UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A/A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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INFOCROSSING, INC.
(Name of Registrant as Specified in Its Charter)
N/A
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INFOCROSSING, INC.
2 CHRISTIE HEIGHTS STREET
LEONIA, NJ 07605
(201) 840-4700
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 15, 2004
--------------------------
The Annual Meeting of Stockholders will be held at 9:00 A.M. on Tuesday, June
15, 2004, at the offices of the Company at 2 Christie Heights Street, Leonia, NJ
07605, for the following purposes:
1. To elect two Directors of the Company for a three-year term;
2. To approve a proposal to amend the Company's 2002 Stock Option and
Stock Appreciation Rights Plan to increase the total number of shares
of common stock for which options may be granted from 1,000,000 to
3,000,000; and
3. To transact such other business as may properly come before the Annual
Meeting.
Only stockholders of record at the close of business on April 29, 2004 will be
entitled to vote at the Annual Meeting.
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING.
THEREFORE, WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE COMPLETE YOUR PROXY AND
RETURN IT IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES. IF YOU DO ATTEND THE ANNUAL MEETING AND WISH TO VOTE IN PERSON,
YOUR PROXY WILL NOT BE USED.
By order of the Board of Directors,
/S/ NICHOLAS J. LETIZIA
Nicholas J. Letizia
Secretary
May 14, 2004
INFOCROSSING, INC.
2 CHRISTIE HEIGHTS STREET
LEONIA, NEW JERSEY 07605
(201) 840-4700
----------------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 15, 2004
--------------------------------
GENERAL INFORMATION
The enclosed Proxy is solicited on behalf of the Board of Directors of
Infocrossing, Inc. (the "Company") for use at the Annual Meeting of Stockholders
of the Company (the "Meeting") to be held at 9:00 A.M. on Tuesday, June 15, 2004
(the "Meeting Date"), at the offices of the Company at 2 Christie Heights
Street, Leonia, NJ 07605.
The authority granted by an executed Proxy may be revoked at any time before its
use by (a) filing a written revocation with the Secretary of the Company, (b)
submitting a new, duly-executed Proxy bearing a later date, or (c) voting in
person at the Meeting. Shares represented by valid Proxies will be voted at the
Meeting in accordance with the specifications in the Proxies.
If no specifications are made in otherwise properly executed Proxies, they will
be voted FOR the election of the Directors nominated by the Board and FOR the
approval of the amendment to the Company's 2002 Stock Option and Stock
Appreciation Rights Plan (the "Plan").
Only stockholders of record at the close of business on April 29, 2004 (the
"Record Date") will be entitled to vote at the Meeting, either in person or by
Proxy. On the Record Date, the Company had outstanding 18,326,419 shares of
common stock, $0.01 par value, each entitled to one vote. The common stock is
the Company's only class of voting stock currently outstanding. A majority in
interest of the outstanding voting stock, represented at the Meeting either in
person or by Proxy, constitutes a quorum for the transaction of business.
The Company will bear the cost of the solicitation of Proxies including, upon
request, reimbursement of brokerage companies and other nominees for their
reasonable expenses in forwarding solicitation materials to beneficial owners of
common stock. In addition to the use of the mails, employees of the Company may
devote part of their time to the solicitation of Proxies by telephone,
telegraph, or in person, but no additional compensation will be paid to them.
The approximate date on which this Proxy Statement and accompanying Proxy are
first being sent or given to stockholders is May 17, 2004.
- 1 -
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's common stock as of April 9, 2004 by (a) all current
Directors of the Company, (b) the Chief Executive Officer and the four most
highly compensated executive officers of the Company whose salary exceeded
$100,000 in the most recent year (the "Named Executives"), (c) all current
Directors and executive officers as a group, and (d) any other person known by
the Company to be the beneficial owner of more than 5% of its common stock.
Beneficial ownership includes shares that the beneficial owner has the right to
acquire within sixty days of the above date from the exercise of options,
warrants, or similar obligations. If no address is shown, the address of the
beneficial owner is in care of the Company.
BENEFICIAL OWNERSHIP OF THE COMPANY'S COMMON STOCK
- ----------------------------------------------------------------------------------------------------------------------------
Number of Shares Percentage
Name and Address of Beneficial Owner Beneficially Owned of Class
- ------------------------------------------------------------------------- ------------------------- -----------------
Zach Lonstein (1) 1,566,191 8.5%
- ------------------------------------------------------------------------- ------ ------------------ -----------------
Robert B. Wallach (2) 526,420 2.8%
- ------------------------------------------------------------------------- ------ ------------------ -----------------
Patrick A. Dolan (3) 315,485 1.7%
- ------------------------------------------------------------------------- ------ ------------------ -----------------
Roger A. Barrios (4) 54,448 *
- ------------------------------------------------------------------------- ------ ------------------ -----------------
Thomas Laudati (5) 32,993 *
- ------------------------------------------------------------------------- ------ ------------------ -----------------
Nicholas J. Letizia (6) 31,831 *
- ------------------------------------------------------------------------- ------ ------------------ -----------------
Kathleen A. Perone 22 Ocean Drive Avenue
Monmouth Beach, NJ 07750 (7) 57,500 *
- ------------------------------------------------------------------------- ------ ------------------ -----------------
Michael B. Targoff 1330 Avenue of the Americas
New York, NY 10019 (8) 53,750 *
- ------------------------------------------------------------------------- ------ ------------------ -----------------
Peter J. DaPuzzo 378 Taconic Road
Greenwich, CT 06831 (9) 67,250 *
- ------------------------------------------------------------------------- ------ ------------------ -----------------
All current Directors and executive officers as a group (13 persons) (10) 2,963,181 15.0%
- ------------------------------------------------------------------------- ------ ------------------ -----------------
Janus Capital Management, LLC 100 Fillmore Street (11) 2,412,118 12.8%
Denver, CO 80206
- -------------------------------------------------------------------------- ------ ------------------ -----------------
Federated Equity Funds 140 East 45th Street - 43rd Floor (12) 1,717,558 9.2%
New York, NY 10017
- -------------------------------------------------------------------------- ------ ------------------ -----------------
Camden Partners One South Street - Suite 2150
Baltimore, MD 21202 (13) 1,927,755 9.9%
- -------------------------------------------------------------------------- ------ ------------------ -----------------
Jack Silver 660 Madison Avenue (14) 942,252 5.1%
New York, NY 10021
- -------------------------------------------------------------------------- ------ ------------------ -----------------
* Less than 1% of Class
(1) Includes 154,945 shares of common stock issuable upon exercise of
options held by Mr. Lonstein. Also includes 750,000 shares, held by
Mr. Lonstein, that are subject to options held by MidOcean Capital
Investors, L.P., Sandler Capital Management, and other parties to a
private placement of securities (see "Certain Relationships and
Related Party Transactions" below).
(2) Includes 481,495 shares of common stock issuable upon exercise of
options held by Mr. Wallach.
(3) Includes 200,000 shares of common stock issuable upon exercise of
options held by Mr. Dolan.
(4) Includes 54,448 shares of common stock issuable upon exercise of
options held by Mr. Barrios.
(5) Includes 32,993 shares of common stock issuable upon exercise of
options held by Mr. Laudati.
(6) Includes 31,831 shares of common stock issuable upon exercise of
options held by Mr. Letizia
- 2 -
(7) Includes 57,500 shares of common stock issuable upon exercise of
non-qualified options held by Ms. Perone.
(8) Includes 53,750 shares of common stock issuable upon exercise of
options held by Mr. Targoff.
(9) Includes 61,250 shares of common stock issuable upon exercise of
options held by Mr. DaPuzzo.
(10) Includes 1,365,118 shares of common stock issuable upon exercise of
options collectively held by the thirteen Directors and executive
officers of the Company.
(11) Includes 521,660 shares of common stock issuable upon exercise of
warrants, issued in connection with a private placement of common
stock by the Company in October 2003, held by various Janus Funds.
(12) Includes 445,293 shares of common stock issuable upon exercise of
warrants, issued in connection with a private placement of common
stock by the Company in October 2003, held by various Federated
Kaufman Funds.
(13) Includes 8,571 common shares issuable upon exercise of warrants
received in connection with a prior loan to the Company, 1,062,500
shares of common stock issuable upon exercise of warrants received in
connection with a Securities Purchase Agreement (See "Certain
Relationships and Related Party Transactions", below), and 111,324
shares of common stock issuable upon exercise of warrants, issued in
connection with a private placement of common stock by the Company in
October 2003. Includes securities held by Camden Partners Strategic
Fund II-A, L.P.; Camden Partners Strategic Fund II-B, L.P.; the
Cahill, Warnock Strategic Partners Fund, L.P.; and Strategic
Associates, L.P., (the "Camden Entities"). Along with Cahill, Warnock
Strategic Partners, L.P., each fund has shared voting and dispositive
power over the total number of shares owned by the Camden Entities.
Each of the Camden Entities disclaims beneficial ownership over any
shares not held of record by it.
(14) Includes 139,288 shares of common stock issuable upon exercise of
warrants, issued in connection with a private placement of common
stock by the Company in October 2003, held by Mr. Silver and Sherleigh
Associates. Jack Silver is a natural person with control over the
Sherleigh Associates Inc. Profit Sharing Plan and other related
parties.
PROPOSAL I - ELECTION OF DIRECTORS
----------------------------------
The Board currently consists of seven Directors divided into three classes.
The persons named in the table below are the Class B Directors nominated by the
Board for election at the Meeting, each to serve a three-year term or until
their respective successors are duly elected and qualified. Each has consented
to being named a nominee in this Proxy Statement and has agreed to serve as a
Director if elected at the Meeting. Unless otherwise indicated, the persons
named in the Proxy intend to vote their shares for the election of these
nominees. If any nominee becomes unable to serve prior to the Meeting, Proxies
will be voted for such other candidates as may be nominated by the Board of
Directors.
Directors will be elected by a plurality of the votes properly cast at the
meeting. Abstentions and broker non-votes will not be treated as votes cast for
this purpose, but will be treated as shares present for the purpose of
determining whether a quorum is present.
DIRECTOR
NAME POSITIONS WITH THE COMPANY AGE SINCE
- ------------------- -------------------------- ------ --------------
Kathleen A. Perone Director 50 2000
Michael B. Targoff Director 59 2001
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE PROPOSAL TO
ELECT THE TWO NOMINEES LISTED ABOVE AS DIRECTORS OF THE COMPANY.
- 3 -
The name, principal occupation with the Company, and certain information
concerning each of the Directors and executive officers of the Company as of
April 28, 2004 are set forth in the table below. Also set forth following the
table is certain additional information regarding each individual's business
experience.
DIRECTOR TERM
NAME POSITIONS WITH THE COMPANY AGE SINCE EXPIRES
- ------------------------- ---------------------------------------- ------- ----------- -----------
Zach Lonstein Chief Executive Officer & Chairman 60 1984 2005
Of the Board of Directors
Robert B. Wallach Vice Chairman & Director 65 2001 2005
Patrick A. Dolan President, Chief Operating 46 2004 2005
Officer & Director
Roger A. Barrios Senior Vice President of the Company 53 - -
and President of a subsidiary
Jim Cortens Executive Vice President 48 - -
William J. McHale Senior Vice President, Finance 49 - -
Thomas Laudati Senior Vice President, 46 - -
Enterprise Engineering
Garry Lazarewicz Senior Vice President, Research 55 - -
& Development
Nicholas J. Letizia Senior Vice President, General 52 - -
Counsel, Treasurer & Secretary
Michael Wilczak Senior Vice President - 33 - -
Corporate Development
Peter J. DaPuzzo Director 63 2001 2006
Kathleen A. Perone Director 50 2000 2004
Michael B. Targoff Director 59 2001 2004
Howard L. Waltman Director 71 2004 2006
ZACH LONSTEIN has been the Company's Chairman of the Board since he organized
the Company in 1984, Chief Executive Officer from 1984 through June 2000 and
from November 2001 to the present, and President from 1984 to May 1996. From
1981 to 1984, Mr. Lonstein was Vice President and General Manager of the
Commercial On-Line division of Informatics General Corporation ("Informatics"
subsequently renamed Sterling Federal Systems, Inc.), a computer software and
services company listed on the New York Stock Exchange. In 1970, Mr. Lonstein
was a founder and President of Transportation Computing Services Corp. ("TCS").
In 1981, TCS was sold to Informatics. The Company purchased the Commercial
On-Line division of Informatics in 1984.
- 4 -
ROBERT B. WALLACH joined the Company in June 1995, and was appointed Vice
Chairman on April 2, 2004. Mr. Wallach was President of the Company from May
1996 until June 2000 and from November 2001 until April 2, 2004; Chief Operating
Officer from April 2001 until April 2, 2004; and a Director of the Company from
1992 until May 2000 and from August 2001 to the present. From June 2000 through
April 2001, he was President of the Company's Managed Services Division. Prior
to June 1995, he was sole proprietor of Horizons Associates, a consulting firm
he founded in 1985. Mr. Wallach has more than 20 years of operating experience
including senior management positions with Boeing Computer Services,
Informatics, and the Financial Information Services Group/Strategic Information
division of Ziff Communications.
PATRICK A. DOLAN served as chairman and chief executive officer of ITO
Acquisition Corporation, doing business as Systems Management Specialists
("SMS"), until the acquisition of SMS by the Company on April 2, 2004, when Mr.
Dolan was appointed as President and Chief Operating Officer of the Company.
During his tenure at SMS, Mr. Dolan was involved in virtually every aspect of
the business, including development of the organization's business strategy,
overseeing operations, service delivery, business development, marketing, human
resources and account management. Before joining SMS in November 1994, he was
Vice President of Sales and Marketing with SHL Systemhouse from March 1992
through November 1994. Mr. Dolan has more than 25 years of experience in the IT
services industry, including positions with Citicorp and ACS.
ROGER A. BARRIOS has served as President of AmQUEST, Inc. ("AmQUEST") since its
inception in 1995 and continues in this position subsequent to the acquisition
of AmQUEST by the Company in February 2002. Mr. Barrios also serves as a Senior
Vice President of the Company. Prior to joining AmQUEST, Mr. Barrios served in
several positions between 1980 and 1995 within American Software, Inc., the
prior parent of AmQUEST.
JIM CORTENS served as President of SMS, until the acquisition of SMS by the
Company on April 2, 2004, when Mr. Cortens was appointed as Executive Vice
President of the Company. As President of SMS, Mr. Cortens was responsible for
all financial and commercial aspects associated with new and existing customer
relationships. Before joining SMS in November 1994, he was Director of Data
Center Services and later Director of Business Development with SHL Systemhouse
from July 1988 until joining SMS in 1994. His employment experience also
includes professional positions with Richardson Greenshields and Manitoba Data
Services in Winnipeg, Canada.
WILLIAM J. MCHALE was named Senior Vice President, Finance of the Company in
September 2002. Prior to joining Infocrossing, from 1990 through 2001, Mr.
McHale was Chief Financial Officer and Executive Vice President at Eden LLC, a
regional importer and distributor. He assisted with that company's sale of its
brand and licensing rights to Learning Curve International. Eden LLC filed for
bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code on June 15,
2001. Prior to Eden, Mr. McHale held senior operations and finance positions
with Amerada Hess Corporation and several private companies. Mr. McHale, a
Certified Public Accountant also spent six years with Arthur Andersen & Co..
THOMAS LAUDATI has been Senior Vice President, Technical Services, of the
Company since 1997 and a Vice President of the Company since 1995, when the
Company purchased MCC Corp. Mr. Laudati joined MCC Corp in 1988 as a senior
analyst, and was promoted to Vice President of Technical Services in April 1991.
Prior to joining MCC Corp., Mr. Laudati held positions in the programming
departments of Horizons Bancorp and Colonial Life Insurance Company.
GARRY LAZAREWICZ has been Senior Vice President, Research & Development, of the
Company since August 1, 1999, and Vice President since June 1995, when the
Company purchased MCC Corp. Mr. Lazarewicz, who oversees all corporate research
and development, joined MCC Corp. in 1979, and was promoted to Vice President in
1985. From 1971 through 1979, he was employed at Global Terminal and Computer
Services, where his last position was Director of MIS.
- 5 -
NICHOLAS J. LETIZIA joined the Company as Chief Financial Officer and Secretary
in November 1998. In April 2001, Mr. Letizia ceased being the Company's Chief
Financial Officer and was named to the new position of Senior Vice President and
General Counsel. In June 2002, he was named to the additional position of
Treasurer. Prior to joining Infocrossing, he was Chief Financial Officer of
InterEquity Capital Corporation, the general partner of a Small Business
Investment Company. Before joining InterEquity in November 1997, he was Vice
President of, and later a consultant to, Helmstar Group, Inc. from 1987 until
November 1997. His employment experience also includes professional positions
with Arthur Andersen & Co. and Donaldson, Lufkin & Jenrette. Mr. Letizia is a
Certified Public Accountant (Inactive Status) and a member of the New Jersey
Bar.
MICHAEL WILCZAK joined the Company as Senior Vice President of Corporate
Development on March 1, 2001. Prior to joining Infocrossing, Mr. Wilczak was
Director of e-Infrastructure Outsourcing for Cabletron Systems and its spin-off,
Global Network Technology Services. From October 1998 through October 1999, when
he joined Cabletron, Mr. Wilczak was Marketing Development Manager for Qwest
Communications, and from June 1993 until leaving to join Qwest, he held several
positions with AT&T, the last being Client Business Manager.
PETER J. DAPUZZO was reelected to the Board of Directors on November 27, 2001.
He had previously served on the Company's Board from July 1999 through May 2000.
Prior to 2002, Mr. DaPuzzo was the Co-President and CEO of Cantor Fitzgerald and
Company, the equity institutional sales and trading division of Cantor
Fitzgerald LP. Mr. DaPuzzo is also a Senior Managing Director of Cantor
Fitzgerald LP. Mr. DaPuzzo joined Cantor Fitzgerald in 1993. Mr. DaPuzzo is
President of the National Organization of Investment Professionals, a
professional group of institutional and broker dealer senior managers, a member
the Presidential Advisory Committee to the President of Security Traders
Association of New York, and a member and the immediate past Chairman of the
Securities Industry Association - Institutional Traders Committee.
KATHLEEN A. PERONE was elected to the Board of Directors in September 2000. In
June 2002, Ms. Perone became President and Chief Executive Officer of Focal
Communications, Inc., headquartered in Chicago, IL. Beginning in April 2000, Ms.
Perone was Managing Director of Acappella Ventures LLC, a Delaware limited
liability corporation, which invested in early stage telecommunications and
technology enterprises. From August 2001 to February 2002, she was Chairman and
Chief Executive Officer of Lightrade, Inc., a private corporation that filed in
March 2001 for bankruptcy protection under Chapter 7 of the U.S. Bankruptcy
Code. From January 1998 through March 2000, Ms. Perone was employed by
Denver-based Level(3) Communications, LLC as President - North American
Operations. Prior to 1998, Ms. Perone held various positions with MFS
Communications (now WorldCom), including President - Global Services Division
and President - Telecom East. Ms. Perone is also a member of the boards of
directors of Focal Communications Corp and Tellium, Inc.
MICHAEL B. TARGOFF was elected to the Board of Directors in May 2001. Mr.
Targoff is the owner of Michael B. Targoff & Co., a company he founded in
January 1998 that seeks active or controlling investments in telecommunications
and related industry early stage companies. From January 1996 through January
1998 Mr. Targoff was president and chief operating officer of Loral Space and
Communications Ltd. Mr. Targoff had been senior vice president of Loral
Corporation prior to the combination of Loral's defense electronics and systems
integration businesses with Lockheed Martin in 1996. Mr. Targoff is a director
and chairman of the audit committee for both Globalstar Telecommunications
Limited and Leap Wireless International, Inc., and a director of ViaSat, Inc.
HOWARD L. WALTMAN was elected to the Board of Directors in April 2004. He had
previously served on the Company's Board from 1997 to May 2000. Mr. Waltman is a
director and, until 2000, was Chairman of Express Scripts, Inc. ("ESI"), a
Company he formed in 1986 as a subsidiary of Sanus, of which he was also a
founder and former Chairman. Sanus was acquired by New York Life Insurance
Company in 1987. ESI, which provides mail order pharmacy services and pharmacy
claims processing services, was spun out of Sanus and taken public in June 1992.
Mr. Waltman also founded Bradford National Corp., which was sold to McDonnell
Douglas Corporation.
- 6 -
MEMBERS OF THE BOARD OF DIRECTORS
The Board of Directors currently has seven members: Zach Lonstein, Robert B.
Wallach, Patrick A. Dolan, Peter J. DaPuzzo, Kathleen A. Perone, Michael B.
Targoff, and Howard L. Waltman. The Board of Directors has determined that the
following members of the Board are independent directors, as such term is
defined in NASDAQ Rule 4200(a)(15): Peter J. DaPuzzo, Kathleen A. Perone,
Michael B. Targoff, and Howard L. Waltman. The independent directors intend to
meet from time to time in executive session without the other members of the
Board.
On October 21, 2003, the Company purchased and retired all of its outstanding
Series A Preferred Stock. In connection with this transaction, Messrs. Tyler T.
Zachem, Richard D. Keller, and Timothy W. Billings, and Ms. Samantha McCuen, who
had been members of the Company's Board of Directors representing the holders of
the Series A Preferred Stock, resigned on the closing date. Mr. Dolan and Mr.
Waltman joined the Board of Directors in April 2004.
The Board of Directors held eleven meetings during 2003 and took two actions by
unanimous written consent. During 2003 (or for such shorter period during which
they served) all Directors attended at least 75% of the meetings of the Board of
Directors and the meetings of the committees on which they served.
The Company encourages all Board Members to attend its Annual Meeting of
Stockholders. At the Annual Meeting held on June 24, 2003, all but one of the
then-current Directors were in attendance.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has a standing Audit Committee of the Board of Directors and a
standing Options and Compensation Committee of the Board of Directors. The
Company does not currently have a nominating committee. The Company values the
input of all directors, whether independent or not, in the nominating process,
but also requires the approval of a majority of the independent directors for
the nomination of any candidate. The Company believes that this process offers
the same protection as a separate nominating committee.
The entire Board of Directors participates in the evaluation and recommendation
of candidates for election as Directors, the size and composition of the Board,
and the implementation of the Company's corporate governance policies. Director
nominees must be approved by a majority of the independent directors (as
independence is defined in the NASDAQ rules) as well as a majority of the full
Board. In evaluating candidates to serve as Directors, the Board of Directors
considers professional ethics and values, relevant managerial experience, and
commitment to enhancing shareholder value. The Board of Directors regularly
assesses the size of the Board, whether any vacancies are anticipated, and the
need for particular expertise. Candidates may come to the attention of the Board
of Directors from current Board members, shareholders, or other persons. The
Board of Directors will consider shareholder recommendations of candidates when
the recommendations are submitted in a proper manner. Any shareholder
recommendations should include the candidate's name and qualifications to serve
as a Director. Submissions should be addressed to Corporate Secretary,
Infocrossing, Inc., 2 Christie Heights Street, Leonia, NJ 07605. For potential
nominees to be considered at the 2005 annual meeting of stockholders, the
Corporate Secretary must receive the information no earlier than December 14,
2004 and no later than January 13, 2005. The notice must include the candidate's
age, business address, residence address, principal occupation or employment,
the number of shares beneficially owned by the candidate, and information that
would be required to solicit a proxy under federal securities laws. The notice
must also include the nominating shareholder's name, address, and the number of
shares beneficially owned, as well as the period such shares have been held by,
the nominating shareholder. The current nominees, Ms. Perone and Mr. Targoff,
have been members of the Board since 2000 and 2001, respectively, and have been
unanimously approved by the Board of Directors to stand for reelection as
Director.
- 7 -
AUDIT COMMITTEE
During 2003, the Audit Committee consisted of Ms. Perone (Chairperson) and
Messrs. Targoff, and DaPuzzo. The Audit Committee met six times in 2003, and
took four actions by unanimous written consent. Each of the members of the Audit
Committee meets the requirements for being members as prescribed by the listing
standards of the Nasdaq Stock Market including the independence standards of the
Nasdaq Stock Market and applicable SEC rules. The Company does not have a
financial expert, as that term is defined in Regulation S-K 401(h)(2), serving
on its audit committee. The Company has not yet identified a peron to serve as a
director, and consequently as a member of the Audit Committee, who meets the SEC
criteria to be a financial expert.
The Audit Committee is governed by a written charter approved by the Board of
Directors. A copy of this charter, as amended, is included as Appendix A.
The Audit Committee has the ultimate authority and responsibility to appoint,
establish the compensation for, evaluate and, where appropriate, replace the
independent auditors of the Company's financial statements, and the independent
auditors report directly to the Audit Committee. The Company requires that all
services provided by the independent auditors be pre-approved by the Audit
Committee. The Audit Committee meets periodically with management and the
Company's independent certified public accountants to discuss their evaluation
of internal accounting controls, the quality of financial reporting, and related
matters. The independent auditors have free access to members of the Audit
Committee without the presence of management, if necessary, to discuss the
results of their audits. The report of the Audit Committee begins on page 16.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Through October 21, 2003, the Options and Compensation Committee consisted of
Messrs. Zachem (Chairman) and Lonstein, Ms. McCuen, and Ms. Perone. On October
21, 2003, Mr. Zachem and Ms. McCuen resigned from the Committee following the
redemption of the Company's Series A Preferred Stock. On December 15, 2003, Mr.
Lonstein resigned from the Committee. Ms. McCuen and Mr. Zachem were non-
employee Directors and were Managing Directors of affiliates of organizations
that had an investment in the Company (See "Certain Relationships and Related
Party Transactions" below). Mr. Lonstein is an executive officer of the Company.
Effective December 15, 2003, the Options and Compensation Committee consisted
solely of Ms. Perone and Mr. Targoff, each of whom is an independent director
under Nasdaq rules.
OPTIONS AND COMPENSATION COMMITTEE
The Options and Compensation Committee of the Board of Directors of the Company
is responsible for, among other matters, establishing policies applicable to the
compensation of the Company's executive officers and reporting on such policies
to the Board of Directors and stockholders; determining the salaries, incentive
compensation and other remuneration of executive officers of the Company; and
reviewing salaries, compensation and remuneration for all other officers of the
Company. The Committee regularly reviews the effectiveness of the Company's
executive compensation practices and revises them as appropriate. The Board may
also delegate the authority to the Options and Compensation Committee to
negotiate contracts with certain employees. The Options and Compensation
Committee met twice during 2003, and took seven actions by unanimous written
consent. A report on the compensation philosophy of the Committee and its
executive compensation activities during 2003 appears beginning on page 12.
EXECUTIVE COMMITTEE
The Executive Committee of the Board of Directors may act with the authority of
the Board except that it may not (i) submit any matter to a vote of the
stockholders, (ii) fill any Board vacancies, (iii) set any compensation for
Board members, and (iv) amend or repeal the By-Laws or any Board resolution
which by its terms may not be so amended or repealed. The Executive Committee
consisted of Messrs. Lonstein (Chairman), Keller, Targoff, Wallach, and Zachem
until October 22, 2003. Effective December 15, 2003, the Executive Committee was
reconstituted to consist solely of Messrs. Lonstein and Targoff. Mr. Lonstein is
a management Director and Mr. Targoff is an independent Director. It was not
necessary for the Executive Committee to meet or take any action by written
consent in 2003.
- 8 -
COMMUNICATIONS FROM SECURITY HOLDERS
Shareholders may communicate with the Board of Directors, including the
independent Directors, by sending a letter to Infocrossing, Inc. - Board of
Directors, c/o Corporate Secretary, Infocrossing, Inc., 2 Christie Heights
Street, Leonia, NJ 07605. The Corporate Secretary has the authority to disregard
or take other appropriate action with respect to any inappropriate
communications. The Corporate Secretary will submit appropriate communications
to the Chairman of the Board or to the specific Director(s) to whom the
correspondence is directed.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
The Summary Compensation Table below includes, for each of the years ended
December 31, 2003, 2002, and 2001, individual compensation for services to the
Company and its subsidiaries as paid to the Named Executives.
SUMMARY COMPENSATION TABLE
- -------------------------------------------------------------------------------------------------------------
Annual Compensation Long Term Compensation
------------------------------------ ----------------------------
Awards
---------------------------
Securities
Name and Principal Other Annual Restricted Underlying All Other
Positions at Salary Compensation Stock Options/SARs Compensation
December 2003 Year ($)(a) Bonus ($) ($) Awards (#) (#) ($)
- ----------------------- ------ --------- ------------ ------------- ------------ -------------- -------------
Zach Lonstein 2003 409,131 - - - 10,000 -
Chief Executive 2002 413,437 145,000(b) - - -
Officer & Chairman 2001 397,031 225,000(d) - - - -
- ----------------------- ------ --------- ------------ ------------- ------------ -------------- -------------
Robert Wallach 2003 409,131 - - - 10,000 -
President & Chief 2002 413,437 145,000(b) - - -
Operating Officer 2001 397,031 225,000(d) - - - -
- ----------------------- ------ --------- ------------ ------------- ------------ -------------- -------------
Roger A. Barrios * 2003 208,689 - - - -
Sr. VP & President of 2002 209,274 20,000(c) - - 70,000 -
AmQUEST, Inc. 2001 - - - - - -
- ----------------------- ------ --------- ------------ ------------- ------------ -------------- -------------
Nicholas J. Letizia 2003 183,635 - - - -
Sr. VP & General 2002 183,750 10,000(c) - - 10,000 -
Counsel 2001 176,667 15,000(d) - - - -
- ----------------------- ------ --------- ------------ ------------- ------------ -------------- -------------
Thomas Laudati 2003 179,888 - - - -
Sr. VP 2002 180,000 75,000(c) - - 2,500 -
2001 157,500 55,000(d) - - - -
- ----------------------- ------ --------- ------------ ------------- ------------ -------------- -------------
* On February 5, 2002, the Company purchased AmQUEST, Inc., and Mr. Barrios was
made President of this subsidiary and Senior Vice President of the Company on
that date.
(a) Messrs Lonstein, Wallach, Barrios, Letizia, and Laudati each
voluntarily reduced their salaries by 5% for the fourth quarter of
2003.
(b) Bonus earned in 2002 and paid in 2003. Messrs. Lonstein and Wallach
each voluntarily waived their right to receive $50,000 of their bonus.
(c) Bonus earned in 2002, paid in April 2003.
(d) Bonus earned in 2001, paid in January 2002.
The Named Executives may participate in certain group life, health, and other
non-cash benefit plans, which are generally available to all Company employees.
The Company also maintains a 401(k) Savings Plan (the "Plan") covering all
eligible employees who have attained the age of 21 years and worked at least
1,000 hours in a one-year period. The Company may make matching contributions at
the discretion of the Board of Directors. For the twelve-month periods ended
December 31, 2003, 2002, and 2001, the Company did not make any matching
contributions.
- 9 -
OPTION GRANT TABLE
The following table gives information concerning grants of options made to the
Named Executives during 2003:
OPTION GRANTS DURING THE LAST FISCAL YEAR
- ----------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
- --------------------------------------------------------------------------------- AT ASSUMED ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE APPRECIATION FOR
SECURITIES TOTAL OPTIONS OPTION TERM
UNDERLYING GRANTED TO ------------------------------
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION
GRANTED (#) FISCAL YEAR PRICE ($/SH) DATE 5% ($) 10% ($)
- ------------------- -------------- --------------- -------------- --------------- -------------- ---------------
Zach Lonstein 10,000 (a) 4.1% $6.9755 01/29/13 $43,869 $111,172
Robert Wallach 10,000 (a) 4.1% $6.9755 01/29/13 $43,869 $111,172
Nicholas J. Letizia 50 (b) - $9.9100 12/14/13 $312 $790
" 15,000 (c) 6.1% $9.9100 12/14/13 $93,485 $236,910
Thomas Laudati 10,000 (a) 4.1% $6.9755 01/29/13 $43,869 $111,172
" 15,000 (c) 6.1% $9.9100 12/14/13 $93,485 $236,910
(a) These options become exercisable as to one-third of the shares on
January 30, 2004, and as to one thirty-sixth of the shares each month
thereafter for 24 months.
(b) These options became exercisable in full on December 31, 2003.
(c) These options become exercisable as to one-third of the shares on
December 15, 2004, and as to one thirty-sixth of the shares each month
thereafter for 24 months.
The Company did not award any stock appreciation rights or reprice any stock
options during the twelve months ended December 31, 2003.
AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table contains information concerning the stock options held by
the Named Executives during the year ended December 31, 2003. No stock
appreciation rights have been granted by the Company.
AGGREGATED OPTION EXERCISES DURING THE TWELVE MONTHS ENDED
DECEMBER 31, 2003 AND YEAR-END OPTION VALUES
- ----------------------------------------------------------------------------------------------------------------
Securities Received Number of Securities Value of Unexercised
from Exercise of Underlying Unexercised In-the-Money Options at
Options during the Options at December 31, December 31, 2003
Twelve Months ended 2003 (#) ($) (1)
December 31, 2003
------------------------- -------------------------- ----------------------------
Net Value
Number Received Un- Un-
Name of Shares ($) Exercisable Exercisable Exercisable Exercisable
- -------------------- ---------- ----------- ----------- ----------- ------------- -----------
Zach Lonstein - - 175,500 10,000 $276,461 $51,545
Robert Wallach - - 477,050 10,000 $2,312,632 $51,545
Roger A. Barrios - - 42,784 27,216 $249,217 $158,533
Nicholas J. Letizia - - 30,163 22,887 $105,562 $67,229
Thomas Laudati - - 28,133 26,467 $196,274 $91,375
(1) The amounts shown represent the aggregate excess of the market value
of shares of common stock underlying in-the-money options at December
31, 2003 over the exercise price of those options.
- 10 -
COMPENSATION OF DIRECTORS
Members of the Board of Directors who are not full-time employees of the Company
are granted non-qualified options to purchase 1,250 shares of the Company's
common stock for each meeting attended. Subject to approval by the Board of
Directors, members of the Audit Committee each receive an annual grant of a
non-qualified option to purchase 2,500 shares of the Company's common stock.
Employees of the Company who are also Directors, and Directors who were also
affiliates of the funds that invested in the Company, do not receive
compensation for their service as Directors.
In consideration of the significant extra effort given by Ms. Perone and Messrs.
Targoff and DaPuzzo in the successful consummation of the recapitalization of
the Company in October, each was awarded non-qualified options to purchase 5,000
shares of the Company's common stock.
Upon their initial election to the Board of Directors, Ms. Perone and Messrs.
Targoff and DaPuzzo each were granted a non-qualified option to purchase 25,000
shares of the Company's common stock.
EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS
Effective as of November 1, 1999, Mr. Lonstein and the Company entered into an
employment agreement with a three-year term. This agreement provided for an
annual salary of $375,000 with increases in the second and third years of at
least 5% per annum and an annual bonus based upon parameters set by the Options
and Compensation Committee. The Options and Compensation Committee of the Board
of Directors had the right, which was not exercised, to provide for a greater
annual increase and also the responsibility to set the parameters for the bonus
calculation. The agreement also provided for a grant of a nonqualified option to
purchase 150,000 shares of the Company's common stock at an exercise price equal
to the market value of the stock on November 10, 1999, in accordance with the
Plan. In addition, the agreement required that the Company provide Mr. Lonstein
a current model automobile and purchase a health club membership. The agreement
also provided that the Company shall nominate Mr. Lonstein to serve as the
Chairman of the Company's Board of Directors. The agreement provides for a death
or disability benefit equal to twice Mr. Lonsteins's base salary. If termination
notice is given by either Mr. Lonstein or the Company, he will be paid for one
year following such notice of termination. In addition, Mr. Lonstein would
receive a pro rata portion of any bonus which the Options and Compensation
Committee reasonably determines would have been payable with respect to the
fiscal year in which Mr. Lonstein's employment terminates.
Effective as of November 1, 1999, Mr. Wallach and the Company entered into an
employment agreement with a three-year term. This agreement provided for an
annual salary of $375,000 with increases in the second and third years of at
least 5% per annum and an annual bonus based upon parameters set by the Options
and Compensation Committee. The Options and Compensation Committee of the Board
of Directors had the right, which was not exercised, to provide for a greater
annual increase and also the responsibility to set the parameters for the bonus
calculation. The agreement also provided for a grant of a non-qualified option
to purchase 150,000 shares of the Company's common stock at an exercise price
equal to the market value of the stock on November 10, 1999, in accordance with
the Plan. In addition, the agreement required that the Company provide Mr.
Wallach a current model automobile and purchase a health club membership. The
agreement provides for a death or disability benefit equal to twice Mr.
Wallachs's base salary. If termination notice is given by either Mr. Wallach or
the Company, he will be paid for one year following such notice of termination.
In addition, Mr. Wallach would receive a pro rata portion of any bonus which the
Options and Compensation Committee reasonably determines would have been payable
with respect to the fiscal year in which Mr. Wallach's employment terminates.
The stated term of each of the foregoing employment agreements was to expire on
October 31, 2002. At the end of the stated term, each agreement provides that
will continue in full force until either the executive or the Company provides
one year notice of termination. Neither the Company nor Messrs. Lonstein or
Wallach have given such notice.
- 11 -
On April 2, 2004, Mr. Wallach was promoted to Vice Chairman.
In connection with the acquisition of SMS by the Company on April 2, 2004, the
Company and Mr. Dolan entered into an employment agreement, cancelable by either
party at any time, and providing for (1) a salary of $280,000, which may be
increased annually by the Company's Board of Directors in their sole discretion;
a grant of a fully vested option to purchase 200,000 shares of the Company's
common stock at the fair market value of such stock on April 2, 2004; a current
model automobile; and reimbursement of costs relating to maintaining an
apartment in New Jersey. The agreement provides for Mr. Dolan to be named
President and Chief Operating Officer of the Company, requires that Mr. Dolan be
named to the Company's Board of Directors; and provides for the possibility of
promotion to Chief Executive Officer after two years if certain revenue and
other targets are achieved. The agreement provides for a severance payment, upon
termination, equal to nine month's salary.
In connection with the acquisition of SMS by the Company on April 2, 2004, the
Company and Mr. Cortens entered into an employment agreement, cancelable by
either party at any time, and providing for (1) a salary of $250,000, which may
be increased annually by the Company's Board of Directors in their sole
discretion; a grant of a fully vested option to purchase 200,000 shares of the
Company's common stock at the fair market value of such stock on April 2, 2004;
and a current model automobile. The agreement provides for Mr. Cortens to be
named Executive Vice President of the Company. The agreement provides for a
severance payment, upon termination, equal to nine month's salary.
In connection with the acquisition of AmQUEST, Inc. on February 5, 2002, AmQUEST
and Mr. Barrios entered into an employment agreement with a one year term with
automatic three-month extensions. This agreement provides for an annual salary
of $210,000, a vehicle allowance of $500 per month, and an annual bonus of up to
30% of his salary to be determined by the Board of Directors of AmQUEST. The
agreement also provided for a grant of a non-qualified option to purchase 70,000
shares of the Company's common stock at an exercise price equal to the market
value of the stock on February 5, 2002, in accordance with the Plan.
CODE OF ETHICS
The Company has adopted a code of ethics that applies to the Company's principal
executive officer, principal financial officer, principal accounting officer or
controller, and persons performing similar functions. A copy of the code of
ethics is included as Appendix B. The Company has posted the code of ethics on
its website at www.infocrossing.com. In addition, a copy of the code of ethics
may be obtained by writing to Infocrossing, Inc., attention: Corporate
Secretary, 2 Christie Heights Street, Leonia, NJ 07605.
REPORT ON EXECUTIVE COMPENSATION
The Options and Compensation Committee of the Board of Directors administers the
compensation of the executive officers of the Company. Until October 21, 2003,
the Options and Compensation Committee was composed of four Directors, three of
whom were not employed by the Company. Two of the three directors who were not
employed by the Company resigned as directors and members of the Options and
Compensation Committee of the Board of Directors on October 21, 2003, following
the redemption of the Company's Series A Preferred Stock. Mr. Targoff,
independent director, was elected to the Options and Compensation Committee at
the regular meeting of the Board of Directors held on December 15, 2003, the
first meeting following the resignation of the two directors noted above. At
such time, Mr. Lonstein resigned from the Options and Compensation Committee.
Ms. Perone, an independent director, is also a member of the Options and
Compensation Committee. The following report is submitted by the Options and
Compensation Committee regarding compensation paid during 2003.
The Company's compensation policies are designed to attract, motivate, and
retain superior talent to enable the Company to achieve its business objectives
and to align the financial interest of the executive officers with the
stockholders of the Company. The Company's overall compensation philosophy is to
reinforce strategic objectives through the use of incentive compensation
programs; align executive compensation structures with shareholder objectives to
ensure a mutuality of interest in strategic decisions; and encourage significant
ownership of stock in the Company to strengthen the mutuality of interest
between executive officers and shareholders.
- 12 -
The compensation of executive officers consists of base compensation,
participation in benefit plans generally available to employees, and in some
instances, bonuses and/or options. In setting compensation, the Options and
Compensation Committee strives to maintain base compensation for the Company's
executive officers at levels which the Committee, based on its experience,
believes are competitive with the compensation of comparable executive officers
in similarly situated companies while relying on stock options and the bonus
plan to provide significant performance incentives.
The base compensation of Messrs. Lonstein, Wallach, and Barrios were established
by the employment agreements between the Company and each of them. Messrs.
Laudati and Letizia do not have employment agreements with the Company. The
employment agreements with Messrs. Lonstein and Wallach provide for annual
increases of base compensation of five percent (5%) effective on November 1 of
each year. Messrs. Lonstein and Wallach voluntarily waived such increases that
would have been effective as of November 1, 2002 and waived such increases that
would have been effective as of November 1, 2003 through at least December 31,
2003. Messrs. Laudati and Letizia each received two percent (2%) increases in
base compensation effective July 1, 2003. Effective October 1, 2003, each of the
foregoing executive officers, along with all other executive officers and
certain other officers, voluntarily took a five percent (5%) reduction in base
compensation until January 1, 2004. Base compensation of each of the Named
Executive Officers for 2003 was slightly less than the base compensation earned
by each of them in 2002.
Executive officers are eligible to participate in a bonus plan. Awards under the
bonus plan are determined by the Options and Compensation Committee. The Options
and Compensation Committee relies significantly on the recommendation of the
Chief Executive Officer with respect to the bonus to be awarded to the other
executive officers. The executive officers, as well as other key employees, may
receive discretionary bonuses based on a subjective evaluation of the
performance of the Company and their contributions to the Company.
The Committee periodically examines market compensation levels and trends for
similar positions in comparable public companies. The Committee has determined,
however, that since the Company's business is an emerging market and the Company
itself was a turnaround situation, there are no reasonable comparables to
benchmark compensation of the Named Executive Officers.
Periodically, the Options and Compensation Committee awards executive officers
and certain other employees stock options under the Amended and Restated 2002
Stock Option and Stock Appreciation Rights Plan (the "2002 Plan"). In
determining the number of options to be granted to each executive officer, the
Options and Compensation Committee reviews the recommendations provided by the
Chief Executive Officer with respect to the executive officers other than the
Chief Executive Officer and makes a subjective determination regarding those
recommendations. Four of the five Named Executive Officers received stock option
grants during 2003. Total shares underlying the options granted are 60,050. The
Chief Executive Officer and the Chief Operating Officer each received options to
purchase 10,000 shares. The option awards to the Named Executive Officers were
made at the time when option awards were made to other employees.
Generally, the Company will pay compensation to executive officers qualifying
for a tax deduction pursuant to Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"). In certain instances, however, stock options
awarded to executive officers may be Incentive Stock Options as defined in
Section 422 of the Code and will not give rise to a tax deduction if the
recipient adheres to the requirements of Section 422.
Based on the individual experience of its members, the Options and Compensation
Committee believes the compensation for each Named Executive Officer for 2003
was reasonable based on each executive officer's experience, level of
responsibility, and the contributions made and expected to be made by each to
the Company. See "Employment Agreements" for a description of the employment
agreements between the Company and each of Messrs. Lonstein, Wallach, and
Barrios.
Options and Compensation Committee
- ----------------------------------
Kathleen A. Perone
Michael B. Targoff
- 13 -
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In May 2000, the Company issued 157,377 shares of redeemable 8% Series A
Cumulative Convertible Participating Preferred Stock (the "Series A Preferred
Stock") and warrants to purchase 2,531,926 shares of the Company's common stock
(the "Investor Warrants"). The two holders of substantially all (156,852 shares)
of the shares of the Series A Preferred Stock were each entitled to name two of
the Company's Directors. On October 21, 2003, the Company purchased and retired
all the outstanding Series A Preferred Stock and all the Investor Warrants for
$80,000,000, using $55,000,000 in cash from the proceeds of the private stock
offering discussed below and issuing $25,000,000 in term loans. In connection
with this transaction, Ms. McCuen and Messrs. Zachem, Billings, and Keller, the
four members of the Company's board of directors representing the holders of the
Series A Preferred Stock, resigned on the closing date.
On October 21, 2003, the Company sold 9,739,111 shares of common stock and five
year warrants to purchase 3,408,689 shares of common stock for a net aggregate
amount of approximately $69,942,000. The warrants have an exercise price of
$7.86 per share and expire in October 2008. The private stock offering was made
only to accredited investors in a transaction exempt from the registration
requirements of the Securities Act of 1933. The net proceeds of the private
stock offering were principally used to fund the redemption of preferred stock
and warrants discussed above, the repayment of Debentures held by various funds
under the control of Camden Partners, and to pay related fees and expenses. The
remainder of the proceeds has been used for working capital purposes. On
February 12, 2004, a Registration Statement on Form S-3, filed by the Company on
behalf of the private stock offering investors as selling shareholders, was
declared effective. The Company will not receive any proceeds from any sales of
stock under this registration statement.
On February 1, 2002, the Company issued Senior Subordinated Debentures (the
"Debentures") and warrants to purchase, initially, 2,000,000 shares of the
common stock of the Company (the "Initial Camden Warrants") (subject to
adjustments as discussed below) to various funds controlled by Camden Partners
(the "Investors") in exchange for $10,000,000. The proceeds of the sale of the
Debentures and warrants were used to fund a portion of the cost of the AmQUEST
Acquisition. The Company had the option to pay interest in the form of (a) cash,
(b) additional Debentures, or (c) a combination of cash and additional
Debentures. The Company chose to make the interest payments due July 31, 2002,
January 31, 2003, and July 31, 2003 using an aggregate of $1,910,160 of
additional Debentures. The Initial Camden Warrants were issued pursuant to a
Warrant Agreement dated as of February 1, 2002 by and between the Company and
the Investors and are subject to certain customary anti-dilution adjustments.
The exercise price of the Initial Camden Warrants is $5.86 per share and they
expire on January 31, 2007. Initial Camden Warrants could be cancelled, in part,
upon the prepayment of the Debentures. On October 21, 2003, the Company repaid
the all the Debentures and interest accrued through that date in the amount of
$12,227,000, and also cancelled 937,500 of the Initial Camden Warrants.
On April 2, 2004, the Company acquired all of the stock of ITO Acquisition
Corporation d/b/a Systems Management Specialists ("SMS') from ITO Holdings, LLC
("Holdings") for approximately $35 million in cash and 135,892 shares of common
stock of the Company. $3,650,000 of the cash purchase price was deposited in an
escrow account as security for potential claims by the Company relating to
breaches, if any, of ITO's representations and warranties during the twelve
months following the closing of the transaction. Pursuant to employment
contracts with the Company, Messrs. Dolan and Cortens, became the Company's
President & Chief Operating Officer and Executive Vice President, respectively,
upon the closing of the transaction. Mr. Dolan also was elected to the Company's
Board of Directors. Messrs. Dolan and Cortens, who are also members of Holdings,
have advised the Company that they received $1,622,254 and $623,577,
respectively, of the cash portion of the purchase price plus 115,485 shares and
20,407, respectively, of the stock portion of the purchase price. Messrs. Dolan
and Cortens may receive up to $356,180 and $119,205, respectively, plus accrued
interest thereon from the escrow account.
Jack Silver, a beneficial owner of more than 5% of the Company's common stock,
received a finder's fee of $300,000 from the Company in connection with the
private placement of common stock consummated on October 21, 2003.
As of December 31, 2003, Mr. Lonstein was indebted to the Company in the amount
of $89,045. This indebtedness is payable on demand and bears interest at the
prime rate of interest plus 1% per annum.
As of December 31, 2003, Mr. Wallach was indebted to the Company in the amount
of $99,082. This indebtedness is payable on demand and bears interest at the
prime rate.
- 14 -
As of December 31, 2003, Mr. Laudati is indebted to the Company in the amount of
$37,935. This indebtedness is payable on demand and bears interest at the prime
rate.
In accordance with the Sarbanes-Oxley Act of 2002, no further advances are being
made to the Company's officers, other than accrued interest on outstanding
balances.
STOCK PERFORMANCE GRAPH
The accompanying graph compares cumulative total stockholder return on the
Company's common stock with the NASDAQ Domestic Stock Index and the NASDAQ
Computer and Data Processing Services Index (SIC Code 737). The graph assumes
that $100 was invested in the Company's common stock and each index on December
31, 1998.
[GRAPHIC REPLACED WITH CHART BELOW]
STOCKHOLDER RETURN
AS OF DECEMBER 31,
--------------------------------------------------
1998 1999 2000 2001 2002 2003
Company Common Stock $100 $232 $56 $56 $57 $111
NASDAQ Domestic Index 100 185 112 89 61 92
NASDAQ Computer and
Data Processing
Services Index 100 220 101 82 56 74
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the executive
officers and Directors of the Company, and persons who beneficially own more
than ten percent of the Company's Common Stock, to file reports of ownership of
Company securities and changes of ownership with the Securities and Exchange
Commission. Copies of those reports must also be furnished to the Company.
Based solely on a review of the copies of reports furnished to the Company, the
Company believes that during the twelve months ended December 31, 2003, persons
beneficially owning more than ten percent of the Company's Common Stock complied
with all applicable Section 16(a) filing requirements on a timely basis. Based
solely on a review of the copies of reports furnished to the Company and the
results of its review to date, the Company currently believes that the following
reports on Form 4 by Executive Officers and Directors were not timely filed
during the twelve months ended December 31, 2003: for Ms. Perone and Mr.
Targoff, four reports each; for Mr. DaPuzzo, three reports; for Messrs.
Lonstein, Wallach, Laudati, Lazarewicz, and Wilczak, two reports each, and
Messrs. Letizia, Carpenter, and McHale, one report each. Messrs. Dolan, Cortens,
and Barrios did not have transactions reportable under Section 16(a) during
2003.
- 15 -
INFORMATION CONCERNING INDEPENDENT AUDITORS
Fees billed by Ernst & Young, LLP, the Company's Independent Auditors
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------
2003 2002
----------------- -----------------
AUDIT FEES $ 420,700 $ 248,0000
AUDIT-RELATED FEES - FOR AN SAS-70
AUDIT IN 2003 AND FOR DUE
DILIGENCE RELATED TO THE AMQUEST
ACQUISITION AND BENEFIT PLAN AUDITS
IN 2002 35,000 44,795
TAX FEES - FOR CORPORATE RETURN
PREPARATION AND TAX AUDIT SUPPORT 101,945 86,1355
-------------- -------------
$ 557,645 $ 378,930
============== =============
The Audit Committee has adopted a policy that requires advance approval of all
audit, audit-related, tax services, and other services performed by the
independent auditor. Unless the specific service has been previously approved
with respect to that year, the Audit Committee must approve the permitted
service before the independent auditor is engaged to perform it.
REPRESENTATION AT THE MEETING
A representative of Ernst & Young, LLP is expected to be present at the Meeting.
Such representative will have an opportunity to make a statement, if he or she
desires to do so, and will be available to respond to appropriate questions.
Ernst & Young, LLP, has been selected to audit the Company's financial
statements for the year ending December 31, 2004.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees the Company's financial reporting process on behalf
of the Board of Directors. Management has the primary responsibility for the
financial statements and the reporting process including the systems of internal
controls. In fulfilling its oversight responsibilities, the Audit Committee
reviewed the audited financial statements in the Annual Report with management
including a discussion of the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant judgments, and the
clarity of disclosures in the financial statements.
The Audit Committee reviewed with the independent auditors, who are responsible
for expressing an opinion on the conformity of those audited financial
statements with accounting principles generally accepted in the United States,
their judgments as to the quality, not just the acceptability, of the Company's
accounting principles and such other matters as are required to be discussed
with the Audit Committee by Statement on Auditing Standards No. 61, as amended
by Statement on Auditing Standards No. 90 (Communications with Audit
Committees). In addition, the Audit Committee has discussed with the independent
auditors the auditors' independence from management and the Company including
the matters in the written disclosures required by the Independence Standards
Board Standard No. 1 and considered the compatibility of non-audit services with
the auditors' independence.
The Audit Committee discussed with the Company's independent auditors the
overall scope and plans for their audits. The Audit Committee meets with the
independent auditors, with and without management present, to discuss the
results of their examinations, their evaluations of the Company's internal
controls, and the overall quality of the Company's financial reporting. The
Audit Committee held six meetings during the year ended December 31, 2003 and
took four actions by written consent.
- 16 -
The independent auditors also provided the Audit Committee with the written
disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and the Committee discussed
with the independent auditors that firm's independence with respect to the
Company and its management. The Committee has also reviewed the Sarbanes-Oxley
Act of 2002 with respect to auditor independence and has defined the amount and
scope of services that may be performed by the independent auditors consistent
with maintaining the auditors' independence. The Audit Committee requires that
all services of the independent auditors be pre-approved by the Audit Committee.
The Audit Committee has considered whether the independent auditors provision of
non-audit services to the Company and the audit and non-audit fees paid to the
independent auditors, are compatible with maintaining the independent auditors'
independence. On the basis of its review, the Audit Committee determined that
the independent auditors have the requisite independence.
Based on the Audit Committee's discussions with management and the independent
auditors, the Audit Committee's review of the audited financial statements, the
representations of management regarding the audited financial statements, and
the report of the independent auditors to the Audit Committee, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2003 for filing with the Securities and Exchange Commission.
Audit Committee
- ---------------
Kathleen A. Perone, Chairperson
Peter J. DaPuzzo
Michael B. Targoff
PROPOSAL II - APPROVAL OF THE AMENDMENT OF THE
COMPANY'S 2002 STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN
On April 26, 2004, the Board of Directors adopted a resolution, subject to
stockholder approval, to amend the Company's 2002 Stock Option and Stock
Appreciation Rights Plan (the "Plan"). If the amendment to the Plan is adopted,
the number of shares for which options may be granted under the plan will
increase from 1,000,000 to 2,000,000.
The Board of Directors believes that it is important to have an option plan
providing for the issuance of stock options to provide adequate incentives to
the Company's employees and directors and remain competitive with option
programs available at similar companies. As of the Record Date, there were
284,883 shares available for grant. The Company may wish to make additional
grants to existing employees, new employees gained through normal growth or
future business acquisitions (although the Company has no definitive plans for
any such acquisitions at this time), or for other purposes. The Board of
Directors believes that it is important to have additional shares available
under the Plan to provide adequate incentives to the Company's workforce.
The affirmative vote of the holders of a majority of the shares of common stock
voting at the Meeting, in person or by proxy, is necessary for approval of the
amendment to the Plan and, unless this vote is received, the amendment to the
Plan for the increase in the number of options available for grant will not
become effective. Abstentions will have the same effect as voting against the
proposal to approve the amendment to the Plan, while broker non-votes have no
effect on the outcome of this proposal.
The essential features of the Plan are summarized below. This summary does not
purport to be a complete description of all the provisions of the Plan, and is
subject to and qualified in its entirety by reference to the complete text of
the Plan, as amended, which has been filed with the Securities and Exchange
Commission with this Proxy Statement. Any stockholder of the Company who wishes
to obtain a copy of the actual Plan document may do so upon written request to
the Secretary of the Company at the following address: Corporate Secretary,
Infocrossing, Inc., 2 Christie Heights Street, Leonia, NJ 07605.
- 17 -
PURPOSE OF THE PLAN
The purpose of the Plan is to provide incentives to selected Directors,
officers, employees, and consultants of the Company and its subsidiaries, by
providing them with the opportunity to realize stock appreciation, by
facilitating stock ownership, and by rewarding them for achieving a high level
of corporate performance. The Plan is also intended to facilitate recruiting and
retaining key personnel of outstanding ability.
ADMINISTRATION
The Board of Directors may appoint a separate committee or direct the
compensation committee to assist the Board in administering the Plan. The Plan
provides that any committee that will assist in administering the Plan shall
consist of not less than three members of the Board, no less than two of whom
shall be Non-Employee Directors; provided, that any grants made by such
committee shall be approved solely by a majority of the Non-Employee Directors.
The Board of Directors may take any action that may be taken by any committee
assisting with the administration of the Plan. Except with respect to options
granted to Non-Employee Directors for attending certain meetings of the Board of
Directors, as described below, any committee assisting the Board of Directors in
administering the Plan has the power to grant options under the Plan and to
determine when and to whom options will be granted, and the form, amount and
other terms and conditions of each grant, subject to the provisions of the Plan.
Any such committee will have the authority to interpret the Plan and any grant
or agreement made thereunder. The Options and Compensation Committee of the
Board of Directors is currently responsible for the administration of the Plan.
ELIGIBILITY
The Plan provides for grants to all employees of the Company and its
subsidiaries of "Incentive Stock Options" within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended, and for grants of non-qualified
options to employees, officers, Directors and consultants of the Company and its
subsidiaries. Additionally, the Plan provides that each unaffiliated Director
shall automatically be granted a stock option covering 1,250 shares for each
meeting of the Board of Directors attended by that Director. A "meeting" for
purposes of the preceding sentence shall include only those meetings of the
Board of Directors when at least a majority of the Directors are present at a
single location. All employees (including executive officers) and all Directors
are eligible to receive options under the Plan.
TYPES OF GRANTS
The Company has discretion to determine whether an option grant shall be an
Incentive Stock Option or a Non-Qualified Stock Option. Subject to certain
restrictions applicable to Incentive Stock Options, options will be exercisable
by the recipients at those times as are determined by the Options and
Compensation Committee, but in no event may the term of an option be longer than
ten years after the date of grant (five years with respect to an Incentive Stock
Option granted to an employee holding 10% or more of the Company's stock). Both
Incentive Stock Options and Non-Qualified Stock Options may be granted to
recipients at such exercise prices as the Options and Compensation Committee may
determine, except that the exercise price of an Incentive Stock Option shall not
be less than 100% of the fair market value of the stock on the date of its grant
(110% in the case of a grant to a 10% or greater stockholder) and the exercise
price of a non-qualified option granted to a non-management Director shall be
the fair market value of the stock on the date of grant.
The purchase price payable upon exercise of options may be paid (1) in cash, (2)
by delivering, subject to the approval of the Options and Compensation
Committee, stock already owned by the holder (where the fair market value of the
shares delivered on the date of exercise is equal to the option price of the
stock being purchased), (3) with the proceeds of a loan from an independent
broker-dealer whereby the loan is secured by the option or the stock to be
received upon exercise, or (4) a combination of the foregoing.
- 18 -
TRANSFERABILITY
During the lifetime of an employee to whom an option has been granted, only the
employee, or the employee's legal representative, may exercise an option. No
options may be sold, assigned, transferred, exchanged or otherwise encumbered
except to a successor in the event of an option holder's death.
STOCK APPRECIATION RIGHTS
Options may be accompanied by either general or limited stock appreciation
rights. Upon exercising a stock appreciation right, a related option shall no
longer be exercisable, and the option shall be considered to have been exercised
to that extent for purposes of determining the number of shares available for
the grant of further options. Upon exercise of a right, the holder receives the
difference between the fair market value per share on the date the right is
exercised and the purchase price per share at which the option is exercisable,
multiplied by the number of shares with respect to which the right is being
exercised. A limited right, however, may be exercised only during the period of
a tender or exchange offer for the Company's shares.
AMENDMENT OR TERMINATION
The Board of Directors may, subject to obtaining stockholder approval to the
extent required by applicable NASDAQ rules, amend or discontinue the Plan but no
amendment or termination shall be made that would impair the rights of any
holder of any option granted before the amendment or termination.
FEDERAL TAX CONSIDERATIONS
The Company has been advised by its outside counsel that the grant, exercise,
and sale of options and stock under the Plan generally results in the following
tax events for United States citizens under current United States Federal income
tax laws.
Incentive Stock Options - A recipient will realize no taxable income, and the
Company will not be entitled to any related deduction, at the time an Incentive
Stock Option is granted under the Plan. No taxable income will result upon the
exercise of an Incentive Stock Option and the Company will not be entitled to
any deduction in connection with that exercise. If certain statutory employment
and holding period conditions are satisfied before the recipient disposes of
shares acquired pursuant to the exercise of such an option, then upon
disposition of the shares after expiration of the statutory holding periods, any
gain or loss realized by a recipient will be a capital gain or loss. The Company
will not be entitled to a deduction with respect to a disposition of the shares
by a recipient after the expiration of the statutory holding periods.
Except in the event of death, if shares acquired by a recipient upon the
exercise of an Incentive Stock Option are disposed of by the recipient before
the expiration of the statutory holding periods, the recipient will be
considered to have realized, as compensation taxable as ordinary income in the
year of disposition, an amount, not exceeding the gain realized on the
disposition, equal to the difference between the exercise price and the fair
market value of the shares on the date of exercise of the option. The Company
will be entitled to a deduction at the same time and in the same amount, since
the recipient is deemed to have realized ordinary income. Any gain realized on
the disposition in excess of the amount treated as compensation or any loss
realized on the disposition will constitute capital gain or loss, respectively.
The foregoing discussion applies only for regular tax purposes. For alternative
minimum tax purposes, at the time of exercise of an Incentive Stock Option, the
recipient would realize income includable in alternative minimum taxable income.
Non-Qualified Stock Options - A recipient will realize no taxable income, and
the Company will not be entitled to any related deduction, at the time a
Non-Qualified Stock Option is granted under the Plan. At the time of exercise of
a Non-Qualified Stock Option, the recipient would realize ordinary income, and
the Company would be entitled to a deduction, equal to the excess of the fair
market value of the stock on the date of exercise over the exercise price. Upon
disposition of the shares, any additional gain or loss realized by the recipient
will be taxed as a capital gain or loss.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE AMENDMENT
OF THE 2002 STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN.
- 19 -
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table presents information, as of December 31, 2003, regarding
securities authorized for issuance under the Company's 1992 Stock Option and
Stock Appreciation Rights Plan and the Company's 2002 Stock Option and Stock
Appreciation Rights Plan.
------------------------- -------------------------- --------------------------
NUMBER OF SECURITIES TO WEIGHTED AVERAGE NUMBER OF SECURITIES
BE ISSUED UPON EXERCISE EXERCISE PRICE OF REMAINING AVAILABLE FOR
OF OUTSTANDING OPTIONS OUTSTANDING OPTIONS FUTURE ISSUANCE
------------------------- -------------------------- --------------------------
Two qualified Stock Option Plans -
previously approved by stockholders (1) 1,530,754 $8.735 737,833 (2)
(1) Includes the Company's 1992 Stock Option and Stock Appreciation Rights
Plan and the Company's 2002 Stock Option and Stock Appreciation Rights
Plan. The 1992 Stock Option and Stock Appreciation Rights Plan was
approved by the stockholders of the Company in September 1992. No
further grants may be made under the 1992 Stock Option and Stock
Appreciation Rights Plan. The 2002 Stock Option and Stock Appreciation
Rights Plan was approved by the stockholders of the Company in June
2002.
(2) The above table does not reflect the proposed increase in the number
of shares authorized to be issued under the 2002 Stock Option and
Stock Appreciation Rights Plan from 1,000,000 to 2,000,000 shares
pursuant to Proposal II above.
In addition to shares authorized for issuance under the foregoing plans, at
December 31, 2003, the Company has reserved 4,566,189 common shares for issuance
upon exercise of the following warrants: (i) 1,062,500 shares exercisable at
$5.86 per share expiring January 31, 2007; (ii) 65,000 shares exercisable at
$18.00 per share expiring September 16, 2010; (iii) 30,000 shares exercisable at
$19.25 per share expiring June 5, 2004; and (iv) 3,408,689 shares exercisable at
$7.86 per share expiring October 20, 2008.
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
In order for a stockholder proposal to be considered for inclusion in the
Company's Proxy Materials for the 2005 Annual Meeting, it must be received by
the Company's Secretary at 2 Christie Heights Street, Leonia, NJ 07605, no later
than January 13, 2005.
OTHER BUSINESS
The Board of Directors knows of no other business to be acted upon at the
Meeting other than the matters described in this Proxy Statement. If other
business is properly presented for consideration at the Meeting, or any
adjournment thereof, the enclosed Proxy shall be deemed to confer discretionary
authority on the persons named therein to vote the shares represented by such
Proxy as to such other business.
The Board of Directors would appreciate the prompt return of the enclosed Proxy,
signed and dated.
ANNUAL REPORT
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2003 WILL BE PROVIDED WITHOUT CHARGE UPON WRITTEN REQUEST TO THE
SECRETARY OF THE COMPANY AT 2 CHRISTIE HEIGHTS STREET, LEONIA, NJ 07605.
- 20 -
APPENDIX A
AUDIT COMMITTEE CHARTER OF
INFOCROSSING, INC.
APRIL 26, 2004
The Board of Directors of Infocrossing, Inc. (the "Company") has
adopted this Charter to govern the operations of the Audit Committee (the
"Committee") of the Company's Board of Directors. The Committee shall review and
reassess the Charter at least annually. It shall report the findings of such
review and reassessment to the Company's Board of Directors at least annually.
At such time, the Board of Director's will determine if any modifications to
this Charter are required.
ORGANIZATION OF THE AUDIT COMMITTEE
The Committee shall be appointed by the Board of Directors and shall
comprise at least three Directors, each of whom are independent of management
and the Company. Members of the Committee shall be considered independent if
they have no relationship that may interfere with the exercise of their
independence from management and the Company and otherwise meet the independence
requirements of applicable SEC and NASDAQ rules. All Committee members shall be
financially literate, and at least one member shall have accounting or related
financial management expertise. The Company's Board of Directors shall appoint
one of the members as Chairperson of the Committee.
STATEMENT OF POLICY
The Audit Committee shall provide assistance to the Board of Directors
in fulfilling their oversight responsibility to the stockholders, potential
stockholders, the investment community, and others relating to the Company's
financial statements and financial reporting process; the systems of internal
accounting and financial controls; the annual independent audit of the Company's
financial statements; and the legal compliance and ethics programs as
established by management and the Board. In so doing, it is the responsibility
of the Committee to maintain free and open communication between the Committee,
independent auditors, and management of the Company. In discharging its
oversight role, the Committee is empowered to investigate any matter brought to
its attention with full access to all books, records, facilities, and personnel
of the Company and the power to retain outside counsel, or other experts for
this purpose.
RESPONSIBILITIES AND PROCESSES
The primary responsibility of the Committee is to oversee the Company's
accounting and financial reporting processes and audits of the Company's
financial statements on behalf of the Board and report the results of their
activities to the Board. Management is responsible for preparing the Company's
financial statements, and the independent auditors are responsible for auditing
those financial statements. The Committee, in discharging its responsibilities,
believes its policies and procedures should remain flexible, in order to best
react to changing conditions and circumstances. The Committee should take the
appropriate actions to set overall corporate policies for quality financial
reporting, sound business risk practices, and ethical behavior.
The following shall be the principal recurring processes of the Audit
Committee in carrying out its oversight responsibilities. The processes are set
forth as a guide with the understanding that the Committee may supplement them
as appropriate.
A - 1
o The Committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately
accountable to the Committee and the Board, as representatives of the
Company's stockholders.
o The Committee shall have the ultimate authority and responsibility to
appoint, establish the compensation for, evaluate and, where appropriate,
replace the independent auditors, and the independent auditors shall report
directly to the Committee.
o The Committee shall review and approve the independent auditors'
compensation and proposed terms of their engagement.
o The Committee shall pre-approve all audit and permitted non-audit services
provided to the Company by the independent auditors. The Committee may
delegate to one or more of its members, to the extent permitted by
applicable SEC and NASDAQ rules, the authority to grant pre-approvals
required hereunder. The decisions of any member to whom authority is
delegated to grant pre-approvals shall be presented to the full Committee
at its next scheduled meeting.
o The Committee shall discuss with the auditors their independence from
management and the Company and the matters included in the written
disclosures required by the Independence Standards Board. The Committee
shall discuss any disclosed relationships between the outside auditor and
the Company and the impact of such relationships on the outside auditor's
independence. The Committee shall take, or recommend that the Board take,
the appropriate action to oversee the independence of the outside auditor.
o The Committee shall develop guidelines for the Company's hiring of
employees of the independent auditors who were engaged on the Company's
account, which shall include a prohibition on hiring any such employee as
principal executive officer, principal financial officer, principal
accounting officer, controller, or any equivalent positions, during
one-year periods prior to the commencement of the audit. .
o The Committee shall discuss with the independent auditors the overall scope
and plans for their audit including the adequacy of staffing and
compensation. Also, the Committee shall discuss with management and the
independent auditors the adequacy and effectiveness of the Company's
accounting and financial controls, including systems to monitor and manage
business risk as well as legal and ethical compliance programs. Further,
the Committee shall meet separately with the independent auditors, with and
without management present, to discuss the results of their examination.
o The Committee shall review the interim financial statements with management
and the independent auditors prior to the filing of the Company's Quarterly
Report on Form 10-Q. Also, the Committee shall discuss the results of the
quarterly review and any other matters required to be communicated to the
Committee by the independent auditors under generally accepted auditing
standards. The Chairperson of the Committee may represent the entire
Committee for the purpose of this review.
o The Committee shall review with management and the independent auditors the
financial statements to be included in the Company's Annual Report on Form
10-K (or the annual report to stockholders if distributed prior to the
filing of Form 10-K), including their judgment about the quality, not just
acceptability, of accounting principles, the reasonableness of significant
judgments, and the clarity of the disclosures in the financial statements.
Also, the Committee shall discuss the results of the annual audit and any
other matters required to be communicated to the Committee by the
independent auditors under generally accepted auditing standards. The
Committee shall determine whether to recommend inclusion of the Company's
annual financial statements in the Company's Annual Report on Form 10-K.
o The Committee shall prepare the audit report required by the Securities and
Exchange Commission to be included in the proxy statement used in
connection with the annual meeting of the Company's stockholders.
o The Committee shall review as appropriate with the Company's Principal
Executive Officer and Principal Financial Officer the contents of the
personal certifications required to be made by them pursuant to Sections
302 and 906 of the Sarbanes Oxley Act of 2002.
A - 2
o The Committee shall review the Company's policies and procedures regarding
compliance with applicable laws and regulations, which shall include a Code
of Ethics that complies with the requirements promulgated under Section 406
of the Sarbanes Oxley Act of 2002 and a Code of Conduct that complies with
the standards contained in NASDAQ rules.
o The Committee shall, to the extent required by the Company's Code of Ethics
and Conduct Code of Conduct, review and approve all related party
transactions and any modifications thereto and, to the extent appropriate,
consult with management, legal counsel, and the independent auditors to
ensure that such transactions are effected and disclosed in conformity with
applicable legal requirements and the Company's Code of Ethics and Conduct
Code of Conduct.
o The Committee shall establish procedures for (i) the receipt, retention and
treatment of complaints received by the Company regarding accounting,
internal accounting controls or auditing matters or suspected violations of
the Company's Code of Ethics, Code of Conduct or other policies and
procedures of the Company, and (ii) the confidential, anonymous submission
by employees of the Company of concerns regarding questionable accounting
or auditing matters or suspected violations of the Company's Code of
Ethics, Code of Conduct or other policies and procedures.
o The Committee shall have the authority to retain, establish the
compensation for and terminate outside counsel and other experts and
advisors, including public accountants, as it determines appropriate to
assist in the full performance of its functions.
o The Company shall provide for appropriate funding, as determined by the
Committee, in its capacity as a committee of the Board, for payment of:
compensation to independent auditors engaged for the purpose of preparing
or issuing an audit report or performing other audit, review or attest
services for the Company; compensation to any advisers appropriately
employed by the Committee; and ordinary administrative expenses of the
Committee that are necessary or appropriate in carrying out its duties.
o In order to fulfill its obligations hereunder, the Committee shall meet as
often as it deems necessary. Such meetings may be conducted in person or
via telephonic conferencing equipment. The Committee shall maintain written
minutes of all meetings and provide copies of such minutes to the Company's
Board of Directors.
A - 3
APPENDIX B
INFOCROSSING, INC.
CODE OF ETHICS
BUSINESS INTEGRITY
Infocrossing, Inc. (the "Company") must live by its core values, one of which is
integrity. Having integrity means being honest, trustworthy and truthful. In
short, it's "doing the right thing" when conducting Company business. To act
with integrity enhances the Company's ability to achieve its vision and business
objectives.
The Company is committed to the highest standards of business conduct in its
relationships with employees, customers, suppliers and shareholders. This means
conducting business in accordance with the spirit and letter of applicable laws
and regulations.
This Code of Ethics (the "Code"), which applies to the Company's principal
executive officer, principal financial officer, principal accounting officer or
controller, and persons performing similar functions (individually, a "Covered
Person" and collectively, the "Covered Persons"), provides a statement of
certain fundamental principals and key policies and procedures that govern the
conduct of the Company's business.
The Code is designed to deter wrongdoing by the Company and Covered Persons and
to promote:
o Honest and ethical conduct, including the ethical handling of actual or
apparent conflicts of interest between personal and professional
relationships, including disclosure to the Audit Committee of the Board of
Directors of the Company (the "Audit Committee") of any material
transaction or relationship that reasonably could be expected to give rise
to such a conflict;
o Full, fair, accurate, timely and understandable disclosure in reports and
documents that the Company files with, or submits to, the Securities
Exchange Commission (the "SEC"), and in other public communications made by
the Company;
o Compliance with applicable governmental laws, rules and regulations;
o The prompt internal reporting to the Audit Committee of violations of the
Code; and
o Accountability for adherence to the Code.
Each Covered Person must follow the policies in the Code. Each Covered Person is
responsible for demonstrating, by actions and words, a continuing personal
commitment to do what the law and the Code require.
COMPLIANCE
It is the Company's policy to prevent the occurrence of unethical or unlawful
conduct in its business, to halt any such conduct promptly, and to discipline
those who engage in such conduct, as well as individuals who fail to exercise
appropriate supervision and oversight. To that end, Covered Persons are expected
to behave in an ethical manner in all maters related to the Company's business
and are expected to use their best efforts to comply with all governmental laws,
rules and regulations that apply to the Company's business.
B - 1
Noncompliance with the Code can have severe consequences for both the Company
and the individuals involved. In addition to potentially damaging the Company's
reputation, trade and customer relations, and business opportunities, conduct
that violates the Code may also violate applicable laws, rules or regulations.
These violations can subject Covered Persons and the Company to civil liability
and criminal prosecution. Covered Persons who violate the Code or applicable
laws, rules or regulations also will be subject to discipline that could include
termination of employment.
If a Covered Person becomes aware of a possible violation of an applicable law,
rule or regulation, the Code or a related policy, he or she must promptly report
that information to the Audit Committee. All reports will be treated
confidentially to the extent possible and will be investigated. If there is any
doubt as to a particular matter being a violation, it should be reported. There
will be no retaliation for making reports in good faith.
CONFLICTS OF INTEREST
To maintain the highest degree of integrity in the conduct of the Company's
business and to maintain a Covered Person's independent judgment, he or she
must, except as otherwise approved by the Audit Committee, avoid any activity or
personal interest that creates or appears to create a conflict between his or
her interests and the interests of the Company. A conflict of interest arises
any time a Covered Person has two or more duties or interests that are mutually
incompatible and conflict with the proper and impartial fulfillment of his or
her duties, responsibilities or obligations to the Company.
Conflicts of interest include a Covered Person making a significant investment
that may affect his or her business decisions, owning a significant financial
interest in or being employed by an organization that is in competition with the
Company, or owning a significant financial interest in or being employed by any
customer, supplier or other organization that does or seeks to do business with
the Company. Covered Persons shall not enter into any of these transactions or
activities without the prior approval of the Audit Committee.
In addition, Covered Persons must be sensitive to issues of security,
confidentiality and conflicts of interest if their spouse or an immediate family
member is a competitor or supplier of the Company, or is employed by a
competitor or supplier. Neither the Company, nor any Covered Person acting on
behalf of the Company, shall knowingly enter into any material transaction with
any Covered Person, or an immediate family member of a Covered Person, or any
material transaction with any entity in which a Covered Person, or an immediate
family member of a Covered Person, has any material interest, directly or
indirectly, without the prior approval of the Audit Committee. If a Covered
Person has any doubts or questions about a possible conflict, he or she must
discuss the matter with the Company's General Counsel before taking any action.
INSIDER TRADING
Except as otherwise permitted by law (e.g., pursuant to a properly adopted plan
that satisfies all of the requirements of SEC Rule 10b5-1), Covered Persons are
prohibited from insider trading (buying or selling the Company's securities when
they are in the possession of material, nonpublic information) and tipping
(passing such information on to someone who may buy or sell securities). This
prohibition applies to the Company's securities and the securities of other
companies if Covered Persons learn material, nonpublic information about them in
the course of performing their duties for the Company.
Information is considered material if (a) there is a substantial likelihood that
a reasonable investor would find the information important in determining
whether or not to trade in a security or (b) the information, if made public,
would likely affect the market price of a company's securities. Examples of
material information include unannounced dividends, earnings, financial results,
new or lost contracts or products, sales results, important personnel changes,
business plans, possible mergers, acquisitions or divestitures or joint
ventures, and important regulatory, judicial and legislative actions.
Information is considered nonpublic unless it has been adequately disclosed to
the public, which means that the information must be publicly disclosed and
adequate time must have passed for the securities markets to digest the
information. Adequate disclosure includes public filings with securities
regulatory authorities and the issuance of press releases, which may include
meetings with members of the press and the public. A delay of two business days
is generally considered a sufficient period for routine information to be
absorbed by the market. A longer period of delay may be considered appropriate
for more complex transactions.
B - 2
Covered Persons may not disclose inside information to anyone, including other
employees, unless the person receiving the information has a legitimate,
business-related need to know. If an employee leaves the Company, he or she must
maintain the confidentiality of that information until it has been adequately
disclosed to the public. If there is any question as to whether information
regarding the Company or any other company the Company has dealings with is
material or has been adequately disclosed to the public, the General Counsel
must be contacted.
ACCURACY AND COMPLETENESS OF DOCUMENTS AND RECORDS
All Covered Persons must follow the highest standards of accuracy and
completeness in preparing any business document or record. The following
principles must be observed:
o Covered Persons shall maintain complete, accurate and timely records and
accounts to reflect all business transactions.
o Covered Persons shall not establish any unrecorded fund for any purpose
without proper documentation.
o Covered Persons shall not make any false entry or misrepresentation in a
business document or record.
o Covered Persons shall not make or authorize any payment on behalf of the
Company with the intention or understanding that any part of such payment
is for a purpose other than that described by the documents or records
supporting the payment.
The Company may, from time to time, be called upon to submit certain documents
and records to various governmental agencies for many purposes; for example, to
support payment for goods and services provided, to obtain necessary licenses or
to establish compliance with applicable legal requirements. All such submissions
to governmental agencies must be prepared with the highest standards of accuracy
and completeness. Inaccurate submissions to a governmental agency could subject
the Company and any Covered Persons involved to civil liability or criminal
prosecution.
ACCURACY AND COMPLETENESS OF SEC AND OTHER FILINGS
The Company is required to make periodic filings with the SEC and NASDAQ. All
such filings must be prepared with the highest standards of accuracy and
completeness. In preparing such filings, Covered Persons shall follow the
Company's accounting procedures, as well as all generally accepted accounting
principles, standards, laws and regulations for accounting and financial
reporting of transactions. Inaccurate filings to the SEC, NASDAQ or any other
government agency or organization could subject the Company and any Covered
Persons involved to civil liability or criminal prosecution. In order to ensure
that all such filings are prepared with the highest standards of accuracy and
completeness:
Covered Persons shall maintain complete and accurate documents and records in
accordance with the principles set forth above.
Covered Persons shall cause the Company to maintain disclosure controls and
procedures and internal controls over financial reporting to ensure that
financial and non-financial information required to be disclosed by the Company
in reports filed with or submitted to the SEC are accurately and completely
recorded, processed, summarized and reported in a timely manner.
Covered persons shall provide timely, candid forecasts and assessments to other
members of management.
Covered persons shall not make any false entry or misrepresentation in a
business document, record or report.
DOCUMENT RETENTION
The Company and each Covered Person shall comply with all laws and regulations
relating to the preservation of records. Under no circumstances are records to
be destroyed selectively or maintained outside the Company's premises or
designated storage facilities.
B - 3
If the existence of a subpoena or impending government investigation is known or
reported to a Covered Person, he or she must promptly report such information to
the Audit Committee and the General Counsel. Covered Persons must retain all
records that may be responsive to a subpoena or pertain to an investigation. Any
questions regarding whether a record pertains to an investigation should be
directed to the General Counsel.
REPORTING VIOLATIONS
If a Covered Person knows of or suspects a violation of applicable laws, rules
or regulations, the Code or the Company's related policies, he or she must
immediately report that information to the Audit Committee. No Covered Person
reporting a suspected violation will be subject to retaliation as a result of a
good faith report.
INVESTIGATIONS OF VIOLATIONS
Reported violations will be promptly investigated. It is imperative that the
Covered Person reporting the violation refrain from conducting a preliminary
investigation of their own. Investigations of alleged violations may involve
complex legal issues. Covered Persons who act on their own may compromise the
integrity of an investigation and adversely affect both themselves and the
Company.
DISCIPLINE FOR VIOLATIONS
The Company intends to use every reasonable effort to prevent the occurrence of
conduct not in compliance with applicable laws, rules and regulations, the Code
and its related policies and to halt any such conduct that may occur as soon as
reasonably possible after its discovery. Covered Persons who violate the law,
the Code and other policies and procedures may be subject to disciplinary
action, up to and including discharge. In addition, disciplinary action, up to
and including discharge, may be taken against any Covered Person who directs or
approves infractions or has knowledge of them and does not move promptly to
correct them in accordance with the Company's policies.
AMENDMENT OR WAIVER
The Board may amend, or waive any provision of, the Code at any time; provided
however that any such amendment or waiver shall promptly be disclosed as
required by applicable SEC rules.
DISCLOSURE
A copy of the Code, including any amendments, shall be filed as an exhibit to
the Company's Annual Report on Form 10-K.
B - 4
FORM OF PROXY
FRONT
PROXY
INFOCROSSING, INC.
PROXY FOR THE ANNUAL MEETING ON JUNE 15, 2004
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Zach Lonstein and Robert B. Wallach proxies,
each with the power to appoint his substitute and with authority in each to act
in the absence of the other, to represent and to vote all shares of stock of
Infocrossing, Inc. (the "Company"), which the undersigned is entitled to vote at
the Annual Meeting of Stockholders of the Company to be held at the offices of
the Company, 2 Christie Heights Street, Leonia, New Jersey, on Tuesday, June 15,
2004 at 9:00AM local time, and at any adjournments thereof, (the "Meeting") as
indicated on the proposals described in the Proxy Statement and all other
matters properly coming before the Meeting.
(Continued, and to be marked, dated and signed, on the other side)
FORM OF PROXY
REVERSE
PROXY
THIS PROXY WILL BE VOTED, AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE
VOTED "FOR" THE PROPOSALS.
A VOTE FOR THE ELECTION OF THE NOMINEES LISTED BELOW IS RECOMMENDED BY THE BOARD
OF DIRECTORS
I. ELECTION OF DIRECTORS II. PROPOSAL to approve the
amendment to the 2002 Stock Option
FOR the election of Kathleen A. and Appreciation Rights Plan to
Perone and Michael B. Targoff [ ] increase the number of shares for
which options may be granted to
WITHHOLD authority to vote for 2,000,000.
all Nominees [ ]
FOR PROPOSAL II [ ]
To withhold authority to vote
for any individual Nominee, AGAINST PROPOSAL II [ ]
write that Nominee's name
name in the space below. ABSTAIN FROM PROPOSAL II [ ]
- ---------------------------------------
III. In their descretion, the
Proxies are authorized to vote
upon such other business as may
properly come before the Meeting.
Signature Signature Date
----------------------- ------------------------- ----------
NOTE: Please sign exactly as name appears hereon. When shares are held by joint
owners, both should sign. When signing as attorney, executor, administrator,
trustee, or guardian, please give title as such. If a corporation, please sign
in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.