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 ss. 240.14a-11(c) or ss. 240.14a-12
ZYTEC CORPORATION
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(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)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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).
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] 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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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ZYTEC CORPORATION
A MINNESOTA CORPORATION
7575 MARKET PLACE DRIVE
EDEN PRAIRIE, MINNESOTA 55344
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 28, 1997, AT 3:30 O'CLOCK P.M.
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TO ZYTEC CORPORATION SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Zytec
Corporation (the "Company"), will be held on Monday, April 28, 1997 at 3:30
o'clock p.m., C.D.T., at the Radisson Plaza Hotel Minneapolis, 35 South Seventh
Street, Minneapolis, Minnesota 55402, for the following purposes:
1. To elect ten directors to the Company's Board of Directors.
2. To ratify the selection by the Board of Directors of Coopers & Lybrand
L.L.P. as the independent accountants to audit the consolidated
financial statements of the Company for the year ending December 31,
1997.
3. To transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
In accordance with the Bylaws of the Company, the Board of Directors has set the
close of business on March 14, 1997 as the record date for the determination of
the shareholders entitled to notice of and to vote at the Annual Meeting or any
adjournments thereof.
Your attention is respectfully directed to the attached Proxy Statement and the
Proxy. IF YOU DO NOT EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE FILL IN
THE ATTACHED PROXY AND DATE, SIGN AND MAIL IT AS PROMPTLY AS POSSIBLE IN ORDER
TO SAVE THE COMPANY FURTHER SOLICITATION EXPENSE.
By order of the Board of Directors
SHERMAN WINTHROP
Secretary
Dated: March 25, 1997
ZYTEC CORPORATION
A MINNESOTA CORPORATION
7575 MARKET PLACE DRIVE
EDEN PRAIRIE, MINNESOTA 55344
612-941-1100
------------------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 28, 1997
------------------------------------
SOLICITATION OF PROXIES
This Proxy Statement is submitted in support of the solicitation of the enclosed
proxy by the Board of Directors of Zytec Corporation, a Minnesota corporation
(the "Company"), for use at the annual meeting of the shareholders of the
Company (the "Annual Meeting") to be held on April 28, 1997, at 3:30 o'clock
p.m., C.D.T., at the Radisson Plaza Hotel Minneapolis, 35 South Seventh Street,
Minneapolis, Minnesota 55402, and at any adjournments thereof. The cost of
solicitation will be borne by the Company. This Proxy Statement and the
accompanying Proxy and Notice of Annual Meeting of Shareholders is intended by
the Company to be mailed to its shareholders on or about March 25, 1997. The
Company may reimburse brokerage firms, banks, and other custodians, nominees,
and fiduciaries for expenses reasonably incurred in forwarding solicitation
materials to beneficial owners of shares.
The Company may have one or more of its officers or employees communicate by
telephone, telegraph, or mail with shareholders who have not returned proxies.
VOTING AND REVOCATION OF PROXY
The Annual Meeting is being held to fix the number of and elect the Company's
Board of Directors, to ratify the selection by the Board of Directors of Coopers
& Lybrand L.L.P. as the Company's independent accountants for the year ending
December 31, 1997, and to transact such other business as may properly come
before the meeting or any adjournments thereof.
The annual report of the Company for the year ended December 31, 1996, including
financial statements, is being mailed to shareholders simultaneously herewith,
but the annual report is not to be considered part of the proxy soliciting
materials.
Only holders of record of shares of the Company's no par value common stock (the
"Common Stock") at the close of business on March 14, 1997 will be entitled to
notice of and to vote at the Annual Meeting and any adjournment thereof. The
securities of the Company outstanding as of March 14, 1997, the record date for
the Annual Meeting, and which are entitled to vote at the meeting, consist of
9,278,703 shares of Common Stock, each share being entitled to one vote.
Shareholders do not have the right to cumulate votes for the election of
directors.
The enclosed Board of Directors' proxy, when properly signed and returned to the
Company, will be voted at the Annual Meeting as directed therein. Proxies in
which no direction is given with respect to the various matters of business to
be transacted at the meeting will be voted (i) FOR the election of the ten
nominees for the Board of Directors named in this Proxy Statement; and (ii) FOR
the ratification of the appointment of Coopers & Lybrand L.L.P. as the Company's
independent accountants for the year ending December 31, 1997. While the Board
of Directors knows of no other matters to be presented at the Annual Meeting or
any adjournment thereof, all proxies returned to the Company will be voted on
any such matter in accordance with the judgment of the proxy holders.
The enclosed proxy may be revoked at any time before it is voted by the
execution and delivery of a proxy bearing a later date or by notification in
writing given to the Secretary of the Company prior to the meeting. The enclosed
proxy may also be revoked by attending the meeting and electing to vote in
person.
A quorum, consisting of a majority of the shares of Common Stock entitled to
vote at the Annual Meeting, must be present in person or by proxy before action
may be taken at the Annual Meeting. If an executed proxy is returned and the
shareholder has abstained from voting on any matter, the shares represented by
such proxy will be considered present at the meeting for purposes of determining
a quorum and for purposes of calculating the vote, but will not be considered to
have been voted in favor of such matter. If an executed proxy is returned by a
broker holding shares in "street name" which indicates that the broker does not
have discretionary authority as to certain shares to vote on one or more
matters, such shares will be considered present at the meeting for purposes of
determining a quorum, but will not be considered to be represented at the
meeting for purposes of calculating the vote with respect to such matter.
ELECTION OF DIRECTORS
(PROPOSAL 1)
The Bylaws of the Company provide that the number of directors may be set by the
shareholders (subject to the right of the Board of Directors to increase or
decrease the number of directors as otherwise permitted by law). At the most
recent Annual Meeting of the Company's shareholders held on April 29, 1996, the
shareholders elected nine directors (Ronald D. Schmidt, John M. Steel, Josef J.
Matz, Sherman Winthrop, Lawrence J. Matthews, Gary C. Flack, Dr. Fred C. Lee,
John V. Titsworth, and James S. Womack). Mr. Titsworth retired from the Board of
Directors effective August 23, 1996. As of October 25, 1996, Thomas J. Kent was
elected by the remaining directors to fill the vacancy created by such
resignation. Effective as of December 20, 1996, the Board of Directors increased
its size from nine to ten directors, and elected Ervin F. Kamm, Jr. to serve as
a director. The Board of Directors presently consists of ten directors.
It is the recommendation of the Company's Board of Directors that the number of
directors be set at ten and that the ten nominees named below be elected as
directors, to serve as directors until the next Annual Meeting of the
shareholders and until their successors shall be duly elected and qualified as
directors.
Unless otherwise directed, the proxies solicited by the Board of Directors will
be voted in favor of electing ten directors at the Annual Meeting and will be
voted in favor of such nominees. However, in the event of the inability or
unwillingness of one or more of these nominees to serve as a director at the
time of the Annual Meeting on April 28, 1997 or any adjournments thereof, the
shares represented by the proxies will be voted in favor of the remainder of
such nominees and may also (in the discretion of the holders of said proxies) be
voted for other nominees not named herein, in lieu of those unable or unwilling
to serve. As of the date hereof, the Board of Directors knows of no nominee who
is unable or unwilling to serve.
All of the nominees of the Board of Directors are presently serving as directors
of the Company. The names and ages of the nominees are as follows:
<TABLE>
<CAPTION>
NAME Positions with the Company Age Director Since
- ---- -------------------------- --- --------------
<S> <C> <C> <C>
Ronald D. Schmidt Chairman of the Board, President 60 1984
and Chief Executive Officer
Ervin F. Kamm, Jr. President of Zytec Power Conversion 57 1996
and Director
John M. Steel Vice President, Marketing and Sales 52 1984
and Director
Josef J. Matz Managing Director of Zytec GmbH 56 1991
and Director
Thomas J. Kent Vice President and General Manager 48 1996
of Services and Logistics and
Director
Sherman Winthrop Secretary and Director 66 1984
Gary C. Flack Director 60 1988
Dr. Fred C. Lee Director 50 1986
Lawrence J. Matthews Director 68 1984
James S. Womack Director 68 1984
</TABLE>
SHAREHOLDER APPROVAL
The affirmative vote of a majority of the voting power of the shares present in
person or by proxy at the Annual Meeting and entitled to vote (assuming a quorum
is present) is required to fix the number of directors at ten and a plurality of
such voting power is required to elect each director.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR
THE ELECTION OF THE TEN NOMINEES FOR THE BOARD OF DIRECTORS AS
SET FORTH IN PROPOSAL 1.
INFORMATION REGARDING DIRECTORS,
NOMINEES AND EXECUTIVE OFFICERS
INFORMATION REGARDING NOMINEES FOR ELECTION AS DIRECTORS
The following discussion sets forth certain information regarding the nominees
for the Board of Directors of the Company.
Mr. Schmidt is a co-founder of the Company and has served as an officer and a
director since the Company commenced operations in January 1984. Until January
1984, he was employed by Control Data Corporation ("CDC") in many areas of
general and product management, including Vice President and General Manager,
Computer Peripherals, Inc., and Managing Director for Control Data Portugal. Mr.
Schmidt also was involved with CDC in connection with its divestiture of the
Centronics printer business and the merger of the Sperry disk operations into
Magnetic Peripherals, Inc. Mr. Schmidt is also a director of U-Ship, Inc.
Mr. Kamm has been a director of the Company since December 1996. Mr. Kamm became
President of Zytec Power Conversion in March 1997. From December 1994 until
January 1997, Mr. Kamm served as President and Chief Executive Officer of Digi
International, Inc., a provider of data communications hardware and software,
and was also a member of its Board of Directors. From May 1988 to December 1994,
Mr. Kamm was President and Chief Operating Officer of Norstan, Inc., a
telecommunications company, and was also a member of its Board of Directors. Mr.
Kamm is also a director of the Institute for Advanced Technology and
MicroMedics, Inc.
Mr. Steel is a co-founder of the Company and has been an officer and a director
since January 1984. Until January 1984, he was employed by CDC in numerous
positions in marketing and general management, with his latest position with CDC
being General Manager--OEM Technical Support.
Mr. Matz joined Zytec in November 1991 as Managing Director--Zytec GmbH, the
Company's wholly-owned subsidiary located in Austria. From October 1990 to
November 1991, he was Vice President--European Operations for Modular Computer
Systems, a computer manufacturer. Until accepting this position with Modular
Computer Systems, Mr. Matz had been employed with CDC for approximately 20
years, including positions as General Manager--Marketing and Operations Europe,
and several sales, marketing and operations positions.
Mr. Kent has been a director of the Company since October 1996. He has been
General Manager of Zytec's Services and Logistics operations, located in
California, since June 1994, and was named Vice President of Services and
Logistics in October 1996. From March 1990 to June 1994, Mr. Kent was employed
by US Windpower, most recently as its Director of Customer and Site Support.
Prior to March 1990, Mr. Kent was employed by FMC Corporation and Rockwell
International, where he held senior level management positions in manufacturing,
operations, materials and logistics, customer support and employee relations.
Mr. Winthrop has been Secretary since January 1984 and a director since November
1984. He has been a principal in the law firm of Winthrop & Weinstine, P.A.,
since 1979. Winthrop & Weinstine, P.A. has been counsel to the Company since
Zytec's formation. Mr. Winthrop is also a director of Bremer Financial
Corporation, a regional multi-bank holding company.
Mr. Flack has been a director of the Company since April 1988 and an associate
in Thomas Group, Inc., a management consulting firm, since November 1988. He was
Vice President--Manufacturing for the Company from December 1987 to November
1988. Prior to December 1987, he was Vice President and General Manager of the
Interconnect Group of Sheldahl, Inc., which manufactures electronic materials,
flexible circuitry, graphic display systems and engineered products. Mr. Flack
is also a director of Unarco.
Dr. Lee has been a director of the Company since February 1986. He has been a
Professor at Virginia Polytechnic Institute and State University ("VPI") in
Blacksburg, Virginia, and director of the Virginia Power Electronics Center at
VPI since 1977.
Mr. Matthews is a co-founder of the Company, has been a director since January
1984, and was Vice President--Engineering of the Company from January 1984 until
his retirement in May 1993. Until January 1984, he was employed by CDC in
engineering design and management and operations management.
Mr. Womack has been a director of the Company since April 1984. He is Chairman
of the Board of Sheldahl, Inc., and was its Chief Executive Officer until 1991.
He is also a director of General Securities, a mutual fund.
BOARD ACTIONS AND COMMITTEES
During the fiscal year ended December 31, 1996, the Board of Directors held
eight meetings. During 1996, committees established by the Board met as follows:
the Compensation Committee met seven times, the Audit Committee met four times
and the Nominating Committee met one time. Each Director attended at least 75%
of the total number of Board meetings and meetings of committees on which the
director served.
All directors hold office until the next annual meeting of shareholders and
until their successors have been elected and qualified or until their earlier
death, resignation or removal from office. The officers of the Company are
appointed by the Board of Directors and hold office until their successors are
chosen and qualified or until their earlier death, resignation, or removal from
office.
The Compensation Committee of the Board of Directors for 1996 consisted of
Lawrence J. Matthews, Sherman Winthrop, and James S. Womack, each of whom served
for the entire year; John V. Titsworth, who served through the date of his
retirement from the Board of Directors on August 23, 1996; and Ervin F. Kamm,
Jr., who was appointed to the Compensation Committee as of December 20, 1996.
The Compensation Committee for 1997 consists of Messrs. Matthews, Winthrop and
Womack. Mr. Kamm resigned from the Compensation Committee effective as of March
3, 1997, when he became President of Zytec Power Conversion operations. All
members of the Compensation Committee, during the period in which they serve,
are non-employee directors of the Company. The Compensation Committee makes
recommendations to the Board regarding the compensation of executive officers
and administers the Company's Employee Incentive Stock Option Plans with respect
to executive officers.
The Audit Committee of the Board of Directors for 1996 consisted of Lawrence J.
Matthews, James S. Womack, Gary C. Flack, Dr. Fred C. Lee, and Sherman Winthrop,
each of whom served for the entire year; John V. Titsworth, who served through
the date of his retirement from the Board of Directors on August 23, 1996; and
Ervin F. Kamm, Jr., who was appointed to the Audit Committee as of December 20,
1996. The Audit Committee for 1997 consists of Messrs. Flack, Matthews,
Winthrop, Womack and Dr. Lee. Mr. Kamm resigned from the Audit Committee
effective as of March 3, 1997, when he became President of Zytec Power
Conversion operations. All members of the Audit Committee, during the period in
which they serve, are non-employee directors of the Company. The Audit Committee
annually recommends independent accountants for appointment by the Board of
Directors and ratification by the shareholders, reviews the services to be
performed by the independent accountants, and receives and reviews the reports
submitted by them.
The Nominating Committee of the Board of Directors for 1996 and 1997 consists of
Lawrence J. Matthews, James S. Womack and Dr. Fred C. Lee, all of whom are
non-employee directors of the Company. The Nominating Committee reviews and
makes recommendations to the Board regarding proposed directors and compensation
of directors. The Committee will consider qualified nominees recommended by
shareholders of the Company if any such recommendation is submitted in writing
to the Secretary of the Company.
INFORMATION REGARDING CERTAIN EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
The following discussion sets forth certain information regarding the executive
officers of the Company who are not directors.
NAME Positions with the Company Age Officer Since
- ---- -------------------------- --- -------------
<S> <C> <C> <C>
John B. Rogers Treasurer and Vice President, 53 1986
Finance
N. Charles Wussow Vice President, Engineering 51 1993
Max Davis Vice President, Manufacturing 53 1995
</TABLE>
Mr. Rogers has been Treasurer and Vice President--Finance of the Company since
January 1986. He held prior positions as Chief Financial Officer of Wagner Spray
Tech, Vice President--Administration of Bachman's, Inc., and Director of Finance
of Dayton-Hudson Corporation.
Mr. Wussow joined Zytec in March 1993 as Vice President--Engineering. In 1978,
he co-founded Summit Electronics, Inc. ("Summit"), a power supply company. In
1982, Summit was sold to Basler Electric Company and Mr. Wussow remained as
General Manager of Basler's Electronic Product Group until his employment with
Zytec. For ten years prior to 1978, Mr. Wussow was employed as a design engineer
and manager with Texas Instruments Equipment Group, on various airborne radar
and missile guidance programs.
Mr. Davis has been Vice President--Manufacturing since April 1995. From July
1991 to April 1995, he was a Senior Partner for Thomas Group, Inc., a management
consulting firm. Mr. Davis served as Vice President Manufacturing for Outbound
Systems, Inc. from January 1990 to July 1991, and as Vice President
Manufacturing for Loredan Biomedical from September 1988 to November 1989. For
19 years prior to 1988, Mr. Davis was employed in various manufacturing
management positions with Hewlett- Packard, most recently as Manufacturing
Manager, Terminals and Personal Computers, in Roseville, California.
EXECUTIVE COMPENSATION
The following table sets forth the cash and noncash compensation for 1996, 1995
and 1994 awarded to or earned by Zytec's Chief Executive Officer and its four
other highest paid executives whose salary earned in 1996 exceeded $100,000:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL NUMBER OF
COMPENSATION STOCK OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY GRANTED (1) COMPENSATION (2)
- -------------------------------------------- --------- --------------------- ------------------ -------------------
<S> <C> <C> <C> <C>
Ronald D. Schmidt 1996 $272,154 0 $4,750
Chairman, President and 1995 241,130 0 4,620
Chief Executive Officer 1994 229,664 0 4,620
John M. Steel 1996 191,120 0 3,640
Vice President--Marketing and Sales 1995 182,330 0 3,110
1994 173,664 0 3,096
Josef J. Matz 1996 210,700 0 0
Managing Director of Zytec GmbH 1995 196,587 0 0
1994 178,000 0 0
Max Davis 1996 152,543 0 1,306
Vice President--Manufacturing 1995 102,509(3) 100,000 2,827 (4)
1994 N/A N/A N/A
John B. Rogers 1996 149,133 0 2,757
Treasurer and Vice President--Finance 1995 134,200 0 2,684
1994 120,225 0 2,404
- ------------------
</TABLE>
(1) Mr. Davis was granted a stock option under one of the Company's Incentive
Stock Option Plans ("ISOPs") on May 1, 1995, with an exercise price equal
to the fair market value of the Common Stock on the date of grant, which
becomes exercisable with respect to 20% of the shares subject to the option
each year thereafter. Options become exercisable under the ISOPs over five
years, beginning one year after the date of grant, so long as the employee
remains in the employ of the Company. No stock options were granted in
1994, 1995 or 1996 to any other executive officer named above.
(2) Except as otherwise noted, consists of contributions made by Zytec on
behalf of the named executive officer under the Company's Section 401(k)
defined contribution plan.
(3) Mr. Davis' employment with the Company commenced on April 17, 1995.
(4) Represents relocation costs in connection with the hiring of Mr. Davis.
STOCK OPTIONS
The Company currently maintains six Employee Incentive Stock Option Plans (the
"Plans" or the "ISOPs"). The six Plans now in existence were approved by the
Company's Board of Directors on December 16, 1983, September 24, 1984, October
25, 1985, February 6, 1987, January 29, 1993, and February 16, 1996. All of the
existing ISOPs were approved by the Company's shareholders within one year after
their adoption by the Board of Directors. The ISOPs are intended to assist the
Company in hiring and retaining well-qualified employees by allowing them to
participate in the ownership and growth of the Company through the grant of
options. Options granted under the ISOPs may be options that qualify as
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code, or options that do not so qualify. Management feels that the
granting of options will serve as partial consideration for, and give employees
an additional inducement to, remain in the service of the Company and provide
them with an increased incentive to work for the Company's success.
The ISOPs are administered by the Company's Board of Directors or, in certain
circumstances, by the Compensation Committee of the Board of Directors. The
Compensation Committee has authority to select the Company's executive officers
who will receive options and to determine the number and exercise price of such
options. In all other cases, the Board of Directors determines the employees who
will be granted options under the ISOPs and, subject to the provisions of the
ISOPs, determines the number of shares subject to each option and the exercise
price of the option. In addition, and subject to the authority of the
Compensation Committee as discussed above, the Board of Directors makes any
other determinations necessary or advisable for the administration of the ISOPs
consistent with their terms. Determinations by the Board of Directors or the
Compensation Committee, as the case may be, are final and conclusive. Grants of
options and other decisions of the Board of Directors or the Compensation
Committee are not required to be made on a uniform basis. See "Report of the
Compensation Committee."
At February 28, 1997, an aggregate of 2,246,927 shares were subject to
outstanding options and 1,251,200 shares were available for future grants under
the ISOPs. The shares to be issued upon the exercise of options granted under
the ISOPs are currently authorized but unissued shares. The number of shares of
the Company's Common Stock available under the ISOPs and purchasable upon the
exercise of options issued under the Plans will be adjusted to prevent dilution
in the event of a stock split, combination of shares, stock dividend or certain
other similar events.
The following table sets forth information concerning each exercise in 1996 by
the individuals named in the Summary Compensation Table of stock options granted
under the Plans and the value at December 31, 1996 of unexercised options held
by such individuals.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN 1996 AND YEAR-END OPTION VALUES
NUMBER OF VALUE ($) OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED VALUE ($) AT YEAR-END AT YEAR-END
NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE (1)
- ----------------------- ---------------- ---------------- ---------------------------- ------------------------------
<S> <C> <C> <C> <C>
Ronald D. Schmidt 0 $0 0 / 0 $0 / $0
John M. Steel 0 0 0 / 0 0 / 0
Josef J. Matz 40,000 375,000 (2) 40,000 / 40,000 395,000 / 395,000
Max Davis 0 0 20,000 / 80,000 135,000 / 540,000
John B. Rogers 0 0 0 / 0 0 / 0
- ---------------
</TABLE>
(1) Based on the difference between the December 31, 1996 closing price of
$10.625 per share, as reported on the Nasdaq National Market, and the
exercise price of the options.
(2) Based on the difference between the closing price of $10.125 per share
on August 28, 1996, the date of exercise, as reported on the Nasdaq
National Market, and the exercise price of the option.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The Compensation Committee makes recommendations to the Board regarding
compensation paid to Zytec's executive officers. The Compensation Committee for
1996 consisted of Lawrence J. Matthews, Sherman Winthrop, and James S. Womack,
each of whom served for the entire year; John V. Titsworth, who served through
the date of his retirement from the Board of Directors on August 23, 1996; and
Ervin F. Kamm, Jr., who was appointed to the Compensation Committee as of
December 20, 1996. All members of the Compensation Committee, during the period
in which they serve, are non-employee directors of the Company. All executive
officers who serve on the Board of Directors abstain from voting on executive
officers' compensation affecting those executive officers who are Board members.
COMPENSATION OF DIRECTORS
The Company's Board of Directors has authorized payment to all non-employee
directors of a retainer of $7,500 per year, a $500 per meeting fee, and the
reimbursement of all out-of-pocket expenses incurred by them in attending
meetings of the Board of Directors. In 1996, Gary C. Flack, Lawrence J.
Matthews, Sherman Winthrop, James S. Womack, and Dr. Fred C. Lee served as
non-employee directors of the Company for the entire year, John V. Titsworth
served as a non-employee director through the date of his retirement in August
1996, and Ervin F. Kamm, Jr. served as a non-employee director commencing with
his election in December 1996. In 1996, total directors fees paid were $10,500
to each of Messrs. Flack, Matthews, Winthrop, and Dr. Lee, $10,000 to Mr.
Womack, $6,500 to Mr. Titsworth, and $500 to Mr. Kamm.
The Company's Board of Directors has also authorized the grant to each
non-employee director, as additional compensation for each year of service as a
director commencing with 1996, of the sum of $14,500, payable in shares of the
Company's common stock. If a non-employee director serves for a period less than
a full calendar year, such additional compensation is payable on a pro rata
basis. The number of shares issuable pursuant to such grants is determined based
on the average of the closing price of said stock as quoted on The Nasdaq
National Market for each of the last five business days of the calendar year
(or, if a director's service is terminated during the year, for each of the last
five business days prior to the date such director's service is completed). In
January 1997, shares were issued to the non-employee directors for services in
1996 as follows: 1,312 shares to each of Messrs. Flack, Matthews, Winthrop,
Womack, and Dr. Lee, and 43 shares to Mr. Kamm. In August 1996, 979 shares were
issued to Mr. Titsworth for services through the date of his retirement in
August 1996.
In April 1990, Dr. Lee and Messrs. Titsworth, Winthrop, and Womack, as
non-employee directors of the Company, were each granted a non-qualified option
to purchase 20,000 shares of Common Stock at $0.50 per share. The options became
exercisable to the extent of 20% of the number of shares underlying each option
(or 4,000 shares) on each anniversary date of the option, beginning April 27,
1991. Each of the options was exercised in full prior to April 26, 1996, their
scheduled termination date.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors (the "Committee") consists
of non-employee directors. For 1996, the Committee consisted of Lawrence J.
Matthews, Sherman Winthrop, and James S. Womack, each of whom served for the
entire year; John V. Titsworth, who served through the date of his retirement
from the Board of Directors on August 23, 1996; and Ervin F. Kamm, Jr., who was
appointed to the Compensation Committee as of December 20, 1996. The Committee
is responsible for assuring that compensation for executives is consistent with
the Company's compensation philosophy. The Committee also administers and
recommends the making of grants under the Company's ISOPs with respect to the
Company's executive officers.
The Company's policy with respect to the compensation of executive officers
includes the following beliefs:
1. The Company's compensation system should attract and retain
highly-qualified personnel.
2. Executive compensation levels should be established by comparison of job
responsibility to similar positions in comparable companies.
3. It is the Company's view that short-term measurements are not generally
indicative of individual performance and, accordingly, the Company does not
believe in the practice of executive employee reviews based on short-term
or arbitrary goals.
Annual compensation for the Company's executive officers is recommended to the
Board of Directors by the Committee. In determining its recommendations, the
Committee does not use a formulaic approach. Instead, the Committee uses various
surveys of executive compensation for companies of a similar size in comparable
industries as a basis for determining competitive levels of cash compensation.
The Committee also takes into account the overall performance of the Company in
making its recommendations regarding executive officers' compensation. The
Committee also considers the scope of responsibility of a particular executive
officer's position at the Company and the executive officer's performance on
behalf of the Company. The Committee makes specific recommendations to the Board
of Directors regarding the amount of executive officers' salaries based on the
foregoing data.
Stock options, which are the only other component of compensation of the
Company's executive officers determined or recommended by the Committee, are
awarded to promote improved long-term performance by the Company. Option grants
for all executive officers, including Ronald D. Schmidt, the Company's Chairman,
President, and Chief Executive Officer, are approved by the Committee in light
of competitive compensation issues and the individual performance of the
Company's executive officers.
Recommendations regarding the compensation for Ronald D. Schmidt are made by the
Committee using a process and philosophy similar to that used for all other
executive officers. The Committee, in making its recommendations regarding Mr.
Schmidt's salary, considers the surveys regarding competitive compensation and
the overall performance of the Company, along with its own assessment of Mr.
Schmidt's performance and contributions to the Company. The Committee then
recommends a salary for approval by the Board of Directors.
Deliberations and votes of the Board of Directors regarding the compensation of
executive officers take place without the presence of any of the executive
officers whose compensation is being determined. The Compensation Committee met
on November 14, 1996 to determine salaries of executive officers for 1997, and
the Board of Directors considered and voted upon such recommendations on
December 20, 1996.
By the Compensation Committee:
Lawrence J. Matthews
Sherman Winthrop
James S. Womack
PERFORMANCE GRAPH
The Company's Common Stock has been traded on The Nasdaq National Market since
November 11, 1993. Prior to that date, there was no public market for the
Company's Common Stock. The following graph shows changes during the period from
October 29, 1993 (the last trading day before the beginning of the month in
which the Company's Common Stock was first traded on The Nasdaq National Market)
to December 31, 1996 (the last trading day of calendar year 1996), in the value
of $100 invested in: (1) the Company's Common Stock; (2) the CRSP Total Return
Index for The Nasdaq Stock Market (US and Foreign); and (3) the Nasdaq
Electronic Components Stocks Index. The values of each investment as of the
dates indicated are based on share prices plus any dividends paid in cash, with
the dividends reinvested on the date they were paid. The calculations exclude
trading commissions and taxes.
CUMULATIVE TOTAL SHAREHOLDER RETURN
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
10/29/93 12/31/93 12/30/94 12/29/95 12/31/96
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Zytec Corporation $100.00 $ 81.93 $ 62.65 $110.84 $204.82
- -----------------------------------------------------------------------------------------------------------------
CRSP Nasdaq (US and Foreign) $100.00 $ 99.69 $ 96.69 $135.79 $166.30
- -----------------------------------------------------------------------------------------------------------------
Nasdaq Electronic Components Stocks Index $100.00 $100.11 $110.60 $183.18 $316.64
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock of the Company as of February 28, 1997,
except as otherwise noted, by (i) each shareholder who is known by the Company
to own beneficially more than 5% of the outstanding Common Stock, (ii) each
director (who together constitute all nominee directors) and each executive
officer included in the Summary Compensation Table, and (iii) all executive
officers and directors as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) CLASS (2)
- ------------------------ ---------------------------- ----------
<S> <C> <C>
BMO Nesbitt Burns Capital (U.S.), Inc. 877,193 (3) 8.6%
790 North Milwaukee Street
Milwaukee, WI 53202
Navellier & Associates 744,215 (4) 8.0
1 East Liberty Street, 3rd Floor
Reno, NV 89501
DIRECTORS AND EXECUTIVE OFFICERS:
Ronald D. Schmidt 945,250 (5)(6) 10.2
7575 Market Place Drive
Eden Prairie, MN 55344
Lawrence J. Matthews 851,932 9.2
7601 Fifth Avenue
Richfield, MN 55423
John M. Steel 823,402 (6) 8.9
7575 Market Place Drive
Eden Prairie, MN 55344
Gary C. Flack 252,562 (5)(6) 2.7
Josef J. Matz 180,000 (7) 1.9
John B. Rogers 94,136 (6) 1.0
Sherman Winthrop 61,312 *
James S. Womack 41,312 *
Dr. Fred C. Lee 30,312 *
Max Davis 21,632 (7) *
Ervin F. Kamm, Jr. 43 *
Thomas J. Kent 0 *
All executive officers and directors as a
group (13 persons) 3,381,893 (8) 36.0%
- ---------------
* Less than 1%.
</TABLE>
(1) Unless otherwise indicated, each person or group has sole voting and
investment power with respect to all outstanding shares. The table includes
shares not outstanding but which may be acquired within 60 days of February
28, 1997 pursuant to the exercise of options to purchase Common Stock.
(2) The percentage calculation is based upon 9,264,603 shares outstanding at
February 28, 1997. For purposes of computing the percent of class owned by
each person, the number of shares which may be acquired by such person
within 60 days of February 28, 1997 pursuant to the exercise of options
referred to in note (7) or (8), or pursuant to the conversion of the
Convertible Subordinated Promissory Note or exercise of the Stock Purchase
Warrant referred to in note (3), is deemed outstanding.
(3) Reflects information as of December 23, 1996, based on a Schedule 13D,
dated January 2, 1997, filed by such company with the Securities and
Exchange Commission, which indicates that the shareholder has shared voting
power and shared dispositive power with respect to said shares. Said shares
are not presently outstanding but may be acquired by such company upon
conversion of a Convertible Subordinated Promissory Note or exercise of a
Stock Purchase Warrant.
(4) Reflects information as of December 31, 1996, based on a Schedule 13G,
dated February 15, 1997, filed by such company with the Securities and
Exchange Commission, which indicates that the shareholder has shared voting
power and shared dispositive power with respect to said shares.
(5) Includes shares held by a partnership consisting of the individual and
members of his family, as follows: Mr. Schmidt (400,000 shares) and Mr.
Flack (25,650).
(6) Includes shares held by the individual's spouse and children, as follows:
Mr. Schmidt (2,200 shares), Mr. Steel (200,000), Mr. Flack (95,600) and Mr.
Rogers (48,502).
(7) Includes, for each individual named, the following number of shares subject
to non-qualified options or options granted under the ISOPs: Mr. Matz
(40,000) and Mr. Davis (20,000).
(8) Includes 140,000 shares subject to non-qualified options or options granted
under the ISOPs.
COMPLIANCE WITH SECTION 16(a)
The Company's directors, executive officers, and any persons holding more than
10% of outstanding Common Stock are required to file reports concerning their
initial ownership of Common Stock and any subsequent changes in that ownership.
The Company believes that the filing requirements were satisfied for 1996. In
making this disclosure, the Company has relied solely on written representations
of its directors, executive officers and beneficial owners of more than 10% of
Common Stock and copies of the reports they have filed with the Securities and
Exchange Commission.
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS
(PROPOSAL 2)
On December 20, 1996, and subject to the ratification of the holders of the
Company's Common Stock, Coopers & Lybrand L.L.P. was selected by the Company's
Board of Directors as the independent accountants to audit the Company's
consolidated financial statements for the year ending December 31, 1997. If the
holders of the Common Stock do not ratify the selection of Coopers & Lybrand
L.L.P., other independent accountants will be considered by the Board of
Directors. All proxies received in response to this solicitation will be voted
in favor of the ratification of the appointment of Coopers & Lybrand L.L.P. as
the Company's independent accountants, unless other instructions are indicated
thereon.
Representatives of Coopers & Lybrand L.L.P. are expected to be present at the
Annual Meeting and will have the opportunity to make a statement, if they desire
to do so, and will be available to respond to appropriate questions.
SHAREHOLDER APPROVAL
The affirmative vote of a majority of the voting power of the shares present in
person or by proxy at the Annual Meeting and entitled to vote (assuming a quorum
is present) is required to ratify the appointment of Coopers & Lybrand L.L.P. as
the independent accountants for the Company for the year ending December 31,
1997.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR
THE RATIFICATION OF THE APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS
THE INDEPENDENT ACCOUNTANTS AS SET FORTH IN PROPOSAL 2.
OTHER BUSINESS
All items of business intended by the management to be brought before the
meeting are set forth in this Proxy Statement, and the management knows of no
other business to be presented. If other matters of business not presently known
to the Board of Directors shall be properly raised at the Annual Meeting, the
person named as the proxies will vote on such matters in accordance with their
best judgment.
FUTURE SHAREHOLDER PROPOSALS
Under the Securities Exchange Act of 1934, the shareholders of the Company have
certain rights to have shareholder proposals included in the Proxy Statement of
the Company for the Company's Annual Shareholders' Meeting in 1998. Any voting
shareholder desiring to submit a proposal for consideration at the 1998 Annual
Meeting should forward the proposal so that it will be received in the Company's
principal executive offices no later than November 25, 1997. Proposals received
by that date that are proper for consideration at the Annual Meeting and
otherwise conform to the rules of the Securities and Exchange Commission will be
included in the 1998 Proxy Statement. Due to the technical nature of the rights
of shareholders and the Company in this area, a shareholder desiring to make a
shareholder proposal should consider consulting his or her personal legal
counsel with respect to such rights.
By Order of the Board of Directors
SHERMAN WINTHROP
Dated: March 25, 1997 Secretary
ZYTEC CORPORATION
A MINNESOTA CORPORATION
7575 MARKET PLACE DRIVE
EDEN PRAIRIE, MINNESOTA 55344
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ZYTEC CORPORATION
Ronald D. Schmidt and John B. Rogers, and either of them, are hereby appointed
proxies (the "Proxies"), each with the power to appoint his substitute, to
represent and to vote as designated below, all shares of common stock of Zytec
Corporation held of record by the undersigned on March 14, 1997 at the Annual
Meeting of Shareholders to be held on April 28, 1997, or any adjournment
thereof.
1. Election of the following nominees as directors: RONALD D. SCHMIDT, ERVIN
F. KAMM, JR., JOHN M. STEEL, JOSEF J. MATZ, THOMAS J. KENT, SHERMAN
WINTHROP, GARY C. FLACK, DR. FRED C. LEE, LAWRENCE J. MATTHEWS, AND JAMES
S. WOMACK
[ ] FOR ALL NOMINEES [ ] WITHHOLD FOR ALL NOMINEES
[ ] FOR ALL NOMINEES EXCEPT THE FOLLOWING (INSTRUCTION: TO WITHHOLD
AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE(S), WRITE THE NAME(S) OF
THE NOMINEE(S) IN THE SPACE PROVIDED BELOW.)
___________________________________________________________________________
2. Ratification of the selection of Coopers & Lybrand L.L.P. as the
independent accountants to audit the consolidated financial statements of
Zytec Corporation for the year ending December 31, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In the event of the inability or unwillingness of one or more of the above-named
nominees to serve as a director at the time of the Annual Meeting on April 28,
1997 or any adjournments thereof, the shares represented by the proxies will be
voted in favor of the remainder of such nominees and may also, in the discretion
of the holders of said proxies, be voted for other nominees not named herein in
lieu of those unable or unwilling to serve. As of the date hereof, the Board of
Directors knows of no nominee who is unable or unwilling to serve.
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the Annual Meeting; management is not presently
aware of any such matters to be presented for action at the Annual Meeting.
The undersigned hereby ratifies and confirms all the parties shall lawfully do
or cause to be done by virtue hereof and hereby revokes all proxies previously
given to vote such shares.
This Proxy, when properly executed, shall be voted in the manner indicated by
the undersigned shareholder. If no direction is made, this Proxy will be voted
in FOR fixing the number of Directors at ten, FOR the directors named in the
Proxy Statement, and FOR the proposal to ratify the selection of Coopers &
Lybrand L.L.P. to audit the consolidated financial statements of Zytec
Corporation for the year ending December 31, 1997.
DATED: _______________, 1997 Please sign exactly as name appears
below. When shares are held by joint
tenants, both must sign. When signing as
attorney, executor, administrator,
trustee, guardian, or in some other
fiduciary capacity, please give full
title as such. If a corporation, please
sign in full corporate name by president
or other authorized officer. If a
partnership, please sign in partnership
name by authorized person.
________________________________________
SIGNATURE
________________________________________
SIGNATURE IF HELD JOINTLY
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY, USING THE ENCLOSED
ENVELOPE.
