<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the
Securities Exchange Act of 1934
[X] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14A-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Xceed Inc.
(Name of Registrant as Specified in its Charter)
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: Not
Applicable
2) Aggregate number of securities to which transaction applies: Not
Applicable
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): Not Applicable
4) Proposed maximum aggregate value of transaction: Not Applicable
5) Total fee paid: Not Applicable
[ ] 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: ________________________________________
1
<PAGE>
XCEED INC.
488 Madison Avenue, 3rd Floor
New York, New York 10022
___________________________________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 4, 2000
___________________________________________________
To the Stockholders of Xceed Inc.:
Notice is hereby given that the Annual Meeting of Stockholders (the "Annual
Meeting") of Xceed Inc., a Delaware corporation (the "Company") will be held at
the [Lowes New York Hotel, 569 Lexington Avenue (at 51st Street), New York, New
York 10022], on May 4, 2000 at [10:00 a.m.] to consider and take action on the
following matters:
1. To elect six directors to serve until the next annual meeting of
stockholders;
2. To approve the adoption of the Xceed Inc. Millennium Stock Option Plan;
3. To ratify the appointment of Deloitte & Touche, LLP, as the Company's
independent certified public accountants;
4. To approve an amendment to the Company's Certificate of Incorporation
to increase the number of authorized shares of common stock from
30,000,000 shares to 100,000,000 shares; and
5. To transact such other business as may properly come before the
meeting.
Holders of record of the Company's common stock at the close of business on
March 3, 2000, are entitled to notice of and to vote at the Annual Meeting or
any adjournments thereof.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE DATE AND SIGN THE
ENCLOSED PROXY AND RETURN IT IN THE ENVELOPE PROVIDED. ANY PERSON GIVING A
PROXY HAS THE POWER TO REVOKE IT AT ANY TIME PRIOR TO ITS EXERCISE AND IF
PRESENT AT THE MEETING MAY WITHDRAW IT AND VOTE IN PERSON.
By Order of the Board of Directors,
Werner G. Haase, Co-Chairman
New York, New York
April ___, 2000
<PAGE>
XCEED INC.
488 Madison Avenue, 3rd Floor
New York, New York 10022
_____________________________________
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 4, 2000
_____________________________________
PROXY STATEMENT
_____________________________________
This Proxy Statement is being furnished in connection with the solicitation
by the Board of Directors of Xceed Inc. (the "Company") of proxies to be voted
at the Annual Meeting of Stockholders of the Company to be held at [Loews New
York Hotel, 569 Lexington Avenue (at 51st Street), New York, New York 10022] at
[10:00 a.m.] on May, 4, 2000 or at any adjournments thereof.
The shares represented by proxies that are received in the enclosed form and
properly filled out will be voted in accordance with the specifications made
thereon. In the absence of specific instructions, proxies will be voted in
accordance with the recommendations made herein with respect to the proposals
described in this Proxy Statement. A proxy may be revoked by a stockholder at
any time before it is exercised by filing an instrument revoking it with our
Corporate Secretary, filing a duly executed proxy bearing a later date or by
attending the meeting and electing to vote in person. This Proxy Statement and
accompanying proxy card will be mailed to stockholders on or about April __,
2000.
Holders of record of the Company's common stock, par value $.01 per share
("Common Stock"), at the close of business on March 3, 2000, are entitled to
notice of and to vote at the Annual Meeting or any adjournments thereof. At the
close of business on March 3, 2000, there were 21,428,230 shares of the Common
Stock of the Company outstanding and entitled to vote at the meeting. There were
882 record holders as of March 3, 2000. Each share will be entitled to one vote.
SECURITIES OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following sets forth information regarding beneficial ownership of our
Common Stock as of March 3, 2000 by:
<PAGE>
. each person known to us who beneficially owns more than 5% of the
outstanding shares of our Common Stock;
. each of our directors and named executive officers; and
. all of our directors and executive officers as a group.
Unless otherwise indicated, the address of each person below is c/o Xceed
Inc., 488 Madison Avenue, New York, New York 10022.
<TABLE>
<CAPTION>
Number of Shares Percentage of Common
Name and Address of Beneficial Owner Beneficially Owned Stock Outstanding
----------------------------------- ------------------ -----------------
<S> <C> <C>
Werner G. Haase (1)(2).................... 2,410,150 10.8%
Nurit Kahane Haasse (2)................... 2,410,150 10.8%
Scott A. Mednick (3)...................... 1,300,000 5.7%
William N. Zabit.......................... 1,073,737 5.0%
Norman Docteroff......................... 125,000 *
81 Two Bridges Road
Fairfield, N.J. 07004
John A. Bermingham (4).................... 100,000 *
9 Raintree Court
Kinnelon, N.J. 07405
Theodore Deikel (5)....................... 1,318,359 5.9%
2424 West Lake of the Isles
Minneapolis, MN 55405
Terry A. Anderson (6)..................... 5,000 *
19197 River Road
Athens, OH 45701
Directors and Executive Officers as
a Group (13 persons)..................... ____ ____%
</TABLE>
______________
(1) Consists of 589,450 shares of Common Stock and 743,750 options, all of
which have vested and are exercisable at various prices ranging from $1.52
per share to $4.40 per share. See "Executive Compensation -Options/SAR
Grants in Last Fiscal Year."
(2) Werner Haase owns 1,333,200 shares of Common Stock, which represents 6.0%
of the Common Stock outstanding. Nurit Kahane Haase owns 1,076,950 shares
of Common Stock, which represents 5.0% of the Common Stock outstanding. Mr.
Haase disclaims any beneficial interest in the shares held by his wife
Nurit Kahane Haase. Mrs.
2
<PAGE>
Haase disclaims any beneficial interest in the shares held by her husband.
(3) Represents 1,000,000 shares issuable upon the exercise of options at an
exercise price of $6.00 per share and 300,000 shares issuable upon the
exercise of options at an exercise price of $17.38 per share. See
"Employment Agreements" and "Executive Compensation - Aggregate Option/SAR
Exercises in Last Fiscal Year; Fiscal Year End Option/SAR Values."
(4) Represents 50,000 shares issuable upon the exercise of options at an
exercise price of $3.43 a share and 50,000 shares issuable upon the
exercise of options at an exercise price of $11.50, which Mr. Bermingham
has received as compensation for serving as a member of our Board of
Directors. The exercise prices were the closing sale prices as quoted on
the Nasdaq National Market System on the dates of the grants.
(5) Mr. Deikel purchased his shares pursuant to a private placement offering by
us in May 1999. The above figure includes 439,453 shares of Common Stock
and warrants to purchase 878,906 shares of Common Stock at an exercise
price of $19.01 per share.
(6) Represents shares issuable upon the exercise of options at an exercise
price of $6.06 per share, which Mr. Anderson has received as compensation
for serving as a member of our Board of Directors. The exercise price was
the market price as quoted on the Nasdaq National Market System on the date
of the grant.
* Represents less than one percent (1%) ownership.
PROPOSAL 1 - ELECTION OF DIRECTORS
GENERAL
All directors of the Company are elected to serve until the next annual
meeting of stockholders or until their successors are elected and qualified.
The Board of Directors currently consists of six members. All six of our
current directors are standing for re-election.
Unless otherwise indicated on the proxy, it is the intention of the persons
named in the proxy to vote the shares represented by each properly executed
proxy for the election as directors of the nominees named below. All nominees
presently serve as directors. The Board of Directors believes that all such
nominees will stand for election and will serve if elected. However, if any
nominee fails to stand for election or is unable to accept election, the persons
named in the proxy may vote for such other person (or persons) as may be
designated by the Board of Directors.
The nominees and their biographies are as follows:
________________________________________________________________________________
Scott A. Mednick
Director since 1998
Age 44
________________________________________________________________________________
Mr. Mednick entered into an employment agreement with the Company on July 17,
1998, at which time he was appointed Chairman of the Board and was also named
the Company's Chief Strategic Officer. Pursuant to the terms of his employment
agreement, the Company has agreed to nominate Mr. Mednick as Chairman during the
term of his employment. Mr. Mednick's employment agreement was recently amended
to extend its initial term through July 17, 2001, at which time the agreemenet
may be renewed upon the mutual agreement of the Company and Mr. Mednick.
3
<PAGE>
In 1982, Mr. Mednick established The Mednick Group, Inc., a company engaged in
graphic design and strategic planning. In 1995, The Mednick Group, Inc. became
THINK New Ideas, Inc., a provider of marketing technology and interactive
business solutions to Fortune 500 companies and other corporate clients. Mr.
Mednick served as Chairman and Chief Executive Officer of THINK New Ideas, Inc.
until May of 1998. Under Mr. Mednick's direction, THINK New Ideas, Inc. was
named one of the top interactive agencies of 1995 by both Adweek and The
Advertising Club of New York. Mr. Mednick is regarded as a highly respected
marketing strategist and graphic designer. He has four graphic design works in
the permanent collection of the Library of Congress and has been published in
most major design publications. Mr. Mednick received a B.F.A. from Rhode Island
School of Design and an M.A. in applied psychology from the University of Santa
Monica.
________________________________________________________________________________
________________________________________________________________________________
Werner G. Haase
Director since 1987
Age 62
_______________________________________________________________________________
Mr. Haase has served as a director of the Company since September 1987 and
became Co-Chairman and Chief Executive Officer in July 1996 following the
Company's acquisition of Journeycraft, Inc. and TheraCom Integrated Medical
Communications, Inc. For at least five years prior to the acquisition of the
foregoing companies, Mr. Haase had been a director and Chief Executive Officer
of Journeycraft, Inc. Mr. Haase was also Chairman and Chief Executive Officer of
Water-Jel Technologies from 1996 to 1998. Since July 1999, Mr. Haase has served
on the board of directors of Vizacom Inc. Mr. Haase received the equivalent of
a B.A. in political science and history of economics from Otto Suhr Institute.
_______________________________________________________________________________
William N. Zabit
Director since 1998
Age 51
_______________________________________________________________________________
Mr. Zabit became President and a director of the Company on September 14, 1998
when the Company acquired Zabit & Associates, Inc. and entered into a four-year
employment agreement with Mr. Zabit. Mr. Zabit resigned as President of the
Company in March 2000. Mr. Zabit founded Zabit & Associates, Inc. in 1993 and
served as its Chief Executive Officer until its acquisition by the Company.
Prior to forming Zabit & Associates, Inc., Mr. Zabit served in an executive
position at William M. Mercer, Inc., where he was responsible for Mercer's
western U.S. and national communications practices. Mr. Zabit received a B.A. in
journalism from the University of Wisconsin.
_______________________________________________________________________________
4
<PAGE>
Norman Docteroff
Director since 1996
Age 66
_______________________________________________________________________________
Mr. Docteroff was elected a director of the Company in May 1996. Since April
1999, Mr. Docteroff has been President and Chief Executive Officer and a member
of the board of directors of Docuport, Inc. From July 1968 until November 1995,
Mr. Docteroff was President of Gemini Industries, a company engaged in the
production of consumer electronic accessories. Since then he has served as an
independent management consultant to Gemini Industries and other companies.
_______________________________________________________________________________
John A. Bermingham
Director since 1997
Age 55
_______________________________________________________________________________
Mr. Bermingham was appointed a director of the Company in November 1997 and also
served as a consultant to the Company in 1997. Mr. Bermingham has been Chief
Executive Officer and a member of the board of directors of Smith Corona
Corporation since November 1998. From May 1997 to November 1998, Mr. Bermingham
was the owner of Promar of New Jersey. Mr. Bermingham served as President and
Chief Executive Officer of Rolodex Corporation from March 1996 to May 1997. From
January 1993 to December 1995, Mr. Bermingham was employed by AT&T as the
President and Chief Executive Officer of AT&T Smart Cards Systems and Solutions,
a division of AT&T. Mr Bermingham received a B.A. in Business Administration
from St. Leo University.
_______________________________________________________________________________
Terry A. Anderson
Director since 1999
Age 52
_______________________________________________________________________________
Mr. Anderson was appointed a director of the Company in 1999. Mr. Anderson is a
journalist, teacher, writer and nationally known speaker. Since 1998,
Mr. Anderson has been a visiting professor at Ohio University's Scripps School
of Journalism since 1998. From 1995 to 1998, Mr. Anderson taught at Columbia
University Graduate School of Journalism. Mr. Anderson is the author of Den of
Lions, which chronicles his captivity for seven years as a hostage in Lebanon.
Mr. Anderson also currently writes a weekly opinion column on political, social
and international affairs for King Feature Syndicate. Mr. Anderson received a
B.A. from Iowa State University and received an honorary Ph.D. from Ohio
University.
_______________________________________________________________________________
The Board of Directors recommends that stockholders vote FOR each of the
nominees for director set forth above.
5
<PAGE>
BOARD COMMITTEES
Audit Committee. The Audit Committee reviews the preparations for and the
scope of the audit of our annual financial statements, reviews drafts of such
statements, makes recommendations as to the engagement and fees of our
independent auditors and monitors the functioning of our accounting and internal
control systems by meeting with representatives of management and the
independent auditors. The Audit Committee has direct access to our independent
auditors and counsel and performs such other duties relating to the maintenance
of the proper books of account and records and other matters as the board of
directors may assign from time to time. Norman Docteroff and John Bermingham
comprise the Audit Committee.
Compensation Committee. The Compensation Committee supervises and makes
recommendations with respect to our employees' compensation levels. The
Compensation Committee approves the terms of employment of all of our officers
and administers the Company's option plans, including establishing the terms and
amounts of option grants. Norman Docteroff and John Bermingham comprise the
Compensation Committee. Werner Haase was on the Compensation Committee until he
stepped down in March 1999.
All directors attended at least 75% of the Board meetings and assigned
committee meetings during the fiscal year ended August 31, 1999. The Board of
Directors held six meetings during the year, the Audit Committee held ___
meetings and the Compensation Committee held ___ meetings.
COMPENSATION OF DIRECTORS
Other than as discussed in the paragraph below, directors who are our
employees receive no additional compensation for their services as directors.
Directors who are not our employees do not receive a fee for attendance in
person at meetings of the Board of Directors or committees of the board of
directors, but are reimbursed for travel expenses and other out-of-pocket costs
incurred in connection with their attendance at the meetings.
Terry Anderson received a fee of $40,000 during fiscal 1999 for rendering
consulting services to us. When Mr. Anderson agreed to join the Board of
Directors, he received a grant of 5,000 options with an exercise price of $6.06
per share, which was the market price of the Common Stock as quoted by the
Nasdaq National Market System on the date of the grant. Mr. Docteroff and Mr.
Bermingham each received a grant of 50,000 options during fiscal 1999. The
options vested in February 2000 and have an exercise price of $11.50 a share,
the closing sale price of the Common Stock as quoted by the Nasdaq National
Market System on the date of the grant.
INDEMNIFICATION
The Delaware General Corporation Law provides that a company may indemnify
its directors and officers as to certain liabilities. Our Certificate of
Incorporation provides for the indemnification of our directors and officers to
the fullest extent permitted by law. The effect of such provision is to
indemnify our directors and officers against all costs, expenses and liabilities
they may incur in connection with any action, suit or proceeding in which they
are involved because of their affiliation with us. We maintain directors and
officers liability insurance to effectuate these provisions.
6
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No interlocking relationships currently exist between our officers and
members of the Compensation Committee. Mr. Haase was a member of the
Compensation Committee until he stepped down in March 1999.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 as amended (the
"Exchange Act") requires that our directors and executive officers and
beneficial owners of more than 10% of our Common Stock file reports of holdings
and transactions in our Common Stock with the Securities and Exchange Commission
and the Nasdaq National Market. Each of William Zabit, John Bermingham, Norman
Docteroff and Terry Anderson failed to file a Form 5 with respect to
transactions in fiscal 1999 on a timely basis. The total number of late reports
was three for Mr. Zabit, one for Mr. Bermingham, one for Mr. Docteroff and one
for Mr. Anderson. Terry Anderson, Gary Kahl, Kevin Labick, Paul Schmidman and
Wolfe Boehme (a former officer) each failed to file a Form 3 on a timely basis
upon becoming a director or executive officer of the Company. Theodore Deikel,
who was a 10% holder of our common stock, failed to file a Form 3 on a timely
basis and reported one sale transaction untimely on Form 4. During fiscal 1999,
Mr. Zabit reported three purchase transactions untimely on Form 4. The Company
has recently instituted a compliance program to assist its directors and
executive officers with Section 16 filings.
EXECUTIVE OFFICERS
The following table sets forth the name, position and age of our executive
officers as of March 3, 2000:
<TABLE>
<CAPTION>
Name Age Position with the Company
- ---- ----- -------------------------------------
<S> <C> <C>
Scott A. Mednick 43 Chief Strategic Officer and Co-Chairman
Werner G. Haase 62 Chief Executive Officer, President and Co-Chairman
John P. Gandolfo 39 Senior Vice President and Chief Financial Officer
Kenneth Walters 46 Chief Operating Officer
Gary S. Kahl 37 Executive Vice President of National Practices
Kevin D. Labick 30 Executive Vice President, National Business Operations
Adeo Ressi di Cervia 27 Executive Vice President, Corporate Strategies
Paul P. Schmidman 46 Chief Corporate Architect and Executive Vice President,
Business Development
Nurit Kahane Haase 49 Senior Vice President and Secretary
</TABLE>
FAMILY RELATIONSHIPS
Werner Haase, the Company's Co-Chairman and Chief Executive Officer, and
Nurit Kahane Haase, the Company's Senior Vice President and Secretary, are
married. There are no other family relationships among directors, nominees or
executive officers.
7
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table.
The following table summarizes the compensation paid to or earned by the
Company's Chief Executive Officer and each of the four other most highly
compensated executive officers of the Company (the "Named Executive Officers").
<TABLE>
<CAPTION>
Annual Compensation | Long-Term Compensation |
| |
| Awards | Payouts |
| | |
| Securities | |
| Restricted Underlying | |
Name and Principal Fiscal Other Annual | Stock Options | LTIP | All Other
Position Year Salary Bonus Compensation | Awarded SARs(#)/ | Payouts | Compensation
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Scott A. Mednick 1999 $350,000 $1,080,000 $0 $0 300,000 $0 $0
Chief Strategic Officer 1998 $ 43,750 $ 80,000 $0 $0 1,000,000 $0 $0
and Co-Chairman 1997
Werner G. Haase 1999 $500,000 $ 150,000 $0 $ -0- $0 $84,299 (1)
Chief Executive Officer 1998 $500,000 $ 300,000 $0 $0 500,000 $0 $80,859 (1)
and Co-Chairman 1997 $500,000 $ 300,000 $0 $0 -0- $0 $82,152 (1)
Nurit Kahane Haase 1999 $250,000 $0 $0 $0 -0- $0 $0
Senior Vice President 1998 $250,000 $0 $0 $0 -0- $0 $0
1997 $250,000 $0 $0 $0 -0- $0 $0
William N. Zabit 1999 $400,000 $0 $0 $0 -0- $0 $ 7,066 (1)
Former President (2) 1998 $0 $0 $0 $0 -0- $0 $0
1997 $0 $0 $0 $0 -0- $0 $0
Wolf Boehme (3) 1999 $212,347 $ 125,000 $0 $0 250,000 $0 $0
Former Chief 1998 $ 28,558 $0 $0 $0 -0- $0 $0
Operating Officer 1997 $0 $0 $0 $0 -0- $0 $0
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes premiums for life insurance policies paid by us on behalf of
Mr. Haase.
(2) Mr. Zabit resigned as President of the Company in March 2000.
(3) Mr. Boehme resigned from the Company in December 1999.
The aggregate amount of personal benefits cannot be specifically or precisely
ascertained and do not, in any event, exceed $50,000 or 10% of compensation as
to any person. We offer health insurance to all of our employees. At the present
time we do not have any retirement, pension, profit sharing, or other similar
programs or benefits for our executive officers.
Option/SAR Grants in Last Fiscal Year.
The table below sets forth information regarding stock options granted during
the 1999 fiscal year to each of the Named Executive Officers who were granted
options in 1999.
<TABLE>
<CAPTION>
| Potential Realizable Value at
| Assumed Annual Rates of Stock Price
Individual Grants | Appreciation for Option Term
- ------------------------------------------------------------------------------------------------------------------------------------
Number of Percent of |
Securities Total Options/ |
Underlying SARs Granted |
Options/ SARs to Employees Exercise Expiration |
Name Granted (#) in Fiscal Year Price ($/Sh) Date | 5% ($) 10% ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> | <C> <C>
Scott A. Mednick 300,000 7.1% $17.38 August 3, | $1,440,532 $1,757,415
Chief Strategic Officer 2004 (1) |
and Co-Chairman |
|
Wolf Boehme (2) 250,000 5.9% $ 7.25 November 19, | $ 285,000 $ 602,500
Former Chief Operating Officer 2001 |
</TABLE>
(1) The vesting of these options has been accelerated pursuant to the terms of
Mr. Mednick's employment agreement. See "Employment Agreements."
(2) Mr. Boehme resigned from the Company in December 1999.
8
<PAGE>
Aggregate Option/SAR Exercises in Last Fiscal Year; Fiscal Year End Option/SAR
Values.
The following table sets forth information concerning the value of
unexercised in-the-money options held by the Named Executive Officers as of
August 31, 1999.
<TABLE>
<CAPTION>
Unexercised In-the-Money
Options/SARs at Fiscal Options/SARs at
Year End Fiscal Year End
Name Shares Acquired on Exercisable/ Exercisable/
Exercise (#) Value Realized ($) Unexercisable Unexercisable
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Scott A. Mednick -0- -0- 1,000,000 $11,810,000
(Exercisable) (Exercisable)
Chief Strategic Officer and
Co-Chairman 300,000 $129,000
(Unexercisable) (Unexercisable)
Werner G. Haase -0- -0- 743,750 $10,609,000
Chief Executive Officer and (Exercisable) (Exercisable)
Co-Chairman
Wolf Boehme 10,000 $72,500 73,333 $ 774,396
Former Chief Operating Officer (1) (Exercisable) (Exercisable)
166,667 $ 1,760,004
(Unexercisable) (Unexercisable)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Mr. Boehme resigned from the Company in December 1999.
PERFORMANCE GRAPH
The graph set forth below compares for the periods indicated the "cumulative
stockholder return" to stockholders of the Company as compared with the return
of the Nasdaq National Market. "Cumulative stockholder return" has been computed
assuming an investment of $100 at the beginning of the period indicated and
assumes a reinvestment of all dividends. These indices are included for
comparative purposes only and do not necessarily reflect management's opinion
that such indices are an appropriate measure of the relative performance of the
stock involved, and are not intended to forecast or be indicative of future
performance.
TOTAL RETURN TO STOCKHOLDERS
(Dividends reinvested monthly)
Annual Return Percentage
<TABLE>
<CAPTION>
Years Ending
--------------------------------------------------------------
Company Index Aug. 94 Aug. 95 Aug. 96 Aug. 97 Aug. 98 Aug. 99
- ------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
XCEED INC.............. -33.45% 12.77% 48.19% 30.00% 84.62% 196.7%
NASDAQ (US)............ 4.10% 34.69% 12.74% 39.52% -4.91% 92.7%
</TABLE>
<TABLE>
<CAPTION>
Indexed Returns
Base Years Ending
Period --------------------------------------------------------------
Company Index Aug. 93 Aug. 94 Aug. 95 Aug. 96 Aug. 97 Aug. 98 Aug. 99
------------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
XCEED INC.................... $100 $ 66.55 $ 75.04 $111.21 $144.57 $266.90 $792.43
NASDAQ (US).................. $100 $104.10 $140.21 $158.07 $220.54 $209.71 $383.14
</TABLE>
$Total Stockholder Returns
Years Ending
------------
Aug. 93 Aug. 94 Aug. 95 Aug. 96 Aug. 97 Aug. 98 Aug. 99
- ------- ------- ------- ------- ------- ------- -------
100 66.55 75.04 111.21 144.57 266.90 792.43
100 104.10 140.21 158.07 220.54 209.71 383.14
---> X-CEED INC. --- NASDAQ (US)
- -----------
The foregoing figures and graph were furnished by Standard & Poor's Compustat, a
division of the Graw-Hill Companies.
EMPLOYMENT AGREEMENTS
We have entered into employment agreements with Scott A. Mednick, Werner G.
Haase, William N. Zabit and Nurit Kahane Haase.
Scott A. Mednick. In July 1998, we entered into an employment agreement
with Scott Mednick, our Chief Strategic Officer and Co-Chairman. Mr. Mednick's
employment agreement was amended in September 1999 and March 2000. Mr. Mednick
has the right to terminate his employment on or after July 17, 2001 if he gives
us at least 60 days advance written notice. In accordance with his employment
agreement, Mr. Mednick received a signing bonus of $960,000. Mr. Mednick
receives a base salary of $350,000, which automatically increases by 10%
9
<PAGE>
annually. Mr. Mednick's employment agreement provides for a guaranteed bonus of
$100,000 during each year of his employment and Mr. Mednick is also eligible to
receive additional bonuses based on the Company's growth and performance.
Under his employment agreement, Mr. Mednick received options to purchase
1,000,000 shares of our Common Stock at an exercise price of $6.00 per share,
all of which are currently exercisable. If Mr. Mednick exercises more than
500,000 of these options he may not sell, assign or transfer the shares in
excess of 500,000 for 48 months unless the trading price of our Common Stock
attains certain price levels ranging from $12.00 per share to $24.00 per share.
As part of the September 1999 amendment to his employment agreement, Mr. Mednick
was granted options to acquire an additional 300,000 shares of Common Stock at
an exercise price of $17.38 per share, all of which are currently exercisable.
In addition, or as part of the March 2000 amendment to his employment
agreement, in exchange for Mr. Mednick's agreement to extend the initial two
year term of his employment agreement, Mr. Mednick has been granted options to
purchase 250,000 shares of Common stock at an exercise price of $27.75 per
share. The options are currently exercisable. In the event of a change in
control of the Company, Mr. Mednick is entitled to receive a one-time payment
equal to three times his then-current annual compensation (including bonuses).
If Mr. Mednick is terminated without cause, he is entitled to receive his annual
salary for the balance of his employment term. Mr. Mednick's employment
agreement contains a non-compete covenant during its term or for so long as he
is receiving annual compensation as a result of his termination without cause
and for 12 months after such compensation is paid. However, Mr. Mednick is only
prohibited from competing with the Company if he (i) terminates his employment
after two years of employment or (ii) does not elect to extend the employment
agreement after the initial four year term.
Werner G. Haase. In December 1996, we entered into a five year employment
agreement with Werner Haase, our President, Chief Executive Officer and Co-
Chairman. Mr. Haase is to receive a base salary of $500,000 per year. During Mr.
Haase's employment, we are to pay premiums, interest and other payments on a
number of policies insuring his life with an aggregate face value of at least
$2.3 million. Mr. Haase's agreement also entitles him to receive bonuses, stock
options and other incentives at the discretion of our Board of Directors. In the
event of a change in control of Xceed, Mr. Haase is entitled to receive a one-
time payment equal to three times his then-current annual compensation. Upon
termination without cause, all debts owed by Mr. Haase to Xceed or to
Journeycraft (Journeycorp's operating subsidiary) shall be cancelled in full and
we are to pay Mr. Haase an amount in cash equal to 100% of the amount of
indebtedness cancelled. As of March 3, 2000 2000, the amount of Mr. Haase's
indebtedness to Journeycorp was $1,223,000. See "Certain Transactions." Mr.
Haase's employment agreement contains a non-compete covenant during the period
of is employment and for 12 months following his termination.
William N. Zabit. In connection our September 1998 acquisition of Zabit &
Associates, we entered into a four year employment agreement with William Zabit,
the former President of the Company. Mr. Zabit is to receive an annual base
salary of $400,000. During the term of Mr. Zabit's employment, we are to pay
premiums, interests and other payments on a policy insuring his life with a face
value of at least $2 million. Mr. Zabit's agreement also entitles him to receive
bonuses, stock options and other incentives at the discretion of our Board of
Directors. In the event of a change in control of Xceed, Mr. Zabit is entitled
to receive a one-time payment equal to three times his then-current annual
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compensation (including bonuses). Upon termination without cause, all debts owed
to us by Mr. Zabit are to be cancelled in full. As of March 1, 2000, Mr. Zabit
was not indebted to the Company. Mr. Zabit's employment agreement contains a
non-compete covenant during the period of his employment and for 18 months
following termination of his employment for cause.
Nurit Kahane Haase. In July 1996, we entered into a five year employment
agreement with Nurit Kahane Haase, our Senior Vice President and Secretary. Ms.
Haase is to receive an annual base salary of $250,000. In the event of a change
in control of Xceed, Ms. Haase is entitled to receive a one-time payment equal
to three times her then-current annual compensation (including bonuses). Ms.
Haase's employment agreement contains a non-compete covenant the period of her
employment and for 12 months following her termination.
STOCK OPTION PLANS
The Company has adopted five stock option plans. The Non-Qualified Stock
Option Plan, which expired on April 6, 1994, covered 187,500 shares of Common
Stock, pursuant to which officers and employees of the Company were eligible to
receive non-qualified stock options. All options granted under the Non-Qualified
Stock Option Plan have been at exercise prices equal to at least the fair market
value of the Common Stock on the date of grant. As of March 3, 2000, options to
acquired 159,500 shares had been exercised and options to acquire 28,000 shares
at an exercise price of $1.52 per share remained outstanding under the plan.
Under the 1990 Stock Option Plan the Company may grant options to purchase up
to 187,500 shares of Common Stock to its officers, key employees and others who
render services to the Company. The exercise price of such options may not be
less than the fair market value per share in the case of incentive stock options
or 85% of the fair market value in the case of non-qualified options. The 1990
Stock Option Plan expired on January 31, 2000. As of March 3, 2000, options to
acquire 162,500 shares had been exercised and options to acquire 25,000 shares
at an exercise price of $1.52 per share remained outstanding under this plan.
The 1995 Stock Option Plan operates on substantially the same terms as the
1990 Stock Option Plan except that it includes options to purchase up to 500,000
shares of Common Stock. Any options granted under the plan expire ten years
from the date of the grant. The plan expires March 3, 2005. As of March 3, 2000,
options to acquire 166,000 shares of Common Stock had been exercised under the
1995 Stock Option Plan and options to acquire a total of 334,000 shares of
Common Stock at an exercise price of $2.19 per share remained outstanding under
this plan.
At the annual meeting of stockholders on February 20, 1998, stockholders
approved the adoption of the 1998 Stock Option Plan which provides for the
issuance of options for the acquisition of up to 2,000,000 shares of Common
Stock. The 1998 Stock Option Plan authorizes the issuance of incentive stock
options which qualify under Section 422A of the Internal Revenue Code as well as
the issuance of non-statutory options. The 1998 Stock Option Plan authorizes the
issuance of statutory incentive options to employees, officers and employee-
directors. Non-statutory incentive options may also be issued to others who
render services to the Company. Any options granted under the 1998 Stock Option
Plan, unless specifically designated otherwise, expire on March 3, 2008. As of
March 3, 2000, options to acquire 297,000 shares of Common Stock had been
exercised under the 1998 Stock Option Plan and options to acquire 1,703,000
shares were outstanding at a weighted average exercise price of $___ per share
under this plan.
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At the annual meeting of stockholders held on March 12, 1999, stockholders
approved the adoption of the 1999 Long-Term Incentive Plan which provides for
the issuance of options to purchase up to 3,000,000 shares of Common Stock. The
1999 Long-Term Incentive Plan authorizes the issuance of incentive stock, stock
appreciation rights, restricted stock, restricted stock units, performance
units, performance shares and other awards. As of March 3, 2000, options to
acquire 2,666,000 shares of Common Stock had been granted under this plan and
options to acquire shares of Common Stock remained outstanding at a weighted
average exercise price of $___ per share.
All of the plans are administered by the Compensation Committee consisting
of Norman Docteroff and John Bermingham.
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
reviewing the Company's overall compensation policies and, with the input of the
Company's Chief Executive Officer, setting the compensation of the Company's
executive officers. The Compensation Committee is comprised solely of two non-
employee directors, Messrs. Docteroff and Bermingham. Werner Haase was on the
Compensation Committee until he stepped down in March 1999.
Compensation Philosophies and Goals
The Company's executive compensation program for fiscal 1999, which consisted
of a combination of base salary, cash bonuses and stock options, is designed in
large part to align executive incentives with the Company's strategic goals.
Accordingly, a significant portion of the total cash compensation of the
Company's senior executives was directly linked to the Company's and the
executive's satisfaction of specified goals. By tying compensation to the
achievement of the Company's core objectives and fundamental values, the Company
believes that a performance-oriented environment is created for its executives
and other employees.
The Company's executive compensation program for fiscal 1999 was also intended
to align executive and stockholder interests by providing executives with an
equity interest in the Company through the granting of stock options. The size
of option grants was recommended by the Chief Executive Officer to the
Compensation Committee for approval. The Compensation Committee based its
review of such recommended grants on various factors, including the executive's
responsibilities, the executive's past, present and expected contributions to
the Company and the executive's current stock and option holdings.
In addition to structuring its executive compensation program in a manner
which will reward executives for the achievement of the Company's business
objectives as well as for individual performance, the Company also seeks to
attract and retain key executives through its compensation program.
Compensation in Fiscal 1999
Cash Compensation
In keeping with the Company's desire to create a performance-oriented
environment through its compensation programs, the bonus component is a
significant percentage of the overall cash compensation payable to the Company's
executive officers. Base salaries of the executive officers for fiscal 1999
were determined by the Compensation Committee.
The Company adopted an executive bonus plan for 1999 which covered the
executive officers and other senior management of the Company. Under the bonus
plan, the Chief Executive Officer recommended to the Compensation Committee for
approval the target amount of bonus compensation payable to each participant for
the year. Each participant's actual bonus compensation was determined based on
the Company's and the participant's, as the case may be, achievement of
specified goals in four key measurement areas: client satisfaction, financial
performance, organizational goals and personal goals. The weighting of each of
the four measurements varied for each participant, depending on his or her role
in the Company. Also, depending on a participant's role in the Company, the
achievement of certain goals was measured on a Company-wide, industry-specific
or individual office basis.
In November 1999, the Compensation Committee reviewed the Company's and each
executive officer's performance against the objective criteria described above.
Based on this review, and in accordance with the criteria described above, bonus
payments were approved to each executive officer as indicated in the Summary
Compensation Table.
Incentive Compensation
During fiscal 1999, the Named Executive Officers received options to purchase
an aggregate of shares to Common Stock at a weighted average exercise price, as
indicated in the table in "Option/SAR Grants in Last Fiscal Year."
1999 Compensation of Chief Executive Officer
Mr. Haase's base salary, bonus and grants of options were determined in
accordance with the same procedures and standards as for other executive
officers of the Company.
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
disallows a federal income tax deduction to public companies for certain
compensation in excess of $1 million paid to a corporation's chief executive
officer or any of its four other most highly compensated executive officers.
Qualifying performance-based compensation will not be subject to the deduction
limit if certain requirements are met. The Company has structured its option
plans to qualify income received upon the exercise of stock options granted
under the plans as performance-based compensation. The Compensation Committee
intends to review the potential effects of Section 162(m) periodically and in
the future may decide to structure additional portions of the Company's
compensation program in a manner designed to permit unlimited deductibility for
federal income tax purposes.
Norman Docteroff
John Bermingham
CERTAIN TRANSACTIONS
In July 1996, we entered into a four year consulting agreement with Target
Capital Corp. and Yitz Grossman that terminates on May 16, 2000. At the time the
agreement was entered into, Mr. Grossman was Chairman of the Board of Directors
and Secretary. Mr. Grossman resigned as an officer and director in December
1996. The agreement provides for annual payments to Target Capital Corp. of
$150,000 per year and an annual bonus of not less than one-half of 1% of our
total revenues. Mr. Grossman is not required to devote his full time to us while
acting as a consultant. In the event of a change in control of the Company, the
agreement provides for a one-time payment to Target Capital Corp. equal to three
times the then current annual consulting compensation (including bonuses). A
change of control includes the acquisition of over 30% of our stock, the sale or
transfers of over 50% of our assets, or certain mergers or other combinations.
Prior to July 1996, Werner Haase borrowed funds from Journeycraft. At the
time of our acquisition of Journeycorp, this amount equaled $1,000,000. A
condition of our acquisition of Journeycorp was the transfer of the loan to us.
The loan bears interest at a rate of 7% and is payable in annual installments of
$100,000. The loan is due in December 2016. As of March 1, 2000, $1,223,000 was
due.
In connection with our acquisition of Zabit & Associates, we were required
to pay off certain promissory notes which were due to two former shareholders of
Zabit & Associates in March 1999. At that time, we paid William Zabit, the
former President of the Company, $3,974,000 consisting of $3,840,000 of
principal and $134,000 of interest. The other shareholder, who is now an
employee of Xceed, received $993,600 consisting of $960,000 of principal
and $33,600 of interest. In addition, in connection with this acquisition the
Company is required to pay off promissory notes to Mr. Zabit in the amount of
$1,544,166 and to another former shareholder of Zabit & Associates in the amount
of $386,042. These notes mature on May 17, 2000.
PROPOSAL 2 - RATIFICATION OF APPOINTMENT
OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
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The Company's financial statements for the fiscal year ended August 31,
1999, were audited by the firm of Holtz Rubenstein & Co., LLP ("Holtz
Rubenstein"). Pursuant to the decision of the Board of Directors, effective
January 21, 2000, the Company dismissed Holtz Rubenstein as the Company's
independent certified public accountants. The reports of Holtz Rubenstein on
the financial statements of the Company for the fiscal years ended August 31,
1998 and 1999 did not contain an adverse opinion or disclaimer of opinion and
were not qualified or modified as to uncertainty, audit scope or accounting
principles.
The foregoing was reported by the Company on Form 8-K filed with the
Securities and Exchange Commission as required by the Exchange Act. As
previously disclosed therein, there were no disagreements at the decision making
level (i.e., between personnel of the Company responsible for the presentation
of its financial statements and personnel of Holtz Rubenstein responsible for
rendering its report) with Holtz Rubenstein on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure.
At the time of the filing of the applicable Form 8-K, the Company provided
Holtz Rubenstein with a copy of this disclosure and requested that Holtz
Rubenstein furnish the Company with a letter addressed to the Securities and
Exchange Commission stating whether Holtz Rubenstein agreed with the statements
made by the Company hereinabove and, if not, stating the respects in which it
did not agree. A copy of the letter of Holtz Rubenstein was previously filed
with the Securities and Exchange Commission. In connection with the preparation
of this proxy statement, the Company again furnished Holtz Rubenstein with this
disclosure and provided Holtz Rubenstein with the opportunity to submit to the
Company, for inclusion in this proxy statement, a statement of up to 200 words
addressing any matters discussed herein as to which Holtz Rubenstein believed
the disclosure was incomplete or inaccurate. Holtz Rubenstein did not request
the inclusion of any such statement.
The Board of Directors appointed Deloitte & Touche, LLP ("Deloitte &
Touche"), as the Company's independent certified public accountants to examine
and report on the Company's consolidated financial statements for the 2000
fiscal year and recommends that the stockholders ratify the appointment. If the
stockholders do not ratify the appointment of Deloitte & Touche, the Audit
Committee and the Board of Directors will consider the appointment of other
independent certified public accountants. One or more representatives of
Deloitte & Touche will be present at the Annual Meeting. They will have the
opportunity to respond to appropriate questions and to make a statement if they
wish to do so.
The Board of Directors recommends a vote FOR the approval and ratification
of Deloitte & Touche, LLP as the Company's independent certified public
accountants.
PROPOSAL 3- TO APPROVE AND RATIFY THE COMPANY'S ADOPTION OF THE XCEED INC.
MILLENNIUM STOCK OPTION PLAN
In January, 2000, the Board of Directors adopted the Xceed Inc. Millennium
New Employee Stock Option Plan (the "New Employee Plan"). The purpose of the
New Employee Plan was to provide for the grant of options to induce individuals
to become employees of the Company and to offer such new employees incentives to
contribute to the Company's progress and to promote the Company's best
interests. The New Employee Plan provides for the grant of options
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that qualify as incentive stock options ("ISOs") under the Internal Revenue Code
of 1986, as amended (the "Code") and options that do not so qualify ("NQSOs").
Pursuant to the terms of the New Employee Plan, the Company may grant options
exercisable to purchase up to 3,000,000 shares of Common Stock. As of March 3,
2000, the Company had granted options exercisable to purchase up to 555,800
shares of Common Stock under the New Employee Plan. Such options become
exercisable one year after the date of grant, are exercisable over a four year
period in equal annual increments and expire ten years from the date of grant.
None of the options are currently exercisable. The exercise prices of the
options granted to date range from $[ ] to $[ ].
------- --------
The Board of Directors has authorized amendment of the New Employee Plan to
provide for the grant of options thereunder to additional categories of
participants as set forth in the Xceed Inc. Millennium Stock Option Plan, a copy
of which has been attached hereto as Exhibit A (the "Millennium Plan") subject
to stockholder approval and ratification as contemplated herein. As amended, the
Millennium Plan provides for the grant of ISOs and NQSOs to officers, directors,
existing employees and consultants of the Company. Pursuant to the rules and
regulations of the Nasdaq National Market System, the foregoing amendment
requires approval of the stockholders of the Company.
The following summary of the material provisions of the Millennium Plan set
forth herein is not intended to be complete and is qualified in its entirety by
reference to such plan, a copy of which is attached hereto as Exhibit A.
General
The Millennium Plan provides for the grant of ISOs and NQSOs with respect
to, in the aggregate, up to 3,000,000 shares of Common Stock (which number is
subject to adjustment in the event of stock dividends, stock splits and other
similar events). To the extent that an ISO or NQSO is not exercised within the
period of exercisability specified therein, it will expire as to the then
unexercised portion. If any ISO or NQSO terminates prior to exercise thereof
and during the duration of the Millennium Plan, the shares of Common Stock as to
which such option or right was not exercised will again become available under
the Millennium Plan for the grant of additional options or rights to any
eligible employee. The shares of Common Stock subject to the Millennium Plan
may be made available from authorized but unissued shares, treasury shares, or
both. In the event that the Millennium Plan is not approved and ratified by the
stockholders, the New Employee Plan shall remain in force without amendment and
any options granted thereunder shall automatically be deemed to be NQSOs.
As of March 3, 2000, an aggregate of persons (none of
-----------------
whom are directors or executive officers) were eligible to participate in the
New Employee Plan. Upon amendment of such plan as set forth in the Millennium
Plan, all executive officers and directors will be eligible to receive options,
provided that non-employees will only be entitled to receive NQSOs.
Administration
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Pursuant to its terms, the Millennium Plan may be administered by: (a) the
Board of Directors; or (b) in the discretion of the Board of Directors, a
committee (the "Committee") consisting of two or more members of the Board of
Directors, each of whom must be a "Non-Employee" director as such term is
defined by Rule 16b-3 (as amended from time to time, "Rule 16b-3") under the
Exchange Act. The Board of Directors or the Committee (by a majority vote or, in
the case of two members, by unanimous vote) generally has the authority to
determine the individuals to whom and the date on which options are to be
granted, the number of shares of stock to be subject to each option, the
exercise price of such options, the terms of any vesting or forfeiture schedule
and the other terms and provisions of each option. Currently, each of the
Company's stock option plans is administered by the Compensation Committee.
Section 16(b) Compliance
It is intended that transactions pursuant to the Millennium Plan will
satisfy the conditions of Rule 16b-3, as amended, promulgated under Section 16
of the Exchange Act. Section 16(b) of the Exchange Act provides that any so-
called "short-swing profits," that is, a profit realized by an officer, director
or owner of ten percent (10%) or more of the outstanding securities on a
purchase and a sale of stock within a six-month period, are recoverable by the
issuer of the securities. Although the application of Section 16(b) (and the
rules promulgated thereunder) is complex, Rule 16b-3 generally mitigates the
impact of Section 16(b) by providing an exemption from the liability provisions
for transactions that satisfy the conditions of Rule 16b-3.
Eligibility and Extent of Participation
ISOs may be granted pursuant to the Millennium Plan only to employees
(including officers and directors) of the Company (and its subsidiaries). NQSOs
may be granted pursuant to the Millennium Plan to officers, directors, employees
or consultants of the Company (and its subsidiaries).
There is no minimum number of shares of Common Stock with respect to which
an option may be granted. However, if the aggregate fair market value (as of
the time of grant) of shares of Common Stock with respect to which ISOs are
exercisable for the first time by any individual during any calendar year (under
all stock option plans of the Company) exceeds $100,000, such excess options
shall be treated as NQSOs.
Purchase Price and Exercise of Options
The price at which shares of Common Stock subject to an option may be
purchased is determined by the Board of Directors (or the Committee); however,
the exercise price of shares of Common Stock issuable upon exercise of an ISO
may not be less than one hundred percent (100%) of the fair market value of the
Common Stock on the date of grant. Additionally, if an ISO is granted to an
optionee who owns more than ten percent (10%) of the voting power of the capital
stock of the Company, the minimum exercise price may not be less than one
hundred ten percent (110%) of the fair market value of the Common Stock on the
date of grant. Any cash proceeds received by the Company from the exercise of
the options will be used for general corporate purposes.
Expiration and Transfer of Options
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The Board of Directors (or the Committee) has the sole discretion to fix
the period within which any ISO or NQSO may be exercised. Any ISO granted under
the Millennium Plan to a ten percent (10%) or less stockholder and any NQSO
shall be exercised during a period of not more than ten years from the date of
grant and any ISO granted to a greater than ten percent (10%) stockholder shall
be exercised within five years from the date of grant. No ISO may be granted
under the Millennium Plan more than ten years after the date of adoption of the
Millennium Plan.
Options granted under the Millennium Plan are not transferable except upon
death. Options generally may be exercised only while the optionholder is
employed by the Company, or in some cases, within three months of termination of
employment. In the event of disability of an optionholder, options may be
exercised to the extent of the accrued right to exercise the option within one
year of termination of employment due to disability. In the event of the death
of an optionholder, options may be exercised subject to expiration of the option
within three years after the date of death, to the extent of the accrued right
to exercise the option at the date of death.
Upon a reorganization, merger or consolidation of the Company as a result
of which the outstanding Common Stock is changed into or exchanged for cash or
property or securities not of the Company's issue, or upon a sale of
substantially all the property of the Company, the Millennium Plan will
terminate and all outstanding options previously granted thereunder shall
terminate, unless provision is made in connection with such transaction for the
continuance of the Millennium Plan or for the assumption of options theretofore
granted. If the Millennium Plan and unexercised options are to terminate
pursuant to such transaction, persons owning any unexercised portions of options
then outstanding will have the right, prior to the consummation of the
transaction, to exercise the unexercised portions of their options, including
the portions thereof which would, but for such transaction, not yet be
exercisable.
Federal Income Tax Considerations
In the case of ISOs, no taxable gain will be realized by an optionholder
upon grant or exercise of the option and the Company will not be entitled to a
tax deduction at the time any such option is granted or exercised. However, the
excess of the fair market value of any Common Stock received over the exercise
price will constitute an adjustment in computing alternative minimum taxable
income at the time of the transfer of stock pursuant to the exercise of the
option, or if later, at the earlier of the time that the stock is transferable
or is not subject to a substantial risk of forfeiture.
The treatment for federal income tax purposes of NQSOs depends on whether
the option has a readily ascertainable fair market value at the time it is
granted. Because the NQSOs are not actively traded on an established market and
because it is likely that the NQSOs will be nontransferable by the optionholder
or will not be immediately exercisable, it is expected that the NQSOs will not
have a readily ascertainable fair market value. If an NQSO does not have a
readily ascertainable fair market value at the time of grant, there is no
taxable event at grant; rather, the excess of: (i) the fair market value of the
Common Stock on the date it is acquired pursuant to exercise of the option over
(ii) the exercise price, plus the amount, if any, paid for the option must be
included in the optionee's gross income at the time of the receipt of stock
pursuant to exercise of the option, or if later, at the earlier of the time that
the stock is transferable or is not subject to a substantial risk of forfeiture.
If stock received pursuant to the exercise of an NQSO is not taxable at receipt
because the stock is nontransferable and subject to a substantial risk of
forfeiture, the
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optionee may nevertheless elect to include such amount in gross income when the
stock is received pursuant to exercise of the option.
Under Section 280G of the Code, certain persons who receive compensation
payments in connection with a change in control of a company may be subject to a
twenty percent (20%) excise tax and the issuer may lose its tax deduction with
respect to such payments. These rules may apply to options and rights granted
under the Millennium Plan. The determination of the application of these rules
will depend upon a number of factual maters not determinable at this time. It
should be realized, however, that these rules may affect the ability of the
Company to secure a tax deduction on the exercise of certain NQSOs granted under
the Millennium Plan.
The tax consequences summarized above may change in the event of amendment
to the Code or the regulations adopted thereunder.
Exercise of Options
Generally, an option will be exercised by the tender of written notice of
the optionholder's intention to exercise, and payment in cash of the aggregate
exercise price for the shares of Common Stock for which the option is being
exercised. The Board of Directors (or the Committee) may, however, permit an
optionee to pay all or a portion of the exercise price by delivering to the
Company shares of Common Stock having an aggregate fair market value at least
equal to such aggregate exercise price. An option may also be exercised by
tender to the Company of a written notice of exercise together with advice of
the delivery of an order to a broker to sell part or all of the shares of Common
Stock subject to such exercise notice and an irrevocable order to such broker to
deliver to the Company sufficient proceeds from the sale of such shares to pay
the exercise price and any withholding taxes (a "cashless exercise") provided
all documentation and procedures are approved in advance by the Board of
Directors (or the Committee). The Company has the authority under the
Millennium Plan to assist any employee of the Company with the payment of the
purchase price of the Common Stock by lending the amount of the purchase price
to the employee, on terms, including rate of interest and security for the loan,
as the Board of Directors (or the Committee) shall authorize.
Amendments to the Millennium Plan
The Board of Directors may at any time terminate the Millennium Plan or
make such amendments thereto as its deems advisable and in the best interests of
the Company, without action on the part of the Company's stockholders, unless
such approval is required pursuant to Section 422 of the Code or other federal
or state law, rule or regulation and, provided that, no such action may be taken
if it affects or impairs the rights of an individual holding options previously
granted (absent such holder's consent). Such amendments may include, without
limitation, changes in the number of shares reserved for issuance under the
plan, the class or classes of individuals eligible to participate therein and
the manner of administration and duration of the plan.
Vote Required for Approval
Approval and ratification of the Millennium Plan will require the
affirmative vote of the holders of at least a majority of the outstanding shares
of Common Stock entitled to vote thereon. The enclosed proxy will be voted as
specified, but if no specification is made with respect to the proposal, it will
be voted in favor of the proposal to approve the Millennium Plan.
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The Board of Directors recommends a vote FOR approval and ratification of
the Xceed Inc. Millennium Stock Option Plan as set forth in Exhibit A hereto,
and, unless marked to the contrary, proxies received from stockholders will be
voted in favor of such plan.
PROPOSAL 4 - AMENDMENT TO
CERTIFICATE OF INCORPORATION
The Company's Certificate of Incorporation currently authorizes the
issuance of up to 30,000,000 shares of Common Stock. As of March 3, 2000,
21,428,230 shares of Common Stock were issued and outstanding and approximately
[ ] shares were subject to currently outstanding stock options, leaving
----------
approximately [ ] shares available for other uses.
-----------
The Board of Directors is proposing an amendment to the Certificate of
Incorporation to increase the number of authorized shares of Common Stock from
30,000,000 to 100,000,000. If the stockholders approve this proposal, the
Fourth Article of the Company's Certificate of Incorporation will be amended to
read in its entirety as follows:
FOURTH: The corporation shall be authorized to issue the following
shares:
Class Number of Shares Par Value
----- ---------------- ---------
COMMON 100,000,000 $.01
BLANK CHECK PREFERRED 1,000,000 $.05
All authorized but unissued shares of Common Stock will be available for
issuance from time to time for any proper purpose approved by the Board of
Directors (including issuances in connection with stock option plans, future
stock splits or dividends and issuances to raise capital or effect
acquisitions). The Board of Directors does not presently intend to seek further
stockholder approval of any particular issuance unless such approval is required
by law or the rules of The Nasdaq Stock Market.
Stockholders do not have any preemptive or similar rights to subscribe for
or purchase any additional shares of Common Stock that may be issued in the
future, and therefore, future issuances of Common Stock may, depending on the
circumstances, have a dilutive effect on the earnings per share, voting power
and other interests of the existing stockholders.
The proposal could have an anti-takeover effect, although that is not its
intention. For example, if the Company were the subject of a hostile takeover
attempt, it could try to impede the takeover by issuing shares of Common Stock,
thereby diluting the voting power of the other outstanding shares and increasing
the potential cost of the takeover. The availability of this defensive strategy
to the Company could discourage unsolicited takeover attempts, thereby limiting
the opportunity for the Company's stockholders to realize a higher price for
their shares than is generally available in the public markets. The Board of
Directors is not aware of any attempt, or contemplated attempt, to acquire
control of the Company, and this proposal is not being presented with the intent
that it be utilized as a type of anti-takeover device.
The Board of Directors recommends a vote FOR the proposed amendment to the
Company's Certificate of Incorporation.
18
<PAGE>
VOTING PROCEDURES
Shares can be voted only if the stockholder is present in person or by
proxy. Whether or not you plan to attend the Annual Meeting in person, you are
encouraged to sign and return the enclosed proxy card in the prepaid envelope.
If you sign your proxy, but do not mark your choices, your shares will be voted
for the persons nominated for election as directors, in favor of approving the
Xceed Inc. Millennium Stock Option Plan, in favor of ratifying the appointment
of Deloitte & Touche as the Company's independent certified public accountants
and in favor of the amendment to the Company's Certificate of Incorporation.
You can revoke your proxy at any time before it is exercised. To do so,
you must give written notice of revocation to our Corporate Secretary, submit
another properly executed proxy with a more recent date, or vote in person at
the Annual Meeting.
VOTE REQUIRED FOR APPROVAL OF THE PROPOSALS
A "quorum" is the presence at the meeting, in person or by proxy, of the
holders of a number of shares entitling them to exercise a majority of the
voting power of the outstanding shares of Common Stock entitled to vote at the
Annual Meeting. There must be a quorum for the meeting to be held. Abstentions
are counted for the purposes of determining the presence of a quorum, but are
not considered a vote cast under Delaware law.
The affirmative vote of a plurality of the votes cast at the Annual Meeting
is required to elect directors. The affirmative vote of a majority of the votes
cast at the Annual Meeting is required for ratification of the appointment of
independent certified public accountants and for approval of the Xceed Inc.
Millennium Stock Option Plan. The affirmative vote of the holders of a
majority of the outstanding shares of Common Stock is required to approve the
amendment to the Company's Certificate of Incorporation.
STOCKHOLDER PROPOSALS
To be considered for inclusion in our proxy statement for the 2001 annual
meeting, director nominations and other proposals of stockholders must be
submitted in writing to our Corporate Secretary on or before . For any
--------
director nomination or other proposal that is not submitted for inclusion in
next year's proxy statement but is instead sought to be presented directly to
the stockholders at the 2001 annual meeting, management will be able to vote
proxies in its discretion if the Company:
. receives notice of the proposal before the close of business on
--------
and advises stockholders in the proxy statement for the 2001 annual
meeting about the nature of the proposal and how management intends to
vote on the proposal, or
19
<PAGE>
. does not receive notice of the proposal before the close of business on
2001.
----------
All director nominations and other proposals of shareholders with regard to
the 2001 annual meeting should be submitted by certified mail, return receipt
requested, to Xceed Inc., 488 Madison Avenue, 3rd Floor, New York, New York
10022, Attention: Secretary.
---------
OTHER MATTERS
The management of the Company knows of no other business that will be
presented for consideration at the meeting, except for the possible presentation
of a stockholder proposal that has been omitted from the Proxy Statement in
accordance with the rules of the Securities and Exchange Commission. However,
if any other matters, including any omitted stockholder proposals, are properly
presented at the meeting, it is the intention of the proxy holders named in the
accompanying proxy card to vote such proxies in accordance with their best
judgment.
ANNUAL REPORT TO STOCKHOLDERS
The Company's annual report on Form 10-K for the fiscal year ended August
31, 1999 as filed with the Securities and Exchange Commission, which is not a
part of the proxy soliciting material, is being delivered to you with this proxy
statement. Additionally, the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended November 30, 1999 is available upon request. All requests
should be directed to Alex Alaminos, Stockholder Relations, at (212) 419-1200.
In addition, the Annual Report and the Quarterly Report as well as additional
filings with the Securities and Exchange Commission are available through our
website at www.xceed.com.
EXPENSE OF SOLICITATION
The cost of soliciting proxies, which also includes the preparation,
printing and mailing of this Proxy Statement, will be borne by the Company.
Solicitation will be made by the Company primarily through the mail. The
Company may also retain the services of a proxy solicitation firm. The Company
has not made any arrangements to do so as of the date of this Proxy Statement,
and does not presently have estimates as to the cost of such services.
Directors, officers and regular employees of the Company may solicit proxies
personally, by telephone or telegram. The Company will request brokers and
nominees to obtain voting instructions of beneficial owners of stock registered
in their names and will reimburse them for any expenses incurred in connection
therewith.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
20
<PAGE>
PLEASE DATE, SIGN AND RETURN THE PROXY CARD AT YOUR EARLIEST CONVENIENCE IN THE
ENCLOSED RETURN ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
A PROMPT RETURN OF YOUR PROXY CARD WILL BE APPRECIATED AS IT WILL SAVE THE
EXPENSE OF FURTHER MAILINGS.
By Order of the Board of Directors,
Werner E. Haase, Co-Chairman
New York, New York
April ___, 20000
21
<PAGE>
EXHIBIT A
XCEED INC.
MILLENNIUM STOCK OPTION PLAN
ARTICLE I
---------
ESTABLISHMENT AND PURPOSE
-------------------------
Section 1.1. Xceed Inc., a Delaware corporation (the "Company"), hereby
establishes a stock option plan to be named the Millennium Stock Option Plan
(the "Plan").
Section 1.2. The purpose of this Plan is to induce persons to whom the
Company determines to extend offers of employment to agree to become employees
of the Company (or any of its subsidiaries), to offer said persons incentives to
contribute to the Company's progress, and to encourage said persons to promote
the best interests of the Company. This Plan provides for the grant to persons
who agree to become employees of the Company options to purchase shares of
common stock of the Company, par value $.01 per share (the "Common Stock") which
qualify as incentive stock options ("Incentive Options") under Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), as well as options
which may not be so qualified ("Non-Qualified Options"). Incentive Options and
Non-Qualified Options may be collectively referred to hereinafter as the
"Options" as the context may require. Persons granted Options hereunder may be
referred to hereinafter as the "Optionees."
Section 1.3. All Options granted on or after the date that this Plan has
been approved and adopted by the Company's board of directors (the "Board of
Directors") shall be governed by the terms and conditions of this Plan unless
the terms of any such Option specifically indicate that it is not to be so
governed.
Section 1.4. Any Option granted hereunder which is intended to qualify as
an Incentive Option which, for any reason whatsoever, fails to so qualify, shall
be deemed to be a Non-Qualified Option granted hereunder.
Section 1.5. Upon approval and ratification of this Plan by the
stockholders of the Company, this Plan shall be automatically amended in its
scope to include, as participants, officers, directors, consultants, and
existing employees; provided, however, that until such time as stockholder
approval and ratification of this Plan occurs, only new employees shall be
eligible to participate herein as set forth in Section 1.2 above.
ARTICLE II
----------
ADMINISTRATION
--------------
Section 2.1. All determinations hereunder concerning the selection of
persons eligible to receive awards under this Plan and determinations with
respect to the timing, pricing and amount of an award hereunder (other than
pursuant to a non-discretionary formula hereinafter set forth, shall be made by
an administrator (the "Administrator"). The Administrator shall be either: (a)
the Board of Directors, or (b) in the discretion of the Board of Directors, a
committee of not
1
<PAGE>
less than two members of the Board of Directors (the "Committee"), each of whom
is a "Non-Employee" Director as such term is defined in Rule 16b-3 (as such rule
may be amended from time to time, "Rule 16b-3") under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). In the event this Plan is
administered by the Committee, the Committee shall select one of its members to
serve as the chairman thereof and shall hold its meetings at such times and
places as it may determine. In such case, a majority of the total number of
members of the Committee shall be necessary to constitute a quorum; and (i) the
affirmative act of a majority of the members present at any meeting at which a
quorum is present, or (ii) the approval in writing by a majority of the members
of the Committee, shall be necessary to constitute action by the Committee.
Section 2.2. The provisions hereof relating to Incentive Options are
intended to comply in every respect with Section 422 of the Code ("Section 422")
and the regulations promulgated thereunder. In the event that any future statute
or regulation shall modify Section 422, this Plan shall be deemed to incorporate
by reference such modification. Any agreement relating to the grant of any
Incentive Option hereunder, which Option is outstanding and unexercised at the
time that any modifying statute or regulation becomes effective, shall also be
deemed to incorporate by reference such modification and no notice of such
modification need be given to the Optionee. Any agreement relating to an
Incentive Option granted hereunder shall provide that the Optionee hold the
stock received upon exercise of such Incentive Option for a minimum of two years
from the date of grant of the Incentive Option and one year from the date of
exercise of such Incentive Option, absent the written approval, consent or
waiver of the Administrator.
Section 2.3. If any provision of this Plan is determined to disqualify the
shares of Common Stock purchasable upon exercise of an Incentive Option granted
hereunder from the special tax treatment provided by Section 422, such provision
shall be deemed to incorporate by reference the modification required to qualify
such shares of Common Stock for said tax treatment.
Section 2.4. The Company shall grant Options hereunder in accordance with
determinations made by the Administrator pursuant to the provisions hereof. All
Options granted pursuant hereto shall be clearly identified as Incentive Options
or Non-Qualified Options. The Administrator may from time to time adopt (and
thereafter amend or rescind) such rules and regulations for carrying out this
Plan and take such action in the administration of this Plan, not inconsistent
with the provisions hereof, as it shall deem proper. The Board of Directors or,
subject to the supervision of the Board of Directors, the Committee, as the
Administrator, shall have plenary discretion, subject to the express provisions
of this Plan, to determine which officers, directors, employees and consultants
shall be granted Options, the number of shares subject to each Option, the time
or times when an Option may be exercised (whether in whole or in installments),
the terms and provisions of the respective agreements relating to the grant of
Options (which need not be identical), including such terms and provisions which
may be amended from time to time as shall be required, in the judgment of the
Administrator, to conform to any change in any law or regulation applicable
hereto, and to make all other determinations deemed necessary or advisable for
the administration of this Plan. The interpretation and construction of any
provision of this Plan by the Administrator (unless otherwise determined by the
Board of Directors) shall be final, conclusive and binding upon all persons.
2
<PAGE>
Section 2.5. No member of the Administrator shall be liable for any action
or determination made in good faith with respect to administration of this Plan
or the Options granted hereunder. Members of the Board of Directors and/or the
Committee, as the Administrator, shall be indemnified by the Company, pursuant
to the Company's bylaws, for any expenses, judgments or other costs incurred as
a result of a lawsuit filed against such member claiming any rights or remedies
arising out of such member's participation in the administration of this Plan.
ARTICLE III
-----------
TOTAL NUMBER OF SHARES TO BE OPTIONED
-------------------------------------
Section 3.1. There shall be reserved for issuance or transfer upon
exercise of the Options granted from time to time hereunder an aggregate of
3,000,000 shares of Common Stock (subject to adjustment as provided in Article
VIII hereof). The shares of Common Stock issued upon exercise of any Option
granted hereunder may be shares of Common Stock previously issued and reacquired
by the Company at any time or authorized but unissued shares of Common Stock, as
the Board of Directors from time to time may determine.
Section 3.2. In the event that any Options outstanding under this Plan for
any reason expire or are terminated without having been exercised in full, the
unpurchased shares of Common Stock subject to such Option and any such
surrendered shares of Common Stock may again be available for transfer
hereunder.
Section 3.3. No Options shall be granted pursuant hereto to any Optionee
after the tenth anniversary of the earlier of: (a) the date that this Plan is
adopted by the Board of Directors, or (b) the date that this Plan is approved by
the stockholders of the Company.
ARTICLE IV
----------
ELIGIBILITY
-----------
Section 4.1. Options may be granted hereunder to employees of the Company
(or any of its subsidiaries) selected by the Administrator. For purposes of
determining who is an employee with respect to eligibility hereunder, the
provisions of Section 422 of the Code shall govern. The Administrator may
determine (in its sole discretion) that any person who would otherwise be
eligible to be granted Options shall, nonetheless, be ineligible to receive any
award under this Plan.
Section 4.2. The Administrator shall (in its discretion) determine the
persons to be granted Options, the time or times at which Options shall be
granted, the number of shares of Common Stock subject to each Option, the terms
of a vesting or forfeiture schedule, if any, the type of Option issued, the
period during which such Options may be exercised, the manner in which Options
may be exercised and all other terms and conditions of the Options; provided,
--------
3
<PAGE>
however, no Option shall be granted which has terms or conditions inconsistent
- --------
with those stated in Articles V and VI hereof. Relevant factors in making such
determinations may include the value of the services rendered by the respective
Optionee, his or her present and potential contributions to the Company, and
such other factors which are deemed relevant by the Administrator in
accomplishing the purpose of this Plan.
ARTICLE V
---------
TERMS AND CONDITIONS OF OPTIONS
-------------------------------
Section 5.1. Each Option granted under this Plan shall be evidenced by a
stock option certificate and agreement (the "Option Agreement") in a form
consistent with this Plan, provided that the following terms and conditions
shall apply:
(a) The price at which each share of Common Stock covered by an Option
may be purchased shall be set forth in the Option Agreement and shall be
determined by the Administrator, provided that the option price for any
Incentive Option shall not be less than the "fair market value" of the shares of
Common Stock at the time of grant determined. Notwithstanding the foregoing, if
an Incentive Option to purchase shares of Common Stock is granted hereunder to
an Optionee who, on the date of the grant, directly or indirectly owns more than
ten percent (10%) of the voting power of all classes of capital stock of the
Company (or its parent or subsidiary), not including the shares of Common Stock
obtainable upon exercise of the Option, the minimum exercise price of such
Option shall be not less than one hundred ten percent (110%) of the "fair market
value" of the shares of Common Stock on the date of grant determined in
accordance with Section 5.1(b) below.
(b) The "fair market value" shall be determined by the Administrator,
which determination shall be binding upon the Optionee, the Company and its
officers, directors, employees and consultants. The determination of the "fair
market value" shall be based upon the following: (i) if the Common Stock is not
listed and traded upon a recognized securities exchange and there is no report
of stock prices with respect to the Common Stock published by a recognized stock
quotation service, on the basis of the recent purchases and sales of the Common
Stock in arms-length transactions; (ii) if the Common Stock is not then listed
and traded upon a recognized securities exchange or quoted on the NASDAQ
National Market System, and there are reports of stock prices by a recognized
quotation service, upon the basis of the last reported sale or transaction price
of the Common Stock on the date of grant as reported by a recognized quotation
service, or, if there is no last reported sale or transaction price on that day,
then upon the basis of the mean of the last reported closing bid and closing
asked prices for the Common Stock on that day or on the date nearest preceding
that day; or (iii) if the Common Stock shall then be listed and traded upon a
recognized securities exchange or quoted on the NASDAQ National Market System,
upon the basis of the last reported sale or transaction price at which shares of
Common Stock were traded on such recognized securities exchange on the date of
grant or, if the Common Stock was not traded on such date, upon the basis of the
last reported sale or transaction price on the date nearest preceding that date.
The Administrator shall also consider such other factors relating to the "fair
market value" of the Common Stock as it shall deem appropriate.
4
<PAGE>
(c) For the purpose of determining whether an Optionee owns more than
ten percent (10%) of the voting power of all classes of stock of the Company, an
Optionee shall be considered to own those shares of stock which are owned
directly or indirectly through brothers and sisters (including half-blooded
siblings), spouse, ancestors and lineal descendants; and proportionately as a
shareholder of a corporation, a partner of a partnership, and/or a beneficiary
of a trust or an estate that owns shares of capital stock of the Company.
(d) Notwithstanding any other provision hereof, in accordance with the
provisions of Section 422(d) of the Code, to the extent that the aggregate "fair
market value" (determined at the time the Option is granted) of the shares of
Common Stock with respect to which Incentive Options (without reference to this
provision) are exercisable for the first time by any individual in any calendar
year under any and all stock option plans of the Company (and its subsidiary
corporations and its parent, if any) exceeds $100,000, such Options shall be
treated as Non-Qualified Options.
(e) An Optionee may, in the Administrator's discretion, be granted
more than one Option during the duration of this Plan and may be issued a
combination of Non-Qualified Options and Incentive Options.
(f) The duration of any Option shall be within the sole discretion of
the Administrator; provided, however, that any Incentive Option granted to a ten
--------- --------
percent (10%) or less stockholder or any Non-Qualified Option shall, by its
terms, be exercised within ten years after the date the Option is granted and
any Incentive Option granted to a greater than ten percent (10%) stockholder
shall, by its terms, be exercised within five years after the date the Option is
granted.
(g) An Option shall not be transferable by the Optionee other than by
will, or by the laws of descent and distribution. An Option may be exercised
during the Optionee's lifetime only by the Optionee.
(h) At least six (6) months shall elapse from the date on which an
Option is granted to an officer, director, or beneficial owner of more than ten
percent (10%) of the outstanding shares of Common Stock of the Company under
this Plan by the Administrator to the date on which any share of Common Stock
underlying such Option is sold, unless the Administrator otherwise consents in
writing.
ARTICLE VI
----------
EMPLOYMENT OR SERVICE OF OPTIONEE
---------------------------------
Section 6.1. If the employment or service of an Optionee is terminated for
cause, the option rights of such Optionee, both accrued and future, under any
then outstanding Option shall terminate immediately, subject to the provisions
of any employment agreement between the Company (or any subsidiary) and an
Optionee which, by its terms, provides otherwise. In the event that an employee
who is an Optionee hereunder has entered into a written employment
5
<PAGE>
agreement with the Company (or a subsidiary), "cause" shall have the meaning
attributed thereto in such employment agreement; otherwise, "cause" shall mean
incompetence in the performance of duties, disloyalty, dishonesty, theft,
embezzlement, unauthorized disclosure of patents, processes or trade secrets of
the Company, individually or as an employee, partner, associate, officer or
director of any organization. The determination of the existence and the proof
of "cause" shall be made by the Administrator and, subject to the review of any
determination made by the Administrator, such determination shall be binding on
the Optionee and the Company.
Section 6.2. Subject to the provisions of any employment agreement between
the Company (or a subsidiary) and an Optionee, if the employment or service of
an Optionee is terminated by either the Optionee or the Company for any reason
other than cause, death, or for disability (as defined in Section 22(e)(3) of
the Code or pursuant to the terms of such an employment agreement), the option
rights of such Optionee under any then outstanding Option shall, subject to the
provisions of Section 5.1(h) hereof, be exercisable by such Optionee at any time
prior to the expiration of the Option or within three months after the date of
such termination, whichever period of time is shorter, but only to the extent of
the accrued right to exercise an Option at the date of such termination.
Section 6.3. Subject to the provisions of any employment agreement between
the Company (or a subsidiary) and an Optionee, in the case of an Optionee who
becomes disabled (as defined by Section 22(e)(3) of the Code or pursuant to the
terms of such an employment agreement), the option rights of such Optionee under
any then outstanding Option shall, subject to the provisions of Section 5.1(h)
hereof, be exercisable by such Optionee at any time prior to the expiration of
the Option or within one year after the date of termination of employment or
service due to disability, whichever period of time is shorter, but only to the
extent of the accrued right to exercise an Option at the date of such
termination
Section 6.4. In the event of the death of an Optionee, the option rights
of such Optionee under any then outstanding Option shall be exercisable by the
person or persons to whom these rights pass by will or by the laws of descent
and distribution, at any time prior to the expiration of the Option or within
three years after the date of death, whichever period of time is shorter, but
only to the extent of the accrued right to exercise an Option at the date of
death. If a person or estate acquires the right to exercise an Option by bequest
or inheritance, the Administrator may require reasonable evidence as to the
ownership of such Option, and may require such consents and releases of taxing
authorities as the Administrator may deem advisable.
Section 6.5. The Administrator may also provide that an employee must be
continuously employed by the Company for such period of time as the
Administrator, in its discretion, deems advisable before the right to exercise
any portion of an Option granted to such employee will accrue, and may also set
such other targets, restrictions or other terms relating to the employment of
the Optionee which targets, restrictions, or terms must be fulfilled or complied
with, as the case may be, prior to the exercise of any portion of an Option
granted to any employee.
6
<PAGE>
Section 6.6. Options granted hereunder shall not be affected by any change
of duties or position, so long as the Optionee continues in the service of the
Company.
Section 6.7. Nothing contained in this Plan or in any Option granted
pursuant hereto shall confer upon any Optionee any right with respect to
continuance of employment or service by the Company nor interfere in any way
with the right of the Company to terminate the Optionee's employment or service
or change the Optionee's compensation at any time.
ARTICLE VII
-----------
PURCHASE OF SHARES
------------------
Section 7.1. Except as provided in this Article VII, an Option shall be
exercised by tender to the Company of the full exercise price of the shares of
Common Stock with respect to which an Option is exercised and written notice of
the exercise. The right to purchase shares of Common Stock shall be cumulative
so that, once the right to purchase any shares of Common Stock has accrued, such
shares or any part thereof may be purchased at any time thereafter until the
expiration or termination of the Option. A partial exercise of an Option shall
not affect the right of the Optionee to subsequently exercise his or her Option
from time to time, in accordance with this Plan, as to the remaining number of
shares of Common Stock subject to the Option. The purchase price payable upon
exercise of an Option shall be in United States dollars and shall be payable in
cash or by certified bank check. Notwithstanding the foregoing, in lieu of cash,
an Optionee may, with the approval of the Administrator, exercise his or her
Option by tendering to the Company shares of Common Stock owned by him or her
having an aggregate fair market value at least equal to the aggregate purchase
price. The "fair market value" of any shares of Common Stock so surrendered
shall be determined by the Administrator in accordance with Section 5.1(b)
hereof.
Section 7.2. Except as provided in Article VI above, an Option may not be
exercised unless the holder thereof is an employee of the Company at the time of
exercise.
Section 7.3. No Optionee or Optionee's executor, administrator, legatee,
or distributee or other permitted transferee, shall be deemed to be a holder of
any shares of Common Stock subject to an Option for any purpose whatsoever
unless and until such Option has been exercised and a stock certificate or
certificates for the shares of Common Stock purchased by the Optionee are issued
to the Optionee in accordance with the terms of this Plan. No adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distributions or other rights for which the record date is
prior to the date that any such stock certificate is issued, except as provided
in Article VIII hereof.
Section 7.4. If: (i) the listing, registration or qualification of the
Options issued hereunder or of any securities issuable upon exercise of such
Options (the "Subject Securities") upon any securities exchange or quotation
system or under federal or state law is necessary as a condition of or in
connection with the issuance or exercise of the Options; (ii) the consent or
approval of any governmental regulatory body is necessary as a condition of or
in connection with the issuance or exercise of the Options; or (iii) any other
consent or approval required by
7
<PAGE>
applicable law, rule or regulation is necessary as a condition of or in
connection with the issuance or exercise of the Options, the Company shall not
be obligated to deliver the certificates representing the Subject Securities or
to accept or to recognize an Option exercise unless and until such listing,
registration, qualification, consent or approval shall have been effected or
obtained. The Company will take reasonable action to so list, register, or
qualify the Options and the Subject Securities, or effect or obtain such consent
or approval, so as to allow for issuance and/or exercise.
Section 7.5. An Optionee may be required to represent to the Company as a
condition of his or her exercise of Options issued under this Plan that: (i) the
Subject Securities acquired upon exercise of his or her Option are being
acquired by him or her for investment purposes only and not with a view to
distribution or resale, unless counsel for the Company is then of the view that
such a representation is not necessary and is not required under the Securities
Act of 1933, as amended (the "Securities Act"), or any other applicable statute,
law, regulation or rule; and (ii) that the Optionee shall make no exercise or
disposition of an Option or of the Subject Securities in contravention of the
Securities Act, the Exchange Act of 1934, or the rules and regulations
thereunder. Optionees may also be required to provide (as a condition precedent
to exercise of an Option) such documentation as may be reasonably requested by
the Company to assure compliance with applicable law and the terms and
conditions of this Plan and the subject Option.
Section 7.6. An Option may be exercised by tender to the Administrator of
a written notice of exercise together with advice of the delivery of an order to
a broker to sell part or all of the shares of Common Stock subject to such
exercise notice and an irrevocable order to such broker to deliver to the
Company (or its transfer agent) sufficient proceeds from the sale of such shares
to pay the exercise price and any withholding taxes. All documentation and
procedures to be followed in connection with such a "cashless exercise" shall be
approved in advance by the Administrator.
ARTICLE VIII
------------
CHANGE IN NUMBER OF OUTSTANDING SHARES OF
-----------------------------------------
STOCK, ADJUSTMENTS, REORGANIZATIONS, ETC.
-----------------------------------------
Section 8.1. In the event that the outstanding shares of Common Stock of
the Company are hereafter increased or decreased or changed into or exchanged
for a different number of shares or kind of shares or other securities of the
Company or of another corporation by reason of reorganization, merger,
consolidation, recapitalization, reclassification, stock split, combination of
shares, or a dividend payable in capital stock, appropriate adjustment shall be
made by the Administrator in the number and kind of shares for the purchase of
which Options may be granted under this Plan, including the maximum number that
may be granted to any one person. In addition, the Administrator shall make
appropriate adjustments in the number and kind of shares as to which outstanding
Options, or portions thereof then unexercised, shall be exercisable, to the end
that the Optionee's proportionate interest shall be maintained as before the
occurrence to the unexercised portion of the Option and with a corresponding
adjustment in the option price per share. Any such adjustment made by the
Administrator shall be conclusive.
8
<PAGE>
Section 8.2. The grant of an Option hereunder shall not affect in any way
the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part of
its business or assets.
Section 8.3. Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company as a result of which the
outstanding securities of the class then subject to Options hereunder are
changed into or exchanged for cash or property or securities not of the
Company's issue, or upon a sale of substantially all the property of the Company
to an association, person, party, corporation, partnership, or control group as
that term is construed for purposes of the Exchange Act, this Plan shall
terminate, and all Options theretofore granted hereunder shall terminate, unless
provision be made in writing in connection with such transaction for the
continuance of this Plan and/or for the assumption of Options theretofore
granted, or the substitution for such Options of options covering the stock of a
successor employer corporation, or a parent or a subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and prices, in which
event this Plan and options theretofore granted shall continue in the manner and
under the terms so provided. If this Plan and unexercised Options shall
terminate pursuant to the foregoing sentence, all persons owning any unexercised
portions of Options then outstanding shall have the right, at such time prior to
the consummation of the transaction causing such termination as the Company
shall designate, to exercise the unexercised portions of their Options,
including the portions thereof which would, but for this Section 8.3 not yet be
exercisable.
ARTICLE IX
----------
DURATION, AMENDMENT AND TERMINATION
-----------------------------------
Section 9.1. The Board of Directors may at any time terminate this Plan or
make such amendments hereto as it shall deem advisable and in the best interests
of the Company, without action on the part of the stockholders of the Company
unless such approval is required pursuant to Section 422 of the Code or the
regulations thereunder; provided, however, that no such termination or amendment
-------- -------
shall, without the consent of the individual to whom any Option shall
theretofore have been granted, affect or impair the rights of such individual
under such Option. Pursuant to (S) 422(b) of the Code, no Incentive Option may
be granted pursuant to this Plan after ten years from the date this Plan is
adopted or the date this Plan is approved by the stockholders of the Company,
whichever is earlier.
9
<PAGE>
ARTICLE X
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RESTRICTIONS
------------
Section 10.1. Any Options and shares of Common Stock issued pursuant
hereto shall be subject to such restrictions on transfer and limitations as
shall, in the opinion of the Administrator, be necessary or advisable to assure
compliance with the laws, rules and regulations of the United States government
or any state or jurisdiction thereof. In addition, the Administrator may in any
Option Agreement impose such other restrictions upon the disposition or exercise
of an Option or upon the sale or other disposition of the shares of Common Stock
deliverable upon exercise thereof as the Administrator may, in its sole
discretion, determine. By accepting the grant of an Option pursuant hereto, each
Optionee shall agree to any such restrictions.
Section 10.2. Any certificate evidencing shares of Common Stock issued
pursuant to exercise of an Option shall bear such legends and statements as the
Administrator, the Board of Directors or counsel to the Company shall deem
advisable to assure compliance with the laws, rules and regulations of the
United States government or any state or jurisdiction thereof. No certificate
evidencing shares of Common Stock shall be delivered pursuant to exercise of the
Options granted under this Plan until the Company has obtained such consents or
approvals from such regulatory bodies of the United States government or any
state or jurisdiction thereof as the Administrator, the Board of Directors or
counsel to the Company deems necessary or advisable.
ARTICLE XI
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FINANCIAL ASSISTANCE
--------------------
Section 11.1 The Company is vested with the authority hereunder to assist
any employee to whom an Option is granted hereunder (including any officer or
director of the Company or any of its subsidiaries who is also an employee) in
the payment of the purchase price payable upon exercise of such Option, by
lending the amount of such purchase price to such employee on such terms and at
such rates of interest and upon such security (or unsecured) as shall have been
authorized by or under authority of the Board of Directors. Any such assistance
shall comply with the requirements of Regulation G promulgated by the Board of
the Federal Reserve System, as amended from time to time, and any other
applicable law, rule or regulation.
ARTICLE XII
-----------
APPLICATION OF FUNDS
--------------------
Section 12.1. The proceeds received by the Company from the issuance and
sale of Common Stock upon exercise of Options granted pursuant to this Plan are
to be added to the general funds of the Company and used for its corporate
purposes as determined by the Board of Directors.
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<PAGE>
ARTICLE XIII
------------
EFFECTIVENESS OF PLAN
---------------------
Section 13.1 This Plan shall become effective upon adoption by the Board
of Directors, and Options may be issued hereunder from and after that date
subject to the provisions of Section 3.3 above. This Plan must be approved by
the Company's stockholders in accordance with the applicable provisions
(relating to the issuance of stock or options) of the Company's governing
documents and state law or, if no such approval is prescribed therein, by the
affirmative vote of the holders of a majority of the votes cast at a duly held
stockholders meeting at which a quorum representing a majority of all the
Company's outstanding voting stock is present and voting (in person or by proxy)
or, without regard to any required time period for approval, by any other method
permitted by Section 422 of the Code and the regulations thereunder. If such
stockholder approval is not obtained within one year of the adoption of this
Plan by the Board of Directors or within such other time period required under
Section 422 of the Code and the regulations thereunder, this Plan shall remain
in force; provided however, that all Options issued and issuable hereunder shall
-------- -------
automatically be deemed to be Non-Qualified Options.
IN WITNESS WHEREOF, pursuant to the approval of this Plan by the Board of
Directors, this Plan is executed and adopted this _____ day of January, 2000.
XCEED INC.
[CORPORATE SEAL]
By: _________________________________________
Werner G. Haase, Chief Executive Officer
ATTEST:
By: ________________________
J. Gandolfo, Secretary
11
<PAGE>
PROXY
XCEED INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Scott A. Mednick and Werner G. Haase, jointly
and individually, as proxies, each with full power of substitution, and hereby
authorizes them to represent and to vote, as directed below, all shares of
common stock, par value $0.01 per share, of Xceed Inc., a Delaware corporation
(the "Company"), that the undersigned would be entitled to vote if personally
present at the Annual Meeting of Stockholders of the Company to be held on
Thursday, May 4, 2000, or any adjournments thereof, as follows on the reverse
side.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
1
<PAGE>
[X] PLEASE MARK VOTES AS IN THIS SAMPLE
1. THE ELECTION OF SIX DIRECTORS TO SERVE UNTIL THE NEXT ANNUAL MEETING OF
STOCKHOLDERS.
[ ] FOR ALL NOMINEES LISTED BELOW [ ] WITHHOLD AUTHORITY FOR ALL
NOMINEES LISTED BELOW
* INSTRUCTION: To withhold authority to vote for a given nominee, strike
through the nominee's name:
<TABLE>
<CAPTION>
Scott A. Mednick Werner G. Haase William N. Zabit Norman Docteroff John A. Bermingham Terry A. Anderson
<S> <C> <C>
2. THE RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE, LLP, AS THE
COMPANY'S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. THE ADOPTION OF THE XCEED INC. MILLENNIUM STOCK OPTION PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. THE APPROVAL OF THE AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
Dated: ___________________, 2000 ______________________________________
Signature
Dated: ___________________, 2000 ______________________________________
Signature if held jointly
* NOTE: When shares are held by joint tenants, both should sign. Persons
signing as executor, administrator, trustee, etc. should so indicate. Please
sign exactly as the name appears on the proxy.
IF NO CONTRARY SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS
ONE, TWO, THREE and FOUR.
PLEASE MARK, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
2
