<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 [X]
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>
XETA 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:
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(4) Date Filed:
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<PAGE> 2
XETA
CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Notice is hereby given that the Annual Meeting of Shareholders of XETA
Corporation will be held at the Company's new headquarters located at 1814 West
Tacoma, Broken Arrow, Oklahoma, on March 25, 1999 at 6:30 p.m., local time, for
the following purposes:
1. To elect six (6) members to the Company's Board of Directors
to serve until the next annual meeting of shareholders and until their
successors have been elected and qualified;
2. To authorize the Board to effect a stock split by amending the
Company's Certificate of Incorporation, or to effect no stock split,
in the Board's discretion, without further shareholder approval, prior
to the next annual meeting of shareholders.
3. To ratify the selection of Arthur Andersen, LLP, as
independent certified public accountants for the Company for the
fiscal year ending October 31, 1999; and
4. To transact such other business as may properly come before
the meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on January 28, 1999, as
the record date for the determination of shareholders entitled to notice of and
to vote at the Annual Meeting or any adjournment or adjournments thereof. Only
shareholders of record at such time will be so entitled to vote. The Company's
Proxy Statement is attached.
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE ANNUAL MEETING REGARDLESS
OF THE NUMBER OF SHARES YOU HOLD. IF YOU DO NOT EXPECT TO ATTEND THE MEETING IN
PERSON, PLEASE SIGN, DATE, AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE. THE GIVING OF THIS PROXY DOES NOT AFFECT YOUR RIGHT TO VOTE IN PERSON
IN THE EVENT YOU ATTEND THE MEETING.
By Order of the Board of Directors
Robert B. Wagner
Secretary
February 22, 1999
<PAGE> 3
XETA
CORPORATION
4500 South Garnett, Suite 1000
Tulsa, Oklahoma 74146
PROXY STATEMENT
SOLICITATION OF PROXIES
This Proxy Statement is being furnished to shareholders of XETA Corporation
(the "Company") by its Board of Directors to solicit proxies for use at the
Annual Meeting of Shareholders to be held on March 25, 1999, at the Company's
new headquarters located at 1814 West Tacoma, Broken Arrow, Oklahoma, at 6:30
p.m., local time, or at such other time and place to which the Annual Meeting
may be adjourned.
The purpose of the Annual Meeting is (i) to elect six members to the
Company's Board of Directors to serve for the ensuing year and until their
successors are elected; (ii) to authorize the Board in its sole discretion to
effect a stock split during the ensuing year by amending the Company's
Certificate of Incorporation, or to effect no stock split; (iii) to ratify the
selection of Arthur Andersen, LLP as the Company's independent certified public
accountants for the fiscal year ending October 31, 1999; and (iv) at the
discretion of the proxy holders, to transact any other business that may
properly come before the Annual Meeting or any adjournment thereof.
Whether or not you intend to be present at the Annual Meeting, you are
urged to promptly complete and return the accompanying proxy card in the
envelope provided. If you are present at the Annual Meeting and wish to vote
your shares in person, the accompanying proxy will, at your request, be returned
to you at the Annual Meeting. Any shareholder giving a proxy has the power to
revoke it at any time before it is exercised by executing a subsequently dated
proxy, submitting a notice of revocation to the Company, or attending the Annual
Meeting and voting in person.
Proxies properly executed and returned will be voted in accordance with the
specifications marked on the proxy card. Proxies containing no specifications
will be voted in favor of the proposals described in this Proxy Statement.
Abstentions and broker non-votes will be counted for determining the presence of
a quorum but are not counted as votes cast in the tabulation of votes at the
meeting. Votes will be tabulated by a representative of the Company.
It is expected that this Proxy Statement and the accompanying form of proxy
will first be mailed to shareholders on or about February 22, 1999. The cost of
preparing, assembling and mailing the Notice of Annual Meeting of Shareholders,
Proxy Statement and form of proxy and the solicitation of proxies will be paid
by the Company. The Company will pay the expenses incurred by brokers, banks and
other persons holding stock in their names or the names of their nominees in
forwarding proxy materials to the beneficial owners of such stock.
VOTING SECURITIES
The Company's only class of voting securities is Common Stock. Shareholders
are entitled to one vote per share of Common Stock held. At the close of
business on January 28, 1999, the record date for the determination of
shareholders entitled to notice of and to vote at the Annual Meeting, there were
2,046,537 shares of Common Stock outstanding, excluding 269,747 shares held in
treasury. The presence in person or by proxy of the holders of a majority of the
outstanding shares of Common Stock on the record date, exclusive of shares held
in treasury, is necessary to constitute a quorum at the Annual Meeting.
<PAGE> 4
ELECTION OF DIRECTORS
(ITEM 1)
Six directors, constituting the entire Board of Directors of the Company,
are to be elected at the Annual Meeting. Members of the Board of Directors are
elected for one year terms. Management's nominees to the Board for the coming
year, all of whom are currently members of the Board, are as follows:
<TABLE>
<CAPTION>
NAME AND AGE POSITIONS WITH COMPANY DIRECTOR SINCE
------------ ---------------------- --------------
<S> <C> <C>
Ron B. Barber Director March, 1987
Age 44
Donald T. Duke Director March, 1991
Age 49
Dr. Robert D. Hisrich Director March, 1987
Age 54
Jack R. Ingram President, Chief Executive March, 1989
Age 55 Officer and Director
Ronald L. Siegenthaler Executive Vice September, 1981
Age 55 President and Director
Robert B. Wagner Vice President of Finance, March, 1996
Age 37 Chief Financial Officer,
Secretary and Director
</TABLE>
MR. BARBER has been a director of the Company since March 1987. He has been
engaged in the private practice of law since October 1980 and is a shareholder
in the law firm of Barber & Bartz, a Professional Corporation, in Tulsa,
Oklahoma, which serves as counsel to the Company. Mr. Barber is also a Certified
Public Accountant licensed in Oklahoma. He received his Bachelor of Science
Degree in Business Administration (Accounting) from the University of Arkansas
and his Juris Doctorate Degree from the University of Tulsa.
MR. DUKE has been a director of the Company since March 1991. He is
President of Duke Energy Co. L.L.C., an oil and gas consulting and investment
firm. Mr. Duke has been in senior management in the oil and gas industry since
1980, including time as President and Chief Operating Officer of Hadson
Petroleum (USA), Inc., a domestic oil and gas subsidiary of Hadson Corporation,
where he was responsible for all phases of exploration and production, land,
accounting, operations, product marketing and budgeting and planning. Mr. Duke
has a Bachelor of Science Degree in Petroleum Engineering from the University of
Oklahoma.
DR. HISRICH has been a director of the Company since March 1987. He
occupies the A. Malachi Mixon III Chair in Entrepreneurial Studies and is
Professor of Marketing and Policy Studies at the Weatherhead School of
Management at Case Western Reserve University in Cleveland, Ohio. Prior to
assuming such positions, he occupied the Bovaird Chair of Entrepreneurial
Studies and Private Enterprise and was Professor of Marketing at the College of
Business Administration for the University of Tulsa. He is also a marketing and
management consultant. He is a member of the Board of Directors of the Bovaird
Supply Company, Jameson Inn, Inc., and Noteworthy Medical Systems, Inc., a
member of the Editorial Boards of the Journal of Venturing and the Journal of
Small Business Management, and a member of the Board of Directors of Enterprise
Development, Inc. Dr. Hisrich received his Bachelor of Arts Degree in English
and Science from DePaul University and his Master of Business Administration
Degree (Marketing) and Ph.D. in Business Administration (Marketing, Finance, and
Quantitative Methods) from the University of Cincinnati.
2
<PAGE> 5
MR. INGRAM has been President of the Company since July 1990 and a director
of the Company since March 1989. Mr. Ingram's business experience prior to
joining the Company was concentrated in the oil and gas industry. Mr. Ingram
holds a Bachelor of Science Degree in Petroleum Engineering from the University
of Tulsa.
MR. SIEGENTHALER has been Executive Vice President of the Company since
July 1990 and a director of the Company since its incorporation. Since 1974,
through SEDCO Investments, a partnership in which Mr. Siegenthaler is a partner,
and as an individual, Mr. Siegenthaler has been involved as partner,
shareholder, officer, director, or sole proprietor of a number of business
entities with significant involvement in fabrication and marketing of steel,
steel products and other raw material, real estate, oil and gas, and
telecommunications. Mr. Siegenthaler received his Bachelor's Degree in Liberal
Arts from Oklahoma State University.
MR. WAGNER joined the Company in July 1988 as Chief Accounting Officer. He
became the Company's Vice President of Finance and Chief Financial Officer in
March, 1989, and a member of the Board of Directors in March 1996. Mr. Wagner is
a Certified Public Accountant licensed in Oklahoma and received his Bachelor of
Science Degree in Accounting from Oklahoma State University.
None of the foregoing nominees has any family relationship to any other
nominee. There are no arrangements or understandings between any of the named
individuals and any other person or persons pursuant to which any of the named
individuals are to be elected as directors.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held three meetings during the fiscal
year ended October 31, 1998. All other action taken by the Board of Directors
was consented to in writing by a memorandum of action in lieu of a meeting, to
which all incumbent directors subscribed. Directors meet their responsibilities
not only by attending Board and committee meetings but also through
communication with members of management on matters affecting the Company. Each
director attended all of the meetings held by the Board during fiscal 1998.
The Board of Directors has an Audit Committee and Compensation Committee,
both of which were established in April 1987. There is no nominating committee
or committee performing the functions of a nominating committee.
The Audit Committee consists of directors Ron B. Barber, Jack R. Ingram and
Donald T. Duke. This Committee advises the Board with respect to the engagement
of independent public accountants and reviews the results of the annual audit,
the adequacy of the Company's internal accounting procedures, and any
transactions between the Company and its officers, directors or entities
controlled by them. The Audit Committee met once independently of meetings of
the Board of Directors during fiscal 1998.
The Compensation Committee consists of directors Ron B. Barber, Robert D.
Hisrich and Donald T. Duke. This Committee advises the Board with respect to the
election or appointment of executive officers and makes recommendations to the
Board concerning compensation of executive officers and awards to executive
officers and others under employee incentive plans. The Compensation Committee
did not meet independently of meetings of the Board of Directors during the 1998
fiscal year.
RECOMMENDATION AND VOTE
The Board of Directors recommends a vote "FOR" the election of all of the
nominees listed above as directors of the Company. The affirmative vote of a
majority of the shares of the Company Common Stock represented at the Annual
Meeting is required for such approval.
3
<PAGE> 6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company as
of December 31, 1998 regarding beneficial ownership of the Company's Common
Stock, par value $.10 per share, by (a) each person known by the Company to own
more than five percent (5%) of the Company's Common Stock, (b) each director and
nominee for election as a director of the Company, (c) each executive officer
named in the Summary Compensation Table, and (d) all directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT OF
OF BENEFICIAL OWNER OWNERSHIP(1) CLASS
------------------- ------------ ---------
<S> <C> <C>
Jack R. Ingram 381,700 (2) 17.4 %
XETA Corporation
4500 S. Garnett, Suite 1000
Tulsa, OK 74146
Ronald L. Siegenthaler 309,257 (3) 13.9 %
P.O. Box 571300
Tulsa, OK 74157
Donald E. Reigel 54,518 (4) 2.6 %
XETA Corporation
5350 Manhattan Circle, Suite 210
Boulder, CO 80303
Tom Luce 32,767 (5) 1.6 %
XETA Corporation
4500 S. Garnett, Suite 1000
Tulsa, OK 74146
Ron B. Barber 31,520 1.5 %
One Ten Occidental Place
110 W. 7th Street, Suite 200
Tulsa, OK 74119
Robert B. Wagner 31,467 (6) 1.5 %
XETA Corporation
4500 S. Garnett, Suite 1000
Tulsa, OK 74146
Tom R. Crofford 15,841 (7) *
XETA Corporation
4500 S. Garnett, Suite 1000
Tulsa, OK 74146
Robert D. Hisrich 12,900 (8) *
10900 Euclid Avenue
Cleveland, OH 44106
Donald T. Duke 12,500 (9) *
1701 Morningstar
Edmond, OK 73034
All officers and
directors as a
group (10 persons) (10) 897,137 (2)-(10) 35.9 %
</TABLE>
4
<PAGE> 7
- ----------
*Less than 1%
(1) Ownership is direct unless otherwise indicated.
(2) Includes 2,500 shares held by Mr. Ingram's wife and options to purchase
170,000 shares of the Company's common stock which are presently
exercisable.
(3) Includes 109,257 shares held by Mr. Siegenthaler as Trustee of the Ronald
L. Siegenthaler Revocable Living Trust dated September 25, 1995, as
amended, and options to purchase 200,000 shares which are presently
exercisable.
(4) Includes options to purchase 39,667 shares of the Company's common stock,
which are presently exercisable. Excludes options to purchase 4,333 shares
which are not presently exercisable.
(5) Includes 100 shares held by Mr. Luce as custodian for his minor child, and
presently exercisable options to purchase 22,167 shares of the Company's
common stock. Excludes options to purchase 4,333 shares of the Company's
common stock which are not presently exercisable.
(6) Includes 1,300 shares held by Mr. Wagner as custodian for his minor
children and options to purchase 19,667 shares of the Company's common
stock which are presently exercisable. Excludes options to purchase 4,333
shares which are not presently exercisable.
(7) Includes 1,000 shares owned by Mr. Crofford's adult son who maintains his
residence with Mr. Crofford (Mr. Crofford disclaims beneficial ownership as
to these shares), and presently exercisable options to purchase 2,167
shares of the Company's common stock. Excludes options to purchase 4,333
shares of the Company's common stock which are not presently exercisable.
(8) Includes 900 shares held by Dr. Hisrich as custodian for his minor child,
and options to purchase 10,000 shares of the Company's common stock which
are presently exercisable.
(9) Includes options to purchase 10,000 shares of the Company's common stock
which are presently exercisable.
(10) Includes options granted to an officer not named in the table to purchase
2,167 shares of the Company's common stock, which options are presently
exercisable. Excludes options granted to such officer to purchase 4,333
shares of the Company's common stock, which are not presently exercisable.
5
<PAGE> 8
EXECUTIVE OFFICERS
The executive officers and significant employees of the Company, their
ages, positions held with the Company and length of time in such positions are
set forth below. There are no family relationships between or among any of the
named individuals. There are no arrangements or understandings between any of
the named individuals and any other person or persons pursuant to which any of
the named individuals are to be elected as officers.
<TABLE>
<CAPTION>
NAME AND AGE POSITIONS WITH COMPANY OFFICER SINCE
------------ ---------------------- -------------
<S> <C> <C>
Jack R. Ingram President, Chief July, 1990
Age 55 Executive Officer and
Director
Ronald L. Siegenthaler Executive Vice President August, 1990
Age 55 and Director
Robert B. Wagner Vice President of Finance, March, 1989
Age 37 Chief Financial Officer,
Secretary, Treasurer and Director
Donald E. Reigel Vice President of June, 1995
Age 44 Marketing & Sales
Tom Crofford Vice President of January, 1988
Age 47 Engineering
Thomas A. Luce Vice President of June, 1986
Age 42 Service
Charles R. Rowland Vice President of January, 1984
Age 57 Manufacturing
</TABLE>
Brief descriptions of the business experience of Messrs. Ingram,
Siegenthaler and Wagner are set forth under the section of this Proxy Statement
entitled "Election of Directors."
MR. CROFFORD joined the Company in October 1982 as a design engineer and
has been its Vice President of Engineering since January 1988. Mr. Crofford has
worked in the field of computer engineering since 1977. He is a member of the
Institute of Electrical and Electronics Engineers.
MR. LUCE joined the Company in November 1982 as Installment Director. He
was later promoted to Director of Installation and Service and became Vice
President of Service in June 1986.
MR. ROWLAND joined the Company in December 1982 as Production Manager and
was promoted to Vice President of Manufacturing in January 1984. Mr. Rowland has
23 years electronic manufacturing experience, including production testing,
assembly line layout and production control management.
MR. REIGEL joined the Company in June 1993 as PBX Product Sales Manager. He
was promoted to Vice President of Marketing and Sales in June 1995. Prior to his
employment with the Company, Mr. Reigel served as a national accounts sales
manager for WilTel Communications Systems for approximately a year and a half.
He has been active in the development of major national accounts in the
telecommunications industry since 1987. Mr. Reigel received his Bachelor of
Science Degree in Business from the University of Colorado.
6
<PAGE> 9
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation of
the Company's President and Chief Executive Officer and the next four most
highly compensated executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
---------------------------------------- ------------------------
(a) (b) (c) (d) (e) (g) (i)
NAME AND COMMON STOCK ALL
PRINCIPAL UNDERLYING OTHER
POSITION YEAR SALARY BONUS OTHER OPTIONS (#) COMPENSATION (1)
-------- -------- -------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Jack R. Ingram 1998 $ 90,000 $277,419 $487,500 (2) -- $ 6,400
President and Chief 1997 90,000 206,482 -- -- --
Executive Officer 1996 90,000 235,334 -- -- 6,000
Donald E. Reigel 1998 75,000 200,603 63,618 (3) 6,500 6,400
Vice President of 1997 75,000 159,591 46,901 (3) -- 6,257
Marketing and Sales 1996 75,000 103,223 33,602 (3) -- 3,263
Tom R. Crofford 1998 88,500 33,917 (4) 268,000 (2) 6,500 4,633
Vice President of 1997 88,461 23,783 (4) 33,750 (2) -- 3,396
Engineering 1996 81,580 -- 228,625 (2) -- 3,160
Thomas A. Luce 1998 86,285 33,917 (4) 228,375 (2) 6,500 3,587
Vice President of 1997 82,686 23,783 (4) 79,625 (2) -- 3,172
Service 1996 77,050 -- -- -- 3,026
Robert B. Wagner 1998 77,600 33,917 (4) 129,375 (2) 6,500 3,226
Vice President of 1997 73,787 23,783 -- -- 2,829
Finance and Chief 1996 68,050 -- -- 7,500 2,829
Financial Officer
</TABLE>
- ----------
(1) Represents the Company's contributions to the employee's account under the
Company's 401(k) plan.
(2) Represents the dollar value of the difference between the price paid for
shares of the Company's common stock upon exercise of stock options and the
market value of such stock on the date of exercise.
(3) Represents sales commissions paid.
(4) Represents an annual bonus equal to 1% of the Company's after tax net
income pursuant to a plan authorized by the Board of Directors on July 29,
1997, effective commencing the 1997 fiscal year.
7
<PAGE> 10
The following table sets forth certain information regarding stock options
granted during the 1998 fiscal year to persons named in the Summary Compensation
Table. No stock appreciation rights were granted during fiscal 1998.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
% OF TOTAL
NUMBER OF
SECURITIES OPTIONS GRANTED
UNDERLYING OPTIONS TO EMPLOYEES IN EXERCISE OR BASE EXPIRATION
NAME GRANTED (#) FISCAL YEAR PRICE ($/Sh) DATE(1)
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Jack R. Ingram -- -- -- --
Donald E. Reigel 6,500 16.25% $17.50 01/02/08
Tom R. Crofford 6,500 16.25% $17.50 01/02/08
Thomas A. Luce 6,500 16.25% $17.50 01/02/08
Robert B. Wagner 6,500 16.25% $17.50 01/02/08
</TABLE>
- ----------
(1) These options become exercisable in cumulative installments of one-third of
the total number of shares covered by the option grant, on each of the
first, second and third anniversary dates of the date of grant, and may be
exercised at any time from and after such dates until the tenth anniversary
of the date of grant.
The following table sets forth certain information regarding stock options
exercised during the 1998 fiscal year by persons named in the Summary
Compensation Table and the number and value of unexercised options held by such
persons as of the fiscal year-end. The Company has not granted stock
appreciation rights.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION VALUES
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES ACQUIRED VALUE REALIZED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
NAME ON EXERCISE (#) ($)(1) OPTIONS AT FY-END(#)(2) AT FY-END ($)(3)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jack R. Ingram 30,000 $487,500 170,000 $ 2,847,500
Donald E. Reigel - - 44,000 609,875
Tom R. Crofford 16,000 268,000 6,500 1,625
Thomas A. Luce 10,500 228,375 26,500 336,625
Robert B. Wagner 7,500 129,375 24,000 253,031
</TABLE>
- ----------
(1) Value is based upon the difference between the fair market value of the
securities underlying the options on the date of exercise and the exercise
price.
(2) All of the options held by the persons named in this table were exercisable
at fiscal year end.
(3) Based upon the difference between the fair market value of the securities
underlying the options at fiscal year-end ($17.75 per share) and the
exercise price.
8
<PAGE> 11
The Company compensates its directors who are not officers of the Company
$250.00 per meeting attended. While the Company does not have any formal
arrangement to grant stock options to its directors, the Company has previously
granted stock options to all of its outside directors. Generally, these options
are for 10,000 shares, with a vesting period of one year and an exercise period
of ten years. No other compensation was paid to directors for their services as
such during the Company's 1998 fiscal year.
EMPLOYMENT AGREEMENTS
The Company has a written employment agreement with Jack R. Ingram
concerning the terms of his compensation as the Company's President and Chief
Executive Officer. Under the agreement, Mr. Ingram receives a $90,000 annual
base salary, plus quarterly and annual bonuses. The quarterly bonus is equal to
50% of the Company's quarterly net income, not to exceed $10,000 per quarter.
The annual bonus is equal to seven percent (7%) of the Company's after-tax net
income, with no maximum cap. The annual bonus is paid on or before January 31 of
each year. In the event Mr. Ingram's employment with the Company is terminated
for reasons other than his resignation, Mr. Ingram will receive the full amount
of any annual and quarterly bonus earned but unpaid through the date of
termination. Mr. Ingram will forfeit any unpaid bonuses in the event of his
resignation. Mr. Ingram's employment with the Company is at-will.
The Company also has a written agreement with Ronald L. Siegenthaler
concerning the terms of his compensation as the Company's Executive Vice
President. Under this agreement, Mr. Siegenthaler receives a monthly retainer of
$8,500. Mr. Siegenthaler is entitled to receive the full amount of any unpaid
fee due him upon his termination of employment for any reason, including his
resignation. Mr. Siegenthaler is retained by the Company on an at-will basis.
The Company entered into a written agreement with Donald E. Reigel on June
12, 1995, concerning the terms of his employment as Vice President of Marketing
and Sales. Pursuant to the terms of the agreement, Mr. Reigel receives a salary
of $75,000, plus a commission equal to 0.25% of the Company's monthly net sales
and service revenues. The agreement also provides for an annual bonus equal to
3% of the increase in the Company's annual net sales and service revenues over
those revenues for the previous fiscal year. Mr. Reigel will forfeit the right
to receive any bonus for the then current fiscal year in the event of
termination of his employment unless he is terminated by the Company without
cause, in which case he will be entitled to receive a bonus, if any, on a
prorated basis.
Mr. Reigel is subject to standard confidentiality restrictions, as well as
to a twelve month non-solicitation agreement upon termination of his employment
for any reason while Jack Ingram remains President of the Company, and a
thirty-day non-solicitation agreement if Mr. Ingram is not President at the time
of Mr. Reigel's termination. There is no set term to Mr. Reigel's employment by
the Company.
9
<PAGE> 12
RELATED TRANSACTIONS
Mr. Barber, a director of the Company, is a shareholder in the law firm of
Barber & Bartz, a Professional Corporation, which serves as outside general
counsel to the Company. During the fiscal year ended October 31, 1998, the
Company paid or accrued legal fees to Barber & Bartz in the approximate amount
of $186,585.
Mr. Duke, a director of the Company, was retained by the Company in May,
1997 as an outside consultant to seek and advise the Company with respect to
acquisition opportunities and to advise the Company concerning its business
systems. Mr. Duke receives a monthly retainer of $4,000 for these services,
which are above and beyond his duties as a director of the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company during its most recent fiscal year and Forms 5 and
amendments thereto furnished to the Company with respect to its most recent
fiscal year and written representations made to the Company by its directors and
officers and by certain beneficial owners of more than ten percent of its Common
Stock, the Company knows of no director, officer, or beneficial owner of more
than ten percent of the Company's Common Stock who has failed to file on a
timely basis reports of beneficial ownership of the Company's Common Stock as
required by Section 16(a) of the Securities Exchange Act of 1934, as amended,
except as follows. The Company utilizes an internal reporting system which legal
counsel to the Company implemented and operates to assist the Company's officers
and directors with compliance with their Section 16 reporting obligations. All
of the Company's officers and directors complied with this internal reporting
system, but subsequent clerical error, which was only discovered after the
relevant reporting periods, resulted in a failure to generate and timely file
the corresponding Forms 4 and 5 for Mr. Reigel, Mr. Rowland and Mr. Luce.
Consequently, Mr. Reigel failed to timely file two reports (a Form 4 and the
subsequent Form 5), both of which related to the same single transaction; Mr.
Rowland failed to timely file two reports (a Form 4 and the subsequent Form 5),
both of which related to two related transactions (a stock option exercise and
sale of underlying shares); and Mr. Luce failed to timely file two reports (a
Form 4 and the subsequent Form 5), both of which related to the same single
transaction.
STOCK SPLIT PROPOSAL
(Item 2)
In April, 1998 the shareholders approved a proposal submitted by the Board
of Directors that authorized the Board in its discretion to effect a stock split
prior to the 1999 Annual Meeting. The Board has not effected a stock split to
date and its authority to do so under the 1998 shareholder resolution will
expire in March of this year. The Board believes it would be in the best
interests of the Company for the Board to maintain the ability to effect a stock
split when it believes prudent to do so, without the necessity of having to call
a special meeting of the shareholders separate from the annual meeting to vote
on such a proposal.
The Board of Directors has therefore approved a resolution which would
authorize the Board to amend Article VI of the Company's Certificate of
Incorporation to effect a stock split of the Company's Common Stock along with a
corresponding reduction in par value, or not amend the Certificate of
Incorporation and effect no stock split, as determined by the Board of Directors
in its discretion (the "Stock Split Proposal"). The Board has directed that the
Stock Split Proposal be submitted to the Company's shareholders for
consideration and approval. Under the terms of the Stock Split Proposal, the
Board of Directors will be granted authority to effect a single stock split
within the confines of the Proposal at any time prior to the next Annual Meeting
of Shareholders if the Board believes that an increase in the number of shares
of Common Stock may improve the trading market for the Company's Stock.
If the Stock Split Proposal is approved by shareholders, the Board of
Directors will be given the discretion to effect a stock split, without further
shareholder action, of not less than 5-for-4 nor greater than 2-for-1 (the
"Stock Splits"), or to effect no stock split. The Board of Directors believes
that this latitude is necessary, given the nature of the stock market and the
changing market price of the Common Stock.
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<PAGE> 13
If the Stock Split Proposal is approved by the shareholders of the Company
at the Annual Meeting, a stock split will be effected only upon a determination
by the Board of Directors that a stock split is in the best interests of the
Company and the shareholders. In connection with any determination by the Board
of Directors to such effect, the Board will also select, at its discretion, one
of the Stock Splits proposed based upon prevailing market conditions, the likely
effect on the market price of the Common Stock and other relevant factors. The
remaining alternative Stock Splits would be abandoned by the Board without
further action by the shareholders.
Shareholders may approve or reject the proposed Stock Splits in whole but
not in part. The effective date of any stock split will be selected by the Board
of Directors (the "Effective Date") on or prior to the Company's next Annual
Meeting of Shareholders. If no stock split is effected by such date, the
authority of the Board of Directors to declare the stock split will expire.
The Stock Split Proposal also authorizes a corresponding reduction in par
value of the Company's Common Stock in relation to the ratio of the Stock
Splits. The proposed amendments to Article VI of the Company's Certificate of
Incorporation would reduce the par value per share of the Company's Common Stock
from $.10 to $.08, $.075, $.06 and $.05 in the case of a 5-for-4, 4-for-3,
3-for-2 and 2-for-1 Stock Split, respectively.
The resolution of the Shareholders approving the proposed alternative
amendments to Article VI of the Company's Certificate of Incorporation is
attached to this Proxy Statement as Appendix "A".
PURPOSE AND EFFECT OF THE STOCK SPLIT
The purpose of the stock split, if the Board elects to declare one, would
be to increase the marketability and liquidity of the Common Stock through
greater availability of shares for purchase and sale and a wider distribution
among a larger number of shareholders. Management believes that an increase in
the number of shares outstanding would encourage and facilitate trades in the
Common Stock which would, it is believed, establish a more liquid market in the
Common Stock and result in a wider distribution of the Common Stock. Although it
is not possible to predict the precise impact the stock split would have on the
trading price of the Company's Common Stock, the stock split would reduce the
per share trading price of the Common Stock, but not necessarily in the same
proportion as the increase in the number of outstanding shares.
All existing rights of shareholders will remain unchanged by the stock
split, and the relative ownership position of any shareholder, except for
immaterial variations caused by the procedures to avoid fractional shares
(discussed below), will remain unchanged. Because the par value of the Company's
Common Stock will be reduced in relation to the ratio of the Stock Splits, the
aggregate par value of the Company's Common Stock and the Company's paid-in
capital and retained earnings will be unaffected. The only change in the
Company's financial statements as a result of a stock split will be the
presentation of earnings per share, which will be reduced proportionately for
any stock split effected for all accounting periods presented.
The stock split, if undertaken in the discretion of the Board, would have
the following effect upon the number of shares of Common Stock outstanding
(which was 2,316,284 as of the Record Date, of which 269,747 were treasury
shares), assuming no other change in the number of shares of Common Stock
outstanding after the Record Date, and without taking into account any reduction
in the number of outstanding shares resulting from the procedures for treatment
of fractional shares described below.
<TABLE>
<CAPTION>
Common Stock
Stock Split Outstanding
----------- -----------
<S> <C>
5-for-4 2,895,355
---------
4-for-3 3,088,379
---------
3-for-2 3,474,426
---------
2-for-1 4,632,568
---------
</TABLE>
All outstanding stock options on the Effective Date of the stock split
would be proportionately adjusted in the number of shares subject to such rights
in the event of a stock split. As of January 4, 1999, there were 516,336
shares of the Company's Common Stock subject to stock purchase options. Because
the stock split, if
11
<PAGE> 14
effected, may range from 5-for-4 to 2-for-1 and because the number of
outstanding shares of Common Stock may change prior to the Effective Date (e.g.,
upon the exercise of any outstanding stock options), existing shareholders
cannot now predict the total number of shares of Common Stock that they will
hold after the stock split, or the total number of shares of Common Stock that
will be outstanding after the stock split.
The Company's Common Stock is listed for trading on the Nasdaq National
Market System. The new shares to be issued as a result of the stock split will
be included in the Company's listing on Nasdaq. Consummation of the stock split
will have no material federal tax consequences to stockholders.
FRACTIONAL SHARES AND ADDITIONAL SHARE CERTIFICATES
No certificates or script representing fractional share interests will be
issued, and no such fractional interests will entitle the holder thereof to
vote, or to any rights as a shareholder of the Company with respect to such
fractional interests. In lieu of any such fractional interests, the Company will
pool all fractional share interests otherwise issuable and make arrangements
with American Securities Transfer & Trust, Inc. (the "Agent") or other third
party to act as agent for the account of all shareholders who would otherwise be
entitled to receive said fractional shares, to sell such shares on behalf of
such shareholders. As soon as practicable after the Effective Date, the Agent
will sell such interests on the basis of prevailing market prices of the Common
Stock as reported on the Nasdaq National Market System at the time of such
sales, and the Agent or the Company will pay to the holders of such interests
their pro rata share of the proceeds derived from the sale of such fractional
interests. All costs of such sale will be borne by the Company.
As soon as practicable following the Effective Date of the stock split, the
Company will mail to each shareholder of record on the Effective Date a share
certificate representing the number of shares of Common Stock that, when
aggregated with each shareholder's present number of shares, will equal the
proportionate increase in the total number of shares held by the stockholder on
the Effective Date. For example, if the Board effects a 5-for-4 stock split, and
a shareholder owns 100 shares of Common Stock on the Effective Date, the Company
will mail to such shareholder a share certificate for 25 shares which, when
added to the shareholder's 100 shares, will represent a total stock ownership of
125 shares.
RECOMMENDATION AND VOTE
The Board of Directors recommends a vote "FOR" the authorization and
approval of this proposal. The affirmative vote of the holders of a majority of
the shares of stock of the Company entitled to notice of and to vote at the
Annual Meeting is required to adopt the Stock Split Proposal.
INDEPENDENT PUBLIC ACCOUNTANTS
(Item 3)
The Board of Directors has selected Arthur Andersen, LLP as the independent
public accountants to audit the Company's financial statements for the fiscal
year ending October 31, 1999. Representatives of Arthur Andersen, LLP are
expected to be present at the Annual Meeting with the opportunity to make a
statement if they desire to do so and to respond to appropriate questions. While
ratification of the Company's selection of accountants by the Company's
shareholders is not required, in the event of a negative vote on such
ratification, the Company's Board of Directors will reconsider its selection.
Arthur Andersen, LLP audited the Company's financial statements for the year
ended October 31, 1998.
12
<PAGE> 15
FINANCIAL INFORMATION - INCORPORATED BY REFERENCE
A copy of the Company's 1998 Annual Report, which includes the Company's
Form 10-KSB containing all financial statements as well as Management's
Discussion and Analysis of Financial Condition and Results of Operations (the
"MD&A"), is being provided to the stockholders along with this Proxy Statement.
In regard to the Stock Split Proposal, the Financial Statements appearing on
pages F-1 to F-15 of the Form 10-KSB, and the MD&A appearing on pages 10 through
14 of the Form 10-KSB, are incorporated herein by reference.
SHAREHOLDER PROPOSALS
Under regulations of the Securities and Exchange Commission, shareholders
are entitled to submit proposals on matters appropriate for shareholder action
at subsequent annual meetings of the Company in accordance with those
regulations. In order for shareholder proposals for the Company's next annual
meeting to be eligible for consideration for inclusion in the proxy statement
and proxy relating to such meeting, they must be received by the Company no
later than October 8, 1999. Such proposals should be directed to XETA
Corporation, 4500 South Garnett, Suite 1000, Tulsa, Oklahoma 74146, Attention:
President.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of no
matter other than those described herein that will be presented for
consideration at the Annual Meeting. However, should any other matters properly
come before the Annual Meeting or any adjournment thereof, it is the intention
of the persons named in the accompanying Proxy to vote in accordance with their
best judgment in the interest of the Company.
By Order of the Board of Directors
Robert B. Wagner
Secretary
Tulsa, Oklahoma
February 22, 1999
13
<PAGE> 16
Appendix "A"
RESOLUTION OF SHAREHOLDERS
RESOLVED, that prior to the Company's next Annual Meeting of Shareholders,
Article VI of the Company's Certificate of Incorporation, which currently
authorizes 10,000,000 shares of Common Stock, par value $.10 per share, and
500,000 shares of Preferred Stock, par value $.10 per share, shall, if
applicable, be deleted and substituted with one of the following alternative
provisions be selected by the Board of Directors, in its discretion:
IF THE BOARD DECLARES A FIVE-FOR-FOUR STOCK SPLIT:
ARTICLE VI
The total authorized number of shares which the Corporation
shall have authority to issue shall consist of 10,500,000 shares,
10,000,000 shares of which shall be classified as Common Shares of the
par value of $.08 per share, and 500,000 shares of which shall be
classified as Preferred Shares, $.10 par value per share.
Simultaneously with the effective date of this amendment (the
"Effective Date"), each four shares of Common Stock issued and
outstanding on the Effective Date shall automatically and without any
action on the part of the holder thereof be reclassified as and changed
into five shares of the Company's Common Stock, par value $.08 per
share.
IF THE BOARD DECLARES A FOUR-FOR-THREE STOCK SPLIT:
ARTICLE VI
The total authorized number of shares which the Corporation
shall have authority to issue shall consist of 10,500,000 shares,
10,000,000 shares of which shall be classified as Common Shares of the
par value of $.075 per share, and 500,000 shares of which shall be
classified as Preferred Shares, $.10 par value per share.
Simultaneously with the effective date of this amendment (the
"Effective Date"), each three shares of Common Stock issued and
outstanding on the Effective Date shall automatically and without any
action on the part of the holder thereof be reclassified as and changed
into four shares of the Company's Common Stock, par value $.075 per
share.
IF THE BOARD DECLARES A THREE-FOR-TWO STOCK SPLIT:
ARTICLE VI
The total authorized number of shares which the Corporation
shall have authority to issue shall consist of 10,500,000 shares,
10,000,000 shares of which shall be classified as Common Shares of the
par value of $.06 per share, and 500,000 shares of which shall be
classified as Preferred Shares, $.10 par value per share.
Simultaneously with the effective date of this amendment (the
"Effective Date"), each two shares of Common Stock issued and
outstanding on the Effective Date shall automatically and without any
action on the part of the holder thereof be reclassified as and changed
into three shares of the Company's Common Stock, par value $.06 per
share.
<PAGE> 17
IF THE BOARD DECLARES A TWO-FOR-ONE STOCK SPLIT:
ARTICLE VI
The total authorized number of shares which the Corporation
shall have authority to issue shall consist of 10,500,000 shares,
10,000,000 shares of which shall be classified as Common Shares of the
par value of $.05 per share, and 500,000 shares of which shall be
classified as Preferred Shares, $.10 par value per share.
Simultaneously with the effective date of this amendment (the
"Effective Date"), each one share of Common Stock issued and
outstanding on the Effective Date shall automatically and without any
action on the part of the holder thereof be reclassified as and changed
into two shares of the Company's Common Stock, par value $.05 per
share.
FURTHER RESOLVED, that notwithstanding the approval by the shareholders of
the foregoing proposed alternative amendments, at any time prior to the filing
of any amendment to the Company's Certificate of Incorporation pursuant hereto
effecting either a five-for four, four-for-three, three-for-two or two-for-one
stock split, the Board of Directors may, in its discretion, abandon such
proposed alternative amendments without further action by the shareholders.
2
<PAGE> 18
APPENDIX B
XETA CORPORATION PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
MARCH 25, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Jack R. Ingram and Ronald L. Siegenthaler, or
either of them, as proxies and attorneys for the undersigned (with full power
to act alone and to designate substitutions), hereby revoking any prior Proxy,
and hereby authorizes them to represent the undersigned and to vote as
designated below, all the shares of Common Stock of XETA Corporation held of
record by the undersigned on January 28, 1999, at the Annual Meeting of
Shareholders to be held March 25, 1999, or any adjournment or postponement
thereof.
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS: [ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote
(except as marked to the contrary below). for all nominees below.
</TABLE>
RON B. BARBER, DONALD T. DUKE, ROBERT D. HISRICH, JACK R. INGRAM, RONALD L.
SIEGENTHALER, AND ROBERT B. WAGNER
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
- --------------------------------------------------------------------------------
2. PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION TO EFFECT A
FIVE-FOR-FOUR, FOUR-FOR-THREE, THREE-FOR-TWO, OR TWO-FOR-ONE STOCK SPLIT,
OR TO EFFECT NO STOCK SPLIT, IN THE BOARD'S SOLE DISCRETION, PRIOR TO THE
NEXT ANNUAL MEETING OF SHAREHOLDERS.
[ ] For [ ] Against [ ] Abstain
3. PROPOSAL TO RATIFY THE SELECTION OF ARTHUR ANDERSEN LLP AS INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS FOR THE COMPANY FOR THE 1999 FISCAL YEAR.
[ ] For [ ] Against [ ] Abstain
(continued on other side)
(continued from other side)
4. IN THEIR DISCRETION ON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE
MEETING.
This Proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this Proxy will
be voted FOR the three foregoing proposals.
- -------------------------------------- -----------------------------------------
(Signature) (Print Name)
- -------------------------------------- -----------------------------------------
(Signature) (Print Name)
NOTE: Signature(s) should follow exactly as your name appears on your
stock certificate. In case of joint ownership each owner should sign.
Executors, administrators, guardians, trustees, etc. should add their title as
such and where more than one executor, etc. is named, a majority must sign. If
the signer is a corporation, please sign full corporate name by a duly
authorized officer.
Dated: , 1999
----------------------------
<PAGE> 19
APPENDIX C
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Xeta Corporation:
We have audited the accompanying consolidated balance sheet of Xeta Corporation
(an Oklahoma corporation) and subsidiary as of October 31, 1998, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the two years in the period ended October 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Xeta Corporation and
subsidiary as of October 31, 1998, and the results of their operations and their
cash flows for each of the two years in the period ended October 31, 1998, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Tulsa, Oklahoma
December 4, 1998
