SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
XOX CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(2) or Item 22(a)(2) of
Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the
filing fee is calculated and state how it was determined.)
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
XOX CORPORATION
1450 ENERGY PARK DRIVE, SUITE 120
ST. PAUL, MN 55108
612/645-9000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 1997 Annual Meeting of Stockholders of XOX CORPORATION (the "Company")
will be held at the IDS Center, 50th floor-Windows on Minnesota, 80 South 8th
Street, Minneapolis, Minnesota 55402, on Tuesday, May 20, 1997, beginning at
3:00 P.M. central time, for the following purposes:
1. To elect a director of the Company;
2. To ratify the appointment of auditors of the Company for the fiscal year
ending December 31, 1997; and
3. To transact such other business as may properly come before the meeting or
any adjournment thereof.
The Board of Directors has fixed the close of business on April 14, 1997, as the
record date for the determination of stockholders entitled to notice of and to
vote at the Annual Meeting or any adjournment thereof.
By Order of the Board of Directors,
/s/ Elizabeth A. Klein
ELIZABETH A. KLEIN
Corporate Secretary
St. Paul, Minnesota
April 24, 1997
XOX CORPORATION
1450 ENERGY PARK DRIVE, SUITE 120
ST. PAUL, MN 55108
612/645-9000
PROXY STATEMENT FOR ANNUAL MEETING
OF STOCKHOLDERS
TO BE HELD MAY 20, 1997
This Proxy Statement is furnished to the stockholders of XOX CORPORATION
(the "Company") in connection with the Company's solicitation of proxies for use
at the 1997 Annual Meeting of Stockholders, which is to be held at the IDS
Center, 50th floor-Windows on Minnesota, 80 South 8th Street, Minneapolis,
Minnesota 55402, on May 20, 1997, beginning at 3:00 P.M. central time, and at
any adjournment thereof.
Proxies delivered pursuant to this solicitation are revocable at the option
of the persons executing the same, prior to their exercise, by attendance and
voting at the Annual Meeting or by written notice delivered to the Corporate
Secretary of the Company prior to the meeting, and are solicited by and on
behalf of the Board of Directors of the Company. Unless previously revoked, all
proxies representing shares entitled to vote which are delivered pursuant to
this solicitation will be voted at the meeting by the named attorneys-in-fact
and agents, to the extent authorized, in accordance with the directions
contained therein. If no such directions are given, the shares represented by
such proxies will be voted in favor of the election of directors, the
ratification of the appointment of auditors, and in accordance with the
discretion of the named attorneys-in-fact and agents on other matters that may
properly come before the meeting.
The cost of this solicitation will be borne by the Company. Proxies may be
solicited by personal interview, telephone, telegraph and electronic mail, as
well as by use of traditional postal delivery. Banks, brokerage houses and other
custodians, nominees and fiduciaries will be requested to forward soliciting
material to their principals and to obtain authorization for the execution of
proxies, and will be reimbursed for their reasonable out-of-pocket expenses
incurred in that connection. Employees of the Company participating in the
solicitation of proxies will not receive any additional remuneration for such
participation.
On April 14, 1997, the record date for the Annual Meeting, the Company had
outstanding 2,930,401 shares of its Common Stock, Par Value $.025 Per Share (the
"Common Stock"), held of record by 1,144 stockholders. Each holder of the Common
Stock is entitled to one vote for each share of such stock held by him. Only
stockholders of record at the close of business on April 14, 1997, will be
entitled to vote at the Annual Meeting. A majority of the outstanding shares,
whether present in person or by proxy, is required to constitute a quorum to
transact business at the meeting. The abstention of a stockholder on any issue
submitted to a vote and a proxy given by a broker who fails or is not authorized
to vote on that issue will each be counted in determining the presence of a
quorum but not in tabulating the vote on that issue, and thus neither will have
an effect on the outcome of the vote. Votes will be tabulated by the Company's
transfer agent, Norwest Bank Minnesota, N.A.
The Company intends to cause this Proxy Statement to be mailed to its
stockholders of record beginning on or about April 24, 1997.
1. ELECTION OF DIRECTORS AND MANAGEMENT INFORMATION
Action will be taken at the Annual Meeting for the election of one nominee
to serve as a Class III director for a three-year term and until his successor
is duly elected and qualified. Directors in Class I and Class II will serve
through the end of their terms.
The Board of Directors recommends a vote in favor of its nominee, who is
currently an incumbent director: in Class III, Dr. Swanson. The election will be
determined as to the nominee by a plurality of the votes duly cast by
stockholders entitled to vote at the Annual Meeting.
NOMINEES
Indicated in the table below are the principal occupations for the last
five years of each of the Board's nominees and each of the current directors who
will continue to serve on the Board through the end of their terms. Their
beneficial ownership of the outstanding Common Stock of the Company as of the
record date for the Annual Meeting is also shown in the beneficial ownership
table.
NOMINEE FOR ELECTION AS CLASS III DIRECTOR, WHOSE TERM WILL EXPIRE IN 2000:
Dr. John A. Swanson 57 Dr. Swanson has been a director of the
Company since 1991. Since March 1993, Dr.
Swanson has been the Chief Technologist at
ANSYS, Inc. From 1970 to March 1993, Dr.
Swanson was President of Swanson Analysis
Systems, Inc. (now ANSYS). Dr. Swanson
founded ANSYS, Inc. in 1970 to develop a
finite element program (Ansys) that is now
used worldwide in many industries for
product design and simulation. Dr. Swanson
received his Masters degree from Cornell
University in Mechanical Engineering and his
Doctorate degree from the University of
Pittsburgh in Applied Mechanics.
CLASS II MEMBERS OF THE BOARD OF DIRECTORS, WHOSE TERM WILL EXPIRE IN 1999:
Robert S. Mars, Jr. 70 Mr. Mars is currently the Chairman of the
Board and has been a director of the Company
since 1990. Mr. Mars currently serves as
Chairman of the Board of W.P. & R.S Mars
Company, an industrial distributor in
Duluth, Minnesota, and Conveyor Belt
Service, Inc. Mr. Mars also previously
served as director of Minnesota Power. Mr.
Mars is an alumnus of Carleton College in
Minnesota and Babson College in
Massachusetts.
Dr. Pradeep Sinha 38 Dr. Sinha is a co-founder of the Company and
the Vice President of Research and Chief
Technical Officer. Dr. Sinha has been a
director of the Company since 1987. Dr.
Sinha's research provided the basis upon
which the Company's software products were
developed. Dr. Sinha received his Doctorate
from Cornell University in Mechanical
Engineering.
CLASS I MEMBERS OF THE BOARD OF DIRECTORS, WHOSE TERM WILL EXPIRE IN 1998:
Lawrence W. McGraw 56 Mr. McGraw has been President, Chief
Executive Officer and a director of the
Company since September 1993. From March
1992 to September 1993, he was a partner of
the Hanna Group in Palo Alto, California,
where he worked with small technology
companies in the areas of strategy and sales
development. From September 1990 to March
1992, Mr. McGraw was Executive Vice
President of Sales and Marketing of
Bimillennium Corporation, a California-based
startup software company, which developed
specialized software products for the
engineering and scientific niches. Prior to
this time, Mr. McGraw had extensive sales
and marketing and sales management
experience with IBM and Tandem Computers,
Inc., including serving as Tandem's Vice
President of North American Sales. Mr.
McGraw received a Bachelor's degree in
Aeronautical Engineering from the University
of Notre Dame and a J.D. degree from the
University of Denver Law School.
Thomas J. Lucas 45 Mr. Lucas has been a director of the Company
since 1995. Mr. Lucas has been employed by
Flint Ink Corporation, located in Detroit,
Michigan since June 1990. Mr. Lucas has been
the Group Vice President since October 1992
and prior to that time was Vice President of
Sales and Marketing. Mr. Lucas holds a J.D.
degree from William Mitchell College of Law
in St. Paul, Minnesota and an A.B. from the
University of Notre Dame.
INFORMATION REGARDING THE BOARD AND CERTAIN COMMITTEES OF THE BOARD
The Audit Committee reviews the results and scope of the audit and other
services provided by the independent auditors, as well as the Company's
accounting principles and its system of internal controls, and reports the
results of its review to the Board. The Audit Committee is composed of Messrs.
Mars (Chairman), Lucas and Dr. Swanson.
The Compensation Committee reviews and makes recommendations concerning
executive compensation and incentive compensation for employees of the Company,
subject to ratification by the Board. The Compensation Committee is composed of
Messrs. McGraw (Chairman), Mars and Lucas.
During the Company's fiscal year ended December 31, 1996, the Board of
Directors held five (5) meetings. The Compensation Committee met one time. The
Audit Committee did not meet. Each of the directors attended at least 75% of the
total number of meetings of the Board.
Members of the Board receive no cash compensation for serving on the Board,
except for reimbursement for expenses incurred in attending meetings. Pursuant
to the Company's 1996 Omnibus Stock Plan, beginning with the 1997 Annual Meeting
of Stockholders and at each subsequent annual meeting, outside directors will
receive nonstatutory stock options to purchase 5,000 shares of the Company's
Common Stock.
CLASSIFIED BOARD
The Company's Amended and Restated Certificate of Incorporation provides
for the classification of members of the Board of Directors. It also provides
that the number of directors constituting the entire Board shall be not less
than three, no more than seven, as affixed from time to time by vote of the
majority of the entire Board, provided further, that the number of directors
constituting the entire Board shall be five unless otherwise fixed by a majority
of the entire Board of Directors. Each director shall also be the record owner
of one or more shares of Common Stock of the Company. The Company's Board of
Directors is classified into three classes and provides for staggered terms. One
class of directors will be elected each year and the members of such class will
hold office for a three-year term or until their successors are duly elected and
qualified until their death, resignation or removal from office. Such
classification makes it more difficult to change the members of the Board of
Directors or to effect a take-over of the Company. Any director or the entire
Board of Directors of the Company may be removed at any time, but only for cause
and only by the affirmative vote of holders of seventy-five percent of the
outstanding shares of capital stock of the Company entitled to vote generally in
the election of directors cast in the meeting of stockholders called for that
purpose.
UNDERWRITER'S NOMINEE
The Underwriting Agreement between the Company and the Underwriter (Equity
Securities Trading Co., Inc.) provides that, for a period of three (3) years
from the date of the Prospectus (September 11, 1996), the Underwriter shall have
the right to designate a nominee for the election to the Company's Board of
Directors and that the Company shall use its best efforts to secure the election
of such nominee to its Board of Directors. As of the date of this Proxy
Statement, no nominee has been identified by the Underwriter.
DIRECTORS, EXECUTIVE OFFICERS AND OTHER MANAGEMENT
NAME AGE POSITION
- ---- --- --------
Robert S. Mars, Jr. (1) 70 Chairman of the Board
Lawrence W. McGraw (1) 56 President, Chief Executive Officer,
acting Chief Financial Officer and Director
Dr. Pradeep Sinha (1) 38 Vice President of Research, Chief Technical
Officer and Director
William J. Birmingham (2) 56 former Chief Financial Officer
Thomas J. Lucas (1) 45 Director
Dr. John A. Swanson (1) 57 Director
Dr. Indranil Chakravarty 43 Vice President, Managing Director of
IIS-XOX Asia Pacific Ltd.
Turhan F. Rahman 45 Vice President of Strategic Planning
Dr. T.K. Srikanth 38 former Vice President of Software
Development
John C. Finnell 39 Director of North American Sales
(1) See "Nominee" section for a description of past business experience of
current members of the Board of Directors.
(2) Effective as of April 22, 1997, Mr. William Birmingham will no longer be the
Chief Financial Officer of the Company. The Company has begun certain
cost-cutting measurements to decrease monthly spending. As part of this process,
the duties of Chief Financial Officer will be undertaken by Mr. Lawrence McGraw,
President/CEO, until such time as the Board determines otherwise.
DR. INDRANIL CHAKRAVARTY joined the Company in July 1995 as Vice President
of High Performance Computing. Dr. Chakravarty is also the Managing Director of
IIS-XOX Asia Pacific Ltd., a joint venture of the Company and IIS Infotech,
Ltd., and currently resides in New Delhi, India. From June 1993 to June 1995,
Dr. Chakravarty was Program Manager at Siemens Corporate Research, Inc. From
April 1981 to May 1993, Dr. Chakravarty was Program Manager at Schlumberger,
Ltd. Dr. Chakravarty holds a Bachelors degree in Electrical Engineering from New
York University and received his Masters and Doctorate degrees from Rensselaer
Polytechnic Institute in Computer and Systems Engineering.
TURHAN F. RAHMAN is a co-founder of the Company and the Vice President of
Strategic Planning. Mr. Rahman has been investigating hardware implementation
strategies for the Company's products. Mr. Rahman has served as a faculty member
in computer science at the University of Minnesota and has held engineering
positions with General Electric and the Cornell Laboratory of Nuclear Studies.
Mr. Rahman received a Bachelors degree in Computer Science and Electrical
Engineering from the University of Minnesota.
DR. T.K. SRIKANTH is a co-founder of the Company and the former Vice
President of Software Development. Dr. Srikanth was responsible for leading the
Company's development and release team and ensuring that product release
schedules and quality assurance levels were met. He also managed the Company's
cooperative development contracts with other organizations. Dr. Srikanth
received his Doctorate from Cornell University in Computer Science. Dr. Srikanth
resigned his executive position with the Company on February 20, 1997 and has
recently returned to India to establish a satellite operation for the Company in
Bangalore, India. Dr. Srikanth continues as an employee of the Company as an
advanced development specialist.
JOHN C. FINNELL joined the Company in January 1996 as Director of North
American Sales. From 1987 to December 1995, Mr. Finnell was North American Sales
and Marketing Manager for LMS International, a Belgium-based company that
develops and markets software products for the Computer Aided Engineering (CAE)
industry. From 1983 to 1987 Mr. Finnell held sales and support positions with
EG&G Structural Kinetics. From 1982 to 1983 Mr. Finnell was employed as a
technical service engineer in the Oil and Gas Drilling industry with Reed Rock
Bit, a division of Baker-Hughes. Mr. Finnell holds a Bachelors degree in
Mechanical Engineering from the University of Michigan.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers and all persons who beneficially
own more than 10% of the outstanding shares of the Company's Common Stock to
file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership of the Company's Common Stock. Executive
officers, directors and greater than 10% beneficial owners are also required to
furnish the Company with copies of all Section 16(a) forms they file. To the
Company's knowledge, based upon a review of the copies of such reports furnished
to the Company and written representations that no other reports were required,
during the year ended December 31, 1996, none of the Company's directors or
officers or beneficial owners of greater than 10% of the Company's Stock failed
to file on a timely basis the forms required by Section 16 of the Exchange Act.
INFORMATION REGARDING BENEFICIAL OWNERSHIP OF PRINCIPAL STOCKHOLDERS, DIRECTORS
AND MANAGEMENT
The following table sets forth, as of April 14, 1997, the ownership of the
Company's Common Stock by each person who is known by the Company to own
beneficially more than 5% of the Company's outstanding Common Stock, by each
director who owns shares and by all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
Number of Shares of Common Percentage of
Name Stock Beneficially Owned)(1) Outstanding Shares
- ---- ---------------------------- ------------------
<S> <C> <C>
SAS IP, Inc. 377,749 (3) 11.9%
123 East 17th Street
Cheyenne, Wyoming 82001
Minnesota Technology, Inc. 185,194 (4) 6.3%
111 Third Avenue South, Suite 400
Minneapolis, Minnesota 55401
Dr. Pradeep Sinha(2) 160,643 (5) 5.3%
Thomas J. Lucas 121,310 (6) 4.1%
6725 Colby Lane
Bloomfield Hills, Michigan 48301
Lawrence W. McGraw(2) 98,000 (7) 3.3%
Dr. John Swanson 80,950 (8) 2.8%
Box 224
Houston, Pennsylvania 15342
Robert S. Mars, Jr. 20,192 (9) *
4114 London Road
Duluth, Minnesota 55804
William J. Birmingham(2) 6,000 (10) *
Dr. Indranil Chakravarty(2) 36,000 (11) 1.2%
Turhan F. Rahman(2) 97,710 (12) 3.3%
Total Executive Officers and 620,805 20.9%
Directors as a group (eight persons)
</TABLE>
* Less than 1%
(1) Shares of Common Stock subject to options, warrants, or convertible debt
securities currently exercisable or exercisable within 60 days after the date of
this Proxy Statement are deemed to be outstanding for purposes of computing the
percentage of shares beneficially owned by the person holding such options,
warrants, or convertible debt securities but are not deemed to be outstanding
for purposes of computing such percentage for any other person. Except as
indicated by footnote, each person or group identified has sole voting and
investment powers with respect to all shares of Common Stock shown as
beneficially owned by them.
(2) The address of Messrs. McGraw, Birmingham and Rahman and Drs. Sinha and
Chakravarty is 1450 Energy Park Drive, Suite 120, Saint Paul, Minnesota 55108.
(3) Includes 90,230 shares subject to currently exercisable options and 166,487
shares issuable upon exercise of warrants.
(4) Includes 30,401 shares issuable upon exercise of warrants.
(5) Includes 20,651 shares issuable upon exercise of warrants and conversion
privileges and 57,088 shares subject to currently exercisable options.
(6) Includes 1,334 shares subject to currently exercisable options and 25,050
shares issuable upon exercise of warrants.
(7) Includes 74,000 shares subject to currently exercisable options.
(8) Includes 11,470 shares issuable upon exercise of warrants. Does not include
shares owned by SAS IP, Inc., a wholly owned subsidiary of ANSYS, Inc. Dr.
Swanson is a founder and shareholder of ANSYS, Inc.
(9) Includes 5,376 shares issuable upon exercise of warrants and conversion
privileges and 8,000 shares subject to currently exercisable options. Does not
include 80,622 shares and 13,167 shares issuable upon exercise of warrants owned
of record by Mr. Mars' children who do not reside in the same household with
him.
(10) Includes 6,000 shares subject to options currently exercisable. Effective
as of April 22, 1997, Mr. Birmingham will no longer be acting as the Chief
Financial Officer of the Company.
(11) Includes 36,000 shares subject to options currently exercisable.
(12) Includes 14,776 shares issuable upon exercise of warrants and conversion
privileges and 13,182 shares subject to currently exercisable options.
INFORMATION REGARDING EXECUTIVE OFFICER COMPENSATION
CASH COMPENSATION
The following summary compensation table provides certain summary
information for the past three years ended December 31 concerning executive
compensation paid or accrued by the Company to the Company's Chief Executive
Officer whose salary and bonus compensation for 1996 exceeded $100,000 (the
"Named Executive Officer").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------ ------------ -------------------
FISCAL SECURITIES
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS UNDERLYING OPTIONS
- --------------------------- ----- ------- ------ -------------------
<S> <C> <C> <C> <C>
Lawrence W. McGraw 1996 $172,500 $21,000 50,000
(Chief Executive Officer) 1995 171,255 30,000 None
1994 165,025 --- 50,000
</TABLE>
COMPENSATION PURSUANT TO STOCK OPTIONS
STOCK OPTION GRANTS DURING FISCAL YEAR 1996
The following table provides information regarding stock options granted
during fiscal year 1996 to the Named Executive Officer in the Summary
Compensation Table.
<TABLE>
<CAPTION>
% OF TOTAL OPTIONS
OPTIONS GRANTED IN FISCAL EXERCISE PRICE PER
NAME GRANTED YEAR SHARE EXPIRATION DATE
- ---- ------- ------------------ ----- ---------------
<S> <C> <C> <C> <C>
Lawrence W. 50,000 (1) 19.9% $4.75 5 years from vesting date
McGraw
</TABLE>
(1) The date of grant of the stock options was March 15, 1996. 20% of the stock
options vest on the date of grant, with the remaining options vesting 20% per
year on the anniversary date of the grant.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information on option exercises in fiscal 1996
by the Named Executive Officer and the value of such officers' unexercised
options at December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE (1) OF UNEXERCISED
NUMBER OF OPTIONS AT DECEMBER 31, 1996 OPTIONS AT DECEMBER 31, 1996
SHARES ---------------------------- ----------------------------
ACQUIRED VALUE (1)
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence W. 24,000 $72,000 64,000 72,000 $114,500 $74,000
McGraw
</TABLE>
(1) Value is the difference between the exercise price of the option and the
closing price of the Units on December 31, 1996 of $5.00, less $.50 assigned to
the warrant component of each Unit.
LAWRENCE W. MCGRAW EMPLOYMENT AGREEMENT
The Company has an employment agreement with Lawrence W. McGraw. Mr.
McGraw's employment agreement remains in effect until December 31, 1997 or until
such agreement is terminated by Mr. McGraw upon 30 days' written notice, subject
to the Company's right to terminate the agreement immediately for cause or upon
Mr. McGraw's continuing disability. The Company also may terminate Mr. McGraw at
any time for any other reason, subject to the obligation of the Company to pay
Mr. McGraw an amount equal to Mr. McGraw's base salary for a period of six
months. After December 31, 1997 the employment agreement may, upon giving
appropriate notice, be terminated by either party without further obligation.
Mr. McGraw's current annual base salary is $172,500 and is subject to review by
the Compensation Committee. Mr. McGraw also is eligible to receive certain other
cash bonuses and stock option grants under the 1996 Omnibus Stock Plan, as
determined by the Board. The Company is the beneficiary of a term life insurance
policy on the life of Mr. McGraw for which the Company pays the annual premium.
During the term of his employment, Mr. McGraw is prohibited from competing with
the Company. Mr. McGraw also is prohibited from indirectly or directly competing
with the Company for a period of 12 months after termination, whether for his
own account or the account of a third party.
1996 OMNIBUS STOCK PLAN
The Board of Directors of the Company adopted and the Company's
stockholders approved, the Company's 1996 Omnibus Stock Plan effective June 14,
1996 (the "Plan"). The Plan supersedes both the 1987 Incentive Stock Option Plan
and the 1987 Non-Qualified Stock Option Plan of the Company, and no new options
will be granted under either of the superseded plans. The purpose of the Plan is
to promote the interests of the Company and its stockholders by providing
personnel of the Company with an opportunity to acquire a proprietary interest
in the Company and thereby develop a stronger incentive to put forth maximum
effort for the continued success and growth of the Company and to aid the
Company in attracting and retaining personnel of outstanding ability. The
Company reserved a total of 500,000 shares of Common Stock for issuance under
the Plan and has granted 132,500 options under the Plan.
The Plan is administered by a committee of three or more non-employee
directors of the Company (the "Committee") appointed by the Board. The Committee
has responsibility to interpret the Plan and all determinations made by it shall
be final and conclusive, subject in all cases to the provisions of the Plan and
the applicable provisions of the Internal Revenue Code of 1986, as amended (the
"Code"). The Committee has complete discretion to select the participants and to
establish the terms and conditions of each award, provided, however, that the
Committee has no discretion with respect to the granting of options to Outside
Directors.
Employees of the Company are eligible to receive incentive stock options
(as that term is defined in Section 422 of the Code), nonqualified stock
options, reload options, stock appreciation rights and restricted stock under
the Plan. Other key individuals who are not employees, may also be granted
nonqualified options under the Plan. Common Stock of the Company granted to
recipients may be unrestricted or may contain such restrictions, including
provisions requiring forfeiture and imposing restrictions upon stock transfer.
Unless forfeited, the recipient of restricted Common Stock will have all other
rights of a stockholder, including without limitation, voting and dividend
rights. The value of a stock appreciation right granted to a recipient is
determined by the appreciation in Common Stock of the Company, subject to any
limitations upon the amount or percentage of total appreciation that the
Committee may determine at the time the right is granted. Concurrent with the
award of any options, the Committee also may authorize reload options to
purchase for cash or shares a number of shares of Common Stock.
The Plan requires that the option price of incentive stock options granted
under the Plan shall be not less than 100% of the fair market value of the
Company's Common Stock as of the date the option is granted and that the term of
an incentive stock option may not exceed ten years. The Plan provides that
nonqualified stock options shall have an option price not less than 85% of the
fair market value of the Company's Common Stock on the date of grant. The
exercise price of any incentive stock option granted to an employee who owns
capital stock representing more than 10% of the voting rights of the Company's
outstanding capital stock on the date of grant must be equal to at least 110% of
the fair market value on the date of grant and shall expire five years from the
date of grant. The Committee sets the term during which any nonqualified options
may be exercised and determines whether such options are exercisable
immediately, in stages, or otherwise. All options granted under the Plan are
nontransferable and are subject to various other conditions and restrictions.
Shares of Common Stock subject to canceled options are available for
subsequently granted options under the Plan.
1987 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLANS
The 1987 Incentive and Non-Qualified Stock Option Plans (the "1987 Plans")
reserved for issuance 600,000 and 200,000 shares of Common Stock, respectively.
The Plans were administered by the Board which had responsibility to interpret
the Plans. Employees of the Company were eligible to receive incentive stock
options under the 1987 Incentive Stock Option Plan and non employees and
employees could receive nonqualified options under the 1987 Non-Qualified Stock
Option Plan. The 1987 Plans provide that the option price of stock options
granted thereunder must be at least 100% of fair market value of the Company's
Common Stock as of the date of the option grant and that the term of any
incentive stock option may not exceed ten years. All options quoted under the
1987 Plans are nontransferable and are subject to various other conditions and
restrictions.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As noted in the chart following the descriptions below, each of the
following transactions involved parties related to the Company.
In February 1993, the Company issued a series of variable repayment
debentures (the "VRDs") as part of an exchange of its then current debt. These
VRDs include: Collateralized VRDs in the aggregate principal amount of $150,351;
Convertible VRDs in the aggregate principal amount of $69,848; Directors VRDs in
the aggregate principal amount of $27,767; Employee Interest-Bearing Notes in
the aggregate principal amount of $282,266; Employee Non-Interest Bearing Notes
in the aggregate principal amount of $276,866; and the SAS IP VRD in the
principal amount of $279,657. In connection with a Subordination and Deferral
Agreement, the holders of the VRDs hold warrants to purchase 15,302 shares of
Common Stock at a purchase price of $1.50 per share. Of these warrants, 9,031
are held by officers and major stockholders of the Company.
With the exception of the Employee Non-Interest Bearing Notes, which bear
no interest, the VRDs bear interest at a rate equal to the prime rate plus two
percent (2%). Interest is payable on a quarterly basis, and principal is payable
out of "adjusted after tax profits" as defined in the instruments evidencing the
debt. The Employee Non-Interest Bearing Notes are convertible into Common Stock
at a conversion rate of $2.50 per share at the option of the note holder and are
payable in eight (8) quarterly installments beginning 90 days after all of the
VRDs have been repaid.
The Collateralized VRDs originated out of two loan transactions in 1989.
The holders of the Collateralized VRDs have the right to convert unpaid interest
into Common Stock at the rate of $15.00 per share. Holders of the Collateralized
VRDs have warrants to purchase 26,000 shares of Common Stock at $15.00 per
share. Certain officers and directors of the Company hold an aggregate of
$23,773 of the Collateralized VRDs and have warrants to purchase 1,500 shares of
Common Stock.
The Convertible VRDs originated out of a loan transaction in 1991. The
holders of the Convertible VRDs have the right to convert the Convertible VRDs
into Common Stock at a conversion rate of either $5.00 per share, or in the
event that the Company completes an equity offering greater than $500,000, the
conversion rate is (OMEGA) of the offering price. On June 18, 1996, the Company
received waivers of conversion rights from the holders of the Convertible VRDs
and, in exchange, $46,914 of the Convertible VRD held by Dr. John A. Swanson, a
director of the Company, was repaid from proceeds of the initial public offering
in September 1996. An aggregate of $22,933 of Convertible VRDs and accrued
interest of $3,625 were converted into 8,169 shares of Common Stock in June
1996.
The Employee Interest-Bearing Notes and Employee Non-Interest Bearing Notes
originated from wage deferrals by the Company's employees from 1988 through
1991. Officers of the Company hold $123,377 and $121,016 of the Employee
Interest-Bearing Notes and Employee Non-Interest Bearing Notes, respectively. In
November 1996, at a regularly scheduled meeting of the Company's Board of
Directors, the Board authorized a repayment schedule for the next three years on
the Employee Interest-Bearing Notes. Over the next three years, up to one-third
of an employees' interest-bearing debt will be repaid annually, if the employee
agrees to convert an equal or greater amount of his/her non-interest bearing
debt into Common Stock at the conversion rate of $2.50 per share. Two of the
Company's officers holding $83,918 of employee interest-bearing debt have
elected this repayment and conversion option. The 1997 repayment installment was
completed by March 31, 1997.
The Directors VRDs originated out of a loan transaction in 1988 with the
Company's then current directors. The holders of the Directors VRDs have the
right to convert the principal and unpaid interest accrued thereon into Common
Stock at the then current market price or the price paid by any third party. No
current officers, directors or major stockholders of the Company hold any
Directors VRDs.
The SAS IP VRD originated out of a loan transaction in 1991. In connection
with the original loan, and after the effect of certain anti-dilution
provisions, the holder of the SAS IP VRD has (i) an option to purchase 90,230
shares of Common Stock for $294,578, and (ii) warrants to purchase 161,204
shares of Common Stock at the rate of $5.68 per share. Both of the foregoing
expire two years after the final repayment of the SAS IP VRD. In September 1996
the SAS IP VRD was repaid out of proceeds from the Company's initial public
offering. SAS IP is a major stockholder of the Company.
In February 1993, the Company issued a license to ANSYS, Inc. that is now
held by SAS IP. This license does not require the payment of future royalties.
The Company issued a significant number of prepaid sub-licenses to Concentra,
Inc. ("Concentra") (formerly Wisdom Systems, Inc./ICAD), such that it is
unlikely that Concentra will pay royalties to the Company in the foreseeable
future. In addition, the SAS IP VRD granted SAS IP certain rights with regard to
the Company's software should the Company default on any of its obligations
thereunder. In particular, SAS IP could have received a nonexclusive,
royalty-free license to use a majority of the Company's intellectual property,
including using such intellectual property to compete with the Company, in the
event of a default.
Beginning in January 1994, the Company obtained bridge loans (the "1994
Bridge Loans") to finance the Company prior to the completion of a private
offering of shares of Common Stock. The 1994 Bridge Loans were evidenced by
demand promissory notes, the outstanding principal and accrued interest of which
became due and payable upon the demand of the holder thereof. The 1994 Bridge
Loans bore interest at the rate of ten percent (10%) per year, compounded
annually. The $56,000 of the aggregate principal amount of the 1994 Bridge Loans
that was still outstanding at the time of the Company's initial public offering,
was repaid in September 1996, shortly after receipt of the proceeds of the
offering.
From June through November 1994, the Company offered and sold 114,707
shares of Common Stock at a price per share of $3.00 ("PPM 6"). From November
through December 1995, the Company offered and sold 96,805 shares of Common
Stock at a price per share of $4.50 ("PPM 7").
Beginning in December 1994, the Company offered a series of 10% convertible
debentures (the "Debentures"). On May 31, 1996, all of the Debentures converted
into 564,086 shares of Common Stock at a price per share of $3.00. In connection
with this offering, the Company issued warrants to purchase 150,800 shares of
Common Stock at an exercise price of $6.00 per share to holders of the
debentures. In March 1997, the Company's Board of Directors voted to extend the
expiration date of these warrants from May 31, 1997 to May 31, 1998.
From April through May 1996, the Company obtained bridge loans (the "1996
Bridge Loans") to finance the Company prior to completion of its initial public
offering. The 1996 Bridge Loans were evidenced by promissory notes, on which the
principal balance became due and payable on November 15, 1996 or out of proceeds
of the initial public offering, whichever occurred first. The 1996 Bridge Loans
bore interest at the rate of ten percent (10%) per year, compounded annually. In
connection with these loans, the Company issued warrants to purchase 12,500
shares of Common Stock to the holders of the Bridge Loans. The 1996 Bridge Loans
were repaid in September 1996, shortly after receipt of proceeds of the initial
public offering.
On August 29, 1996 an officer of the Company made a bridge loan of $25,000.
This loan was evidenced by a promissory note and bore interest at the rate of
10.75%, compounded annually. There were no warrants to purchase Common Stock
issued in this bridge loan transaction. The loan and accrued interest was repaid
on September 17, 1996 out of proceeds from the initial public offering.
The following directors, officers and major stockholders of the Company
participated in the foregoing transactions as follows:
<TABLE>
<CAPTION>
DEBT ($)
----------------------------------------------------------------------------------------------
EMPLOYEE
EMPLOYEE NON- DEBENTURES
COLLATER- CONVERT- INTEREST- INTEREST (BEFORE
ALIZED IBLE BEARING BEARING SAS IP 1994 CONVER- 1996
VRDS VRDS NOTES NOTES VRD BRIDGE SION) BRIDGE
---- ---- ----- ------ ---- ------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas J. Lucas...... --- --- --- --- --- --- 238,000(2) 25,000
Turhan F. Rahman..... 3,088 --- 34,816 34,150 --- --- --- ---
Robert S. Mars, Jr... 12,192 4,395 --- --- --- 61,000(1) --- 25,000
Minnesota
Technology, Inc.... --- --- --- --- --- 150,000 54,000 ---
SAS IP, Inc.......... --- --- --- --- 279,657 --- --- ---
Pradeep Sinha........ 3,088 --- 49,102 48,163 --- --- --- ---
TK Srikanth.......... 5,404 --- 39,458 38,704 --- --- --- ---
John A. Swanson...... --- 46,914 --- --- --- 56,000 --- 25,000
William J.
Birmingham ........ --- --- --- --- --- --- --- 25,000
Totals 23,773 51,310 123,377 121,016 279,657 267,000 292,000 100,000
</TABLE>
<TABLE>
<CAPTION>
EQUITY (SHARES OF COMMON STOCK)
---------------------------------------------
DEBENTURES
(AFTER
PPM 6 PPM 7 CONVERSION)
----- ----- -----------
<S> <C> <C> <C>
Robert S. Mars, Jr........................ 17,789 (1)(3) 2,250 (1) ---
John A. Swanson........................... 16,667 --- ---
Thomas J. Lucas........................... --- 5,555 (4) 89,371 (2)
Minnesota Technology...................... 34,293 --- 20,500
</TABLE>
(1) Of this amount, Mr. Mars converted $51,000 (plus accrued interest) into
17,789 shares of Common Stock in PPM 6 and the other $10,000 (plus accrued
interest) converted into 2,250 shares of Common Stock in PPM 7.
(2) In addition, Roger C. Lucas, the brother of Thomas J. Lucas, purchased
$25,000 of Debentures which converted into 9,118 shares of Common Stock.
(3) Between December 1995 to February 1996, Mr. Mars gifted the 17,789 shares of
Common Stock to his seven children and their spouses.
(4) In addition, Cornelius Lucas, the father of Thomas J. Lucas, purchased
10,000 shares of Common Stock.
Minnesota Technology, Inc. ("MTI"), had the right under an agreement with
the Company to purchase its pro rata share of certain types of securities issued
by the Company, at the same price and on the same terms as others participating
in the offering. The Company notified MTI of the initial public offering and MTI
waived those rights.
Dr. Indranil Chakravarty owns five percent (5%) of IIS-XIX Asia Pacific
Ltd. pursuant to the joint venture agreement between the Company, IIS Infotech
Ltd. and Dr. Chakravarty.
The Company intends that all ongoing and future transactions between the
Company and its directors, officers, principal stockholders and affiliates of
any such persons will be on terms no less favorable to the Company than those
that are generally available from unaffiliated third parties, and will be
ratified by a majority of the independent outside members of the Company's Board
of Directors who do not have an interest in the transaction.
2. RATIFICATION OF APPOINTMENT OF AUDITORS
At its meeting held March 27, 1997, the Board of Directors appointed the
accounting firm of Ernst & Young LLP ("Ernst & Young") to be the auditors of the
Company for the current fiscal year ending December 31, 1997, subject to the
ratification of such appointment by the affirmative vote of the holders of a
majority of the outstanding Common Stock entitled to vote at the Annual Meeting.
Should a majority of the shares duly voted at the Annual Meeting fail to concur
in the appointment of Ernst & Young, the selection of auditors will be
reconsidered by the Board of Directors.
The Company has been informed that neither Ernst & Young nor any member
thereof has any relationship with the Company other than that arising from such
firm's employment as auditors. Representatives of Ernst & Young are expected to
be present at the Annual Meeting and will be afforded an opportunity to make a
statement, if they wish, and to respond to appropriate stockholders' questions,
if any.
The services which are to be rendered by Ernst & Young to the Company with
respect to the 1997 fiscal year include: (1) examination of the financial
statements contained in the Company's Annual Report to Stockholders and in its
Annual Report on Form 10-KSB, (2) consultation on various accounting matters,
(3) meetings with the Audit Committee of the Board of Directors, (4) preparation
of federal and state tax returns for the Company and its subsidiaries, (5) tax
services in connection with the Company's employee benefit plans, and (6)
miscellaneous tax services as required. The Audit Committee annually reviews the
services rendered by the Company's auditors, as well as the possible effect
thereof on auditor independence, and has approved the nature of such services.
The Board of Directors recommends a vote for the ratification of the
appointment of Ernst & Young as the Company's auditors for the fiscal year
ending December 31, 1997. The vote required for such ratification is a majority
of the votes duly cast by stockholders entitled to vote at the Annual Meeting.
OTHER MATTERS
Although there is no business, so far as is now known to the Company,
except that set forth above to be presented for action by the Company's
stockholders at the Annual Meeting, it is intended that the shares represented
by the proxies solicited herewith will be voted on any other matters and
proposals that may properly come before the meeting, or any adjournment thereof,
in accordance with the discretion of the persons named therein as
attorneys-in-fact and agents, unless contrary written instructions are received.
PROPOSALS OF SECURITY HOLDERS
A proposal by a security holder intended to be presented at the Company's
1998 Annual Meeting of Stockholders and to be included in the Proxy Statement
therefor must be received in writing at the Company's principal executive
offices at 1450 Energy Park Drive, Suite 120, St. Paul, MN 55108, marked to the
attention of the Corporate Secretary, no later than November 30, 1997.
- -------------------------------------------------------------------------------
PLEASE DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED REPLY ENVELOPE, TO WHICH NO POSTAGE NEED BE AFFIXED IF MAILED IN THE
UNITED STATES.
- -------------------------------------------------------------------------------
XOX CORPORATION
PROXY FOR THE 1997 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Lawrence W. McGraw and Elizabeth A. Klein,
and each of them, with full power to appoint a substitute, to vote all shares
the undersigned is entitled to vote at the Annual Meeting of Stockholders of XOX
Corporation to be held on May 20, 1997, and at any adjournment thereof, as
specified below on the matters referred to, and, in their discretion, upon any
other matters which may be brought before the meeting:
1. ELECTION OF DIRECTOR:
Dr. John Swanson (Class III) [ ] FOR [ ] AGAINST [ ] ABSTAIN
2. RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS AUDITORS FOR FISCAL
YEAR 1997:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. TO VOTE WITH DISCRETIONARY AUTHORITY ON ANY OTHER BUSINESS AS MAY PROPERLY
BE PRESENTED AT THE MEETING.
(Continued on reverse side)
(Continued from other side)
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this Proxy will
be voted FOR THE DIRECTOR NAMED IN PROPOSAL 1 AND FOR PROPOSAL 2.
When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporate name by president or
other authorized officer. If a partnership, please sign in partnership name by
authorized person.
Dated________________________________, 1997
___________________________________________
Print
___________________________________________
Signature
___________________________________________
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY.
