<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
XETEL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
<PAGE> 2
[XETEL CORPORATION LETTERHEAD]
July 22, 1999
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
("Annual Meeting") of XeTel Corporation, a Delaware Corporation (the "Company"),
which will be held at 10:30 A.M. Central Time on Tuesday, August 17, 1999, at
the Company's offices located at 2105 Gracy Farms Lane, Austin, Texas 78758.
The enclosed Proxy Statement more fully describes the details of the
business to be conducted at the Annual Meeting.
After careful consideration, the Company's Board of Directors has
unanimously approved the proposals and recommends you vote FOR each such
proposal.
Your vote is important to the Company. After reading the Proxy
Statement, please mark, date, sign and return no later than August 5, 1999, the
enclosed proxy card in the accompanying reply envelope. If you decide to attend
the Annual Meeting, please notify the Secretary of the Company you wish to vote
in person and your proxy will not be voted. YOUR SHARES CANNOT BE VOTED UNLESS
YOU MARK, SIGN AND RETURN THE ENCLOSED PROXY, OR ATTEND THE ANNUAL MEETING IN
PERSON.
A copy of the Company's Fiscal Year 1999 Annual Report to Stockholders
is also enclosed.
The Board of Directors and Management look forward to seeing you at the
Annual Meeting.
Sincerely,
/s/ ANGELO A. DECARO, JR.
Angelo A. DeCaro, Jr.
President and Chief Executive Officer
<PAGE> 3
[XETEL CORPORATION LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 17, 1999
To the Stockholders of XeTel Corporation:
NOTICE IS HEREBY GIVEN the Annual Meeting of Stockholders ("Annual
Meeting") of XeTel Corporation, a Delaware corporation (the "Company"), will be
held at 10:30 A.M. Central Time on Tuesday, August 17, 1999, at the Company's
offices located at 2105 Gracy Farms Lane, Austin, Texas 78758 for the following
purposes, as more fully described in the Proxy Statement accompanying this
Notice:
(i) to elect one Class II Director to serve until the annual
stockholders' meeting in the year 2000 and one Class I
Director to serve until the annual stockholders' meeting in
the year 2002 or in each case until their successors are
elected and qualified;
(ii) to transact such other business as may properly come before
the Annual Meeting and any adjournment or adjournments
thereof.
The foregoing items of business are more fully described in the proxy
statement accompanying this notice.
Only stockholders of record at the close of business on July 5, 1999
are entitled to notice of and to vote at the Annual Meeting. The stock transfer
books of the Company will remain open between the record date and the date of
the meeting. A list of the stockholders entitled to vote at the Annual Meeting
will be available for inspection at the Company's offices, 2105 Gracy Farms
Lane, Austin, Texas 78758 for at least 10 days prior to the Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting in
person. Whether or not you plan to attend, please carefully read the
accompanying proxy statement, which describes matters to be voted upon at the
Annual Meeting, and mark, date, sign and return the enclosed proxy card in the
reply envelope provided. Should you receive more than one proxy because your
shares are registered in different names and addresses, each proxy should be
returned to ensure that all your shares will be voted. You may revoke your proxy
at any time prior to the Annual Meeting. If you attend the Annual Meeting and
vote by ballot, your proxy vote will be revoked automatically, and only your
vote at the Annual Meeting will be counted. The prompt return of your proxy card
will assist us in preparing for the Annual Meeting.
By order of the Board of Directors,
/s/ JULIAN C. HART
Julian C. Hart
Secretary
Austin, Texas
July 22, 1999
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT: IF YOU DO NOT EXPECT TO ATTEND THE ANNUAL MEETING, OR IF
YOU DO PLAN TO ATTEND BUT WISH TO VOTE BY PROXY, PLEASE COMPLETE, SIGN, DATE AND
RETURN PROMPTLY THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
- --------------------------------------------------------------------------------
<PAGE> 4
[XETEL CORPORATION LOGO]
-------------------------------
PROXY STATEMENT
-------------------------------
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 17, 1999
GENERAL INFORMATION FOR STOCKHOLDERS
THE ENCLOSED PROXY ("PROXY") IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS (THE "BOARD") OF XETEL CORPORATION, A DELAWARE CORPORATION (THE
"COMPANY"), FOR USE AT THE 1999 ANNUAL MEETING OF STOCKHOLDERS (THE "ANNUAL
MEETING") TO BE HELD AT 10:30 A.M. CENTRAL TIME ON TUESDAY, AUGUST 17, 1999, AT
THE COMPANY'S OFFICES LOCATED AT 2105 GRACY FARMS LANE, AUSTIN, TEXAS 78758, AND
AT ANY ADJOURNMENT THEREOF.
This proxy statement and the accompanying form of Proxy are to be first
mailed to the stockholders entitled to vote at the Annual Meeting on or about
July 22, 1999.
Any stockholder or stockholder's representative who, because of a
disability, may need special assistance or accommodation to allow him or her to
participate at the Annual Meeting may request reasonable assistance or
accommodation from the Company by contacting Investor Relations in writing at
2105 Gracy Farms Lane, Austin, Texas 78758 or by telephone at (512) 435-1228. To
provide the Company sufficient time to arrange for reasonable assistance, please
submit such requests by August 5, 1999.
RECORD DATE AND VOTING
Stockholders of record at the close of business on July 5, 1999 (the
"Record Date") are entitled to notice of, and to vote at, the Annual Meeting. As
of the close of business on such date, there were 9,287,557 shares of the
Company's common stock, $0.0001 par value per share (the "Common Stock"),
outstanding and entitled to vote, held by 109 registered stockholders of record
in street name for the benefit of approximately 1,862 owners. No shares of the
Company's preferred stock, par value $0.0001, were outstanding. Each stockholder
is entitled to one vote for each share of Common Stock held by such stockholder
as of the record date. Abstentions and broker non-votes (i.e., the submission of
a Proxy by a broker or nominee specifically indicating the lack of discretionary
authority to vote on the matter) are counted as present for purposes of
determining the presence or absence of a quorum for the transaction of business.
Abstentions will be counted towards the tabulation of votes cast on proposals
presented to the stockholders and will have the same effect as negative votes,
whereas broker non-votes will not be counted for purposes of determining whether
a proposal has been approved.
IMPORTANT
PLEASE MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED,
POSTAGE-PREPAID, RETURN ENVELOPE BY NO LATER THAN AUGUST 5, 1999, SO THAT IF YOU
ARE UNABLE TO ATTEND THE ANNUAL MEETING, YOUR SHARES MAY BE VOTED.
PROXIES
If the enclosed form of proxy is properly signed and dated, the shares
represented thereby will be voted at the Annual Meeting in accordance with the
instructions specified thereon. If the proxy does not specify how the shares
represented thereby are to be voted, the proxy will be voted FOR the election of
the directors proposed by the Board unless the authority to vote for the
election of such directors is withheld. Any stockholder giving a Proxy pursuant
to this solicitation may revoke it at any time prior to its exercise by filing
with the Assistant
<PAGE> 5
Secretary of the Company at its offices at 2105 Gracy Farms Lane, Austin, Texas
78758 a written notice of such revocation or a duly executed Proxy bearing a
later date, or by attending the Annual Meeting and voting in person.
SOLICITATION
This solicitation of Proxies is made for the Board, and the Company
will bear the costs of the solicitation, including the expense of preparing,
assembling, printing and mailing this proxy statement and the material used in
this solicitation of proxies. It is contemplated that proxies will be solicited
principally through the mails, but directors, officers and regular employees of
the Company may solicit proxies personally or by telephone. Although there is no
formal agreement to do so, the Company may reimburse banks, brokerage houses and
other custodians, nominees and fiduciaries for their reasonable expenses in
forwarding the proxy materials to their principals. The Company may pay for and
use the services of individuals or companies not regularly employed by the
Company in connection with the solicitation of proxies if the Board determines
that it is advisable.
THE COMPANY'S ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED MARCH
27, 1999 (THE "ANNUAL REPORT") HAS BEEN MAILED CONCURRENTLY WITH THE MAILING OF
THE NOTICE OF ANNUAL MEETING AND PROXY STATEMENT TO ALL STOCKHOLDERS ENTITLED TO
NOTICE OF AND TO VOTE AT THE ANNUAL MEETING. THE ANNUAL REPORT IS NOT
INCORPORATED INTO THIS PROXY STATEMENT AND IS NOT CONSIDERED PROXY SOLICITING
MATERIAL.
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
PROPOSAL ONE - ELECTION OF DIRECTORS
GENERAL
The Company's Board is divided into three classes, with the term of
office of one class expiring each year. The Company currently has five
Directors, with one Director in Class I, two Directors in Class II and two
Directors in Class III. Raimon L. Conlisk, formerly a Class II Director,
resigned his position on the Board and the remaining members of the Board
appointed Alan R. Schuele to fill such vacancy on the Board until the next
annual meeting as provided by the Company's Second Restated Certificate of
Incorporation. The term of office of Director Sam L. Densmore also expires at
this Annual Meeting. The term of office of Kozo Sato and the Class II Director
to be elected at this meeting expire at the year 2000 annual meeting. The term
of office of Angelo A, DeCaro, Jr. and Ronald W. Guire expire at the year 2001
annual meeting. At this Annual Meeting, stockholders will be asked to elect one
(1) Director with a term of one (1) year and elect one (1) Director with a term
of three (3) years.
VOTE REQUIRED
Each nominee receiving the affirmative votes of a majority of the
shares present in person or represented by proxy at the Annual Meeting and
entitled to vote on the election of directors shall be elected to the Board of
Directors. Votes withheld from any Director are counted for purposes of
determining the presence or absence of a quorum, but have no legal effect under
Delaware law. While there is no definitive statutory or case law authority in
Delaware as to the proper treatment of abstentions and broker non-votes in the
election of Directors, the Company believes that both abstentions and broker
non-votes should be counted for purposes of whether a quorum is present at the
Annual Meeting. In the absence of precedent to the contrary, the Company intends
to treat abstentions and broker non-votes with respect to the election of
directors in this manner.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the Company's nominees named below, both are presently
directors of the Company. If any nominee of the Company is unable or declines to
serve as a director at the time of the Annual Meeting, the proxies will be voted
for any nominee who is designated by the present Board of Directors to fill the
vacancy. It is not expected that any nominee will be unable or will decline to
serve as a director.
2
<PAGE> 6
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD RECOMMENDS STOCKHOLDERS VOTE FOR THE NOMINEES LISTED BELOW.
NOMINEES FOR ELECTION AT THE ANNUAL MEETING
The name of the nominees and certain information about each are set
forth below:
<TABLE>
<CAPTION>
Name of Nominee Age Position/Principal Occupation
--------------- --- -----------------------------
<S> <C> <C>
Sam L. Densmore..................... 58 Director (Class I)
Alan R. Schuele..................... 53 Director (Class II)
</TABLE>
MR. DENSMORE has served as a Director of the Company since May 1997.
Mr. Densmore has served with RF Monolithics, Inc., a radio frequency component
and module designer and manufacturer, since 1993 including as its President and
Chief Executive Officer since 1996, Director since 1994 and Executive Vice
President, Chief Operating Officer, Chief Financial Officer and Secretary from
1993 to 1996. In 1991, Mr. Densmore founded the IBC Group, a private consulting
company, and served as its President from 1991 to 1993. From 1984 to 1990, Mr.
Densmore was employed at Recognition International, Inc., a document image
processing company. During that period, Mr. Densmore served as Senior Vice
President, Treasurer and Chief Financial Officer from 1989 to 1990 and Vice
President of Corporate Development from 1984 to 1989. Mr. Densmore is a
Certified Public Accountant.
MR. SCHUELE joined XeTel as a Director of the Company in August 1998.
From August 1998 to June 1999, Mr. Schuele served as President and COO and as a
director of Unitrode Corporation. Unitrode Corporation designs, manufactures and
sells analog/linear and mixed-signal integrated circuits, electronic modules and
non-volatile products. Prior to working with Unitrode, he was the President and
CEO and a director of Benchmarq Microelectronics, Inc. Mr. Schuele has also held
a variety of senior management positions with Crystal Semiconductor, Motorola
Semiconductor, Mostek Corporation and Cypress Semiconductor.
INCUMBENT DIRECTORS WHO'S TERMS OF OFFICE CONTINUE AFTER THE ANNUAL MEETING
The names and certain other information about the Directors whose terms
of office continue after the Annual Meeting are set forth below:
<TABLE>
<CAPTION>
Name of Nominee Age Position/Principal Occupation
--------------- --- -----------------------------
<S> <C> <C>
Kozo Sato................... 59 Director (Class II)
Angelo A. DeCaro, Jr........ 47 Director (Class III)
Ronald W. Guire ............ 50 Director (Class III)
</TABLE>
MR. SATO has served as a Director of the Company since 1986 and as
Chairman of the Board of Directors from 1986 to April 1998. Mr. Sato previously
served as the Company's Chief Executive Officer from 1986 to August 1995. Mr.
Sato served as a director of Rohm Americas, Inc., a wholly owned subsidiary of
Rohm Co., Ltd., Japan, a diversified electronics company, from February 1997 to
February 1999. From 1984 to October 1997, Mr. Sato served as the Chief Executive
Officer and President of Rohm U.S.A., Inc., a wholly owned subsidiary of Rohm
Co., Ltd., Japan.
MR. DECARO has served as a Director and President of the Company since
1993, and in August 1995 was elected its Chief Executive Officer. Mr. DeCaro was
employed by IBM from 1974 to 1993, and served as Director of Operations-Printed
Wiring Board and Services at IBM's circuit board facility in Austin, Texas from
1992 to 1993 and Plant Manager of the same facility from 1989 to 1992.
MR. GUIRE has served as a Director of the Company from 1986 and has
served as Chairman of the Board since April 1998. Mr. Guire has served with EXAR
Corporation ("EXAR"), a semiconductor designer and manufacturer, since 1984
including as Executive Vice President since June 1995, as Senior Vice President
from
3
<PAGE> 7
1989 to 1995 and as a director, Secretary of the Board of Directors and Chief
Financial Officer since 1985. Mr. Guire was formerly a partner in the public
accounting firm of Graubart & Co. from 1979 to 1985.
There is no family relationship between any Director of the Company.
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or awarded by the
Company during fiscal 1999 to the President and Chief Executive Officer and each
of the four other most highly compensated officers of the Company whose total
annual compensation in such year exceeded $100,000 (collectively, the "Named
Executive Officers") for services rendered in all capacities to the Company and
its subsidiaries for the fiscal years ended March 29, 1997, March 28, 1998 and
March 27, 1999:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation Awards
-------------------------------- -----------------------
Other Annual Restricted Securities All Other
Fiscal Compensation Stock Underlying Compensation
Year Salary Bonus ($) (1) ($)(2) Options(#) ($) (3)
----- ------- ------ ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Angelo A. DeCaro, Jr ......... 1999 199,616 -- 4,800 35,000 35,000 2,500
President and Chief 1998 180,000 10,000 4,800 29,688 25,000 2,375
Executive Officer and 1997 168,462 10,000 4,800 -- 70,000 2,106
Director
William A. Peten ............. 1999 158,462 -- -- 17,500 20,000 2,043
Senior Vice President, 1998 134,904 5,000 -- 14,844 10,000 1,811
Corporate Materials 1997 122,855 10,000 -- -- 30,000 1,903
and Systems
Stephen D. Sauter ............ 1999 156,539 -- 4,800 17,500 25,000 2,432
Vice President, Sales 1998 92,308 33,231 28,398(5) -- 50,000(5) --
and Marketing 1997 -- -- -- -- -- --
Richard S. Chilinski ......... 1999 153,077 -- -- 17,500 20,000 1,976
Vice President, Chief 1998 132,500 5,000 -- 14,844 10,000 1,781
Financial Officer and 1997 104,807 10,000 -- -- 30,000 370
Assistant Secretary
Norman E. O'Shea ............. 1999 144,833 -- 4,800 8,750 10,000 1,077
Vice President, General 1998 135,562 -- 4,000 -- 15,000 1,585
Manager XeTel West 1997 40,872(4) 14,762 1,600 -- 40,000(4) 1,226
</TABLE>
----------------
(1) Represents car allowances and a special transaction for Mr. Sauter in
fiscal 1998.
(2) Messrs. DeCaro, Peten, Sauter, Chilinski and O'Shea were issued 10,000,
5,000, 5,000, 5,000 and 2,500, respectively, shares of Common Stock on
August 11, 1998. The market price of the shares on the award date was
$3.50. The shares will vest in full upon completion of two years of
continued service.
Messrs. DeCaro, Peten and Chilinski were issued 5,000, 2,500 and 2,500,
respectively, shares of Common Stock on April 20, 1998, based on fiscal
1998 performance. The market price of the shares on the award date
4
<PAGE> 8
was $5.94. The shares will vest in full upon completion of two years of
continued service. As of the last day of fiscal 1998, Messrs. DeCaro,
Peten and Chilinski had no shares of restricted stock of the Company.
(3) Represents matching contributions under the Company's 401(k) Profit
Sharing Plan.
(4) Mr. O'Shea joined the Company in December 1996, and at such time was
granted 40,000 options in connection with his joining the Company.
(5) Mr. Sauter joined the Company in August 1997, and such time was granted
50,000 options and was reimbursed approximately $25,600 of moving
expenses in connection with his joining the Company.
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the grant of stock
options under the 1997 Plan to the Named Executive Officers during the 1999
fiscal year:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants Potential
------------------------- Realizable Value at
% of Total Assumed Annual Rates
Number of Options of Stock Price
Securities Granted to Appreciation for
Underlying Employees in Option Term ($) (5)
Options Fiscal Year Exercise Price Expiration ---------------------
Name Granted (1) (2) ($/Share) (3) Date (4) 5% 10%
- ----------------------- ----------- ------------ -------------- ---------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Angelo A. DeCaro, Jr. 25,000 7.55% 3.50 8/10/05 35,621 83,013
10,000 3.02 2.88 1/18/06 11,724 27,323
William A. Peten 15,000 4.53 3.50 8/10/05 21,373 49,808
5,000 1.51 2.88 1/18/06 5,862 13,662
Stephen D. Sauter 15,000 4.53 3.50 8/10/05 21,373 49,808
10,000 3.02 2.88 1/18/06 11,724 27,323
Richard S. Chilinski 15,000 4.53 3.50 8/10/05 21,373 49,808
5,000 1.51 2.88 1/18/06 5,862 13,662
Norman E. O'Shea 10,000 3.02 3.50 8/10/05 14,249 33,205
</TABLE>
- -----------------------
(1) Options were granted on August 11, 1998 and January 19, 1999 under the 1997
Plan. Each option will become exercisable as to twenty-five percent (25%)
of the shares upon the optionee's completion of one (1) year of service
measured from the grant date and with respect to the balance of the shares
in a series of equal annual installments over three (3) years of service
thereafter. The option will become immediately exercisable upon an
acquisition of the Company by merger or asset sale, unless the option is
assumed by the acquiring entity. Any assumed options will become
immediately exercisable following an optionee's involuntary termination of
service, other than for cause, if such involuntary termination occurs
within 18 months, following the acquisition of the Company by merger or
asset sale or a change in control of the Company.
(2) The Company granted options to purchase an aggregate of 331,000 shares of
Common Stock to employees during fiscal 1999, including options granted to
Named Executive Officers.
(3) The exercise price may be paid in cash or through a cashless exercise
procedure involving a same-day sale of the purchased shares. The Plan
Administrator may also assist an optionee in the exercise of an option by
loaning the optionee sufficient funds to pay the exercise price for the
purchased shares, together with any federal and state income tax liability
incurred by the optionee in connection with such exercise. The Plan
Administrator has the discretionary authority to reprice outstanding
options under the Plan through the
5
<PAGE> 9
cancellation of those options and the grant of replacement options with an
exercise price based on the lower fair market value of the option shares on
the regrant date.
(4) Each option has maximum term of seven (7) years, subject to earlier
termination in the event of the optionee's cessation of service with the
Company.
(5) Potential realizable value is based on assumption that the market price of
the Common Stock appreciates at the annual rate shown (compounded annually)
from the date of grant until the end of the seven (7) year option term.
There can be no assurance that the actual stock price appreciation over the
seven (7) year option term will be at the assumed five percent (5%) and ten
percent (10%) levels or at any other defined level.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning option exercises
and option holdings for the fiscal year ended March 27, 1999 for each of the
Named Executive Officers:
<TABLE>
<CAPTION>
Value Realized Number of Securities
Shares (Market Price Underlying Unexercised Value of Unexercised
Acquired at Exercise Options at In-The-Money Options at
on Date less Fiscal Year-End (#) Fiscal Year-End ($)(1)
Exercise Exercise Price) -------------------------- --------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ----------------------------- -------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Angelo A. DeCaro, Jr ......... -- -- 186,250 93,750 166,175 5,775
William A. Peten ............. -- -- 106,500 45,500 101,995 3,465
Stephen D. Sauter ............ -- -- 12,500 62,500 -- --
Richard S. Chilinski ......... -- -- 71,500 60,500 62,370 20,790
Norman E. O'Shea ............. -- -- 23,750 41,250 -- --
</TABLE>
- -----------------------
(1) Based on the fair value of the Company's Common Stock as of March 27, 1999
of $2.38 per share, less the exercise price for such shares.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board currently consists of Messrs.
Guire, Sato and Schuele. Neither of these individuals was and officer or
employee of the Company at anytime during fiscal 1999.
No current executive Officer of the Company has ever served as a member
of the board of directors or compensation committee of any other entity that was
or has had one or more executive officers serving as a member of the Company's
Board or Compensation Committee.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's executive
officers and Directors, and persons who own more than ten percent (10%) of a
registered class of the Company's equity securities, to file reports of
ownership on Form 3 and changes in ownership on Form 4 or Form 5 with the
Securities and Exchange Commission ("SEC"). Such officers, Directors and 10%
stockholders are also required by SEC rules to furnish the Company with copies
of all Section 16(a) forms they file. All named officers and directors filed
Form 5 for fiscal 1999 on July 9, 1999 instead of the required due date.
6
<PAGE> 10
REPORT OF COMPENSATION COMMITTEE
GENERAL
The Compensation Committee of the Board of Directors (the "Committee"),
is comprised of non-employee Directors. The current members of the Committee are
Messrs. Guire, Sato and Schuele. No current executive officer has ever served as
a member of the board of directors or compensation committee of any other entity
that has or has had one or more executive officers serving as a member of the
Company's Board of Directors or Compensation Committee. The Committee is
responsible for recommending to the Board the compensation programs and levels
of pay for executive officers. A Stock Option Committee, comprised of Guire and
Schuele, administer the Company's stock option plan, including the awarding of
grants thereunder. The Committee also advises management on pay programs and
levels for other employees.
COMPENSATION PHILOSOPHY AND OBJECTIVES
Through the Compensation Committee, the Company has developed and
implemented compensation policies, plans and programs which seek to tie
executive compensation to the attainment of Company-wide, business unit and
individual performance objectives, while providing compensation sufficient to
attract, motivate and retain talented executives who will contribute to the
Company's long-term success. In furtherance of these goals, annual base salaries
are generally set at levels that take into account both competitive and
performance factors. The Company also relies to a significant degree on annual
and longer-range incentive compensation to attract and motivate its executives.
Annual incentive compensation is variable and is closely tied to corporate
performance to encourage profitability, growth and the enhancement of
stockholder value. During fiscal 1999, compensation for the Company's executive
officers consisted of base salary, annual cash incentive opportunities,
longer-term equity incentives, participation as eligible employees (with all
other eligible employees of the Company) in the Company's 401 (k) Savings Plan,
an auto allowance for certain executive officers, and certain benefits available
generally to employees of the Company.
BASE SALARY
The Compensation Committee fixes the base salary of the President and
Chief Executive Officer and reviews and approves base salaries for each of the
Company's other executive officers annually in connection with annual
performance reviews. In adjusting these base salaries, the Compensation
Committee examines both qualitative and quantitative factors relating to
corporate and individual performance. In many instances, the qualitative factors
necessarily involve a subjective assessment by the Committee. The Committee
considers a mix of factors and evaluates individual performance against that mix
both in absolute terms, in relation to the executive's peers within the Company
and competitive salary survey information.
To assist in recruiting highly qualified management, the Committee
generally targets base salaries paid to executive officers at competitive
levels, depending on individual qualifications and experience.
During fiscal 1999, the Compensation Committee increased the salary of
the President and Chief Executive Officer, resulting in an adjusted salary
comparable to mid-range salaries paid to chief executive officers of
comparable-sized high technology companies. Based on the Compensation
Committee's conclusion that salaries of the Company's other executive officers
should be aligned with the salaries of executive officers at comparable-sized
high technology companies, salary adjustments for the other executive officers
ranged up to 14% in fiscal 1999.
ANNUAL INCENTIVE OPPORTUNITIES
The Company maintains annual cash incentive bonus programs to reward
executive officers and other key employees for attaining defined performance
goals. For most executive officers and other key employees, bonuses are based
primarily on Company-wide performance targets. For senior management personnel,
while Company-wide performance is a factor, significant weight is also given to
individual performance and the performance of particular operation groups within
the Company. Company-wide, operating group and individual targets are
established annually for these bonus programs.
7
<PAGE> 11
The Company maintains an annual incentive award program designed to
reward management and other key employees for Company-wide, business unit and
individual performance. Under the program, executive officers (including the
Chief Executive Officer) receive a percentage of their base salary based upon
the achievement of targeted levels of performance. These levels of performance
include but are not limited to, the Company's level of net sales and earnings
and other criteria related to asset management, productivity, quality and
throughput to the extent that achievement of such goals are affected by the
individual's performance. For the Chief Executive Officer, the target percentage
for fiscal 1999 was 50% of base salary, and the target percentage was 30% for
the other executive officers. Target awards are subject to a multiplier,
calculated on the basis of actual results against each of the performance
criteria in the cases of the Chief Executive officer and other officers. For
fiscal 1999, no bonuses were paid under this program based upon the Company's
performance.
EQUITY INCENTIVES
The Company has utilized the 1997 Plan to further align the interests
of stockholders and management by creating common incentives related to the
possession by management of substantial economic interest in the long-term
appreciation of the Company's stock. Generally, options under the Plan are
granted with exercise prices set at the fair market value of the underlying
stock on the date of grant, have a term of seven years, and are subject to
vesting over four years. In determining the size of a stock issuance award or an
option to be granted to an executive officer, the Committee takes into account
the officer's position and level of responsibility within the Company, the
officer's existing stock and unvested option holdings, the potential reward to
the officer if the stock price appreciates in the public market, and the
competitiveness of the officer's overall compensation arrangements, including
stock options and stock issuance awards, although outstanding performance by an
individual may also be taken into consideration. Option grants may also be made
to new executives upon commencement of employment and, on occasion, to
executives in connection with a significant change in job responsibility.
In fiscal 1999, the Committee granted stock options to executive
officers. After considering the criteria discussed above, the Committee granted
to Mr. DeCaro options to purchase 35,000 shares. In addition to amounts granted
associated with joining the Company, the Committee also granted options to other
executive officers to acquire shares ranging in aggregate amounts from 10,000 to
25,000 shares. In general, in determining the size of all such grants, the
Committee focused in particular on its conclusion, based on experience and
informal information subjectively evaluated, that the stock and option holdings
of the Company's executive officers were below the levels needed to provide
appropriate equity incentives. In addition, the Company has made stock issuance
awards to executive officers as a part of its long-term compensation program in
fiscal 1999.
COMPLIANCE WITH INTERNAL REVENUE CODE 162(m)
As a result of Section 162(m) of the Internal Revenue Code of 1986, as
amended, which was enacted into law in 1993, the Company will not be allowed a
federal income tax deduction for compensation paid to certain executive
officers, to the extent that compensation exceeds $1 million per officer in any
one year. This limitation will apply to all compensation paid to the covered
executive officers which is not considered to be performance based.
Compensation which does qualify as performance-based compensation will not have
to be taken into account for purposes of this limitation. The 1997 Stock
Incentive Plan contains certain provisions which are intended to assure that any
compensation deemed paid in connection with the exercise of stock options
granted under that plan with an exercise price equal to the market price of the
option shares on the grant date will qualify as performance-based compensation.
RONALD W. GUIRE
KOZO SATO
ALAN R. SCHUELE
8
<PAGE> 12
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL AGREEMENTS
The Company has not entered into any employment agreements with members
of its senior management. However, the Company has entered into
change-in-control agreements with certain members of its senior management,
which provide that if the officer is terminated (i) by the Company other than
for cause, or by reason of the officer's death or permanent disability or (ii)
by the officer following a change in certain conditions of employment, within
eighteen (18) months after a "change in control" of the Company (as those terms
are defined in the Change-In-Control Agreements), the Company will pay to the
officer an amount equal to two times the annual rate of the officer's base
salary in effect of the time of termination plus two times the bonus paid as
defined in the annual executive variable pay plan for services rendered in the
four fiscal quarters immediately preceding the termination. Additionally, each
unvested stock option will automatically accelerate and the Company's repurchase
right with respect to restricted stock issuances will immediately terminate. The
Change-in-Control Agreements also provide the Company will make available
certain insurance benefits at the officer's expense for the eighteen-month
period following the officer's termination.
STOCK PERFORMANCE GRAPH
The graph below depicts the Company's stock price as an index assuming
$100 invested on February 14, 1996 (the date of the Company's initial public
offering), along with the composite prices of companies listed in the NASDAQ
Stock Composite Index, the NASDAQ Electronics Component Index and a Peer Group
(defined below). The Peer Group consists of the following publicly held,
mid-tier electronic manufacturing services companies whose business, taken as a
whole, resembles the Company's activities: ACT Manufacturing, Inc., CMC
Industries, Inc., EFTC Corporation, IEC Electronics Corporation and SigmaTron
International, Inc. The Peer Group index was derived using the average of the
individual company stock prices for each period. The comparisons in the graph
are required by regulations of the Securities and Exchange Commission and are
not intended to forecast or be indicative of the possible future performance of
the Common Stock.
[COMPARISON OF CUMULATIVE TOTAL RETURN SINCE FEB. 14, 1996** GRAPH]
9
<PAGE> 13
<TABLE>
<CAPTION>
2/14/96 3/29/96 3/27/97 3/27/98 3/26/99
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
XeTel Corporation 100 96 54 41 26
NASDAQ Electronic Component Index 100 96 170 194 275
NASDAQ Stock Composite Index - US 100 101 115 170 227
Peer Group 100 97 157 135 87
</TABLE>
**$100 invested on February 14, 1996 in stock or index, including
reinvestment of dividends.
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, which might incorporate future
filings made by the Company under those statutes, the preceding Report of the
Compensation Committee and the Company Stock Performance Graph will not be
incorporated by reference into any of those prior filings, nor will such report
or graph be incorporated by reference into any future filings made by the
Company under those statutes.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of June 1, 1999 (i) by
each person or group who is known by the Company to be the beneficial owner of
more than 5% of the Common Stock, (ii) by each Director of the Company and each
Named Executive Officer of the Company who beneficially held shares of the
Common Stock as of such date, and (iii) by all current executive officers and
Directors of the Company as a group. Except as otherwise noted, each person's
address is c/o XeTel Corporation, 2105 Gracy Farms Lane, Austin, Texas 78758,
and each person has sole voting and investment power over the shares shown as
beneficially owned, except to the extent authority is shared by his or her
spouse under applicable community property laws.
<TABLE>
<CAPTION>
Shares Beneficially Owned
Name and address of -------------------------
Beneficial Owner Number Percent
---------------- ------ -------
<S> <C> <C>
Rohm U.S.A., Inc. ......................
149 Kifer Court
Sunnyvale, CA 94086-5120 ............ 4,142,411 40.0
Julian C. Hart(1) ...................... 596,300 5.8
David W. Gault(2) ...................... 559,400 5.4
Angelo A. DeCaro, Jr.(3) (4) (5) ....... 213,867 2.1
William A. Peten(3) (6) ................ 119,478 1.2
Kozo Sato(4)(7) ........................ 111,000 1.1
Richard S. Chilinski(3) (8) ............ 106,000 1.0
Ronald W. Guire(4) (9) ................. 99,750 1.0
Norman E. O'Shea(3) (10) ............... 28,593 *
Steve Sauter(3) (11) ................... 24,000 *
Sam L. Densmore(4) (12) ................ 20,000 *
Alan R. Schuele(4) (13) ................ 15,000 *
All current executive officers and
Directors as a group(14) ............... 1,340,238 13.0
</TABLE>
- --------------
*Represents less than one percent of the outstanding shares of Common Stock plus
all options currently exercisable or exercisable within 60 days after June 1,
1999.
(1) Includes 54,500 shares which may be acquired pursuant to options currently
exercisable or exercisable within 60 days after June 1, 1999, and includes
27,958 shares owned by Hart & Hart, Inc., Mr. Hart's defined benefit plan.
10
<PAGE> 14
(2) Includes 47,000 shares which may be acquired pursuant to options currently
exercisable or exercisable within 60 days after June 1, 1999, and includes
220,328 shares owned by JDG Properties, Inc., Mr. Gault's defined benefit
plan.
(3) Named Executive Officer of the Company.
(4) Director of the Company.
(5) Includes 191,250 shares which may be acquired pursuant to options currently
exercisable or exercisable within 60 days after June 1, 1999, which are
subject to certain repurchase rights in accordance with the Automatic
Option Grant Program.
(6) Includes 109,500 shares which may be acquired pursuant to options currently
exercisable or exercisable within 60 days after June 1, 1999.
(7) Includes 111,000 shares which may be acquired pursuant to options currently
exercisable or exercisable within 60 days after June 1, 1999, which may be
subject to certain repurchase rights in accordance with the Automatic
Option Grant Program.
(8) Includes 86,500 shares which may be acquired pursuant to options currently
exercisable or exercisable within 60 days after June 1, 1999.
(9) Includes 99,750 shares which may be acquired pursuant to options currently
exercisable or exercisable within 60 days after June 1, 1999, which may be
subject to certain repurchase rights in accordance with the Automatic
Option Grant Program.
(10) Includes 23,750 shares which may be acquired pursuant to options currently
exercisable or exercisable within 60 days after June 1, 1999.
(11) Includes 12,500 shares which may be acquired pursuant to options currently
exercisable or exercisable within 60 days after June 1, 1999.
(12) Includes 20,000 shares which may be acquired pursuant to options currently
exercisable or exercisable within 60 days after June 1, 1999, which are
subject to certain repurchase rights in accordance with the Automatic
Option Grant Program.
(13) Includes 15,000 shares which may be acquired pursuant to options currently
exercisable or exercisable within 60 days after June 1, 1999, which are
subject to certain repurchase rights in accordance with the Automatic
Option Grant Program.
(14) Includes 727,500 shares which may be acquired pursuant to options currently
exercisable or exercisable within 60 days after June 1, 1999.
BOARD MEETINGS AND COMMITTEES
The Board held a total of five (5) meetings during fiscal 1999. During
fiscal 1999, the Board had an Audit Committee, a Compensation Committee, a
Special Committee and a Nominating Committee.
The Audit Committee currently comprised of Messrs. Densmore, Guire and
Schuele met two (2) times during fiscal 1999. The Audit Committee recommends to
the Board the engagement of the Company's independent accountants and reviews
with such accountants the plan, scope and results of their examination of the
financial statements.
The Compensation Committee, currently comprised of Messrs. Guire, Sato
and Schuele met four (4) times during fiscal 1999. The Compensation Committee
sets the level of compensation of executive officers and advises management with
respect to compensation levels for key employees. The Stock Option Committee
comprised of Messrs. Guire and Schuele administer the Company's Option Plan.
The Special Committee, currently composed of Messrs. Schuele and
Densmore met five (5) times during fiscal 1999. The Special Committee reviews
and makes recommendations to the Board on significant matters between the
Company and its officers, directors, principal stockholders and affiliates
(including Rohm).
The Nominating Committee currently comprised of Messrs. DeCaro,
Densmore and Guire, met one (1) time during fiscal 1999. The Nominating
Committee reviews the qualifications of, and makes recommendations to the Board
with respect to, Director nominees who are properly presented to such committee.
Each director attended or participated in 89% or more of the aggregate
of (i) the total number of meetings of the Board and (ii) the total number of
meetings held by all committees of the Board on which such director served
during fiscal 1999.
11
<PAGE> 15
BOARD COMPENSATION
Directors who are full-time salaried employees of the Company are not
compensated for their service on the Board or on any Board committee. Directors
who are not employees of the Company receive a quarterly retainer of $3,000 for
their services and a fee of $1,000 for each Board meeting and $500 for each
committee meeting attending, plus travel and lodging expenses where appropriate.
The Chairman of the Board receives an additional $2,000 quarterly retainer.
Under the Automatic Option Grant Agreement of the 1997 Plan, each individual who
is first elected or appointed as a non-employee Board member will be granted a
non-statutory option to purchase 15,000 shares of Common Stock. In addition, on
the date of each annual stockholders meeting each individual who is to continue
to serve as a non-employee Board member after the meeting will be granted a
non-statutory option to purchase an additional 5,000 shares of Common Stock, the
exercise price per share being equal to the fair market value per share on the
option grant date, provided each individual has served as a non-employee Board
member for at least six (6) months.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be
presented by such stockholders at the Company's 2000 Annual Meeting must be
received by the Company no later than March 24, 2000 in order to be considered
for inclusion in the proxy statement and form of proxy relating to that meeting.
If timely submitted, such proposals may be included in next year's Proxy
Statement if they comply with certain additional rules and regulations
promulgated by the Securities and Exchange Commission and the procedure set
forth in the Bylaws of the Company. In addition, the proxy solicited by the
Board for the 2000 Annual Meeting will confer discretionary authority to vote on
any stockholder proposal that was timely submitted and presented at the Annual
Meeting, unless the Company received notice of such proposal not later than June
7, 2000.
ANNUAL REPORT
A copy of the Company's Annual Report to Stockholders for the year
ended March 27, 1999 has been mailed concurrently with this proxy statement to
all stockholders entitled to notice of and to vote at the Annual Meeting. The
Annual Report is not incorporated into this proxy statement and is not
considered proxy solicitation material.
FORM 10-K
The Company filed an Annual Report on Form 10-K with the Securities and
Exchange Commission on or about June 25, 1999. Stockholders may obtain a copy of
this report, without charge, by writing to Investor Relations, XeTel
Corporation, 2105 Gracy Farms Lane, Austin, Texas 78758.
CERTAIN TRANSACTIONS
The Company has engaged in a number of transactions with Rohm in the
past and expects to in the future. The Company believes that these transactions
were on terms no less favorable to the Company than would have been obtained
from unaffiliated third parties. All significant transactions in the past and
future, if any, between the Company and its officers, Directors, principal
stockholders and affiliates (including Rohm) will be approved by a majority of
the Company's independent Directors and will be on terms no less favorable to
the Company than could be obtained from unaffiliated third parties.
ACCOUNTANTS
The Company's financial statements have been audited by
PricewaterhouseCoopers LLP as independent accountants. Representatives of
PricewaterhouseCoopers LLP are expected to be present at the Annual Meeting of
Stockholders. They do not expect to make any statement, but will have an
opportunity to make a statement if they desire to do so and will be available to
respond to appropriate questions.
OTHER MATTERS
The Company knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters properly come before
the Annual Meeting, it is the intention of the persons named in the
12
<PAGE> 16
enclosed form of Proxy to vote the shares they represent as the Board may
recommend. Discretionary authority with respect to such other matters is granted
by the execution of the enclosed Proxy.
THE BOARD OF DIRECTORS
Dated: July 22, 1999
13
<PAGE> 17
<TABLE>
<S> <C> <C> <C>
PLEASE MARK YOUR
VOTES AS IN
[X] THIS EXAMPLE.
WITHHOLD
AUTHORITY TO
VOTE FOR ALL
1. To elect a Class I FOR NOMINEES:
Director to serve [ ] [ ] SAM L. DENSMORE (CLASS I)
on the Board of ALAN R. SCHUELE (CLASS II)
Directors for the
three years or until the respective successor is duly elected and qualified and to
elect a Class II Director to serve on the Board of Directors for one year or until
the respective successor of each such Class II Director is duly elected and
qualified to serve on the Board of Directors:
WITHHOLD AUTHORITY for the following nominee(s)
only: (write the name(s) of the nominee(s) in this
space)
The Board of Directors recommends a vote
FOR the Directors listed above. This
proxy, when properly executed, will be
voted as specified above. If no
specifications is made, this Proxy will be
voted FOR the election of the Directors
listed above.
Dated: ____________________, 1999
- ----------------------------------------------- ------------------------------------------------
Signature SIGNATURE (IF HELD JOINTLY)
Please sign exactly as your name appears on your stock certificate. When shares are held jointly, each person should sign. When
signing as attorney, executor, administrator, trustee or guardian, please give full title as such. An authorized person should sign
on behalf of corporations, partnerships, limited liability companies and associations and give his or her title.
</TABLE>
<PAGE> 18
XETEL CORPORATION
PROXY
ANNUAL MEETING OF STOCKHOLDERS, AUGUST 17, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
XETEL CORPORATION
The undersigned revokes all previous proxies, acknowledges receipt of the
Notice of the Annual Meeting of Stockholders to be held August 17, 1999 and the
Proxy Statement and appoints Ronald W. Guire and Angelo A. DeCaro, Jr., and each
of them, the Proxy of the undersigned, with full power of substitution, to vote
all shares of Common Stock of XeTel Corporation (the "Company") which the
undersigned is entitled to vote, either on his or her own behalf or on behalf of
any entity or entities, at the Annual Meeting of Stockholders of the Company to
be held at XeTel Corporation, 2105 Gracy Farms Lane, Austin, Texas 78758 on
Tuesday, August 17, 1999 at 10:30 A.M. Central Time (the "Annual Meeting"), and
at any adjournment or postponements thereof, with the same force and effect as
the undersigned might or could do if personally present thereat. The shares
represented by this proxy shall be voted in the manner set forth on the reverse
side.
