<PAGE> 1
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
ZERO Corporation
(Name of Registrant as Specified in its Charter)
Anita J. Cutchall
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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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:
---------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
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Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / 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:
N/A
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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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<PAGE> 2
[LOGO]
- - - --------------------------------------------------------------------------------
ZERO CORPORATION
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
AND
PROXY STATEMENT
JULY 27, 1994
<PAGE> 3
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OF
ZERO CORPORATION
The 1994 Annual Meeting of Stockholders of ZERO Corporation will be held on
Wednesday, July 27, 1994, at 2:00 p.m., local time, at The Biltmore Los Angeles,
Tiffany Room, 506 South Grand Avenue, Los Angeles, California, for the following
purposes:
1. To elect 3 directors for a three-year term to expire at the 1997
Annual Meeting of Stockholders; and to elect 1 director for a
two-year term to expire at the 1996 Annual Meeting of
Stockholders.
2. To consider and vote upon a proposal to approve the Company's 1994
Stock Option Plan.
3. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
Stockholders of record at the close of business on June 10, 1994, are
entitled to notice of and to vote at the meeting. A list of such stockholders
will be open for examination by any stockholder, for any purpose germane to the
Annual Meeting, for a period of ten days prior to the date of the meeting during
ordinary business hours at the executive offices of the Company, 444 South
Flower Street, Suite 2100, Los Angeles, California 90071.
All stockholders are cordially invited to attend the meeting in person.
Whether or not you attend, to assure your representation, please vote, sign,
date and return your proxy card in the accompanying envelope. If you attend the
meeting and wish to vote in person, you may withdraw your proxy at that time.
By Order of the Board of Directors
Howard W. Hill, Chairman of the Board
Anita J. Cutchall, Corporate Secretary
Los Angeles, California
June 24, 1994
<PAGE> 4
ZERO CORPORATION
444 South Flower Street, Suite 2100
Los Angeles, California 90071-2922
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of ZERO Corporation, a Delaware corporation,
for use at the 1994 Annual Meeting of Stockholders to be held on July 27, 1994,
or at any adjournment or postponement thereof, pursuant to the Notice of Annual
Meeting of Stockholders.
The persons named on the accompanying proxy card will vote shares
represented by all valid proxies in accordance with the instructions thereon. If
no instructions are given, shares represented by valid proxies will be voted FOR
each of the nominees for director named herein and FOR the 1994 Stock Option
Plan. As to any other business which may properly come before the Annual
Meeting, the named proxies will vote in accordance with their best judgment. The
Company does not currently know of any other such business. A stockholder giving
a proxy may revoke it at any time before it is exercised (i) by giving to the
Corporate Secretary of the Company a written notice of revocation or an executed
proxy bearing a later date, or (ii) by appearing at the Annual Meeting and
voting in writing in person.
This Proxy Statement and the form of proxy will be sent to stockholders
commencing approximately June 24, 1994.
RECORD DATE AND VOTING
Only holders of shares of Common Stock of record at the close of business
on June 10, 1994, are entitled to notice of and to vote at the Annual Meeting.
At the close of business on June 10, 1994, the Company had outstanding
15,919,744 shares of Common Stock.
Subject to cumulative voting rights in the election of directors, holders
of shares of Common Stock are entitled to one vote per share on each matter
submitted to or acted upon by the stockholders at the Annual Meeting. In the
election of directors, votes may be cast in favor or withheld. Votes that are
withheld will be excluded entirely from the vote and will have no effect. In the
election of directors, stockholders are also entitled to cumulative voting
rights. Under cumulative voting, each stockholder is entitled to as many votes
as is equal to the number of directors to be elected multiplied by the number of
shares owned by the stockholder, and all such votes may be cast for one nominee
or distributed among two or more nominees. Approval of the 1994 Stock Option
Plan and all other matters which may come before the meeting requires a majority
vote of the stockholders of the Company.
<PAGE> 5
SOLICITATION
The cost of solicitation will be borne by the Company. In addition to the
use of the mails, proxies may be solicited, in person and by telephone, by
regular employees of the Company, at no additional compensation. The Company has
also engaged Morrow & Co. to assist in the solicitation of proxies. This firm
will be paid a fee of $5,000 and will be reimbursed for expenses incurred in
connection with such engagement. The Company will also reimburse banks,
brokerage houses and other custodians, nominees and fiduciaries for their
reasonable expenses in forwarding proxy materials to the beneficial owners of
the shares held by them.
VOTING SECURITIES AND CERTAIN STOCKHOLDERS
The following table shows the total number of shares of Common Stock
beneficially owned by directors, the nominees and the named executive officers,
and all directors and executive officers as a group, at the close of business on
June 1, 1994. No stockholder was known by the Company to own beneficially more
than 5% of the outstanding Common Stock as of June 1, 1994.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
TITLE OF CLASS NAME OF BENEFICIAL OWNER OWNERSHIP(1) OF CLASS
- - - ------------------ -------------------------------------------- ------------ --------
<S> <C> <C> <C>
Common Stock Gary M. Cusumano(a) 500 *
Bruce J. DeBever(a) 1,000 *
Clinton G. Gerlach(a) 11,790 *
John B. Gilbert(a)(b) 10,491 *
Wilford D. Godbold, Jr.(a)(b) 141,927 *
Bernard B. Heiler(a)(b) 14,264 *
Howard W. Hill(a)(b) 45,315 *
Whitney A. McFarlin(a) 5,790 *
Anita J. Cutchall(b) 1,486 *
George A. Daniels(b) 24,100 *
James F. Hermanson(b) 34,118 *
Directors and executive officers
as a group (11 persons) 290,781 1.8%
</TABLE>
(a) Director
(b) Executive officer
- - - ---------------
* Less than 1%.
(1) Includes an aggregate of 114,606 shares which, as of June 1, 1994, may be
acquired within sixty days pursuant to the exercise of options, and shares
held by trusts of which directors, executive officers and members of their
families are trustees.
2
<PAGE> 6
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Pursuant to Section 16(a) of the Securities Exchange Act of 1934 and the
rules issued thereunder, the directors and executive officers of the Company are
required to file with the Securities and Exchange Commission and with the New
York Stock Exchange reports of ownership and changes in ownership of the
Company's Common Stock. Copies of such reports are required to be furnished to
the Company. Based solely on its review of the copies of such reports furnished
to the Company, or written representations that no reports were required, the
Company believes that during fiscal 1994 all of its executive officers and
directors complied with Section 16(a) requirements.
ELECTION OF DIRECTORS
PROPOSAL 1
There are currently eight members of the Board of Directors of the Company.
The Certificate of Incorporation of the Company provides for a classified Board
of Directors. Class III consists of three members: John B. Gilbert, Wilford D.
Godbold, Jr. and Howard W. Hill. Effective May 1, 1994, the Board of Directors,
in acknowledgment of Mr. Gilbert's many achievements with the Company, elected
Mr. Gilbert as Chairman Emeritus. Mr. Gilbert stepped down as Chairman of the
Board of Directors, and the Board elected Mr. Hill as Chairman. The Board of
Directors has nominated Messrs. Gilbert, Godbold and Hill in Class III for
election to hold office for three years until the 1997 Annual Meeting of
Stockholders, and until their successors have been duly elected and qualified.
On April 22, 1994, the Board of Directors elected Gary M. Cusumano to fill
the vacancy on the Board of Directors until the Annual Meeting of Stockholders,
and nominated him in Class II to hold office until the 1996 Annual Meeting of
Stockholders and until his successor has been duly elected and qualified.
In connection with Proposal 1, proxies, unless instructed otherwise, will
be voted FOR the election of Mr. Cusumano in Class II and FOR the election of
Messrs. Gilbert, Godbold and Hill in Class III. If a nominee shall become
unavailable or refuse to serve as a director (an event that is not anticipated),
the named proxies will vote for a substitute nominee at their discretion.
3
<PAGE> 7
The following information is furnished with respect to the nominees and
each of the directors whose terms will continue after the Annual Meeting.
<TABLE>
<CAPTION>
TERM TO DIRECTOR
NOMINEE FOR DIRECTOR CLASS II AGE POSITION/PRINCIPAL OCCUPATION EXPIRE SINCE
- - - -------------------------------- --- --------------------------------------------- ------- --------
<S> <C> <C> <C> <C>
Gary M. Cusumano 50 Director; President, The Newhall Land and 1994 1994
Farming Company (real estate and
agriculture).
</TABLE>
<TABLE>
<CAPTION>
NOMINEES FOR DIRECTOR CLASS III
- - - --------------------------------
<S> <C> <C> <C> <C>
John B. Gilbert 73 Director, Chairman Emeritus; Chairman and 1994 1952
President, TOLD Corporation (land
development).
Wilford D. Godbold, Jr. 56 Director, President and Chief Executive 1994 1982
Officer. Mr. Godbold also serves as a
director of Pacific Enterprises, Santa Fe
Pacific Pipelines, Ltd., and The Southern
California Gas Company.
Howard W. Hill 67 Director, Chairman of the Board. Mr. Hill 1994 1960
also serves as a director of Precision
Castparts Corporation.
</TABLE>
<TABLE>
<CAPTION>
CONTINUING DIRECTORS CLASS I
- - - --------------------------------
<S> <C> <C> <C> <C>
Bruce J. DeBever 58 Director; President, Decor Concepts, Inc. 1995 1992
(commercial furniture).
Bernard B. Heiler 48 Director, Vice President -- Marketing and 1995 1988
Sales.
Whitney A. McFarlin 53 Director; Chairman, President and Chief 1995 1988
Executive Officer, Angeion Corporation
(medical research and development). Mr.
McFarlin also serves as a director of
PSICOR, Inc.
</TABLE>
<TABLE>
<CAPTION>
CONTINUING DIRECTOR CLASS II
- - - --------------------------------
<S> <C> <C> <C> <C>
Clinton G. Gerlach 67 Director; Chairman of the Board, President 1996 1972
and Chief Executive Officer, Calnetics
Corporation (molded plastic components).
</TABLE>
Each of the directors listed above has held the same position or another
executive position with the same employer during the past five years except for
Messrs. Heiler and McFarlin. Mr. Heiler has held his current position with the
Company since October 1992, prior to which he was Vice President of GTE
California, a telephone public utility from 1984 through 1992, and President of
GTEL, a telecommunications integrator and a subsidiary of GTE California, from
January 1986 through October 1992. Mr. McFarlin has held his current position at
Angeion Corporation since September 1993, prior to which he was President and
Chief Executive Officer of Clarus Medical Systems (formerly Medilase, Inc.),
medical delivery systems, since July 1990, a private investor since March 1990,
and was the President and Chief Executive Officer of Everest & Jennings
International from June 1985 through March 1990.
4
<PAGE> 8
PLEASE NOTE THAT YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE
ELECTION OF THE NOMINEES LISTED ON PAGE 4.
MEETINGS OF THE BOARD OF DIRECTORS, COMMITTEES OF THE BOARD AND DIRECTORS' FEES
The Board of Directors met four times during the fiscal year ended March
31, 1994. The Board at its organizational meeting appoints an Audit Committee, a
Compensation Committee and a Nominating Committee. The Board also appoints an
Executive Committee and a Stock Option Committee.
Messrs. DeBever, Gerlach and McFarlin serve on the Audit Committee, the
functions of which include serving as liaison between the Board and the
independent public accountants of the Company, reviewing and discussing the
accountants' annual internal control recommendations with both the accountants
and management, and making such other inquiries and recommendations as they deem
necessary. The Audit Committee met two times during fiscal year ended March 31,
1994 and all members attended.
Messrs. DeBever, Gilbert, Hill and McFarlin serve on the Compensation
Committee, the functions of which include reviewing and recommending to the full
Board the remuneration to be paid to the President and Chief Executive Officer,
and reviewing with the President his plans with respect to the remuneration of
other executive officers and certain key employees of the Company. This
committee also reviews and prepares recommendations to the full Board with
respect to proposed changes in the Company's major fringe benefit plans, such as
the 1994 Stock Option Plan (the "1994 Plan"), the ZERO Corporation Pension Plan
(the "Pension Plan"), and the supplemental executive retirement and life
insurance plans. The Compensation Committee met twice during fiscal year ended
March 31, 1994 and all members attended. The Compensation Committee's report on
executive compensation begins at page 6.
Messrs. Gilbert, Godbold and Hill serve on the Nominating Committee, the
functions of which include reviewing and recommending to the full Board
potential candidates for positions on the Board. The committee will consider
nominees recommended by stockholders if such nominations are submitted in
writing, accompanied both by a description of the proposed nominee's
qualifications and an indication of the consent of the proposed nominee and
relevant biographical information. Recommendations should be addressed to the
Nominating Committee in care of the Corporate Secretary of the Company for
receipt not less than thirty, nor more than sixty days, prior to the annual
meeting. If less than forty days' notice or prior public disclosure of the
meeting date is given to stockholders, then recommendations must be received not
later than the close of business on the tenth day following the notice or public
disclosure of the meeting date. The Nominating Committee met once during fiscal
year ended March 31, 1994 and all members attended.
Messrs. Gilbert, Godbold and Hill serve on the Executive Committee, the
functions of which include acting for the Board of Directors when the action of
the full Board is not required. This committee held no meetings during fiscal
year ended March 31, 1994.
5
<PAGE> 9
Messrs. DeBever and McFarlin serve on the Stock Option Committee, the
functions of which include making all determinations necessary for the
administration of the 1994 Plan. This committee met once during the year ended
March 31, 1994 and all members attended.
Nonemployee directors receive a fee of $3,000 per quarter plus $1,000 for
each meeting attended. No additional fees are paid for attendance at committee
meetings. Under the 1988 Stock Option Plan (the "1988 Plan"), approved by
stockholders of the Company, at the organizational meeting of the Board of
Directors immediately following each annual meeting of stockholders, nonemployee
directors were automatically granted a nonqualified option to purchase 1,000
shares of Common Stock. The options were granted at prices not less than the
fair market value of the Common Stock on the date of grant. Under the 1994 Plan
submitted as Proposal 2 below, upon approval of the stockholders of the Company,
at the organizational meeting of the Board of Directors immediately following
the 1994 Annual Meeting and subsequent annual meetings of stockholders,
nonemployee directors will automatically be granted nonqualified options to
purchase 2,000 shares of Common Stock. The options will be granted at prices not
less than the fair market value of the Common Stock on the date of grant.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's compensation policies applicable to its executive officers
consist of three major components: base salary, annual bonus and stock options.
The executive compensation policies of the Compensation Committee (the
"Committee") are designed to provide competitive levels of compensation that
integrate pay with the Company's annual and long-term performance goals which
reward above-average corporate performance, recognize individual initiative and
achievement, and assist the Company in attracting and retaining highly-qualified
and experienced executives.
During fiscal year 1994 the Committee retained the services of Hewitt
Associates, an international benefits and compensation consulting firm
("Hewitt"), to study the compensation policies of the Company in comparison to
the compensation practices of other companies of similar size and similar
industries. The study also took into account the performance of the Company.
Hewitt also reviewed the compensation plans in which the executive officers
named in the "Summary Compensation Table" participate and the compensation for
each of such officers. The report of Hewitt to the Committee resulted in changes
to the Company's compensation plans as discussed below.
The Company has established and annually adjusts salaries for each
executive officer position as considered appropriate in light of the
responsibilities and duties of the position and the performance of the
individual. The President and Chief Executive Officer of the Company reviews
with the Committee his plans with respect to the remuneration of the executive
officers and other key employees of the Company. He also reviews major fringe
benefit plans of the Company, including the 1994 Plan, the Pension Plan, and the
supplemental executive retirement and life insurance plans.
The Committee establishes a base salary for the President and Chief
Executive Officer, which is subject to approval of the full Board of Directors.
The Committee does not operate with a precise formula, but considers, in
establishing compensation, the Company's strategic goals, its success in meeting
such goals, its cash flow, its earnings, the general cost of living, and the
economy in which the Company operates. In
6
<PAGE> 10
reviewing the President's salary for fiscal year 1994, in conjunction with the
Hewitt study, the Committee considered his individual accomplishments, including
his efforts in obtaining viable acquisition candidates, effective cost controls,
working capital management and maintaining a high quality workforce. For fiscal
1994, in accordance with the compensation philosophy, the Committee increased
the salary of the President and Chief Executive Officer from $283,250 to
$300,000, an increase of 5.9%.
Based on the Hewitt study, the Board of Directors adopted a new bonus plan
for the management employees of the Company to better reflect what the Board
believed to be fair compensation for the 1994 fiscal year and future years.
Under the bonus plan, in addition to base compensation, the Committee has the
authority to assign a target bonus to the President and Chief Executive Officer.
Additionally, the President and Chief Executive Officer will review with the
Committee the target bonuses to be assigned to officers and other key executives
of the Company. The bonus plan is designed to award bonuses based upon three
factors: actual net income versus plan net income for the fiscal year, the
increase in value to the Company's stockholders in the form of dividends and
stock price appreciation, and the percentage increase in tangible stockholders'
equity during the fiscal year. Bonuses awarded to the President and Chief
Executive Officer, and to the named executive officers of the Company, are shown
in the "Summary Compensation Table" below.
The Committee endorses the compensation philosophy that stock ownership by
management and stock-based performance compensation arrangements are beneficial
in aligning the interests of management with those of the stockholders and
believes the result is an enhancement of stockholder value. Thus, the Committee
recommends to the Stock Option Committee awards of options covering shares of
Common Stock of the Company, as well as stock appreciation rights for certain
options not deemed to be "incentive stock options" within the meaning of Section
422A of the Internal Revenue Code of 1986.
Information with respect to the award of stock options to the President and
Chief Executive Officer, and to the named executive officers of the Company, as
well as the description of the 1988 Plan, is shown below in the table entitled
"Option/SAR Grants in Last Fiscal Year".
In determining the number of shares subject to options granted to the
President and Chief Executive Officer, officers and other key employees of the
Company, the Committee, along with the Stock Option Committee, evaluates their
respective overall compensation packages. The Committee has also established
general target guidelines for awards of stock options and stock appreciation
rights for other levels of management based upon salary range, individual
performance and potential to improve stockholder value, as recommended by the
President and Chief Executive Officer.
Compensation Committee of the
Board of Directors setting
compensation
for fiscal year 1994
John B. Gilbert, Chairman
Bruce J. DeBever
Howard W. Hill
Whitney A. McFarlin
7
<PAGE> 11
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee setting compensation for fiscal
year 1994 consisted of Messrs. John B. Gilbert, Bruce J. DeBever, Howard W. Hill
and Whitney A. McFarlin. Mr. Gilbert is Chairman Emeritus of the Board of
Directors and Chairman of the Compensation Committee, and was formerly President
and Chief Executive Officer of the Company, and Chairman of the Board. Howard W.
Hill is Chairman of the Board of Directors, and was formerly President and Chief
Executive Officer of the Company, and Vice Chairman of the Board.
EXECUTIVE COMPENSATION
COMPENSATION TABLES
The following table shows the compensation paid by the Company to its Chief
Executive Officer and the other highest-paid executive officers during the
fiscal years indicated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------- ALL OTHER
NAME AND ------------------------- STOCK OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) (IN SHARES) ($)(2)(3)
- - - ---------------------------------- ---- --------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Wilford D. Godbold, Jr. 1994 $ 300,000 $ 142,500 22,000 $ 27,824
President, Chief Executive 1993 $ 283,250 $ 78,563 25,000 $ 27,478
Officer and Director 1992 $ 275,000 $ 45,000 21,000 --
James F. Hermanson 1994 $ 175,200 $ 66,500 11,000 $ 24,602
Vice President 1993 $ 167,890 $ 39,281 12,500 $ 21,454
1992 $ 163,000 $ 22,500 10,500 --
Bernard B. Heiler(4) 1994 $ 175,000 $ 66,500 11,000 $ 2,415
Vice President-Marketing and
Sales
George A. Daniels 1994 $ 169,925 $ 64,600 11,000 $ 17,323
Vice President and Chief 1993 $ 160,680 $ 36,663 12,500 $ 17,397
Financial Officer 1992 $ 156,000 $ 21,000 10,500 --
Anita J. Cutchall(4) 1994 $ 85,017 $ 23,940 2,600 $ 1,929
Director of Legal Affairs and
Corporate Secretary
</TABLE>
- - - ---------------
(1) Includes payments earned and accrued in the fiscal year listed but paid
during the following fiscal year.
(2) Represents Company contributions of $16,563, $15,378, $1,178, $14,555 and
$1,331 under the ZERO Corporation Pension Plan (a defined contribution plan)
for the accounts of Messrs. Godbold, Hermanson, Heiler and Daniels and Ms.
Cutchall, respectively; $5,664, $5,162 and $2,618 under the Supplemental
Executive Retirement Plan for Messrs. Godbold, Hermanson and Daniels,
respectively; $1,349 and $2,050 of insurance premiums paid on term life
insurance for Messrs. Godbold and Hermanson, respectively; and an additional
$4,248, $2,012, $1,237, $150 and $598 under the Employee Stock Purchase Plan
for Messrs. Godbold, Hermanson, Heiler and Daniels and Ms. Cutchall,
respectively.
(3) Amounts for fiscal years prior to fiscal year 1993 are not required to be
disclosed.
(4) Fiscal years prior to fiscal year 1994 are not required to be disclosed.
8
<PAGE> 12
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS/SARS
SECURITIES GRANTED TO GRANT
UNDERLYING EMPLOYEES EXERCISE OR DATE
OPTIONS/SARS IN FISCAL BASE PRICE EXPIRATION PRESENT
NAME GRANTED(1) YEAR ($/SH) DATE VALUE(2)
- - - --------------------------------------- ------------ ------------ ----------- ---------- --------
<S> <C> <C> <C> <C> <C>
Wilford D. Godbold, Jr. 22,000 10.1% $ 13.75 10/18/98 $ 93,060
James F. Hermanson 11,000 5.1% $ 13.75 10/18/98 $ 46,530
Bernard B. Heiler 11,000 5.1% $ 13.75 10/18/98 $ 46,530
George A. Daniels 11,000 5.1% $ 13.75 10/18/98 $ 46,530
Anita J. Cutchall 2,600 1.2% $ 13.75 10/18/98 $ 10,998
</TABLE>
- - - ---------------
(1) The option price of each option granted under the 1988 Plan is not less than
the fair market value of the Common Stock on the date of grant. Options are
generally granted for terms of five years and generally exercisable in
annual installments of one-third of the total grant commencing one year from
the date of grant, on a cumulative basis. Options are subject to earlier
termination in certain events related to death, retirement or other
termination of employment. Options granted generally are intended to meet
the definition of an "incentive stock option" as that term is defined in
Section 422A of the Internal Revenue Code of 1986 or are nonqualified
options. Such options may be granted with provisions that they may be
exercised for a period of up to ten years from the date of grant, may
provide for stock appreciation rights and may give the option holder the
right to deliver shares of the Company's Common Stock already owned as
partial consideration for the option price. All of the above options were
granted on October 19, 1993. No additional options will be granted under the
1988 Plan.
(2) Based on the modified Black-Scholes option pricing model adapted for use in
valuing executive stock options. The actual value, if any, an executive may
realize will depend on the excess of the stock price over the exercise price
on the date the option is exercised, so that there is no assurance the value
realized by an executive will be at or near the value estimated by the
Black-Scholes model. Assumptions under the Black-Scholes model are: expected
volatility of 33.6%; risk-free rate of return of 6.7%; dividend yield of 3%;
and time of exercise at five years. No adjustments have been made for
non-transferability or risk of forfeiture.
9
<PAGE> 13
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF NUMBER OF UNEXERCISED
SECURITIES UNEXERCISED IN-THE-MONEY
UNDERLYING OPTIONS/SARS OPTIONS/SARS
OPTIONS/SARS AT FY END (#) AT FY END ($)(2)
EXERCISED VALUE ------------------------- -------------------------
NAME (#) REALIZED ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- - - ----------------------- ------------ --------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Wilford D. Godbold, Jr. 25,915 $84,392 51,043/45,668 $88,185/$50,083
James F. Hermanson 6,000 $25,500 24,666/22,834 $41,424/$25,041
Bernard B. Heiler 0 0 8,581/22,669 $12,240/$24,490
George A. Daniels 19,003 $68,821 11,663/22,834 $24,254/$25,041
Anita J. Cutchall 0 0 1,066/ 4,734 $ 2,335/$ 4,673
</TABLE>
- - - ---------------
(1) Represents the difference between the market value on the date of exercise
of the option and the exercise price of the option.
(2) Represents the difference between the price of $13.50, which was the closing
price of the Company's Common Stock on the New York Stock Exchange Composite
Index on March 31, 1994, and the exercise price of the option.
10
<PAGE> 14
COMMON STOCK PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change,
assuming quarterly reinvestment of dividends, of the Common Stock of the Company
against the cumulative total return of the S&P Composite-500 Stock Index and the
S&P Manufacturing Industries Index, for the five year period commencing March
31, 1989. The stock price performance depicted is not necessarily indicative of
future price performance.
The information shall not be deemed "filed" with the Securities and
Exchange Commission and shall not be deemed to be incorporated into any filing
of the Company under the Securities Act of 1933 or the Securities Exchange Act
of 1934 in the absence of specific reference to such captions and information.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
3-31-89 3-31-90 3-31-91 3-31-92 3-31-93 3-31-94
------- ------- ------- ------- ------- -------
Zero Corporation $100 $ 95 $ 95 $ 95 $115 $108
S&P 500 $100 $119 $136 $152 $175 $177
S&P Manufacturing $100 $123 $133 $146 $158 $184
__________
* $100 INVESTED ON 03/31/89 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING MARCH 31.
11
<PAGE> 15
PROPOSAL 2
1994 STOCK OPTION PLAN
At April 22, 1994, only 38,329 shares remained available for grant under
the Company's 1988 Plan. Accordingly, in order to continue to encourage stock
ownership by selected officers and employees of the Company, as well as
directors who are not also employees of the Company ("Nonemployee Directors"),
the Board of Directors adopted the 1994 Stock Option Plan on April 22, 1994 (the
"1994 Plan"). The 1994 Plan will make 750,000 shares of the Company's Common
Stock available for options. The closing sale price of the Company's Common
Stock on the New York Stock Exchange on June 10, 1994 was $12.50.
The 1994 Plan provides for the grant of incentive stock options ("incentive
stock options") as defined under Section 422A of the Internal Revenue Code of
1986, as amended (the "Code"), and for options that do not so qualify
("nonqualified options"), as determined in each individual case by a duly
appointed committee of the Board of Directors (the "Committee"). The 1994 Plan
also provides for the grant of stock appreciation rights ("stock appreciation
rights") in connection with options granted.
Key full-time employees, including officers of the Company, are eligible to
receive grants of options and associated stock appreciation rights under the
1994 Plan. As of the date of this Proxy Statement, there are approximately 60
such key employees.
Beginning with the organizational meeting of the Board of Directors
immediately after the 1994 Annual Meeting (and at the organizational meeting of
the Board of Directors immediately after each annual meeting thereafter) (the
"Date of Grant"), each Nonemployee Director shall automatically be granted a
nonqualified option to purchase 2,000 shares of Common Stock under the 1994
Plan. A Nonemployee Director elected after a Date of Grant shall automatically
be granted a nonqualified option to purchase a pro-rata portion of the number of
shares automatically granted to Nonemployee Directors on a Date of Grant.
Nonemployee Directors are not eligible to receive any other options or stock
appreciation rights under the 1994 Plan. Of the eight directors, four--Messrs.
Cusumano, DeBever, Gerlach and McFarlin--are Nonemployee Directors. Thus, if the
1994 Plan is approved by the stockholders, at the organizational meeting of the
Board of Directors immediately after the Annual Meeting, these directors will
each be automatically issued an option to purchase 2,000 shares of the Company's
Common Stock.
The Committee which administers the 1994 Plan consists of directors who are
not full-time employees of the Company. The Committee has the authority to
select the employees to whom options and any associated stock appreciation
rights may be granted, to determine the terms of each such option and the number
of shares to be issued pursuant thereto, and any associated stock appreciation
right, to interpret the provisions of the 1994 Plan and to make all other
determinations that it may deem necessary or advisable for the administration of
the 1994 Plan. The Board of Directors, however, has the right, as discussed
below, to terminate or amend the plan, and to make certain adjustments in the
number and type of shares covered by the plan in the event of certain
transactions involving the Company. In addition, all determinations and
decisions regarding the administration of the 1994 Plan regarding Nonemployee
Director options will be made by the entire Board of Directors.
12
<PAGE> 16
The option price at which Common Stock may be purchased on exercise of
options granted under the 1994 Plan shall not be less than the per share fair
market value of the Common Stock on the date the option is granted. Incentive
stock options granted under the 1994 Plan shall have a maximum term of not more
than (i.e., are exercisable for) 10 years. Options granted under the 1994 Plan
to any person owning more than 10% of the total combined voting power of all
classes of stock of the Company, that are intended to be incentive stock
options, are subject to the further restrictions that such options must have (i)
an exercise price of not less than 110% of the fair market value per share on
the Date of Grant, and (ii) a term of not more than five years. The actual term
of each option will be determined by the Board or by the Committee at the time
of grant. No employee may be granted options in any one calendar year
exercisable for more than 50,000 shares of Common Stock.
The full option price for all shares purchased on exercise of options
granted under the 1994 Plan is required to be paid at the time of exercise in
cash or, if so provided in an option agreement, in whole or in part with shares
of the issued and outstanding stock of the Company (valued at their fair market
value on the date of exercise). Generally, options granted to employees under
the 1994 Plan remain outstanding and are exercisable only so long as the person
to whom they were granted remains employed by the Company, subject to certain
exceptions in the case of retirement, permanent disability or death of a
participant holding unexercised options on the date of such event and to certain
provisions, discussed below, relating to changes in control of the Company.
Incentive stock options granted under the 1994 Plan are subject to a
restriction which provides that the aggregate fair market value (determined as
of the date the option is granted) of the stock with respect to which incentive
stock options are exercisable for the first time by an employee during any
calendar year (under all such plans of the Company) shall not exceed the maximum
amount permitted by Section 422A of the Code, which is currently $100,000.
Options granted to Nonemployee Directors may not be exercised until the
first anniversary of the Date of Grant. During the second year after the grant
of such options, one-third may be exercised, during the third year two-thirds
may be exercised, and all options may be exercised after the end of the third
year from the Date of Grant. No such options may be exercisable more than eight
years from the Date of Grant. Options granted to a Nonemployee Director
terminate ninety days after such director ceases to be a director of the
Company, except upon death or disability within one year from the Date of Grant,
at which time the Nonemployee Director's options shall be 100% exercisable and
shall terminate if not exercised within 12 months.
Stock appreciation rights granted under the 1994 Plan permit the holders of
such rights, on surrender of all or part of an unexercised related option, to
receive payment of the difference between the option exercise price of the
underlying shares and the fair market value of such shares as of the date of
surrender. Stock appreciation rights granted under the 1994 Plan must be granted
in connection with related options. Such a stock appreciation right will be
exercisable only at such time or times, and only to the extent, that the related
option is exercisable, and the exercise of the stock appreciation right is
treated as the exercise of the option. Upon exercise of stock appreciation
rights, the Company may make payment in cash, in shares of Common Stock valued
at their fair market value on the date of exercise, or partly in cash and partly
in shares of such stock. The Committee may, at the time a stock appreciation
right is granted, impose such conditions on the
13
<PAGE> 17
exercise of the stock appreciation right as may be required to satisfy the
requirements of Rule 16b-3 under the Securities Exchange Act of 1934, as
amended. In addition, the exercise of a stock appreciation right and the manner
of payment is in the sole discretion of the Committee, and the Committee may at
any time not allow exercise of the stock appreciation right, and instead require
that the option holder exercise the option as if there were no stock
appreciation rights with respect to such option.
Incentive stock options granted under the 1994 Plan have certain
advantageous tax consequences under federal income tax laws. No taxable income
is recognized by the option holder for federal income tax purposes at the time
of the grant or exercise of an incentive stock option, and no federal income tax
deduction is available to the Company as a result of a grant or exercise. Any
gain or loss recognized by an option holder on the disposition of shares
acquired pursuant to the exercise of an incentive stock option is treated as
long-term capital gain or loss, provided that such disposition does not occur
(i) within one year after the date of exercise of the option, or (ii) within two
years after the date the option was granted. If the shares are sold before these
holding period requirements are satisfied, the holder will recognize ordinary
income at the time of the sale in an amount generally equal to the lesser of the
gain realized upon the disposition or the difference between the fair market
value of the stock on the date of exercise and the exercise price. Any remaining
gain will be treated as long-term or short-term capital gain, depending on how
long the shares are held. In the case of a disposition prior to the satisfaction
of the holding periods described above, the Company is entitled to a federal
income tax deduction equal to the amount of ordinary income recognized by the
option holder.
The grant of a nonqualified option will not result in taxable income to the
recipient of the option for federal income tax purposes nor will the Company be
entitled to an income tax deduction at the time of grant. Upon exercise of a
nonqualified option, the option holder will generally recognize ordinary income
for federal income tax purposes equal to the difference between the exercise
price and the fair market value of the shares on the date of exercise. The
Company will be entitled to a federal income tax deduction at the time of
exercise in the amount of the ordinary income recognized by the option holder.
In general, any further gain realized by the option holder on the subsequent
disposition of such shares will be long-term or short-term capital gain,
depending on how long the shares are held.
Upon the exercise of a stock appreciation right, the holder will recognize
ordinary income for federal income tax purposes in the amount of the cash
received, plus the fair market value of any shares of stock received, and the
Company will be entitled to a corresponding deduction.
If the Company is required to withhold any tax imposed as a result of
exercise of an option, the option holder must pay that amount in cash to the
Company concurrently with the exercise of the option. However, if the Committee
so authorizes, the option holder exercising a nonqualified option may elect to
pay some or all of such withholding tax with either shares covered by the
nonqualified option being exercised or with other shares of the Company owned by
the option holder.
The 1994 Plan expires on April 22, 2014, unless earlier terminated by the
Board of Directors. The Board of Directors has authority to alter, amend,
suspend or terminate the 1994 Plan in such manner as it deems advisable, except
that the Board of Directors is not permitted, without stockholder approval, to:
(i) change the provisions relating to the eligibility to participate, (ii)
reduce the minimum exercise price of options or stock appreciation rights
granted, (iii) increase the number of shares subject to the plan; (iv) extend
the duration of
14
<PAGE> 18
the plan; or (v) alter any of the terms governing the participation of
Nonemployee Directors. The alteration, amendment, suspension or termination of
the 1994 Plan shall not, without the consent of the option holder, deprive an
option holder of any option or associated stock appreciation right granted under
the 1994 Plan, or of any rights under such option or stock appreciation right.
The 1994 Plan provides for appropriate adjustment in the number and type of
shares covered by options and stock appreciation rights granted under the 1994
Plan in the event of a reorganization, merger, consolidation, recapitalization,
or certain other transactions involving the Company that have the effect of
changing the number or type of shares previously subject to the 1994 Plan.
Moreover, in the event a recipient of an award under the 1994 Plan ceases to be
an employee within one year after (i) the directors of the Company who were
nominated by the Board of Directors cease to constitute a majority of the
directors of the Company; (ii) the consummation of a reorganization, merger or
consolidation of the Company in which the Company does not survive and the terms
of which provide that the award shall continue in effect thereafter, or (iii)
the date of the first public announcement that any person or entity shall have
become the beneficial owner of more than 25% of the voting power of the Company,
all outstanding options and stock appreciation rights will become exercisable in
full, without regard to any otherwise applicable restrictions on exercise. In
the case of Nonemployee Director options, if within one year of the occurrence
of any of the events described in clauses (i) through (iii) of the preceding
sentence, the option holder ceases to be a Nonemployee Director as a result of
the option holder not being nominated for re-election or being removed from the
Board without cause, the option holder's Nonemployee Director option will become
exercisable in full, without regard to any otherwise applicable restrictions on
exercise. These provisions may tend to discourage such a transaction, even if
the transaction would be beneficial to stockholders of the Company.
Under applicable tax regulations (the so-called "golden parachute"
provisions), acceleration of an option or stock appreciation right as a result
of a change in the ownership or control of the Company (including certain of the
terminating events described in the preceding paragraph) may result in the loss
of a deduction to which the Company may otherwise be entitled as a result of the
exercise of the option or stock appreciation right, and the imposition of a 20%
excise tax on the holder. The applicability of the golden parachute provisions
depends upon the particular facts and the circumstances of each holder,
including his or her level of compensation and the value of all payments
resulting from the change in control.
The foregoing summary of certain of the terms of the 1994 Plan is not
intended to be a complete statement of all of its provisions and is qualified in
its entirety by reference to the 1994 Plan itself, a complete copy of which is
attached as Appendix A to this Proxy Statement.
The 1994 Plan is subject to approval of the holders of a majority of the
Company's Common Stock present or represented at the Annual Meeting. UNLESS
INDICATED TO THE CONTRARY, THE ENCLOSED PROXY CARD WILL BE VOTED FOR APPROVAL OF
THE 1994 PLAN.
15
<PAGE> 19
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
1994 STOCK OPTION PLAN
---------------------------------------
# OF SECURITIES
NAME AND POSITION DOLLAR VALUE($) UNDERLYING UNITS(1)
- - - ------------------------------------------------------------ --------------- -------------------
<S> <C> <C>
Wilford D. Godbold, Jr. * 22,000
President, Chief Executive Officer and Director
James F. Hermanson * 11,000
Vice President
Bernard B. Heiler * 11,000
Vice President -- Marketing and Sales
George A. Daniels * 11,000
Vice President and Chief Financial Officer
Anita J. Cutchall * 2,600
Director of Legal Affairs and Corporate Secretary
Executive Group * 57,600
Non-Executive Director Group * 8,000(2)
Non-Executive Officer Employee Group * 157,200
</TABLE>
- - - ---------------
* The value of an option is equal to the difference between the market price
of the Company's Common Stock on the date of exercise and the market price
of the Company's Common Stock on the date of grant, multiplied by the number
of shares as to which the option is exercisable. On June 10, 1994 the
closing sale price of the Company's Common Stock on the New York Stock
Exchange was $12.50. There is no way to determine what the future value will
be.
(1) Other than with respect to awards to members of the Non-Executive Director
Group, the amount of awards is determined by a committee of the Board of
Directors and it is not possible to determine the number of stock
appreciation rights or the number of shares as to which options would have
been granted to each of the persons or groups identified in the above table.
(2) The 1994 Plan provides for automatic annual grants of options to purchase
2,000 shares of Common Stock to Nonemployee Directors.
PLEASE NOTE THAT YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
APPROVAL OF THE 1994 STOCK OPTION PLAN.
OTHER MATTERS
A representative of Deloitte & Touche, the firm of independent accountants
who audited the financial statements of the Company for the fiscal year ended
March 31, 1994, will attend the Annual Meeting. The representative will be
provided the opportunity to make a statement if the representative desires to do
so and will be available to respond to appropriate questions.
16
<PAGE> 20
The management of the Company does not know of any matter to be acted upon
at the Annual Meeting other than the matters described above. If any other
matter properly comes before the Annual Meeting, however, the holders of the
proxies will vote thereon in accordance with their best judgment.
STOCKHOLDER PROPOSALS FOR THE 1995 ANNUAL MEETING OF STOCKHOLDERS
Stockholder proposals intended to be presented at the 1995 Annual Meeting
of Stockholders must be received at the executive offices of ZERO Corporation at
444 South Flower Street, Suite 2100, Los Angeles, California 90071-2922,
addressed to the attention of the Corporate Secretary, by February 17, 1995, for
inclusion in the proxy statement and form of proxy relating to that meeting.
ANNUAL REPORT
The Company's 1994 Annual Report, which includes financial statements, is
being mailed to stockholders concurrently herewith.
ANNUAL REPORT ON FORM 10-K
Upon written request the Company will provide to any stockholder solicited
hereby (without charge) a copy of its 1994 Annual Report on Form 10-K filed with
the Securities and Exchange Commission. Requests should be directed to Anita J.
Cutchall, Corporate Secretary, ZERO Corporation, 444 South Flower Street, Suite
2100, Los Angeles, California 90071-2922.
Howard W. Hill, Chairman of the Board
Anita J. Cutchall, Corporate Secretary
June 24, 1994
17
<PAGE> 21
ZERO CORPORATION
1994 STOCK OPTION PLAN
SECTION 1. PURPOSE OF PLAN
The purpose of this 1994 Stock Option Plan (this "Plan") of ZERO
Corporation, a Delaware corporation (the "Company"), is to enable the Company
and its divisions and subsidiaries to attract, retain and motivate their
employees by providing for or increasing the proprietary interests of such
employees in the Company, and to enable the Company to attract, retain and
motivate its nonemployee directors and further align their interests with those
of the stockholders of the Company by providing for or increasing the
proprietary interests of such directors in the Company.
SECTION 2. PERSONS ELIGIBLE UNDER PLAN
Any person, including any director of the Company, who is an employee of
the Company or any of its divisions or subsidiaries (an "Employee") shall be
eligible to be considered for the grant of Awards (as hereinafter defined)
hereunder. Any director of the Company who is not an Employee (a "Nonemployee
Director") shall automatically receive Nonemployee Director Options (as
hereinafter defined) pursuant to Section 4 hereof, but shall not otherwise
participate in this Plan.
SECTION 3. AWARDS
(a) The Committee (as hereinafter defined), on behalf of the Company, is
authorized under this Plan to enter into arrangements with eligible Employees
providing for options to purchase, or stock appreciation rights ("Stock
Appreciation Rights") relating to, shares of common stock, par value $.01 per
share, of the Company ("Common Shares"). The entering into of any such
arrangement is referred to herein as the "grant" of an "Award." Awards shall
contain such terms and conditions not inconsistent with the provisions of this
Plan as the Committee shall deem appropriate.
(b) Each Stock Appreciation Right shall relate to a specific stock option
granted under this Plan, and shall provide for the conditional right to
surrender all or part of an unexercised related option and to receive payment of
an amount equal to the excess of the fair market value of the underlying shares
on the date of surrender over the option exercise price. Such payment may be
made, in the sole discretion of the Committee, in shares of stock valued at
their fair market value on the date of surrender of the option or in cash, or
partly in shares and partly in cash. The exercise of a Stock Appreciation Right
and the manner of payment shall be in the sole discretion of the Committee and
any Stock Appreciation Right shall be subject to the condition that the
Committee may at any time in its absolute discretion not allow the exercise of a
Stock Appreciation Right and instead require that the optionee exercise any
option granted under this Plan as if there were no Stock Appreciation Rights
with respect to such option. The Committee may further impose such conditions on
the exercise of Stock Appreciation Rights as may be required to comply with Rule
16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). A Stock Appreciation Right granted hereunder shall be exercisable at such
time or times and only to the extent that the related stock option is
exercisable,
A-1
<PAGE> 22
will not be transferable except to the extent that such related stock option is
transferable and shall expire no later than the expiration of the related stock
option.
(c) Common Shares may be issued pursuant to an Award for any lawful
consideration as determined by the Committee, including, without limitation,
services rendered by the recipient of such Award.
(d) Subject to the provisions of this Plan, the Committee, in its sole and
absolute discretion, shall determine all of the terms and conditions of each
Award granted under this Plan, which terms and conditions may include, among
other things:
(i) a provision permitting the recipient of such Award, including any
recipient who is a director or officer of the Company, to pay the purchase
price of the Common Shares issuable pursuant to such Award, or such
recipient's tax withholding obligation with respect to such issuance, in
whole or in part, by any one or more of the following:
(A) the delivery of previously owned shares of capital stock of the
Company (including the delivery of a small number of the shares subject
to the Award to be used automatically, in a series of simultaneous
transactions, to pay the exercise price for a larger number of
additional shares) or other property, provided that the Company is not
then prohibited from purchasing or acquiring shares of its capital stock
or such other property, or
(B) a reduction in the amount of Common Shares otherwise issuable
pursuant to such Award;
(ii) subject to Section 3(e), a provision conditioning or accelerating
the receipt of benefits pursuant to such Award, either automatically or in
the discretion of the Committee, upon the occurrence of specified events,
including, without limitation, a change of control of the Company, an
acquisition of a specified percentage of the voting power of the Company,
the dissolution or liquidation of the Company, a sale of substantially all
of the property and assets of the Company or an event of the type described
in Section 8 hereof; or
(iii) a provision required in order for such Award to qualify as an
incentive stock option under Section 422 of the Internal Revenue Code (an
"Incentive Stock Option"), provided that the recipient of such Award is
eligible under the Internal Revenue Code to receive an Incentive Stock
Option.
(e) Each Award that is subject to vesting shall provide that if the
recipient thereof shall cease to be an Employee within one year after a Change
of Control as a result of such recipient terminating or being terminated other
than for Cause, such recipient's Award shall become fully vested as of the date
on which such recipient ceases to be an Employee. A "Change of Control" shall
mean the first to occur of the following:
(i) the date upon which the directors of the Company who were
nominated by the Board of Directors of the Company (the "Board") for
election as directors cease to constitute a majority of the directors of
the Company;
(ii) the consummation of a reorganization, merger or consolidation of
the Company (other than a reorganization, merger or consolidation
contemplated by Section 4(h)(ii) or the sole purpose of which is to change
the Company's domicile solely within the United States) (1) as a result of
which the outstanding securities of the class then subject to such Award
are exchanged for or converted into cash,
A-2
<PAGE> 23
property and/or securities not issued by the Company and (2) the terms of
which provide that such Award shall continue in effect thereafter; or
(iii) the date of the first public announcement that any person or
entity, together with all Affiliates and Associates (as such capitalized
terms are defined in Rule 12b-2 promulgated under the Exchange Act) of such
person or entity, shall have become the Beneficial Owner (as defined in
Rule 13d-3 promulgated under the Exchange Act) of voting securities of the
Company representing more than 25% of the voting power of the Company (a
"25% Stockholder"); provided, however, that the terms "person" and
"entity," as used in this clause (iii), shall not include (1) the Company
or any of its subsidiaries, (2) any employee benefit plan of the Company or
any of its subsidiaries, (3) any entity holding voting securities of the
Company for or pursuant to the terms of any such plan or (4) any person or
entity if the transaction that resulted in such person or entity becoming a
25% Stockholder was approved in advance by the Board.
"Cause" shall mean the Award recipient's (A) conviction by a court of competent
jurisdiction of a felony or serious misdemeanor involving moral turpitude, (B)
willful disregard of any written directive of the Board that is not inconsistent
with the Certificate of Incorporation or Bylaws of the Company or applicable
law, (C) breach of his or her fiduciary duty involving personal profit, or (D)
neglect of his or her duties that has a material adverse effect on the Company.
(f) Notwithstanding any other provision of this Plan, no Employee shall be
granted options during any one calendar year for in excess of 50,000 shares of
Common Stock, subject to adjustment pursuant to Section 8 hereof.
SECTION 4. NONEMPLOYEE DIRECTOR OPTIONS
(a) Each year, on the date of the annual meeting of stockholders of the
Company, or any adjournment thereof, at which directors of the Company are
elected (the "Date of Grant"), each Nonemployee Director shall automatically be
granted an option (a "Nonemployee Director Option") to purchase 2,000 Common
Shares. In addition, each person who becomes a Nonemployee Director after a Date
of Grant shall automatically be granted, upon the date he or she becomes a
Nonemployee Director (the "New Director Date"), a Nonemployee Director Option to
purchase a number of Common Shares, rounded to the nearest whole share, equal to
(i) 2,000 minus (ii) 2,000 multiplied by the quotient of (x) the number of days
from (1) the Date of Grant immediately preceding the New Director Date to (2)
the New Director Date divided by (y) 365 days. Each person who becomes a
Nonemployee Director after the Effective Date (as defined in Section 10 below)
of this Plan but prior to the first Date of Grant shall automatically be
granted, upon the date he or she becomes a Nonemployee Director, a Nonemployee
Director Option to purchase 500 Common Shares.
(b) If, on any date upon which Nonemployee Director Options are to be
automatically granted pursuant to this Section 4, the number of Common Shares
remaining available for option under this Plan is insufficient for the grant to
each Nonemployee Director of a Nonemployee Director Option to purchase the
entire number of Common Shares specified in this Section 4, then a Nonemployee
Director Option to purchase a
A-3
<PAGE> 24
proportionate amount of such available number of Common Shares (rounded to the
nearest whole share) shall be granted to each Nonemployee Director on such date.
(c) Subject to Section 4(h) and Section 4(i) hereof, each Nonemployee
Director Option granted under this Plan shall not be exercisable until the first
anniversary of the Date of Grant of such Nonemployee Director Option and
thereafter shall become exercisable to purchase
(i) 33 1/3% of the Common Shares subject thereto (rounded to the
nearest whole share) as of the first anniversary of the Date of Grant of
such Nonemployee Director Option;
(ii) 66 2/3% of such Common Shares (rounded to the nearest whole
share) as of the second anniversary of such Date of Grant, and
(iii) 100% of such Common Shares as of the third anniversary of such
Grant Date;
provided, however, that (1) if the optionee shall cease to be a Nonemployee
Director as a result of death or permanent disability prior to the second
anniversary of such Date of Grant, such Nonemployee Director Option shall become
exercisable to purchase 100% of such Common Shares (rounded to the nearest whole
share) as of the date that such optionee ceases to be a Nonemployee Director and
such Nonemployee Director Option shall terminate with respect to the balance of
such Common Shares, or (2) if the optionee ceases to be a Nonemployee Director
as a result of not standing for re-election because of the policies of the Board
relating to age, such Nonemployee Director Option shall become exercisable to
purchase 100% of such Common Shares as of the date on which such optionee ceases
to be a Nonemployee Director.
(d) Each Nonemployee Director Option granted under this Plan shall expire
upon the first to occur of the following:
(i) The first anniversary of the date upon which the optionee shall
cease to be a Nonemployee Director as a result of death or permanent
disability;
(ii) The 90th day after the date upon which the optionee shall cease
to be a Nonemployee Director for any reason other than death or permanent
disability; or
(iii) The eighth anniversary of the Date of Grant of such Nonemployee
Director Option.
(e) Each Nonemployee Director Option shall have an exercise price equal to
the aggregate Fair Market Value on the Date of Grant of such option of the
Common Shares but in no event less than the aggregate par value of such Common
Shares on such date.
(f) Payment of the exercise price of any Nonemployee Director Option
granted under this Plan and the optionee's tax withholding obligation, if any,
with respect to such Nonemployee Stock Option shall be made in full in cash
concurrently with the exercise of such Nonemployee Director Option; provided,
however, that the payment of such exercise price and/or tax withholding may
instead be made, in whole or in part, by any one or more of the following:
(i) the delivery of previously owned shares of capital stock of the
Company (including the delivery of a small number of the shares subject to
the Nonemployee Director Option to be used automatically, in a series of
simultaneous transactions, to pay the exercise price for a larger number of
additional shares) or
A-4
<PAGE> 25
other property, provided that the Company is not then prohibited from
purchasing or acquiring shares of its capital stock or such other
property;
(ii) a reduction in the amount of Common Shares or other property
otherwise issuable pursuant to such Nonemployee Director Option; or
(iii) the delivery, concurrently with such exercise and in accordance
with Section 220.3(e)(4) of Regulation T promulgated under the Exchange
Act, of a properly executed exercise notice for such Nonemployee Director
Option and irrevocable instructions to a broker promptly to deliver to the
Company a specified dollar amount of the proceeds of a sale of the Common
Shares issuable upon exercise of such Nonemployee Director Option.
(g) The "Fair Market Value" of a Common Share or other security on any date
(the "Determination Date") shall be equal to the closing price per Common Share
or unit of such other security on the business day immediately preceding the
Determination Date, as reported in The Wall Street Journal, Western Edition, or,
if no closing price was so reported for such immediately preceding business day,
the closing price for the next preceding business day for which a closing price
was so reported, or, if no closing price was so reported for any of the 30
business days immediately preceding the Determination Date, the average of the
high bid and low asked prices per Common Share or unit of such other security on
the business day immediately preceding the Determination Date in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotations System ("NASDAQ") or such other system then
in use, or, if the Common Shares or such other security were not quoted by any
such organization on such immediately preceding business day, the average of the
closing bid and asked prices on such day as furnished by a professional market
maker making a market in the Common Shares or such other security selected by
the Board.
(h) All outstanding Nonemployee Director Options theretofore granted under
this Plan and not otherwise terminated or expired shall become fully exercisable
immediately prior to, and shall terminate upon, the first to occur of the
following:
(i) the dissolution or liquidation of the Company;
(ii) a reorganization, merger or consolidation of the Company (other
than a reorganization, merger or consolidation the sole purpose of which is
to change the Company's domicile solely within the United States) as a
result of which the outstanding securities of the class then subject to
such outstanding Nonemployee Director Options are exchanged for or
converted into cash, property and/or securities not issued by the Company,
unless such reorganization, merger or consolidation shall have been
affirmatively recommended to the stockholders of the Company by the Board
and the terms of such reorganization, merger or consolidation shall provide
that such Nonemployee Director Options shall continue in effect thereafter
and shall be exercisable to acquire the number and type of securities or
other consideration to which the Nonemployee Directors would have been
entitled had they exercised such Nonemployee Director Options immediately
prior to such reorganization, merger or consolidation; or
(iii) the sale of substantially all of the property and assets of the
Company.
A-5
<PAGE> 26
(i) If the optionee shall cease to be a Nonemployee Director within one
year after a Change of Control as a result of such optionee not being nominated
for re-election or such optionee being removed from the Board other than for
Cause, such optionee's Nonemployee Director Option shall become exercisable to
purchase 100% of the Common Shares subject thereto as of the date on which such
optionee ceases to be a Nonemployee Director.
(j) Each Nonemployee Director Option shall be nontransferable by the
optionee other than by will or the laws of descent and distribution, and shall
be exercisable during the optionee's lifetime only by the optionee or the
optionee's guardian or legal representative.
(k) Nonemployee Director Options are not intended to qualify as Incentive
Stock Options.
SECTION 5. STOCK SUBJECT TO PLAN
(a) The aggregate number of Common Shares that may be issued pursuant to
all Incentive Stock Options granted under this Plan shall not exceed 750,000,
subject to adjustment as provided in Section 8 hereof.
(b) The aggregate number of Common Shares issued and issuable pursuant to
all Awards (including Incentive Stock Options) and Nonemployee Director Options
granted under this Plan shall not exceed 750,000, subject to adjustment as
provided in Section 8 hereof.
(c) For purposes of Section 5(b) hereof, the aggregate number of Common
Shares issued and issuable pursuant to all Awards and Nonemployee Director
Options granted under this Plan shall at any time be deemed to be equal to the
sum of the following:
(i) the number of Common Shares which were issued prior to such time
pursuant to Awards and Nonemployee Director Options granted under this
Plan, other than Common Shares which were subsequently reacquired by the
Company pursuant to the terms and conditions of such Awards and with
respect to which the holder thereof received no benefits of ownership such
as dividends; plus
(ii) the number of Common Shares which were otherwise issuable prior
to such time pursuant to Awards granted under this Plan, but which were
withheld by the Company as payment of the purchase price of the Common
Shares issued pursuant to such Awards or as payment of the recipient's tax
withholding obligation with respect to such issuance; plus
(iii) the maximum number of Common Shares issuable at or after such
time pursuant to Awards and Nonemployee Director Options granted under this
Plan prior to such time.
SECTION 6. DURATION OF PLAN
Neither Awards nor Nonemployee Director Options shall be granted under this
Plan after April 22, 2004. Although Common Shares may be issued after April 22,
2004 pursuant to Awards and Nonemployee Director Options granted prior to such
date, no Common Shares shall be issued under this Plan after April 22, 2014.
A-6
<PAGE> 27
SECTION 7. ADMINISTRATION OF PLAN
(a) This Plan shall be administered by a committee of the Board (the
"Committee") consisting of two or more directors, each of whom is (i) a
"disinterested person" (as such term is defined in Rule 16b-3 promulgated under
the Exchange Act, as such Rule may be amended from time to time) and (ii) an
"outside" director for purposes of the proposed regulations under Section 162(m)
of the Internal Revenue Code (and any final regulations that may be adopted
under Section 162(m)) as the same may be amended from time to time.
(b) Subject to the provisions of this Plan, the Committee shall be
authorized and empowered to do all things necessary or desirable in connection
with the administration of this Plan, including, without limitation, the
following:
(i) adopt, amend and rescind rules and regulations relating to this
Plan;
(ii) determine which persons are Employees and to which of such
Employees, if any, Awards shall be granted hereunder;
(iii) grant Awards to Employees and determine the terms and conditions
thereof, including the number of Common Shares issuable pursuant thereto;
(iv) determine the terms and conditions of the Nonemployee Director
Options that are automatically granted hereunder, other than the terms and
conditions specified in Section 4 hereof;
(v) determine whether, and the extent to which, adjustments are
required pursuant to Section 8 hereof; and
(vi) interpret and construe this Plan and the terms and conditions of
all Awards and Nonemployee Director Options granted hereunder.
SECTION 8. ADJUSTMENTS
If the outstanding securities of the class then subject to this Plan are
increased, decreased or exchanged for or converted into cash, property or a
different number or kind of securities, or if cash, property or securities are
distributed in respect of such outstanding securities, in either case as a
result of a reorganization, merger, consolidation, recapitalization,
restructuring, reclassification, dividend (other than a regular, quarterly cash
dividend) or other distribution, stock split, reverse stock split or the like,
or if substantially all of the property and assets of the Company are sold,
then, unless the terms of such transaction shall provide otherwise, the
Committee shall make appropriate and proportionate adjustments in (a) the number
and type of shares or other securities or cash or other property that may be
acquired pursuant to Incentive Stock Options and other Awards and Nonemployee
Director Options theretofore granted under this Plan, (b) the maximum number and
type of shares or other securities that may be issued pursuant to Incentive
Stock Options and other Awards and Nonemployee Director Options thereafter
granted under this Plan, and (c) the maximum number of Common Shares for which
options may be granted during any one calendar year.
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<PAGE> 28
SECTION 9. AMENDMENT AND TERMINATION OF PLAN
The Board may amend or terminate this Plan at any time and in any manner,
subject to the following limitations:
(a) no such amendment or termination shall deprive the recipient of
any Award or Nonemployee Director Option theretofore granted under this
Plan, without the consent of such recipient, of any of his or her rights
thereunder or with respect thereto; and
(b) Section 4 hereof shall not be amended more than once every six
months, other than to comport with changes in the Internal Revenue Code,
the Employee Retirement Income Security Act, or the rules thereunder.
SECTION 10. EFFECTIVE DATE OF PLAN
This Plan shall be effective as of April 22, 1994 (the "Effective Date"),
the date upon which it was approved by the Board; provided, however, that no
Common Shares may be issued under this Plan until it has been approved, directly
or indirectly, by the affirmative votes of the holders of a majority of the
securities of the Company present, or represented, and entitled to vote at a
meeting duly held in accordance with the laws of the State of Delaware.
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<PAGE> 29
PROXY (SOLICITED BY THE BOARD OF DIRECTORS OF ZERO CORPORATION)
ZERO CORPORATION
ANNUAL MEETING OF STOCKHOLDERS, WEDNESDAY, JULY 27, 1994
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and the accompanying Proxy Statement for the 1994 Annual Meeting
and, revoking all prior proxies, hereby appoints Wilford D. Godbold, Jr. and
Howard W. Hill or either one of them, with full power of substitution, as
Proxies to vote all the shares of Common Stock owned or held by the undersigned
at the Annual Meeting of Stockholders to be held at The Biltmore Los Angeles,
Tiffany Room, 506 South Grand Avenue, Los Angeles, California, on Wednesday,
July 27, 1994, at 2:00 P.M., local time, or any adjournment or postponement
thereof, upon the matters set forth below and upon such other business as may
properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED BELOW, OR IF NO
DIRECTION IS INDICATED, WILL BE VOTED FOR ITEMS 1 AND 2 BELOW AND IN THE
DISCRETION OF THE PROXIES IN MATTERS DESCRIBED IN ITEM 3 BELOW.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 1
<TABLE>
<S> <C> <C>
1. Election of Directors / / FOR the nominees listed below / / WITHHOLD AUTHORITY
(except as marked to the contrary)
John B. Gilbert Wilford D. Godbold, Jr. Howard W. Hill
/ / FOR the nominee listed below / / WITHHOLD AUTHORITY
(except as marked to the contrary)
Gary M. Cusumano
</TABLE>
(INSTRUCTION: To withhold authority to vote for a nominee write the nominee's
name in the space provided below.)
- - - --------------------------------------------------------------------------------
IMPORTANT -- THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE
(Continued on the reverse side)
2. 1994 Stock Option Plan / / FOR / / AGAINST / / ABSTAIN
3. To transact such other business as may properly come before the meeting or
any adjournment or postponement thereof.
DATED: , 1994
(Signature)
(Signature)
This proxy should be
dated, signed by the
stockholder(s) as the
name(s) appears hereon,
and returned promptly in
the enclosed envelope.
Persons signing in a
fiduciary capacity should
so indicate.
