<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:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule 14A-
6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)(S) 240.14a-11(c) or (S)(S) 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:
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<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 seven directors to serve until the next annual meeting of
stockholders;
2. To ratify the appointment of Deloitte & Touche, LLP, as the Company's
independent certified public accountants;
3. To approve the adoption of the Xceed Inc. Millennium Stock Option
Plan;
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 11, 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 11,
2000.
Holders of record of the Company's common stock, par value $.01 per share
(the "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 Common
Stock 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:
. each person known to us who beneficially owns more than 5% of the
outstanding shares of our Common Stock;
. each of our directors (and nominees for director) and named executive
officers; and
. all of our directors (and nominees for director) 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.
<PAGE>
<TABLE>
<CAPTION>
Number of Percentage
Shares of Common
Beneficially Stock
Name and Address of Beneficial Owner Owned Outstanding
- ------------------------------------ ------------ -----------
<S> <C> <C>
Werner G. Haase(1)(2)................................ 2,410,150 10.7%
Nurit Kahane Haase(2)................................ 2,410,150 10.7%
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, NJ 07004
John A. Bermingham(4)................................ 100,000 *
9 Raintree Court
Kinnelon, NJ 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
Edward A. Bennett.................................... -- --
725 Washington Street
New York, NY 10014
Directors and Executive Officers as a Group (13 per-
sons)............................................... 7,611,426 30.11%
</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--Option/SAR
Grants in Last Fiscal Year."
(2) Werner Haase owns 1,333,200 shares of Common Stock, which represents 5.9%
of the Common Stock outstanding. Nurit Kahane Haase owns 1,076,950 shares
of Common Stock, which represents 4.8% of the Common Stock outstanding. Mr.
Haase disclaims any beneficial interest in the shares held by his wife
Nurit Kahane Haase. Mrs. 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 $3.44 per share and 50,000 shares issuable upon the
exercise of options at an exercise price of $11.50 per share, which
Mr. Bermingham has received as compensation for serving as a member of the
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
the Company 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 the 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.
2
<PAGE>
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 and will be increased
to seven members after the Annual Meeting. 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
except for Mr. Bennett presently serve on the Board of 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 Co-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 a
director 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 agreement may be renewed upon the mutual agreement of the Company and
Mr. Mednick. 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 by both Adweek and
The Advertising Club of New York. 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.
3
<PAGE>
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.
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 1998
Age 52
Mr. Anderson was appointed a director of the Company in 1998. Mr. Anderson
is a journalist, teacher, writer and nationally known speaker. Mr. Anderson has
been a visiting professor at Ohio University's Scripps School of Journalism
since 1998. From 1995 until 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.
Edward A. Bennett
Nominee for Director
Age 53
Mr. Bennett is currently a principal of 212 Ventures, a venture capital fund
and the Chairman of Mobilenet, a wireless solutions company. From 1997 to 1999,
Mr. Bennett was President and Chief Executive Officer of Bennett Media
Collaborative, a media consulting company. From June 1997 to February 2000, Mr.
Bennett served as a Director and Vice Chairman of methodfive, LLC, which was
acquired by the Company in February 2000. Mr. Bennett also served as President
and Chief Executive Officer of Prodigy Ventures, an Internet/technology
investment firm from June 1996 to June 1997 and President and Chief Executive
Officer of Prodigy, Inc. from 1995 to June 1996. From 1989 to 1994, Mr. Bennett
served as President and Chief
4
<PAGE>
Executive Officer of VH-1 Network and from 1979 to 1989 as Executive Vice
President and Chief Operating Officer of Viacom Cable. Mr. Bennett is a
director of SoftNet Systems, Inc., Engage Technologies Inc. and Real Names
Corp.
The Board of Directors recommends that stockholders vote FOR each of the
nominees for director set forth above.
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 one
meeting and the Compensation Committee held three 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 per share,
the closing sale price of the Common Stock as quoted on 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.
5
<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
---- --- -------------------------
<C> <C> <S>
Scott A. Mednick............... 44 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, President 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.
6
<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 LTIP
Name and Principal Fiscal Other Annual Stock Options Pay- All Other
Position Year Salary Bonus Compensation Awarded SARs(#)/ outs 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 $ 0 $ 0 $0 $0 -0- $0 $ 0
Werner G. Haase......... 1999 $500,000 $ 150,000 $ 0 $ 0 -0- $ 0 $84,299(1)
Chief Executive
Officer, 1998 $500,000 $ 300,000 $ 0 $ 0 500,000 $ 0 $80,859(1)
President 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(2)..... 1999 $400,000 $ 0 $ 0 $ 0 -0- $ 0 $ 7,066(1)
Former President 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 Operating 1998 $ 28,558 $ 0 $ 0 $ 0 -0- $ 0 $ 0
Officer 1997 $ 0 $ 0 $ 0 $ 0 -0- $ 0 $ 0
</TABLE>
- --------
(1) Includes premiums for life insurance policies paid by us on behalf of these
persons.
(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 $50,000 or 10% of
compensation as to any person. We offer health insurance to all of our
employees. At the present time we do not have any retirement, pension, profit
sharing, or other similar programs or benefits for our executive officers.
Option/SAR Grants in Last Fiscal Year.
The table below sets forth information regarding stock options granted
during the 1999 fiscal year to each of the Named Executive Officers who were
granted options in fiscal 1999.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term
------------------------------ ---------------------
Number of Percent of Total
Securities Options/ SARs
Underlying Granted to
Options/ SARs Employees in Exercise
Name Granted(#) Fiscal Year Price ($/Sh) Expiration Date 5%($) 10%($)
- ---- ------------- ---------------- ------------ ----------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Scott A. Mednick........ 300,000 7.1% $17.38 August 3, 2004(1) $1,440,532 $3,183,199
Chief Strategic Officer
and Co-Chairman
Wolf Boehme............. 250,000 5.9% $ 7.25 November 19, 2001 $ 285,000 $ 602,500
Former Chief Operating
Officer
</TABLE>
7
<PAGE>
- --------
(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.
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. The last reported sale price of the Common Stock on August 31,
1999 was $17.81 per share. Accordingly, the values set forth below have been
calculated based on that price less the applicable exercise price per share,
multiplied by the number of shares underlying the options.
<TABLE>
<CAPTION>
Unexercised In-the-Money
Options/SARs at Options/SARs at
Shares Fiscal Year End Fiscal Year End
Acquired Value Exercisable/ Exercisable/
Name on Exercise(#) Realized($) Unexercisable Unexercisable
- ---- -------------- ----------- --------------- ----------------
<S> <C> <C> <C> <C>
Scott A. Mednick........ -0- -0- 1,000,000 $ 11,810,000
Chief Strategic Officer (Exercisable) (Exercisable)
and 300,000 $ 129,000
Co-Chairman (Unexercisable) (Unexercisable)
Werner G. Haase ........ -0- -0- 743,750 $ 10,609,000
Chief Executive
Officer, (Exercisable) (Exercisable)
President and Co-
Chairman
Wolf Boehme(1).......... 10,000 $72,500 73,333 $ 774,396
Former Chief Operating (Exercisable) (Exercisable)
Officer 166,667 $ 1,760,004
(Unexercisable) (Unexercisable)
</TABLE>
(1) Mr. Boehme resigned from the Company in December 1999.
8
<PAGE>
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 and a group of eleven companies that the Company
deems comparable consisting of AnswerThink Consulting Group, Inc., Sapient
Corporation, Organic Inc., Cysive, Inc., iXL Enterprises, Inc., RareMedium
Group Inc., Proxicom, Inc., Lante Corporation, Scient Corporation, Razorfish,
Inc. and marchFIRST (the "Peer Group Index"). "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.
[Performance Graph appears here]
Indexed Returns
<TABLE>
<CAPTION>
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
PEER Group............. $100 $197.24 $300.69 $255.76 $339.93 $430.09 $765.20
</TABLE>
9
<PAGE>
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 a four year 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 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 an annual base salary of $350,000, which automatically
increases 10% 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 Common Stock at an exercise price of $6.00 per share. If
Mr. Mednick exercises more than 500,000 of these options, for a 48-month
period, he may not sell, assign or transfer the shares in excess of 500,000
unless the trading price of the Common Stock attains certain price levels
ranging from $12.00 per share to $24.00 per share. As part of the 1999
amendment to his employment agreement, Mr. Mednick was granted options, all of
which are currently exercisable, to acquire an additional 300,000 shares of
Common Stock at an exercise price of $17.38 per share. As part of the March
2000 amendment to his employment agreement, in exchange for Mr. Mednick's
agreement to extend the initial term of his employment from two to three years,
we granted Mr. Mednick options to acquire 250,000 shares of Common Stock at an
exercise price of $13.63 per share. All of these 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 that is in effect during the term of his employment, for so long as he
receives base compensation for termination without cause, and for 12 months
after the final base compensation payment is made. In addition, the non-compete
covenant remains in effect if Mr. Mednick elects not to extend the employment
agreement after the initial four year term, or he voluntarily resigns prior to
the expiration of 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 the Company, 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
the Company 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, 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 the Company, Mr.
Zabit is entitled to receive a one-time payment equal to three times his then-
current annual 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,
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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 the Company, 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 acquire 159,375 shares had been exercised and options to
acquire 28,125 shares at an exercise price of $1.52 per share remained
outstanding under this 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 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 purchase 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 options to employees, officers and employee-directors. Non-
statutory 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 633,329 shares had been exercised under the 1998 Stock
Option Plan and options to acquire 1,277,804 shares at exercise prices ranging
from $3.44 to $22.44 per share remained outstanding under this plan.
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 120,300 shares had been exercised and options to acquire 2,376,983
shares at exercise prices ranging from $11.25 to $45.69 per share remained
outstanding under this plan.
All of the Plans are administered by the Compensation Committee consisting
of Norman Docteroff and John Bermingham.
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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.
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Incentive Compensation
During fiscal 1999, the Named Executive Officers received options to
purchase an aggregate of 550,000 shares to Common Stock at a weighted average
exercise price of $12.76 per share, 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.
CERTAIN TRANSACTIONS
In July 1996, we entered into a four year consulting agreement with Target
Capital Corp. and Yitz Grossman which 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 of
the Company 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 the Company 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 transfer 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% per annum 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 under this loan.
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 the Company, 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.
We are currently conducting negotiations with Nurit Kahane Haase with
respect to her potential acquisition of our Journeycorp division. If this were
to occur, Mrs. Haase would resign as our Senior Vice President and Secretary.
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PROPOSAL 2--RATIFICATION OF APPOINTMENT
OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
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.
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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 "Millennium Plan"). As currently in effect,
the purpose of the Millennium Plan is 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 Millennium Plan provides for the grant of options
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 Millennium 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 to acquire up to 555,800 shares
of Common Stock under the Millennium 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 $37.13 to $40.25 per share.
The Company is proposing the Millennium Plan for approval of the
stockholders of the Company. Once approved by the stockholders of the Company,
the Millennium Plan will provide 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, these provisions of
the Millennium Plan require approval of the stockholders of the Company.
A copy of the Millennium Plan is attached hereto as Exhibit A. 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.
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). No employee may be issued more than 1,000,000 shares pursuant
to options granted under the Millennium Plan during the term of the plan. 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
individual. 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 and any options
granted thereunder shall automatically be deemed to be NQSOs.
As of March 3, 2000, an aggregate of 76 persons (none of whom are directors
or executive officers) were eligible to participate in the New Employee Plan.
Upon approval of the Millennium Plan by the stockholders of the Company, all
officers, employees, consultants and directors will be eligible to receive
options, provided that non-employees will only be entitled to receive NQSOs.
Administration
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 (i) 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 and (ii) and "Outside Director" as such term is defined in Section
162(m) of the Code and the regulations thereunder. The Board of Directors or
the Committee (by a majority vote or, in the case of two members, by unanimous
vote) generally
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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. Only the
Committee may grant options to employees covered under Section 162(m) of the
Code. Currently, each of the Company's stock option plans is administered by
the Compensation Committee. All options granted under the Millennium Plan will
be evidenced by option agreements which shall contain the applicable terms and
conditions.
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. However, 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
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
generally 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. In the
event the employment of an optionholder is terminated for cause, an
optionholder's rights under all options are generally immediately forfeited.
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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 general, an optionholder will not recognize taxable income upon grant or
exercise of an ISO and the Company will not be entitled to any business expense
deduction with respect to the grant or exercise of an ISO. However, upon the
exercise of an ISO, the excess of the fair market value on the date of the
exercise of the shares received over the exercise price of shares will be
treated as an adjustment to the optionholder's alternative minimum taxable
income. In order for the exercise of an ISO to qualify for the foregoing tax
treatment, the optionholder generally must be an employee of the Company or a
subsidiary from the date the ISO is granted through the date three months
before the date of exercise, except in the case of death or disability, where
special rules apply.
If the optionholder has held the ISO (or the shares acquired upon exercise
thereof) for at least two years after the date of grant and the shares acquired
upon exercise of the options for at least one year after the date of exercise,
upon disposition of the shares by the optionholder, the difference, if any,
between the sale price of the shares and the exercise price of the option will
be treated as long-term capital gain or loss. If the optionholder does not
satisfy these holding period requirements, the optionholder will recognize
ordinary income at the time of the disposition of the shares, generally in an
amount equal to the excess of the fair market value of the shares at the time
the option was exercised over the exercise price of the option. The balance of
gain realized, if any, will be long-term capital gain or short-term capital
gain, depending upon whether or not the shares were sold more than one year
after the option was exercised. If the optionholder sells the shares prior to
the satisfaction of the holding period requirements but at a price below the
fair market value of the shares at the time the option was exercised, the
amount of ordinary income will be limited to the excess of the amount realized
on the sale over the exercise price of the option. If the optionholder includes
the ordinary income in income or the Company complies with the applicable
reporting requirements, it will be entitled to a business expense deduction in
the same amount and at the same time as the optionholder recognizes ordinary
income, subject to any deduction limitation under Section 162(m).
In general, an optionholder to whom a NQSO is granted will recognize no
income and the Company will not be entitled to any business expense deduction
at the time of the grant of the option. Upon exercise of a NQSO, an
optionholder will recognize ordinary income in an amount equal to the amount by
which the fair market value of the shares on the date of exercise exceeds the
exercise price of the option. If the optionholder includes such amount in
income or the Company complies with applicable reporting requirements, it will
be entitled to a business expense deduction in the same amount and at the same
time as the optionholder recognizes ordinary income, subject to any deduction
limitation under Section 162(m).
Section 162(m) of the Code and the regulations proposed thereunder generally
would disallow the Company a federal income tax deduction for compensation paid
to the chief executive officer and the four other most highly compensated
executive officers to the extent such compensation paid to any of such
individuals exceeds one million dollars in any year. Section 162(m) generally
does not disallow a deduction for payments of qualified "performance-based
compensation" the material terms of which have been disclosed to and approved
by stockholders. The Company intends that compensation attributable to options
and subject to performance objectives granted under the Millennium Plan will be
qualified "performance-based compensation."
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Under certain circumstances, the accelerated vesting or the cashout or
exercise of options in connection with a change in control of the Company might
be deemed an "excess parachute payment" for purposes of the golden parachute
tax provisions of Section 280G of the Code. To the extent it is so considered,
the optionholder may be subject to a 20% excise tax and the Company may be
denied a tax deduction.
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 and Termination
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). No ISO may be granted ten years after
the adoption of the Millennium Plan.
Vote Required for Approval
Approval and ratification of the Millennium Plan will require the
affirmative vote of a majority of the votes cast at the Annual Meeting. 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.
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.
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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, 21,428,450
shares of Common Stock were issued and outstanding.
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:
<TABLE>
<CAPTION>
Class Number of Shares Par Value
----- ---------------- ---------
<S> <C> <C>
Common.......................................... 100,000,000 $.01
Blank Check Preferred........................... 1,000,000 $.05
</TABLE>
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.
VOTING PROCEDURES
Shares can be voted only if the stockholder is present at the Annual Meeting
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
enclosed 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.
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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 a reasonable time before the
Company begins to print and mail its proxy materials for the 2001 annual
meeting. 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 February
25, 2001 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
. does not receive notice of the proposal a reasonable time before the
Company begins to print and mail its proxy materials for the 2001 annual
meeting.
All director nominations and other proposals of stockholders 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 first 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.
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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 has engaged the firm of Georgeson & Company, Inc. to assist in the
distribution and solicitation of proxies. Georgeson & Company, Inc. will
receive a fee of $7,500 plus expenses for these 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.
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 G. Haase, Co-Chairman
New York, New York
April 11, 2000
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XCEED INC.
MILLENNIUM STOCK OPTION PLAN
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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 incentives to new and
existing employees, officers, directors and consultants 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 such persons 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. Prior to the approval and ratification of this Plan by the
stockholders of the Company, only new employees shall be granted Options under
this Plan.
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 less than two members of the Board of Directors (the
"Committee"), each of whom is both (i) 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") and (ii) an "Outside Director" as such term is defined in Section 162(m)
of the Code and the regulations thereunder. 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.
Only the Committee may grant Options to employees who are covered under Section
162(m) of the Code.
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
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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.
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. No employee may be issued
more than 1,000,000 shares pursuant to Options granted hereunder during the
term of the Plan.
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.
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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, officers,
directors and consultants 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,
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 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
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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.
(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 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.
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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.
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
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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 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.
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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.
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 or other federal or state law, rule or regulation;
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.
A-7
<PAGE>
Article X
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
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.
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
A-8
<PAGE>
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 13th day of January, 2000.
XCEED INC.
/s/ Werner G. Haase
By: _________________________________
Werner G. Haase, Chief Executive
Officer
A-9
<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 on the reverse
side, 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
<PAGE>
[X] Please mark your
votes as in this
example.
<TABLE>
<CAPTION>
FOR ALL NOMINEES WITHHOLD AUTHORITY
LISTED BELOW FOR ALL NOMINEES
LISTED BELOW
<S> <C> <C> <C>
1. THE ELECTION OF [_] [_] "INSTRUCTIONS: To withhold authority to vote for
SEVEN DIRECTORS a given nominee, strike through the nominee's
TO SERVE UNTIL name:
THE NEXT
ANNUAL Scott A. Mednick, Werner G. Haase, William N. Zabil,
MEETING OF Norman Docleroff, John A. Bermingham, Terry A.
STOCKHOLDERS Anderson, Edward A. Bennelt
FOR AGAINST ABSTAIN
2. THE RATIFICATION OF THE APPOINTMENT [_] [_] [_]
OF DELOITTE & TOUCHE, LLP, AS THE
COMPANY'S INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS.
3. THE ADOPTION OF THE XCEED INC. [_] [_] [_]
MILLENNIUM STOCK OPTION PLAN.
4. THE APPROVAL OF THE AMENDMENT TO [_] [_] [_]
THE COMPANY'S CERTIFICATE OF
INCORPORATION.
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.
</TABLE>
SIGNATURE(S)_______________________________________DATE __________________
*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.
<PAGE>
CONSENT OF DIRECTOR NOMINEE
I hereby consent to the reference to me in the Proxy Statement with which
this consent is filed as a person who has been nominated to serve as a director
of Xceed Inc.
Dated: April 10, 2000
/s/ Edward A. Bennett
------------------------
Edward A. Bennett
