SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Amendment No. ______________)
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/ / Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2))
/x/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
Zitel Corporation
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Zitel Corporation
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) or Schedule 14A
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
- ----------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- ----------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined):
- ----------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- ----------------------------------------------------------------------------
(5) Total fee paid:
- ----------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
- ----------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- ----------------------------------------------------------------------------
(3) Filing party:
- ----------------------------------------------------------------------------
(4) Date filed:
- ----------------------------------------------------------------------------
<PAGE>
ZITEL CORPORATION
47211 BAYSIDE PARKWAY
FREMONT, CA 94538
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 25, 1996
TO THE SHAREHOLDERS OF ZITEL CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Zitel
Corporation, a California corporation (the "Company"), will be held on Thursday,
January 25, 1996 at 3:00 p.m. local time at the Newark/Fremont Hilton, 39900
Balentine Drive, Newark, California 94560 for the following purposes:
1. To elect directors to serve for the ensuing year and until
their successors are elected.
2. To approve the adoption of the 1995 Non-Employee Directors'
Stock Option Plan.
3. To transact such other business as may properly come before
the meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on November 30,
1995 as the record date for the determination of shareholders entitled to notice
of and to vote at this Annual Meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors
Henry C. Harris
Secretary
Fremont, California
December 21, 1995
================================================================================
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
================================================================================
<PAGE>
ZITEL CORPORATION
47211 BAYSIDE PARKWAY
FREMONT, CA 94538
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Zitel Corporation, a California corporation (the "Company"), for use at the
Annual Meeting of Shareholders to be held on January 25, 1996 at 3:00 p.m. local
time (the "Annual Meeting"), or at any adjournment or postponement thereof, for
the purposes set forth herein and in the accompanying Notice of Annual Meeting.
The Annual Meeting will be held at the Newark/Fremont Hilton, 39900 Balentine
Drive, Newark, California 94560. The Company intends to mail this proxy
statement and accompanying proxy card on or about December 21, 1995 to all
shareholders entitled to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies
including preparation, assembly, printing and mailing of this proxy statement,
the proxy and any additional information furnished to shareholders. Copies of
solicitation materials will be furnished to banks, brokerage houses, fiduciaries
and custodians holding in their names shares of Common Stock beneficially owned
by others to forward to such beneficial owners. The Company may reimburse
persons representing beneficial owners of Common Stock for their costs of
forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular employees of the
Company. No additional compensation will be paid to directors, officers or other
regular employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on
November 30, 1995 will be entitled to notice of and to vote at the Annual
Meeting. At the close of business on November 30, 1995, the Company had
outstanding and entitled to vote 7,297,187 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to
one vote for each share held on all matters to be voted upon. With respect to
the election of directors, shareholders may exercise cumulative voting rights.
Under cumulative voting, each holder of Common Stock will be entitled to five
votes for each share held. Each shareholder may give one candidate, who has been
nominated prior to voting, all the votes such shareholder is entitled to cast or
may distribute such votes among as many such candidates as such shareholder
chooses. However, no shareholder will be entitled to cumulate votes unless the
candidate's name has been placed in nomination prior to the voting and at least
one shareholder has given notice at the meeting, prior to the voting, of his or
her intention to cumulate votes. Unless the proxyholders are otherwise
instructed, shareholders, by means of the accompanying proxy, will grant the
proxyholders discretionary authority to cumulate votes.
All votes will be tabulated by the inspector of election appointed for
the meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions and broker non-votes are counted
towards a quorum but are not counted for any purpose in determining whether a
matter is approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power
to revoke it at any time before it is voted. It may be revoked by filing with
the Secretary of the Company at the Company's principal executive office, 47211
Bayside Parkway, Fremont, California 94538, a written notice of revocation or a
duly executed proxy bearing a later
1.
<PAGE>
date or it may be revoked by attending the meeting and voting in person.
Attendance at the meeting will not, by itself, revoke a proxy.
SHAREHOLDER PROPOSALS
Proposals of shareholders that are intended to be presented at the
Company's 1997 Annual Meeting of Shareholders must be received by the Company no
later than August 26, 1996 in order to be included in the proxy statement and
proxy relating to that Annual Meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
There are five nominees for the five Board positions presently
authorized in the Company's Bylaws. Each director to be elected will hold office
until the next annual meeting of shareholders and until his or her successor is
elected and has qualified or until such director's earlier death, resignation or
removal. Each nominee listed below is currently a director of the Company. Each
nominee listed below was previously elected by the shareholders.
Shares represented by executed proxies will be voted, if authority to
do so is not withheld, for the election of the five nominees named below,
subject to the discretionary power to cumulate votes. In the event that any
nominee should be unavailable for election as a result of an unexpected
occurrence, such shares will be voted for the election of such substitute
nominee as management may propose. Each person nominated for election has agreed
to serve if elected and management has no reason to believe that any nominee
will be unable to serve.
The five candidates receiving the highest number of affirmative votes
cast at the meeting will be elected directors of the Company.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
NOMINEES
The names of the nominees and certain information about them are set
forth below:
PRINCIPAL OCCUPATION/
NAME AGE POSITION HELD WITH THE COMPANY
William R. Lonergan........ 69 Chairman of the Board of Directors
Catherine P. Goodrich...... 39 Venture Capitalist
Jack H. King............... 60 President and Chief Executive Officer
William M. Regitz.......... 56 Manager, Intel Corporation
Robert H. Welch............ 54 Management Consultant
William R. Lonergan has served as Chairman of the Board of Directors
since July 1994 and as a Director of the Company since July 1983. Mr. Lonergan
was a Partner of Oxford Partners, the general partner of several venture capital
partnerships, from May 1983 to December 1994. Since January 1995, he has been a
consultant to Oxford Partners. Mr. Lonergan is a Director of Dataware
Technologies, Inc. and of Kurzweil Applied Intelligence, Inc.
2.
<PAGE>
Catherine P. Goodrich was elected a Director of the Company in July
1994. Ms. Goodrich has been a Principal of Goodrich Ventures and a venture
capital consultant since June 1992. From 1985 to 1992, she was a general partner
of Oak Investment Partners. Ms. Goodrich is also a Director of Uniphase
Corporation, a laser components semiconductor equipment manufacturer, Etec
Corp., a manufacturer of semiconductor equipment, SanDisk Corp., a manufacturer
of flash memory cards and one privately-held company.
Jack H. King was appointed President and Chief Executive Officer of
Zitel in October 1986. He was elected as a Director in January 1987. Prior to
joining Zitel, Mr. King served as President and Chief Executive Officer of
Dynamic Disk, Inc., a manufacturer of thin film media, from 1984 to 1986. From
1981 to 1984, he served as President and Chief Operating Officer of Data
Electronics, Inc., a cartridge tape drive manufacturer. Mr. King is also a
Director of Etec Corp., a manufacturer of semiconductor equipment.
William M. Regitz has served as a Director of the Company since March
1983. He is Manager of the Folsom Validation Center in Folsom, California (FVC)
for Intel Corporation ("Intel"). He has served in various positions at Intel
since 1971.
Robert H. Welch is a founder of Zitel and served as its President and
Chief Executive Officer and Director from its inception in 1979 until October
1986. Mr. Welch was Chairman of the Board of Zitel from October 1986 to November
1987 and has remained a Director since that date. Since October 1987, Mr. Welch
has served as a management consultant through his firm, Bay Venture Management,
for several privately-held firms and is a private investor. From April 1994 to
September 1995, Mr. Welch served as an officer and director of Advanced Wireless
Communications, Inc., a privately-held company.
Mr. Lonergan was originally elected to the Board pursuant to agreements
between Zitel, the Oxford Funds and certain Zitel shareholders to elect a
designee of the Oxford Funds reasonably acceptable to Zitel. These agreements
terminated in January 1984. Mr. Regitz was originally elected to the Board
pursuant to an agreement between Zitel and Intel in connection with the February
1983 product acquisition transaction between the two companies. This agreement
expired on February 2, 1987.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended September 30, 1995, the Board of Directors
held seven meetings. The Board has an Audit Committee and a Compensation
Committee.
The Audit Committee meets with the Company's independent auditors at
least annually to review the results of the annual audit and discuss the
financial statements; recommends to the Board the independent auditors to be
retained; and receives and considers the accountants' comments as to controls,
adequacy of staff and management performance and procedures in connection with
audit and financial controls. The Audit Committee is composed of three
non-employee directors: Ms. Goodrich and Messrs. Lonergan and Welch. It met two
times during such fiscal year.
The Compensation Committee makes recommendations concerning salaries
and incentive compensation, awards stock options to employees, sales
representatives and consultants under the Company's stock option plans and
otherwise determines compensation levels and performs such other functions
regarding compensation as the Board may delegate. The Compensation Committee is
composed of three non-employee directors: Messrs. Lonergan, Regitz and Welch. It
met four times during such fiscal year.
During the fiscal year ended September 30, 1995, each Board member
attended 75% or more of the aggregate number of meetings of the Board and of the
committees on which they served that were held during the period for which they
were a director or committee member, respectively.
3.
<PAGE>
PROPOSAL 2
APPROVAL OF ADOPTION OF THE 1995 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
In April 1995, the Company's Board of Directors adopted, subject to
shareholder approval, the Company's 1995 Non-Employee Directors' Stock Option
Plan (the "Directors' Plan"). The Directors' Plan provides for automatic,
non-discretionary grants of options to purchase an aggregate of 100,000 shares.
Shareholders are requested in this Proposal 2 to approve the adoption
of the Directors' Plan, including the reservation of 100,000 shares of Common
Stock for issuance thereunder. The affirmative vote of the holders of a majority
of the outstanding shares of Common Stock present in person or represented by
proxy and voting at the Annual Meeting will be required to approve the adoption
of the Directors' Plan. In order to take advantage of the exemption contained in
Rule 16b-3 ("Rule 16b-3") of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), for purposes of this vote, abstentions will be counted
toward the tabulation of votes counted and will have the same effect as negative
votes, while broker non-votes will not be counted for any purpose in determining
whether this matter has been approved.
THE BOARD RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2.
The essential features of the Directors' Plan are outlined below:
GENERAL
The Directors' Plan provides for non-discretionary grants of
nonstatutory stock options. Options granted under the Directors' Plan are not
intended to qualify as incentive stock options, as defined under Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code").
PURPOSE
The purpose of the Directors' Plan is to retain the services of persons
now serving as Non-Employee Directors of the Company (as defined below), to
attract and retain the services of persons capable of serving on the Board of
Directors of the Company and to provide incentives for such persons to exert
maximum efforts to promote the success of the Company.
ADMINISTRATION
The Directors' Plan is administered by the Board of Directors of the
Company. The Board of Directors has the final power to construe and interpret
the Directors' Plan and options granted under it, and to establish, amend and
revoke rules and regulations for its administration.
The Board of Directors is authorized to delegate administration of the
Directors' Plan to a committee of not less than two members of the Board. The
Board of Directors does not presently contemplate delegating administration of
the Directors' Plan to any committee of the Board of Directors.
ELIGIBILITY
The Directors' Plan provides that options may be granted only to
Non-Employee Directors of the Company. A "Non-Employee Director" is defined in
the Directors' Plan as a director of the Company and its affiliates who is not
otherwise an employee of the Company or any affiliate. Four of the Company's
five current directors are eligible to participate in the Directors' Plan.
4.
<PAGE>
TERMS OF OPTIONS
Each option under the Directors' Plan is subject to the following terms
and conditions:
Non-Discretionary Grants. Option grants under the Directors' Plan are
non-discretionary. Pursuant to the terms of the Directors' Plan, options to
purchase Common Stock of the Company are automatically granted as follows: (a)
on April 27, 1995, the adoption date of the Directors' Plan, each Non-Employee
Director who had not received a discretionary stock option grant from the
Company during the previous 12 months, was automatically granted an option to
purchase 15,000 shares of Common Stock of the Company; (b) each person who
becomes a Non-Employee Director of the Company shall, upon the date of initial
election to the Board, automatically be granted an option to purchase 15,000
shares of Common Stock, and (c) each Non-Employee Director, who has been a
Non-Employee Director for at least three months, will automatically be granted
an option to purchase 3,000 shares of Common Stock on the date of each annual
meeting of shareholders, commencing with the year 1996. During the fiscal year
ended September 30, 1995, only one Non-Employee Director, Mr. Lonergan, was
granted an option to purchase shares of the Company's Common Stock pursuant to
the Directors' Plan. The exercise price of this option is $11.75 per share, the
fair market value of the Common Stock at the time of grant.
Option Exercise. An option granted under the Directors' Plan becomes
exercisable as follows: Options granted pursuant to (a) and (b) above become
exercisable in equal quarterly installments over a period of three years from
the date of grant and options granted under (c) above become exercisable in
equal quarterly installments over a period of one year from the date of grant;
provided that, during the entire period prior to each such vesting date, the
Non-Employee Director has served as a Non-Employee Director or employee of or
consultant to the Company.
Exercise Price; Payment. The exercise price of options granted under
the Directors' Plan shall be equal to 100% of the fair market value of the
Common Stock subject to such options on the date such option is granted. The
exercise price of options granted under the Directors' Plan must be paid with
cash at the time the option is exercised.
No option granted under the Directors' Plan is exercisable by any
person after the expiration of ten years from the date the option is granted.
Other Provisions. The option agreement may contain such other terms,
provisions and conditions not inconsistent with the Directors' Plan as may be
determined by the Board of Directors.
ADJUSTMENT PROVISIONS
If there is any change in the stock subject to the Directors' Plan or
subject to any option granted under the Directors' Plan (through merger,
consolidation, reorganization, recapitalization, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or otherwise), the
Directors' Plan and options outstanding thereunder will be appropriately
adjusted as to the class and the maximum number of shares subject to the plan
and the class, number of shares and price per share of stock subject to
outstanding options.
RESTRICTIONS ON TRANSFER
Under the Director's Plan, an option may not be transferred by the
optionee otherwise than by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order satisfying the requirement of
Rule 16b-3 under the Exchange Act and shall be exercised only by the person to
whom such options are granted. During the lifetime of an optionee, an option may
be exercised only by the optionee or his or her guardian or legal
representative.
5.
<PAGE>
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the Directors' Plan at any time.
Unless terminated earlier, such plan will terminate on April 26, 2005.
The Board may amend the Directors' Plan at any time, provided, however,
that the Board shall not amend the Directors' Plan more than once every six
months, with respect to the provisions of the Directors' Plan which relate to
the amount, price and timing of grants, other than to comport with changes in
the Code, the Employee Retirement Income Security Act, or the rules thereunder.
Any amendment of the Directors' Plan must be approved by the shareholders within
12 months of its adoption by the Board if the amendment would (a) increase the
number of shares of Common Stock reserved for issuance under the Directors'
Plan, (b) modify the requirements relating to eligibility for participation in
the Directors' Plan, or (c) modify any other provision of the Directors' Plan,
if such approval is required in order to comply with the requirements of Rule
16b-3 under the Exchange Act.
Options granted before amendment or termination of the Directors' Plan
will not be altered or impaired by any amendment or termination of such plan
without consent of the person to whom such options were granted.
EFFECT OF CERTAIN CORPORATE EVENTS
In the event of a dissolution, liquidation or specified type of merger
of the Company, the surviving corporation either will assume the rights under
the Directors' Plan or substitute similar rights, or the exercise date of any
ongoing offering will be accelerated such that the outstanding rights may be
exercised immediately prior to, or concurrent with, any such event.
STOCK SUBJECT TO DIRECTORS' PLAN
If options granted under the Directors' Plan expire, lapse or otherwise
terminate without being exercised, the Common Stock not purchased under such
options again becomes available for issuance under the Directors' Plan.
CERTAIN FEDERAL INCOME TAX INFORMATION
Stock options granted under the Directors' Plan are subject to federal
income tax treatment pursuant to rules governing options that are not incentive
stock options.
The following is only a summary of the effect of federal income
taxation upon the optionee and the Company with respect to the grant and
exercise of options under the Directors' Plan, does not purport to be complete
and does not discuss the income tax laws of any state or foreign country in
which an optionee may reside.
Options granted under the Directors' Plan are nonstatutory options.
There are no tax consequences to the optionee or the Company by reason of the
grant of a nonstatutory stock option. Upon exercise of a nonstatutory stock
option, the optionee normally will recognize taxable ordinary income equal to
the excess of the stock's fair market value on the date of exercise over the
option exercise price. Because the optionee is a director of the Company, under
existing laws, the date of taxation (and the date of measurement of taxable
ordinary income) may in some instances be deferred unless the optionee files an
election under Section 83(b) of the Code. The filing of Section 83(b) election
with respect to the exercise of an option may affect the time of taxation and
the amount of income recognized at each such time. At the time the optionee
recognizes ordinary income due to the exercise of the option, the Company will
be entitled (subject to the requirement of reasonableness, the provisions of
Section 162(m) of the Code and the satisfaction of a tax reporting obligation)
to a business expense deduction equal to the taxable ordinary income recognized
by the optionee. Upon disposition of the stock, the optionee will recognize a
capital gain or loss equal to the difference between the selling price and the
sum of the amount paid for such stock plus any amount recognized as ordinary
income upon exercise of such option. Such gain or loss will be long or
short-term depending on whether the stock was
6.
<PAGE>
held for more than one year. There are generally no tax consequences to the
Company by reason of the disposition of the stock.
NEW PLAN BENEFITS
1995 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
NUMBER OF SHARES SUBJECT
NAME AND POSITION DOLLAR VALUE2/ TO OPTIONS GRANTED
- ----------------- -------------- ------------------------
William R. Lonergan1/ 176,250 15,000
Director
All Non-Employee Directors 176,250 15,000
as a Group3/
- -------------------------
1/ The grant to Mr. Lonergan is subject to shareholder approval of Proposal
2.
2/ Exercise price ($11.75) multiplied by the number of shares underlying the
option.
3/ In addition to the above grant, pursuant to the terms of the Directors'
Plan, Ms. Goodrich and Messrs. Lonergan, Regitz and Welch, upon their
re-election as non-employee directors of the Company at the Annual
Meeting (see Proposal 1) and the approval of Proposal 2, will
automatically be granted options to purchase 3,000 shares each of the
Company's common stock. Such grants will be effective on the date of the
Annual Meeting and will be priced at the fair market value on the date of
grant.
7.
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
ownership of the Company's Common Stock as of November 30, 1995 by: (i) each
nominee for director; (ii) each of the executive officers named in the Summary
Compensation Table employed by the Company in that capacity on November 30,
1995; (iii) all executive officers and directors of the Company as a group; and
(iv) all those known by the Company to be beneficial owners of more than five
percent of its Common Stock.
BENEFICIAL OWNERSHIP1/
NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES TOTAL
---------------- --------- -----------
William R. Lonergan2/................. 3,750 *
Catherine P. Goodrich2/............... 2,500 *
Jack H. King2/........................ 332,000 4.4%
William M. Regitz2/................... 9,000 *
Robert H. Welch2/..................... 3,750 *
Frank J. Vukmanic2/................... 5,465 *
Henry C. Harris2/..................... 83,701 1.1%
Richard F. Harapat2/.................. 52,201 *
All executive officers and directors
as a group (9 persons)2/............ 500,867 6.4%
- -----------------------
* Less than one percent.
1/ This table is based upon information supplied by officers, directors and
principal shareholders and Schedules 13D and 13G filed with the
Commission. Unless otherwise indicated in the footnotes to this table
and subject to community property laws, where applicable, each of the
shareholders named in this table has sole voting and investment power
with respect to the shares indicated as beneficially owned. Applicable
percentages are based on 7,297,187 shares outstanding on November 30,
1995, adjusted as required by rules promulgated by the Commission.
2/ Includes shares which certain executive officers, directors and
principal shareholders of the Company have the right to acquire within
60 days after the date of this table pursuant to outstanding options as
follows: William R. Lonergan, 3,750 shares; Catherine P. Goodrich, 2,500
shares; Jack H. King, 326,000 shares; William M. Regitz, 2,500 shares;
Robert H. Welch, 3,750 shares; Frank J. Vukmanic, 4,500 shares; Henry C.
Harris, 82,000 shares; Richard F. Harapat, 50,500 shares and all
executive officers and directors as a group, 484,000 shares.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934.
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Company's equity securities, to file with the Commission initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Officers, directors and greater than ten
percent shareholders are required by Commission regulation to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended September 30, 1995, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with.
8.
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Each non-employee director of the Company receives a per meeting fee of
$1,500. In the fiscal year ended September 30, 1995, the total paid to
non-employee directors for meeting fees was $21,000. In addition, Mr. Lonergan
was reimbursed $2,232.42 for out-of-pocket expenses in connection with his
attendance at Board meetings.
During the fiscal year, Mr. Welch received $6,000 for consulting
services provided to the Company and Ms. Goodrich received $1,875 for consulting
services provided to the Company.
In April 1995, the Board adopted the Directors' Plan (see Proposal 2)
to provide for the automatic grant of options to purchase shares of Common Stock
to Non-Employee Directors of the Company. On the date of adoption of the
Directors' Plan, April 27, 1995 (the "Adoption Date"), each person who was then
a Non-Employee Director of the Company was granted an option to purchase 15,000
shares of the Common Stock of the Company under the Directors' Plan, provided
that such Non-Employee Director had not received a discretionary stock option
grant from the Company during the period beginning 12 months prior to the
Adoption Date. Mr. Lonergan was the only Non-Employee Director to receive such a
grant. His grant has an exercise price of $11.75 per share, the fair market
value on the grant date. Such option has a term of ten years and becomes
exercisable in equal quarterly installments over a period of three years from
the date of grant.
9.
<PAGE>
<TABLE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY OF COMPENSATION
The following table shows for the fiscal years ending September 30, 1993,
1994 and 1995, compensation awarded or paid to, or earned by the Company's Chief
Executive Officer, its other three most highly compensated executive officers at
September 30, 1995 and one former executive officer who resigned his position as
an executive officer of the Company during fiscal year 1995 (the "Named
Executive Officers"):
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
----------------------------------------------------- ---------------
Number of
Name Securities Other
and Underlying Compen-
Principal Salary1/ Bonus Options sation2/
Position Year ($) ($) (#) ($)
- -------- ---- ------- ------- --------- ------
<S> <C> <C> <C> <C> <C>
Jack H. King 1995 229,904 14,600 50,000 1,469
President and ----
Chief Executive Officer 1994 196,096 0 [30,000]3/ 2,396
----
1993 220,303 0 30,000 2,146
----
Frank J. Vukmanic 1995 145,000 9,000 15,000 110,3904/
Vice President, ----
Marketing 1994 45,173 0 30,000 32
----
1993 --- --- --- ---
----
Henry C. Harris 1995 140,975 19,000 20,000 569
Vice President, Finance ----
and Administration, 1994 130,368 0 [5,000]3/697
Chief Financial and ----
Accounting Officer and 1993 131,150 0 5,000 632
Secretary ----
Donald F. Olker5/ 1995 137,698 8,300 0 1,098
Former Vice President, ----
Business Development 1994 130,368 0 [5,000]3/1,199
and Special Programs ----
1993 132,035 0 5,000 1,047
----
Richard F. Harapat 1995 118,751 19,8136/ 10,000 690
Vice President, Sales ----
1994 111,550 13,9237/ 0 1,101
----
1993 111,791 31,3917/ 5,000 938
----
<FN>
- --------------------
1/ Includes amounts deferred pursuant to Section 401(k) of the Internal Revenue
Code of 1986, as amended.
2/ Represents life insurance premiums for the benefit of the Named Executive
Officers.
3/ Options canceled during fiscal year ended September 30, 1994.
4/ Includes $110,000 in expenses paid in connection with Mr. Vukmanic's
relocation.
5/ Mr. Olker resigned his position as an executive officer of the Company on
September 29, 1995.
6/ Includes $15,813 in commissions on Company net sales.
7/ Represents commission on Company net sales.
</FN>
</TABLE>
10.
<PAGE>
STOCK OPTION GRANTS AND EXERCISES
The Company grants options to its executive officers under its 1990
Stock Option Plan (the "1990 Option Plan"). As of November 30, 1995, options to
purchase a total of 942,615 shares were outstanding under the 1990 Option Plan
and the Company's former option plans and options to purchase 69,499 shares
remained available for grant under the 1990 Option Plan.
<TABLE>
The following tables show for the fiscal year ended September 30,
1995, certain information regarding options granted to, exercised by, and held
at year end by, the Named Executive Officers:
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Potential
Realizable Value at
Assumed Annual
Rates of Stock Price
Appreciation
Individual Grants for Option Term 1/
------------------------ -----------------------
Number
of Securi- % of
ties Total
Under- Options/
lying Granted to Exercise
Options/ Employees or Base Expira-
Granted in Fiscal Price tion
Name (#) 2/ Year (%) ($/Sh) Date 5% ($) 10% ($)
- ---- -------- - --------- -------- -------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Jack H. King 50,000 18.4 11.25 07/25/05 354,375 894,375
Frank J. Vukmanic 15,000 5.5 11.25 07/25/05 106,313 268,313
Henry C. Harris 20,000 7.3 11.25 07/25/05 141,750 357,750
Donald F. Olker3/ 0 0 ---- ---- ---- ----
Richard F. Harapat 10,000 3.7 11.25 07/25/05 70,875 178,875
<FN>
- --------------------
1/ Calculated on the assumption that the market value of the underlying stock
increases at the stated values compounded annually for the ten-year term
of the options. At November 30, 1995, the exercise price of all of the
options was above the closing market price for the Company's Common Stock.
2/ Such options generally vest over a four-year period with 25% of the
options vesting in each of the first four years of its ten-year term. The
Board of Directors may reprice or accelerate the options under the terms
of the 1990 Option Plan.
3/ Mr. Olker resigned his position as an executive officer of the Company on
September 29, 1995.
</FN>
</TABLE>
11.
<PAGE>
<TABLE>
The following table sets forth for the fiscal year ended September 30,
1995 options exercised by and held at year end by the Named Executive Officers.
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
FY-End (#) FY-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) 1/ Unexercisable Unexercisable 2/
- ---- ---------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Jack H. King 0 0 326,000/50,000 2,966,000/6,250
Frank J. Vukmanic 0 0 7,500/37,500 44,063/134,062
Henry C. Harris 10,000 163,750 82,000/20,000 611,375/2,500
Donald F. Olker3/ 31,250 219,531 6,250/0 42,188/0
Richard F. Harapat 0 0 50,500/13,500 383,450/23,875
<FN>
- --------------------
1/ Value realized is based upon the fair market value of the Company's Common
Stock on the date of exercise less the exercise price and does not
necessarily indicate that the optionee sold such stock.
2/ The fair market value of the Company's Common Stock at September 30, 1995
($11.375) less the exercise price of the options.
3/ Mr. Olker resigned his position as an executive officer of the Company on
September 29, 1995.
</FN>
</TABLE>
12.
<PAGE>
PERFORMANCE MEASUREMENT COMPARISON
The following chart shows the value of an investment of $100 on September
30, 1990 in cash of (i) the Company's Common Stock, (ii) the NASDAQ Stock
Market-US Index and (iii) the Hambrecht & Quist Technology Index. All values
assume reinvestment of the full amount of all dividends and are calculated as of
September 30 of each year:1
[The following descriptive data is supplied in accordance with Rule 304(d)
of Regulation S-T]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG ZITEL CORPORATION, THE NASDAQ STOCK MARKET-US INDEX
AND THE HAMBRECHT & QUIST TECHNOLOGY INDEX
Cumulative Total Return
---------------------------------------------
9/90 9/91 9/92 9/93 9/94 9/95
Zitel Corp ZITL 100 190 200 106 219 294
NASDAQ Stock Market-US INAS 100 157 176 231 233 321
H & Q Technology IHQT 100 145 165 197 223 374
*$100 invested on 09/30/90 in stock or index -- including reinvestment
of dividends. Fiscal year ending September 30.
- --------
1/ This section is not "soliciting material", is not deemed filed with the
SEC and is not to be incorporated by reference in any filing of the
Company under the 1933 Act or the 1934 Act whether made before or after
the date hereof and irrespective of any general incorporation language in
any such filing.
13.
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION1
The Company's executive compensation generally consists of a base salary,
a cash bonus and long-term incentive stock options.
Annual compensation for executive officers and non-officer vice
presidents of the Company, other than the President, is recommended by the
President and is reviewed and approved by the Compensation Committee. The
individual salary recommendations may vary based on the President's judgment
regarding the value of a position in the Company, performance of the executive
and comparative compensation for like positions at other technology companies of
similar size in the area, derived from salary survey data and other sources.
The annual compensation for the President is recommended by the
Compensation Committee and approved by the non-employee members of the Board of
Directors. The Committee determines the President's annual compensation based on
the same criteria and the same survey as used for officers, with the objective
of placing his salary at the median for Presidents of comparable companies.
The Company believes that compensation of the key executives should be
sufficient to attract and retain highly qualified personnel and should also
provide meaningful incentives for measurable superior performance. The Company
seeks to reward achievement of long-term and short-term performance goals. The
Company currently does not provide retirement benefits to its executive
officers, other than the availability of a 401(k) plan.
During fiscal year 1995, the Company did not establish a formal bonus
plan. Subsequent to the fiscal year end, bonus compensation was recommended by
the President and was reviewed and approved by the Compensation Committee. In
addition to individual achievements, the primary factor considered in
establishing bonus amounts for fiscal year 1995 was the Company's net sales and
operating results (without considering royalty revenue). Also during the year,
upon Compensation Committee approval, the President was given discretion to
grant a bonus to an officer for outstanding performance.
The Compensation Committee uses stock option grants to further align the
interests of shareholders and management by creating common incentives related
to the possession by management of a substantial economic interest in the
long-term appreciation of the Company's Common Stock. The Committee considers
the number of options previously granted and the proportion that have vested in
making its decisions. Stock option grants, other than for the President, are
made periodically at the recommendation of the President with the approval of
the Compensation Committee. The Committee makes option grants to the President
on the same basis as for other officers. Options are granted at the full market
value on the date of grant. In light of these factors, and in order to provide
an incentive to management to achieve the Company's operational goals, in July
1995, the Committee approved grants to purchase 50,000 shares to the President
at $11.25 per share. On the same date and at the same price, the Committee
approved grants to the Vice President, Marketing, Vice President, Finance and
Administration and the Vice President, Sales totaling 15,000 shares, 20,000
shares and 10,000 shares, respectively.
The Compensation Committee has not yet established a policy for
determining which forms of incentive compensation awarded to its Named Executive
Officers shall be designed to qualify as "performance-based compensation."
- --------
1/ This section is not "soliciting material," is not deemed filed with the
SEC and is not to be incorporated by reference in any filing of the
Company under the 1933 Act or the 1934 Act whether made before or after
the date hereof and irrespective of any general incorporation language in
any such filing.
14.
<PAGE>
During fiscal 1995, the Company reported an increase in revenue of 36% and
reported record earnings of $1.12 per share. Accordingly, in October 1995, the
Compensation Committee approved a discretionary bonus totaling $30,300 for the
officers, excluding the President, and $14,600 to the President. In addition,
during fiscal 1995, one officer received a $10,000 discretionary bonus. In
October 1995, the Committee approved raises for officers ranging from 7% to 8%,
effective in either October or December. The President's salary was not
adjusted.
COMPENSATION COMMITTEE
William R. Lonergan
William M. Regitz
Robert H. Welch
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, the Company's Compensation Committee consists of Messrs.
Lonergan, Regitz and Welch. Mr. Welch served as President, Chief Executive
Officer and Director of the Company from 1979 to October 1986. Mr. Welch was
Chairman of the Board of the Company from October 1986 to November 1987 and has
remained a Director since that date.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented
for consideration at the Annual Meeting. If any other matters are properly
brought before the meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.
By Order of the Board of Directors
Henry C. Harris
Secretary
December 21, 1995
15.
<PAGE>
APPENDIX A
- --------------------------------------------------------------------------------
ZITEL CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS--JANUARY 25, 1996
Jack H. King or Henry C. Harris, or either of them, each with the power of
substitution and revocation, are hereby authorized to represent the undersigned,
with all powers which the undersigned would possess if personally present, to
vote the Common Stock of the undersigned at the annual meeting of shareholders
of ZITEL CORPORATION to be held at the Newark/Fremont Hilton, 39900 Balentine
Drive, Newark, California 94560, at 3:00 p.m. local time on January 25, 1996 and
at any postponements or adjournments of that meeting, as set forth below, and in
their discretion upon any business that may properly come before the meeting.
THIS PROXY WILL BE VOTED AS SPECIFIED OR, IF NO CHOICE IS SPECIFIED, WILL BE
VOTED FOR THE ELECTION OF THE NOMINEES NAMED, IN FAVOR OF THE MATTER DESCRIBED
IN ITEM 2, AND, AS SAID PROXIES DEEM ADVISABLE, ON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING.
1. ELECTION OF DIRECTORS.
/ / FOR all nominees listed below / / WITHHOLD
(except as indicated) authority to vote for all
nominees listed below
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through such nominee's name.)
William R. Lonergan, Catherine P. Goodrich, Jack H. King, William M. Regitz
and Robert H. Welch.
(Continued and to be signed on reverse side)
- --------------------------------------------------------------------------------
ATTENTION: PLEASE NOTE THAT THIS BOX WILL NOT BE PRINTED, IT IS TO SHOW THE TEXT
POSITION ON THE FRONT OF THIS PROXY CARD.
<PAGE>
- --------------------------------------------------------------------------------
(Continued from other side)
2. TO APPROVE THE ADOPTION OF THE 1995 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Dated: , 19
------------- ----
---------------------------
---------------------------
---------------------------
(Please sign exactly as your
name appears hereon
indicating your official
title when signing in a
representative capacity.)
- --------------------------------------------------------------------------------
ATTENTION: PLEASE NOTE THAT THIS BOX WILL NOT BE PRINTED. IT IS TO SHOW THE TEXT
POSITION ON THE BACK OF THIS PROXY CARD.
