.
<PAGE>
XYVISION, INC.
101 EDGEWATER DRIVE
WAKEFIELD, MASSACHUSETTS 01880-1291
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE
HELD ON WEDNESDAY, SEPTEMBER 27, 1995
The Annual Meeting of Stockholders of Xyvision, Inc. (the "Company") will
be held at the offices of the Company, 101 Edgewater Drive, Wakefield,
Massachusetts on Wednesday, September 27, 1995 at 10:00 a.m., local time, to
consider and act upon the following matters:
To elect two Class III directors to serve for the ensuing three years;
To ratify the selection by the Board of Directors of Coopers & Lybrand L.L.P.
as the Company's independent public accountants for the current fiscal year;
and
To transact such other business as may properly come before the meeting or
any adjournment thereof.
Stockholders of record at the close of business on August 3, 1995 will be
entitled to vote at the meeting or any adjournment thereof.
By Order of the Board of Directors,
Eugene P. Seneta, Secretary
Wakefield, Massachusetts
August 23, 1995
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN
ORDER TO ENSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF
THE PROXY IS MAILED IN THE UNITED STATES.
1
<PAGE>
XYVISION, INC.
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 27, 1995
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Xyvision, Inc. (the "Company") for use
at the Annual Meeting of Stockholders to be held on September 27, 1995 and at
any adjournment of that meeting. All proxies will be voted in accordance with
the stockholders' instructions, and if no choice is specified, the proxies
will be voted in favor of the matters set forth in the accompanying Notice of
Annual Meeting. Any proxy may be revoked by a stockholder at any time before
its exercise by delivery of written revocation or a subsequently dated proxy
to the Secretary of the Company or by voting in person at the Annual Meeting.
The Company's Annual Report for the fiscal year ended March 31, 1995
("fiscal 1995") is being mailed to stockholders, along with this Notice of
Annual Meeting and Proxy Statement, on or about August 23, 1995.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR FISCAL 1995,
INCLUDING AN AMENDMENT THERETO, AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ("SEC"), EXCEPT FOR EXHIBITS, WILL BE FURNISHED WITHOUT CHARGE TO
ANY STOCKHOLDER UPON WRITTEN REQUEST TO THE SECRETARY OF XYVISION, INC., 101
EDGEWATER DRIVE, WAKEFIELD, MASSACHUSETTS 01880-1291.
VOTING SECURITIES AND VOTES REQUIRED
At the close of business on August 3, 1995, the record date for the
determination of stockholders entitled to notice of and to vote at the Annual
Meeting, there were outstanding and entitled to vote an aggregate of
8,726,849 shares of Common Stock of the Company ("Common Stock") and 221,903
shares of Series B Convertible Preferred Stock of the Company ("Series B
Stock"), constituting all of the voting stock of the Company (collectively,
the "Voting Stock"). Holders of Common Stock and Series B Stock are entitled
to one vote and two votes per share, respectively.
The holders of a majority of the shares of Voting Stock outstanding and
entitled to vote at the Annual Meeting shall constitute a quorum for the
transaction of business at the Annual Meeting. Shares of Voting Stock
represented in person or by proxy (including shares which abstain or do not
vote with respect to one or more of the matters presented for stockholder
approval) will be counted for purposes of determining whether a quorum exists
at the Annual Meeting. The affirmative vote of the holders of a plurality of
the shares of Voting Stock voting on the matter is required for the election
of directors. The affirmative vote of the holders of a majority of the shares
of Voting Stock voting on the matter is required for the ratification of the
selection of Coopers & Lybrand L.L.P. as the Company's independent
accountants for the current fiscal year.
Shares which abstain from voting as to a particular matter, and shares
held in "street name" by brokers or nominees who indicate on their proxies
that they do not have discretionary authority to vote such shares as to a
particular matter, will not be counted as votes in favor of such matter, and
also will not be counted as shares voting on such matter. Accordingly,
abstentions and "broker non-votes" will have no effect on the voting on a
matter that requires the affirmative vote of a certain percentage of the
shares voting on the matter.
1
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGERS
The following table sets forth the beneficial ownership of the Company's
Common Stock as of May 31, 1995 (i) by each person who is known by the
Company to beneficially own more than 5% of the outstanding shares of Common
Stock, (ii) by each director, (iii) by each of the executive officers named
in the Summary Compensation Table set forth under the caption "Executive
Compensation" below, and (iv) by all current directors and executive officers
(the "Senior Executives") as a group.
<TABLE>
<CAPTION>
<S> <C> <C>
Number of Shares Percentage of
Beneficially Owned Common Stock
Name and Address (1) Outstanding (2)
5% Stockholders (3)
Tudor Trust (4) 4,038,726 35.0%
c/o Braverman Codron & Company 233 South
Beverly Drive Beverly Hills, California
90212
James S. Saltzman (5) 1,656,741 19.0%
General Partner Saltzman Partners 420
South York Road Hatboro, Pennsylvania
19040
Philippe Villers (6) 478,368 5.6%
20 Whit's End Road Concord,
Massachusetts 01742
Other Directors
Thomas H. Conway (7) 325,000 3.6%
Leland S. Kollmorgen (8) 24,000 *
James McKenney 0 *
Other Senior Executives
Daniel M. Clarke (9) 131,644 1.5%
James G. Hickey (10) 71,460 *
Kevin J. Duffy (11) 56,776 *
All directors and officers as a group
(10 persons) (12) 2,397,601 25.6%
* Less than 1%.
</TABLE>
The inclusion herein of any shares deemed beneficially owned does not
constitute an admission by such stockholder of beneficial ownership of those
shares. Each stockholder possesses sole voting and investment power with
respect to the shares listed, except as otherwise indicated. For purposes of
this table, in accordance with the rules of the Securities and Exchange
Commission, each person or entity listed is deemed to beneficially own any
shares issuable upon the conversion of the Company's Series B Stock or upon
the exercise of stock options or warrants that are currently exercisable or
exercisable within 60 days after May 31, 1995.
2
<PAGE>
Number of shares deemed outstanding includes 8,645,637 shares outstanding
as of May 31, 1995, plus any shares issuable upon conversion of Series B
Stock held by the person or entity in question or subject to options or
warrants held by the person or entity in question that are currently
exercisable or exercisable within 60 days following May 31, 1995.
For purposes of this table, "5% Stockholders" are those persons who are
known by the Company to beneficially own more than 5% of the outstanding
shares of Common Stock (including shares of Common Stock issuable upon
conversion of the Series B Stock). Those persons who are known by the Company
to beneficially own more than 5% of the outstanding shares of Series B Stock
are not separately identified on this table since holders of shares of Series
B Stock generally vote with the holders of the Common Stock on all matters as
to which this Proxy Statement relates.
Includes 2,825,000 shares of Common Stock issuable upon the exercise of
Common Stock Purchase Warrants and 52,226 shares of Common Stock issuable
upon conversion of Series B Stock. See "Certain Transactions" regarding
additional shares which may be acquired by Tudor Trust.
Includes 93,372 shares of Common Stock issuable upon conversion of Series
B Stock owned by Saltzman Partners, of which Mr. Saltzman is the General
Partner.
Includes 82,378 shares held by Mr. Villers' spouse, directly and as a
custodian, and trusts for members of Mr. Villers' family. Mr. Villers
exercises investment and voting power with respect to such shares, but
disclaims beneficial ownership thereof.
Includes 300,000 shares subject to stock options.
Includes 23,000 shares subject to stock options.
Includes 122,000 shares subject to stock options.
Consists of 71,460 shares subject to stock options.
Includes 56,701 shares subject to stock options.
Includes a total of 629,641 shares subject to stock options and 93,372
shares issuable upon conversion of Series B Stock.
ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes (designated
Class I directors, Class II directors and Class III directors), with members
of each class serving for staggered three-year terms. There are currently one
Class I director, whose term expires at the 1996 Annual Meeting of
Stockholders, one Class II director, whose term expires at the 1997 Annual
Meeting of Stockholders, and two Class III directors, whose terms expire at
the 1995 Annual Meeting of Stockholders (in all cases subject to the election
and qualification of their successors and to their earlier death, resignation
or removal).
The persons named in the enclosed proxy will vote to elect Leland S.
Kollmorgen and James McKenney as Class III directors, unless authority to
vote for them is withheld by marking the proxy to that effect. Mr. Kollmorgen
and Mr. McKenney are currently Class III directors of the Company. If
elected, Messrs. Kollmorgen and McKenney will serve until the 1998 Annual
Meeting of Stockholders (subject to the election and qualification of their
successors and to their earlier death, resignation or
3
<PAGE>
removal). Messrs. Kollmorgen and McKenney have indicated their willingness to
serve, if elected, but if one or both of them should be unable or unwilling
to stand for election, proxies may be voted for a substitute nominee or
nominees, as the case may be, designated by the Board of Directors.
Set forth below are the name and certain information with respect to each
director of the Company, including the nominees for Class III director.
CLASS I DIRECTOR
JAMES S. SALTZMAN, age 51, has been the General Partner of Saltzman
Partners, an investment firm, since 1982. He served as Chairman of the Board
of Directors of the Company from February 1994 to February 1995. He has been
a director of the Company since 1992.
CLASS II DIRECTOR
THOMAS H. CONWAY, age 56, has been Chief Executive Officer of the Company
since 1991 and was President from 1991 to February 1994. He has been the
President of T.H. Conway and Associates, Inc., a management consulting firm,
since July 1993. For the past eleven years he has been assisting companies to
remediate their operational and financial problems. He has been a director of
the Company since March 1993 (at which time he was elected to fill a vacancy
in the Class II Directors) and has been Chairman of the Board of Directors
since February 1995.
CLASS III DIRECTORS
LELAND S. KOLLMORGEN, age 68, has been the President of TLK Inc., a
business consulting firm, since 1983. Rear Admiral Kollmorgen (USN, Retired)
is former Chief of Naval Research to the United States Navy. He has been a
director of the Company since 1988.
JAMES MCKENNEY, age 66, has been the John J. McLean Professor of Business
Administration at Harvard University since 1960. Mr. McKenney has been a
director of the Company since November 1994 (at which time he was elected to
fill a vacancy in the Class III Directors).
BOARD AND COMMITTEE MEETINGS
The Board of Directors met seven times during fiscal 1995. Each director
attended at least 75% of the aggregate of the number of Board of Directors'
meetings and the number of meetings of Committees of the Board on which he
then served.
The Company has an Audit Committee of the Board of Directors, which provides
the opportunity for direct contact between the Company's independent public
accountants and the Board. The Audit Committee reviews the effectiveness of
the auditors during the annual audit, discusses the Company's internal
accounting control policies and procedures and considers and recommends the
selection of the Company's independent public accountants. The Audit
Committee met twice during fiscal 1995. The current Audit Committee members
are Mr. Conway (Chairman), Mr. Kollmorgen and Mr. Saltzman.
The Company also has a Compensation and Stock Option Committee (the
"Compensation Committee") of the Board of Directors, which provides
recommendations to the Board regarding compensation programs of the Company
and administers the Company's 1992 Stock Option Plan. The Compensation
Committee met three times during fiscal 1995. The current Compensation
Committee members are Mr. Kollmorgen (Chairman) and Mr. Saltzman.
The Company also has a Nominating Committee, which provides recommendations
to the Board of Directors regarding nominees for directorships. The
Nominating Committee did not meet during fiscal 1995 as its function for such
period was performed by the full Board of Directors. The Committee will
consider nominees recommended by stockholders. Stockholders who wish to
recommend nominees for
4
<PAGE>
director should submit such recommendations to Eugene P. Seneta, Secretary of
the Company, at the principal offices of the Company, who will forward them
to the Nominating Committee for consideration. The current Nominating
Committee members are Mr. Saltzman (Chairman) and Mr. Kollmorgen.
DIRECTORS' COMPENSATION
Directors who are not employees of the Company receive directors' fees of
$2,000 per year. Such outside directors also receive fees of $500 for each
Board meeting attended and directors who are members of Committees of the
Board receive fees of $250 per Committee meeting attended, provided such
Committee meeting was not held on the same day as a Board meeting. Directors
are also reimbursed for expenses incurred in attending Board or Committee
meetings. Directors who are employees receive no additional compensation for
serving as directors.
Under the Company's 1992 Director Stock Option Plan, each newly elected
outside director is granted, upon his initial election as a director, an
option to purchase 20,000 shares of Common Stock at an exercise price equal
to the fair market value of the Common Stock as of the date of grant. Each
option granted under the 1992 Director Stock Option Plan becomes exercisable
on a cumulative basis in five equal annual installments beginning on the date
of grant, provided the optionee continues to serve as a director.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table sets forth certain information concerning the
compensation, for the fiscal years indicated, of the Company's Chief
Executive Officer and the Company's three other most highly compensated
executive officers during fiscal 1995 (the "Senior Executives").
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Long-Term
Compensation
Annual Compensation (2) Awards
NAME AND OPTIONS ALL OTHER
PRINCIPAL POSITION (1) FISCAL YEAR SALARY ($) BONUS ($) (NO. OF SHARES) COMPENSATION ($) (3)
Thomas H. Conway (4) 1995 $141,200 $-- -- $--
Chief Executive Officer 1994 157,250 -- -- --
and Chairman of the
Board of Directors 1993 286,950 -- 300,000 --
Daniel M. Clarke 1995 149,654 60,000 --
President and Chief 1994 131,615 30,000 -- --
Operating Officer 1993 130,000 20,000 25,000 --
James G. Hickey 1995 120,751 -- 25,000 1,222
Vice President, 1994 120,751 20,000 -- 1,522
Customer Support, and
Managing Director,
Europe 1993 116,969 15,000 55,900 1,170
Kevin J. Duffy 1995 119,741 20,000 10,000 1,349
Vice President, 1994 115,500 20,000 -- 1,304
North American Sales 1993 114,844 15,000 75,499 1,119
------------------------
</TABLE>
5
<PAGE>
exercise table which follow, present information concerning the Company's
Chief Executive Officer and its four other most highly compensated executive
officers (determined by reference to total annual salary and bonus earned by
such officers) in fiscal 1995 whose total salary and bonus exceeded
$100,000. Because the Company only had three other executive officers whose
compensation exceeded $100,000 for fiscal 1995, this table and the table
that follows present compensation information only for the Chief Executive
Officer and such other three executive officers.
(2) In accordance with the rules of the SEC, other compensation in the
form of perquisites and other personal benefits has been omitted because such
perquisites and other personal benefits constituted less than the lesser of
$50,000 or 10% of the total annual salary and bonus for the Senior Executive.
(3) Consists of Company matching contributions to 401(k) Plan.
(4) Mr. Conway serves as Chief Executive Officer pursuant to an agreement
between the Company and T.H. Conway & Associates, Inc., a management
consulting firm of which Mr. Conway is the President. The Company pays T.H.
Conway & Associates, Inc. directly for Mr. Conway's services. See "Certain
Transactions."
OPTION GRANTS
The following table sets forth certain information concerning grants of
stock options during fiscal 1995 to each of the Senior Executives.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Potential
Realizable Value
at Assumed Annual
Rates of Stock
Price
Appreciation For
Individual Grants Option Term (3)
Percent of
Number of Total
Securities Options
Underlying Granted to Exercise or
Options Employees in Base Priced Expiration
Name Granted(#) (1) Fiscal Year ($/Sh) (2) Date 5%($) 10%($)
Thomas H. Conway -- -- -- -- $-- $ --
Daniel M. Clarke 60,000 20.2% $0.25 6/16/04 47,031 72,231
James G. Hickey 25,000 8.4% $0.23 6/16/04 19,596 30,096
Kevin J. Duffy 10,000 3.4% $0.28 6/16/04 7,838 12,038
</TABLE>
(1) Each option becomes exercisable in equal annual installments over a five
year period commencing on the date of grant.
(2) The exercise price is equal to the fair market value on the date of
grant.
(3) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term (ten years
from the date of grant). These gains are based on assumed
6
<PAGE>
rates of stock appreciation of 5% and 10% compounded annually from the date
the respective options were granted to their expiration date. Actual gains,
if any, on stock option exercises will depend on the future performance of
the common stock and the date on which the options are exercised
OPTION EXERCISES AND HOLDINGS
The following table sets forth certain information concerning the value of
unexercised options held by each of the Senior Executives on March 31, 1995.
None of the Senior Executives exercised any stock options during fiscal 1995.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Number of Shares Value of Unexercised
Subject to Unexercised In-The-Money Options
Options at Fiscal Year-End at Fiscal Year-End ($) (1)
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
Thomas H. Conway 300,000 0 $150,000 $0
Daniel M. Clarke 110,000 75,000 55,000 37,500
James G. Hickey 66,460 58,540 33,230 29,270
Kevin J. Duffy 54,701 55,299 27,351 27,650
</TABLE>
(1) Based on the fair market value of the Common Stock on March 31, 1995
($.50 per share).
AGREEMENTS WITH SENIOR EXECUTIVES
In 1990, the Company entered into agreements with Messrs. Clarke and
Hickey entitling such individuals to benefits under the Company's Severance
Program for Executive Committee Corporate Officers. Under this Program, an
employee whose employment is terminated by the Company involuntarily without
"cause" (as defined in the Program) is entitled to (i) a severance payment in
the amount of three months salary; (ii) if he has not obtained other
employment within three months after his employment termination date,
bi-weekly salary payments for an additional period from such date until the
earlier of one year after his employment termination date or the date on
which he obtains other employment; and (iii) a continuation of medical,
dental and insurance benefits until the earlier of one year after his
employment termination date or the date on which he obtains other employment.
In addition, an employee whose employment terminates for any reason, whether
voluntary or involuntary, within three months following a "change in control"
(as defined in the Program) is entitled to receive the benefits described
above, and all outstanding stock options held by the employee shall
immediately become exercisable in full. The Program remains in effect for so
long as such individuals are employed by the Company (although
post-employment benefits expire one year after employment termination).
The Company has an Employee Severance Benefit Plan in which all full-time
employees (including executive officers) who have been employed for at least
90 days participate. Under this Plan, if a "change in control" of the Company
(as defined in the Plan) occurs, and within 12 months thereafter a
participant's employment with the Company is terminated either by the Company
other than for "cause" or "disability" (each as defined in the Plan) or by
the participant for "good reason" (as defined in the Plan), then (i) the
participant is entitled to (a) a cash payment equal to 50% of his annual base
compensation if he has been employed by the Company for less than one year or
100% of his annual base compensation if he has been employed by the Company
for one year or more (subject to reduction in certain events for tax reasons)
and (b) a continuation of certain insurance benefits for a period of one
7
<PAGE>
year, and (ii) all outstanding stock options held by the participant shall
immediately become exercisable in full. Notwithstanding the foregoing, if a
particular change in control of the Company is approved in advance by the
Board of Directors of the Company, participants shall not be entitled to any
of the foregoing benefits. This Plan may be amended or terminated by the
Board of Directors at any time prior to the occurrence of a change in
control. Amounts payable to any employee under the Plan are reduced by
amounts payable to such employee under any other program or agreement under
which he will receive benefits.
Under an employment agreement with Thomas H. Conway, Chief Executive
Officer of the Company, effective October 1, 1993, the Company has agreed to
pay Mr. Conway the sum of $9,000 per month, plus reasonable out-of-pocket
expenses, plus $200 per hour for each hour of services rendered to the
Company in excess of 45 hours per month. This cash compensation is in lieu of
all non-cash benefits employees of the Company normally receive (such as
health insurance benefits and vacation time). This agreement also provides
that Mr. Conway may employ additional members of T.H. Conway and Associates,
a consulting firm of which he is a principal, at specified rates, provided
that the aggregate amount of compensation and reimbursement of out-of-pocket
expenses paid to such employees may not exceed $50,000 without advance
approval of the Board of Directors. In fiscal 1995, the Company paid $141,200
and $2,055 to T.H. Conway and Associates for services of Mr. Conway and its
employees other than Mr. Conway, respectively, and an aggregate of $5,580 for
reimbursement of expenses. In addition, each member of the Board of Directors
of the Company has signed an agreement that they will not sue Mr. Conway or
T.H. Conway and Associates in connection with the performance of services to
the Company except for fraud, malfeasance or gross negligence.
CERTAIN TRANSACTIONS
Prior to joining the Company in August 1991, Mr. Conway served as an
interim Chief Executive Officer of Smart Names, Inc. A petition for
involuntary bankruptcy under Chapter 7 was filed against Smart Names, Inc. in
the Bankruptcy Court for the State of Maryland on February 28, 1992.
On June 30, 1992, the Company obtained a $2,000,000 line of credit with
Tudor Trust, a current investor in the Company. The line, which is payable on
demand, is secured by substantially all of the assets of the Company and has
been used for working capital and general business purposes. Interest on the
line of credit is payable monthly. The Company issued 400,000 shares of
common stock and a common stock purchase warrant for 100,000 shares of common
stock at an exercise price of $.50 per share to the Tudor Trust, for no
additional consideration upon signing of the line of credit. In addition, as
required by the line of credit, from September 30, 1992 through June 30,
1993, the Company granted the investor four additional common stock purchase
warrants, each covering 100,000 shares of common stock.
On September 28, 1993, the Company and the investor amended the line of
credit. Under the terms of this amendment: (i) the amount available under the
line of credit was increased from $2,000,000 to $2,500,000; (ii) annual
interest rate was reduced from 13% to 10%; and (iii) the term of the line of
credit was extended from June 30, 1994 to June 30, 1995. In consideration of
such changes, the Company: (i) reduced the exercise price of 200,000 and
100,000 common stock purchase warrants exercisable by Tudor Trust from $.50
and $.25 per share, respectively, to $.09 per share (the fair market value of
the common stock on September 28, 1993); (ii) issued 200,000 shares of common
stock and a warrant to purchase 300,000 shares of common stock at an exercise
price of $.09 per share to Tudor Trust for no additional consideration; and
(iii) agreed to grant the investor up to eight additional warrants, each
covering 125,000 shares of common stock at an exercise price at the lesser of
the fair market value of the common stock on the date of issue or $1.00 per
share.
On December 3, 1993, the Company and Tudor Trust entered into an
additional amendment to the line of credit. Under the terms of this
amendment, the amount available under the line of credit was
8
<PAGE>
increased to $3,000,000. In consideration of this change, the Company: (i)
issued 100,000 shares of common stock and a warrant to purchase 500,000
shares of common stock at fair market value of the common stock on December
3, 1993 and (ii) agreed to grant Tudor Trust up to seven additional common
stock purchase warrants between December 31, 1993 and June 30, 1995, each
covering 200,000 shares of common stock at an exercise price at the lesser of
the fair market value of the common stock on the date of grant or $1.00 per
share (these warrants are in lieu of the last seven of the warrants referred
to in clause (iii) of the preceding paragraph).
The Company and Tudor Trust are currently negotiating an amendment to
extend the line of credit which expired on June 30, 1995. The Company expects
to complete documentation of this amendment in August 1995, but there can be
no assurance that it will do so or that the amendment will be on terms that
are similar to those in the prior amendment.
On July 29, 1994, Xyvision entered into an exchange agreement with
Saltzman Partners, Tudor Trust and certain other parties relating to the 15%
Exchange Notes of the Company held by such stockholders. James S. Saltzman,
the General Partner of Saltzman Partners, is a director of the Company.
Saltzman Partners and Tudor Trust held 15% Exchange Notes in the principal
amounts of $1,087,500 and $630,000, respectively, which they exchanged upon
the terms set forth below. Xyvision entered into the exchange agreement in
order to relieve itself of the payment obligations on the 15% Exchange Notes,
which were to mature beginning September 30, 1994. Under the terms of the
exchange agreement, Xyvision issued the following securities to holders of
its 15% Exchange Notes in exchange for the delivery of its 15% Exchange Notes
for cancellation: (i) a new promissory note in a principal amount equal to
the principal amount of the 15% Exchange Note, which would mature 30 months
from the date of issuance and would not bear interest; (ii) such number of
shares of Xyvision common stock as is determined by dividing the aggregate
principal amount of the 15% Exchange Note delivered for cancellation by
$10.00; and (iii) such number of shares of Series B Stock of Xyvision as is
determined by dividing the accrued interest in the 15% Exchange Note
delivered for cancellation by $10.00. Dividends of $.40 per share accrue
annually on the Series B Stock and are payable on a quarterly basis. The
Series B Stock has a liquidation preference of $12.50 per share and is
convertible into Common Stock at a rate of two shares of common stock for
each share of Series B Stock. Pursuant to the exchange agreement, Saltzman
Partners received a 4% Exchange Note in the principal amount of $1,087,500,
108,750 shares of common stock and 46,686 shares of Series B Stock and Tudor
Trust received 4% Exchange Notes in an aggregate principal amount of
$630,000, an aggregate of 63,000 shares of common stock and an aggregate of
26,113 shares of Series B Stock.
Based solely on its review of copies or reports filed by reporting persons
of the Company pursuant to Section 16(a) of the Exchange Act of 1934, as
amended (the "Exchange Act"), the Company believes that all filings required
to be made by reporting persons of the Company were timely made in accordance
with the requirements of the Exchange Act except for a Form 3 which was filed
by Mr. McKenney. Mr. McKenney was elected as a director of the Company on
November 28, 1994. Accordingly, his Form 3 was due December 8, 1994. He filed
the Form 3 with the SEC relating to the Company on February 28, 1995.
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
Subject to ratification by stockholders, the Board of Directors has
selected the firm of Coopers & Lybrand L.L.P. to serve as the Company's
independent public accountants for the current fiscal year. Coopers & Lybrand
L.L.P. has served as the Company's independent public accountants since the
Company's inception. Although stockholder approval of the Board of Directors'
selection of Coopers & Lybrand L.L.P. is not required by law, the Board of
Directors believes that it is advisable to give stockholders an opportunity
to ratify this selection. If this proposal is not approved at the Annual
Meeting, the Board of Directors will reconsider its selection of Coopers &
Lybrand L.L.P.
9
<PAGE>
Representatives of Coopers & Lybrand L.L.P. are expected to be present at
the Annual Meeting. They will have the opportunity to make a statement if
they desire to do so and will also be available to respond to appropriate
questions from stockholders.
OTHER MATTERS
The Board of Directors does not know of any other matters which may come
before the Annual Meeting. However, if any other matters are properly
presented to the Annual Meeting, it is the intention of persons named in the
accompanying proxy to vote, or otherwise act, in accordance with their
judgment on such matters.
All costs of solicitations of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and
regular employees, without additional remuneration, may solicit proxies by
telephone, telecopy and personal interviews. Brokers, custodians and
fiduciaries will be requested to forward proxy-soliciting material to the
owners of stock held in their names, and, as required by law, the Company
will reimburse them for their out-of-pocket expenses in this regard.
Georgeson & Company Inc. ("Georgeson") has been engaged by the Company to
solicit proxies on behalf of the Company. For these services, the Company
will pay Georgeson a fee of $6,000.00 plus reimbursement of its reasonable
out-of-pocket expenses. In addition, the Company has agreed to indemnify
Georgeson against liabilities or claims arising out of the performance by
Georgeson of such services.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1996 Annual
Meeting of Stockholders must be received by the Company at its principal
office in Wakefield, Massachusetts not later than April 25, 1996 for
inclusion in the proxy statement for that meeting.
By Order of the Board of Directors,
Eugene P. Seneta, Secretary
August 23, 1995
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED.
10
<PAGE>
PROXY
XYVISION, INC.
ANNUAL MEETING OF STOCKHOLDERS -- SEPTEMBER 27, 1995
The undersigned, having received notice of the meeting and management's
proxy statement therefor, and revoking all prior proxies, hereby appoint(s)
Thomas H. Conway, Daniel M. Clarke and Patrick J. Rondeau, and each of them,
the attorneys of the undersigned with power of substitution, to attend the
Annual Meeting of Stockholders of Xyvision, Inc. (the "Company") to be held
at the offices of the Company, 101 Edgewater Drive, Wakefield, Massachusetts
at 10:00 a.m. (local time), on Wednesday, September 27, 1995 and any
adjourned sessions thereof, and there to vote and act upon the following
matters in respect of all shares of Common Stock and Series B Stock of the
Company which the undersigned will be entitled to vote or act upon, with all
powers the undersigned would possess if personally present.
Attendance of the undersigned at the meeting or at any adjourned session
thereof will not be deemed to revoke this proxy unless the undersigned shall
affirmatively indicate thereat the intention of the undersigned to vote said
shares in person. If the undersigned hold(s) any of the shares of the Company
in a fiduciary, custodial or joint capacity or capacities, this proxy is
signed by the undersigned in every such capacity as well as individually.
In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the meeting, or any adjournment thereof.
1. To elect Leland S. Kollmorgen and James McKenney as a Class III
Directors:
For [ ] Withhold Authority to Vote [ ]
For except as follows:
2. To ratify the selection of Coopers & Lybrand as the Company's
independent public accountants for the fiscal year ending March 31, 1996 .
For [ ] Against [ ] Abstain [ ]
The shares represented by this proxy will be voted as directed by the
undersigned. If no direction is given with respect to any election to office
or proposal specified above, this proxy will be voted for such election to
office or proposal.
This proxy is solicited on behalf of the Board of Directors of the
Company.
Signed Dated:
Signature(s)
Please sign name(s) exactly as appearing hereon. When signing as attorney,
executor, administrator or other fiduciary, please give your full title as
such. Joint owners should each sign personally. If a corporation, sign in
full corporate name, by authorized officer. If a partnership, please sign in
partnership name, by authorized person.
12
