SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
[X] Filed by the Registrant
[_] Filed by a Party other than the Registrant
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by
Rule 14A-6(e)(2))
[ ] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Worldwide Xceed Group, Inc.
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(Name of Registrant as Specified In Its Charter)
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(1) Title of each class of securities to which transaction applies:
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computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
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[_] Fee paid previously with preliminary materials.
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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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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WORLDWIDE XCEED GROUP, INC.
233 Broadway
New York, New York 10279
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 20, 2001
----------------
To the Stockholders of Worldwide Xceed Group, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of Worldwide Xceed Group, Inc., a Delaware corporation (the
"Company") will be held at _________________, New York, New York on March 20,
2001 at 9:00 a.m. eastern time to consider and take action on the following
matters:
1. To elect five directors to serve until the next annual meeting of
stockholders.
2. To approve an amendment to Article Fourth of the Company's Certificate
of Incorporation to increase the number of authorized shares of Common
Stock from 100,000,000 to 200,000,000 and to state the terms of the
authorized blank check preferred shares.
3. To approve an amendment to Article Fourth of the Company's Certificate
of Incorporation to effect a ten-for-one reverse stock split of the
issued and outstanding shares of the Company's Common Stock.
4. To approve an amendment to the Xceed Inc. Amended and Restated
Millennium Stock Option Plan to increase the number of shares reserved
for issuance thereunder to 2,000,000 shares after giving effect to a
ten-for-one reverse stock split.
5. To ratify the appointment of Deloitte & Touche, LLP, as the Company's
independent certified public accountants.
6. To transact such other business as may properly come before the
meeting.
Holders of record of the Company's common stock at the close of business on
February 8, 2001, are entitled to notice of and to vote at the Annual Meeting or
any adjournments thereof.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE DATE AND SIGN THE
ENCLOSED PROXY AND RETURN IT IN THE ENVELOPE PROVIDED. ANY PERSON GIVING A PROXY
HAS THE POWER TO REVOKE IT AT ANY TIME PRIOR TO ITS EXERCISE AND IF PRESENT AT
THE MEETING MAY WITHDRAW IT AND VOTE IN PERSON.
By Order of the Board of Directors,
Richard R. Dennerline, Secretary
New York, New York
February 23, 2001
WORLDWIDE XCEED GROUP, INC.
233 Broadway
New York, New York 10022
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ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 20, 2001
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PROXY STATEMENT
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This Proxy Statement is being furnished in connection with the
solicitation by the Board of Directors of Worldwide Xceed Group, Inc. (the
"Company") of proxies to be voted at the Annual Meeting of Stockholders of the
Company to be held at _____________________, New York, New York at 9:00 a.m.
eastern time on March 20, 2001 or at any adjournments thereof.
This Proxy Statement and the accompanying Notice of Annual Meeting and
proxy are first being sent to stockholders on or about February 23, 2001. The
shares represented by proxies that are received in the enclosed form and
properly filled out will be voted in accordance with the specifications made
thereon. In the absence of specific instructions, proxies will be voted in
accordance with the recommendations made herein with respect to the proposals
described in this Proxy Statement. A proxy may be revoked by a stockholder at
any time before it is exercised by filing an instrument revoking it with the
Secretary of the Company, filing a duly executed proxy bearing a later date or
by attending the meeting and electing to vote in person.
Holders of record of the Company's common stock, par value $.01 per
share (the "Common Stock"), at the close of business on February 8, 2001, are
entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof. At the close of business on February 8, 2001, there were __________
shares of Common Stock outstanding and entitled to vote at the meeting. There
were ___ record holders as of February 8, 2001. Each share will be entitled to
one vote.
PROPOSAL 1--ELECTION OF DIRECTORS
General
All directors of the Company are elected to serve until the next annual
meeting of stockholders or until their successors are elected and qualified. The
Company's Amended and Restated Bylaws provide that the Board of Directors shall
consist of five members. There are currently five members serving on the Board
of Directors. All five of our current directors are standing for re-election.
Information is provided below with respect to the nominees for
director. The proxy holders intend to vote all proxies received by them in the
accompanying form for the nominees listed below unless otherwise instructed.
Each nominee for director has consented to serve as such if elected by the
stockholders. However, if any nominee fails to stand for election or is unable
to accept election, the persons named in the proxy may vote for such other
person (or persons) as may be designated by the Board of Directors.
The nominees and their biographies are as follows:
Howard A. Tullman
Director since 2000
Age 55
Howard A. Tullman has served as a director and as our Chief Executive
Officer since September 2000. Since March 2000, Mr. Tullman has been the General
Manager of Chicago High Tech Investors I, LLC, an Internet-oriented investment
fund. From September 1996 until February 2000, Mr. Tullman served as the chief
executive officer of Tunes.com, Inc. and its predecessors, an Internet music
site he co-founded and which was sold to EMusic.com, Inc. From October 1993
until October 1996, Mr. Tullman was the president and chief executive officer of
Imagination Pilots, Inc., a multimedia software developer he founded in 1993.
Mr. Tullman serves as a director of Emusic.com Inc. and the Princeton Review and
is the chairman of the board of The Cobalt Group, Inc.
Terry A. Anderson
Director since 1999
Age 53
Terry A. Anderson has served as a director since March 1999. He is a
journalist, teacher, writer and nationally known speaker. Mr. Anderson is
currently a visiting professor at Ohio University's Scripps School of
Journalism, where he has taught since 1993. Mr. Anderson also currently writes a
weekly opinion column on political, social and international affairs for King
Feature Syndicate.
Edward A. Bennett
Director since 2000
Age 54
Edward A. Bennett has served as a director since May 2000. Mr. Bennett
has been a partner in (212) Ventures, a venture capital firm, since March 2000.
Since November 1999, Mr. Bennett has served as the chairman of MOBILELOGIC, a
wireless solutions company he co-founded. From 1995 until 1999, Mr. Bennett was
president of Bennett Media Collaborative. Mr. Bennett is a director of SoftNet
Systems, Inc., Key3Media Group, Inc. and Engage, Inc.
John A. Bermingham
Director since 1997
Age 56
John A. Bermingham has served as a director since November 1997. Since
August 2000, he has served as a managing partner and the chief operating officer
of Capital Key Advisors, an investment banking firm. From 1998 until May 2000,
Mr. Bermingham was the president and chief executive officer of Smith Corona
Corporation. From 1996 until November 1998, he served as a principal with The
Promar Group, a consulting company. From 1993 until 1996, Mr. Bermingham held
the position of president and chief executive officer of AT&T Smart Cards
Systems and Solutions, a division of AT&T.
Stuart N. Emanuel
Director since 2000
Age 57
Stuart N. Emanuel has served as a director since November 2000.
Mr. Emanuel has been the president of worldwide operations for the Business
Solutions Group of Spherion Corporation, a human capital management company,
since 1997. From 1989 until 1997 he acted as vice president of various divisions
within Spherion. Mr. Emanuel is Chairman of the Board of Interim Technology
(Asia), Pte. Ltd., and a director of the Information Technology Association of
America (ITAA), Amerihost Properties and Zanathon Inc., a Salt Lake City hi-tech
company. Mr. Emanuel serves pursuant to Spherion Corporation's right to
designate two nominees to the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR EACH OF
THE NOMINEES FOR DIRECTOR SET FORTH ABOVE.
Board Committees
The Company has standing Audit and Compensation Committees. The Board
of Directors as a whole acts as a Nominating Committee. All directors attended
at least 75% of the Board meetings and assigned committee meetings during the
fiscal year ended August 31, 2000. The Board of Directors held ten meetings
during the year, the Audit Committee held __ meetings and the Compensation
Committee held __ meetings.
Audit Committee. The Audit Committee is comprised of three independent
directors, as defined by the National Association of Securities Dealers, Inc.
("NASD"). The committee
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operates in accordance with its written charter adopted by the Board of
Directors (set forth in Appendix A to this proxy statement). The Audit Committee
reviews the preparations for and the scope of the audit of our annual financial
statements, reviews our quarterly financial statements, reviews drafts of such
statements, makes recommendations as to the engagement and fees of our
independent auditors, considers the effects that the provision of any non-audit
services may have on auditor independence and monitors the functioning of our
accounting and internal control systems by meeting with representatives of
management and the independent auditors. The Audit Committee has direct access
to our independent auditors and counsel and performs such other duties relating
to the maintenance of the proper books of account and records and other matters
as the Board of Directors may assign from time to time. Terry Anderson, Edward
Bennett and John Bermingham comprise the Audit Committee. Norman Docteroff was
on the Audit Committee until his resignation from the Board of Directors in
December 2000.
Compensation Committee. The Compensation Committee operates in
accordance with its written charter adopted by the Board of Directors. The
committee supervises and makes recommendations with respect to compensation
arrangements for the Company's executive officers. The Compensation Committee
reviews the performance of the Company's executive officers, provides input
regarding long-range planning for executive development and succession and
administers the Company's option plans, including establishing the terms and
amounts of option grants. Edward Bennett and John Bermingham currently comprise
the Compensation Committee. Norman Docteroff was on the Compensation Committee
until his resignation from the Board of Directors in December 2000.
Compensation of Directors
Other than as discussed in the paragraph below, directors who are our
employees receive no additional compensation for their services as directors.
Directors who are not our employees do not receive a fee for attendance in
person at meetings of the Board of Directors or committees of the Board of
Directors, but are reimbursed for travel expenses and other out-of-pocket costs
incurred in connection with their attendance at the meetings.
Terry Anderson received a fee of $10,000 during fiscal 2000 for
rendering consulting services to us. Mr. Bennett and Mr. Bermingham are entitled
to receive an option to purchase 100,000 and 50,000 shares of Common Stock,
respectively, as of February 8, 2000. The exercise price for such options would
be $40.25.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 as amended (the
"Exchange Act") requires that our directors and executive officers and
beneficial owners of more than 10% of our Common Stock file reports of holdings
and transactions in our Common Stock with the Securities and Exchange Commission
and the Nasdaq National Market. Based solely upon a review of Forms 3, 4 and 5
furnished to the Company, the Company is not aware of any person that has failed
to file a required report. However, the Company did not receive written
representations from Werner Haase, William Zabit, Edward Bennett, John
Bermingham, Norman Docteroff or John Gandolfo that no Form 5 was required to be
filed for the fiscal year ended August 31, 2000. The Company has recently
instituted a compliance program to assist its directors and executive officers
with Section 16 filings.
3
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation awarded, earned or paid
for services rendered in all capacities by the Company's Chief Executive Officer
and each of the four other most highly compensated executive officers of the
Company (the "Named Executive Officers") for each of the last three fiscal
years.
Summary Compensation Table
Annual Compensation Long Term
Compensation
Securities
Name and Underlying All Other
Principal Position Fiscal Year Salary Bonus ($) Options (#) Compensation ($)
- -------------------- ----------- ------ --------- ---------------- -----------------
Scott A. Mednick(1) 2000 $350,000 $ 200,000 600,000 $ 0
Co-Chairman 1999 $350,000 $1,080,000 300,000 $ 0
1998 $ 43,750 $ 80,000 1,000,000 $ 0
Werner G. Haase (2) 2000 $500,000 $ 102,550 0 $ 52,000(3)
Chief Executive Officer, 1999 $500,000 $ 150,000 0 $ 84,299
President and Co-Chairman 1998 $500,000 $ 300,000 500,000 $ 80,859
William N. Zabit(4) 2000 $405,000 $ 0 0 $ 0
President 1999 $405,000 $ 0 0 $ 7,066
1998 $ 0 $ 0 0 $ 0
John P. Gandolfo(5) 2000 $213,000 $ 75,000 333,332 $ 0
Senior Vice President and 1999 $ 0 $ 0 0 $ 0
Chief Financial Officer 1998 $ 0 $ 0 0 $ 0
Kevin Labick(6) 2000 $275,000 $ 168,000 125,000 $ 121,875(7)
Executive Vice President 1999 $ 0 $ 0 150,000 $ 0
1998 $ 0 $ 0 0 $ 0
- ----------------------
(1) Mr. Mednick resigned as Chairman of the Company in December 2000.
(2) Mr. Haase resigned as Chief Executive Officer and Co-Chairman in
August 2000. Mr. Haase resigned as President in November 2000.
(3) Includes premiums for life insurance policies paid by the Company on
behalf of Mrs. Haase.
(4) Mr. Zabit resigned as President of the Company in March 2000.
(5) On September 29, 2000, Mr. Gandolfo resigned from his position. In
connection with his resignation, 83,337 options granted to
Mr. Gandolfo on November 1, 1999 were cancelled, 125,000 options
granted on April 17, 2000 were cancelled and the grant of 83,332
options dated April 17, 2000 was cancelled.
(6) On September 12, 2000, Mr. Labick's employment was terminated. In
connection with his termination, all of the options granted to Mr.
Labick in fiscal years 1999 and 2000 were cancelled. Includes payment
made in connection with termination of employment.
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OPTION GRANTS IN LAST FISCAL YEAR
The table below sets forth information regarding stock options granted
during fiscal year 2000 to each of the Named Executive Officers.
Option Grants in Last Fiscal Year
Potential
Realizable Value
Individual Grants at Assumed Annual
-------------------------------------- Rates of Stock
Percent of Total Price Appreciation
Number of Securities Options Granted For Option Term(1)
Underlying Options to Employees in Exercise Expiration -----------------------
Name Granted (#) Fiscal Year Price ($/SH) Date 5%($) 10%($)
---- --------------------- --------------- ------------ ----------- ------ --------
250,000 2.9% $13.63 4/05/03 $349,629 $715,175
Scott A. Mednick(2)(3) 250,000 2.9% $ 7.50 4/17/03 $192,188 $393,750
Co-Chairman 100,000 2.9% $ 7.50 4/17/03 $ 76,875 $157,500
Werner Haase 0
Co-Chairman, Chief
Executive Officer and
President
William Zabit(4) 0
President
John P. Gandolfo(5) 125,000 1.4% $22.00 11/01/03 $433,469 $910,250
Senior Vice President 125,000 1.4% $ 7.50 4/17/04 $147,773 $310,313
and Chief Financial 83,332 1.0% $ 7.50 4/17/04 $ 64,061 $131,248
Officer
Kevin Labick(6) 125,000 1.4% $ 7.50 4/17/04 $147,773 $310,313
Executive Vice President
(1) Potential realizable value is reported net of the option exercise price but
before taxes associated with exercise. These amounts assume annual
compounding results in total appreciation of approximately 63% (5% per
year) and approximately 159% (10% per year). Actual gains, if any, on stock
option exercises and Common Stock are dependent on the future performance
of the Common Stock, overall market conditions and the continued employment
of the officer. There can be no assurance that the amounts reflected in
this table will be achieved.
(2) Mr. Mednick resigned as Chairman of the Company in December 2000.
(3) 250,000 options vested on day of grant, while the additional grants vested
on December 31, 2000.
(4) Mr. Zabit resigned as President of the Company in March 2000.
(5) In connection with his resignation on September 29, 2000, 83,337 options
granted to Mr. Gandolfo on November 1, 1999 were cancelled, 125,000 options
granted on April 17, 2000 were cancelled and the grant of 83,332 options
dated April 17, 2000 was cancelled.
(6) In connection with his termination on September 12, 2000, all of the
options granted to Mr. Labick in fiscal year 2000 were cancelled.
5
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR; FISCAL YEAR END OPTION VALUES
The following table sets forth information concerning the value of
unexercised in-the-money options held by the Named Executive Officers as of
August 31, 2000.
Aggregated Option Exercises in Last Fiscal Year; Fiscal Year End Option Values
Value of Unexercised
Unexercised In-the-Money Options
Options at at Fiscal Year End($)(2)
--------------- ------------------------
Fiscal Year End(#)
------------------
Shares Acquired Exercisable/ Exercisable/
Name On Exercise (#) Value Realized ($)(1) Unexercisable Unexercisable
- ---- --------------- --------------------- ---------------- --------------
Scott A. Mednick(3) 0 0 1,349,990 $1,630,000
Co-Chairman (Exercisable) (Exercisable)
550,010 $45,500
(Unexercisable) (Unexercisable)
Werner G. Haase(4) 0 0 743,750 $4,068,375
Chief Executive Officer, (Exercisable) (Exercisable)
President and Co-Chairman
William Zabit(5)
President
John P. Gandolfo(6) 0 0 41,663 $0
Senior Vice President and (Exercisable) (Exercisable)
Chief Financial Officer 208,337 $16,250
(Unexercisable) (Unexercisable)
Kevin Labick(7) 25,000 $175,000 50,000 $0
Executive Vice President (Exercisable) (Exercisable)
200,000 $16,250
(Unexercisable) (Unexercisable)
(1) Represents the difference between the average of the high and low prices
of the Common Stock on the Nasdaq National Market on the date of exercise
and the option exercise price multiplied by the number of shares
acquired on exercise.
(2) Represents the difference between $7.359 (the average of the high and
low prices of the Common Stock on the Nasdaq National Market on August
31, 2000) and the option exercise price multiplied by the number of
shares of Common Stock held.
(3) Mr. Mednick resigned as Chairman of the Company in December 2000.
(4) Mr. Haase resigned as Chief Executive officer and Co-Chairman of
the Company in August 2000. Mr. Haase resigned as President in
November 2000.
(5) Mr. Zabit resigned as President of the Company in March 2000.
(6) Mr. Gandolfo resigned as Senior Vice President and Chief Financial
Officer of the Company in September 2000.
(7) Mr. Labick's employment with the Company was terminated in
September 2000.
6
Performance Graph
The graph set forth below compares for the periods indicated the
"cumulative stockholder return" to stockholders of the Company as compared with
the return of the Nasdaq National Market and a group of eleven companies that
the Company deems comparable consisting of AnswerThink Consulting Group, Inc.,
Sapient Corporation, Organic Inc., Cysive, Inc., iXL Enterprises, Inc.,
RareMedium Group Inc., Proxicom, Inc., Lante Corporation, Scient Corporation,
Razorfish, Inc. and marchFIRST, Inc. (the "Peer Group Index"). "Cumulative
stockholder return" has been computed assuming an investment of $100 on August
31, 1995 and assumes a reinvestment of all dividends. These indices are included
for comparative purposes only and do not necessarily reflect management's
opinion that such indices are an appropriate measure of the relative performance
of the stock involved, and are not intended to forecast or be indicative of
future performance.
[Performance Graph appears here]
Indexed Returns
Base Period Years Ending
Company Index Aug. 95 Aug. 96 Aug. 97 Aug. 98 Aug. 99 Aug. 00
------------- ------- ------- ------- ------- ------- -------
XCEED INC. $100
NASDAQ (US) $100
PEER Group $100
Employment Agreements
During fiscal 2000, the Company had employment agreements with
Howard A. Tullman, Scott A. Mednick, Werner G. Haase, William N. Zabit, John P.
Gandolfo and Kevin D. Labick. As stated below, the Company's employment
agreements with Werner G. Haase, William N. Zabit, John P. Gandolfo and Kevin D.
Labick have been terminated.
Howard A. Tullman. In August 2000, the Company entered into a three
year employment agreement with Howard Tullman, the Company's Chief Executive
Officer. Mr. Tullman was selected by the Board of Directors to succeed Mr. Haase
upon his resignation of the position of Chief Executive Officer in August 2000.
Pursuant to his employment agreement, Mr. Tullman receives an annual base salary
of $400,000 and has received options to purchase up to 1 million shares of
Common Stock. Mr. Tullman is also eligible to receive bonuses at the discretion
of the Board of Directors. If Mr. Tullman is terminated by the Company without
cause during the first year of his employment, he is entitled to receive the
balance of his annual salary up to and through the 18th month of his employment
term; during the second or third year of his employment, he is entitled to
receive the balance of his annual salary up to and through the 36th month of his
employment term; or after his initial three year term, he is entitled to six
months severance. In the event of a change in control of the Company during the
initial three-year term of Mr. Tullman's employment agreement, where the
controlling entity does not assume the employment agreement or breaches its
provisions, Mr. Tullman is entitled to the severance arrangements and
acceleration of his options as set forth above. Mr. Tullman's employment
agreement contains a non-compete covenant that is in effect during the term of
his employment and for 12 months after his termination. Although this employment
agreement is dated August 4,
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2000, Mr. Tullman did not assume executive responsibilities until the beginning
of fiscal year 2001.
Scott A. Mednick. In July 1998, the Company entered into an employment
agreement with Scott Mednick, its former Co-Chairman, which was amended in
September 1999 and April 2000. In December 2000, the Company entered into a
separation agreement with Mr. Mednick and Mr. Mednick resigned from his position
with the Company. Mr. Mednick will continue to receive his base salary of
$350,000 through July 17, 2001 and will maintain his right to vested and
unvested stock options, in accordance with the terms of the stock option plans
they were issued under. The Company will also continue to provide Mr. Mednick
with medical, disability and life insurance benefits through July 17, 2001. In
addition, the noncompetition covenant contained in Mr. Mednick's employment
agreement will remain in effect until July 17, 2001 and he will continue to be
bound by a confidentiality agreement with the Company. Mr. Mednick has released
the Company from all other obligations under his employment agreement. Prior to
his resignation, the Company's employment agreement with Mr. Mednick provided
for an initial term of two years, and a renewal term of two years if not
terminated at the end of the initial two year term. While employed with the
Company, Mr. Mednick received an annual base salary of $350,000. In the event of
a change in control, Mr. Mednick was entitled to receive a one-time payment
equal to three times his then-current annual compensation (including bonuses).
Finally, upon termination without cause, Mr. Mednick was entitled to receive his
annual salary for the balance of his employment term.
Werner G. Haase. In December 1996, the Company entered into a five year
employment agreement with Werner Haase, its former President, Co-Chairman and
Chief Executive Officer. In connection with the Company's sale of the
Performance Enhancement Business in November 2000, Mr. Haase resigned from his
positions with the Company and released the Company from all obligations under
his employment agreement. In addition, upon closing of the sale, Mr. Haase
relinquished all rights to vested and unvested stock options, other than certain
options to purchase an aggregate of 43,750 shares of Common Stock. While
employed with the Company, Mr. Haase was paid a base salary of $500,000 per year
and the Company paid premiums, interest and other payments on a number of
policies insuring his life with an aggregate face value of at least $2,300,000.
Mr. Haase's employment agreement also entitled him to receive bonuses, stock
options and other incentives at the discretion of our Board of Directors. In the
event of a change in control, Mr. Haase was entitled to receive a one-time
payment equal to three times his then-current annual compensation (including
bonuses). Finally, upon termination without cause, Mr. Haase was entitled to
cancellation of all debts owed by him to the Company or to Journeycraft (our
former wholly-owned subsidiary which was sold to 488 Performance Group) and the
Company was obligated to pay him an amount in cash equal to 100% of the amount
of indebtedness cancelled. As of August 31, 2000, the amount of Mr. Haase's
indebtedness to us was $1,222,000. Mr. Haase's indebtedness, represented by a
promissory note, was sold to a third party for $100,000 in connection with the
closing of the Company's sale of the Performance Enhancement Business.
William N. Zabit. In September 1998, the Company entered into a four
year employment agreement with William Zabit, its former President. Mr. Zabit
resigned from his position as President in March 2000 and his employment
agreement was subsequently terminated effective as of September 15, 2000. While
employed by the Company, Mr. Zabit was paid an annual base
8
salary of $400,000 and the Company paid premiums, interest and other payments on
a policy insuring his life with a face value of at least $2,000,000. Mr. Zabit's
employment agreement also entitled him to receive bonuses, stock options and
other incentives at the discretion of the Board of Directors. In the event of a
change in control, Mr. Zabit was entitled to receive a one-time payment equal to
three times his then-current annual compensation (including bonuses). Upon
termination without cause, all debts owed to the Company by Mr. Zabit were to be
cancelled in full. As of the effective date of his termination, Mr. Zabit was
not indebted to the Company. Pursuant to certain promissory notes executed in
connection with our acquisition of Zabit & Associates, the Company was indebted
to Mr. Zabit and another former shareholder of Zabit & Associates; however, as
of August 9, 2000, the Company had paid off the promissory notes in full and was
not indebted to those individuals.
James P. Gandolfo. In May 2000, the Company entered into a two year
employment agreement with Mr. Gandolfo, its former Senior Vice President and
Chief Financial Officer. In September 2000, Mr. Gandolfo resigned from his
positions with the Company. In addition, Mr. Gandolfo relinquished all rights to
vested and unvested stock options, other than certain options to purchase an
aggregate of 41,663 shares of Common Stock. While employed with the Company, Mr.
Gandolfo was paid a base salary of $325,000 per year. Mr. Gandolfo's employment
agreement also entitled him to receive discretionary bonuses. Upon termination
without cause, Mr. Gandolfo was entitled to receive severance in an amount equal
to three months of his annual salary.
Kevin Labick. In May 2000, the Company entered into a two year
employment agreement with Mr. Labick, its former Executive Vice President, which
was amended in June 2000. In September 2000, Mr. Labick was terminated from his
position with the Company and all obligations under his employment agreement
were terminated. In addition, Mr. Labick's rights to vested and unvested stock
options were cancelled. While employed with the Company, Mr. Labick was paid a
base salary of $275,000 per year. Upon termination without cause, Mr. Labick was
entitled to receive severance in an amount equal to twelve months of his annual
salary.
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
reviewing the Company's overall compensation policies and, with the input of the
Company's Chief Executive Officer, setting the compensation of the Company's
executive officers. The Compensation Committee is comprised solely of two
non-employee directors, Edward Bennett and John Bermingham. Norman Docteroff was
on the Compensation Committee until his resignation from the Board of Directors
in December 2000.
Compensation Philosophies and Goals
The Company's executive compensation program for fiscal 2000, which
consisted of a combination of base salary, cash bonuses and stock options, is
designed in large part to align executive incentives with the Company's
strategic goals. Accordingly, a portion of the total cash compensation of the
Company's senior executives was directly linked to the Company's and the
executive's satisfaction of specified goals. By tying compensation to the
9
achievement of the Company's core objectives and fundamental values, the Company
believes that a performance-oriented environment is created for its executives
and other employees.
The Company's executive compensation program for fiscal 2000 was also
intended to align executive and stockholder interests by providing executives
with an equity interest in the Company through the granting of stock options.
The size of option grants was recommended by the Chief Executive Officer to the
Compensation Committee for approval. The Compensation Committee based its review
of such recommended grants on various factors, including the executive's
responsibilities, the executive's past, present and expected contributions to
the Company and the executive's current stock and option holdings.
In addition to structuring its executive compensation program in a
manner which will reward executives for the achievement of the Company's
business objectives as well as for individual performance, the Company also
seeks to attract and retain key executives through its compensation program.
Compensation in Fiscal 2000
Cash Compensation
Base salaries of the executive officers for fiscal 2000 were determined
by the Compensation Committee. In keeping with the Company's desire to create a
performance-oriented environment through its compensation programs, the bonus
component is a significant percentage of the overall cash compensation payable
to the Company's executive officers.
The Company adopted an executive bonus plan for 2000 which covered the
executive officers and other senior management of the Company. Under the bonus
plan, the Chief Executive Officer recommended to the Compensation Committee for
approval the target amount of bonus compensation payable to each participant
(other than himself) for the year. Each participant's actual bonus compensation
was determined based on the Company's and the participant's, as the case may be,
achievement of specified goals in four key measurement areas: client
satisfaction, financial performance, organizational goals and personal goals.
The weighting of each of the four measurements varied for each participant,
depending on his or her role in the Company. Also, depending on a participant's
role in the Company, the achievement of certain goals was measured on a
Company-wide, industry-specific or individual office basis.
In November 2000, the Compensation Committee reviewed the Company's and
each executive officer's performance against the objective criteria described
above. Based on this review, and in accordance with the criteria described
above, bonus payments were approved to each executive officer as indicated in
the Summary Compensation Table.
Incentive Compensation
During fiscal 2000, the Named Executive Officers received options to
purchase an aggregate of 1,333,332 shares of Common Stock at a weighted average
exercise price of $8.88 per share, as indicated in the table in "Option Grants
in Last Fiscal Year."
10
2000 Compensation of Chief Executive Officer
Werner Haase served as our Chief Executive Officer until his
resignation from that position in August 2000. Mr. Haase's base salary, bonus
and grants of options were determined in accordance with the same procedures and
standards as for other executive officers of the Company.
Howard Tullman has served as our Chief Executive Officer since
September 2000, following Mr. Haase's resignation. Pursuant to his employment
agreement with us, Mr. Tullman receives an annual base salary of $400,000 and
has received options to purchase up to 1 million shares of Common Stock. Mr.
Tullman's bonus will be determined in accordance with the same procedures and
standards as for other executive officers of the Company.
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code of 1986, as amended,
generally disallows a federal income tax deduction to public companies for
certain compensation in excess of $1 million paid to a corporation's chief
executive officer or any of its four other most highly compensated executive
officers. Qualifying performance-based compensation will not be subject to the
deduction limit if certain requirements are met. The Company has structured its
option plans to qualify income received upon the exercise of stock options
granted under the plans as performance-based compensation. The Compensation
Committee intends to review the potential effects of Section 162(m) periodically
and in the future may decide to structure additional portions of the Company's
compensation program in a manner designed to permit unlimited deductibility for
federal income tax purposes.
CURRENT MEMBERS OF THE COMPENSATION COMMITTEE:
Edward A. Bennet
John A. Bermingham
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No interlocking relationships currently exist between our officers and
members of the Compensation Committee.
REPORT OF THE AUDIT COMMITTEE
The Board of Directors maintains an Audit Committee comprised of three
of the Company's outside directors. The Board of Directors and the Audit
Committee believe that the Audit Committee's current member composition
satisfies the rule of the NASD that governs audit committee composition, Rule
4310(c)(26)(B)(i), including the requirement that audit committee members all be
"independent directors" as that term is defined by NASD Rule 4200(a)(15).
In accordance with its written charter adopted by the Board of
Directors (set forth in Appendix A to this proxy statement), the Audit Committee
assists the Board of Directors with
11
fulfilling its oversight responsibility regarding the quality and integrity of
the accounting, auditing and financial reporting practices of the Company. In
discharging its oversight responsibilities regarding the audit process, the
Audit Committee:
(1) reviewed and discussed the audited financial statements with management;
(2) discussed with the independent auditors the material required to be
discussed by Statement on Auditing Standards No. 61; and
(3) reviewed the written disclosures and the letter from the independent
auditors required by the Independence Standards Board's Standard No.
1, and discussed with the independent auditors any relationships that
may impact the auditors' objectivity and independence. In addition, in
accordance with the Securities and Exchange Commission's new auditor
independence requirements, the Audit Committee has considered the
effects that the provision of non-audit services may have on the
auditors' independence.
Based upon the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K for the
fiscal year ended August 31, 2001, as filed with the Securities and Exchange
Commission.
CURRENT MEMBERS OF THE AUDIT COMMITTEE:
Terry A. Anderson
Edward A. Bennet, Chairman
John A. Bermingham
Audit Fees
The Company has been billed a total of approximately $400,000 by
Deloitte & Touche, LLP, the Company's independent auditors, for professional
services rendered for the audit of the Company's annual financial statements
for the fiscal year ended August 31, 2000 and the reviews of interim
financial statements included in the Company's Forms 10-Q filed during the
last fiscal year.
Financial Information Systems Design and Implementation Fees
There were no fees billed by Deloitte & Touche, LLP for professional
services rendered in connection with financial information systems design and
implementation during the fiscal year ended August 31, 2000.
All Other Fees
The Company has been billed a total of $0 for all other services
rendered by Deloitte & Touche, LLP that are not set forth above.
12
CERTAIN TRANSACTIONS
Prior to July 1996, Werner Haase had borrowed funds from Journeycraft
which at the time of the acquisition of Journeycraft by us amounted to
$1,000,000. As a result of the acquisition, the loan was transferred to us. The
loan bears interest at 7% and is payable in annual installments of $100,000
which amount is first applied to interest and the balance to reduce principal.
The remaining balance and any accrued interest is due in full in December, 2016.
As of August 31, 2000, $1,222,000 was due from Mr. Haase.
In connection with our acquisition of Zabit & Associates, we agreed to
pay off certain promissory notes which were due to two former shareholders of
Zabit & Associates in March 1999. We paid William Zabit, the former President of
the Company, $3,974,000, consisting of $3,840,000 of principal and $134,000 of
interest and paid the other shareholder, who is now our employee, $993,600,
consisting of $960,000 of principal and $33,600 of interest. In addition, in
connection with this acquisition, in May 2000 we paid off promissory notes to
Mr. Zabit and to another former stockholder of Zabit & Associates in the
aggregate amount of $2,161,000.
On July 31, 2000, we sold all the assets and liabilities associated
with the JourneyCorp travel division to Journey Corp. .Com, a company formed and
privately-owned by Mrs. Haase. In connection with the transaction, we received a
promissory note in the amount of $704,000, which bears interest at a rate of 6%
per annum and is payable to Xceed in equal quarterly installments of $58,667
over three years. In addition, we entered into an exclusivity agreement whereby
our U.S. offices will use their best efforts to make their corporate travel
arrangements through Journey Corp. .Com until July 31, 2003. Upon consummation
of the sale of JourneyCorp, Mrs. Haase resigned from her positions as our Senior
Vice President and Secretary.
In April 2000, we entered into a two-year Joint Marketing Agreement
with Spherion Corporation, a 5% stockholder, which renews automatically for
one-year periods unless terminated by either party 60 days prior to the end of
the relevant term. In addition, the agreement may be terminated by either party
upon 120 days written notice. Under the agreement, Xceed and Spherion agreed to
cross-sell one another's products and offerings, using their respective
promotional materials and customer service representatives, with a finder's fee
being paid to the generating party based on the first twelve months' revenue
generated. Each also agreed to assign a senior executive to monitor and grow the
relationship.
In October 2000, we sold the operations previously acquired by the
acquisitions of Enterprise Solutions Group, Inc., Catalyst Consulting Services,
Inc. and a portion of the operations of Sterling Carteret, Inc. to Xceed Retail
Solutions Group, Inc., a company formed and privately-owned by Gary S. Kahl, our
former Executive Vice President of National Practices, and other former
employees of Xceed, in a negotiated transaction in exchange for the assumption
by Xceed Retail Solutions Group of the liabilities related to these operations.
In connection with that sale, we granted a temporary nonexclusive license to
Xceed Retail Solutions Group to use the XCEED service mark. The license expired
in January 2001. Upon consummation of the sale of these operations to Xceed
Retail Solutions Group, Mr. Kahl resigned his positions with Xceed and Mr. Kahl
and the other former employees joining Xceed Retail Solutions Group agreed to
relinquish their Xceed stock options and all claims for severance compensation.
13
In November 2000, we sold the Performance Enhancement Group to 488
Performance Group, Inc., a company formed and privately-owned by Werner G.
Haase, our former President, Chief Executive Officer, Co-chairman and director.
CURRENT EXECUTIVE OFFICERS
Because all of the Named Executive Officers are no longer employed by
the Company, the information below is being provided regarding the Company's
current executive officers.
Name Age Position
---- --- --------
Howard A. Tullman 55 Chief Executive Officer
Douglas C. Laux 48 Chief Financial Officer and Treasurer
Richard R. Dennerline 36 Chief Legal Officer and Secretary
Paul P. Schmidman 47 Executive Vice President
Douglas C. Laux has been employed by us since October 2000 and was
designated as our Chief Financial Officer and Treasurer in November 2000. From
February 2000 until October 2000, Mr. Laux was the chief financial officer for
Drinks.com, Inc., an on-line marketing company and retailer of wine, beer and
spirits. From September 1995 until January 2000, Mr. Laux served as the chief
financial officer at Platinum Entertainment, Inc., a music entertainment company
and was its chief operating officer from mid-1998 until January 2000. Platinum
Entertainment filed for Chapter 11 bankruptcy protection in July 2000 in U.S.
Bankruptcy Court in Chicago, Illinois.
Richard R. Dennerline has been employed by us since September 2000 and
was designated as our Chief Legal Officer in November 2000 and our Secretary in
October 2000. From June 1997 until September 2000, Mr. Dennerline was a partner
in the law firm of Freeborn & Peters in Chicago, Illinois, with which he was
also an associate from April 1995 until May 1997. Mr. Dennerline currently acts
as an independent consultant to Freeborn & Peters. From May 1989 through March
1995, Mr. Dennerline was an associate with the law firm of Sidley & Austin in
Chicago, Illinois.
Paul P. Schmidman has served as our Executive Vice President since
March 1999. From May 1998 until March 1999, Mr. Schmidman was senior vice
president and general manager of interactive media at THINK New Ideas, Inc., a
provider of marketing technology and interactive business solutions. From
December 1996 until December 1998, Mr. Schmidman served as executive vice
president and general manager of BoxTop Interactive. From January 1996 until
December 1996 Mr. Schmidman was a consultant with ElectroGig, Software
Ventures, RT-Set and 7th Level.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following sets forth information regarding beneficial ownership of
our Common Stock as of February __, 2001 by:
Each person known to the Company who beneficially owns more than 5% of
the outstanding shares of our Common Stock, each of the Company's directors (and
nominees for director) and Named Executive Officers and all of the Company's
directors (and nominees for
14
director) and executive officers as a group.
Unless otherwise indicated, the address of each person below is c/o
Worldwide Xceed Group, Inc., 233 Broadway, New York, New York 10279.
Amount and Nature of Percentage of Common Stock
Name and Address of Beneficial Owner Beneficial Ownership Outstanding(1)
------------------------------------ -------------------- --------------------------
Werner G. Haase(2)...................................... 589,450(3)(4) 1.1%
Scott A. Mednick(5)..................................... 1,550,000(6) 3.0%
Howard A. Tullman....................................... 1,002,200(7) %
William N. Zabit(8)..................................... 1,179,828 2.4%
Douglas C. Laux......................................... 175,000(9) *
Richard R. Dennerline................................... 245,000(10) *
Paul P. Schmidman....................................... 252,500(11) *
Terry A. Anderson(12)...................................
19197 River Road 5,000 *
Athens, OH 45701
Edward A. Bennett.......................................
725 Washington Street 262,411 *
New York, NY 10014
John A. Bermingham......................................
9 Raintree Court 100,000(13) *
Kinnelon, NJ 07405
Norman Docteroff(14)....................................
81 Two Bridges Road -- *
Fairfield, NJ 07004
Stuart Emanuel..........................................
832 Commerce Drive -- *
Oak Brook, IL 60523
Raymond Marcy (15)......................................
2050 Spectrum Boulevard -- *
Ft. Lauderdale, FL 33309
Directors and Executive Officers as a Group (__ persons) %
- --------------------
(1) Percentage of class as set forth below is calculated based on the number of
shares outstanding on February __, 2001.
(2) Mr. Haase resigned as Chief Executive Officer and Co-Chairman of the
Company in August 2000. Mr. Haase resigned as President in November 2000.
(3) Includes 43,750 currently exercisable options to acquire Common Stock.
(4) Excludes 876,950 shares of Common Stock held by Mr. Haase's wife,
Nurit Kahane Haase. Werner Haase disclaims any beneficial interest in the
shares held by his wife.
(5) Mr. Mednick resigned as Chairman of the Company in December 2000.
(6) Represents 1,550,000 currently exercisable options to acquire Common Stock.
(7) Includes 1,000,000 currently exercisable options to acquire Common Stock.
(8) Mr. Zabit resigned as President of the Company in March 2000.
(9) Includes 175,000 currently exercisable options to acquire Common Stock
(10) Includes 245,000 currently exercisable options to acquire Common Stock
(11) Includes 252,000 currently exercisable options to acquire Common Stock
(12) Represents 5,000 currently exercisable options to acquire Common Stock.
(13) Includes 100,000 currently exercisable options to acquire Common Stock.
(14) Mr. Docteroff resigned as a director of the Company in December 2000.
(15) Mr. Marcy resigned as a director of the Company in November 2000.
* Represents less than one percent (1%) ownership.
15
PROPOSAL 2--AMEND AND RESTATE CERTIFICATE OF
INCORPORATION; AMENDMENT OF ARTICLE FOURTH
The Board of Directors has unanimously approved, and recommends that
the stockholders adopt, an amendment to Article FOURTH of the Company's
Certificate of Incorporation to increase the number of authorized shares of
Common Stock from 100,000,000 to 200,000,000. If the Company's stockholders
adopt the proposed amendment, the first sentence of Article FOURTH would read as
follows:
FOURTH: The total number of shares of capital stock which
the Corporation shall have authority to issue is Two Hundred
Million shares of common stock, par value $.01 per share, and
One Million shares of Blank Check Preferred Stock, par value
$.05 per share.
The Company currently is authorized to issue 100,000,000 shares of
Common Stock, of which __________ shares were outstanding as of February ___,
2001. In addition, as of February __, 2001, there were _________ shares of
Common Stock reserved for issuance under the Company's stock option plans,
___________ shares reserved for issuance upon conversion of Series A
Cumulative Convertible Preferred Stock and __________ shares held in the
Company's treasury, leaving ________________ shares of Common Stock available
for issuance. If adopted, the proposed amendment would increase the number of
authorized shares of Common Stock to 200,000,000, of which ____________ would
be available for issuance.
The additional shares of Common Stock for which authorization is sought
would be part of the existing class of Common Stock, if and when issued. These
shares would have the same rights and privileges as the shares of Common Stock
currently outstanding. Holders of the Company's Common Stock do not have
preemptive rights to subscribe for and purchase any new or additional issue of
Common Stock or securities convertible into Common Stock.
16
The Board of Directors believes that the increase in the number of
authorized shares of Common Stock is in the best interests of the Company and
its stockholders. The purpose of increasing the number of authorized shares of
Common Stock is to have shares available for issuance for such corporate
purposes as the Board of Directors may determine in its discretion, including,
without limitation:
- future acquisitions
- investment opportunities
- stock splits
- stock dividends or other distributions
- conversion of convertible securities
- future financings and other corporate purposes
The Company has no agreements or understandings regarding the issuance of
additional shares of Common Stock.
Under the provisions of the Delaware General Corporation Law, a board
of directors generally may issue authorized but unissued shares of common stock
without stockholder approval. A substantial number of authorized but unissued
shares of Common Stock not reserved for specific purposes will allow the Company
to take prompt action with respect to corporate opportunities that develop,
without the delay and expense of convening a special meeting of stockholders.
The issuance of additional shares of Common Stock may reduce stockholders'
equity per share and may reduce the percentage of ownership of Common Stock of
existing stockholders. It is not the present intention of the Board of Directors
to seek stockholder approval prior to any issuance of additional shares of
Common Stock unless required by law or the rules of the Nasdaq National Market
or any other stock exchanges on which the Common Stock may be listed. The Nasdaq
National Market currently requires stockholder approval as a prerequisite to
listing shares in several instances, including acquisition transactions where
the present or potential issuance of shares could result in an increase in the
number of shares of common stock outstanding by 20% or more.
Although the Company currently has no reason to believe that a takeover
attempt is likely to occur, increasing the number of authorized shares of Common
Stock may provide the Company with the means of discouraging a possible attempt.
These additional shares of Common Stock could be used in the future, through
private sales to purchasers allied with management or otherwise, to dilute the
stock ownership of persons seeking to obtain control of the Company, thus making
less likely a change in control of the Company, whether or not favored by a
majority of the unaffiliated stockholders, with the possible effect of deterring
an offer for the Company at a substantial premium over the current market price
of the Common Stock. The Company has no present intention to issue securities
for this purpose.
The Company's Certificate of Incorporation currently reflects that the
Company is authorized to issue 1,000,000 shares of Blank Check Preferred Stock.
The Board of Directors is proposing further amendment to Article FOURTH which
includes a description of the authority previously granted to the Board of
Directors to authorize the issuance of up to 1,000,000 shares of preferred stock
with rights, preferences and limitations as determined by the Board of
Directors. These shares of preferred stock could be issued by the Board of
Directors in
17
one or more transactions with terms which might make the acquisition of a
controlling interest in the Company more difficult or costly. If the Company's
stockholders approve the proposed amendment, a new second paragraph of Article
FOURTH would read as follows:
1. The Preferred Stock may be issued from time to time in one
or more series. Subject to the other provisions of this
Certificate of Incorporation and any limitations prescribed by
law, the Board of Directors is authorized to provide for the
issuance of and issue shares of Preferred Stock in series and,
by filing a certificate pursuant to the laws of the State of
Delaware, to establish from time to time the number of shares
to be included in each such series and to fix the designation,
powers, preferences and rights of the shares of each such
series and any qualifications, limitations or restrictions
thereof. The number of authorized shares of Preferred Stock
may be increased or decreased (but not below the number of
shares thereof then outstanding) by the affirmative vote of
the holders of a majority of the total voting power of the
Common Stock, without a vote of the holders of any of the
Preferred Stock, or of any series thereof, unless a vote of
any such holders is required pursuant to the certificate or
certificates establishing such series of Preferred Stock.
This change is intended to accurately reflect the Company's
authority to issue shares with the rights and preferences as may be
determined by the Board of Directors of the Company pursuant to the
authorized Blank Check Preferred.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR AMENDMENT OF ARTICLE
FOURTH OF THE CERTIFICATE OF INCORPORATION.
PROPOSAL 3--REVERSE STOCK SPLIT
The Board of Directors has approved and hereby is soliciting
stockholder approval of an amendment to Article FOURTH of the Company's
Certificate of Incorporation (the "Amendment") pursuant to which each ten
(10) shares of the issued and outstanding shares of Common Stock shall be
converted into one (1) issued and outstanding share of Common Stock. If the
Company's stockholders approve the proposed amendment, a third, fourth and
fifth paragraph would be added to Article FOURTH and would read as follows:
2. CONVERSION OF COMMON STOCK.
At the time of the filing of this Certificate of
Incorporation with the Secretary of State of the State of Delaware,
(a) each ten (10) shares of issued and outstanding common stock
shall automatically, without the necessity of any further action on
the part of the holder thereof, be changed and reclassified into one
(1) share of common stock. Upon the occurrence of the
reclassification effected by this Article Fourth, Section 2 (the
"Conversion"), each certificate for outstanding shares of common
stock dated prior to the effective date of the Conversion ("Old
Common Stock") shall evidence, and be deemed to evidence, the number
of shares of common stock into which the shares previously evidenced
by such certificate shall have been reclassified in accordance with
this Article Fourth, Section 2, and the Conversion shall become
effective in accordance with the terms hereof, whether or not any or
all of the certificates evidencing Old Common Stock shall have been
surrendered or new certificates evidencing the number of shares of
common stock into which such shares have been reclassified have been
issued in accordance with Article Fourth, Section 3 hereof.
3. SUBSEQUENT REISSUANCE OF CERTIFICATES.
Following the occurrence of the Conversion, each holder of
shares of Old Common Stock shall receive a letter of transmittal
from the Corporation's transfer agent and shall either (a) surrender
each certificate evidencing any such shares pursuant to the
instructions in such letter of transmittal or (b) notify the
Corporation that such certificate has been lost, stolen or destroyed
and execute an agreement satisfactory to the Corporation to
indemnify the Corporation from any loss incurred by it in connection
with the reissuance of such lost, stolen or destroyed certificate.
The Corporation shall thereupon issue and deliver or cause to be
issued and delivered to such holder a certificate or certificates,
in the name shown on such certificate evidencing Old Common Stock,
for the number of whole shares of common stock into which the shares
of Old Common Stock evidenced by the surrendered (or lost, stolen or
destroyed) certificate have been reclassified, dated as of the date
on which the Conversion become effective. The Corporation shall not
be obligated to issue any certificate evidencing shares of common
stock in connection with the Conversion except in accordance with
this Article Fourth, Section 3.
4. FRACTIONAL SHARES.
Notwithstanding the foregoing, no fraction of a share of
common stock shall be issued by virtue of the Conversions, but in
lieu thereof, each holder of shares of Old Common Stock who would
otherwise be entitled to a fraction of a share of common stock
(after aggregating all fractional shares of Common Stock to be
received by such holder) shall receive from the Corporation the
number of shares of common stock the holder would otherwise be
entitled to, rounded up to the next number of whole shares of common
stock.
If approved, this ten-for-one reverse stock split (the "Reverse
Split") will become effective upon filing an amendment to the Company's
Certificate of Incorporation with the Secretary of the State of Delaware.
Once implemented, the Reverse Split would result in each holder of our Common
Stock on the Record Date owning fewer shares of Common Stock than they owned
immediately before the Reverse Split, and outstanding options, warrants, and
other convertible rights will become exercisable to purchase a fewer number
of shares of Common Stock at an exercise price per share increased by the
factor of the Reverse Split. Fractional shares, options and warrants will be
rounded up to the nearest whole.
18
In order to effect the Reverse Split as currently described, the
stockholders are being asked to approve the Amendment to the Company's
Certificate of Incorporation. The Board of Directors, however, reserves the
right, notwithstanding stockholder approval and without further action by the
stockholders, to decide not to proceed with the Reverse Split if at any time
prior to the Amendment's effectiveness, the Board of Directors determines in its
sole discretion , that the Reverse Split is no longer in the best interests of
the Company or its stockholders. The Board of Directors may at any time make any
and all changes to the Amendment that it deems necessary in order to file the
Amendment with the Secretary of State of the State of Delaware and give effect
to the Reverse Split.
EFFECTS OF THE REVERSE SPLIT
The Reverse Split will not affect in any manner the rights and
preferences of the Company's stockholders. There will be no change in the voting
rights, right to participate in stock or cash dividends, or rights upon the
liquidation or dissolution of the Company of holders of Common Stock; nor will
the Reverse Split affect in any manner the ability of the Company's stockholders
to sell under Rule 144 or otherwise engage in market transactions in accordance
with federal and state securities laws. The Reverse Split will result in an
automatic adjustment of any and all outstanding options, warrants and other
rights exercisable or convertible into shares of Common Stock. The adjustment
will consist of an increase in the exercise price or conversion value per share
by the factor of the Reverse Split and the number of shares issuable upon
exercise or conversion will be reduced by the same factor. For example, if a
ten-for-one (10-for-1) Reverse Split is implemented, an option, warrant or other
right exercisable or convertible into 1,000 shares of Common Stock at an
exercise price or conversion value of $1.00 per share immediately before
implementation of the Reverse Split would be exercisable or convertible into 100
shares of Common Stock at an exercise price or conversion value of $10.00 per
share immediately after implementation of the Reverse Split. All other relative
rights and preferences of holders of outstanding options, warrants and other
rights convertible or exercisable into shares of our common stock shall remain
unchanged.
19
REASONS FOR REVERSE SPLIT
The Board of Directors believes that approval of the Reverse Split is
in the best interest of the Company and its shareholders for several reasons.
First, as the Company's Common Stock is listed on The Nasdaq National Market
("Nasdaq"), the Company must qualify for continued listing on NASDAQ under the
NASDAQ maintenance criteria. The NASDAQ maintenance criteria include, among
other things, the requirement that its Common Stock maintain a minimum bid price
of at least $1.00 per share, and the requirement that the market value of the
Company's public float be at least $5,000,000. As of the date of this Proxy
Statement the Company does not satisfy the minimum bid price criteria. As a
result, it may be necessary to implement a reverse split of the Company's Common
Stock in order to meet the Nasdaq maintenance criteria and to ensure that the
Company's Common Stock will continue to qualify for listing on NASDAQ.
Additionally, the Board of Directors believes that a Reverse Split, which will
result in a higher per share trading price of the Company's Common Stock, will
enable the Company to attract additional interest in its Common Stock from the
investment community, and particularly market-makers. Numerous broker-dealers
and investment bankers require that a company's common stock have a minimum
public trading price before those broker-dealers or investment bankers will
agree to make a market in that security. As a result, we believe that the
Reverse Split has the potential of improving the liquidity of the public market
for the Company's Common Stock.
MECHANICS OF THE REVERSE SPLIT
If the Reverse Split is approved by the requisite vote of the Company's
stockholders and the Board of Directors does not thereafter elect to abandon the
Reverse Split as described above, the Amendment will be filed with the Secretary
of State of the State of Delaware. The Reverse Split will be effective on the
date of such filing. Upon filing the Amendment, every ten (10) issued and
outstanding shares of Common Stock will, immediately following filing of the
Amendment, be automatically and without any action on the part of the
stockholders, converted into and reconstituted as one (1) share of Common Stock.
As soon as practicable after the effective date, the Company will mail
or cause to be mailed, a letter of transmittal to each stockholder of record of
shares of Common Stock outstanding as of the effective date. The letter of
transmittal will set forth instructions for surrender to the Company's transfer
agent of the certificates representing the Common Stock prior to the Reverse
Split in exchange for the certificates representing the appropriate number of
shares of Common Stock following the Reverse Split. CERTIFICATES SHOULD NOT BE
SENT TO THE COMPANY OR THE TRANSFER AGENT PRIOR TO THE RECEIPT OF SUCH LETTER OF
TRANSMITTAL FROM THE COMPANY. Until this exchange is completed, the
stockholders' Common Stock shall be deemed equal to the new number of whole
shares of Common Stock to which each shareholder is entitled as a result of the
Reverse Split.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE REVERSE SPLIT.
20
PROPOSAL 4--AMENDMENT TO THE MILLENNIUM STOCK OPTION PLAN
Description of Proposed Amendment
Stockholders are being asked to approve an amendment to the Amended
and Restated Millennium Stock Option Plan (the "Millennium Plan") to increase
the number of shares of Common Stock reserved for issuance thereunder by
11,000,000 shares, from 9,000,000 to 20,000,000 and to increase the maximum
number of shares which may be issued to an employee from 1,000,000 shares to
5,000,000 shares.
All numbers in this description and in the summary below are
pre-reverse stock split, and do not reflect the ten-for-one conversion that
will occur if the reverse stock split is approved and becomes effective. If
the reverse stock split is approved and becomes effective, the number of
shares of Common Stock reserved for issuance under the Amended plan will be
2,000,000. If the reverse stock split is approved and becomes effective, the
maximum number of shares which may be issued to an employee will be
500,000 shares.
The Board of Directors believes that the increase in the number of
shares reserved for issuance under the Millennium Plan is in the best interests
of the Company because of the continuing need to provide stock options to
attract and retain quality employees. The Board believes that the additional
reserve of shares with respect to which equity incentives may be granted will
provide the Company with additional flexibility to facilitate the expansion and
retention of its workforce. The Board of Directors has authorized amendment of
the Millennium Plan to provide for the issuance of more shares of Common Stock
as set forth in the Second Amended and Restated Millennium Stock Option Plan
(the "Amended Plan") subject to stockholder approval.
Below is a summary of the principal provisions of the Amended Plan,
assuming stockholder approval of the amendment.
Description of the Amended Plan
The Amended Plan provides for the grant of options that qualify as
incentive stock options ("ISOs") under the Internal Revenue Code of 1986, as
amended (the "Code") and options that do not so qualify ("NQSOs") with
respect to, in the aggregate, up to 20,000,000 shares of Common Stock (which
number is subject to adjustment in the event of stock dividends, stock splits
and other similar events). No employee may be issued more than 5,000,000
shares pursuant to options granted under the Amended Plan during the term of
the plan. To the extent that an ISO or NQSO is not exercised within the
period of exercisability specified therein, it will expire as to the then
unexercised portion. If any ISO or NQSO terminates prior to exercise thereof
and during the duration of the Amended Plan, the shares of Common Stock as to
which such option or right was not exercised will again become available
under the Amended Plan for the grant of additional options or rights to any
eligible individual. The shares of Common Stock subject to the Amended Plan
may be made available from authorized but unissued shares, treasury shares,
or both.
21
Administration
Pursuant to its terms, the Amended Plan may be administered by: (a) the
Board of Directors; or (b) in the discretion of the Board of Directors, a
committee (the "Committee") consisting of two or more members of the Board of
Directors, each of whom must be (i) a "Non-Employee" director as such term is
defined by Rule 16b-3 (as amended from time to time, "Rule 16b-3") under the
Exchange Act and (ii) and "Outside Director" as such term is defined in
Section162(m) of the Code and the regulations thereunder. The Board of Directors
or the Committee (by a majority vote or, in the case of two members, by
unanimous vote) generally has the authority to determine the individuals to whom
and the date on which options are to be granted, the number of shares of stock
to be subject to each option, the exercise price of such options, the terms of
any vesting or forfeiture schedule and the other terms and provisions of each
option. Only the Committee may grant options to employees covered under Section
162(m) of the Code. Currently, each of the Company's stock option plans is
administered by the Compensation Committee. All options granted under the
Amended Plan will be evidenced by option agreements which shall contain the
applicable terms and conditions.
Section 16(b) Compliance
It is intended that transactions pursuant to the Amended Plan will
satisfy the conditions of Rule 16b-3, as amended, promulgated under Section 16
of the Exchange Act. Section 16(b) of the Exchange Act provides that any
so-called "short-swing profits," that is, a profit realized by an officer,
director or owner of ten percent (10%) or more of the outstanding securities on
a purchase and a sale of stock within a six-month period, are recoverable by the
issuer of the securities. Although the application of Section 16(b) (and the
rules promulgated thereunder) is complex, Rule 16b-3 generally mitigates the
impact of Section 16(b) by providing an exemption from the liability provisions
for transactions that satisfy the conditions of Rule 16b-3.
Eligibility and Extent of Participation
ISOs may be granted pursuant to the Amended Plan only to employees
(including officers and directors) of the Company (and its subsidiaries). NQSOs
may be granted pursuant to the Amended Plan to officers, directors, employees or
consultants of the Company (and its subsidiaries). As of February __, 2001, an
aggregate of ____ persons were eligible to participate in the Amended Plan,
including 5 directors, ____ executive officers and ___ employees.
There is no minimum number of shares of Common Stock with respect to
which an option may be granted. However, if the aggregate fair market value (as
of the time of grant) of shares of Common Stock with respect to which ISOs are
exercisable for the first time by any individual during any calendar year (under
all stock option plans of the Company) exceeds $100,000, such excess options
shall be treated as NQSOs.
Purchase Price and Exercise of Options
The price at which shares of Common Stock subject to an option may be
purchased is determined by the Board of Directors (or the Committee); however,
the exercise price of shares of Common Stock issuable upon exercise of an ISO
may not be less than one hundred percent (100%) of the fair market value of the
Common Stock on the date of grant. However, if an ISO is
22
granted to an optionee who owns more than ten percent (10%) of the voting power
of the capital stock of the Company, the minimum exercise price may not be less
than one hundred ten percent (110%) of the fair market value of the Common Stock
on the date of grant. Any cash proceeds received by the Company from the
exercise of the options will be used for general corporate purposes.
Expiration and Transfer of Options
The Board of Directors (or the Committee) has the sole discretion to
fix the period within which any ISO or NQSO may be exercised. Any ISO granted
under the Amended Plan to a ten percent (10%) or less stockholder and any NQSO
shall be exercised during a period of not more than ten years from the date of
grant and any ISO granted to a greater than ten percent (10%) stockholder shall
be exercised within five years from the date of grant. No ISO may be granted
under the Amended Plan more than ten years after the date of adoption of the
Amended Plan.
Options granted under the Amended Plan are not transferable except upon
death. Options generally may be exercised only while the option holder is
employed by the Company, or in some cases, within three months of termination of
employment. In the event of disability of an optionholder, options may generally
be exercised to the extent of the accrued right to exercise the option within
one year of termination of employment due to disability. In the event of the
death of an optionholder, options may be exercised subject to expiration of the
option within three years after the date of death, to the extent of the accrued
right to exercise the option at the date of death. In the event the employment
of an optionholder is terminated for cause, an optionholder's rights under all
options are generally immediately forfeited.
Upon a reorganization, merger or consolidation of the Company as a
result of which the outstanding Common Stock is changed into or exchanged for
cash or property or securities not of the Company's issue, or upon a sale of
substantially all the property of the Company, the Amended Plan will terminate
and all outstanding options previously granted thereunder shall terminate,
unless provision is made in connection with such transaction for the continuance
of the Amended Plan or for the assumption of options theretofore granted. If the
Amended Plan and unexercised options are to terminate pursuant to such
transaction, persons owning any unexercised portions of options then outstanding
will have the right, prior to the consummation of the transaction, to exercise
the unexercised portions of their options, including the portions thereof which
would, but for such transaction, not yet be exercisable.
Federal Income Tax Considerations
In general, an optionholder will not recognize taxable income upon
grant or exercise of an ISO and the Company will not be entitled to any business
expense deduction with respect to the grant or exercise of an ISO. However, upon
the exercise of an ISO, the excess of the fair market value on the date of the
exercise of the shares received over the exercise price of shares will be
treated as an adjustment to the optionholder's alternative minimum taxable
income. In order for the exercise of an ISO to qualify for the foregoing tax
treatment, the option holder generally must be an employee of the Company or a
subsidiary from the date the ISO is granted through the date three months before
the date of exercise, except in the case of death or disability, where special
rules apply.
23
If the optionholder has held the ISO (or the shares acquired upon
exercise thereof) for at least two years after the date of grant and the shares
acquired upon exercise of the options for at least one year after the date of
exercise, upon disposition of the shares by the optionholder, the difference, if
any, between the sale price of the shares and the exercise price of the option
will be treated as long-term capital gain or loss. If the optionholder does not
satisfy these holding period requirements, the optionholder will recognize
ordinary income at the time of the disposition of the shares, generally in an
amount equal to the excess of the fair market value of the shares at the time
the option was exercised over the exercise price of the option. The balance of
gain realized, if any, will be long-term capital gain or short-term capital
gain, depending upon whether or not the shares were sold more than one year
after the option was exercised. If the optionholder sells the shares prior to
the satisfaction of the holding period requirements but at a price below the
fair market value of the shares at the time the option was exercised, the amount
of ordinary income will be limited to the excess of the amount realized on the
sale over the exercise price of the option. If the optionholder includes the
ordinary income in income or the Company complies with the applicable reporting
requirements, it will be entitled to a business expense deduction in the same
amount and at the same time as the optionholder recognizes ordinary income,
subject to any deduction limitation under Section 162(m).
In general, an optionholder to whom a NQSO is granted will recognize no
income and the Company will not be entitled to any business expense deduction at
the time of the grant of the option. Upon exercise of a NQSO, an optionholder
will recognize ordinary income in an amount equal to the amount by which the
fair market value of the shares on the date of exercise exceeds the exercise
price of the option. If the optionholder includes such amount in income or the
Company complies with applicable reporting requirements, it will be entitled to
a business expense deduction in the same amount and at the same time as the
optionholder recognizes ordinary income, subject to any deduction limitation
under Section 162(m).
Section 162(m) of the Code and the regulations proposed thereunder
generally would disallow the Company a federal income tax deduction for
compensation paid to the chief executive officer and the four other most highly
compensated executive officers to the extent such compensation paid to any of
such individuals exceeds one million dollars in any year. Section 162(m)
generally does not disallow a deduction for payments of qualified
"performance-based compensation" the material terms of which have been disclosed
to and approved by stockholders. The Company intends that compensation
attributable to options and subject to performance objectives granted under the
Millennium Plan will be qualified "performance-based compensation."
Under certain circumstances, the accelerated vesting or the cashout or
exercise of options in connection with a change in control of the Company might
be deemed an "excess parachute payment" for purposes of the golden parachute tax
provisions of Section 280G of the Code. To the extent it is so considered, the
optionholder may be subject to a 20% excise tax and the Company may be denied a
tax deduction.
Exercise of Options
Generally, an option will be exercised by the tender of written notice
of the optionholder's intention to exercise, and payment in cash of the
aggregate exercise price for the shares of Common Stock for which the option is
being exercised. The Board of Directors (or the
24
Committee) may, however, permit an optionee to pay all or a portion of the
exercise price by delivering to the Company shares of Common Stock having an
aggregate fair market value at least equal to such aggregate exercise price. An
option may also be exercised by tender to the Company of a written notice of
exercise together with advice of the delivery of an order to a broker to sell
part or all of the shares of Common Stock subject to such exercise notice and an
irrevocable order to such broker to deliver to the Company sufficient proceeds
from the sale of such shares to pay the exercise price and any withholding taxes
(a "cashless exercise") provided all documentation and procedures are approved
in advance by the Board of Directors (or the Committee). The Company has the
authority under the Amended Plan to assist any employee of the Company with the
payment of the purchase price of the Common Stock by lending the amount of the
purchase price to the employee, on terms, including rate of interest and
security for the loan, as the Board of Directors (or the Committee) shall
authorize.
Amendments to the Millennium Plan and Termination
The Board of Directors may at any time terminate the Amended Plan or
make such amendments thereto as its deems advisable and in the best interests of
the Company, without action on the part of the Company's stockholders, unless
such approval is required pursuant to Section 422 of the Code or other federal
or state law, rule or regulation and, provided that, no such action may be taken
if it affects or impairs the rights of an individual holding options previously
granted (absent such holder's consent). No ISO may be granted ten years after
the adoption of the Millennium Plan.
New Plan Benefits
Because the Board of Directors has discretion in determining the
persons who will receive grants of options under the Amended Plan and the
number of shares covered by any such options, the persons to whom options
will be granted in the future and the number of options that will be granted
in the future are not determinable. The following table presents information
on options that are expected to be granted under the Amended Plan during
fiscal year 2001, subject to stockholder approval of this Proposal 4, as of
February ___, 2001.
New Plan Benefits Table
Because all of the Named Executive Officers are no longer employed by
the Company, information regarding the benefits to be received by executives and
all officers of the Company is provided with respect to the current executives
and officers of the Company.
- ------------------------------------------------------------- ------------------------- ------------------------------
Dollar Value Number of Shares Underlying
Name and Principal Position ($)(1) Options
- ------------------------------------------------------------- ------------------------- ------------------------------
Howard A. Tullman - Chief Executive Officer
- ------------------------------------------------------------- ------------------------- ------------------------------
Douglas A. Laux - Chief Financial Officer and Treasurer
- ------------------------------------------------------------- ------------------------- ------------------------------
Richard R. Dennerline - Chief Legal Officer
- ------------------------------------------------------------- ------------------------- ------------------------------
Paul P. Schmidman - Executive Vice President
- ------------------------------------------------------------- ------------------------- ------------------------------
Executive Officer Group (__ persons)
- ------------------------------------------------------------- ------------------------- ------------------------------
Non-Executive Officer Director Group (__ persons)
- ------------------------------------------------------------- ------------------------- ------------------------------
Non-Executive Officer Employee Group (__ persons)
- ------------------------------------------------------------- ------------------------- ------------------------------
- ------------------------------------------------------------- ------------------------- ------------------------------
25
- --------------------
(1) The value of the listed shares is not determinable at this time. Unless
otherwise noted, the exercise price of each of these options is (or will
be, as applicable) the closing price of a share of Common Stock on the
Nasdaq National Market on the date of the relevant option grant.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENTS
TO THE AMENDED AND RESTATED MILLENNIUM STOCK OPTION PLAN.
PROPOSAL 5--RATIFICATION OF APPOINTMENT
OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Company's financial statements for the fiscal year ended August 31,
2000, were audited by Deloitte & Touche, LLP ("Deloitte & Touche").
The Company's financial statements for the fiscal year ended August 31,
1999, were audited by the firm of Holtz Rubenstein & Co., LLP ("Holtz
Rubenstein"). Pursuant to the decision of the Board of Directors, effective
January 21, 2000, the Company dismissed Holtz Rubenstein as the Company's
independent certified public accountants. The reports of Holtz Rubenstein on the
financial statements of the Company for the fiscal years ended August 31, 1998
and 1999 did not contain an adverse opinion or disclaimer of opinion and were
not qualified or modified as to uncertainty, audit scope or accounting
principles.
The foregoing was reported by the Company on Form 8-K filed with the
Securities and Exchange Commission as required by the Securities Exchange Act of
1934, as amended. As previously disclosed therein, there were no disagreements
at the decision making level (i.e., between personnel of the Company responsible
for the presentation of its financial statements and personnel of Holtz
Rubenstein responsible for rendering its report) with Holtz Rubenstein on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure.
At the time of the filing of the applicable Form 8-K, the Company
provided Holtz Rubenstein with a copy of this disclosure and requested that
Holtz Rubenstein furnish the Company with a letter addressed to the Securities
and Exchange Commission stating whether Holtz Rubenstein agreed with the
statements made by the Company hereinabove and, if not, stating the respects in
which it did not agree. A copy of the letter of Holtz Rubenstein was previously
filed with the Securities and Exchange Commission.
The Board of Directors appointed Deloitte & Touche, LLP, as the
Company's independent certified public accountants to examine and report on the
Company's consolidated financial statements for the 2001 fiscal year and
recommends that the stockholders ratify the appointment. If the stockholders do
not ratify the appointment of Deloitte & Touche, the Audit Committee and the
Board of Directors will consider the appointment of other independent certified
public accountants. One or more representatives of Deloitte & Touche will be
present at the Annual Meeting. They will have the opportunity to make a
statement if they wish to do so and are expected to be available to respond to
appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL AND
RATIFICATION OF DELOITTE & TOUCHE, LLP AS THE COMPANY'S INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS.
26
OTHER MATTERS
The Board of Directors knows of no other matters to be presented for
stockholder action at the Annual Meeting. However, if other matters do properly
come before the Meeting or any adjournments or postponements thereof, the Board
of Directors intends that the persons named in the proxies will vote upon such
matters in accordance with their best judgment.
VOTING PROCEDURES
Howard A. Tullman and Richard R. Dennerline, the persons named as
proxies on the proxy card accompanying this proxy statement, were selected by
the Board of Directors of the Company to serve in such capacity. Mr. Tullman and
Mr. Dennerline each serve as an executive officer and director of the Company.
The shares represented by each executed and returned proxy will be voted in
accordance with the directions indicated thereon or, if no direction is
indicated, in accordance with the recommendations of the Board of Directors
contained in this proxy statement. The Board of Directors does not presently
intend to bring any business before the Annual Meeting other than the specific
proposals referred to in this proxy statement and specified in the notice of
Annual Meeting, and so far as is known to the Board of Directors, no other
matters are to be brought before the Annual Meeting. As to any other business
that may properly come before the Annual Meeting, however, it is intended that
proxies, in the form enclosed, will be voted in respect thereof in accordance
with the judgment of the persons voting such proxies.
You can revoke your proxy at any time before it is exercised. To do so,
you must give written notice of revocation to our Corporate Secretary, submit
another properly executed proxy with a more recent date, or vote in person at
the Annual Meeting.
QUORUM
The required quorum for the transaction of business at the Annual
Meeting will be a majority of the outstanding shares of Common Stock entitled to
vote on the record date, represented in person or by proxy. Directions to
withhold authority, abstentions and broker non-votes will be treated as present
and entitled to vote for purposes of determining whether a quorum is present at
the Annual Meeting. A broker non-vote occurs when a nominee holding shares for a
beneficial owner does not vote on a particular proposal because the nominee does
not have discretionary voting power with respect to that item and has not
received instructions from the beneficial owner.
REQUIRED VOTE
A plurality of the votes of the shares present in person or represented
by proxy at the Annual Meeting is required to elect the nominees for director.
Stockholders will not be allowed to cumulate their votes in the election of
directors. Broker non-votes will have no effect in the election of directors.
Approval and adoption of the Reverse Split, amendment to Article FOURTH of the
Certificate of Incorporation and amendment of the Millennium Plan will require
the affirmative vote of a majority of the shares entitled to vote at the
Meeting.
27
Directions to withhold authority to vote will have no effect on the
election of directors, because directors are elected by a plurality of the
votes cast. Any proxy marked `abstain" with respect to the amendment to
Article FOURTH of the Certificate of Incorporation, the approval and
adoption of the Reverse Split and amendment of the Millennium Plan will have
the effect of a vote against the proposal. Shares represented by proxy as to
which there is a broker non-vote or a proxy in which authority to vote for
any matter considered is withheld will have no effect on the vote for any
matter.
STOCKHOLDER PROPOSALS
To be considered for inclusion in our proxy statement for the 2002
annual meeting, director nominations and other proposals of stockholders must be
submitted in writing to our Corporate Secretary and received at our principal
executive offices not less than one hundred twenty (120) calendar days in
advance to February 23, 2002; provided, however, that if the date of our 2002
Annual Meeting is different from the date of this year's annual meeting by more
than sixty (60) days, then notice must be received a reasonable time before the
Company begins to print and mail its proxy materials for the 2002 annual
meeting.
All director nominations and other proposals of stockholders with
regard to the 2002 annual meeting should be submitted by certified mail, return
receipt requested, to Worldwide Xceed Group, Inc., 233 Broadway, New York, New
York 10279, Attention: Chief Legal Officer.
ANNUAL REPORT TO STOCKHOLDERS
The Company's annual report on Form 10-K for the fiscal year ended
August 31, 2000 as filed with the Securities and Exchange Commission, which is
not a part of the proxy soliciting material, is being delivered to you with this
Proxy Statement. Additionally, the Company's Quarterly Report on Form 10-Q for
the first fiscal quarter ended November 30, 2000 is available upon request. All
requests should be directed to Carol Weber, Stockholder Relations, at (212)
553-2000. In addition, the Annual Report and the Quarterly Report as well as
additional filings with the Securities and Exchange Commission are available
through our web site at www.xceed.com.
EXPENSE OF SOLICITATION
The cost of soliciting proxies, which also includes the preparation,
printing and mailing of this Proxy Statement, will be borne by the Company.
Solicitation will be made by the Company primarily through the mail. The Company
has engaged the firm of __________ to assist in the distribution and
solicitation of proxies. __________ will receive a fee of $_______ plus expenses
for these services. Directors, officers and regular employees of the Company may
solicit proxies personally, by telephone or telegram. The Company will request
brokers and nominees to obtain voting instructions of beneficial owners of stock
registered in their names and will reimburse them for any expenses incurred in
connection therewith.
28
PLEASE DATE, SIGN AND RETURN THE PROXY CARD AT YOUR EARLIEST CONVENIENCE IN THE
ENCLOSED RETURN ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
A PROMPT RETURN OF YOUR PROXY CARD WILL BE APPRECIATED AS IT WILL SAVE THE
EXPENSE OF FURTHER MAILINGS.
By Order of the Board of Directors,
Richard R. Dennerline, Secretary
New York, New York
February 23, 2001
29
APPENDIX A
AMENDED AND RESTATED CHARTER
THE AUDIT COMMITTEE
OF
THE BOARD OF DIRECTORS
OF
WORLDWIDE XCEED GROUP, INC.
December 14, 2000
I. PURPOSE. The Audit Committee (the "COMMITTEE") of the Board of
Directors (the "BOARD") of Worldwide Xceed Group, Inc., a Delaware
corporation (the "COMPANY"), shall provide assistance to the members of the
Board in fulfilling their oversight functions with regard to the Company's
financial matters. In so doing, it shall be the responsibility of the
Committee to maintain free and open means of communication between the
members of the Board, the Company's independent public accountants who audit
the Company's financial statements (the "AUDITORS"), and the Company's
financial management. The Board shall have the ultimate authority and
responsibility, based upon recommendations from the Committee, to select, and
where appropriate, replace the Auditors, who are ultimately accountable to
the Board of Directors and the Committee.
While the Audit Committee has the functions set forth in this Charter,
it is not the duty of the Audit Committee to plan or conduct audits or to
determine that the Company's financial statements are complete and accurate
or are in accordance with generally accepted accounting principles. The
responsibility to plan and conduct audits is that of the Auditors. The
Company's management has the responsibility to determine that the Company's
financial statements are complete and accurate and in accordance with
generally accepted accounting principles. It is also not the duty of the
Audit Committee to assure the Company's compliance with laws and regulations
or compliance with the Company's code of ethical conduct. The primary
responsibility for these matters rests with the Company's management.
In its oversight capacity, the Audit Committee is neither intended nor
equipped to guarantee with certainty to the full Board and stockholders the
accuracy and quality of the Company's financial statements and accounting
practices. The Audit Committee can do no more than rely upon information it
receives, questions and assesses in fulfilling its functions.
II. COMPOSITION. The Committee shall consist of at least three (3)
independent directors, who shall satisfy the requirements of the National
Association of Securities Dealers for companies listed on the Nasdaq National
Market . Each Committee member shall be financially literate or shall become
financially literate within a reasonable period after his or her appointment
to the Committee, and further, at least one member of the Committee shall
have accounting or related financial management expertise. Committee members
and the Committee Chairman shall be designated by the full Board of Directors
upon the recommendation of the Chairman of the Board.
III. FUNCTIONS. The Committee's functions may be divided into the
following general categories: (1) assessing processes related to risks and
control environment, (2) overseeing financial reporting, and (3) evaluating
the independent audit processes. The Committee shall:
A. RISK AND CONTROL ENVIRONMENT PROCESSES.
(i) Assist the Board of Directors of the Company in fulfilling its
oversight functions with respect to the quality, integrity and annual
independent audit of the Company's financial statements.
(ii) Review this Charter at least annually or as conditions dictate.
(iii) Perform such other functions as assigned by law, the Company's
certificate of incorporation or bylaws, or the Board of Directors.
B. REPORTING PROCESS.
(i) Review with senior management and the Auditors the Company's
annual financial statements to be included in the Company's annual
report on Form 10-K.
(ii) Review the interim financial statements with management and the
Auditors the Company's financial statements relating to the Company's
reports on Form 10-Q. The Chairman of the Committee may represent the
entire Committee for the purposes of this review.
(iii) Based upon discussions with, and reliance upon, management and
the Auditors, cause to be prepared a report for inclusion in the
Company's proxy statement, which report will satisfy the requirements of
Item 7(e)(3) of Schedule 14A under the Securities Exchange Act of 1934
(the "Act"). In addition, the Committee will provide the disclosure
required by Item 9(e) of Schedule 14A of the Act and provide any other
audit committee-related disclosure, in filings with the Securities and
Exchange Commission or otherwise required by applicable securities laws,
rules and regulations or by the rules of any securities exchange or
market on which securities of the Company are listed.
(iv) Discuss with the Auditors their judgments about the quality,
not just the acceptability, of the Company's accounting principles and
financial disclosure practices used or proposed and the appropriateness
of significant management judgments.
C. AUDIT PROCESS.
(i) Recommend to the Board of Directors the selection of the
Auditors, considering, among other things, independence and
effectiveness. The Committee shall review and discuss with the Auditors
all significant relationships the Auditors have with the Company to
determine the Auditors' independence. The Committee shall also be
responsible for approving the fees and other compensation to be paid to
the Auditors.
2
The Committee shall receive from the Auditors a formal written statement
delineating all relationships affecting objectivity and independence
between the Auditors and the Company.
(ii) Review the performance of the Auditors and recommend to the
Board any proposed discharge of the Auditors when circumstances warrant.
(iii) Review any significant disagreements between management and the
Auditors in connection with the preparation of the Company's financial
statements.
(iv) Review with the Auditors and management the extent to which
changes or improvements in financial or accounting practices, as
approved by the Committee, have been implemented.
(v) Provide an open avenue of communication among the Auditors,
management and the Board of Directors.
IV. MEETINGS. The Committee may have such meetings as the Chairman of
the Committee may deem necessary. The Committee also shall meet at the
request of the Chairman of the Committee or at the request of the Auditors or
the Chief Executive Officer or the Chief Financial Officer. Members of
senior management, the Auditors or others may attend meetings of the
Committee at the invitation of the Committee and shall provide pertinent
information as necessary. The Committee shall meet with the Auditors and
management in separate executive sessions to discuss any matters that the
Committee or these groups believe should be discussed privately with the
Committee.
The Chairman of the Committee shall set the agenda of each meeting and
arrange for the distribution of the agenda, together with supporting
material, to the Committee members prior to each meeting. Two members of the
Committee will constitute a quorum.
V. COMMUNICATION WITH THE BOARD OF DIRECTORS. The Committee shall,
after each meeting, report its activities, findings and conclusions to the
full Board of Directors and provide the Board with copies of minutes of the
Audit Committee meetings.
VI. Minutes. At each meeting, the Chairman shall select one Committee
member to act as secretary and prepare minutes of the Committee's meetings.
After approval by the Committee Chairman, such minutes shall be distributed
to all directors.
3
WORLDWIDE XCEED GROUP, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 20, 2001
The undersigned stockholder of Worldwide Xceed Group, Inc. (the
"Company") hereby appoints Howard A. Tullman and Richard R. Dennerline, and each
of them acting singly, the attorneys and proxies of the undersigned, with full
power of substitution, to vote on behalf of the undersigned all shares of Common
Stock, par value $0.01 per share, of the Company standing of record in the name
of the undersigned at the close of business on February 8, 2001, at the Annual
Meeting of Stockholders of the Company to be held on Wednesday, March 20, 2001,
at 9:00 a.m. eastern time at ______________, and at all adjournments thereof,
with all powers the undersigned would have if personally present, hereby
revoking any proxy heretofore given, and the undersigned authorizes and
instructs such proxies to vote as follows:
------------------------------
IF NO DIRECTION IS INDICATED WITH RESPECT TO ANY ITEM, THIS PROXY WILL BE
VOTED FOR THE ADOPTION OF SUCH ITEM.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE.)
PLEASE DATE, SIGN AND MAIL YOUR PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
WORLDWIDE XCEED GROUP, INC.
MARCH 20, 2001
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
FOR all nominees WITHHOLD AUTHORITY to 2. AMEND ARTICLE FOR AGAINST ABSTAIN
listed at right vote for all nominees FOURTH OF
(except as marked to listed at right CERTIFICATE OF [_] [_] [_]
the contrary) INCORPORATION
TO INCREASE THE NUMBER
OF AUTHORIZED SHARES OF
COMMON STOCK FROM
100,000,000 TO
200,000,000
AND STATE THE TERMS OF
AUTHORIZED BLANK CHECK
PREFERRED STOCK
1. ELECTION [_] [_] 3. AMEND ARTICLE FOURTH
OF TO EFFECT A
DIRECTORS TEN-FOR-ONE REVERSE FOR AGAINST ABSTAIN
STOCK SPLIT OF THE
ISSUED AND OUTSTANDING [_] [_] [_]
COMMON STOCK
Nominees: 4. AMENDMENT TO XCEED FOR AGAINST ABSTAIN
Howard A. Tullman INC. AMENDED AND
Terry A. Anderson RESTATED MILLENIUM [_] [_] [_]
Edward A. Bennett STOCK OPTION PLAN
John A.
Bermingham
Stuart N. Emanuel
5. RATIFICATION OF FOR AGAINST ABSTAIN
DELOITTE & TOUCHE,
LLLP [_] [_] [_]
INSTRUCTIONS: To withhold PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE
authority to vote for a given ENCLOSED ENVELOPE PROMPTLY, SO AS TO ENSURE A
nominee, strike through nominee's QUORUM AT THE MEETING, REGARDLESS OF WHETHER YOU
name: INTEND TO ATTEND THE MEETING IN PERSON.
Receipt of the notice of annual meeting and
the accompanying proxy statement is acknowledged.
SIGNATURE____________________________________SIGNATURE_________________________________DATE______________
IF HELD JOINTLY
NOTE: Please sign exactly as the name appears on the proxy. If shares are held
jointly, each owner should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer.
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