key employees and others who render
services to the Company, options ("Options") to purchase up to 500,000 shares
of the Company's Common Stock, subject to adjustment under certain
circumstances, at a price which may not be less than the fair market value per
share on the date of the granting of the Option. The closing price of the
Common Stock on September 4, 1996 was $2 7/16.
Payment of the exercise price shall be made in cash, or, with the consent of
the Board of Directors, in whole or in part, in shares of Common Stock or with
a full recourse interest bearing promissory note of the Optionee secured by a
pledge of the shares received upon exercise of such Option. If an Option
granted under the 1996 Plan shall expire, terminate or be cancelled for any
reason without being exercised in full, the corresponding number of
unpurchased shares shall again be available for the purposes of the 1996 Plan.
Options may be granted in the form of incentive stock options within the
meaning of the Internal Revenue Code of 1986, as amended, or options which do
not qualify for treatment as incentive stock options.
The 1996 Plan will be administered by the Board of Directors or a committee
(the "Committee") appointed by the Board of Directors. The Board of Directors
determine the persons who are to be granted Options and the number and terms
of such Options based upon the contribution of such persons to the management
and growth of the Company. The 1996 Plan contains no preset criteria
determining the identity or amount of Options to be granted to any person or
group of persons. Therefore, no determinations can be made at the present
time as to the benefits or amounts that will be or would have been issued to
any specific person or groups of persons under the 1996 Plan. No Option may
be exercised after the expiration of 10 years from the date of the grant. No
Option may be granted under the 1996 Plan after July 8, 2006.
Incentive stock options are subject to the following limitations: (i) The
aggregate fair market value (determined at the time an option is granted) of
stock with respect to which incentive stock options are exercisable for the
first time by an optionee during any calendar year (under all such plans of
the Company, its parent or subsidiary) shall not exceed $100,000, and (ii) if
the individual to whom the incentive stock options were granted is considered
as owning stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company, then (A) the option price at the time of
grant may not be less than 110% of the fair market value per share for such
Common Stock and (B) the option period must be no more than five years from
the date of grant.
The Committee shall determine for each Option the extent, if any, to which
such Option shall be exercisable in the event of the termination of an
Optionee's employment with or rendering of services to the Company. However,
any such Option which is an ISO shall in all events lapse unless exercised by
the Optionee within a sixty-day (60) period, or if termination is by reason of
death, within the twelve month period after such termination, and then only if
and to the extent that such Option was exercisable at the date of termination
of employment.
The Board of Directors may, at any time, alter, suspend or terminate the 1996
Plan, except that the Board of Directors may not, without further approval of
the stockholders, (1) increase the maximum number of shares for which Options
may be granted under the 1996 Plan, (2) decrease the minimum purchase price
for shares of Common Stock to be issued upon exercise of Options or (3) change
the class of persons eligible to receive Options. Except in limited
circumstances, the Board of Directors may not make any change which would have
a material adverse affect upon any Option previously granted unless the
consent of the Optionee is obtained. No person may be divested of ownership
of shares already issued under the 1996 Plan.
The foregoing summary of the 1996 Plan is qualified in its entirety by, and
reference is hereby made to, the 1996 Plan, a copy of which is attached hereto
as Exhibit A.
The grant or exercise of an incentive stock option will not generally cause
recognition of income by the Optionee; however, the amount by which the fair
market value of a share of Common Stock at the time of exercise of an
incentive stock option exceeds the option price, is a "tax preference item"
for purposes of the alternative minimum tax. In the event of a sale of the
shares received upon exercise of an incentive stock option more than two years
from the date of grant and more than one year from the date of exercise, any
appreciation of the shares received above the exercise price should qualify as
long-term capital gain. However, if shares of Common Stock acquired pursuant
to the exercise of an incentive stock option are sold by the Optionee before
the completion of such holding periods so much of the gain as does not exceed
the difference between the option price and the lesser of the fair market
value of the shares at the date of exercise or the fair market value at the
date of disposition will be taxable as ordinary income for the taxable year in
which the sale occurs. Any additional gain realized on the sale should qualify
as a capital gain.
The grant of an Option that is not an incentive stock option (a "non-qualified
option") should not result in recognition of income by the Optionee. Upon
exercise of a non-qualified option, the excess of the fair market value of the
shares at the exercise date over the option price should be considered
compensation taxable as ordinary income. In the event of a sale of the
shares, any appreciation after the date of the exercise should qualify as
capital gain.
In connection with incentive stock options and non-qualified options, the
Company will be entitled to a deduction for federal income tax purposes at the
same time and in the same amount as the ordinary income recognized by the
employee provided any Federal income tax withholding requirements are
satisfied.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU
VOTE FOR THE 1996 STOCK OPTION PLAN
ITEM III. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Subject to approval by the stockholders, the Board of Directors has appointed
Margolin, Winer & Evens LLP as the independent auditors to audit the financial
statements of the Company for the fiscal year ending December 31, 1996.
Margolin, Winer & Evens LLP also served as the Company's auditors for the
fiscal years ended December 31, 1995 and 1994. It is expected that a
representative of Margolin, Winer & Evens LLP will be present at the Annual
Meeting with the opportunity to make a statement if he desires to do so and to
be available to respond to appropriate questions from stockholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
RATIFICATION OF THE APPOINTMENT OF MARGOLIN, WINER & EVENS LLP
AS INDEPENDENT AUDITORS
VOTE REQUIRED
The affirmative vote of a majority of the votes cast at the Annual Meeting,
assuming a quorum is present, is required to elect directors, to approve the
adoption of the 1996 Stock Option Plan and to approve the selection of
auditors. Abstentions will not be counted as affirmative votes. The current
members of the Board of Directors presently hold voting authority for Common
Stock representing an aggregate of approximately 1,848,772 votes, or
approximately 40.9% of the total number of votes eligible to be cast at the
Annual Meeting. The members of the Board of Directors have indicated their
intention to vote affirmatively on all of the proposals.
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
or telegram. 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.
PROPOSALS OF STOCKHOLDERS
Stockholders of the Company who intend to present a proposal for action at the
next Annual Meeting of Stockholders of the Company must notify the Company's
management of such intention by notice in writing received at the Company's
principal executive offices on or before June 7, 1997 in order for such
proposal to be included in the Company's Proxy Statement and form of proxy
relating to such Meeting. Stockholders who wish to present a proposal for
action at the next Annual Meeting are advised to contact the Company as soon
as possible in order to permit the inclusion of any proposal in the Company's
proxy statement.
OTHER MATTERS
The Company knows of no items of business that are expected to be presented
for consideration at the Annual Meeting which are not enumerated herein.
However, if other matters properly come before the Meeting, it is intended
that the person named in the accompanying Proxy will vote thereon in
accordance with his best judgement.
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.
Brooklyn, New York By Order of the Board of Directors
October 3, 1996
Martin Kaye, Secretary
<PAGE>
EXHIBIT A
INNODATA CORPORATION
1996 STOCK OPTION PLAN
There is hereby established a 1996 Stock Option Plan (the "Plan"). The
Plan provides for the grant to certain employees and others who render
services to Innodata Corporation or its subsidiaries (the "Company") of
options ("Options") to purchase shares of common stock of the Company ("Common
Stock").
1. Purpose: The purpose of the Plan is to provide additional incentive to
the officers, employees, and others who render services to the Company, who
are responsible for the management and growth of the Company, or otherwise
contribute to the conduct and direction of its business, operations and
affairs. It is intended that Options granted under the Plan strengthen the
desire of such persons to join and remain in the employ of the Company and
stimulate their efforts on behalf of the Company.
2. The Stock: The aggregate number of shares of Common Stock which may be
subject to Options shall not exceed 500,000. Such shares may be either
authorized and unissued shares, or treasury shares. If any Option granted
under the Plan shall expire, terminate or be cancelled for any reason without
having been exercised in full, the corresponding number of unpurchased shares
shall again be available for the purposes of the Plan.
3. Types of Options: Options granted under the Plan shall be in the form
of (i) incentive stock options ("ISO's"), as defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code") or (ii) non-statutory
options which do not qualify under such Section ("NSO's"), or both, in the
discretion of the Board of Directors or any committee appointed by the Board
(each, the "Committee"). The status of each Option shall be identified in the
Option Agreement.
4. Eligibility:
(a) ISO's may be granted to such employees (including officers and
directors who are employees) of the Company as the Committee shall select from
time to time.
(b) NSO's may be granted to such employees (including officers and
directors) of the Company, and to other persons who render services to the
Company, as the Committee shall select from time to time.
5. General Terms of Options:
(a) Option Price. The price or prices per share of Common Stock to be
sold pursuant to an Option (the "exercise price") shall be fixed by the
Committee but shall in any case not be less than:
(i) the fair market value per share for such Common Stock on the
date of grant in the case of ISOs other than to a 10% Stockholder,
(ii) 110% of the fair market value per share for such Common Stock
on the date of grant in the case of ISOs to a 10% Stockholder, and
(iii)the fair market value on the date of grant in the case of
NSO's.
A "10% Stockholder" means an individual who within the meaning of
Section 422(b)(6) of the Code owns stock possessing more than 10 percent of
the total combined voting power of all classes of stock of the Company or of
its parent or any subsidiary corporation.
(b) Period of Option Vesting. The Committee shall determine for each
Option the period during which such Option shall be exercisable in whole or in
part, provided that no ISO to a 10% Stockholder shall be exercisable more than
five years after the date of grant.
(c) Special Rule for ISO's. The aggregate fair market value
(determined at the time the ISO is granted) of the stock with respect to which
ISOs are exercisable for the first time by an Optionee during any calendar
year (under all such plans of the Company, its parent or subsidiary) shall not
exceed $100,000, and any excess shall be considered an NSO.
(d) Effect of Termination of Employment.
(i) The Committee shall determine for each Option the extent, if
any, to which such Option shall be exercisable in the event of the termination
of the Optionee's employment with or rendering of other services to the
Company.
(ii) However, any such Option which is an ISO shall in all events
lapse unless exercised by the Optionee:
(A) prior to the 60th day after the date on which employment
terminated, if termination was other than by reason of death; and
(B) within the twelve-month period next succeeding the death
of the Optionee, if termination is by reason of death.
(iii)The Committee shall have the right, at any time, and from time
to time, with the consent of the Optionee, to modify the lapse date of an
Option and to convert an ISO into an NSO to the extent that such modification
in lapse date increases the life of the ISO beyond the dates set forth above
or beyond dates otherwise permissible for an ISO.
(e) Payment for Shares of Common Stock. Upon exercise of an Option,
the Optionee shall make full payment of the Option Price:
(i) in cash, or,
(ii) with the consent of the Committee and to the extent permitted
by it:
(A) with Common Stock of the Company valued at fair market
value on date of exercise, but only if held by the Optionee for a period of
time sufficient to prevent a pyramid exercise that would create a charge to
the Company's earnings,
(B) with a full recourse interest bearing promissory note of
the Optionee, secured by a pledge of the shares of Common Stock received upon
exercise of such Option, and having such other terms and conditions as
determined by the Committee,
(C) by delivering a properly executed exercise notice together
with irrevocable instructions to a broker to sell shares acquired upon
exercise of the Option and promptly to deliver to the Company a portion of the
proceeds thereof equal to the exercise price, or
(D) any combination of any of the foregoing.
(f) Option Exercises. Options shall be exercised by submitting to the
Company a signed copy of notice of exercise in a form to be supplied by the
Company. The exercise of an Option shall be effective on the date on which
the Company receives such notice at its principal corporate offices. The
Company may cancel such exercise in the event that payment is not effected in
full, subject to the terms of Section 5(e) above.
(g) Non-Transferability of Option. No Option shall be transferable by
the Optionee or otherwise than by will or by the laws of descent and
distribution. During the Optionee's lifetime, such Option shall be exercisable
only by such Optionee. If an Optionee should die while in the employ of the
Company, the Option theretofore granted to the Optionee, to the extent then
otherwise exercisable, shall be exercisable only by the estate of the Optionee
or by a person who acquired the right to exercise such Option by bequest or
inheritance or otherwise by reason of the death of the Optionee.
Notwithstanding the foregoing, if so provided in an agreement between the
Company and the Optionee, an Optionee may transfer his or her Options to
immediate family members or trusts for their benefit or partnerships in which
immediate family members are the only partners, without consideration, and
subject to the same terms and conditions as were applicable to the Options
immediately prior to their transfer.
6. Other Plan Terms:
(a) Number of Options which may be Granted to, and Number of Shares of
Common Stock which may be Acquired by Employees.
(i) The Committee may grant more than one Option to an individual,
and, subject to the requirements of Section 422 of the Code, with respect to
ISOs, such Option may be in addition to, in tandem with, or in substitution
for, Options previously granted under the Plan or of another corporation and
assumed by the Company.
(ii) The Committee may permit the voluntary surrender of all or a
portion of any Option granted under the Plan or otherwise to be conditioned
upon the granting to the employee of a new Option for the same or a different
number of shares of Common Stock as the Option surrendered, or may require
such voluntary surrender as a condition precedent to a grant of a new Option
to such employee. Such new Option shall be exercisable at the price, during
the period, and in accordance with any other terms or conditions specified by
the Committee at the time the new Option is granted, all determined in
accordance with the provisions of the Plan without regard to the price, period
of exercise, or any other terms or conditions of the Option surrendered.
(b) Period of Grant of Options. Options may be granted at any time
under the Plan, provided that Options which are granted before the Plan has
been approved by the stockholders of the Company shall be exercisable only
after the Plan is approved by such stockholders. However, no Option shall be
granted under the Plan after July 8, 2006.
(c) Effect of Change in Common Stock. In the event of a
reorganization, recapitalization, liquidation, stock split, stock dividend,
combination of shares, merger or consolidation, or the sale, conveyance, lease
or other transfer by the Company of all or substantially all of its property,
or any change in the corporate structure or shares of Common Stock of the
Company, pursuant to any of which events the then outstanding shares of the
common stock are split up or combined or changed into, become exchangeable at
the holder's election for, or entitle the holder thereof to other shares of
common stock, or in the case of any other transaction described in Section
424(a) of the Code, the Committee may change the number and kind of shares of
Common Stock available under the Plan and any outstanding Option (including
substitution of shares of common stock of another corporation) and the price
of any Option and the fair market value determined under this Plan in such
manner as it shall deem equitable in its sole discretion.
(d) Optionees not Stockholders. An Optionee or a legal representative
thereof shall have none of the rights of a stockholder with respect to shares
of Common Stock subject to Options until such shares shall be issued or
transferred upon exercise of the Option.
7. Option Agreement: The Company shall effect the grant of Options under
the Plan, in accordance with determinations made by the Committee, by
execution of instruments in writing in a form approved by the Committee. Each
Option shall contain such terms and conditions (which need not be the same for
all Options, whether granted at the same time or at different times) as the
Committee shall deem to be appropriate and not inconsistent with the
provisions of the Plan, and such terms and conditions shall be agreed to in
writing by the Optionee.
8. Certain Definitions:
(a) Fair Market Value. As used in the Plan, the term "fair market
value" shall mean as of any date:
(i) if the Common Stock is not traded on any over-the-counter
market or on a national securities exchange, the value determined by the
Committee using the best available facts and circumstances,
(ii) if the Common Stock is traded in the over-the-counter market,
based on most recent closing prices for the Common Stock on the date the
calculation thereof shall be made, or
(iii)if the Common Stock is listed on a national securities
exchange, based on the most recent closing prices for the Common Stock of the
Company on such exchange.
(b) Subsidiary and Parent. The term "subsidiary" and "parent" as used
in the Plan shall have the respective meanings set forth in Sections 424(f)
and (e) of the Internal Revenue Code.
9. Not an Employment Contract: Nothing in the Plan or in any Option or
stock option agreement shall confer on any Optionee any right to continue in
the service of the Company or any parent or subsidiary of the Company or
interfere with the right of the Company to terminate such Optionee's
employment or other services at any time.
10. Withholding Taxes:
(a) Whenever the Company proposes or is required to issue or transfer
shares of Common Stock under the Plan, the Company shall have the right to
require the Optionee to remit to the Company an amount sufficient to satisfy
any Federal, state and/or local withholding tax requirements prior to the
delivery of any certificate or certificates for such shares. Alternatively,
the Company may, in its sole discretion from time to time, issue or transfer
such shares of Common Stock net of the number of shares sufficient to satisfy
the withholding tax requirements. For withholding tax purposes, the shares of
Common Stock shall be valued on the date the withholding obligation is
incurred.
(b) In the case of shares of Common Stock that an Optionee receives
pursuant to his exercise of an Option which is an ISO, if such Optionee
disposes of such shares of Common Stock within two years from the date of the
granting of the ISO or within one year after the transfer of such shares of
Common Stock to him, the Company shall have the right to withhold from any
salary, wages, or other compensation for services payable by the Company to
such Optionee, amounts sufficient to satisfy any withholding tax obligation
attributable to such disposition.
(c) In the case of a disposition described in Section (b), the Optionee
shall give written notice to the Company of such disposition within 30 days
following the disposition, which notice shall include such information as the
Company may reasonably request to effectuate the provisions hereof.
11. Agreements and Representations of Optionees
As a condition to the exercise of an Option, unless counsel to the
Company opines that it is not necessary under the Securities Act of 1933, as
amended, and the pertinent rules thereunder, as the same are then in effect,
the Optionee shall represent in writing that the shares of Common Stock being
purchased are being purchased only for investment and without any present
intent at the time of the acquisition of such shares of Common Stock to sell
or otherwise dispose of the same.
12. Administration of the Plan:
(a) The Plan shall be administered by the Board of Directors or a
Committee of the Board of Directors of the Company (the "Committee")
consisting of not less than two Directors.
(b) Subject to the express provisions of the Plan, the Committee shall
have authority, in its discretion, to determine the individuals to receive
Options, the times when they shall receive them and the number of shares of
Common Stock to be subject to each Option, and other terms relating to the
grant of Options.
(c) Subject to the express provisions of the Plan, the Committee shall
have authority to construe the respective option agreements and the Plan, to
prescribe, amend and rescind rules and regulations relating to the Plan, to
determine the terms and provisions of the respective option agreements (which
need not be identical) and, as specified in this Plan, the fair market value
of the common stock, and to make all other determinations necessary or
advisable for administering the Plan. The Committee may correct any defect or
supply any omission or reconcile any inconsistency in the Plan or in any
option agreement in the manner and to the extent it shall deem expedient to
carry it into effect, and it shall be the sole and final judge of such
expediency. The determinations of the Committee on the matters referred to in
this Section 12 shall be conclusive.
(d) The Committee may, in its sole discretion, and subject to such terms
and conditions as it may adopt, accelerate the date or dates on which some or
all outstanding Options may be exercised.
(e) The Committee may require that any Option Shares issued be legended
as necessary to comply with applicable federal and state securities laws.
13. Amendment and Discontinuance of the Plan:
(a) The Board of Directors of the Company may at any time alter, suspend
or terminate the Plan, but no change shall be made which will have a material
adverse effect upon any Option previously granted, unless the consent of the
Optionee is obtained; provided, however, that the Board of Directors may not
without further approval of the stockholders, (i) increase the maximum number
of shares of Common Stock for which Options may be granted under the Plan or
which may be purchased by an individual Optionee, (ii) decrease the minimum
option price provided in the Plan, or (iii) change the class of persons
eligible to receive Options.
(b) The Company intends that Options designated by the Committee as
ISO's shall constitute ISOs under Section 422 of the Code. Should any
provision in this Plan for ISO's not be necessary in order to so comply or
should any additional provisions be required, the Board of Directors of the
Company may amend the Plan accordingly without the necessity of obtaining the
approval of the stockholders of the Company.
14. Other Conditions: If at any time counsel to the Company shall be of
the opinion that any sale or delivery of shares of Common Stock pursuant to an
Option granted under the Plan is or may in the circumstances be unlawful under
the statutes, rules or regulations of any applicable jurisdiction, the Company
shall have no obligation to make such sale or delivery, and the Company shall
not be required to make any application or to effect or to maintain any
qualification or registration under the Securities Act of 1933 or otherwise
with respect to shares of Common Stock or Options under the Plan, and the
right to exercise any such Option may be suspended until, in the opinion of
said counsel, such sale or delivery shall be lawful.
At the time of any grant or exercise of any Option, the Company may, if it
shall deem it necessary or desirable for any reason connected with any law or
regulation of any governmental authority relative to the regulation of
securities, condition the grant and/or exercise of such Option upon the
Optionee making certain representations to the Company and the satisfaction of
the Company with the correctness of such representations.
15. Approval; Effective Date; Governing Law: The Plan was adopted by the
Board of Directors on July 8, 1996 and is to be submitted to stockholders for
their approval at the first meeting of stockholders following such date. The
Plan shall terminate if not approved by stockholders. The Plan shall be
interpreted in accordance with the internal laws of the State of New York.
