<PAGE>
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 Section 240.14a-11(c) or Section
240.14a-12
ZERO CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO]
----------------------------------------------------------------------
ZERO CORPORATION
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
AND
PROXY STATEMENT
JULY 24, 1996
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OF
ZERO CORPORATION
The 1996 Annual Meeting of Stockholders of ZERO Corporation will be held on
Wednesday, July 24, 1996, at 2:00 p.m., local time, at The Biltmore Los Angeles,
Emerald Room, 506 South Grand Avenue, Los Angeles, California, for the following
purposes:
1. To elect a director for a three-year term to expire at the 1999
Annual Meeting of Stockholders.
2. To consider and act on the stockholders' proposals set forth in the
proxy statement, if such proposals are properly brought before the
meeting.
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 7, 1996, 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, 1996
<PAGE>
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 1996
Annual Meeting of Stockholders to be held on July 24, 1996, 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
the nominee for director named herein. 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 person.
This Proxy Statement and the form of proxy will be sent to stockholders
commencing approximately June 24, 1996.
RECORD DATE AND VOTING
The close of business on June 7, 1996, was fixed as the record date for the
determination of stockholders entitled to receive notice of and to vote at the
Annual Meeting. As of the close of business on June 7, 1996, the Company had
outstanding 12,128,518 shares of Common Stock, par value $.01 ("Common Stock").
A majority of the outstanding shares of Common Stock must be represented in
person or by proxy at the Annual Meeting in order to constitute a quorum for the
transaction of business. 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.
In tabulating the votes, broker nonvotes and votes that are withheld will be
excluded entirely from the vote and will have no effect. 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, in cases where there is more than one nominee.
The affirmative vote of the holders of a majority of the shares of Common
Stock present at the Annual Meeting in person or by proxy and entitled to vote
thereat will be required to adopt the stockholders' proposals set forth on pages
12 and 13 if properly presented at the Meeting. In determining whether the
stockholders' proposals have received the requisite number of affirmative votes,
abstentions will have the same effect as votes against the proposals, and broker
nonvotes will have no effect on the outcome.
<PAGE>
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 nominee and the named executive officers,
and all directors and executive officers as a group, at the close of business on
May 31, 1996. No stockholder was known by the Company to own beneficially more
than 5% of the outstanding Common Stock as of May 31, 1996.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT
BENEFICIAL OF
TITLE OF CLASS NAME OF BENEFICIAL OWNER OWNERSHIP (1) CLASS
- ----------------- -------------------------------------------------------------------- ------------- ------------
<S> <C> <C> <C>
Common Stock Gary M. Cusumano (2)................................................ 2,832 (4)
Bruce J. DeBever (2)................................................ 3,999 (4)
Clinton G. Gerlach (2).............................................. 13,874 (4)
John B. Gilbert (2)................................................. 11,632 (4)
Wilford D. Godbold, Jr. (2)(3)...................................... 161,994 1.3%
Bernard B. Heiler (2)(3)............................................ 34,862 (4)
Howard W. Hill (2)(3)............................................... 45,052 (4)
Whitney A. McFarlin (2)............................................. 7,874 (4)
George A. Daniels (3)............................................... 40,994 (4)
James F. Hermanson (3).............................................. 39,874 (4)
Michael D. LeRoy (3)................................................ 5,000 (4)
Directors and executive officers as a group (12 persons)............ 374,978 3%
</TABLE>
- ---------
(1) Includes an aggregate of 179,169 shares which, as of May 31, 1996, 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) Director.
(3) Executive officer.
(4) Less than 1%.
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
2
<PAGE>
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 1996 all of its executive officers and directors complied with
Section 16(a) requirements.
PROPOSAL 1
ELECTION OF DIRECTOR
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 II consists of two members: Gary M. Cusumano and Clinton G.
Gerlach. The Board of Directors has nominated Mr. Cusumano in Class II for
election to hold office for three years until the 1999 Annual Meeting of
Stockholders, and until his successor has been duly elected and qualified. Mr.
Gerlach will retire from the Board of Directors effective July 24, 1996.
In connection with the election of director, proxies, unless instructed
otherwise, will be voted for the election of Mr. Cusumano in Class II. If the
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.
The following information is furnished with respect to the nominees and each
of the directors whose terms will continue after the Annual Meeting.
NOMINEE FOR DIRECTOR:
<TABLE>
<CAPTION>
TERM TO DIRECTOR
CLASS II AGE POSITION/PRINCIPAL OCCUPATION EXPIRE SINCE
- ------------------------- --- -------------------------------------------------- ------- --------
<S> <C> <C> <C> <C>
Gary M. Cusumano......... 52 Director; President, The Newhall Land and Farming 1996 1994
Company (real estate and agriculture). Mr.
Cusumano also serves as a director of Watkins
Johnson Company.
</TABLE>
CONTINUING DIRECTORS:
<TABLE>
<CAPTION>
CLASS I
- -------------------------
<S> <C> <C> <C> <C>
Bruce J. DeBever......... 60 Director; President, Little Tikes Commercial Play 1998 1992
Systems (Omni) Inc. (commercial play equipment).
Bernard B. Heiler........ 50 Director, Vice President--Marketing and Sales. 1998 1988
Whitney A. McFarlin...... 55 Director; Chairman, President and Chief Executive 1998 1988
Officer, Angeion Corporation (medical device
company).
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
TERM TO DIRECTOR
CLASS III AGE POSITION/PRINCIPAL OCCUPATION EXPIRE SINCE
- ------------------------- --- -------------------------------------------------- ------- --------
<S> <C> <C> <C> <C>
John B. Gilbert.......... 75 Director, Chairman Emeritus; Chairman and 1997 1952
President, TOLD Corporation (land development).
Wilford D. Godbold, 58 Director, President and Chief Executive Officer. 1997 1982
Jr....................... Mr. Godbold also serves as a director of Pacific
Enterprises, Santa Fe Pacific Pipelines, Inc., and
The Southern California Gas Company.
Howard W. Hill........... 69 Director, Chairman of the Board. Mr. Hill also 1997 1960
serves as a director of Precision Castparts
Corporation.
</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 West, a
telephone public utility from 1984 through 1992, and President of GTEL, a
telecommunications integrator and a subsidiary of GTE, from January 1986 through
October 1992. Mr. McFarlin has held his current position at Angeion 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 and a private investor since March 1990.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEE LISTED
ON PAGE 3.
MEETINGS OF THE BOARD OF DIRECTORS, COMMITTEES OF THE BOARD AND DIRECTORS' FEES
The Board of Directors met five times during the fiscal year ended March 31,
1996 and all members
attended. The Board at its organizational meeting appoints an Audit Committee, a
Compensation Committee, a Nominating Committee, an Executive Committee, and a
Stock Option Committee.
Messrs. Cusumano, 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 three times during fiscal year
ended March 31, 1996.
Messrs. DeBever, Gilbert, Hill and McFarlin currently 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 ZERO Corporation Retirement
Savings
4
<PAGE>
Plan (the "Pension Plan") and life insurance plans. The Compensation Committee
met twice during fiscal year ended March 31, 1996 and all members attended. The
Compensation Committee's report on executive compensation begins below.
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 by a description of the proposed nominee's qualifications,
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, 1996 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, 1996.
Messrs. Cusumano, DeBever and McFarlin serve on the Stock Option Committee,
the functions of which include making all determinations necessary for the
administration of the 1994 Stock Option Plan. This committee met twice during
the year ended March 31, 1996.
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 1994 Stock Option Plan, approved by stockholders of the
Company, at the organizational meeting of the Board of Directors immediately
following each annual meeting of stockholders, each nonemployee director is
automatically granted a non-qualified option to purchase 2,000 shares of Common
Stock. Options are granted at prices not less than the fair market value of the
Common Stock on the date of grant.
REPORT OF THE COMPENSATION COMMITTEE
The following Report of the Compensation Committee and the Performance
Graphs shall not be deemed to be "soliciting material" or to be "filed" with the
Securities and Exchange Commission (the "Commission") or subject to Regulations
14A or 14C of the Commission or the liabilities of Section 18 of the Securities
Exchange Act of 1934 (the "Exchange Act"). Such Report and Performance Graphs
shall not be deemed incorporated by reference into any filing under the
Securities Act of 1933 or the Exchange Act, notwithstanding any general
incorporation by reference of this Proxy Statement in any other document.
GENERAL
The Company's compensation policies applicable to its executive officers
consist of three major components: base salary, annual bonus and stock options.
As previously stated, 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.
5
<PAGE>
The compensation policies of the Company were re-examined during 1994 when
the Committee retained the services of Hewitt Associates, an international
benefits and compensation consulting firm ("Hewitt"). In developing its
recommendations to the Committee, Hewitt examined, among other things, the
competitive position of the Company on each component of compensation in
comparison to the compensation practices of other companies of similar size and
in similar industries. Hewitt also reviewed the compensation plans in which each
of the officers named in the "Summary Compensation Table" participate. As
previously provided, changes resulting from the study are described below.
The base salaries of the executive officers have been established at levels
considered appropriate in light of the responsibilities and duties of each
position. Salaries are reviewed annually and adjusted as warranted by the
performance of each individual, increases in the cost of living and other
factors. The President and Chief Executive Officer reviews with the Committee
his plans with respect to the base salaries of the executive officers and other
key employees of the Company. He also reviews with the Committee major fringe
benefit plans, including the 1994 Stock Option Plan, the Pension Plan, 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 takes into account
various qualitative and quantitative factors. The Company's strategic goals and
its success in meeting strategic goals, its cash flow, its earnings, the general
cost of living, and the economy in which the Company operates are quantitative
factors considered. The Committee, however, also recognizes achievements that
may be difficult to quantify. In reviewing the President's salary for fiscal
year 1996, as done in 1995, the Committee considered his individual
accomplishments, including his efforts in setting strategic direction and
vision, obtaining viable acquisition candidates, effective cost controls,
working capital management and maintaining a high quality workforce. For fiscal
year 1996, in accordance with the compensation philosophy, the Committee
increased the salary of the President and Chief Executive Officer from $325,000
to $350,000, an increase of 7.7%.
The Company's management bonus plan was also revised in 1994 based on the
Hewitt study mentioned above. 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 over the
year, and the percentage increase in tangible stockholders' equity during the
fiscal year, subject to adjustment. 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" on page 8.
The Committee strongly endorses the philosophy of linking long-term
executive total compensation to Company performance and 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.
6
<PAGE>
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 1994 Stock Option Plan, is shown on page 9 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
1996
John B. Gilbert, CHAIRMAN
Bruce J. DeBever
Howard W. Hill
Whitney A. McFarlin
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee setting compensation for fiscal
year 1996 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. Mr. 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.
7
<PAGE>
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 -------------
------------------------- STOCK OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(1) (IN SHARES) COMPENSATION ($)(2)
- ------------------------------------------------------- ---- ---------- ------------ ------------- --------------------
<S> <C> <C> <C> <C> <C>
Wilford D. Godbold, Jr................................. 1996 $ 350,000 $367,696 22,000 $104,573
President, Chief Executive 1995 $ 325,000 $289,413 26,000 $ 52,834
Officer and Director 1994 $ 300,000 $142,500 22,000 $ 42,469
George A. Daniels...................................... 1996 $ 197,500 $165,988 11,000 $ 38,103
Vice President and Chief 1995 $ 180,500 $128,588 12,500 $ 17,545
Financial Officer 1994 $ 169,925 $ 64,600 11,000 $ 17,323
Bernard B. Heiler...................................... 1996 $ 197,500 $165,988 11,000 $ 30,381
Vice President--Marketing 1995 $ 185,500 $132,150 12,500 $ 13,585
and Sales 1994 $ 175,000 $ 66,500 11,000 $ 2,430
James F. Hermanson..................................... 1996 $ 197,500 $165,988 11,000 $ 47,119
Vice President 1995 $ 185,500 $132,150 12,500 $ 34,849
1994 $ 175,200 $ 66,500 11,000 $ 31,811
Michael D. LeRoy (3)................................... 1996 $ 197,500 $165,988 11,000 $ 1,317
Vice President--
Corporate Development
</TABLE>
- ---------
(1) Includes bonus payments earned and accrued in the fiscal year listed but
paid during the following fiscal year.
(2) Consists of Company contributions to the ZERO Corporation Retirement Savings
Plan (a profit sharing plan), interest accruals on deferred compensation
above 120% of the applicable federal rate, the dollar value of insurance
premiums paid with respect to life insurance plans, and restoration plans.
Such contributions, interest accruals, insurance premiums and restoration
amounts for 1996 were:
<TABLE>
<CAPTION>
CONTRIBUTIONS TO INTEREST INSURANCE RESTORATION
SAVINGS PLAN ACCRUALS PREMIUMS AMOUNTS
---------------- -------- -------- -----------
<S> <C> <C> <C> <C>
Mr. Godbold............................................ $12,858 $ 37,324 $12,336 $42,055
Mr. Daniels............................................ $12,663 $ 6,033 $ 5,370 $14,037
Mr. Heiler............................................. $12,597 $ 2,032 $ 1,434 $14,318
Mr. Hermanson.......................................... $12,598 $ 9,568 $10,106 $14,847
Mr. LeRoy.............................................. $ 1,317 $ 0 $ 0 $ 0
</TABLE>
(3) Mr. LeRoy became an employee of the Company during fiscal year 1995.
8
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/SARS GRANT
UNDERLYING GRANTED TO EXERCISE OR DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED (1) FISCAL YEAR ($/SH) DATE VALUE (2)
- ------------------------------------------------------- ------------ ---------------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Wilford D. Godbold, Jr................................. 22,000 9% $15.375 10/24/2002 $ 162,580
George A. Daniels...................................... 11,000 4.5% $15.375 10/24/2002 $ 81,290
Bernard B. Heiler...................................... 11,000 4.5% $15.375 10/24/2002 $ 81,290
James F. Hermanson..................................... 11,000 4.5% $15.375 10/24/2002 $ 81,290
Michael D. LeRoy....................................... 11,000 4.5% $15.375 10/24/2002 $ 81,290
</TABLE>
- ---------
(1) The option price of each option granted under the 1994 Stock Option 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 seven 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
non-qualified 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
consideration for the option price. All of the above options were granted on
October 25, 1995.
(2) The Present Value is 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 38%; risk-free rate of
return of 6.75%; dividend yield of .7%; and time of exercise at seven years.
No adjustments have been made for non-transferability or risk of forfeiture.
9
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF NUMBER OF UNEXERCISED IN-THE-MONEY
SECURITIES OPTIONS/SARS AT OPTIONS/SARS
UNDERLYING VALUE FISCAL YEAR END (#) AT FISCAL YEAR END ($)(2)
OPTIONS/SARS REALIZED ------------------------- -------------------------
NAME EXERCISED (#) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- -------------------------------------------------- ------------ -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Wilford D. Godbold, Jr............................ 22,181 $173,484 60,862/46,668 $337,476/$119,618
George A. Daniels................................. 9,259 $ 46,606 25,736/23,002 $115,180/$ 58,520
Bernard B. Heiler................................. 1,000 $ 1,250 28,499/23,001 $127,583/$ 58,517
James F. Hermanson................................ 14,762 $ 88,092 25,736/23,002 $115,180/$ 58,520
Michael D. LeRoy.................................. 0 0 5,000/21,000 $ 20,000/$ 55,180
</TABLE>
- ---------
(1) Represents the difference between the market value on the date of exercise
of the option and the exercise price.
(2) Represents the difference between $16.75, which was the closing market price
of the Company's Common Stock on The New York Stock Exchange Composite Index
on March 29, 1996, minus the exercise price of the option.
COMMON STOCK PERFORMANCE GRAPHS
Set forth below are line graphs comparing the yearly percentage changes,
assuming quarterly reinvestment of dividends, of the Common Stock of the Company
against the cumulative total return of the S&P SmallCap 600 and the S&P
Manufacturing Industries Index for the five year period commencing March 31,
1991, and for the two year period commencing May 31, 1994. The Company was
chosen for inclusion in the S&P SmallCap 600 in October 1994, an index designed
to track the stock performance of 600 companies with capitalization ranges of
$27 million to $886 million. 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 Exchange Act in the absence of
specific reference to such captions and information.
10
<PAGE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN* COMPARISON OF TWO YEAR
CUMULATIVE TOTAL RETURN*
[CHART]
11
<PAGE>
PROPOSALS 2(a) AND 2(b)
STOCKHOLDER PROPOSALS
ZERO has been advised by two holders of shares of Common Stock of the
Company of their intentions to introduce at the Annual Meeting the proposals and
supporting statements set forth below. The Board of Directors disclaims any
responsibility for the content of the proposals and for the statements made in
support thereof, which are presented as received from the stockholders. The
names and addresses of the proponents will be furnished to any person, orally or
in writing, as requested, promptly upon receipt of any oral or written request
for the information.
STOCKHOLDER PROPOSAL REGARDING DECLASSIFYING THE BOARD OF DIRECTORS
The owner of 150 shares of Common Stock has notified ZERO that he intends to
present the following proposal at the Annual Meeting:
RESOLVED, that the stockholders of the Company request that the Board of
Directors take the necessary steps, in accordance with state law, to declassify
the Board of Directors so that all directors are elected annually, such
declassification to be effected in a manner that does not affect the unexpired
terms of directors previously elected.
SUPPORTING STATEMENT:
At last year's annual meeting of stockholders a similar resolution was
approved by a significant number of the voting shares.
The election of directors is the primary avenue for stockholders to
influence corporate governance policies and to hold management accountable for
implementation of those policies. I believe that the classification of the Board
of Directors, which results in only a portion of the Board being elected
annually, is not in the best interests of the Company and its stockholders.
The Board of Directors of the Company is divided into three classes serving
staggered three-year terms. I believe that the Company's classified Board of
Directors maintains the incumbency of the current Board and therefore of current
management, which in turn limits management's accountability to stockholders.
The elimination of the Company's classified Board would require each new
director to stand for election annually and allow stockholders an opportunity to
register their views on the performance of the Board collectively and each
director individually. I believe this is one of the best methods available to
stockholders to insure that the Company will be managed in a manner that is in
the best interests of the stockholders.
I am a founding member of the Investors Rights Association of America and I
believe that concerns expressed by companies with classified boards that the
annual election of all directors could leave companies without experienced
directors in the event that all incumbents are voted out by stockholders, are
unfounded. In my view, in the unlikely event that stockholders vote to replace
all directors, this decision would express stockholder dissatisfaction with the
incumbent directors and reflect the need for change. I urge your support, vote
for this resolution.
12
<PAGE>
THE BOARD OF DIRECTORS' STATEMENT IN OPPOSITION TO THE FOREGOING STOCKHOLDER
PROPOSAL
At the 1995 Annual Meeting a similar resolution was introduced and was
rejected by the stockholders.
The stockholders of the Company approved the current classified board in
1988. At its 1988 Annual Meeting, stockholders representing 85% of the shares of
Common Stock voting at the meeting approved the reorganization of ZERO and the
Company became a Delaware corporation with a classified Board of Directors. The
stockholders approved the reorganization after consideration of the
recommendations and reasons presented by the Board of Directors, including its
belief that a classified board provides the board a greater likelihood of
continuity and experience.
Greater continuity on ZERO's Board of Directors assures that the majority of
directors at any given time will have experience with its operations and
business affairs. The Board of Directors continues to believe that this permits
more effective long-term strategic planning. A classified board also helps ZERO
to attract and retain well-qualified individuals who are able to commit the time
and resources to understand ZERO and its operations. Continuity and quality of
leadership resulting from the classified board create long-term value for the
stockholders.
A classified board also reduces the possibility of a sudden change in
majority control of the Board of Directors. In the event of a hostile takeover
attempt, arm's length discussions with management and the board would be more
likely due to the fact that approximately two-thirds of the class of directors
have terms of more than one year. The board along with management would then be
in a position to negotiate the most favorable transaction for the stockholders
of the Company.
The Board of Directors continues to believe that a classified board will
benefit the Company and its stockholders by permitting all stockholders to rely
on the consistency and continuity of corporate policy. At the same time, annual
elections, in which one of three classes of the Board of Directors is elected
each year, assures stockholders an opportunity to renew and reinvigorate
corporate decision-making while maintaining the basic integrity of corporate
policy year to year for the benefit of all who rely on it.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ABOVE PROPOSAL
STOCKHOLDER PROPOSAL REGARDING STOCK COMPENSATION FOR NON-EMPLOYEE DIRECTORS
The owner of 300 shares of Common Stock has notified ZERO that he intends to
present the following proposal at the Annual Meeting:
RESOLVED that the shareholders recommend that the board of directors take
the necessary steps to ensure that from here forward all non-employee directors
should receive a minimum of fifty percent of their total compensation in the
form of company stock which cannot be sold for three years.
SUPPORTING STATEMENT:
A significant equity ownership by outside directors is probably the best
motivator for facilitating identification with shareholders.
13
<PAGE>
Traditionally, outside directors, usually selected by management, were
routinely compensated with a fixed fee, regardless of corporate performance. In
today's competitive global economy, outside directors must exercise a critical
oversight of management's performance in furthering corporate profitability. All
too often, outside directors oversight has been marked by complacency, cronyism,
and inertia.
Corporate America has too many examples of management squandering company
assets on an extended series of strategic errors. Meanwhile, Boards of Directors
stood by and passively allowed the ineptitude to continue, well after disaster
struck. They fiddled while Rome was burning.
When compensation is in company stock, there is a greater likelihood that
outside directors will be more vigilant in protecting their own, as well as
corporate, and shareholder interests.
What is being recommended in this proposal is neither novel nor untried. A
number of corporations have already established versions of such practices,
namely, Scott Paper, The Travelers, and Hartford Steam Boiler.
Robert B. Stobough, Professor of Business Administration at the Harvard
Business School, did a series of studies comparing highly successful to poorly
performing companies. He found that outside directors in the better performing
companies had significantly larger holdings of company stock than outside
directors in the mediocre performing companies.
It can be argued that awarding stock options to outside directors
accomplishes the same purpose of insuring director's allegiance to a company's
profitability, as paying them exclusively in stock. However, it is our
contention that stock options are rewarding on the upside, but offer no
penalties on the downside, where shareholders bear the full downside risks.
There are few strategies that are more likely to cement outside directors with
shareholder interests and company profitability than one which results in their
sharing the same bottom line.
THE BOARD OF DIRECTORS' STATEMENT IN OPPOSITION TO THE FOREGOING STOCKHOLDER
PROPOSAL
The Company's compensation of its nonemployee directors currently consists
of two components: cash compensation and stock compensation in the form of stock
options. The board believes that annual automatic stock option grants to the
nonemployee directors, which vest over three years, closely align the interests
of nonemployee directors with those of the stockholders. The board also believes
that the compensation structure for nonemployee directors is fair and
competitive with industry standards, and that changes recommended by the above
stockholder proposal are neither advisable nor necessary.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ABOVE PROPOSAL
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, 1996, 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.
14
<PAGE>
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 1997 ANNUAL MEETING OF STOCKHOLDERS
Stockholder proposals intended to be presented at the 1997 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 25, 1997, for
inclusion in the proxy statement and form of proxy relating to that meeting.
ANNUAL REPORT
The Company's 1996 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 1996 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. Internet World Wide Web users can
request information on ZERO through the following universal resource:
http://www.zerocorp.com
Howard W. Hill, CHAIRMAN OF THE BOARD
Anita J. Cutchall, CORPORATE SECRETARY
June 24, 1996
15
<PAGE>
PROXY (SOLICITED BY THE BOARD OF DIRECTORS OF ZERO CORPORATION)
ZERO CORPORATION
ANNUAL MEETING OF STOCKHOLDERS, WEDNESDAY, JULY 24, 1996
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and the accompanying Proxy Statement for the 1996 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,
Emerald Room, 506 South Grand Avenue, Los Angeles, California, on Wednesday,
July 24, 1996, 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 EXECUTED WILL BE VOTED AS DIRECTED BELOW, OR IF NO DIRECTION IS
INDICATED, WILL BE VOTED FOR ITEM 1, AGAINST ITEM 2, AND IN THE DISCRETION OF
THE PROXIES IN MATTERS DESCRIBED IN ITEM 3 BELOW.
IMPORTANT--THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE
(CONTINUED ON THE REVERSE SIDE)
<PAGE>
PLEASE MARK
YOUR VOTES AS /X/
INDICATED IN
THIS EXAMPLE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 1
FOR the nominee listed below WITHHOLD
(except as marked to the contrary) AUTHORITY
1. Election of Director / / / /
Gary M. Cusumano
(INSTRUCTION: To withhold authority to vote for the nominee write the nominee's
name in the space provided below.)
_____________________________________________________
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ITEMS 2(a) AND (b)
FOR AGAINST ABSTAIN
2. (a) Declassification of the Board of Directors / / / / / /
(b) Compensation of Board of Directors
3. To transact such other business as may / / / / / /
properly come before the meeting or
any adjournment or postponement thereof.
This proxy should be dated, signed by
the stockholder(s) as the name(s) appear
hereon, and returned promptly in the
enclosed envelope. Persons signing in a
fiduciary capacity should so indicate.
DATED:__________________________, 1996
______________________________________
(Signature)
______________________________________
(Signature)
