IONA Iona Technologies Adr (MM)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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IONA TECHNOLOGIES PLC
The IONA Building
Shelbourne Road, Ballsbridge
Dublin 4, Ireland

 

April 29, 2008

 

Dear Shareholder:

 

On behalf of the Board of Directors, I am pleased to invite you to the 2008 Annual General Meeting of IONA Technologies PLC. The meeting will be held at The Four Seasons Hotel, Ballsbridge, Dublin 4, Ireland, on Monday, September 29, 2008, at 3:00 p.m. (local Irish time). I hope that you will be able to attend the meeting.

 

The attached Notice of Annual General Meeting and Proxy Statement set out the business due to be considered at this meeting. Shareholders who are present at the meeting will have the opportunity to ask questions of the Board of Directors.

 

It is important that your views be represented whether or not you are able to attend the meeting. Please sign and date the enclosed form of proxy and return it to us in the enclosed envelope. Completion of this proxy form will not prevent you from attending and voting at the meeting if you ultimately wish to do so.

 

Yours sincerely,

 

Kevin Melia
Chairman of the Board

 

Directors: Seán Baker, Chris Horn (UK), Ivor Kenny, James Maikranz (US), Kevin Melia,
Bruce Ryan (US), Francesco Violante (Italy), Peter Zotto (US).
Registered Office: The IONA Building, Shelbourne Road, Ballsbridge, Dublin 4, Ireland
Registered Number: 171387

 

 

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the contents of this document or what action you should take, you should consult your stockbroker, bank manager, or other independent professional adviser. If you have sold or transferred all your Ordinary Shares in IONA Technologies PLC, please forward this document at once to the stockbroker, bank or other agent through whom the sale was affected for transmission to the purchaser.

IONA TECHNOLOGIES PLC

 

NOTICE OF ANNUAL GENERAL MEETING

To Be Held on September 29, 2008

 

NOTICE is hereby given that the Annual General Meeting (the “Annual Meeting”), of IONA Technologies PLC (the “Company”) will be held at The Four Seasons Hotel, Ballsbridge, Dublin 4, Ireland on Monday, September 29, 2008, at 3:00 p.m. (local Irish time) for the following purposes:

 

1. To receive and consider the consolidated financial statements of the Company for the fiscal year ended December 31, 2007 and the Reports of the Directors and Auditors thereon (Proposed Resolution No. 1).

 

2. To re-elect the following persons who retire by rotation pursuant to Article 80(c) of the Articles of Association of the Company and who are recommended by the Board of Directors of the Company for re-election:

 

Mr. Kevin Melia (Proposed Resolution No. 2(a)).
Dr. Seán Baker (Proposed Resolution No. 2(b)).
Mr. James Maikranz (Proposed Resolution No. 2(c)).

 

3. To authorize the Audit Committee of the Board Directors to fix the remuneration of Ernst & Young (Dublin) (the “Auditors”) and Ernst & Young LLP (Boston) (Proposed Resolution No. 3).

 

4. To consider, and if thought appropriate, pass the following resolution as a special resolution of the Company (Proposed Resolution No. 4):

 

“That:

 

(a) the Company and/or any subsidiary (as such expression is defined by the EC (Public Limited Companies Subsidiaries Regulations 1997) of the Company be generally authorized to make market purchases (as defined by Section 212 of the Companies Act 1990) of shares of any class of the Company on such terms and conditions and in such manner as the Directors may from time to time determine in accordance with and subject to the provisions of the Companies Act 1990 and to the restrictions and provisions set out in Article 11(e) of the Articles of Association of the Company;

 

(b) the re-issue price range at which any treasury shares (as defined by Section 209 of the Companies Act 1990) held by the Company may be re-issued off-market shall be the price range set out in Article 1l(f) of the Articles of Association of the Company; and

 

(c) the authorities hereby conferred shall expire at the close of business (local Irish time) on the earlier of the date of the next Annual General Meeting of the Company after the passing of this resolution or January 30, 2010 unless previously revoked or renewed in accordance with the provisions of the Companies Act 1990.”

 

The accompanying Proxy Statement contains further information with respect to these matters.

 

By Order of the Board of Directors,

 

Kevin Melia
Chairman of the Board

 

Date: April 29, 2008

 

Registered Office:

 

The IONA Building

Shelbourne Road

Ballsbridge

Dublin 4 Ireland

WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD PROMPTLY IN ORDER TO ASSURE THAT YOUR SHARES ARE VOTED. A RETURN ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. YOUR PROXY WILL BE AUTOMATICALLY REVOKED IF YOU VOTE IN PERSON AT THE ANNUAL MEETING.

 

Notes:

 

TABLE OF CONTENTS

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

This Proxy Statement contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 about our business and future financial performance. In some cases, you can identify forward-looking statements by terminology, such as “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “intend,” “potential,” or “continue” or the negative of such terms or other comparable terminology, although not all forward-looking statements contain such terms. Actual results may differ materially from those projected in the forward-looking statements due to various uncertainties and risks, including, without limitation, risks associated with the effects of general economic and market conditions, lessening demand in the information technology market, difficulty managing operations and difficulty in keeping pace with rapid industry, technological and market changes, as well as those described in Item 1A of Part I (Risk Factors) of our Annual Report on Form 10-K for the fiscal year ended December 31, 2007. We disclaim any obligation to update any forward-looking statements contained herein after the date of this Proxy Statement.

 

IONA TECHNOLOGIES PLC
The IONA Building
Shelbourne Road, Ballsbridge
Dublin 4, Ireland

 

PROXY STATEMENT

 

FOR THE ANNUAL GENERAL MEETING

To Be Held on September 29, 2008

 

 

 

 

 

Unless otherwise provided herein or required by the context, references to “we,” “us,” “our,” “the Company” or “IONA” in this Proxy Statement shall mean IONA Technologies PLC.

 

General

 

This Proxy Statement is furnished in connection with the solicitation by the Board of Directors of IONA Technologies PLC (the “Board of Directors”) of proxies for the Annual General Meeting of IONA (the “Annual Meeting”) to be held at The Four Seasons Hotel, Ballsbridge, Dublin 4, Ireland, on Monday, September 29, 2008, at 3:00 p.m. (local Irish time), and at any adjournments thereof, for the purposes set forth in the Notice of Annual General Meeting. This Proxy Statement, IONA’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007 (the “Annual Report”), IONA’s Directors’ Report and Consolidated Financial Statements for the fiscal year ended December 31, 2007, and the accompanying form of proxy are first being distributed to shareholders on or about August 8, 2008.

 

The Directors’ Report and Consolidated Financial Statements for the fiscal year ended December 31, 2007 have been prepared in accordance with applicable Irish law and the International Financial Reporting Standards (“IFRSs”) as adopted by the European Union, and the Company’s financial statements have been prepared in accordance with applicable Irish law and the Accounting Standards promulgated by the Accounting Standards Board and published by the Institute of Chartered Accountants in Ireland (“Generally Accepted Accounting Practice in Ireland”). The consolidated financial statements constitute the Company’s statutory accounts under Irish law and will be annexed to the Company’s annual return to be lodged with the Companies Registration Office, Dublin, Ireland.

 

The Annual Report includes financial data and information which has been prepared in accordance with United States generally accepted accounting principles (“US GAAP”). The financial information included in the Annual Report does not comprise full accounts within the meaning of Section 19 of the Companies (Amendment) Act 1986.

The Company’s mailing address is The IONA Building, Shelbourne Road, Ballsbridge, Dublin 4, Ireland, and its telephone number is +353-1-637-2000.

 

Record Date for Holders of Ordinary Shares.   Only holders of record of ordinary shares, par value €0.0025 per share (“Ordinary Shares”), of the Company (individually, “Member” and collectively, “Members”) as of the close of business on July 18, 2008, whose names are registered in the Register of Members of the Company will receive notice of the Annual Meeting and any adjournments thereof; however, Members as of 3:00 p.m. on September 27, 2008 shall be entitled to attend and vote at the Annual Meeting in respect of the number of Ordinary Shares registered in their name at such time.

 

Record Date for Holders of ADSs.   Deutsche Bank Trust Company Americas (the “Depositary”), as depositary under the Deposit Agreement dated as of April 26, 2004 (the “Deposit Agreement”), among the Company, the Depositary and the holders of American Depositary Receipts (“ADRs”), evidencing American Depositary Shares (“ADSs”) representing the Ordinary Shares, issued thereunder, has fixed the close of business on July 18, 2008 as the record date for the determination of holders of ADSs entitled to give instructions for the exercise of voting rights, in respect of the Ordinary Shares deposited under the Deposit Agreement, at the Annual Meeting or any adjournment or postponement thereof.

 

Shareholder Meetings

 

Irish law provides for two types of shareholder meetings, an annual general meeting and an extraordinary general meeting. An annual general meeting must be held once every calendar year within nine months of the end of the fiscal year, provided that no more than 15 months may elapse between such meetings. Extraordinary general meetings may be convened by the board of directors or at the request of shareholders holding not less than one-tenth of the paid-up capital that carries the right of voting at annual general meetings. Unless all shareholders of the Company and the Company’s independent auditors consent to shorter notice, shareholders must receive written notice of an annual general meeting or an extraordinary general meeting convened for the passing of a special resolution at least 21 clear calendar days prior to the date of such meeting, and written notice of other extraordinary general meetings at least 14 clear calendar days prior to the date of such meeting.

 

Quorum and Location of Annual Meeting

 

A quorum must be present in order to conduct any business at the Annual Meeting. Our Articles of Association provide that the presence at the Annual Meeting, either in person or by proxy, of three persons entitled to vote at such meeting, each being a Member or a proxy for a Member or a duly authorized representative of a corporate Member, constitutes a quorum for the transaction of business. We will treat Ordinary Shares represented by a properly signed and returned proxy (including holders of shares who abstain or withhold their vote with respect to one or more of the proposed resolutions to be voted on at the meeting) as present at the Annual Meeting for the purposes of determining the presence or absence of a quorum.

 

Under Irish law, our Annual Meeting must take place in Ireland, unless all Members entitled to attend and vote at the meeting consent in writing to the meeting being held elsewhere or a resolution providing that the meeting be held elsewhere has been passed at our previous annual general meeting.

 

Voting of Ordinary Shares

 

Generally.   Voting at the Annual Meeting is by a show of hands unless a poll (i.e., a written vote) is duly demanded. Votes may be given either in person or by proxy. Subject to the Company’s Articles of Association and to any rights or restrictions attached to any class or classes of shares, by a show of hands each Member present in person or by proxy has one vote, and on a poll each Member shall have one vote for each Ordinary Share held by such Member. Where there is a tie, whether by a show of hands or by a poll, the Chairman of the meeting is entitled to cast the deciding vote in addition to any other vote the Chairman may have. A poll may be demanded by (i) the Chairman of the meeting, (ii) at least five Members, present in person or by proxy and entitled to vote at the meeting, (iii) any Member or Members present in person or by proxy, representing not less than one-tenth of the total voting rights of all the Members entitled to vote at the

meeting, or (iv) any Member or Members present in person or by proxy holding not less than one-tenth of the paid-up capital that carries the right of voting at the meeting. Under Irish law, an abstention or a vote that is “withheld” will not be counted in the calculation of the proportion of the votes “for” or “against” a proposed resolution.

 

A majority of votes cast is required to pass an ordinary resolution, and 75% or greater of the votes cast is required to pass a special resolution. A special resolution is required to effect certain actions, including alterations to our Memorandum or Articles of Association or changes to the name of the Company. As of March 31, 2008, there were 610 Members entitled to attend and vote at the Annual Meeting and therefore, 610 votes on a show of hands (or, if a poll is demanded, 36,514,363 votes) capable of being cast at the Annual Meeting. The number of Members entitled to attend and vote at the Annual Meeting will be equal to the total number of Members as of 3:00 p.m. on September 27, 2008. The number of votes capable of being cast at the Annual Meeting will be equal to the total number of Members on a show of hands (or, if a poll is demanded, the number of Ordinary Shares in issue) as of 3:00 p.m. on September 27, 2008.

 

By Proxy.   Each proxy which is properly executed and returned to the Company will be voted in the manner directed by the Member executing it or, if no directions are given, will be voted (or withheld) at the discretion of the Chairman of the Annual Meeting or any other person duly appointed as proxy by the Member. The Chairman shall abstain from voting any proxy for which voting instructions are not provided.

 

Any Member who executes and delivers a proxy may revoke it at any time prior to its use by (i) delivery of a written notice of such revocation, or a duly executed proxy bearing a later date to the Secretary of the Company at the address of the Company set forth above at least 48 hours before commencement of the Annual Meeting, (ii) appearing at the Annual Meeting and requesting the return of the proxy, or (iii) voting at the Annual Meeting. In accordance with the provisions of the Company’s Articles of Association, all proxies must be received by the Secretary of the Company or the registrar of the Company at least 48 hours prior to the Annual Meeting to be validly included in the tally of Ordinary Shares voted at the Annual Meeting.

 

Voting of Ordinary Shares Underlying ADSs pursuant to the Deposit Agreement

 

Generally.   Holders of ADRs evidencing ADSs representing our Ordinary Shares may not vote at the Annual Meeting; however, subject to certain limitations set forth in the Deposit Agreement, the Depositary (or more specifically its nominee, Bank of Ireland Nominees Ltd.) has the right to vote all Ordinary Shares deposited under the Deposit Agreement. The Depositary, however, is required by the Deposit Agreement to vote the Ordinary Shares deposited thereunder in accordance with the instructions of the holders of ADRs and is prohibited from exercising voting discretion with respect to such Ordinary Shares.

 

Notice of Annual Meeting.   As soon as practicable after receipt from the Company of the Notice of Annual General Meeting, the Depositary shall mail to the holders of ADRs as of the close of business on July 18, 2008 a notice of the Annual Meeting substantially similar to that sent to the Members indicating (a) the date, time and place of the Annual Meeting, (b) that each holder of ADRs on the close of business on July 18, 2008 will be entitled to instruct the Depositary as to the exercise of voting rights pertaining to the Ordinary Shares represented by the ADSs evidenced by such holder’s ADRs, and (c) the manner in which such instructions must be given.

 

Voting of Ordinary Shares Underlying ADSs.   Upon the timely receipt of voting instructions from a holder of ADRs, the Depositary shall vote or cause to be voted the Ordinary Shares represented by the ADSs evidenced by such holder’s ADRs in accordance with such instructions. Under the Deposit Agreement, the Depository may give a discretionary proxy to a person designated by the Company to vote any Ordinary Shares deposited thereunder for which instructions were either not received or not received on time. The Depositary itself does not have the right to exercise any voting discretion with respect to Ordinary Shares deposited under the Deposit Agreement. The Company, however, has instructed the Depositary that it does not want a discretionary proxy to be given to a Company designee with respect to the matters to be voted upon at the Annual Meeting.

 

Solicitation of Proxies

 

The cost of preparing, assembling, printing and mailing the Proxy Statement, the Notice of Annual General Meeting and the enclosed form of proxy, as well as the cost of soliciting proxies relating to the Annual Meeting, will be borne by the Company. The Company will request banks, brokers, dealers and voting trustees or other nominees, including the Depositary in the case of the ADRs, to solicit their customers who are owners of Ordinary Shares listed of record and names of nominees, and will reimburse them for the reasonable out-of-pocket expenses of such solicitation. The original solicitation of proxies by mail may be supplemented by telephone, telegram and personal solicitation by officers and other regular employees or agents of the Company.

 

Recommendations of the Board of Directors

 

The Board of Directors recommends a vote:

 

 

At the Annual Meeting, the consolidated financial statements of the Company for the fiscal year ended December 31, 2007, together with the Reports of the Directors and Auditors thereon, will be presented and considered.

 

The affirmative vote of a majority of Members present at the Annual Meeting and voting thereon (or if a poll is demanded at the meeting, the holders of a majority of the Ordinary Shares represented at the Annual Meeting and voting thereon) will be necessary to approve the proposed resolution to receive and consider the consolidated financial statements of the Company for the fiscal year ended December 31, 2007 and the Reports of the Board of Directors and Auditors thereon. Please note, however, that a vote “FOR” or “AGAINST” this proposed resolution will have no effect on the approval of the consolidated financial statements of the Company for the fiscal year ended December 31, 2007 by the Board of Directors. Under Irish law, the Company is only obligated to present the financial statements to the Members at the Annual Meeting, not submit the financial statements to a vote. Therefore, the Company will have fulfilled its obligation upon such presentation regardless of whether or not this vote is passed.

 

Ernst & Young (Dublin) reviewed the financial statements for the fiscal year ended December 31, 2007 as part of their procedures related to their review and report on our financial statements for the fiscal year ended December 31, 2007 prepared in accordance with IFRSs and Generally Accepted Accounting Practice in Ireland. Ernst & Young LLP (Boston) audited and reported on our financial statements for the fiscal year ended December 31, 2007 prepared in accordance with US GAAP.

 

Representatives of Ernst & Young (Dublin) will be present at the Annual Meeting to read the Report of the independent Auditors to the Members and IONA expects that they will also be available to respond to appropriate questions.

The Board of Directors recommends that the shareholders vote FOR the proposed resolution to receive and consider the consolidated financial statements of the Company for the fiscal year ended December 31, 2007 and Reports of the Board of Directors and Auditors thereon.

 

Nominees

 

Pursuant to Article 80(d) of the Company’s Articles of Association, although required to retire by rotation as directors, Messrs. Kevin Melia and James Maikranz, and Dr. Seán Baker, all being Class III Directors, are eligible for re-election. The Board of Directors recommends their re-election as Class III Directors. If re-elected as Class III Directors, each director will hold office until the Company’s 2011 annual general meeting unless they resign or are removed from office, whichever is earlier. The affirmative vote of a majority of the Members present at the Annual Meeting and voting thereon (or, if a poll is demanded at the meeting, the holders of a majority of the Ordinary Shares represented at the Annual Meeting and voting thereon) will be necessary to elect each nominee for Class III Director .

 

The Board of Directors is satisfied that each of the nominees for re-election (i) continues to make an effective contribution, (ii) demonstrates a commitment to his role as a director, and (iii) provides an independent and objective perspective in discharging his duties.

 

The Board of Directors recommends that the shareholders vote FOR the re-election of each nominee for Class III Director.

 

The following table sets forth (i) the nominees to be elected at the Annual Meeting, (ii) the other directors, (iii) the year such nominee or director was first elected a director, (iv) other positions at IONA currently held by each nominee or director, (v) the year each nominee’s or director’s current term will expire and (vi) each nominee’s and director’s class. Please see the section titled “Directors and Executive Officers” in this Proxy Statement for additional information concerning each of our nominees and continuing directors.

 

 

 

 

The remuneration of Ernst & Young (Dublin) and Ernst & Young LLP (Boston) for the fiscal year ending December 31, 2008 shall be fixed by the Audit Committee of the Board of Directors. Neither Ernst & Young (Dublin) nor Ernst & Young LLP (Boston) has a relationship with the Company or with any affiliate of the Company, other than as our auditors. The affirmative vote of a majority of Members present at the Annual Meeting and voting thereon (or, if a poll is demanded at the meeting, the holders of a majority of the Ordinary Shares represented at the Annual Meeting and voting thereon) will be necessary to approve the Audit Committee’s authority to fix the remuneration of Ernst & Young (Dublin) and Ernst & Young LLP (Boston) .

 

The Board of Directors recommends that the shareholders vote FOR approval of the Audit Committee’s authority to fix the remuneration of Ernst & Young (Dublin) and Ernst & Young LLP (Boston).

 

Principal Accounting Fees and Services for Fiscal Year Ended December 31, 2007

 

The following table shows the fees for professional and other services rendered by Ernst & Young (Dublin) to the Company during the fiscal years ended December 31, 2007 and 2006:

 

 

 

 

Audit Committee’s Pre-approval Policies and Procedures

 

Our Audit Committee has adopted a pre-approval policy for audit and non-audit services which sets forth the manner in which certain proposed services to be performed by our independent auditor may be pre-approved. Under the policy, the Audit Committee annually pre-approves a catalog of specific audit and non-audit services that may be performed by our auditors in the categories of audit services, audit-related services, tax services and all other services. Our Audit Committee pre-approved 100% of the audit and non-audit services performed by our auditors in 2007 and 2006. In addition, the policy sets forth an annual budget for

each specific cataloged service that may not be exceeded without obtaining separate pre-approval from the Audit Committee.

 

Pursuant to the policy, any proposed service not pre-approved under a catalog or any proposal to exceed the allotted budget must be submitted to the Audit Committee for approval at the next scheduled meeting of the Audit Committee. In the event that time constraints necessitate pre-approval prior to the next scheduled meeting of the Audit Committee, the Chairman of the Audit Committee has the authority to grant such pre-approval.

 

The Chief Financial Officer is responsible for monitoring the services of the independent auditor, determining whether such services are in compliance with the policy, and periodically reporting the results of such services to the Audit Committee. The Chief Financial Officer or any other executive officer is required to immediately report any breach of the policy to the Chairman of the Audit Committee.

 

At last year’s annual general meeting, our shareholders authorized the Company to purchase up to 10% of our own shares and set the price range at which treasury shares may be re-issued off-market. This authority will expire on the day of the Annual Meeting. At the Annual Meeting, we will propose to renew this authorization for an additional 18 months, or until the next annual general meeting, whichever is earlier.

 

The affirmative vote of 75% of the Members present at the Annual Meeting and voting thereon (or if a poll is demanded at the meeting, the holders of 75% of the Ordinary Shares represented at the Annual Meeting and voting thereon) will be necessary to approve the Company’s authority to purchase its own shares and set the price range for the re-issue of treasury shares off-market .

 

The Board of Directors recommends that the shareholders vote FOR approval of the authority of the Company to purchase of its own shares and set the price range for the re-issue of treasury shares off-market.

DIRECTORS AND EXECUTIVE OFFICERS

 

The following table sets forth our directors and executive officers, their ages and the positions currently held by each such person at IONA as of April 15, 2008.

 

 

 

 

Set forth below is information with respect to (i) each nominee for Class III Director to be elected at the Annual Meeting, (ii) the Class I and II Directors, and (iii) the other executive officers.

 

Information With Respect to Nominees

 

Kevin C. Melia has served as our Chairman of the Board since May 2003 and as a non-executive director from May 1994 to May 2003. Mr. Melia served as Chairman of the Board of Manufacturers’ Services Limited, an electronics manufacturing outsourcing company from January 2002 to January 2003. From June 1994 to January 2002, Mr. Melia served as Chief Executive Officer of Manufacturers’ Services Limited. From January 1992 to June 1994, he was Chief Financial Officer of Sun Microsystems, a workstation manufacturer. In addition, from January 1993 to February 1994, Mr. Melia was President of Sun Microsystems Computer Co., a division of Sun Microsystems. Mr. Melia currently serves on the board of directors of RadiSys Corp., a U.S.-based provider of embedded advanced solutions for the communications networking and commercial systems markets, Greatbatch, Inc., a CRM and medical device manufacturer, and C&S Wholesale Grocers, Inc., a U.S.-based wholesale grocery distributor. He is also currently serving as a joint managing director of Boulder Brook Partners LLC, a U.S.-based private investment firm.

 

Seán Baker served as our Chief Corporate Scientist from May 2003 to October 2007 and as an executive director from March 1991 to October 2007 when he retired from office as our Chief Corporate Scientist and became a non-executive director. Dr. Baker co-founded IONA in March 1991, and served as Senior Vice President from 1991 to 1996, as Executive Vice President, Customer Services from 1996 to 1999, as Chief Scientific Officer from 1999 to November 2000, as Executive Vice President and Chief Technology Officer

from November 2000 to September 2001, and as Chief Corporate Officer from September 2001 to May 2003. From 1981 to 1994, Dr. Baker held a tenured post in the Computer Science Department at Trinity College, Dublin. Dr. Baker currently serves on the board of directors of National Digital Research Centre Limited, an Irish based technology research and innovation company. He formed and is co-director of CIO Ireland, and he is a member of the Advisory Science Council, the Executive Committee of the Irish Software Association, and the Advisory Board Irish Centre for High-End Computing. Dr. Baker also chairs the R&D Advisory Committee to the ICT Sector within ICT Ireland.

 

James D. Maikranz has served as a non-executive director of IONA since July 2001. Mr. Maikranz was employed by J.D. Edwards & Company, a provider of collaborative software solutions, from October 1998 to March 2001, most recently as Senior Vice President of Worldwide Sales. Prior to joining J.D. Edwards & Company, Mr. Maikranz was employed by SAP AG, a provider of e-business software solutions, from January 1992 to September 1998, most recently as Senior Vice President of Sales. Mr. Maikranz has also served in senior executive positions for Computer Application Specialists, a software company specializing in the oil and gas industry, and Info Services, a company providing human resources based software applications. Mr. Maikranz was a founder and member of the board of directors of the Chaptec Solutions Company, a management consulting firm. Mr. Maikranz has been an advisory board member for i2 Technologies, Inc., a supply chain optimization company, and currently serves on the board of directors of Servigistics, Inc., a global service parts management solutions company, Taleo Corporation (formerly known as Recruitsoft, Inc.), a provider of on demand talent management solutions, and DataSynapse, Inc., a grid computing software application company.

 

Information with respect to Class I Directors

 

Christopher J. Horn has served as our Vice Chairman of the Board of Directors since April 2005. Dr. Horn co-founded IONA in February 1991 and served as our Chief Executive Officer from the Company’s inception through May 2000, and then again from May 2003 to September 2005. Dr. Horn also served as Chairman of the Board from February 1991 to May 2003. He is best known for his development of IONA’s Orbix product. Dr. Horn received his Doctorate in Computer Science from Trinity College, Dublin. Dr. Horn currently serves as a director for the charitable organization UNICEF Ireland, UUTECH, the University of Ulster’s technology and knowledge transfer company, Cloudsmith Inc., a U.S.-based software tooling company, Sli Siar Teoranta, an Irish-based business consultancy company and LeCayla Technologies Limited, an Irish-based software billing systems company. Dr. Horn received an honorary Doctor of Science from Trinity College, Dublin and the Gold Medal for Industry from the Industry and Commerce Committee of the Royal Dublin Society in 2001.

 

Bruce J. Ryan has served as a non-executive director of IONA since June 2006. From November 2003 to June 2004, Mr. Ryan served as the Interim Chief Executive Officer of Silverstorm Technologies, Inc., a networking technology company. From February 1998 to November 2002, Mr. Ryan served as Executive Vice President and Chief Financial Officer of Global Knowledge Network Training LLC, a provider of information technology learning services and certifications, and from July 1994 to October 1997, he served as the Executive Vice President and Chief Financial Officer of Amdahl Corporation, a provider of information technology solutions. In addition, from 1969 to 1994, Mr. Ryan held various executive positions at Digital Equipment Corporation, including Senior Vice President of Financial Services, Senior Vice President of Industry Marketing and Vice President and Corporate Controller. Mr. Ryan also currently serves on the board of directors of UTStarcom Incorporated and KVH Industries, Inc., and is the chairman of KVH’s audit committee.

 

Information with respect to Class II Directors

 

Ivor Kenny has served as a non-executive director of IONA since August 1999. Dr. Kenny has written thirteen books on strategic leadership, for one of which he was awarded a DLitt and Outstanding Doctor of the Year. He is currently a director of the Irish-based international media group Independent News and Media PLC and chairman of its compensation committee, and Distinguished Professor of Public Policy at International Management Centres. From 1982 to November 2006, Dr. Kenny served as Senior Research Fellow at University College Dublin, where he worked with international organizations on their strategies. He was Director General of the Irish Management Institute from 1962 to 1983, Chancellor of the International

Academy of Management from 1982 to 1987, Executive-in-Residence at Indiana University in 1986 and a Fulbright Fellow at American Universities. He holds a number of distinctions and honorary doctorates and was invested a Knight Commander of the Order of St. Gregory by Pope John Paul II. He was awarded the Gold Medal of Honor of the Comité International de l’Organisation Scientifique and the First Economics Award of the Economic Development Foundation, Texas.

 

Francesco Violante has served as a non-executive director of IONA since May 2001. Since June 2006, Mr. Violante has served as Chief Executive Officer of the SITA Group, a Swiss-based global airline reservation systems company. Mr. Violante served as Regional Vice President of Electronic Data Systems Corp. Europe from October 2000 to May 2003. From May 2003 to June 2006, Mr. Violante served as Managing Director of SITA, Inc., and as its Senior Vice President, from October 1999 to September 2000. Mr. Violante served as Chief Information Officer of Telecom Italia SpA, an Italian telephone company, from September 1998 to October 1999. Prior to September 1998, Mr. Violante held numerous executive management positions at Compaq Corporation, Europe and Digital Equipment Corporation.

 

Peter M. Zotto has served as our Chief Executive Officer and a director since April 2005. Mr. Zotto served as our Chief Operating Officer from October 2003 to April 2005 and as our President from October 2004 to April 2005. Prior to joining IONA, Mr. Zotto was the Chief Executive Officer of Proteus Industries, Inc., a life sciences company, from January 2003 to August 2003. Mr. Zotto is the founder of Claright, a consulting firm specializing in providing marketing expertise to small to mid-sized companies, and served as its President from April 2001 to October 2002. From September 1999 to March 2001, Mr. Zotto was Chief Executive Officer of WBT Systems, Inc., an e-learning software company. Mr. Zotto held a number of executive management positions at Digital Equipment Corporation from 1992 though 1999, including General Manager and Vice President, Workstations Business, Vice President, European Sales and Marketing and General Manager, Systems Business Unit.

 

Information with respect to Other Executive Officers

 

Lawrence E. Alston, Jr. has served as our Vice President and General Manager of Open Source since May 2007. From January 2007 to May 2007, Mr. Alston served as our Vice President of Corporate Strategy and Product Management, and from May 2004 to January 2007, he served as our Vice President of Marketing. Prior to joining IONA, Mr. Alston served as Vice President, Products of Pantero Corporation, a U.S.-based data interoperability solutions company, from March 2003 to May 2004. Mr. Alston served as Vice President of Product Management and Strategy from 2000 to 2002 at eXcelon Corporation (formerly known as Object Design, Inc.), a U.S.-based software infrastructure, products, services and solutions company, and prior to that held various positions in product management and marketing at eXcelon Corporation from 1993 to 2000.

 

Scott R. Devens has served as our Vice President of Worldwide Sales since January 2008. From January 2007 to January 2008, Mr. Devens served as our Vice President of International Sales and Alliances, where he was responsible for overseeing the Company’s sales activities in Europe, the Middle East, Africa, and the Asia-Pacific Rim, and for managing strategic alliances with platform and technology providers and system integrators. He served as our Vice President of Asia-Pacific and Alliances from March 2005 to January 2007, as our Vice President of Products from March 2004 to March 2005, and as our Vice President of our CORBA Business Unit from April 2003 to March 2004. Prior to joining IONA, Mr. Devens had a 14-year tenure at Data General Corporation (now part of EMC Corporation), where he served as General Manager of Latin America among other senior management positions in finance and operations.

 

Christopher M. Mirabile was appointed as our Chief Financial Officer in January 2008 and has served as our General Counsel and Secretary since September 2003. Mr. Mirabile served as our Senior Counsel from 1997 to 2000 and as our Corporate Counsel from 2000 until 2003. Prior to joining IONA, Mr. Mirabile was a lawyer in the business practice group at Testa, Hurwitz & Thibeault, LLP of Boston, Massachusetts. Prior to beginning his legal practice, Mr. Mirabile was a management consultant with Price Waterhouse LLP in its Strategic Consulting Group.

 

Eric A. Newcomer has served as our Chief Technology Officer since April 2002. From November 1999 to March 2002, Mr. Newcomer served as our Vice President of Engineering, Web Services Integration Products.

Prior to joining IONA, Mr. Newcomer was a Senior Member of Technical Staff and Manager of the COM+ Expertise Center, Enterprise Application Server Engineering, NT Program Office, at Digital Equipment Corporation/Compaq Computer Corporation from October 1997 to October 1999. Mr. Newcomer is a co-author of Understanding SOA with Web Services published in December 2004 by Addison Wesley , author of Understanding Web Services published in May 2002 by Addison Wesley, co-author of Principles of Transaction Processing published in January 1997 by Morgan Kaufman and the author and/or co-author of numerous whitepapers and articles.

 

Our executive officers are appointed by the Board of Directors on an annual basis and serve until their resignation, retirement or removal, whichever is earlier.

 

Independence of Members of the Board of Directors

 

The Board of Directors has determined that Dr. Kenny and Messrs. Maikranz, Melia, Ryan and Violante are independent within the meaning of the director independence standards of Rule 4200(a)(15) of the National Association of Securities Dealers (“NASD”), the NASDAQ Stock Market LLC listing standards (“NASDAQ”), and the SEC, including Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In determining the independence of directors, the Board of Directors broadly considers all relevant facts and circumstances, including relationships, if any, set forth in this Proxy Statement under the section titled “Certain Relationships and Related Transactions.”

 

Board Meetings

 

During the fiscal year ended December 31, 2007, the Board of Directors held eight meetings. Each incumbent director attended no fewer than 75% of the board meetings held during such period. In addition, each incumbent director, other than Mr. Maikranz, attended no fewer than 75% of the meetings of the committees of the Board of Directors on which he served during such period. For the 2007 fiscal year, Mr. Maikranz attended 71% of the Audit Committee meetings and 67% of the Compensation Committee meetings held during the period in which he was a member of such committee. Mr. Maikranz was unable to participate in certain meetings due to business conflicts.

 

Attendance at the Annual General Meeting

 

Our policy is to schedule a regular meeting of the Board of Directors on the same date as our annual general meeting and, accordingly, directors are encouraged to be present at our annual general meeting as well. All of the directors attended our annual general meeting held in 2007.

 

Committees of the Board of Directors

 

The Board of Directors has established four standing committees: the Audit Committee, the Compensation Committee, the Nominating and Corporate Governance Committee and the New Markets Committee. The membership of each committee is listed below.

 

 

Audit Committee

 

During the fiscal year ended December 31, 2007, the Audit Committee held eight meetings and took no actions by unanimous written consent. This committee operates under a written charter adopted by the Board of Directors, a current copy of which is available under the corporate governance section of our website at

www.iona.com . The Audit Committee reviews with management and our auditors our financial statements, the accounting principles applied in the preparation of our financial statements, the scope of the audit, any comments made by the auditors on our financial statements and our accounting controls and procedures, our worldwide corporate compliance program, the independence of our auditors, our internal controls, our policy pertaining to related person transactions, the other matters as set forth in the committee’s charter, as adopted by the Board of Directors, and such other matters as the committee deems appropriate. The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of our independent auditors in preparing or issuing an audit report or performing other audit, review or attest services for us and pre-approves all such audit, review or attest engagements. The Audit Committee also approves all audit and non-audit fees to be paid, and non-audit services to be performed, by our auditors and is responsible for preparing the Audit Committee Report for inclusion in this and subsequent proxy statements in accordance with applicable rules and regulations.

 

The Board of Directors has determined that each member of the Audit Committee is independent within the meaning of the director independence standards of NASDAQ and applicable rules of the SEC, including Rule 10A-3(b)(1) under the Exchange Act, and that each member is financially literate and has the requisite financial sophistication required by the NASD audit committee requirements. In addition, the Board of Directors has determined, in accordance with the rules of the SEC, that Mr. Ryan is an “audit committee financial expert.” Shareholders should understand that this designation is a disclosure requirement of the SEC related to Mr. Ryan’s experience and understanding with respect to certain accounting and auditing matters. The designation does not impose upon Mr. Ryan any duties, obligations or liability that are greater than those that are generally imposed on other members of the Audit Committee and the Board of Directors, and designation as an audit committee financial expert pursuant to this SEC requirement does not affect the duties, obligations or liability of any other member of the Audit Committee or the Board of Directors.

 

Compensation Committee

 

During the fiscal year ended December 31, 2007, the Compensation Committee held 15 meetings and took no actions by unanimous written consent. This committee operates under a written charter adopted by the Board of Directors, a current copy of which is available under the corporate governance section of our website at www.iona.com . The Compensation Committee sets our executive compensation philosophy and objectives; authorizes the retention and termination of outside advisors used for compensation matters and determines the scope of their assignments; recommends compensation for our directors, executive officers and employees; reviews and approves the goals and objectives relevant to the compensation of our executive officers and evaluates their performance, including performance relative to respective goals and objectives, as well as overall performance; monitors all general compensation programs; and reviews and recommends for inclusion in our annual proxy statement the section titled “Compensation Discussion and Analysis.” The Compensation Committee is also responsible for the administration and award of equity incentives pursuant to our equity incentive plans and administration of our 1999 Employee Share Purchase Plan.

 

In determining the appropriate compensation of our executive officers, the Compensation Committee uses compensation survey data from executive compensation surveys, the consulting services of Radford Surveys & Consulting (“Radford”) to provide analysis of the various components of the compensation of our executive officers against industry benchmarks, and, solely in connection with the compensation of the executive officers other than the Chief Executive Officer, the analysis and recommendations of the Chief Executive Officer. Please see the section titled “ Compensation Discussion and Analysis” in this Proxy Statement for a more detailed discussion of our compensation philosophy, objectives, practices and analysis.

 

The Board of Directors has determined that each member of the Compensation Committee is (i) an independent director within the meaning of the director independence standards of NASDAQ and applicable rules of the SEC; (ii) a non-employee director as defined in Rule 16b-3 of the Exchange Act; and (iii) an outside director pursuant to Rule 162(m) of the Internal Revenue Code.

Compensation Committee Interlocks and Insider Participation

 

No member of the Compensation Committee has ever been an officer or employee of IONA or any of its subsidiaries. None of our executive officers serves as a member of the board of directors or compensation committee of any entity that has an executive officer serving as a member of our Board of Directors or Compensation Committee.

 

Nominating and Corporate Governance Committee

 

During the fiscal year ended December 31, 2007, the Nominating and Corporate Governance Committee held five meetings and took action by unanimous written consent four times. This committee operates under a written charter adopted by the Board of Directors, a current copy of which is available under the corporate governance section of our website at www.iona.com . The Board of Directors has determined that each member of the Nominating and Corporate Governance Committee is independent within the meaning of the director independence standards of NASDAQ and applicable rules of the SEC.

 

The Nominating and Corporate Governance Committee reviews the composition, size and organization of the Board of Directors and establishes criteria and procedures for identifying and evaluating candidates for our Board of Directors. This committee annually reviews its charter, as well as the criteria and procedures for identifying and evaluating director candidates.

 

The Nominating and Corporate Governance Committee identifies candidates for our Board of Directors through numerous sources, including recommendations from the other directors, the Chief Executive Officer, other executive officers, third-party search firms, shareholders or any other source it deems appropriate. This committee will evaluate all proposed director candidates in the same manner, with no regard to the source of the initial recommendation. It seeks to have available to it qualified candidates from a broad pool of individuals with a range of talents, experience, backgrounds and perspectives. This committee considers many factors with regard to each candidate, including judgment, integrity, diversity, prior experience, the interplay of the candidate’s experience with the experience of other members of the Board of Directors, and the candidate’s willingness to devote substantial time and effort to board responsibilities. At a minimum, the Nominating and Corporate Governance Committee must be satisfied that each nominee meets the following minimum qualifications:

 

 

Based on the foregoing, the Nominating and Corporate Governance Committee makes recommendations to the Board of Directors with respect to director nominees.

 

Process for Shareholders to Nominate Candidates to our Board of Directors

 

A. Shareholders may nominate a candidate to our Board of Directors by submitting written notice of such nomination to the Secretary of the Company not later than the close of business on the seventh (7 ^th ) day nor earlier than the close of business on the forty-second (42 ^nd ) day prior to the date selected for a general meeting of the shareholders. All such shareholder nominations for director candidates must include the following information:

 

 

 

B. In addition, shareholders who wish to submit a nomination to our Nominating and Corporate Governance Committee for its review and possible inclusion in our proxy statement for our next annual general meeting must follow the following procedures:

 

1. Recommendations must be submitted to the Secretary of the Company not less than 120 calendar days prior to the date on which the Company’s proxy statement was released to shareholders in connection with the previous year’s annual meeting.

 

2. Recommendations must include the following information:

 

 

Our Secretary will promptly forward such nominations to the Nominating and Corporate Governance Committee. Once the Nominating and Corporate Governance Committee receives the nomination of a candidate and the shareholder making the nomination has complied with the minimum procedural requirements above, the Nominating and Corporate Governance Committee will evaluate such candidate for possible recommendation to our Board of Directors for candidacy to our Board of Directors.

 

C. All nominations pursuant to sections A and B above must be sent to the attention of the Secretary of the Company at:

 

IONA Technologies PLC
The IONA Building
Shelbourne Road
Ballsbridge, Dublin 4
Ireland

 

New Markets Committee

 

During the fiscal year ended December 31, 2007, the New Markets Committee held two meetings and took no action by unanimous written consent. The New Markets Committee assesses potential new strategic

markets, including vertical market opportunities, potential strategic and financial partners and potential strategic market initiatives, as well as any other matters as the Board of Directors may delegate to it from time to time.

 

Communications with the Non-Executive Directors

 

The Board of Directors provides a process for our shareholders to send communications directly to our non-executive directors. Any shareholder who desires to contact the non-executive directors may do so by writing to IONA Non-Executive Directors c/o IONA Technologies PLC, The IONA Building, Shelbourne Road, Ballsbridge, Dublin 4, Ireland.

 

All communications received will be forwarded directly to the Nominating and Corporate Governance Committee, who will forward such communications to other non-executive directors, members of IONA’s management or such other persons as it deems appropriate. The Nominating and Corporate Governance Committee or, if appropriate, IONA’s management, will respond in a timely manner to any substantive communications from a shareholder or an interested party.

 

Code of Business Conduct and Ethics

 

It is our policy that all of our officers, directors and employees worldwide conduct our business in an honest and ethical manner and in compliance with all applicable laws and regulations. Our Board of Directors adopted a Code of Business Conduct and Ethics that applies to all of our directors, officers and employees, including our Chief Executive Officer, Chief Financial Officer and Corporate Controller. This code was filed as Exhibit 11.1 to our Annual Report on Form 20-F for the year ended December 31, 2003 and is available on our website at www.iona.com . You may also obtain a copy of our Code of Business Conduct and Ethics free of charge by contacting our Investor Relations department at our U.S. headquarters as follows: IONA Technologies, Inc., 200 West Street, Waltham, Massachusetts 02451 or 781-902-8000. This code satisfies the requirements set forth in Item 406 of Regulation S-K and applies to all relevant persons set forth therein. We intend to disclose on our website at www.iona.com amendments to, and, if applicable, waivers of, our Code of Business Conduct and Ethics.

 

Policies and Procedures Regarding Review, Approval or Ratification of Related Party Transactions

 

The Nominating and Corporate Governance Committee has adopted a written policy for the review, approval and ratification of transactions involving the Company and “related persons” (directors, director nominees, executive officers, or shareholders beneficially owning more than 5% of our Ordinary Shares, and the immediate family members of such persons). The policy covers all transactions, arrangements or relationships (or any series of similar transactions, arrangements or relationships) in which the Company or any of its subsidiaries was, is or will be a participant, and in which any related person had, has or will have a direct or indirect material interest.

 

All related person transactions are reviewed and, as appropriate, may be approved or ratified by the Nominating and Corporate Governance Committee and/or the Board of Directors. If a director is involved in the transaction, he or she may not participate in any review, approval or ratification of such transaction. Related person transactions are approved by the Nominating and Corporate Governance Committee and/or the Board of Directors only if, based on all of the facts and circumstances, they are in, or not inconsistent with, the best interests of the Company and our shareholders, as the Nominating and Corporate Governance Committee and/or the Board of Directors determines in good faith. In the case of a transaction presented to the Nominating and Corporate Governance Committee and/or the Board of Directors for ratification, the Nominating and Corporate Governance Committee and/or the Board of Directors may ratify the transaction or determine whether rescission of the transaction is appropriate.

Certain Relationships and Related Transactions

 

In accordance with its charter, the Nominating and Corporate Governance Committee conducts a review of all related party transactions for potential conflict of interest situations on an ongoing basis, and, if appropriate, approves all related party transactions.

 

Other than compensation agreements and other arrangements which are described in the section titled “Compensation Discussion & Analysis” in this Proxy Statement, and payments made to K Capital Source Limited (“K Capital”) described below, in 2007, there was no transaction or series of similar transactions to which we were a party in which the amount involved exceeded $120,000 in which any director, executive officer, holder of 5% or more of any class of our capital stock, or any member of their immediate family had a direct or indirect material interest.

 

The Company engaged K Capital to provide capital market communication and advisory services in 2007 and paid K Capital $180,000 for such services. A son of Dr. Ivor Kenny, a member of our Board of Directors, was a principal of K Capital during part of 2007. Prior to December 31, 2007, Financial Dynamics Ireland Limited acquired K Capital. As a result, from and after December 31, 2007, Dr. Kenny’s son no longer has an equity interest in the company providing capital market communication and advisory services to the Company.

 

No portion of this Report of the Audit Committee shall be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act through any general statement incorporating by reference in its entirety the Proxy Statement in which this report appears, except to the extent that the Company specifically incorporates this report or a portion of it by reference. In addition, this report shall not be deemed filed under either the Securities Act or the Exchange Act.

 

This report is submitted by the Audit Committee of the Board of Directors. The Audit Committee currently consists of Messrs. Ryan (chairman), Maikranz and Melia. None of the members of the Audit Committee is an officer or employee of the Company, and the Board of Directors has determined that each member of the Audit Committee meets the independence requirements promulgated by NASDAQ and the SEC, including Rule 10A-3(b)(1) under the Exchange Act. Mr. Ryan is an “audit committee financial expert” as currently defined under SEC rules. The Audit Committee operates under a written charter adopted by the Board of Directors.

 

The Audit Committee oversees the Company’s accounting and financial reporting processes on behalf of the Board of Directors. The Company’s management has the primary responsibility for the financial statements, for maintaining effective internal control over financial reporting, and for assessing the effectiveness of internal control over financial reporting. In fulfilling its oversight responsibilities, the Audit Committee has reviewed and discussed with management the Company’s audited consolidated financial statements for the fiscal year ended December 31, 2007, including a discussion of, among other things, the quality of the Company’s accounting principles, the reasonableness of significant estimates and judgments, and the clarity of disclosures in the Company’s financial statements.

 

The Audit Committee also reviewed with Ernst & Young (Dublin), the Company’s independent auditors, the results of their audit and discussed matters required to be discussed by the Statement on Auditing Standards No. 61 (Communication with Audit Committees) , as currently in effect, other standards of the Public Company Accounting Oversight Board, rules of the SEC and other applicable regulations. The Audit Committee has reviewed permitted services under rules of the SEC as currently in effect and discussed with Ernst & Young (Dublin) its independence from management and the Company, including the matters in the written disclosures and the letter from the independent auditors required by Independence Standards Board Standard No. 1 ( Independence Discussions with Audit Committees ), as currently in effect, and has considered and discussed the compatibility of non-audit services provided by Ernst & Young (Dublin) with that firm’s independence.

 

The Audit Committee met with Ernst & Young (Dublin), with and without management present, to discuss the results of its examination; its evaluation of the Company’s internal controls, including internal control over financial reporting; and its assessment of the overall quality of the Company’s financial reporting.

 

Based on its review of the financial statements and the aforementioned discussions, the Audit Committee concluded that it would be reasonable to recommend, and on that basis did recommend, to the Board of Directors that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 for filing with the SEC.

 

The Audit Committee has also evaluated the performance of Ernst & Young (Dublin), including, among other things, the amount of fees paid to Ernst & Young (Dublin) for audit and non-audit services in 2007. Information about the fees paid to Ernst & Young (Dublin) in 2007 is discussed in this Proxy Statement under “Proposed Resolution 3 — Authorization of the Audit Committee to fix the Remuneration of Ernst & Young (Dublin) and Ernst & Young LLP (Boston). ”

 

Respectfully submitted by the Audit Committee,

 

Bruce J. Ryan, Chairman
James D. Maikranz
Kevin C. Melia

 

Our named executive officers for the fiscal year ended December 31, 2007 are Peter M. Zotto, Chief Executive Officer; Robert C. McBride, Chief Financial Officer until January 31, 2008; and the other three most highly compensated executive officers: William B. McMurray, Vice President, World Wide Sales and Marketing until January 1, 2008; Lawrence E. Alston, Jr., Vice President and General Manager, Open Source; and Christopher M. Mirabile, General Counsel and Secretary. Mr. Mirabile was appointed as our Chief Financial Officer effective February 1, 2008 and retains the titles of General Counsel and Secretary. These individuals are referred to collectively in this Proxy Statement as our “Named Executive Officers.”

COMPENSATION AND OTHER INFORMATION CONCERNING DIRECTORS AND OFFICERS

 

Compensation Discussion and Analysis

 

Overview

 

This Compensation Discussion and Analysis (“CD&A”) discusses our overall compensation philosophy, objectives and practices for our Named Executive Officers, with an emphasis on the analysis used to determine the total compensation of our Named Executive Officers.

 

Our compensation philosophy is based on a desire to balance retention of executive talent with pay for performance-based incentive compensation. Our incentive compensation programs are designed to reward our Named Executive Officers for continued service and our sustained financial and operating performance. We believe that the compensation of our Named Executive Officers should align their interests with those of our shareholders and focus their behavior on the achievement of short-term corporate targets as well as long-term business objectives and strategies. It is the responsibility of the Compensation Committee of our Board of Directors, which is comprised entirely of directors who are independent under the standards established by NASDAQ and the SEC, to establish and administer our compensation practices to ensure that these practices are competitive and include incentives designed to appropriately drive our performance.

 

Objectives of Our Compensation Program for Named Executive Officers

 

Our compensation program for our Named Executive Officers is designed to achieve the following objectives:

 

 

While we generally believe that the compensation of our Named Executive Officers should reflect their success as a management team, rather than as individuals, in attaining short-term and long-term key operating objectives (such as revenue growth and gross profit improvement), as well as longer-term strategic objectives (such as product development), we also believe that individual performance and success should be rewarded. Our cash incentives are structured to reward achievement of short and long-term team, as well as and individual, performance objectives.

 

We also believe that the compensation of our Named Executive Officers should not be based on the short-term performance of our Ordinary Shares, whether favorable or unfavorable, but rather on our long-term operating performance. We believe that the price of our Ordinary Shares over time will reflect our long-term operating performance and, ultimately, the quality of the management of the Company by our Named

Executive Officers. Therefore, we seek to have our long-term performance reflected in our executive compensation through our equity incentive programs, which are designed to align the interests of our Named Executive Officers with those of our shareholders.

 

In setting compensation levels for our Named Executive Officers for the fiscal year ended December 31, 2007, the Compensation Committee considered the following factors, in addition to the benchmarking described below under “ Role of Benchmarking and Compensation Consultant in Compensation Decisions :”

 

 

The Compensation Committee believes that our analysis of these factors, in conjunction with the benchmarking data, provides the best information to structure the compensation of our Named Executive Officers to meet our compensation objectives.

 

Role of Benchmarking and Compensation Consultant in Compensation Decisions

 

The Compensation Committee believes that the use of benchmarking data is an important factor in remaining competitive with our peers and furthering our objective of attracting, motivating and retaining highly qualified personnel. To gauge market competitiveness of our Named Executive Officer compensation, the Compensation Committee typically utilizes (i) compensation survey data from highly regarded executive compensation surveys for the software and high technology and the subscription software industries and (ii) the consulting services of Radford. For the fiscal year ended December 31, 2007, at the recommendation of the Vice-President of Human Resources, the Compensation Committee used the following surveys to review the compensation of our Named Executive Officers:

 

 

The Compensation Committee believes that the practices of the companies within these industries and revenue ranges provide us with the appropriate compensation benchmarks because these companies have similar organizational structures and tend to compete with us to attract executives and other employees. The Compensation Committee, with the assistance of our Vice President of Human Resources, annually reassesses the relevance of these surveys and makes appropriate changes as necessary.

 

Role of the Chief Executive Officer in Compensation Decisions

 

The Compensation Committee, which is comprised entirely of directors who are independent under the standards established by NASDAQ and the SEC, determines the compensation packages for all of our Named Executive Officers. In determining the appropriate compensation for our Named Executive Officers other than the Chief Executive Officer, the Compensation Committee will meet with our Chief Executive Officer and our Vice-President of Human Resources to review the analysis provided by Radford, and determine the appropriate

compensation of such executive officers. Our Chief Executive Officer does not participate in any discussions concerning his own compensation.

 

In the first quarter of each year, our Chief Executive Officer will meet with each executive officer to establish such officer’s performance objectives for the current fiscal year and evaluate the performance of each executive officer against such officer’s performance objectives from the prior fiscal year. Performance objectives are generally aligned to (i) IONA’s operating plan as approved by the Board of Directors, (ii) the performance objectives approved by the Compensation Committee for the Chief Executive Officer, and (iii) individual goals. Using the results of these performance assessments, combined with the results from the compensation benchmarking process, our Chief Executive Officer, with information provided by our Vice-President of Human Resources, makes recommendations to the Compensation Committee regarding the base salaries, variable compensation components, and long term incentive equity awards for the other Named Executive Officers. The Compensation Committee then carefully considers these recommendations when setting the overall compensation for each Named Executive Officer for the next fiscal year.

 

In addition to his recommendations, but subject to compensation parameters approved by the Compensation Committee, our Chief Executive Officer has the discretion to set certain management by objective targets for certain bonus awards to our executive officers under our Senior Management Team Bonus Plan. These bonuses are generally accretive to any incentive award established by the Compensation Committee and the targets are generally aligned to IONA’s operating plan and goals for the Chief Executive Officer as approved by the Board of Directors.

 

Elements of Compensation

 

Our executive compensation program consists of three primary elements: base salary, cash incentives and long-term equity incentives, primarily in the form of share options and performance based phantom share unit awards. Our Named Executive Officers are also eligible for certain benefits offered to employees generally, including life, health, disability and dental insurance, as well as the right to participate in our 401(k) plan. Our Named Executive Officers are generally “at will” employees, except for our Chief Executive Officer, who has a three-year employment contract that is discussed in more detail under the section titled “Potential Benefits Upon Termination or Change in Control” of this Proxy Statement. In addition, we entered into change in control agreements with our Named Executive Officers, and have a change in control plan for our non-executive directors, both of which provide severance and other benefits to our Named Executive Officers and directors in the event of a change in control of the Company, and are discussed in more detail in this CD&A.

 

 

 

 

 

Share Incentive Plans

 

The following is a brief description of each of our share option plans under which our Named Executive Officers have been granted equity incentives.

 

2006 Share Incentive Plan

 

On May 10, 2006, the Board of Directors adopted our 2006 Share Incentive Plan and on August 24, 2006, it was approved by our shareholders. The 2006 Share Incentive Plan replaces the Company’s 1997 Share Option Scheme and 1997 Director Share Option Scheme, both of which have been terminated and no additional options may be granted thereunder.

 

Certain features of the 2006 Share Incentive Plan include:

 

 

In the Compensation Committee’s discretion, awards with conditions and restrictions relating to the attainment of performance goals may become vested and non-forfeitable in connection with a change in control. In addition, in the event of a change in control of the Company in which our shareholders will receive cash consideration, the Company may make or provide for a cash payment to participants holding share options and share appreciation rights equal to the difference between the per share cash consideration and the exercise price of the share options or share appreciation rights.

 

1997 Director Share Option Scheme

 

All share options granted under the 1997 Director Share Option Scheme automatically accelerate and become exercisable in full in the event the option holder’s service on our Board of Directors ceases by reason of his death or permanent disability or in the event of a change in control of IONA.

 

1999 Employee Share Purchase Plan

 

In 1999, the Company established a qualified Employee Share Purchase Plan. In 2003, the Board of Directors and shareholders approved an amendment to the 1999 Employee Share Purchase Plan to increase the number of our Ordinary Shares issuable under the plan to 2,000,000. All of the Company’s employees and employees of the Company’s participating subsidiaries who are employed full-time on the first and last business day of any payment period (a six-month period commencing February 1 and August 1 and ending July 31 and January 31, respectively, in each year) and have worked for more than five months in any calendar year are eligible to participate. The purchase price per Ordinary Share for each payment period is the lesser of

(i) 85% of the average market price of our ADSs on the first business day of the payment period and (ii) 85% of the average market price of our ADSs on the last business day of the payment period. In each payment period, an employee may authorize payroll deductions in an amount not less than 1% but not more than 10% of the employee’s salary for participation in the 1999 Employee Share Purchase Plan. Rights under the 1999 Employee Share Purchase Plan terminate upon the happening of certain specified events including retirement, resignation and death.

 

Senior Management Team Bonus Plan

 

The Senior Management Team Bonus Plan provides for annual target bonus amounts for our executive officers, including our Named Executive Officers, based upon the attainment of performance targets that are established by the Compensation Committee for the relevant fiscal year, and relate to financial metrics with respect to the Company or any of its subsidiaries, including, but not limited to, the following: revenue, operating income and specific strategic operational goals for the relevant fiscal year. The plan also provides that each Named Executive Officer who is eligible to receive a bonus under the plan shall have a targeted bonus opportunity for each performance period. Pursuant to the plan, performance goals are measured at the end of each performance period after the Company’s financial reports have been released.

 

Impact of Tax and Accounting on Compensation Decisions

 

As a general matter, the Compensation Committee takes into account the various tax and accounting implications of the compensation vehicles employed by us.

 

When determining amounts of long-term incentive grants to executives and employees, the Compensation Committee examines the accounting cost associated with the grants. Under FAS 123(R), grants of share options and restricted share units result in an accounting charge for us equal to the grant date fair value of those securities. For restricted share units, the accounting cost is generally equal to the fair market value of the underlying shares of common stock on the date of the award. The cost is then amortized over the requisite service period. With respect to share options, we calculate the grant date fair value based on the Black-Scholes formula with an adjustment for possible forfeitures and amortize that value as compensation expense over the vesting period.

 

Section 162(m) of the Internal Revenue Code does not permit publicly traded companies to take income tax deductions for compensation paid to the Chief Executive Officer and certain other executive officers to the extent that compensation exceeds $1 million per officer in any taxable year and does not otherwise qualify as performance-based compensation. The Compensation Committee considers steps that might be in the Company’s best interests to minimize the impact of Section 162(m) of the Internal Revenue Code. However, in establishing the cash and equity incentive compensation programs for our Named Executive Officers, the Compensation Committee believes that the potential deductibility of the compensation payable under those programs should be only one of a number of relevant factors taken into consideration, and not the sole or primary factor. The Compensation Committee believes that cash and equity incentive compensation must be maintained at the requisite level to attract and retain the executive officers essential to the Company’s financial success, even if all or part of that compensation may not be deductible by reason of the limitations of Section 162(m) of the Internal Revenue Code.

 

Compensation Mix

 

When making compensation decisions, the Compensation Committee analyzes summaries prepared by Radford of the prior year’s base salary, short-term incentives and long-term incentives for each Named Executive Officer. The summaries present the dollar amount of the following components of the Named Executive Officer’s compensation: base salary, target cash bonuses versus actual cash bonuses earned, and the value of outstanding equity awards. In addition, Radford provides analysis of the various components of the compensation of our Named Executive Officers against industry benchmarks. Taking into account the recommendations provided by the Chief Executive Officer, the Compensation Committee then considers the appropriate compensation mix as between base and variable compensation for each Named Executive Officer.

In 2007, between 20% and 40% of the total compensation for our Named Executive Officers, other than the Vice-President of Worldwide Sales and Marketing, was represented by variable compensation. In 2007, 60% of the total compensation for the Vice-President of Worldwide Sales and Marketing was represented by variable compensation. The Compensation Committee believes that this compensation mix was required in order motivate and retain our Named Executive Officers in an extremely competitive environment.

 

Base Salary

 

The Compensation Committee believes that our Named Executive Officers, including our Chief Executive Officer, are paid salaries in line with their responsibilities, expertise, skills, knowledge and experience. The Compensation Committee targets base salaries for each of our Named Executive Officers at between the market median (50 ^th  percentile) and upper quartile (75 ^th  percentile) for the software and high technology industries, as identified in the compensation surveys described above. We believe that this target enables us to attract, motivate and retain our leadership team in an extremely competitive environment. In general, the salaries of our Named Executive Officers are reviewed on an annual basis.

 

Mr. Zotto’s base salary for the 2007 fiscal year was $375,000 (which amount reflects the annualized dollar amount of Mr. Zotto’s base salary based on an April 1 ^st  start date of his employment contract with the Company). The Compensation Committee determined the amount of the Chief Executive Officer’s base salary based on the following factors: (i) the Company’s strong financial performance for the 2006 fiscal year, (ii) the positive evaluation by the Board of Directors of his overall performance in the 2006 fiscal year, (iii) the operating plan and goals set for him by the Board of Directors for the 2007 fiscal year; and the Compensation Committee’s assessment that his base salary for the 2006 fiscal year was below the market median salary for chief executive officers of software companies with revenues in the range of $40 million to $199 million, as identified in the compensation surveys described above. The Compensation Committee believed that in order to retain Mr. Zotto, it was appropriate to position his base salary between the market median (50 ^th  percentile) and upper quartile (75 ^th  percentile) for the software and high technology industries, as identified in the compensation surveys described above.

 

The base salaries for our other Named Executive Officers were determined by the Compensation Committee after considering (i) their then current base salary level, (ii) benchmark salary information; (iii) the Company’s strong financial performance for the 2006 fiscal year, (iv) their individual performance assessments for the 2006 fiscal year; (v) salary recommendations from our Chief Executive Officer, and (vi) the amount of base salary as a component of total compensation. The Compensation Committee also took into account the competitive environment for attracting and retaining executives for similar positions in the software industry. The Compensation Committee determined that although the Company has a strong financial performance in the 2006 fiscal year, the base salaries for each of these Named Executive Officers were competitive at between the market median (50 ^th  percentile) and upper quartile (75 ^th  percentile) in the software and high technology industries, as identified in the compensation surveys described above, and therefore did not need to be changed for the 2007 fiscal year from the levels established for the 2006 fiscal year. For the fiscal years 2006 and 2007, the base salaries for our Named Executive Officers were:

 

 

 

 

Variable Cash Compensation

 

The Compensation Committee believes that some portion of overall cash compensation for executive officers should be “at risk,” or contingent upon successful implementation of the Company’s overall strategy. For

the 2007 fiscal year, pursuant to the Senior Management Team Bonus Plan, the Compensation Committee established a bonus program for our senior management team (the “2007 Senior Management Team Bonus Program”), including our Named Executive Officers other than our Named Executive Officers who were covered by a sales commission plan. Mr. McMurray, and for part of the year, Mr. Alston, were not eligible to receive a bonus under this program because they were covered by a sales commission plan. Mr. Alston was eligible to participate in the program only for that portion of the year where he did not have a sales commission plan. The annual target cash bonus amounts for the participants under this program were aimed to be between the market median (50 ^th  percentile) and upper quartile (75 ^th  percentile) of bonuses awarded to executive officers in the software and high technology industries, as identified in the compensation surveys described above. The 2007 fiscal year annual target bonus amounts, as well as amounts actually paid, for the participants were:

 

 

 

 

For purposes of the 2007 Senior Management Team Bonus Program, the financial performance of our Company for the 2007 fiscal year was measured quarterly based on the achievement of certain revenue and operating income targets, and individual performance criteria was based on each individual’s area of responsibility. Although the Compensation Committee structured the program so that Company and individual performance criteria were weighted equally in order to stress the importance of both group and individual performance, a performance threshold based upon the attainment of certain Company performance targets was established. In cases where the Company fails to meet the overall Company performance metrics, no bonuses would be awarded. The Company performance metrics and bonus amounts were evaluated as follows:

 

 

The threshold Company revenue or operating income targets for the 2007 fiscal year, as determined under the 2007 Senior Management Team Bonus Program, were not met, and therefore, no bonuses were awarded. However, based on the recommendation of our Chief Executive Officer, the Compensation Committee decided

to award a $25,500 discretionary bonus to Mr. Mirabile in connection with his work in 2007 related to the acquisitions of two companies, Century 24 Solutions Limited and Logicblaze, Inc.

 

The Compensation Committee also established a sales commission program for Mr. McMurray based on our 2007 operating plan, which paid sales commissions based on the achievement of global quarterly and annual revenue quotas for the 2007 fiscal year. The quotas were set for global product, consulting, training and support revenues based on the overall Company revenue target of $85.0 million, as outlined in our 2007 operating plan as approved by the Board of Directors. Within parameters set by the Compensation Committee, our Chief Executive Officer established the matrix pursuant to which Company’s actual results were measured and commissions paid. For the 2007 fiscal year, Mr. McMurray’s target bonus amount was $250,000. If Company revenue targets were achieved for each of these categories, then Mr. McMurray would receive 100% of his target bonus amount. If actual aggregate revenue was greater than the total quota amount, then Mr. McMurray was eligible to receive a bonus in excess of the $250,000 target. Any excess amount awarded was determined by the Compensation Committee in its discretion. Mr. McMurray was paid $197,509 under this program.

 

In addition to his sales commission program and in accordance with the discretion afforded to our Chief Executive Officer under the 2007 Senior Management Team Bonus Program, our Chief Executive Officer established an additional management by objectives (“MBO”) bonus opportunity of $210,000 for Mr. McMurray in order to incentivize him to exceed the quarterly revenue targets set forth in his sales commission program. For each quarter where revenues exceeded the target by a certain percentage, Mr. McMurray had the opportunity to earn the following bonus amounts: $35,000 for the first quarter, $70,000 for the second quarter, $70,000 for the third quarter, and $35,000 for the fourth quarter. The quarterly bonus opportunities are cumulative such that bonus amounts for quarters where revenue targets were missed were eligible to be awarded if the revenue target in a future quarter was overachieved such that the aggregate of the quarterly revenue targets to that date were achieved. Mr. McMurray was awarded $175,000 of the entire $210,000 opportunity.

 

The Compensation Committee also established a bonus program for Mr. Alston based on our 2007 operating plan, which paid sales commissions based on the achievement of global quarterly and annual billing goals for the 2007 fiscal year. Billing goals were established for our open source business against which actual results were measured and commission awarded. For the 2007 fiscal year, Mr. Alston’s target bonus amount was $63,000. If the Company’s billing goals were achieved, then Mr. Alston would receive 100% of his target bonus amount. If the actual billings were greater than the goal assigned, then Mr. Alston was eligible to receive a bonus in excess of the $63,000 target. Mr. Alston was paid $63,000 under this program.

 

Equity Incentives

 

In the 2007 fiscal year, the Compensation Committee awarded two types of long-term equity incentives to our Named Executive Officers — share options and phantom share units. The Compensation Committee believed that the granting of these long-term equity incentives was necessary in order motivate and retain our Named Executive Officers in an extremely competitive environment. In prior years, all of our long-term equity incentives were structured as share options that vested over time. Based on industry analysis and consultation with Radford, the Compensation Committee decided that a portion of the long-term equity incentives awarded to our Named Executive Officers should be contingent upon the successful achievement of certain Company performance criteria. Therefore, the Compensation Committee decided to grant a combination of share options and performance-based phantom share units to our Named Executive Officers.

In February 2007, the Compensation Committee awarded the following share options to our Named Executive Officers:

 

 

In addition, in February 2007, the Compensation Committee awarded phantom share units to our Named Executive Officers. These phantom share units had two requirements for vesting: (i) the satisfaction of certain Company performance-based objectives and (ii) the passage of time. The Compensation Committee aligned the Company performance metrics to be the same as the metrics used for the 2007 Senior Management Bonus Program. The Company performance metrics and the number of phantom share units that could vest is as follows:

 

 

The following table sets forth the number of phantom share units that (i) could have been earned by each Named Executive Officer if (A) the threshold and target performance objectives were achieved and (B) the maximum number of units were awarded, and (ii) were earned. As set forth in the “Grants of Plan-Based Awards Table” in this Proxy Statement, the threshold Company revenue and operating income targets for the 2007 fiscal year were not met and therefore, no phantom share units were eligible to vest and all of the units automatically expired.

 

 

 

 

Executive Compensation Summary

 

The following table sets forth summary compensation information for our Named Executive Officers for the fiscal year ended December 31, 2007.

SUMMARY COMPENSATION TABLE

 

 

 

 

 

 

 

Grants of Plan-Based Awards in 2007

 

The following table sets forth information about grants of plan-based awards during the fiscal year ended December 31, 2007 to our Named Executive Officers.

GRANTS OF PLAN-BASED AWARDS

 

 

 

 

Outstanding Equity Awards at December 31, 2007

 

The following table sets forth information regarding unexercised and vested or unvested options that were held as of December 31, 2007 for each of our Named Executive Officers. The market and payout values for the phantom share units are calculated based on a market value of $3.26 per share (the closing price of the ADRs evidencing ADSs representing our Ordinary Shares on the NASDAQ Global Market on December 31, 2007) multiplied by the number of shares that would have vested if the target performance-based Company objectives for the fiscal year ended December 31, 2007 had been achieved.

 

OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2007

 

 

 

Option Exercises and Shares Vested

 

The following table sets forth information with respect to the exercise of share options during the fiscal year ended December 31, 2007 for each of our Named Executive Officers.

OPTION EXERCISES AND SHARES VESTED