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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [] [x]
Filed by a Party other than the Registrant []
Check the appropriate box:
[] Preliminary Proxy Statement
[] [x] Definitive Proxy Statement
[] Definitive Additional Materials
[] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
[] Confidential, for Use of the Commission Only (as permitted by Rule
14-6(e)(2))
XYVISION, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[] [x] No fee required.
[] Fee computed on table below per Exchange Act Rules 14-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
1
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<PAGE>
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5) Total fee paid:
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[] Fee paid previously with preliminary materials.
[] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the pervious filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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[GRAPHIC OMITTED]
XYVISION, INC.
101 EDGEWATER DRIVE
WAKEFIELD, MASSACHUSETTS 01880-1291
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 25, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of
Xyvision, Inc., a Delaware corporation (the "Company"), will be held on
Thursday, September 25, 1997 at 10:00 a.m. at the offices of the Company, 101
Edgewater Drive, Wakefield, Massachusetts (the "Meeting") for the purpose of
considering and voting upon the following matters:
1. To elect two Class II Directors for the ensuing three years;
2. To approve an amendment to the Company's Certificate of Incorporation to
(i) effect a reverse split of the Company's Common Stock, $.03 par value
per share (the "Common Stock"), pursuant to which each four shares of
Common Stock then outstanding will be converted into one share, and (ii)
change the authorized number of shares of Common Stock from 50,000,000 to
25,000,000;
3. To approve the Xyvision, Inc. 1997 Stock Incentive Plan;
4. To ratify the appointment of Coopers & Lybrand L.L.P. as the Company's
independent public accountants for the current year; and
5. To transact such other business, if any, as may properly come before the
Meeting or any adjournment thereof.
The Board of Directors has no knowledge of any other business to be
transacted at the Meeting.
The Board of Directors has fixed the close of business on Thursday, July
31, 1997 as the record date for the determination of stockholders entitled to
notice of and to vote at the Meeting and at any adjournments thereof. A list of
the Company's stockholders is open for examination to any stockholder at the
principal executive offices of the Company, 101 Edgewater Drive, Wakefield,
Massachusetts 01880-1291 and will be available at the Meeting.
A copy of the Company's Annual Report to Stockholders for the fiscal year
ended March 31, 1997, which contains consolidated financial statements and
other information of interest to stockholders, accompanies this Notice and the
enclosed Proxy Statement.
By Order of the Board of Directors,
/s/ Eugene Seneta
Eugene Seneta, Secretary
August 25, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE PROMPTLY COMPLETE, SIGN,
DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING ENVELOPE. NO
POSTAGE NEED BE AFFIXED IF THE PROXY CARD IS MAILED IN THE UNITED STATES.
3
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XYVISION, INC.
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 25, 1997
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Xyvision, Inc., a Delaware corporation (the
"Company"), of proxies for use at the Annual Meeting of Stockholders to be held
on Thursday, September 25, 1997 at 10:00 a.m. at the offices of the Company,
101 Edgewater Drive, Wakefield, Massachusetts 01880-1291 and at any
adjournments thereof (the "Meeting").
All proxies will be voted in accordance with the instructions of the
stockholder. If no choice is specified, the proxies will be voted in favor of
the matters set forth in the accompanying Notice of Meeting. Any proxy may be
revoked by a stockholder at any time before its exercise by delivery of a
written revocation or a subsequently dated proxy to the Secretary of the
Company or by voting in person at the Meeting. Attendance at the Meeting will
not itself be deemed to revoke a proxy unless the stockholder gives affirmative
notice at the Meeting that the stockholder intends to revoke the proxy and vote
in person.
THE NOTICE OF MEETING, THIS PROXY STATEMENT, THE ENCLOSED PROXY CARD AND
THE COMPANY'S ANNUAL REPORT TO STOCKHOLDERS FOR THE FISCAL YEAR ENDED MARCH 31,
1997 ARE BEING MAILED TO STOCKHOLDERS ON OR ABOUT AUGUST 25, 1997. THE COMPANY
WILL, UPON WRITTEN REQUEST OF ANY STOCKHOLDER, FURNISH WITHOUT CHARGE A COPY OF
ITS ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED MARCH 31, 1997, AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WITHOUT EXHIBITS. PLEASE
ADDRESS ALL SUCH REQUESTS TO THE SECRETARY, XYVISION, INC., 101 EDGEWATER
DRIVE, WAKEFIELD, MASSACHUSETTS 01880-1291. EXHIBITS WILL BE PROVIDED UPON
WRITTEN REQUEST AND PAYMENT OF AN APPROPRIATE PROCESSING FEE.
VOTING SECURITIES AND VOTES REQUIRED
On July 31, 1997, the record date for determination of stockholders
entitled to vote at the Meeting, there were outstanding and entitled to vote an
aggregate of 14,271,415 shares of Common Stock of the Company, $.03 par value
per share (the "Common Stock"), and 235,299 shares of Series B Convertible
Preferred Stock of the Company, $1.00 par value per share (the "Series B
Stock"), constituting all of the voting stock of the Company. Holders of Common
Stock are entitled to one vote per share and holders of Series B Stock are
entitled to the number of votes equal to the number of whole shares of Common
Stock into which the Series B Stock held by such holders are then convertible
(two shares as of July 31, 1997). For the matters to be acted on at this Annual
Meeting, holders of the Common Stock and the Series B Stock (collectively, the
"Capital Stock") shall vote together as a single class.
The holders of a majority of the shares of Capital Stock issued and
outstanding and entitled to vote at the Meeting shall constitute a quorum for
the transaction of business at the Meeting. Shares of Capital Stock present in
person or represented by proxy (including shares which abstain or do not vote
withrespect to one or more of the matters presented for stockholder approval)
will be counted for purposes of determining whether a quorum exists at the
Meeting.
The affirmative vote of the holders of a plurality of the votes cast by
the holders of Capital Stock entitled to vote at the Meeting is required for
the election of directors. The affirmative vote of the holders of a majority of
the votes represented by the shares of Capital Stock outstanding on the record
date is required for approval of the amendment to the Company's Certificate of
Incorporation. The affirmative vote of the holders of a majority of the votes
represented by the shares of Capital Stock present or represented by proxy and
voting on the matter is required for the approval of the Xyvision, Inc. 1997
Stock Incentive Plan and ratification of the selection of Coopers & Lybrand
L.L.P. as the Company's independent public accountants for the current 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 will also not
be counted as votes cast or 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 plurality or a certain
percentage of the votes cast or shares voting on a matter. However, because
shares which abstain and shares represented by "broker non-votes" are
nonetheless
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<PAGE>
considered outstanding shares, abstentions and "broker non-votes" with respect
to a matter that requires the affirmative vote of a certain percentage of the
votes represented by the outstanding shares will have the same effect as a vote
against such matter.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of May 31, 1997,
with respect to the beneficial ownership of shares of Common Stock by (i) each
person known to the Company to beneficially own more than 5% of the outstanding
shares of Common Stock, (ii) the directors of the Company, (iii) the persons
listed in the Summary Compensation Table below (the "Named Executive
Officers"), and (iv) all current directors and executive officers of the
Company as a group.
<TABLE>
<S> <C> <C>
Amount and Nature
of Beneficial Ownership(1)
_______________________________________________
Name and Address of Beneficial Owner Number of Shares Percent of Class (%)(2)
_____________________________________________________ _________________ _______________________
Jeffrey L. Neuman (3) 20,038,530 69.2
c/o Tudor Trust
c/o Braverman Codron & Company
450 N. Roxbury Avenue
Los Angeles, CA 90210
James S. Saltzman (4) 2,173,900 15.2
General Partner
c/o Saltzman Partners
621 E. Germantown Pike
Plymouth Valley, PA 19401
Other Directors
_____________________________________________________
Kevin J. Duffy (5) 91,176 *
Leland S. Kollmorgen (6) 24,000 *
James L. McKenney (7) 12,000 *
Other Named Executive Officers
_____________________________________________________
Thomas H. Conway (8) 325,000 2.2
Paul J. Woods (9) 16,400 *
James G. Hickey (10) 103,820 *
Eugene P. Seneta (11) 25,224 *
James Hannigan (12) 38,000 *
All current directors and executive officers, as a 22,493,746 76.9
group (13) (9 Persons)
------------
</TABLE>
* Less than 1%
(1) The number of shares beneficially owned by each director and executive
officer is determined under rules promulgated by the Securities and
Exchange Commission (the "SEC"), and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under such
rules, beneficial ownership includes any shares as to which the individual
has sole or shared voting power or investment power and also any shares
which the individual has the right to acquire within 60 days after May 31,
1997 through the
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exercise of any stock option or other right, including upon the conversion
of Series B Stock or the Company's 6% Convertible Subordinated Debentures
due 2002 (the "Debentures"). The inclusion herein of such shares, however,
does not constitute an admission that the named stockholder is a direct or
indirect beneficial owner of such shares. Unless otherwise indicated, each
person or entity named in the table has sole voting power and investment
power (or shares such power with his or her spouse) with respect to all
shares of capital stock listed as beneficially owned by such person or
entity.
(2) Number of shares deemed outstanding includes 14,263,192 shares outstanding
as of May 31, 1997, plus any shares issuable upon conversion of Series B
Stock or Debentures 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, 1997.
(3) Based upon information provided to the Company by Mr. Neuman, includes
14,540,000 shares of Common Stock issuable upon the exercise of Common
Stock Purchase Warrants, 117,978 shares of Common Stock issuable upon
conversion of Series B Stock and 23,000 shares of Common Stock issuable
upon conversion of Debentures. Includes securities held by both Mr. Neuman
and by Tudor Trust. Mr. Neuman is the grantor, sole trustee and sole
current beneficiary of Tudor Trust. See "Certain Transactions."
(4) Includes 20,000 shares of Common Stock subject to outstanding stock
options held by Mr. Saltzman which are exercisable within the 60-day
period following May 31, 1997. Includes securities held by both Mr.
Saltzman and Saltzman Partners. Mr. Saltzman is the General Partner of
Saltzman Partners. See "Certain Transactions."
(5) Includes 90,901 shares of Common Stock subject to outstanding stock
options which are exercisable within the 60-day period following May 31,
1997.
(6) Includes 23,000 shares of Common Stock subject to outstanding stock
options which are exercisable within the 60-day period following May 31,
1997.
(7) Consists of 12,000 shares of Common Stock subject to outstanding stock
options which are exercisable within the 60-day period following May 31,
1997.
(8) Includes 300,000 shares of Common Stock subject to outstanding stock
options which are exercisable within the 60-day period following May 31,
1997.
(9) Consists of 16,400 shares of Common Stock subject to outstanding stock
options which are exercisable within the 60-day period following May 31,
1997.
(10) Consists of 103,820 shares of Common Stock subject to outstanding stock
options which are exercisable within the 60-day period following May 31,
1997.
(11) Consists of 25,224 shares of Common Stock subject to outstanding stock
options which are exercisable within the 60-day period following May 31,
1997.
(12) Consists of 38,000 shares of Common Stock subject to outstanding stock
options which are exercisable within the 60-day period following May 31,
1997.
(13) Includes an aggregate of 638,041 shares subject to outstanding stock
options which are exercisable within the 60-day period following May 31,
1997, 14,540,000 shares of Common Stock issuable upon the exercise of
Common Stock Purchase Warrants, 117,978 shares of Common Stock issuable
upon conversion of Series B Stock and 23,000 shares of Common Stock
issuable upon conversion of Debentures.
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 1999 Annual Meeting of
Stockholders, two Class II directors, whose terms expire at the 1997 Annual
Meeting of Stockholders, and two Class III directors, whose terms expire at the
1998 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, as Class II
directors, Kevin J. Duffy and Jeffrey L.
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Neuman unless the proxy is marked otherwise. Messrs. Duffy and Neuman are each
currently directors of the Company.
Each Class II director will be elected to hold office until the 2000
Annual Meeting of Stockholders (subject to the election and qualification of
his successor and to his earlier death, resignation or removal). Each of the
nominees has indicated his willingness to serve, if elected; however, if any
nominee should be unable to serve, the person acting under the proxy may vote
the proxy for a substitute nominee. The Board of Directors has no reason to
believe that any of the nominees will be unable to serve if elected.
Set forth below are the names and certain information with respect to each
director of the Company, including the nominees for Class II directors. There
are no family relationships among any of the directors and executive officers
of the Company.
CLASS II DIRECTORS
KEVIN J. DUFFY, age 42, has served as President and Chief Operating
Officer of the Company since August 1996 and as a director of the Company since
October 1996. Previously, he served as Senior Vice President and General
Manager, Xyvision Publishing Group from December 1995 to September 1996. From
April 1991 to December 1995 he served as Vice President, North American Sales.
Mr. Duffy joined the Company in June 1983.
JEFFREY L. NEUMAN, age 53, has been Chairman of the Board of Directors of
the Company since October 1996. Mr. Neuman has been a private investor since
1987.
CLASS I DIRECTOR
JAMES S. SALTZMAN, age 53, 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 III DIRECTORS
LELAND S. KOLLMORGEN, age 70, has been the President of TLK Inc., a
business consulting firm, since 1983 and is a self-employed consultant. Rear
Admiral Kollmorgen (USN, Retired) is a consultant and former Chief of Naval
Research to the United States Navy. He has been a director of the Company since
1988.
JAMES L. MCKENNEY, age 68, 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.
BOARD AND COMMITTEE MEETINGS
The Board of Directors of the Company met nine times (including by
telephone conference) during fiscal 1997. All directors attended at least 75%
of the meetings of the Board of Directors and of the committees on which they
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 the fiscal 1997. The current Audit Committee members are
Messrs. Kollmorgen, McKenney and Saltzman.
The Company 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 twice during fiscal 1997. The current Compensation Committee members are
Messrs. Kollmorgen (Chairman) and Saltzman.
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The Company has a Technology Committee of the Board of Directors which
provides recommendations to the Board regarding the Company's technology. The
Technology Committee met twice during fiscal 1997. The current Technology
Committee members are Messrs. Kollmorgen (Chairman) and McKenney.
The Company has a Nominating Committee of the Board of Directors, which
provides recommendations to the Board of Directors regarding nominees for
directorships. The Nominating Committee did not meet during fiscal 1997 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 director should submit such recommendations to
Eugene P. Seneta, Secretary of the Company, at the principal executive offices
of the Company, who will forward them to the Nominating Committee for
consideration. The current Nominating Committee members are Messrs. Saltzman
(Chairman) and Kollmorgen.
DIRECTOR 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 in person and $250 for each telephonic Board meeting in
which the director participates, and directors who are members of Committees of
the Board of Directors 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, a
non-qualified 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.
EXECUTIVE COMPENSATION
Summary Compensation
The following table sets forth certain information with respect to
compensation, for the fiscal years indicated, of each person who served as the
chief executive officer of the Company during fiscal 1997 and the Company's
four other most highly compensated executive officers during fiscal 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
_______________________ ________________________________________
FISCAL NUMBER OF SHARES ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS UNDERLYING OPTIONS COMPENSATION (2)
____________________________________ ________ ___________ _________ ____________________ _________________
<S> <C> <C> <C> <C> <C>
Kevin J. Duffy 1997 $142,327 -- 200,000 $1,573
President and Chief Operating 1996 $122,135 $15,000 10,000 $1,221
Officer 1995 $119,741 $20,000 $1,349
Thomas H. Conway (3) 1997 $130,000 - - -
Former Chairman of the Board 1996 $182,200 - - -
of Directors and Chief Executive 1995 $141,200 - - -
Officer
Paul J. Woods 1997 $127,795 - 40,000 $235
Senior Vice President and 1996 $116,768 - 4,500 $287
General Manager, Contex Group 1995 $129,165 - - $323
</TABLE>
8
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<PAGE>
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
_______________________ ________________________________________
FISCAL NUMBER OF SHARES ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS UNDERLYING OPTIONS COMPENSATION (2)
__________________________________ ________ ___________ _________ ____________________ _________________
<S> <C> <C> <C> <C> <C>
James G. Hickey 1997 $122,751 - 32,000 $1,228
Vice President, Business 1996 $120,751 $10,000 - $1,221
Development and Managing 1995 $120,751 - 25,000 $1,222
Director, Europe
James Hannigan (4) 1997 $120,000 - 100,000 $1,200
Vice President, Research and 1996 $120,000 $10,000 - $1,200
Development 1995 $119,407 - - $1,186
Eugene P. Seneta 1997 $110,011 - 40,000 -
Vice President, Chief Financial 1996 $97,384 - - $729
Officer, Treasurer and Secretary 1995 $86,032 - - $1,010
______________
</TABLE>
(1) 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 $50,000 or 10% of the total annual salary and bonus for the Named
Executive Officer.
(2) Consists of Company matching contributions to the Company's 401(k) Plan.
(3) The Company paid T.H. Conway and Associates, Inc., a management consulting
firm of which Mr. Conway is the President, directly for Mr. Conway's
services. See "Employment Contracts and Change-in-Control Arrangements."
Mr. Conway resigned as Chairman of the Board of Directors and Chief
Executive Officer of the Company in October 1996.
(4) Mr. Hannigan resigned as Vice President, Research and Development on June
4, 1997.
Option Grants
The following table sets forth certain information concerning grants of
stock options made during fiscal 1997 to each of the Named Executive Officers.
The Company granted no stock appreciation rights during fiscal 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
_________________________________________________________________________________________
NUMBER OF SHARES PERCENT OF TOTAL OPTIONS
UNDERLYING OPTIONS GRANTED TO EMPLOYEES IN EXERCISE PRICE PER
NAME GRANTED (1) FISCAL YEAR (%) SHARES($) (2) EXPIRATION DATE
__________________ ____________________ _________________________ ___________________ ________________
<S> <C> <C> <C> <C>
Kevin J. Duffy 200,000 14.4 .50 10/24/06
Thomas H. Conway - - - -
Paul J. Woods 40,000 2.9 .50 10/24/06
James G. Hickey 32,000 2.3 .50 10/24/06
James Hannigan 100,000 7.2 .50 10/24/06
Eugene P. Seneta 40,000 2.9 .50 10/24/06
_________________
</TABLE>
(1) Each option becomes exercisable in equal annual installments over a
five-year period commencing on the date of grant.
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(2) The exercise price of all options is equal to the fair market value on the
date of grant.
Fiscal Year-End Option Value Table
The following table sets forth certain information regarding the number
and value of unexercised stock options held as of March 31, 1997 by each of the
Named Executive Officers. No stock options were exercised during fiscal 1997 by
the Named Executive Officers and no stock appreciation rights were exercised
during fiscal 1997 by the Named Executive Officers or were outstanding at year
end.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
FISCAL YEAR END AT FISCAL YEAR END
_____________________________ _____________________________
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
____________________ _____________________________ _____________________________
<S> <C> <C>
Kevin J. Duffy 90,901/219,099 15,677/3,704
Thomas H. Conway 300,000/0 120,000/0
Paul J. Woods 16,400/43,600 1,938/0
James G. Hickey 103,820/53,180 17,985/4,831
James Hannigan 38,000/137,000 6,622/3,168
Eugene P. Seneta 25,224/64,776 4,625/2,644
_________________
</TABLE>
(1) Value based upon the last sales price per share ($.50) of the Company's
Common Stock on March 31, 1997 as reported through the National Quotation
Bureau Pink Sheets, less the exercise price.
AGREEMENTS WITH SENIOR EXECUTIVES
Under an employment agreement in effect during part of fiscal 1997 with
Thomas H. Conway, former Chief Executive Officer of the Company, the Company
paid T. H. Conway and Associates, Inc. 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 week. This cash compensation
was in lieu of all non-cash benefits employees of the Company normally receive
(such as health insurance benefits and paid vacation time). This agreement also
provided that Mr. Conway could employ additional members of T.H. Conway and
Associates, Inc., 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 per year
without advance approval of the Board of Directors. In fiscal 1997, the Company
paid $130,000 to T.H. Conway and Associates, Inc. for services of Mr. Conway
and an aggregate of $1,141 for reimbursement of expenses. In addition, certain
members 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, Inc. in connection
with the performance of services to the Company except for fraud, malfeasance
or gross negligence. Mr. Conway resigned as Chief Executive Officer of the
Company in October 1996.
In 1990, the Company entered into an agreement with James G. Hickey
entitling him 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
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full. The Program remains in effect for so long as Mr. Hickey is 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 by the Company
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 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.
CERTAIN TRANSACTIONS
Thomas H. Conway, former Chief Executive Officer of the Company, is a
general partner of CR Management LP, which has a fifty percent equity interest
in Document Management Solutions, Inc., a systems integration services company
serving the publishing industry. Tudor Trust, of which Jeffrey L. Neuman,
Chairman of the Board of Directors of the Company, is the grantor, sole trustee
and sole current beneficiary, also has a fifty percent equity interest in
Document Management Solutions, Inc. The Company paid Document Management
Solutions, Inc. $64,632 and $260,313 in fiscal 1996 and 1997, respectively, for
integration services.
On June 30, 1992, the Company obtained a $2,000,000 line of credit with
Tudor Trust. Jeffrey L. Neuman, Chairman of the Board of Directors of the
Company, is the grantor, sole trustee and sole current beneficiary of Tudor
Trust. 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. On
September 28, 1993, the Company and Tudor Trust amended the line of credit to,
among other things, increase the amount available under the line of credit to
$2,500,000, reduce the annual interest rate from 13% to 10% and extend the line
of credit from June 30, 1994 to June 30, 1995. As consideration for such
amendment, the Company, among other things, issued Common Stock and a series of
Common Stock Purchase Warrants to Tudor Trust. On December 3, 1993, the Company
and Tudor Trust entered into an additional amendment to the line of credit to
increase the amount available under the line of credit to $3,000,000. As
consideration for such amendment, the Company, among other things, issued
Common Stock and a series of Common Stock Purchase Warrants to Tudor Trust. On
February 29, 1996, the Company and Tudor Trust entered into an additional
amendment to the line of credit to increase the amount available under the line
of credit to $4,000,000 and to extend the term of the line of credit to
December 31, 1997. As consideration for such amendment, the Company, among
other things, issued a series of Common Stock Purchase Warrants to Tudor Trust.
Late in fiscal 1996, management of the Company concluded that, due
principally to the significant losses from operations in the third and fourth
quarters of fiscal 1996 (which amounted to approximately $1.8 million and $2.5
million, respectively), the Company's $4,000,000 credit line would be
insufficient to finance the Company's cash needs during the first quarter of
fiscal 1997. Accordingly, after investigating a number of alternative sources
of financing, on May 31, 1996, the Company and Tudor Trust entered into an
additional amendment to the line of credit to, among other things, (i) increase
the maximum loan amount to $5,000,000, (ii) reduce the interest rate on the
line of credit from 10% to 8% per annum, (iii) eliminate any borrowing
covenants or conditions that would prevent the Company from accessing the full
$5,000,000 of available credit, and (iv) eliminate the requirement for the
issuance of additional warrants to Tudor Trust under the line of credit (which
were issuable on a quarterly basis). In consideration therefor, the Company
issued to Tudor Trust warrants for the purchase of an aggregate of 10,000,000
shares of Common Stock of the Company at an exercise price of $.18 per share
(representing the fair market value of the Common Stock of the Company as of
the date of issuance). In connection with this line of
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credit amendment, Tudor Trust exercised certain outstanding warrants for the
purchase of 2,092,500 shares of Common Stock of the Company for an aggregate
purchase price of $200,000.
On November 22, 1996, the Company and Tudor Trust entered into an
additional amendment to the line of credit to, among other things, increase the
maximum loan amount thereunder to $6,000,000. Such amendment also provides that
Tudor Trust shall have sole discretion to decide whether or not to make any and
all advances of funds in excess of $5,000,000, and that Tudor Trust shall have
the right to refuse to make any advances of funds in excess of $5,000,000 for
any reason or no reason.
In addition, the Company has begun negotiations with Tudor Trust to
further amend the line of credit to permit increased borrowing. There can be no
assurance, however, that such negotiations will be successful or that increased
borrowings will be available under the Company's line of credit.
On September 30, 1996, the Company entered into an exchange agreement with
Tudor Trust, Saltzman Partners, and certain other parties relating to the
Company's 4% Promissory Notes (the "4% Notes") held by such parties. Jeffrey L.
Neuman, the grantor, sole trustee and sole current beneficiary of Tudor Trust,
is the Chairman of the Board of Directors of the Company. James S. Saltzman,
the General Partner of Saltzman Partners, is a director of the Company. Tudor
Trust and Saltzman Partners held 4% Notes in the aggregate principal amounts of
$2,378,500 and $1,087,500, respectively, which they exchanged upon the
following terms. Under the terms of the exchange agreement, the Company issued
to holders of its 4% Notes in exchange for the delivery of its 4% Notes for
cancellation such number of shares of Common Stock of the Company as was equal
to the principal amount of the 4% Notes exchanged divided by $2.00 (any accrued
but unpaid interest was paid in cash at the time of such exchange). Pursuant to
the exchange agreement, Tudor Trust received 1,189,250 shares of Common Stock
and $23,785 in accrued interest, and Saltzman Partners received 543,750 shares
of Common Stock and $10,875 in accrued interest.
On October 7, 1996, the Company entered into an exchange agreement with
Tudor Trust on the same terms as described in the previous paragraph pursuant
to which the Company issued 15,000 shares of Common Stock and paid $22.82 in
accrued interest to Tudor Trust in exchange for the delivery for cancellation
of a 4% Note in the principal amount of $30,000 held by Tudor Trust.
On September 30, 1996, the Company entered into an exchange agreement with
Tudor Trust and certain other parties relating to the Company's 6% Convertible
Subordinated Debentures due 2002 (the "Debentures") held by such parties. Tudor
Trust held Debentures in the aggregate principal amount of $1,970,000, which it
exchanged upon the following terms. Under the terms of the exchange agreement,
the Company issued to holders of its Debentures in exchange for the delivery of
its Debentures for cancellation such number of shares of Common Stock of the
Company as was equal to the sum of the principal amount of the Debentures
exchanged plus the accrued interest thereon, divided by $3.33. Pursuant to the
exchange agreement, Tudor Trust received 783,462 shares of Common Stock.
APPROVAL OF AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO
EFFECT ONE-FOR-FOUR REVERSE SPLIT AND TO CHANGE AUTHORIZED NUMBER OF SHARES OF
COMMON STOCK
The Board of Directors has adopted a resolution declaring the advisability
of, and submitting to the stockholders for approval, a proposal to amend the
Company's Certificate of Incorporation (the "Proposed Amendment") to (i) effect
a reverse split of the Company's Common Stock, pursuant to which each four
shares of Common Stock will be automatically converted into one share without
any action on the part of the stockholder (the "Reverse Split") and (ii) change
the authorized number of shares of Common Stock from 50,000,000 to 25,000,000
shares. Any fractional shares of Common Stock which result from the Reverse
Split will be rounded up to a full share. The Reverse Split will become
effective as of 5:00 P.M., Boston time (the "Effective Date"), on the date that
the certificate of amendment to the Company's Certificate of Incorporation
giving effect to the Proposed Amendment is filed with the Secretary of State of
the State of Delaware.
If for any reason the Board of Directors deems it advisable, the Proposed
Amendment may be abandoned at any time before the Effective Date, whether
before or after the Meeting (even if such proposal has been approved by the
stockholders).
THE BOARD OF DIRECTORS BELIEVES THE ADOPTION OF THE PROPOSED AMENDMENT IS
IN THE BEST INTERESTS OF THE
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COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
PROPOSED AMENDMENT.
Effect of the Reverse Split
As a result of the Reverse Split, the number of whole shares of Common
Stock held by stockholders of record as of the close of business on the
Effective Date will automatically, without any action required by the
stockholders, be equal to the number of shares of Common Stock held immediately
prior to the close of business on the Effective Date divided by four, with any
fractional share which might result from the Reverse Split rounded up to a full
share. The Reverse Split will not affect a stockholder's percentage ownership
interest in the Company or proportional voting power, except for minor
differences resulting from the rounding up of fractional shares. The rights and
privileges of the holders of shares of Common Stock will be unaffected by the
Reverse Split. The par value of the Common Stock will remain at $.03 per share
following the Effective Date of the Reverse Split, and the number of shares of
Common Stock issued will be reduced. As a consequence, the aggregate par value
of the issued Common Stock will be reduced. In addition, the number of
authorized but unissued shares of Common Stock will be increased by the Reverse
Split, the issuance of which may have the effect of diluting the earnings per
share and book value per share. as well as the stock ownership and voting
rights, of outstanding Common Stock, and may have an anti-takeover effect.
Stockholders have no right under Delaware law or under the Company's
Certificate of Incorporation or By-laws to dissent from the Reverse Split or to
dissent from the rounding up to a full share of any fractional share resulting
from the Reverse Split.
The Common Stock is currently registered under Section 12(g) of the
Exchange Act and as a result, the Company is subject to the periodic reporting
and other requirements of the Exchange Act. The Reverse Split will not affect
the registration of the Common Stock under the Exchange Act, and the Company
has no current intention of terminating its registration under the Exchange
Act.
Upon consummation of the Reverse Split, the total number of shares
currently reserved for grants of stock options and all stock options previously
granted would be decreased proportionately. The cash consideration payable per
share upon exercise of the stock options would be increased proportionately.
Similarly, the total number of shares issuable upon exercise of warrants
granted by the Company would be decreased proportionately and the cash
consideration payable per share upon exercise of the warrants would increase
proportionately. Finally, the number of shares of Common Stock issuable upon
conversion of the Series B Stock would be decreased proportionately.
Purpose of the Reverse Split
The Board of Directors is submitting the Reverse Split for approval of the
stockholders primarily because it believes the Reverse Split may increase the
trading price of the Common Stock and thereby enhance the likelihood of
generating interest in the Company's Common Stock by more investors and members
of the securities brokerage industry. The Board of Directors also believes the
Reverse Split may enhance the likelihood for success of any acquisition or
financing efforts which might be undertaken by the Company. The Company
believes that brokerage firms and institutional investors might be more willing
to evaluate the Company's securities as a possible investment opportunity for
their clients and to act as a market maker in the Company's securities if the
price range for the Common Stock were higher. The Board of Directors believes
that additional interest by the investment community in the Company's Common
Stock might result in a more liquid trading market for the stock and that
potential acquisition candidates might be more willing to accept shares of
Common Stock if the trading prices were in a higher range and the market for
the Common Stock was believed to be less volatile. Although the Board of
Directors believes that its ability to complete acquisitions or conduct
financings might be benefited by the proposed Reverse Split, there can be no
assurance that this will occur. At the current time the Company has no
agreements for any acquisitions or financings, other than as described in this
Proxy Statement.
The Board of Directors further believes that low trading prices of the
Company's Common Stock may have an adverse impact upon the efficient operation
of the trading market in the securities. In particular, brokerage firms often
charge a greater percentage commission on low-priced shares than that which
would be charged on a transaction in the same dollar amount of securities with
a higher per share price. A number of brokerage firms will not recommend
purchases of low-priced stock to their clients or make a market in such shares,
which tendencies
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may adversely affect the Company. Stockholders should note that the effect of
the Reverse Split upon the market prices for the Company's Common Stock cannot
be accurately predicted. In particular, there is no assurance that prices for
shares of the Common Stock after the Reverse Split will be four times the
prices for shares of the Common Stock immediately prior to the Reverse Split.
Furthermore, there can be no assurance that the proposed Reverse Split will
achieve the desired results which have been outlined above, nor can there be
any assurance that the Reverse Split will not adversely impact the market price
of the Common Stock or, alternatively, that any increased price per share of
the Common Stock immediately after the proposed Reverse Split will be sustained
for any prolonged period of time. In addition, the Reverse Split may have the
effect of creating odd lots of stock for some stockholders and such odd lots
may be more difficult to sell or have higher brokerage commissions associated
with the sale of such odd lots.
Exchange of Stock Certificates
As soon as practicable after the Effective Date, the Company intends to
require stockholders to exchange their stock certificates for new certificates
representing the number of whole shares of Common Stock into which their shares
of Common Stock have been converted as a result of the Reverse Split.
Stockholders will be furnished with the necessary materials and instructions
for the surrender and exchange of stock certificates at the appropriate time by
the Company's transfer agent. Stockholders will not be required to pay a
transfer or other fee in connection with the exchange of certificates.
STOCKHOLDERS SHOULD NOT SUBMIT ANY CERTIFICATES TO THE TRANSFER AGENT UNTIL
REQUESTED TO DO SO.
Federal Income Tax Consequences of the Reverse Split
The following description of federal income tax consequences of the
Reverse Split is based upon the Internal Revenue Code of 1986, as amended, the
applicable Treasury Regulations promulgated thereunder, judicial authority and
current administrative rulings and practices as in effect on the date of this
Proxy Statement. The Company has not sought and will not seek an opinion of
counsel or a ruling from the Internal Revenue Service regarding the federal
income tax consequences of the Reverse Split. This discussion is for general
information only and does not discuss consequences which may apply to special
classes of taxpayers (e.g., non-resident aliens, broker-dealers or insurance
companies). Stockholders are urged to consult their own tax advisors to
determine the particular consequences to them.
The exchange of four shares of Common Stock for one share of Common Stock
pursuant to the Reverse Split will not result in recognition of gain or loss.
The holding period of the shares of Common Stock acquired in the Reverse Split
will include the stockholder's holding period for the shares of Common Stock
exchanged therefor, provided that the shares of Common Stock were held as a
capital asset. The adjusted basis of the shares of Common Stock acquired in the
Reverse Split will be the same as the adjusted basis of the shares of Common
Stock exchanged therefor.
Change in Authorized Common Stock
The Proposed Amendment will change the authorized number of shares of
Common Stock from 50,000,000 to 25,000,000 shares. The Company's 3,000,000
shares of authorized Preferred Stock will not be affected by the Proposed
Amendment. The Board of Directors believes that the proposed change in the
authorized number of shares of Common Stock will not adversely affect the
Company's ability to continue to honor its outstanding commitments and to
provide shares for issuance in connection with future financings, debt exchange
transactions and other general corporate purposes. Except for the shares of
Common Stock issuable under the Company's stock option and stock benefit plans
or upon the conversion of outstanding warrants and shares of Series B Stock,
there is no existing plan, understanding or agreement for the issuance of any
shares of Common Stock, although the Company continues to negotiate with as
many debtholders as possible with respect to potential exchange transactions
that may involve the issuance of Common Stock.
APPROVAL OF THE XYVISION, INC. 1997 STOCK INCENTIVE PLAN
Stockholders are being asked to approve the Xyvision, Inc. 1997 Stock
Incentive Plan (the "1997 Plan"). Subject to adjustment in the event of stock
splits and other similar events, awards may be made under the 1997
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Plan for up to 2,000,000 shares of the Company's Common Stock. If the Proposed
Amendment is approved by the stockholders at the Meeting, the number of shares
of Common Stock available for issuance under the 1997 Plan will be decreased
proportionately.
THE BOARD OF DIRECTORS BELIEVES THE APPROVAL OF THE 1997 PLAN IS IN THE
BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" THE APPROVAL OF THE 1997 PLAN.
SUMMARY OF THE 1997 PLAN
The following summary of the 1997 Plan is qualified in its entirety by
reference to the plan, a copy of which may be obtained by making a written
request to the Secretary of the Company.
Description of Awards
The 1997 Plan provides for the grant of incentive stock options,
nonstatutory stock options, restricted stock awards and other stock-based
awards, including the grant of shares based upon certain conditions, the grant
of securities convertible into Common Stock and the grant of stock appreciation
rights (collectively "Awards").
Incentive Stock Options and Nonstatutory Stock Options. Optionees receive
the right to purchase a specified number of shares of Common Stock at a
specified option price and subject to such other terms and conditions as are
specified in connection with the option grant. The 1997 Plan permits the Board
to determine the manner of payment of the exercise price of options, including
through payment by cash, check or in connection with a "cashless exercise"
through a broker, by surrender to the Company of shares of Common Stock, by
delivery to the Company of a promissory note, or by any other lawful means.
Restricted Stock Awards. Restricted Stock Awards entitle recipients to
acquire shares of Common Stock, subject to the right of the Company to
repurchase all or part of such shares from the recipient in the event that the
conditions specified in the applicable Award are not satisfied prior to the end
of the applicable restriction period established for such Award.
Other Stock-Based Awards. Under the 1997 Plan, the Board has the right to
grant other Awards based upon the Common Stock having such terms and conditions
as the Board may determine, including the grant of shares based upon certain
conditions, the grant of securities convertible into Common Stock and the grant
of stock appreciation rights.
Eligibility to Receive Awards
Officers, employees, directors, consultants and advisors of the Company
and its subsidiaries will be eligible to receive Awards under the 1997 Plan,
including four executive officers and approximately 160 other employees of the
Company. The maximum number of shares with respect to which an Award may be
granted to any participant under the 1997 Plan may not exceed 500,000 shares
per calendar year. If the Proposed Amendment is approved by the stockholders at
the Meeting, the maximum number of shares with respect to which an Award may be
granted to any participant under the 1997 Plan will be decreased
proportionately.
The granting of Awards under the 1997 Plan is discretionary, and the
Company cannot now determine the number or type of Awards to be granted in the
future to any particular person or group.
Administration
The 1997 Plan is administered by the Company's Board of Directors. The
Board has the authority to adopt, amend and repeal the administrative rules,
guidelines and practices relating to the 1997 Plan and to interpret the
provisions of the 1997 Plan. Pursuant to the terms of the 1997 Plan, the Board
of Directors may delegate authority under the 1997 Plan to one or more
committees of the Board, and subject to certain limitations, to one or more
executive officers of the Company. The Board has authorized the Compensation
Committee to administer certain aspects of the 1997 Plan, including the
granting of options to executive officers. Subject to any applicable
limitations contained in the 1997 Plan, the Board of Directors, the
Compensation Committee, or any other committee or executive officer to whom the
Board delegates authority, as the case may be, selects the recipients of
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Awards and determines (i) the number of shares of Common Stock covered by
options and the dates upon which such options become exercisable, (ii) the
exercise price of options, (iii) the duration of options, and (iv) the number
of shares of Common Stock subject to any restricted stock or other stock-based
Awards and the terms and conditions of such Awards, including conditions for
repurchase, issue price and repurchase price.
The Board of Directors is required to make appropriate adjustments in
connection with the 1997 Plan and any outstanding Awards to reflect stock
dividends, stock splits and certain other events. In the event of a merger,
liquidation or other Acquisition Event (as defined in the 1997 Plan), the Board
of Directors is authorized to provide for outstanding Options or other
stock-based Awards to be assumed or substituted for, to accelerate the Awards
to make them fully exercisable prior to consummation of the Acquisition Event
or to provide for a cash-out of the value of any outstanding options. If any
Award expires or is terminated, surrendered, canceled or forfeited, the unused
shares of Common Stock covered by such Award will again be available for grant
under the 1997 Plan.
Amendment or Termination
No Award may be made under the 1997 Plan after the tenth anniversary of
the adoption of the plan by the Board of Directors, but Awards previously
granted may extend beyond that date. The Board of Directors may at any time
amend, suspend or terminate the 1997 Plan, except that no Award designated as
subject to Section 162(m) of the Code by the Board of Directors after the date
of such amendment shall become exercisable, realizable or vested (to the extent
such amendment was required to grant such Award) unless and until such
amendment shall have been approved by the Company's stockholders.
Certain Federal Income Tax Consequences
The following discussion of the material United States federal income tax
consequences of the issuance and exercise of options to the optionee and the
Company does not purport to be a complete description of federal tax aspects of
the 1997 Plan.
Incentive Options. The grant of an incentive option does not produce
taxable income to the optionee or a deduction to the Company. If an incentive
option is exercised while the optionee is employed or within three months
following the termination of employment (twelve months in the case of
termination of employment because of permanent disability), or after the
optionee's death if death occurs during the foregoing periods, exercise of the
option will in general also not produce taxable ordinary income to the optionee
or a deduction to the Company. For alternative minimum tax purposes, however,
such exercise will increase the optionee's "alternative minimum taxable income"
and may result in a liability to pay the alternative minimum tax.
To the extent that the aggregate fair market value of the stock
(determined at time of grant) with respect to which incentive options granted
under all option plans of the Company and its subsidiary corporations are
exercisable for the first time by an individual during any calendar year
exceeds $100,000, such options will be treated as nonstatutory stock options.
If stock acquired upon the exercise of an incentive option is disposed of
more than two years after the date the option is granted and one year after the
date the option is exercised, gain or loss recognized upon disposition of the
stock will be capital gain or loss. If these one-year and two-year holding
period requirements are not satisfied, the optionee will realize ordinary
income at the time of disposition of the stock. (A disposition giving rise to
such ordinary income is referred to as "disqualifying disposition.") Upon a
disqualifying disposition, an optionee will generally realize ordinary income
equal to the lesser of (a) the difference between fair market value of the
stock on the date of exercise and the exercise price, or (b) the difference
between the sales price of the shares and the exercise price, and the Company
will be entitled to a deduction equal to such amount. Any additional gain
recognized in the disposition will be a capital gain for which no deduction
will be available to the Company.
If an optionee exercises an incentive option in whole or in part by
surrendering previously acquired stock, no gain or loss is recognized on the
exchange of the previously acquired shares unless the exchange results in a
disqualifying disposition of the shares surrendered. Such a disqualifying
disposition may result in the realization of ordinary income.
Nonstatutory Options. The grant of a nonstatutory option does not produce
taxable income to the optionee or a deduction to the Company. An optionee
exercising a nonstatutory option recognizes ordinary income in the
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amount of the difference between the fair market value of the shares at the
time of exercise and the exercise price of the shares, and the Company is
entitled to a corresponding deduction. An optionee will have a basis in the
shares acquired upon exercise of the option equal to the exercise price plus
ordinary income recognized upon exercise of the option. Upon selling the
shares, the optionee will recognize a capital gain or loss equal to the
difference between the sale price of the shares and the optionee's basis in the
shares. The capital gain or loss will be a long-term gain or loss if the shares
are held more than one year from the date of exercise.
The Company will have a withholding obligation with respect to any
ordinary income recognized by an optionee.
If an optionee exercises a nonstatutory option by surrendering previously
acquired stock, no gain or loss is recognized on the exchange for an equivalent
number of new shares. The optionee will recognize ordinary income, and the
Company will be entitled to a corresponding deduction, in general equal to the
fair market value of any new shares received in excess of the number of
previously acquired shares surrendered in the exchange.
Surrender of Options. If an optionee surrenders all or any portion of an
option in exchange for cash or stock, the optionee realizes ordinary income
subject to withholding (and the Company is in general entitled to a deduction)
equal to the amount of cash and the fair market value of the stock received.
REASONS FOR STOCKHOLDER APPROVAL
The 1997 Plan has been designed so that options granted under the plan
will qualify as performance-based compensation and, accordingly, not be subject
to the deduction limit imposed by Section 162(m) of the Code. However, in order
to qualify as performance-based compensation, and thereby ensure the federal
tax deductibility of options granted under the 1997 Plan, stockholder approval
of the plan at the Meeting is required. If the stockholders do not vote to
approve the 1997 Plan, the plan will not be effective and the Company will not
grant any options or make any stock-based awards under the plan.
RATIFICATION OF THE APPOINTMENT 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 Meeting, the
Board of Directors will reconsider its selection of Coopers & Lybrand L.L.P.
Representatives of Coopers & Lybrand L.L.P. are expected to be present at
the 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.
GENERAL
OTHER MATTERS
The Board of Directors knows of no other business which will be presented
for consideration at the Meeting other than that described above. However, if
any other business should come before the Meeting, it is the intention of the
persons named in the enclosed Proxy to vote, or otherwise act, in accordance
with their best judgment on such matters.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Any proposal that a stockholder intends to present at the 1998 Annual
Meeting of Stockholders must be submitted to the Secretary of the Company at
its principal executive offices, 101 Edgewater Drive, Wakefield, Massachusetts,
01880-1291, no later than April 27, 1998 in order to be considered for
inclusion in the proxy statement relating to that meeting.
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and
holders of more than 10% of the Company's Common Stock ("Reporting Persons") to
file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership of Common Stock and other equity securities
of the Company. Based solely on its review of copies of reports filed by the
Reporting Persons furnished to the Company, the Company believes that during
the last fiscal year the Reporting Persons complied with all Section 16(a)
filing requirements.
COSTS OF SOLICITATION
The Company will bear the costs of soliciting proxies. In addition to
solicitations by mail, the Company's directors, officers and regular employees
may, without additional remuneration, solicit proxies by telephone, facsimile
and personal interviews. The Company will also request brokerage houses,
custodians, nominees and fiduciaries to forward copies of the proxy material to
those persons for whom they hold shares and request instructions for voting the
Proxies. The Company will reimburse such brokerage houses and other persons for
their reasonable expenses in connection with this distribution. Georgeson &
Company Inc. 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 $7,000
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.
By Order of the Board of Directors,
/s/ Eugene P. Seneta
Eugene P. Seneta, Secretary
August 25, 1997
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING. WHETHER
OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, SIGN, DATE, AND RETURN
THE ENCLOSED PROXY CARD IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION IS
APPRECIATED.
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XYVISION, INC.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 25, 1997
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF THE COMPANY
AND SHOULD BE RETURNED AS SOON AS POSSIBLE
The undersigned, having received notice of the Annual Meeting of
Stockholders and the Board of Directors' proxy statement therefor, and revoking
all prior proxies, hereby appoint(s) Eugene P. Seneta and Patrick J. Rondeau,
and each of them, attorneys or attorney of the undersigned (with full power of
substitution in them and each of them) for and in the name(s) of the
undersigned to attend the Annual Meeting of Stockholders of XYVISION, INC. (the
"Company") to be held on Thursday, September 25, 1997 at 10:00 a.m. at the
offices of the Company, 101 Edgewater Drive, Wakefield, Massachusetts, and any
adjournments thereof, and there to vote and act upon the following matters in
respect of all shares of stock of the Company which the undersigned may be
entitled to vote or act upon, with all the powers the undersigned would possess
if personally present.
In their discretion, the proxy holders are authorized to vote upon such
other matters as may properly come before the meeting or any adjournments
thereof. 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, this proxy will be voted as recommended by the Board of Directors.
Attendance of the undersigned at the meeting or at any adjournment thereof will
not be deemed to revoke this proxy unless the undersigned shall revoke this
proxy in writing.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO
COMPLETE, DATE, SIGN AND RETURN THIS PROXY IN THE ACCOMPANYING ENVELOPE.
A VOTE "FOR" BOTH DIRECTOR NOMINEES AND A VOTE "FOR" EACH OF PROPOSAL
NUMBERS 2, 3 AND 4 IS RECOMMENDED BY THE BOARD OF DIRECTORS
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING AND ANY ADJOURNMENT
THEREOF.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
BY THE UNDERSIGNED STOCKHOLDER(S). IF NO OTHER INDICATION IS MADE, THE PROXIES
SHALL VOTE "FOR" BOTH DIRECTOR NOMINEES AND "FOR" EACH OF PROPOSAL NUMBERS 2, 3
AND 4.
1. To elect the following nominees for Class II Director to serve for the
ensuing three years (except as marked below):
Nominees: Kevin J. Duffy
Jeffrey L. Neuman
[] FOR [] WITHHOLD
both nominees
(except as marked below)
(Instruction: To withhold a vote for an individual nominee, write the
name of such nominee in the space provided below. Your shares will be
voted for the remaining nominee.)
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<PAGE>
<PAGE>
2. To approve the amendment to the Company's Certificate of Incorporation to
effect a one-for-four reverse split of the Common Stock and to change the
number of authorized shares of Common Stock from 50,000,000 to 25,000,000.
[] FOR [] AGAINST [] ABSTAIN
3. To approve the Xyvision, Inc. 1997 Stock Incentive Plan.
[] FOR [] AGAINST [] ABSTAIN
4. To ratify the appointment of Coopers & Lybrand L.L.P. as the Company's
independent public accountants for the current year.
[] FOR [] AGAINST [] ABSTAIN
PLEASE MARK YOUR VOTES AS INDICATED IN THIS EXAMPLE [] [x].
<TABLE>
<S> <C> <C> <C>
MARK HERE MARK HERE IF
FOR ADDRESS YOU PLAN TO
CHANGE AND [] ATTEND THE []
NOTE AT LEFT MEETING
</TABLE>
Dated:______________________________________, 1997
_________________________________________
Signature
_________________________________________
Signature if held jointly
NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS HEREON.
WHEN SHARES ARE HELD BY JOINT OWNERS, BOTH SHOULD
SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE
FULL TITLE AS SUCH. IF A CORPORATION, PLEASE SIGN
IN FULL CORPORATE NAME BY AUTHORIZED OFFICER,
GIVING FULL TITLE. IF A PARTNERSHIP, PLEASE SIGN
IN PARTNERSHIP NAME BY AUTHORIZED PERSON, GIVING
FULL TITLE.
22
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