<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
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 [] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[][x] Definitive Proxy Statement
[] Definitive Additional Materials
[] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
XYVISION, INC.
_____________________________________________________________________ __
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
_____________________________________________________________________ _____
(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 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(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):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[] 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 previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
XYVISION, INC.
30 New Crossing Road
Reading, Massachusetts 01867-3254
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 9, 1999
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 9, 1999 at 10:00 a.m. at the offices of the Company, 30 New
Crossing Road, Reading, Massachusetts (the "Meeting") for the purpose of
considering and voting upon the following matters:
1. To elect one Class I Director for the ensuing three years; and
2. 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
29, 1999 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, 30 New Crossing Road, Reading,
Massachusetts and will be available at the Meeting.
A copy of the Company's Annual Report to Stockholders for the fiscal year
ended March 31, 1999, 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,
Wendy Darland, Secretary
August 12, 1999
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE PROMPTLY COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE ACCOMPANYING ENVELOPE. NO
POSTAGE NEED BE AFFIXED IF THE PROXY IS MAILED IN THE UNITED STATES.
<PAGE>
XYVISION, INC.
30 New Crossing Road
Reading, Massachusetts 01867-3254
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 9, 1999
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 9, 1999 at 10:00 a.m. at the offices of the Company, 30
New Crossing Road, Reading, Massachusetts 01867-3254 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 AND THE
COMPANY'S ANNUAL REPORT TO STOCKHOLDERS FOR THE FISCAL YEAR ENDED MARCH 31,
1999 ARE FIRST BEING SENT OR GIVEN TO STOCKHOLDERS ON OR ABOUT AUGUST 12, 1999.
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, 1999, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WITHOUT
EXHIBITS. PLEASE ADDRESS ALL SUCH REQUESTS TO THE SECRETARY, XYVISION, INC., 30
NEW CROSSING ROAD, READING, MASSACHUSETTS 01867-3254. EXHIBITS WILL BE PROVIDED
UPON WRITTEN REQUEST AND PAYMENT OF AN APPROPRIATE PROCESSING FEE.
All share numbers in this Proxy Statement have been adjusted to give
effect to the one-for-five reverse split of the Common Stock that occurred in
October 1998.
VOTING SECURITIES AND VOTES REQUIRED
On July 29, 1999, the record date for determination of stockholders
entitled to vote at the Meeting, there were outstanding and entitled to vote an
aggregate of 2,852,701 shares of Common Stock of the Company, $.03 par value
per share (the "Common Stock"), 234,977 shares of Series B Convertible
Preferred Stock of the Company, $1.00 par value per share (the "Series B
Stock"), and 175,000 shares of Series C Convertible Preferred Stock of the
Company, $.01 par value per share (the "Series C Stock"), constituting all of
the voting stock of the Company. Holders of Common Stock are entitled to one
vote per share, 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 (2/5 of a share as of July 29,
1999) and holders of Series C Stock are entitled to the number of votes equal
to the number of whole shares of Common Stock into which the Series C Stock
held by such holders are then convertible (10 shares as of July 29, 1999). For
the matters to be acted on at the Meeting, holders of the Common Stock, the
Series B Stock and the Series C 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
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
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.
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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 (such as the matter being voted on at the Meeting) that requires the
affirmative vote of a plurality or a certain percentage of the votes cast or
shares voting on a matter.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of May 31, 1999,
with respect to the beneficial ownership of shares of Common Stock, Series B
Stock and Series C Stock by (i) each person known to the Company to
beneficially own more than 5% of the outstanding shares of any class of Capital
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> <C> <C> <C> <C>
AMOUNT AND NATURE AMOUNTAND NATURE AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP OF BENEFICIAL OWNERSHIP OF BENEFICIAL
OWNERSHIP
OF COMMON STOCK OF SERIES B STOCK OF SERIES C STOCK
_________________________________ __________________________ ___________________
PERCENT NUMBER PERCENT
NAME AND ADDRESS OF NUMBER OF OF NUMBER PERCENT OF OF OF
BENEFICIAL OWNER SHARES(1) CLASS(2) OF SHARES CLASS SHARES CLASS
______________________________________ ____________ _______ ___________ ____ _______ ___
5% STOCKHOLDERS
Jeffrey L. Neuman 3,119,120 (3) 67.4% 58,989 25.1% 175,000 100%
Tudor Trust u/d/t
December 12, 1997
450 N. Roxbury Avenue
Los Angeles, CA 90210
James S. Saltzman 475,097(4) 16.5% 46,686 19.9% 0 *
c/o Saltzman Partners
621 E. Germantown Pike
Plymouth Valley, PA 19401
JTH Associates 65,141(5) 2.3% 25,758 11.0% 0 *
400 Fifth Avenue South, Suite 305
Naples, FL 33940
Gerlach & Co. 5,847(6) * 14,618 6.2% 0 *
111 Wall Street, 8th Floor
New York, NY 10043
Lancer Enterprises 5,151(7) * 12,879 5.5% 0 *
Largo della Fontanella di Borghese 19
00186 Rome Italy
United Mineworkers of America 5,070(8) * 12,675 5.4% 0 *
One Financial Center
Boston, MA 02111
OTHER DIRECTORS
Kevin J. Duffy 41,600(9) 1.4% 0 * 0 *
Leland S. Kollmorgen 4,800(10) * 0 * 0 *
OTHER NAMED EXECUTIVE OFFICERS
Michael S. Borin 9,300(11) * 0 * 0 *
Mark LeBlanc 5,000(12) * 0 * 0 *
Carol S. Bumbaca 7,604(13) * 0 * 0 *
Gerald T. Ulbricht 6,100(14) * 0 * 0 *
All current directors and executive 3,668,621(15) 77.7% 105,675 45.0% 175,000 100%
officers, as a group (9 Persons)
</TABLE>
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(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 currently or within 60 days
after May 31, 1999 through the exercise of any stock option or other
right, including upon the conversion of Series B Stock, Series C Stock or
the Company's 6% Convertible Subordinated Debentures due 2002 (the
"Debentures"). Any references in these footnotes to options, warrants or
other securities held by a person or entity refers only to options,
warrants or other securities currently exercisable or exercisable within
60 days after May 31, 1999. The inclusion herein of 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 of Common Stock deemed outstanding includes 2,852,701
shares outstanding as of May 31, 1999, plus any shares issuable upon
conversion of Series B Stock or Series C Stock or subject to options or
warrants held by the person or entity in question.
(3) Based upon information provided to the Company by Tudor Trust, includes
23,595 shares of Common Stock issuable upon conversion of Series B Stock
and 1,750,000 shares of Common Stock issuable upon conversion of Series C
Stock. 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 18,674 shares of Common Stock issuable upon conversion of Series B
Stock and 4,000 shares of Common Stock subject to outstanding stock
options. Consists of securities held by both Mr. Saltzman and Saltzman
Partners. Mr. Saltzman is the General Partner of Saltzman Partners.
(5) Includes 10,303 shares of Common Stock issuable upon conversion of Series B
Stock.
(6) Consists of 5,847 shares of Common Stock issuable upon conversion of Series
B Stock.
(7) Consists of 5,151 shares of Common Stock issuable upon conversion of Series
B Stock.
(8) Consists of 5,070 shares of Common Stock issuable upon conversion of Series
B Stock.
(9) Consists of 41,600 shares of Common Stock subject to outstanding stock
options.
(10) Includes 4,600 shares of Common Stock subject to outstanding stock
options. Includes securities held by both Mr. Kollmorgen and a Profit
Share Plan for Mr. Kollmorgen.
(11) Consists of 9,300 shares of Common Stock subject to outstanding stock
options.
(12) Consists of 5,000 shares of Common Stock subject to outstanding stock
options.
(13) Consists of 7,604 shares of Common Stock subject to outstanding stock
options.
(14) Consists of 6,100 shares of Common Stock subject to outstanding stock
options.
(15) Includes an aggregate of 74,204 shares subject to outstanding stock
options, 42,269 shares of Common Stock issuable upon conversion of Series
B Stock and 1,750,000 shares of Common Stock issuable upon conversion of
Series C 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 1999 Annual Meeting of
Stockholders, two Class II directors, whose terms expire at the 2000 Annual
Meeting of Stockholders, and one Class III director, whose term expires at the
2001 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 I
director, James S. Saltzman, the director nominee named below, unless the proxy
is marked otherwise. Mr. Saltzman is currently a director of the Company.
The Class I director will be elected to hold office until the 2002 annual
meeting of stockholders (subject to the election and qualification of his
successor and to his earlier death, resignation or removal). The nominee has
indicated his willingness to serve, if elected; however, if the 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 the
nominee will be unable to serve if elected.
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Set forth below are the names and certain information with respect to each
director of the Company, including the nominee for Class I director. There are
no family relationships among any of the directors and executive officers of
the Company.
NOMINEE FOR CLASS I DIRECTOR
James S. Saltzman, age 55, has been the General Partner of Saltzman
Partners, an investment firm, since 1982. Since January 1997, Mr. Saltzman has
served as Vice Chairman of Madison Monroe, Inc., a private company engaged in
investments. 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. Mr. Saltzman serves on the Board of Directors of Dynasil
Corporation of America.
CLASS II DIRECTORS
Kevin J. Duffy, age 44, has served as President and Chief Operating
Officer of the Company since August 1996 and as a director of the Company since
October 1996. In December 1998, he was elected President and Chief Executive
Officer of Xyvision Enterprise Solutions, Inc. 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 55, has been Chairman of the Board of Directors of
the Company since October 1996. Mr. Neuman has been a private investor since
1987.
CLASS III DIRECTOR
Leland S. Kollmorgen, age 72, 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.
For information relating to shares of Common Stock owned by each of the
directors, see "Security Ownership of Certain Beneficial Owners and
Management."
BOARD AND COMMITTEE MEETINGS
The Board of Directors of the Company met six times (including by
telephone conference) during fiscal 1999. All directors attended at least 75%
of the meetings of the Board of Directors and of the committees on which they
served.
The Board of Directors has an Audit Committee, 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 once
during the fiscal 1999. The current Audit Committee members are Messrs.
Kollmorgen and Saltzman (Chairman).
The Board of Directors has a Compensation and Stock Option Committee (the
"Compensation Committee"), which provides recommendations to the Board
regarding compensation programs of the Company and administers the Company's
stock option and stock benefit plans. The Compensation Committee met once
during fiscal 1999. The current Compensation Committee members are Messrs.
Kollmorgen (Chairman) and Saltzman.
The Board of Directors has a Nominating Committee, which provides
recommendations to the Board of Directors regarding nominees for directorships.
The Nominating Committee did not meet during fiscal 1999, 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 Wendy
Darland, Secretary of the Company, at the principal executive offices of the
Company,
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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 4,000 shares of Common Stock at an exercise
price equal to the fair market value of the Common Stock as of the date of
grant.
EXECUTIVE COMPENSATION
Summary Compensation
The following table sets forth certain information with respect to
compensation, for the fiscal years indicated, of the Company's Chief Executive
Officer and the Company's four other most highly compensated executive officers
who were serving as executive officers at the end of fiscal 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<S> <C> <C> <C> <C> <C>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
_____________________ ________________________
AWARDS
______
Fiscal Securities All Other
Name and Principal Position Year Salary(1) Bonus Underlying Options Compensation(2)
_______________________________________ ____ ________ _______ ________________________ ______________
Kevin J. Duffy 1999 $172,827 $ 1,500 - $1,743
President and Chief Operating Officer 1998 $150,000 - - $1,500
1997 $142,327 - 40,000 $1,573
Gerald T. Ulbricht 1999 $105,174 $50,107 17,600 $1,261
Vice President, North American Sales 1998 - - - -
1997 - - - -
Mark LeBlanc 1999 $118,981 $15,000 20,000 $1,013
Vice President, Engineering 1998 - - - -
1997 - - - -
Carol S. Bumbaca 1999 $116,558 $ 2,500 14,000 $1,188
Vice President, Customer Support 1998 - - - -
1997 - - - -
Michael S. Borin 1999 $118,847 - 7,000 $1,188
Vice President, Human Resources 1998 $110,001 - - $1,100
1997 $ 93,558 - 8,000 $ 936
- ---------------------
</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.
5
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Option/SAR Grants
The following table sets forth certain information concerning grants of
stock options made during the year ended March 31, 1999 to each of the Named
Executive Officers. The Company granted no stock appreciation rights during the
year ended March 31, 1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICEAPPRECIATION
FOR
INDIVIDUAL GRANTS OPTION TERM (1)
________________________________________________________________ _____________________
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE PRICE
OPTIONS EMPLOYEES IN PER
NAME GRANTED FISCAL YEAR SHARE (2) EXPIRATION DATE 5% 10%
_______________________ ______ ______________ __________________ _________________ ______ _______
Kevin J. Duffy - - - - - -
Gerald T. Ulbricht 17,600 21% $ .75 7/1/08 $8,301 $21,037
Mark LeBlanc 20,000 24% $ .75 7/1/08 $9,433 $23,906
Carol S. Bumbaca 14,000 17% $ .75 7/1/08 $6,603 $16,734
Michael S. Borin 7,000 9% $ .75 7/1/08 $3,302 $ 8,367
- ---------------------
</TABLE>
(1) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming the specified compound rates of appreciation (5% and 10%) on
the market value of the Common Stock on the date of option grant over the
term of the options. These numbers are calculated based on rules
promulgated by the Securities and Exchange Commission and do not reflect
the Company's estimate of future stock price growth. Actual gains, if any,
on stock option exercises and Common Stock holdings are dependent on the
timing of such exercise and the future performance of the Common Stock.
There can be no assurance that the rates of appreciation assumed in this
table can be achieved or that the amounts reflected will be received by
the option holder.
(2) All options were granted at fair market value as determined by the Board of
Directors of the Company on the date of the 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, 1999 by each of the
Named Executive Officers. No stock options were exercised during fiscal 1999 by
the Named Executive Officers and no stock appreciation rights were exercised
during fiscal 1999 by the Named Executive Officers or were outstanding at year
end.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<S> <C>
NUMBER OF SECURITIES UNDERLYING UNEXERCISED
OPTIONS AT FISCAL YEAR-END(1)
____________________________________________
NAME EXERCISABLE / UNEXERCISABLE
____________________________ ____________________________________________
Kevin J. Duffy 41,600 / 20,400
Gerald T. Ulbricht 1,700 / 18,300
Mark LeBlanc 0 / 20,000
Carol S. Bumbaca 4,103 / 15,897
Michael S. Borin 7,450 / 12,550
---------------------
</TABLE>
(1) As of March 31, 1999, the Named Executive Officers held no unexercised
in-the-money options.
6
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Employee Severance Benefit Plan
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 or her annual
base compensation if he or she has been employed by the Company for less than
one year or 100% of his or her annual base compensation if he or she 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 or she will receive benefits. On December 31, 1998, as part of the
Restructuring (as defined below), Xyvision Enterprise Solutions, Inc., a newly
formed subsidiary of the Company, assumed this Plan.
CERTAIN TRANSACTIONS
The Restructuring
On December 31, 1998, the Company effected a corporate restructuring (the
"Restructuring") pursuant to the terms of an agreement dated as of December 22,
1998 by and among the Company, Xyvision Enterprise Solutions, Inc.
("XyEnterprise") and 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.
Pursuant to the Restructuring, and the terms of a Contribution and
Assumption Agreement dated as of December 31, 1998 by and between the Company
and XyEnterprise, substantially all of the assets of the Company's publishing
business were transferred to XyEnterprise, while the majority of its
liabilities, including obligations under its line of credit with Tudor Trust,
remained with the Company. On December 31, 1998, the Company and Tudor Trust
entered into an amendment to the line of credit, as detailed below.
Tudor Trust also surrendered for cancellation as of December 31, 1998 all
of its Common Stock Purchase Warrants, covering an aggregate of 4,956,000
shares of Common Stock of the Company at various exercise prices.
Independently of the Company, on December 1, 1998, Tudor Trust made an
offer to certain holders of the Company's outstanding Debentures, 15%
Promissory Notes and 4% Promissory Notes to purchase such securities at 10% of
their face value. On December 31, 1998, Tudor Trust agreed to reduce the
Company's liability with respect to any such acquired securities to the
purchase price paid by Tudor Trust. As of July 29, 1999, Tudor Trust had
purchased, and the Company had cancelled, $25,000 aggregate principal amount of
Debentures and $347,000 aggregate principal amount of 4% Promissory Notes.
On December 31, 1998, XyEnterprise and Tudor Trust entered into a Loan
Agreement providing XyEnterprise with a $1,000,000 line of credit to use for
working capital and general business purposes. The line of credit bears an
interest rate of 8% per annum and is collateralized by substantially all of the
assets of XyEnterprise. On July 1, 1999, XyEnterprise and Tudor Trust entered
into an amendment to the line of credit, among other things, to increase the
amount available thereunder to $1,750,000 and extend the term of the line of
credit to June 30, 2001.
XyEnterprise and Tudor Trust entered into a Series A Convertible Preferred
Stock Purchase Agreement, dated as of December 31, 1998, pursuant to which
Tudor Trust purchased 400,000 shares of Series A Preferred Stock of
XyEnterprise for an aggregate purchase price of $1,000,000. On July 1, 1999,
XyEnterprise and Tudor Trust entered into a Series A Convertible Preferred
Stock Purchase Agreement, pursuant to which Tudor Trust purchased
7
<PAGE>
300,000 shares of Series A Preferred Stock of XyEnterprise for an aggregate
principal purchase price of $750,000. The Series A Preferred Stock converts
into Common Stock of XyEnterprise on a one-for-one basis, subject to
adjustment.
Tudor Trust Credit Line
On June 30, 1992, the Company obtained a $2,000,000 line of credit with
Tudor Trust. The line, which is payable on demand, is secured by the shares of
Common Stock of XyEnterprise held by the Company and has been used for working
capital and general business purposes. Interest on the line of credit is
payable annually. On September 28, 1993, the Company and Tudor Trust amended
the line of credit, among other things, to increase the amount available
thereunder to $2,500,000. On December 3, 1993, the Company and Tudor Trust
entered into an additional amendment to the line of credit to increase the
amount available thereunder to $3,000,000. On February 29, 1996, the Company
and Tudor Trust entered into an additional amendment to the line of credit to
increase the amount available thereunder to $4,000,000. On May 31, 1996, the
Company and Tudor Trust entered into an additional amendment to the line of
credit, among other things, to increase the amount available thereunder to
$5,000,000 and to reduce the interest rate on the line of credit to 8% per
annum. On November 22, 1996, the Company and Tudor Trust entered into an
additional amendment to the line of credit, among other things, to increase the
amount available thereunder to $6,000,000.
On November 10, 1997, the Company and Tudor Trust entered into an
additional amendment to the line of credit, among other things, to increase the
amount available thereunder to $8,300,000, reduce the interest rate on the line
of credit to 6%, provide for Tudor Trust to cause the issuance of a letter of
credit from a bank in the amount of $444,600 to the Company's landlord and
extend the term of the line of credit to March 31, 2001. In consideration for
such amendment, the Company issued to Tudor Trust a warrant for the purchase of
2,000,000 shares of Common Stock of the Company at an exercise price of $.80
per share, which warrant was cancelled on December 31, 1998 as part of the
Restructuring.
On June 26, 1998, the Company and Tudor Trust amended and restated the
line of credit, among other things, to (i) increase the amount available
thereunder to $13,500,000, (ii) provide that Tudor Trust shall have the sole
discretion to decide whether or not to make advances of funds thereunder, (iii)
provide that the interest payable thereunder from December 1, 1997 through
January 1, 1999 shall be paid in shares of Common Stock based on the fair
market value of the Common Stock, (iv) provide Tudor Trust with the option of
receiving the interest payable thereunder after January 1, 1999 in cash or in
shares of Common Stock based on the fair market value of the Common Stock, and
(v) increase the interest rate on the line of credit to 8% per annum. In
consideration for such amendment, the Company issued to Tudor Trust a warrant
for the purchase of 600,000 shares of Common Stock of the Company at an
exercise price of $1.25 per share, which warrant was cancelled on December 31,
1998 as part of the Restructuring.
On December 31, 1998, as part of the Restructuring, the Company and Tudor
Trust amended the line of credit, among other things, to (i) decrease the
amount available thereunder to $12,226,620, (ii) convert $1,750,000 of the
outstanding indebtedness thereunder into 175,000 shares of Series C Stock (each
of which is convertible into 10 shares of Common Stock), (iii) provide for the
convertibility of an additional $5,000,000 of the outstanding indebtedness
thereunder into Series C Stock beginning in June 1999 at the option of Tudor
Trust at a conversion ratio of $10 per share, (iv) decrease the interest rate
on the convertible portion of the line of credit to 6% per annum, (v)
accelerate the term of the line of credit to March 31, 2000, and (vi) release
liens held by Tudor Trust on the Company's assets which were transferred to
XyEnterprise while taking a security interest in the 2,800,000 shares of Common
Stock of XyEnterprise held by the Company.
Other Transactions
Tudor Trust has a 50% equity interest in Document Management Solutions,
Inc., a systems integration services company serving the publishing industry.
The Company paid Document Management Solutions, Inc. $57,466 and $6,413 for
integration services provided to the Company in fiscal 1998 and 1999,
respectively.
8
<PAGE>
On May 21, 1997, the Company and Tudor Trust entered into an exchange
agreement pursuant to which Tudor Trust exchanged Debentures in the aggregate
principal amount of $20,000 for 1,655 shares of Common Stock of the Company.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected the firm of PricewaterhouseCoopers LLP
to serve as the Company's independent public accountants for the current fiscal
year. Representatives of PricewaterhouseCoopers LLP 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 2000 ANNUAL MEETING
Any proposal that a stockholder of the Company wishes to be considered for
inclusion in the Company's proxy materials for its 2000 Annual Meeting of
Stockholders pursuant to Rule 14a-8 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), must be received by the Secretary of the
Company at its offices, 30 New Crossing Road, Reading, Massachusetts 01867-3254
no later than April 14, 2000.
If a stockholder of the Company wishes to present a proposal before the
2000 Annual Meeting other than one submitted for inclusion in the Company's
proxy statement and proxy, such stockholder must give written notice to the
Secretary of the Company at the address noted above. The Secretary must receive
such notice no later than June 28, 2000. If a stockholder fails to provide
timely notice of a proposal to be presented at the 2000 Annual Meeting, the
proxies designated by the Board of Directors of the Company will have
discretionary authority to vote on that proposal if it is properly brought
before the 2000 Annual Meeting.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of 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. Except as described below and
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.
Jeffrey L. Neuman, the Chairman of the Board of the Company, and Tudor
Trust, of which Mr. Neuman is the grantor, sole trustee and sole current
beneficiary, each failed to file a Form 5 for the fiscal year ended March 31,
1999.
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 expects to pay Georgeson a fee of
$1,600 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.
9
<PAGE>
By Order of the Board of Directors,
Wendy Darland, Secretary
August 12, 1999
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION IS
APPRECIATED.
10
<PAGE>
Appendix A
XYVISION, INC.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 9, 1999
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) Kevin J. Duffy, Wendy Darland and Kevin P.
Lanouette, 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 9, 1999 at 10:00 a.m. at the
offices of the Company, 30 New Crossing Road, Reading, Massachusetts, and any
adjournments thereof, and there to vote and act upon the following matter 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 AND SIGN THIS PROXY AND RETURN IT IN THE ACCOMPANYING ENVELOPE.
A VOTE "FOR" THE DIRECTOR NOMINEE 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" THE DIRECTOR NOMINEE.
To elect James S. Saltzman for Class I Director to serve for the ensuing three
years.
[] FOR [] WITHHOLD
Please mark your votes as indicated in this example [][x]
MARK HERE FOR ADDRESS []
CHANGE AND NOTE AT LEFT
MARK HERE IF YOU PLAN []
TO ATTEND THE MEETING
Dated: ______________________, 1998
___________________________________
Signature
___________________________________
Signature if held jointly
<PAGE>
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.
