SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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
[ ] 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:
<PAGE>
XOX CORPORATION
7640 WEST 78TH STREET
BLOOMINGTON, MINNESOTA 55439
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
June 15, 1999
TO THE SHAREHOLDERS:
The annual meeting of shareholders (the "Annual Meeting") of XOX
Corporation, a Delaware Corporation (the "Company"), will be held on Tuesday,
June 15, 1999, at 10:00 a.m. local time, at the Decathlon Hotel & Athletic Club,
1700 E. 79th Street, Bloomington, Minnesota for the following purposes:
1) To elect member to the Board of Directors
2) To elect Grant Thornton, LLP as the Company's independent
auditor for the fiscal year ending December 31, 1999; and
3) To act upon such other business as may properly come before
the Annual Meeting, or any adjournment or adjournments
thereof.
Shareholders of record at the close of business on May 10, 1999 are
entitled to notice of and to vote at the Annual Meeting or any adjournment or
adjournments thereof.
Your attention is directed to the proxy statement accompanying this
Notice for a more complete statement of matters to be considered at the Annual
Meeting. A copy of the Company's Annual Report for the fiscal year ended
December 31, 1998 also accompanies this Notice.
Your are cordially invited to attend the Annual Meeting. Whether or not
you plan to attend, please sign, date and return your proxy in the reply
envelope provided.
By Order of the Board of Directors,
/s/ Mark O. Senn
Mark O. Senn
President & COO
Minneapolis, Minnesota
Date: May 14, 1999
PLEASE SIGN, DATE AND RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE.
<PAGE>
XOX CORPORATION
7640 WEST 78TH STREET
BLOOMINGTON, MINNESOTA 55439
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 15, 1999 AT 10:00 a.m.
GENERAL INFORMATION
The accompanying proxy is solicited by the Board of Directors of XOX
Corporation, a Delaware corporation (the "Company"), for use at the annual
meeting of stockholders to be held on June 15, 1999 (the "Annual Meeting"), at
10:00 a.m. local time, at the Decathlon Hotel & Athletic Club, 1700 E. 79th
Street, Bloomington, Minnesota, or any adjournment thereof, for the purposes set
forth in the accompanying Notice of Annual Meeting of Stockholders.
Solicitation of proxies may be made in person or by mail, telephone or facsimile
transmission by directors, officers and regular employees of the Company. The
directors, officers and regular employees of the Company will not receive any
additional compensation for such activities. The Company may also request
banking institutions, brokerage firms, custodians, nominees and fiduciaries to
forward solicitation materials to the beneficial owners of common stock of the
Company held of record by such persons, and the Company will reimburse the
reasonable forwarding expenses. The cost of this solicitation of proxies will be
paid by the Company. This Proxy Statement and the enclosed form of proxy are
furnished in connection with the proxy solicitation and are first being mailed
to stockholders on or about May 17, 1999.
A copy of the Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1998, is enclosed herewith. THE COMPANY WILL FURNISH WITHOUT CHARGE
TO ANY PERSON WHOSE PROXY IS BEING SOLICITED ADDITIONAL COPIES OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-KSB, WITHOUT EXHIBITS, FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1998 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
INCLUDING FINANCIAL STATEMENTS INCLUDED THEREIN, UPON WRITTEN REQUEST TO XOX
CORPORATION, 7640 WEST 78TH STREET, BLOOMINGTON, MINNESOTA 55439, ATTENTION:
MARK SENN. THE COMPANY WILL FURNISH THE EXHIBITS TO SUCH FORM 10-KSB UPON
WRITTEN REQUEST TO THE ABOVE ADDRESS AND THE PAYMENT OF A FEE COVERING THE
COMPANY'S REASONABLE EXPENSES IN FURNISHING SUCH EXHIBITS.
<PAGE>
REVOCATION OF PROXY
Any stockholder returning the accompanying proxy may revoke such proxy at any
time prior to its exercise (a) by giving written notice to the Company of such
revocation, (b) by voting in person at the meeting, or (c) by delivering to the
Company, a properly signed proxy bearing a later date. Attendance at the Annual
Meeting will not in itself constitute revocation of a proxy. Any written notice
or proxy revoking a proxy should be sent to XOX Corporation, 7640 West 78th
Street, Bloomington, Minnesota 55439, Attention: Mark Senn.
RECORD DATE AND VOTING
The voting securities of the Company are shares of its common stock, $.25 par
value per share ("Common Stock"), each share of which entitles the holder
thereof to one vote on each matter to come before the Annual Meeting or any
adjournment thereof.
At the close of business on May 10, 1999 (the "Record Date"), the Company had
issued and outstanding 3,072,901 shares of Common Stock held of record by
approximately 229 registered holders on behalf of approximately 1,089 beneficial
owners. Only holders of record of Common Stock are entitled to vote on matters
that come before the Annual Meeting or any adjournment thereof. As provided in
the Certificate of Incorporation of the Company, there is no right of cumulative
voting. All matters being voted upon by the stockholders require a majority vote
of the shares of Common Stock represented at the Annual Meeting either in person
or by proxy.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by the
election inspectors appointed for the meeting and will determine whether or not
a quorum is present. The presence in person or by proxy of the holders of a
majority of the outstanding shares of Common Stock entitled to vote at the
Annual Meeting is necessary to constitute a quorum at the Annual Meeting or any
adjournment thereof. If a quorum is not present or represented at the meeting,
the stockholders entitled to vote, present in person, or represented by proxy,
have the power to adjourn the meeting from time to time, without notice other
than an announcement at the meeting, until a quorum is present or represented.
At any such reconvened meeting at which a quorum is present or represented, any
business may be transacted that might have been transacted at the meeting as
originally notified.
Shares represented by proxies marked "Abstained" will be considered present at
the meeting for purposes of determining a quorum and for purposes of calculating
the total number of votes cast, but will not be considered to have been voted in
favor of such matter. If an executed proxy is returned by a broker holding
shares in street name which indicates that the broker does not have
discretionary authority to vote on one or more matters as to certain shares,
such shares will be considered present at the meeting for purposes of
determining a quorum, but will not be considered to be voted at the meeting for
purposes of calculating the vote with respect to such matter.
2
<PAGE>
ACTION TO BE TAKEN UNDER THE PROXY
Shares represented by properly executed and returned proxies will be voted as
specified on the proxies. Shares represented by proxies where no specification
has been made will be voted (i) FOR, PROPOSAL ONE -- the election of the person
named in this Proxy Statement as nominee for election to the Board of Directors
and (ii) FOR, PROPOSAL TWO -- the appointment of Grant Thornton LLP as the
independent auditors of the Company for the current fiscal year; and (iii) in
the discretion of the proxy holders, as to any other business that properly
comes before the meeting. Stockholders may designate a person or persons other
than those named in the enclosed proxy to vote their shares at the Annual
Meeting or any adjournment thereof.
PROPOSAL ONE:
ELECTION OF DIRECTORS
The Amended and Restated Bylaws provide that the number of directors that
constitute the Board of Directors shall be as least one (1). The Board of
Directors currently has six (6) members consisting of Steven Mercil, Thomas J.
Lucas, Steven B. Liefschultz, Bernard J. Reeck, Peter Dahl and Craig Gagnon. The
Board is divided into three classes, with each class elected in a different year
for a term of three years. Peter Dahl has been nominated for election to the
Board of Directors at the 1999 Annual Meeting and has consented to serve if
elected. Nominees may be contacted at the offices of the Company. The Company
knows of no reason why the listed nominee would be unavailable to serve.
NOMINEES FOR ELECTION AS CLASS II DIRECTORS
WHOSE TERM WILL EXPIRE IN 2002
Peter Dahl, age 32 Mr. Dahl has been a director of the
Company since 1998. Mr. Dahl's
biography is included below under
"Directors".
In case any nominee should become unavailable for election for any
reason, the persons named on the enclosed proxy card may vote for a substitute
nominee as the Board of Directors may propose.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ELECTION OF
ITS NOMINEE TO THE BOARD OF DIRECTORS.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth as of April 20, 1999, the number of shares of the
Company's Common Stock beneficially owned by: (i) each director of the Company;
(ii) each of the Named Executive
3
<PAGE>
Officers; (iii) each person known by the Company to beneficially own more than
5% of the outstanding shares of Common Stock; and (iv) all executive officers
and directors as a group.
NUMBER OF SHARES OF
COMMON PERCENTAGE OF
NAME STOCK BENEFICIALLY OUTSTANDING SHARES
- ---- ------------------ ------------------
OWNED(1)
--------
SAS IP, Inc. 126,315(2) 4%
123 East 17th Street
Cheyenne, Wyoming 15342
Minnesota Investment Network Corp. 216,628(3) 7%
111 Third Avenue South
Suite 420
Minneapolis, Minnesota 55401
Dr. Pradeep Sinha 258,022(4) 8%
7640 West 78th Street
Bloomington, MN 55439
Steven B. Liefschultz 410,500(5) 13%
7630 West 78th Street
Bloomington, Minnesota 55401
Thomas J. Lucas 141,677(6) 4%
6725 Colby Lane
Bloomfield Hills, Michigan 48239
Steven Mercil 66,250(7) 2%
111 3rd Ave S Suite 420
Minneapolis, Minnesota 55401
Bernard J. Reeck 243,628(8) 8%
1232 Duluth Court
St. Paul, Minnesota 55109
Peter Dahl 12,500(9) *
BankWindsor
740 Marquette Ave
IDS Center
Minneapolis, Minnesota 55402
4
<PAGE>
Craig Gagnon 27,500(10) *
Oppenheimer Wolff & Donnelly
45 South 7th Street
Suite 3400
Minneapolis, Minnesota 55402
Mark O. Senn 100,000(11) 3%
7640 W. 78th Street
Bloomington, MN 55439
Total Executive Officers and Directors 1,218,683(12) 40%
as a group (eight persons & affiliates)
- --------------------
* Less than 1%.
(1) Shares of Common Stock subject to options, warrants, or convertible
debt securities currently exercisable or exercisable within 60 days
after March 31, 1999 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) Includes 5,283 shares issuable upon exercise of warrants.
(3) Includes 8,335 shares issuable upon exercise of warrants and 5,000
options currently exercisable.
(4) Includes 1,386 shares issuable upon exercise of warrants and 160,888
options currently exercisable.
(5) Includes 30,600 shares issuable upon exercise of warrants and 115,000
options currently exercisable.
(6) Includes 1,250 shares issuable upon exercise of warrants and 23,001
options currently exercisable.
(7) Includes 82,250 options currently exercisable. Excludes securities held
by Minnesota Investment Network Corporation of which Mr. Mercil is CEO.
(8) Includes 28,000 shares issuable upon exercise of warrants and 15,000
options currently exercisable.
(9) Includes 5,000 shares subject to options currently exercisable.
(10) Includes 5,000 shares subject to options currently exercisable.
(11) Includes 32,332 shares subject to options currently exercisable.
(12) Includes securities held by Minnesota Investment Network Corporation,
of which Mr. Mercil is affiliated.
5
<PAGE>
DIRECTORS
---------
Director
Name Age Position Since
- ---- --- -------- --------
Steven Mercil 46 Vice Chairman and Director(1)(2)(3)(4) 1997
Thomas J. Lucas 46 Director(1)(2)(3)(4) 1995
Steven B. Liefschultz 51 Chairman of the Board of Directors(2)(3) 1997
Bernard J. Reeck 71 Director(2)(3) 1997
Peter Dahl 32 Director(1) 1998
Craig Gagnon 59 Director(1)(3)(4) 1998
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
(3) Member of the Executive Committee
(4) Compliance Committee
STEVEN MERCIL was Interim Chief Executive Officer from October 1997 to June 4,
1998 and served as Interim Chief Financial Officer of the Company until March
31, 1999. Mr. Mercil became Vice Chairman on April 19, 1999. Mr. Mercil has
served as CEO of MIN-Corp, a venture fund that focuses on investments in
Minnesota since July of 1998. He was previously the equity fund manager of
Minnesota Technology, Inc. (MTI), an equity investment fund specializing in
Minnesota technology companies. MTI granted Mr. Mercil a leave of absence to be
employed at the Company on an interim basis. Mr. Mercil has more than 13 years
of experience assisting in the strategic development and growth of public and
private companies. He joined the Company's Board in August of 1997 after
previously serving from 1993 to 1995.
THOMAS J. LUCAS is a director of the Company. Mr. Lucas was Group Vice President
for Flint Ink Company, located in Detroit, Michigan for seven years. Currently,
Mr. Lucas is Chief Executive Officer for Made in the Shades Optical Inc. Mr.
Lucas holds a J.D. degree from William Mitchell College of Law in St. Paul,
Minnesota and a B.A. from the University of Notre Dame.
BERNARD J. REECK is a director of the Company. Mr. Reeck is the president of
Group Services Company, which has interests, among others, in the oil and gas
industry, and of the Cellars Wines & Spirits Inc., a chain of retail liquor
stores in Minnesota. He has also been involved in numerous real estate
transactions since 1975. Mr. Reeck has a law degree from the University of North
Dakota and is a retired managing editor of West Publishing Company.
STEVEN B. LIEFSCHULTZ has served as Chairman of the Board of Directors since
November 1997. Mr. Liefschultz is Chairman of the Remada Company, a real estate
development and management company in Minnesota. Prior to this, Mr. Liefschultz
practiced law for 12 years, specializing in
6
<PAGE>
commercial litigation, contract negotiation and commercial real estate. He has
extensive experience in the development, ownership, financing and management of
income real estate and other areas of investment. Mr. Liefschultz received his
B.A. and law degrees from the University of Minnesota.
PETER DAHL is a director of the Company. Mr. Dahl currently is the Executive
Vice President and Chief Operating Officer for BankWindsor. He oversees the
commercial and private lending functions of the bank as well as the overall
asset growth and performance of the loan portfolio. His areas of expertise
involve small business, mezzanine, and real estate finance, which enhance his
ability to cultivate relationships with entrepreneurs and their businesses. Mr.
Dahl works closely with younger companies to establish the credit facilities
they need to help them grow.
CRAIG GAGNON is a director of the Company. Mr. Gagnon is a partner with
Oppenheimer Wolff & Donnelly in Minneapolis, Minnesota. Mr. Gagnon's practice is
concentrated in litigation in the areas of securities fraud, accounting
malpractice and legal malpractice defense work. Mr. Gagnon chairs the Board of
Trustees for William Mitchell College of Law; is a Fellow in the American
College of Trial Lawyers; and is a past president of the Metropolitan Breakfast
Club. Mr. Gagnon also acts as a general partner in several commercial real
estate partnerships located in Minnesota. Mr. Gagnon received his Bachelor of
Arts degree from the University of Minnesota (1964) and his Juris Doctor degree
from William Mitchell College of Law (1968 - magna cum laude).
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors currently has four committees - an Executive Committee,
an Audit Committee, a Compliance Committee and a Compensation Committee. The
recently created Executive Committee takes an active role in the operation and
strategic direction of the Company. It is authorized and directed to take any
and all necessary and appropriate action of the Company including, but not
limited to, forming and appointing members to an advisory committee, determining
the compensation of any such advisory committee, conducting executive searches,
filling employment positions with the Company, hiring organizational
consultants, conducting directorial searches and recommending candidates to the
Board of Directors, and negotiating contracts with existing and potential
customers of the Company. The Executive Committee as a whole, met at least 5
times and numerous other times with only a majority, during 1998. The Audit
Committee reviews the results and scope of the audit and other services provided
by the Company's 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 of Directors. The Audit Committee met two (2) times during
1998. The Compliance Committee reviews all desired stock transactions by the
Company's Directors and/or Officers. The Compliance Committee did not meet
during 1998. The Compensation Committee makes recommendations concerning
executive compensation and incentive compensation for employees of the Company,
subject to ratification by the Board of Directors. The Compensation Committee
did not meet during 1998.
7
<PAGE>
1998 MEETINGS OF THE BOARD OF DIRECTORS
Eleven (11) formal meetings of the Board of Directors were held during 1998. In
addition, the Board of Directors frequently met on a casual basis and conducted
its business through written actions in lieu of meetings. No incumbent director
attended fewer than 75% of the aggregate of the total number of meetings of the
Board of Directors or meetings of the Executive, Audit, Nominating or
Compensation Committees on which the incumbent director served.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities and 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. Directors,
executive officers and greater than 10% beneficial owners are also required to
furnish the Company with copies of all Section 16(a) forms that they file.
Pradeep Sinha, former Chief Executive Officer, Chief Technical Officer and a
director of the Company, filed a Form 4 in July 1998 to report a transaction
occurring in March 1998 and June, 1998. Steven Mercil, Interim Chief Financial
Officer and a director of the Company filed a Form 4 in July 1998 to report a
transaction occurring in June 1998.
On July 28, 1998, Mr. Mercil and Mr. Lucas were granted options to correct
errors related to prior service on the Board of the Company. On April 12, 1999
Mr. Mercil filed a Form 5 relating to the grant of his options and on April 13,
1999 Mr. Lucas filed a Form 5 relating to the grant of his options.
Mr. Peter Dahl filed a Form 5 on February 12, 1999 to report a grant of stock
options. Mr. Dahl owned no shares of the Company's common stock on the date of
becoming a director of the Company.
Except as indicated above, based upon a review of the copies of such reports
furnished to the Company, the Company believes that all directors, and greater
than 10% owners complied with all Section 16(a) filing requirements applicable
to them during fiscal 1998.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
The following summary compensation table provides certain information for the
years ended December 31, 1998 and 1997 concerning executive compensation paid or
accrued to the Company's Chief Executive Officer (the "Named Executive
Officer").
8
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------- ------------
SECURITIES
FISCAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS
- ------------------------------ ------ ------ ----- -----------
<S> <C> <C> <C> <C>
Steven B. Mercil (1) 1998 $50,000 None 22,250
(Interim Chief Executive Officer 1997 $20,833 None 60,000
and Interim Chief Financial
Officer)
Pradeep Sinha (2) 1998 $112,000 None 60,000
(Chief Executive Officer and 1997 $96,000 None 35,000
Chief Technical Officer)
</TABLE>
- ------------------------------
(1) Mr. Mercil became Chief Executive Officer effective October 1997
through June 4, 1998 and was compensated based on an annualized salary
of $100,000 on a pro rata basis. Mr. Mercil served as Interim Chief
Financial Officer until March 31, 1999 for which he received no cash
compensation. However MIN-Corp., an affiliate of Mr. Mercil, received
an option for 16,000 shares of common stock to compensate for Mr.
Mercil's assistance to the Company.
(2) Mr. Sinha served as Chief Technical Officer and also served as Interim
Chief Executive Officer from August 1997 to October 1997 and then
became Chief Technical Officer and also Chief Executive Officer on June
4, 1998. Effective March 26, 1999, Dr. Sinha resigned.
STOCK OPTION GRANTS DURING FISCAL YEAR 1998
The following table provides information regarding stock options granted during
fiscal year 1998 to the Named Executive Officers in the Summary Compensation
Table.
<TABLE>
<CAPTION>
% OF TOTAL OPTIONS EXERCISE PRICE EXPIRATION
---------------------- -------------- ----------
NAME OPTIONS GRANTED GRANTED IN FISCAL YEAR PER SHARE DATE
---- --------------- ---------------------- -------------- ----------
<S> <C> <C> <C> <C>
Pradeep Sinha(1) 60,000 37% $1.38 June 4, 2008
Steven Mercil 16,000 10% $1.38 June 4, 2008
6,250 4% $3.50 July 28, 2008
</TABLE>
9
<PAGE>
(1) Dr. Sinha may exercise the subject non-qualified stock option for up to 33%
of the stock option upon signing of employment agreement, 33% six months after
signing new employment agreement and 33% 12 months after signing new employment
agreement. No new employment agreement was signed.
(2) MIN-Corp. received options for 16,000 shares of common stock to compensate
for Mr. Mercil's assistance to the Company. MIN-Corp. may exercise the subject
non-qualified option for up to 100% of the option stock after March 31, 1999.
Mr. Mercil was granted options for 6,250 shares, currently exercisable, to
correct errors related to prior service on the Board of the Company.
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
VALUE (1) OF UNEXERCISED
NUMBER OF NUMBER OF UNEXERCISED OPTIONS OPTIONS AT DECEMBER 31,
SHARES VALUE AT DECEMBER 31, 1997 1997
ACQUIRED ON REALIZED -------------------------------- ---------------------------------
NAME EXERCISE (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ---------------- ----------- --------------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Steven B. 0 0 60,000 0 No Value No Value
Mercil
Dr. Pradeep 0 0 0 60,000 No Value No Value
Sinha
</TABLE>
(1) Value is the difference between the exercise price of the option and the
closing price of the Common Stock on December 31, 1998 of $1.000.
EMPLOYMENT AGREEMENTS
The Company had an oral agreement with Steven B. Mercil regarding his employment
as Interim Chief Executive Officer and Chief Financial Officer. As part of the
agreement, Mr. Mercil agreed to serve as Interim Chief Executive Officer until
June 4, 1998. Mr. Mercil agreed to serve as Interim Chief Financial Officer with
no cash compensation until his resignation effective March 31, 1999. Dr. Pradeep
Sinha, former Chief Executive Officer and Chief Technical Officer and Board
Member worked under an employment agreement dating back to December 20, 1994.
Dr. Sinha has resigned effective March 26, 1999 to pursue private consulting.
10
<PAGE>
DIRECTOR COMPENSATION
The Company has a standard arrangement outlining the compensation to be given to
its Board of Directors. Members of the Board (or the entities with which such
directors are affiliated) do not receive any cash compensation for serving on
the Board, except for reimbursement for expenses incurred in attending meetings
and instead receive a non-qualified stock option to purchase 5,000 shares of the
Company's Common Stock for each year of service on the Board. In addition,
during fiscal year 1998, members of the Company's Executive Committee received
stock options to purchase 10,000 shares of Common Stock at 100% of the Fair
Market Value of each share at the date of grant. Each option granted to
Directors on the Executive Committee vests one year from the date of grant,
provided that on such anniversary date the Optionee has served on such Executive
Committee for one year. In addition, in fiscal year 1997, Steven Liefschultz was
granted an option to purchase 100,000 shares of Common Stock with an exercise
price of $1.70 per share which was not less then 85% of the Fair Market Value of
the Common Stock on date of grant. This grant was not made pursuant to the
Company's 1996 Omnibus Stock Plan, and was made in consideration of the
additional contemplated work to be performed by Mr. Liefschultz. This option
vests as follows: 25% of the shares vested immediately upon grant. 50% of the
shares vested in equal installments on November 30, 1997, December 31, 1997 and
January 31, 1998 and the remaining 25% of the shares vest upon the occurrence of
certain contingencies related to either the amount of time Mr. Liefschultz works
for the Company or the occurrence of various business and financial
transactions.
1996 OMNIBUS STOCK PLAN
The Board of Directors of the Company adopted and the Company's stockholders
approved the 1996 Omnibus Stock Plan (the "Stock Plan") effective June 14, 1996.
The Stock Plan supersedes both the 1987 Incentive Stock Option Plan and the 1987
Non-Qualified Stock Option Plan of the Company, and, while options previously
granted thereunder remain exercisable, no new options will be granted under
either of the superseded plans. The purpose of the Stock Plan is to promote the
interests of the Company and its stockholders by providing personnel of the
Company with 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 Stock Plan. At the Annual
Shareholder Meeting held on June 4, 1998, Stockholders approved an amendment to
the Stock Plan to add 500,000 shares of the Company's common stock to be
reserved for issuance under the Stock Plan (so that a total of 1,000,000 shares
of common stock will have been reserved for issuance under the Plan), and to
eliminate the formula provisions under the Stock Plan. As of March 31, 1999,
872,739 Shares of Common Stock are available for issuance under the Stock 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 the
responsibility to interpret the Stock Plan and all determinations made by it are
final and conclusive, subject in all cases to the provisions of the Stock 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. Outside Directors are
eligible to receive only nonqualified stock options under the Stock Plan.
11
<PAGE>
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 Stock
Plan. Other key individuals, who are not employees, may also be granted
nonqualified options under the Stock 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 Stock Plan requires that the option price of incentive stock options granted
under the Stock Plan shall be no 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 Stock 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 Stock 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 Stock Plan.
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;
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, 603 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
12
<PAGE>
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. 4,500 of these warrants expired in 1998. In addition, the Company paid
off $22,344 of these loans in 1998 in connection with a waiver of certain rights
contained in the VRD's. Certain current and former officers and directors of the
Company hold an aggregate of $77,081 of the Collateralized VRD's and have
warrants to purchase 11,000 shares of Common Stock.
The Employee Interest-Bearing Notes and Employee Non-Interest Bearing Notes
originated from wage deferrals by the Company's employees from 1988 through
1991. Current and former officers of the Company held $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 three-year repayment
schedule on the Employee Interest-Bearing Notes. Over a three year period
beginning in 1997, up to one-third of an employees' interest-bearing debt is
repaid annually, if the employee converts an equal or greater amount of his/her
non-interest bearing debt into Common Stock at the conversion rate of $2.50 per
share. In 1996 two of the Company's then current officers holding $83,918 of
employee interest-bearing debt elected this repayment and conversion option. The
third and final repayment installment is expected to be completed on or about
March 31, 1999.
The Directors VRDs originated out of a loan transaction in 1988 with the
Company's then current directors. The holders of the Directors VFDs 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. In
1998, the Company paid off $7,767 of these loans in connection with a waiver of
certain rights contained in the VRDs. 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 held (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 $5.68 per share. In September 1996 the SAS IP VRD was repaid out
of proceeds from the Company's initial public offering. Both the above option
and warrants expired in September of 1998.
From April through May 1996, the Company obtained bridge loans (the "1996 Bridge
Loans") to finance the Company prior to completion of its initial public
offering. The 1996 Bridge Loans were evidenced by promissory notes, on which the
principal balance became due and payable on November 15, 1996 or out of proceeds
of the initial public offering, whichever occurred first. The 1996 Bridge Loans
bore interest at the rate of ten percent (10%) per year, compounded annually. In
connection with these loans, the Company issued warrants to purchase 12,500
shares of Common Stock to the holders of the Bridge Loans. The 1996 Bridge Loans
were repaid in September 1996, shortly after receipt of proceeds of the initial
public offering.
13
<PAGE>
The following table includes major stockholders, current and former directors
and officers of the Company who served in these capacities during 1998 and
participated in the foregoing transactions as follows:
DEBT ($)
- --------------------------------------------------------------------------------
Employee
Employee Non-
Collater- Interest- interest
alized Bearing Bearing 1996
VRDS Notes Notes Bridge
Thomas J. -- -- -- 25,000
Lucas
Turhan F. 11,605 11,383 --
Rahman
Pradeep 2,001 16,367 16,054 --
Sinha
Totals 2,001 27,972 27,437 25,000
Equity (Shares of Common Stock)
- --------------------------------------------------------------------------------
Steven B. Liefschultz 50,000 PPM
November 11,
1997
Bernard J. Reeck 50,000 PPM
November 11,
1997
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, including shares, 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.
On December 2, 1997 the Company entered into a lease agreement (the "Lease")
with the Braemar Business Center, LLC regarding the leasing of the Company's
office space. Prior to December 31, 1997, Mr. Steven B. Liefschultz, Chairman of
the Company's Board of Directors, had a significant ownership interest in
Braemar Center, LLC. Currently, Mr. Liefschultz has no financial interest or
ownership in the Braemer Center.
14
<PAGE>
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.
PROPOSAL TWO:
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company has selected Grant Thornton LLP to serve
as independent auditors to the Company for the fiscal year ending December 31,
1999 and recommends that the stockholders of the Company appoint Grant Thornton
LLP as the Company's independent auditors. Representatives of Grant Thornton LLP
are expected to be present at the Annual Meeting and will be given an
opportunity to make a statement if they so desire and to respond to appropriate
questions. If the appointment of Grant Thornton LLP is not ratified by the
stockholders, the Board of Directors is not obligated to appoint other auditors,
but the Board of Directors will give consideration to such unfavorable vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" RATIFICATION OF
THE APPOINTMENT OF GRANT THORNTON LLP AS INDEPENDENT AUDITORS.
SUBMISSION OF STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be present at the 2000 Annual Meeting of
Stockholders must be received by the Secretary of the Company, 7640 West 78th
Street, Bloomington, MN 55439, no later than January 14, 2000 for inclusion in
the Company's proxy statement for such meeting.
A stockholder who intends to present a stockholder proposal at the 2000 Annual
Meeting, but does not intend to include the proposal in the Company's proxy
statement for such meeting, must notify the Secretary of the Company on or
before March 31, 2000. If the notice is not timely, the persons named on the
Company's proxy card for the 2000 Annual Meeting may use their discretionary
authority when the proposal is raised at the meeting.
15
<PAGE>
OTHER BUSINESS
The Company's management knows of no other business that will be presented for
consideration at the Annual Meeting other than that described in this Proxy
Statement. If any other business properly comes before the Annual Meeting, it is
intended that proxies solicited by the Board of Directors will be voted in
accordance with the judgment of the person voting the proxies. The Company also
requests that each stockholder pay special attention to the items addressed in
the cover letter to this Proxy Statement by Mr. Mark Senn, President and COO of
the Company. It relates to the current status of the Company and outlines the
direction the Company anticipates moving in the future. Although these
developments are not subject to stockholder vote, the Company deems them to be
important enough to be brought to each stockholder's attention.
If you have any questions with respect to the matters set forth in this Proxy
Statement or the Annual Meeting, please do not hesitate to contact Mark Senn,
President and COO, XOX Corporation, 7640 West 78th Street, Bloomington,
Minnesota 55439.
By Order of the Board of Directors
/s/ Mark Senn
Mark Senn
President & COO
Bloomington, Minnesota
May 14, 1999
16
<PAGE>
XOX CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
JUNE 15, 1999
10:00 A.M.
DECATHLON HOTEL AND ATHLETIC CLUB
1700 E. 79TH STREET
BLOOMINGTON, MINNESOTA
XOX CORPORATION
7640 WEST 78TH STREET, BLOOMINGTON, MN 55439 PROXY
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Steven B. Liefschultz, Chairman of the Board and
Steven B. Mercil, Vice Chairman and Secretary, or either of them as attorneys
and proxies of the undersigned, with full power of substitution, to vote all of
the shares of the Common Stock of XOX Corporation, a Delaware Corporation (the
"Company"), held or owned by the undersigned or standing in the name of the
undersigned at the Annual Meeting of Shareholders of the Company to be held at
the Decathlon Hotel and Athletic Club, 1700 E. 79th Street, Bloomington,
Minnesota, at 10:00 a.m. local time on June 15, 1999, and any adjournment
thereof, and the undersigned hereby instructs said attorneys to vote as follows:
SEE REVERSE FOR VOTING INSTRUCTIONS.
<PAGE>
[ARROW] PLEASE DETACH HERE [ARROW]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
<TABLE>
<S> <C>
1. Election of director: 01 Peter Dahl (Class II) [ ] Vote FOR [ ] Vote WITHHELD
the nominee from the nominee
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY ________________________________________________
INDICATED NOMINEE, WRITE THE NUMBER(S) OF THE | |
NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.) |________________________________________________|
2. To ratify the appointment of Grant Thornton LLP as [ ] For [ ] Against [ ] Abstain
the Company's independent Auditors for the fiscal
year ending December 31, 1999.
3. In their discretion, the proxies are authorized to vote upon such other business as may properly come
before the Annual Meeting or any adjournments thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE UNDERSIGNED SHAREHOLDER.
IF NO DIRECTION IS MADE, THIS PROXY APPOINTMENT WILL BE VOTED "FOR" PROPOSALS 1 AND 2.
Address Change? Mark Box [ ] Dated: _________________________, 1999.
Indicate changes below:
________________________________________________
| |
|________________________________________________|
Signature(s) in Box
Please sign exactly as your name(s) appear on
Proxy. If held in joint tenancy, all persons
must sign. When signing as attorney, executor,
administrator, trustee or guardian, please give
full title as such. Corporations should provide
full name of corporation and title of authorized
officer signing the proxy.
</TABLE>
