SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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
Xscribe Corporation
---------------------------
(Name of Registrant as Specified in Its Charter)
Xscribe Corporation
-------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)
or 14a-6(i)(2) or Item 22(a)(2) of Schedule 14A
[ ] $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3)
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11
[ ] 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.
Page 1 of 23 <PAGE>
XSCRIBE CORPORATION
6285 Nancy Ridge Drive
San Diego, California 92121
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
August 5, 1996
To: Xscribe Shareholders
The Annual Meeting of Shareholders of XSCRIBE CORPORATION (the
"Company") will be held on Monday, August 5, 1996, at 1:00 p.m.,
local time, at the Wyndham Garden Hotel, 5935 Lusk Boulevard, San
Diego, California, for the following purposes:
1. To elect directors.
2. To ratify the appointment by the Company's Board of
Directors of KPMG Peat Marwick LLP as independent auditors
for the 1997 fiscal year.
3. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Only shareholders of record at the close of business on June 10,
1996, are entitled to receive notice of and vote at the meeting
and any adjournment thereof.
All shareholders are cordially invited to attend the meeting in
person. Regardless of whether you plan to attend the meeting,
please sign, date, and promptly return the enclosed proxy in the
accompanying envelope. Shareholders attending the meeting may
vote in person even if they have returned a proxy.
By Order of the Board of Directors
/s/ Bruce C. Myers
Bruce C. Myers
Secretary
San Diego, California
June 25, 1996
Page 2 of 23 <PAGE>
XSCRIBE CORPORATION
6285 Nancy Ridge Drive
San Diego, California 92121
PROXY STATEMENT
--------------
The accompanying proxy is solicited by and on behalf of the Board
of Directors of XSCRIBE CORPORATION ("Xscribe" or the "Company")
to be used at the Annual Meeting of Shareholders to be held on
Monday, August 5, 1996, at 1:00 p.m., local time (the "Meeting
Date"), at the Wyndham Garden Hotel, 5935 Lusk Boulevard, San
Diego, California, and any adjournment thereof. This proxy
statement and the accompanying proxy are being first mailed to
holders of Xscribe's common stock ("Common Stock") on or about
June 28, 1996.
Xscribe will bear the cost of the solicitation of proxies. In
addition, the Company may reimburse brokers, banks, custodians,
nominees and fiduciaries representing beneficial owners of shares
for their reasonable charges and expenses incurred in forwarding
proxies and proxy materials to the beneficial owners of such
Common Stock. Proxies may be solicited by certain of the
Company's directors, officers and regular employees without
additional compensation, personally or by telephone, additional
mailings or telegram.
The Company's principal offices are located at 6285 Nancy Ridge
Drive, San Diego, California 92121, and the Company's telephone
number is (619) 457-5091.
VOTING SECURITIES
-----------------
Shareholders of record as of the close of business on June 10,
1996 (the "Record Date"), will be entitled to vote at the Annual
Meeting. At the Record Date, 5,716,557 shares of Common Stock
were outstanding of which 666,666 shares may not be entitled to
vote because they may be canceled subsequent to the Record Date
and prior to the Meeting Date as more fully described under
"Certain Transactions" herein. Each of the 5,716,557 (or
5,049,891) shares entitled to vote is entitled to one vote on all
matters to come before the meeting. A majority of the shares
entitled to vote, represented in person or by proxy, will
constitute a quorum at the Annual Meeting.
Each shareholder voting in the election of directors may cumulate
votes for nominated directors, giving one candidate a number of
votes equal to the number of directors to be elected multiplied
by the number of shares held by the shareholder, or may
Page 3 of 23 <PAGE>
distribute votes on the same principle among as many candidates
as the shareholder chooses. No shareholder, however, may cumulate
votes for any candidate unless the candidate's name has been
placed in nomination prior to the voting and at least one
shareholder has given notice prior to the voting of his or her
intention to cumulate votes.
Voting for the election of directors may be, but need not be, by
ballot. It will be by ballot if before the voting begins a
shareholder demands that ballots be used. A plurality of votes
shall elect the directors; that is, provided a quorum is present,
the seven persons receiving the greatest number of affirmative
votes shall be elected. All matters other than the election of
directors and matters identified in this Proxy Statement as
requiring approval by affirmative vote of the majority of
outstanding shares will be decided by a majority of the shares
represented and voting, provided such majority is also a majority
of the required quorum.
Abstentions will be counted for purposes of determining whether a
quorum is present at the meeting. For matters other than election
of directors, abstentions will have the effect of a "no" vote due
to the majority requirements described above. Broker non-votes
will not be counted for the purpose of determining whether a
quorum is present. Broker non-votes will have no effect on actual
voting, unless approval by affirmative vote of the majority of
outstanding shares is required, in which case a broker non-vote
will have the effect of a "no" vote.
Votes will be counted by the Company's proxy tabulators and
inspectors of election.
Shareholders may revoke any proxy given pursuant to this
solicitation by delivering prior to the Annual Meeting a written
notice of revocation or a duly-executed proxy bearing a later
date or by attending the meeting and voting in person. Shares
represented by a properly-executed and returned proxy will be
voted at the Annual Meeting in accordance with any directions
noted on the proxy and, if no directions are indicated, the
shares represented by the proxy will be voted in favor of the
proposals set forth in the notice attached hereto.
BENEFICIAL OWNERSHIP OF COMPANY SECURITIES
------------------------------------------
The following table sets forth information as of June 10, 1996,
with respect to all shareholders known by the Company to be the
beneficial owner of more than five percent of its outstanding
Common Stock. Except as noted below, each shareholder has sole
voting and investment powers with respect to the shares shown.
Page 4 of 23 <PAGE>
Percent of Shares
of Common Stock
Outstanding<F1>
-------------------
Number of Without
Name of Beneficial Shares of With ICL ICL
Owner or Group Common Stock Shares Shares<F2>
------------------ ------------ -------- ---------
Sam Wyly <F3><F7> 112,108<F4> 1.96% 2.22%
Charles J. Wyly, Jr. <F3><F7> 119,889<F5> 2.10% 2.37%
Evan A. Wyly <F3><F7> 77,362 1.35% 1.53%
Lorne House Trust <F3><F7> 1,054,002<F6> 18.44% 20.87%
ICL Inc. <F8><F9> 666,666 11.66% 0.00%
[FN]
<F1> Includes and reflects the ownership of common stock
subject to options exercisable within 60 days of June 10,
1996.
<F2> Excludes 666,666 shares that may be canceled subsequent to
the Record Date and prior to the Meeting Date as more
fully described under "Certain Transactions" herein.
<F3> The address of Sam Wyly, Charles J. Wyly, Jr. and Evan
Wyly is 8080 North Central Expressway, Suite 1100, Dallas,
Texas 75206. The address of Lorne House Trust Limited is
Lorne House, Castletown, Isle of Man, British Isles. Sam
Wyly and Charles J. Wyly, Jr., are brothers. Evan Wyly is
a member of the Board of Directors, the son of Sam Wyly
and the nephew of Charles J. Wyly, Jr. Donald R. Miller,
the son-in-law of Charles Wyly, is also a member of the
Board of Directors.
<F4> Includes 35,440 shares owned directly by Sam Wyly and
76,668 shares owned by family trusts of which Sam Wyly is
trustee. Does not include 665,478 shares beneficially
owned by an irrevocable trust established by Sam Wyly. Sam
Wyly disclaims beneficial ownership of the excluded
shares.
<F5> Includes 35,440 shares directly owned by Charles J. Wyly,
Jr. and 84,449 shares owned by family trusts of which
Charles J. Wyly, Jr. is trustee. Does not include 388,524
shares beneficially owned by an irrevocable trust
Page 5 of 23 <PAGE>
established by Charles J. Wyly, Jr. Charles J. Wyly, Jr.
disclaims beneficial ownership of the excluded shares.
<F6> These shares are beneficially owned by Lorne House Trust
as trustee of the Bulldog trust and the Pitkin trust,
irrevocable trusts established by Sam Wyly and Charles J.
Wyly, Jr., respectively. The record holders are Tensas,
Ltd. and Roaring Creek, Ltd., which are corporations
wholly owned by such trusts. Sam Wyly and Charles J. Wyly,
Jr. disclaim beneficial ownership of these shares.
<F7> Does not include the right to receive an aggregate of
about 55,333 shares resulting from the expiration of
certain stock options assumed by Xscribe in the
Photomatrix merger.
<F8> The address of ICL Inc. is Soundview Plaza, 1266 East Main
Street, Stamford, Connecticut. The address of ICL's parent
corporations ICL-UK and ICL PLC is ICL House, 1 High
Street, Putney, London SW151SW, England. The address of
Fujitsu is 6-1, Marunouchi I-chome, Chiyoda-ku, Tokyo,
Japan 100.
<F9> According to the Schedule 13D filed with the Commission in
November 1993, ICL Inc., a Delaware corporation, is a
wholly-owned subsidiary of International Computers
Limited, an English Company ("ICL-UK"). ICL-UK, in turn,
is a wholly-owned subsidiary of ICL PLC, an English
company. A majority of the outstanding voting securities
of ICL PLC is owned by Fujitsu Limited, a Japanese company
("Fujitsu"). ICL UK, ICL PLC and Fujitsu may be deemed to
be controlling persons of ICL Inc.
ELECTION OF DIRECTORS
---------------------
If the transaction described under "Certain Transactions" herein
is not finalized before the Meeting Date, seven directors are to
be elected at the Annual Meeting to serve until the next Annual
Meeting and until their respective successors are elected and
qualified. If the transaction described under "Certain
Transactions" herein is finalized before the Meeting Date, six
directors are to be elected at the Annual Meeting to serve until
the next Annual Meeting and until their respective successors are
elected and qualified.
Should any of the nominees decline or be unable to serve as a
director, the persons authorized in the proxy to vote on your
behalf will vote with full discretion in accordance with their
best judgment. If the transaction described under "Certain
Transactions" herein is finalized after the Meeting Date, then
Page 6 of 23 <PAGE>
the Company believes that Mr. Jukka V. Norokorpi will resign from
the Board and the Board will be reduced to six members at that
time. The Company knows of no other reason why any nominees
listed below would not be available for election, or, if elected,
would not be willing or able to serve. If additional persons are
nominated for election as directors, the proxy holders intend to
vote all proxies received by them according to cumulative voting
rules to assure the election of as many of the nominees listed
below as possible. In such event, the specific nominees for whom
votes are cumulated will be determined by the proxy holders.
Nominees
Mr. SUREN G. DUTIA has been a Director and has served as the
President and Chief Executive Officer of the Company since
January 1989. He was elected to be the Chairman of the Board of
the Company in September 1990. He also serves as the chief
executive officer of each of Xscribe's subsidiaries. Prior to
January 1989, Mr. Dutia was associated from 1981 to December 1988
with Dynatech Corporation, a diversified high-technology company
headquartered in Burlington, Massachusetts. From 1986 to 1988,
Mr. Dutia was a Division Manager and Vice President. Mr. Dutia
was responsible for several subsidiaries, including one operating
subsidiary for which he acted as President. He directed
turn-around/divestiture activities for Dynatech and handled
investor relations. Mr. Dutia is 54 years of age.
Mr. DONALD R. MILLER, JR. has been a Director of the Company
since April 1993. From November 1990 to present, Mr. Miller has
served as Vice President Market Development and, since September
1992, as a Director for Michaels Stores, Inc., a specialty retail
chain. From September 1984 to November 1990 Mr. Miller served as
Director of Real Estate at Michaels Stores. Prior to joining
Michaels, Mr. Miller served in various real estate positions with
Peoples Restaurants, Inc. Mr. Miller also serves as a director of
Sterling Software, Inc., a computer software company. Mr. Miller
is 41 years of age and the son-in-law of Charles J. Wyly, Jr.
Mr. PATRICK W. MOORE has been a Director of the Company since
January 1991. Mr. Moore, who currently serves as the President of
IPAC Manufacturing, Inc., located in Carlsbad, California, has
significant business experience in both the private and public
sectors. Mr. Moore has served on the National Commission on
Employment Policy, committees of the National Academy of Science,
and as the national president of various trade organizations
based in Washington, D.C. From 1981 to 1986 Mr. Moore served as
President of the San Diego Private Industry Council and as
Executive Director of the San Diego Regional Employment and
Training Consortium. Mr. Moore is 47 years of age.
Mr. JUKKA V. NOROKORPI has been a Director of the Company since
July 1994. Since January 1, 1996 Mr. Norokorpi has been Managing
Page 7 of 23 <PAGE>
Director of TeamWARE Group, a subsidiary of ICL. In this
capacity, among other things, Mr. Norokorpi manages the
development and marketing of ICL's groupware software systems and
related hardware currently distributed in the U.S. market by
Xscribe's subsidiary Lexia Systems, Inc. ("Lexia"). From June
1993 through December 1995 Mr. Norokorpi was Vice
President-Client Server Systems within ICL's Client-Server
Systems Division. From September 1991 to June 1993, Mr. Norokorpi
was Director-Systems Division of ICL's Personal Systems Division.
Prior to September 1991, Mr. Norokorpi was Director-Systems
Division and prior to that Director-Product Management of Nokia
Data. ICL acquired Nokia Data in September 1991. Mr. Norokorpi is
47 years of age.
Pursuant to the purchase agreement dated October 22, 1993, among
Xscribe, Xscribe Acquisition, Inc. (now known as Lexia Systems,
Inc.) and ICL Inc., relating to Xscribe's acquisition through its
wholly owned subsidiary, Lexia Systems, of certain assets of the
North American Sales Division of ICL, ICL has the right, subject
to the exercise of fiduciary duties of the directors, to have its
designee nominated for election as a director at each annual or
special meeting of the shareholders of Xscribe at which the
nominee is required to stand for election and to have the
nominee's election recommended to the shareholders of Xscribe.
Mr. Norokorpi may resign from the Board if and when the
transaction described under "Certain Transactions" herein is
finalized.
Mr. IRA H. SHARP has been a Director of the Company since January
1990. Mr. Sharp has been the owner, Chief Executive Officer and
General Counsel of Alderson Reporting Company, Inc., a court-
reporting and litigation-support services firm in Washington,
D.C. since 1984. Mr. Sharp also served in the same capacities for
Alderson from 1977 until 1983. During the period of his absence
from Alderson, Mr. Sharp was a lawyer in private practice.
Mr. Sharp is 53 years of age.
Mr. JOHN F. STALEY has been a Director of the Company since
January 1989. From 1972 to the present, Mr. Staley has been a
partner in Staley, Jobson and Wetherell, a law firm Mr. Staley
founded, located in Pleasanton, California. Mr. Staley was also
the founder and a director of Lab Sales of California and P.M.
America, which were corporations involved in the manufacturing,
sale and distribution of blood-analyzing machines and which were
sold to Dynatech Corporation in 1982. From 1982 to the present,
Mr. Staley has been a co-founder of the Bank of Livermore,
California. Mr. Staley is 52 years of age.
Mr. EVAN A. WYLY has served as a Director of the Company since
April 1993. Mr. Wyly is a Managing Director of Maverick Capital,
Ltd., an investment fund management company. In 1988 Mr. Wyly
Page 8 of 23 <PAGE>
founded Premier Partners Incorporated, a private investment firm,
and served as its President until 1992. Mr. Wyly also serves as a
director of Michaels Stores, Inc., a specialty retail chain, as a
Director of Sterling Commerce, Inc., an electronic commerce
company, and as a director of Sterling Software, Inc., a computer
software company. Mr. Wyly is 34 years of age.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU
VOTE FOR THE NOMINEES LISTED ABOVE.
------------------------------------------------------
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
-------------------------------------------------
During fiscal year 1996, there were six meetings of the Board of
Directors. All of the Company's directors attended at least 75
percent of all meetings of the Board of Directors and other
committees of the Board on which such directors served during
fiscal year 1996.
The standing committees of the Board of Directors of the Company
are the Compensation Committee, the Nominating Committee, and the
Audit Committee.
The principal duties of the Compensation Committee are to
determine and review all compensation of directors, officers, and
employees of the Company, to administer and manage the Company's
incentive compensation plans, to determine grants of stock
options under Company plans, and to report to the Board of
Directors of the Company. Current members of the Compensation
Committee are Messrs. Miller, Sharp and Staley. The Compensation
Committee met four times during fiscal year 1996.
The Nominating Committee's principal duties are to nominate
persons to serve on the Board of Directors of the Company and to
report to the Board. The members of the Nominating Committee are
Messrs. Dutia, Staley and Wyly. The Nominating Committee does not
solicit or consider nominations from shareholders. The Nominating
Committee met once during fiscal year 1996.
The principal duties of the Audit Committee are to advise and
assist the Board of Directors in evaluating the performance of
the Company's independent auditors, including the scope and
adequacy of the auditor's examination, and to review with the
auditors the accuracy and completeness of the Company's financial
statements and procedures. The members of the Audit Committee are
Messrs. Wyly, Moore and Norokorpi, none of whom are officers or
employees of the Company. The Audit Committee met once during
fiscal year 1996.
Page 9 of 23 <PAGE>
DIRECTOR COMPENSATION
---------------------
Directors who are also officers or employees of the Company or
subsidiaries receive no additional compensation for their
services as directors. In fiscal year 1996, Directors who are not
employees of the Company were paid an annual fee of $4,000 plus
$250 for each Board or Committee meeting attended. In addition,
Directors are reimbursed for reasonable travel expenses incurred
in attending meetings.
In November 1996 the Compensation Committee offered, and each
outside Board member accepted, the opportunity to cancel certain
options previously granted, and to replace those options with a
new option covering a like number of shares at a lower exercise
price. The new exercise price is $.88 per share (which equaled
market at the date of grant) and the exercise prices of the
canceled options ranged from $1.31 to $2.50 per share. The new
options vest 50% one year after the date of grant and 100% after
two years. Options repriced totaled 180,000 shares (15,000 for
Mr. Miller, 43,333 for Mr. Moore, 10,000 for Mr. Norokorpi,
46,667 for Mr. Sharp, 50,000 for Mr. Staley and -6- 15,000 for
Mr. Wyly). The Compensation Committee took this action because
the Company desires to provide appropriate incentives in order to
retain these valuable Board members.
CERTAIN TRANSACTIONS
--------------------
In connection with the acquisition of Photomatrix, Photomatrix
restructured outstanding indebtedness to members and affiliates
of the Wyly family into non-negotiable seven year terms notes
bearing interest at the rate of eight percent per annum. The
total principal amount of the notes payable to members of the
Wyly family and their affiliates as of March 31, 1996 is $667,685
of which $45,687 is payable to Evan Wyly and $12,616 is payable
to Donald Miller.
Lexia is a party to distribution and license agreements with
International Computers Limited (ICL) pursuant to which Lexia
purchases from ICL and resells computer equipment and software.
ICL extends Lexia trade credit in connection with these
transactions. Mr. Norokorpi, an Xscribe Board member who is also
the Managing Director of ICL's TeamWARE Group, does not receive
any direct benefits from these transactions.
Xscribe and ICL have had certain disagreements relating to ICL's
alleged breach of its obligations under certain prior agreements
between Xscribe and ICL. Under the terms of a settlement reached
in principle, among other things, these prior agreements will be
restructured, ICL will return for cancellation 666,666 shares of
Page 10 of 23 <PAGE>
Xscribe common stock owned by ICL, and ICL will forfeit its right
to appoint a representative to Xscribe's Board of Directors. If
this transaction is finalized prior to the Meeting Date, then the
666,666 shares returned by ICL will not be entitled to vote at
the meeting. Also if and when the transaction is finalized, Mr.
Jukka V. Norokorpi will resign from Xscribe's Board of Directors
and the Board will be reduced to six members. There can be no
assurance that this transaction will be finalized.
STOCK OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
---------------------------------------------------
The following table sets forth certain information regarding the
ownership of Xscribe common stock by Directors and Executive
Officers:
<TABLE>
Percent of Shares of
Common Stock Outstanding
as of June 10, 1996<F1>
------------------------
Shares of Common
Stock Beneficially With Without
Name of Beneficial Owned as of ICL ICL
Owner or Group June 10, 1996<F1> Shares Shares<F2>
----------------- ------------------ ------ ---------
<S> <C> <C> <C>
Suren G. Dutia
President, CEO and Chairman
of the Board<F3> 144,067 2.48% 2.80%
Donald R. Miller, Director 0 <F*> <F*>
Patrick W. Moore, Director 5,000 <F*> <F*>
Bruce C. Myers
Chief Operating Officer,
Chief Financial Officer,
Secretary<F4> 68,566 1.19% 1.34%
Jukka V. Norokorpi, Director 0 <F*> <F*>
Ira H. Sharp, Director 5,000 <F*> <F*>
John F. Staley, Director 15,333 <F*> <F*>
Evan A. Wyly, Director<F5> 77,362 1.35% 1.53%
All directors and executive
officers as a group<F6> 315,828 5.38% 6.06%
</TABLE>
Page 11 of 23 <PAGE>
[FN]
<F1> Includes and reflects the ownership by the named director or
officer of shares of Common Stock subject to options
exercisable within 60 days of June 10, 1996.
<F2> Excludes 666,666 shares that may be canceled subsequent to
the Record Date and prior to the Meeting Date as more fully
described under "Certain Transactions" herein.
<F3> Includes options to purchase 100,000 shares.
<F4> Includes options to purchase 50,000 shares.
<F5> Excludes shares owned or beneficially owned by other family
members.
<F6> Includes options to purchase 150,000 shares.
<F*> less than 1%
EXECUTIVE COMPENSATION
----------------------
Summary of Cash and Certain Other Compensation
The following table shows, for the most recent three fiscal
years, the cash compensation paid by the Company, as well as all
other compensation paid or accrued for those years to the Chief
Executive Officer and the Company's other executive officer as of
March 31, 1996.
<TABLE>
<CAPTION>
Summary Compensation Table
--------------------------
Long Term
Annual Compensation Compensation
Name and Fiscal Stock
Principal Position Year Salary Bonus Other<F1> Option Shares
------------------ ------ ------ ----- ------- -----------
<S> <C> <C> <C> <C> <C>
Suren G. Dutia 1996 $165,000 - $13,900 191,667
President and 1995 $163,300 $10,000 $15,200 100,000
Chief Executive 1994 $154,000 $90,000 $13,500 50,000
Officer
Bruce C. Myers 1996 $140,000 - $14,300 133,334
Chief Operating 1995 $138,800 $ 7,500 $14,100 66,667
Officer, Chief 1994 $120,000 $60,000 $ 6,600 33,333
Financial Officer
</TABLE>
Page 12 of 23 <PAGE>
[FN]
<F1> Includes Company matching contributions to the Xscribe
Savings and Investment Plan ($4,400, $4,300, and $4,500 for
Mr. Dutia and $4,400, $4,500, and $4,500 for Mr. Myers) and
supplemental life and medical premiums ($9,500, $10,900, and
$9,000 for Mr. Dutia and $9,900, $9,600, and $2,100 for Mr.
Myers) for 1996, 1995 and 1994, respectively.
Employment Agreements. Mr. Dutia and Mr. Myers are employed under
employment agreements that expire in June 1997 and December 1996,
respectively. The Cash Compensation, Savings and Investment Plan,
Supplemental Life Insurance and Medical Premium plans provided to
Messrs. Dutia and Myers, as described above, were provided in
accordance with those employment contracts. If either Mr. Dutia's
or Mr. Myers' employment is terminated by the Company without
cause, then he will be entitled to receive his base salary and
health insurance benefits for the remainder of the term.
Officers Severance Policy. In 1988, the Company's Board of
Directors adopted an Officers Severance Policy that was modified
in November 1990. Under the policy, Mr. Dutia and Mr. Myers are
to receive eight weeks' compensation upon termination of
employment by the Company in addition to any amounts payable
under the remaining term of an employment agreement.
Stock Option Grants Table
-------------------------
The following table shows certain information concerning stock
options granted during fiscal year 1996 to the Company's two
executive officers:
Fiscal Year 1996 Stock Option Grants
(stock option grants are normally considered for
executive officers every year)
<TABLE>
% Total Potential
Options Realizable
Options Granted to Exercise Expira- Value<F2>
Name Granted Employees Price<F1> tion Date @5% @10%
---- ------- ---------- -------- --------- --- ----
<S> <C> <C> <C> <C> <C> <C>
S. Dutia 25,000<F3> 4.3% $1.69 2005 $8,700 $ 38,800
S. Dutia 166,667 28.7% $0.88 2005 $92,200 $233,800
B. Myers 16,667<F3> 2.9% $1.69 2005 $ 5,700 $ 25,900
B. Myers 116,667 20.1% $0.88 2005 $64,600 $163,600
</TABLE>
Page 13 of 23 <PAGE>
[FN]
<F1> The exercise may be paid in cash or, at the discretion of
the Compensation Committee, by tendering shares of Xscribe
Common Stock instead of cash.
<F2> The potential realizable value is calculated pursuant to SEC
regulations by assuming the indicated annual rates of stock
price appreciation for the option term. Actual realized
value will depend on the actual annual rate of stock price
appreciation for the option term.
<F3> These grants were canceled and repriced in connection with
the subsequent grant.
Aggregated Stock Option Exercises and Fiscal Year-end Stock
Option Value Table
The following table sets forth certain information regarding the
number and value of specified unexercised options held by the
Chief Executive Officer and the Company's other executive officer
as of March 31, 1996:
<TABLE>
<CAPTION>
Number of Value of Unexercised
Unexercised Options<F1> In-the-Money Options<F2>
---------------------- -----------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Suren G. Dutia 100,000 166,667 $ 59,870 $ 0
Bruce C. Myers 50,000 116,667 $ 29,935 $ 0
</TABLE>
[FN]
<F1> No options were exercised in fiscal year 1996.
<F2> The value is calculated as the total market value of stock
subject to the options on June 5, 1996 ($.875 per share),
less the total of the option prices.
Ten Year Option Repricing Table
-------------------------------
In June 1995 the Compensation Committee offered to reprice a
portion of the option shares previously granted to Mssrs. Dutia
and Myers and with an original exercise price in excess of June
1995 market value. In November 1995 the Compensation Committee
offered to reprice all option shares previously granted to Mssrs.
Dutia and Myers and with an original exercise price in excess of
Page 14 of 23 <PAGE>
November 1995 market, including the option shares repriced in
June 1995. These offers were made in conjunction with identical
offers to most employees. The following table sets forth the
specified information concerning all options repriced for all
executive officers of the Company for the period August 1987
(initial public offering) through March 1996.
<TABLE>
<CAPTION> Length
of
Number Original
of Option
Shares Market Term
Under- Price of Exercise New Remaining
lying Stock at Price at Exer- at Date
Options Time of Time of cise of
Name Date Repriced Repricing Repricing Price Repricing
---- ---- -------- --------- --------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
S. Dutia, November
CEO 1990 200,000 $0.18 $3.75 $0.18 8 years
S. Dutia, June
CEO 1995<F1> 25,000 $1.25 $4.13 $1.69 9 years
S. Dutia, November
CEO 1995 166,667 $0.88 $1.31- $0.88 6-9 years
$2.91
B. Myers, November
CFO 1990 100,000 $0.18 $1.50- $0.18 8 years
$3.48
B. Myers, June
CFO 1995<F1> 16,667 $1.25 $4.13 $1.69 9 years
B. Myers, November
CFO 1995 116,667 $0.88 $1.31- $0.88 6-9 years
$2.91
</TABLE>
[FN]
<F1> These grants were canceled and repriced in connection with
the November 1995 grants.
Report on Stock Option Repricing
--------------------------------
In connection with the June 1995 and November 1995 option
repricings the Compensation Committee issued the identical report
as follows:
Page 15 of 23 <PAGE>
While the Committee believes that the Company's Stock Option
Plans have been instrumental in attracting and retaining quality
executive officers, and other employees and Directors, the
incentive feature of such program may become lost when options
are granted at fair market value and subsequently the market
price of the Company's common stock falls substantially below the
exercise price of stock options granted under such program. In
1994 and 1995, the market price for the Company's common stock
fell substantially. As a result of the drop in market price of
the common stock, the optionees holding options granted since
April 7, 1992 have exercise prices substantially higher than the
current market value, and therefore hold options which are "out
of the money." After careful consideration of the relevant
factors, including (1) the decline in the market price of the
common stock (2) the reasons for the decline in the market price
of the common stock (3) the large percentage of the Company's'
employees and Directors holding out of the money options, and
(4) the importance of equity incentive to the Company's overall
compensation program for executive officers and employees at all
levels and Directors, the Committee approved the cancellation of
the existing options and the reissue of said options pursuant to
the Company's Stock Option Plans.
COMPENSATION COMMITTEE
Donald R. Miller
Ira H. Sharp
John F. Staley
BENEFIT PLAN DESCRIPTIONS
--------------------------
The following are brief descriptions of the benefit plans
provided to the Company's executive officers:
1994 Stock Option Plan
----------------------
The Xscribe Corporation 1994 Stock Option Plan ("1994 Plan") was
adopted by the Company's Board of Directors in May 1994 and
approved by the Company's shareholders in July 1994. The 1994
Plan authorizes the grant of incentive and nonqualified stock
options covering an aggregate of 366,666 shares of Common Stock.
As of March 31, 1996, a total of 366,666 shares of Common Stock
were reserved for issuance pursuant to the 1994 Plan, of which
all shares were subject to outstanding options and no shares
remained available for options to be granted in the future.
Page 16 of 23 <PAGE>
The 1994 Plan is administered by the Compensation Committee of
the Board of Directors, which has the authority to award
incentive or nonqualified options to any employee of the Company
or its subsidiaries. Approximately 150 employees are currently
eligible to participate in the Plan and options are currently
held by 17 of these employees.
The exercise price of an incentive option may not be less than
100% of the fair market value per share on the date of grant and
the exercise price for a nonqualified option may not be less than
85% of the fair market value per share on the date of grant. The
1994 Plan defines fair market value as the mean between the bid
and asked price of the Common Stock as quoted on NASDAQ. Subject
to these limitations, the Committee determines the exercise
price. Because the Company has a substantial net operating loss
carryforward for federal income tax purposes and would not
materially benefit from a compensation deduction, the Committee
generally has awarded incentive stock options to employees.
The Committee also determines the schedule pursuant to which
options become exercisable. Options granted to officers and
employees typically vest as follows: 33% to 50% of the options
granted vest 12 months following the date of grant, 33% to 50%
vest 24 months following the date of grant and 0% to 34% vest 36
months following the date of the grant. The only condition to
vesting imposed under outstanding options is continuous service
as an employee during the vesting period. All outstanding options
automatically vest, in full, in the event of the dissolution or
liquidation of the Company or, in the event of a reorganization,
merger or consolidation of the Company, if the Company is not the
surviving company.
Options granted under the 1994 Plan may expire no later than 10
years from the date of the grant. If an employee terminates his
employment for any reason other than death or permanent
disability, his vested options expire within 90 days of the
termination. In the case of death or permanent disability, the
vested options expire within 12 months of employment termination.
The exercise price is payable in full, in cash, or in the
discretion of the Committee, by the delivery of outstanding
shares of Common Stock owned by the participant, at the time of
exercise of the option.
1992 Stock Option Plan
----------------------
The Xscribe Corporation 1992 Stock Option Plan ("1992 Plan") was
adopted by the Company's Board of Directors in May 1992 and
approved by the Company's shareholders in July 1992. The 1992
Plan authorizes the grant of incentive and nonqualified stock
options covering an aggregate of 333,333 shares of Common Stock.
Page 17 of 23 <PAGE>
As of March 31, 1996, a total of 302,500 shares of Common Stock
were reserved for issuance pursuant to the 1992 Plan, of which
297,333 shares were subject to outstanding options and 5,167
remained available for options to be granted in the future.
The 1992 Plan is administered by the Compensation Committee of
the Board of Directors, which has the authority to award
incentive or nonqualified options to any employee or Board member
of the Company or its subsidiaries. Approximately 150 employees
and six Board members are currently eligible to participate in
the Plan and options are currently held by nine employees and six
Board members.
The exercise price of an incentive option may not be less than
100% of the fair market value per share on the date of grant and
the exercise price for a nonqualified option may not be less than
85% of the fair market value per share on the date of grant. The
1992 Plan defines fair market value as the mean between the bid
and asked price of the Common Stock as quoted on NASDAQ. Subject
to these limitations, the Committee determines the exercise
price. Because the Company has a substantial net operating loss
carryforward for federal income tax purposes and would not
materially benefit from a compensation deduction, the Committee
generally has awarded incentive stock options to employees.
The Committee also determines the schedule pursuant to which
options become exercisable. Options granted to officers and
employees typically vest as follows: 33% to 50% of the options
granted vest 12 months following the date of grant, 33% to 50%
vest 24 months following the date of grant and 0% to 34% vest 36
months following the date of the grant. The only condition to
vesting imposed under outstanding options is continuous service
as an employee or Board member during the vesting period. All
outstanding options automatically vest, in full, in the event of
the dissolution or liquidation of the Company or, in the event of
a reorganization, merger or consolidation of the Company, if the
Company is not the surviving company.
Options granted under the 1992 Plan may expire no later than 10
years from the date of the grant. If an employee terminates his
employment for any reason other than death or permanent
disability, his vested options expire within 90 days of the
termination. In the case of death or permanent disability, the
vested options expire within 12 months of employment termination.
The exercise price is payable in full, in cash, or in the
discretion of the Committee, by the delivery of outstanding
shares of Common Stock owned by the participant, at the time of
exercise of the option.
Savings and Investment Plan. The Xscribe Corporation Savings and
Investment Plan (the "Savings Plan") generally covers all
Page 18 of 23 <PAGE>
employees of the Company and its subsidiaries (other than
Photomatrix) who are at least age 21 and have completed at least
six months of service with the Company. The Savings Plan is a
qualified plan under Section 401(a) of the Code and meets the
requirements of Section 401(k) of the Code. Under the Savings
Plan, participants may elect to contribute between 2% and 10% of
their annual compensation each year to the Savings Plan. The
Company is required to make a matching contribution to the
Savings Plan each year in an amount equal to 50% of the first 6%
of compensation contributed by each participant.
Participants may elect to invest their accounts in one of three
mutual funds (a) the Janus Fund, which is a common stock fund,
(b) Invesco Industrial Income Fund, which is a common stock fund
or (c) Dreyfus Short-Intermediate Government Fund, which invests
in government obligations. Participants immediately acquire a
vested interest in their own contributions to the Savings Plan
and acquire a vested interest in the matching contributions by
the Company and in any earnings therein according to a 6-year
vesting schedule, pursuant to which participants become 10%
vested for each of the first three years of service, and an
additional 20% vested for each of the next two years of service
and an additional 30% vested for the following year.
Participants' vested interests are distributed after termination
of employment. In addition, participants may make withdrawals
from their accounts while employed if they are either (a) over
age 59-1/2 or (b) experiencing an extreme financial hardship.
Photomatrix Corporation Salary Savings Plan
-------------------------------------------
In connection with the acquisition of Photomatrix Corporation,
Xscribe agreed to continue Photomatrix's existing Salary Savings
Plan ("Photomatrix Plan"), which is a qualified plan under
Section 401(a) of the Code and meets the requirements of Section
401(k) of the Code. The Photomatrix Plan generally covers all
employees of Photomatrix who are at least age 21 and have
completed at least three months of service with Photomatrix.
Under the Photomatrix Plan, participants may elect to have their
salary reduced by up to 10% of their compensation, subject to the
maximum allowed to be deferred under a 401(k) plan, and have the
salary reduction amount contributed to the Photomatrix Plan.
Photomatrix is not required to make any contributions to the
Photomatrix Plan but in fiscal year 1996 Photomatrix made
discretionary contributions equal to 50% of the first 6% of
compensation contributed by each participant.
Participants may elect to invest their accounts one of three
mutual funds (a) the Janus Fund, which is a common stock fund,
(b) Invesco Industrial Income Fund, which is a common stock fund
or (c) Dreyfus Short-Intermediate Government Fund, which invests
in government obligations. Participants immediately acquire a
Page 19 of 23 <PAGE>
vested interest in their own contributions to the Photomatrix
Plan and acquire a vested interest in the discretionary
contributions by Photomatrix according to a 6-year vesting
schedule, pursuant to which participants become 20% vested after
the first two years of service, and an additional 20% vested for
each of the next four years of service. Participants' vested
interests are distributed after termination of employment.
Supplemental Life Insurance and Medical Premium Plans.
------------------------------------------------------
The Company provides life insurance to its executive officers in
the amount equal to five times base salary. The Company also pays
medical insurance costs for its executive officers. Such costs
were based on a fixed premium. In addition, the Company pays
supplemental medical premiums for Messrs. Dutia and Myers. These
premiums cover any medical expenses that are not covered by the
Group Medical Plans that are available to all employees.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
-------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, officers and persons who own more than ten
percent of the Company's common stock, to file reports of
ownership and changes in ownership of securities with the
Securities and Exchange Commission and to furnish to the Company
copies of all Section 16(a) forms they file. Based solely on its
review of copies of such forms received by it, or written
representations from reporting persons that no Forms 5 were
required for those persons, the Company believes that during
fiscal year 1995, all filings required by its directors, officers
and greater than 10 percent beneficial owners were timely filed.
INDEPENDENT AUDITORS
--------------------
Xscribe's Board of Directors has selected KPMG Peat Marwick LLP
as Xscribe's independent auditors for the fiscal year 1997. In
the absence of instructions to the contrary, the shares
represented by the proxy delivered to the Board of Directors will
be voted in favor of ratification of this appointment. A
representative of KPMG Peat Marwick LLP is expected to be present
at the Annual Meeting and will be available to respond to
appropriate questions and to make such statements as he or she
may desire.
Page 20 of 23 <PAGE>
ANNUAL REPORT
-------------
The Annual Report of the Company for the 1996 Fiscal Year, which
includes financial statements for the fiscal year ended March 31,
1996, is being mailed with this proxy statement to shareholders
of record on June 10, 1996. The Annual Report is not considered
to be part of this proxy statement.
The Company has filed with the Securities and Exchange Commission
its Form 10-K for the year ended March 31, 1996. This report
contains detailed information concerning the Company and its
operations, supplementary financial information and certain
schedules which may not be included in the Annual Report. A COPY
OF THIS REPORT, EXCLUDING EXHIBITS, WILL BE FURNISHED TO
SHAREHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO BRUCE C.
MYERS, XSCRIBE CORPORATION, 6285 NANCY RIDGE DRIVE, SAN DIEGO,
CALIFORNIA 92121. A COPY OF ANY EXHIBIT WILL BE FURNISHED TO ANY
SHAREHOLDER UPON WRITTEN REQUEST AND PAYMENT TO THE COMPANY OF A
COPYING CHARGE OF 25 CENTS PER PAGE. REQUESTS FOR COPIES OF
EXHIBITS SHOULD ALSO BE DIRECTED TO THE ABOVE ADDRESS.
SHAREHOLDER PROPOSALS
---------------------
Shareholders of the Company who intend to submit proposals to the
Company's shareholders at the next Annual Meeting of Shareholders
must submit such proposals to the Company by no later than
February 28, 1997. Shareholder proposals should be submitted to
Bruce C. Myers, Xscribe Corporation, 6285 Nancy Ridge Drive, San
Diego, California 92121.
OTHER BUSINESS
--------------
Xscribe knows of no other business to be submitted to the
meeting. If any other business properly comes before the meeting
or any adjournment thereof, the persons named as proxy holders on
the enclosed proxy card intend to vote the shares represented in
accordance with their best judgment in the interest of the
Company.
/s/ BRUCE C. MYERS
BRUCE C. MYERS
Secretary
June 25, 1996
San Diego, California
Page 21 of 23 <PAGE>
P R O X Y
XSCRIBE CORPORATION
6285 Nancy Ridge Drive, San Diego, California 92121
THIS PROXY IS SOLICITED ON BEHALF OF BOARD OF DIRECTORS
The undersigned hereby appoints Suren G. Dutia and
Bruce C. Myers, or either of them, with unlimited power of
substitution, as Proxies to represent the undersigned at the
Annual Meeting of Shareholders of XSCRIBE CORPORATION, to be held
on Monday, August 5, 1996, at 1:00 p.m., local time, at the
Wyndham Garden Hotel, 5935 Lusk Boulevard, San Diego, California,
or at any adjournment of adjournments thereof, and to vote, as
directed on the reverse side of this proxy card, all shares of
common stock, which the undersigned would be entitled to vote if
then personally present.
In their discretion, the proxies are authorized to vote
upon such other business as may properly come before the meeting.
[X] Please mark your vote as in this example.
1. Election of Directors
FOR all nominees listed WITHHOLD AUTHORITY
(except as amended to the to vote for all nominees
contrary below) (including listed below [ ]
discretionary authority
to cumulate votes).
[ ]
Nominees:
S.G. Dutia P.W. Moore,
J.F. Staley E.A. Wyly
I.H. Sharp D.R. Miller, Jr.
J.V. Norokorpi
(INSTRUCTION: To withhold authority to vote for any individual
nominee, strike a line through the nominee's name in the list
above.)
2. Ratification of appointment by the Board of Directors of
KPMG Peat Marwick LLP as independent auditors for fiscal
year 1997
FOR [ ] AGAINST [ ] ABSTAIN [ ]
This proxy when properly executed will be voted in the manner
directed herein by the undersigned shareholder. If no direction
Page 22 of 23 <PAGE>
is made, this proxy will be vote for Proposals 1 and 2 except
broker nonvotes will not be counted.
--------------------------------------
Signature(s)
Date
-----------------------------
Please sign exactly as your name
appears above. If stock is
registered in the name of two
persons, each should sign.
Executors, administrators,
trustee, guardian, attorneys,
and corporate officers should
show their full titles.
Page 23 of 23 <PAGE>
