<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED MARCH 31, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM__________TO___________
Commission file number 1-5260
ZERO CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as set forth in its charter)
Delaware 95-1718077
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
444 South Flower Street, Ste. 2100, Los Angeles, CA 90071-2922
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 213/629-7000
------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, $.01 Par Value New York Stock Exchange, Inc.
Pacific Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
-- --
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the registrant's voting and non-voting common
stock held by non-affiliates was $355,962,642 as of May 19, 1998 (based upon
the closing sale price of $29.25 per share of such stock on the New York Stock
Exchange, Inc. on May 19, 1998).
Common stock outstanding as of May 19, 1998--12,440,752 shares.
DOCUMENTS INCORPORATED BY REFERENCE
None.
<PAGE>
PART I
ITEM 1. BUSINESS.
ZERO Corporation (the "Company", "ZERO", or "Registrant") was incorporated in
Delaware in 1988 as a successor to a California corporation of the same name
that was originally incorporated in 1952. ZERO is primarily engaged in the
design, manufacture and marketing of system packaging, thermal management and
engineered cases that protect electronic equipment.
On April 6, 1998, the Company entered into a definitive merger agreement with
Applied Power Inc. ("API") pursuant to which the Company would become a wholly
owned subsidiary of API (the "Merger"). Stockholders of the Company would
receive 0.85 share of API for each share of the Company's stock. Approved by
the boards of directors of both companies, consummation of the Merger is
subject to approval by the stockholders of both companies and satisfaction of
other certain conditions. The Merger would be accounted for as a pooling of
interests, is structured to be tax free to ZERO stockholders and is expected
to be completed in July 1998. See Note 13 of Notes to Consolidated Financial
Statements in Item 8 hereof.
Description of Business Segments
- --------------------------------
ZERO has two business segments: (i) Enclosures and Accessories -- Products
include card cages for printed circuit boards, backplanes, filter fan packages
and microprocessor-controlled fan trays, blowers, motorized impellers, heat
exchangers, air conditioners and computerized thermal management controls,
electronic cabinets and consoles, cable management racks, deep drawn aluminum
ZERO boxes and cases, fabricated cases, specialized case hardware and other
specialized enclosures sold to the electronics industry; and (ii) Other --
Products include air cargo enclosures and hardware, aluminum luggage, camera
cases, industrial carrying cases, food service containers and other custom
metal products.
ENCLOSURES AND ACCESSORIES. The Enclosures and Accessories segment serves the
system packaging, thermal management and engineered case requirements of the
telecommunications, instrumentation and data processing markets. The
telecommunications market includes applications ranging from traditional
central office telephone equipment and high-capacity digital switching systems
to wireless cellular and paging systems. The instrumentation market includes
sophisticated electronic equipment located in diverse environments. The data
processing market includes a range of applications, from mainframes and
workstations to servers and routers.
ZERO employs manufacturers' representatives, direct sales people and
distributors to market its products worldwide. ZERO's standard products and
accessories are sold through catalogs, advertisements, trade journals and
independent distributors.
OTHER. ZERO also serves the air cargo and consumer/other markets. Air Cargo
designs, manufactures and markets a broad range of specialized and general-
purpose cargo containers as well as a patented telescoping baggage/cargo
system. In addition, ZERO produces and markets the well-known of ZERO
Halliburton(R) luggage, carrying cases and attaches for consumers worldwide,
food service containers and other specialized enclosures.
ZERO's consumer products are marketed worldwide through catalogs,
advertisements, telemarketing programs and trade journals, and are distributed
through established independent dealers. Nonstandard or specialized products
and accessories are marketed through manufacturers' representatives and direct
sales people.
Financial information about ZERO's business segments, as well as activity from
its foreign operations and export sales by domestic operations, is set forth in
Note 11 - "Segment Information" of Notes to Consolidated Financial Statements
in Item 8 hereof and is incorporated herein by reference.
Raw Materials
- -------------
The principal raw materials used by ZERO in manufacturing its products are
aluminum and steel and, to a lesser extent, plastics. Such materials are
purchased under competitive bids at levels sufficient to meet foreseeable
production and delivery schedules from an adequate number of suppliers. Other
raw materials and supplies
2
<PAGE>
necessary for the production of ZERO's products are purchased from a variety of
suppliers. As of May 31, 1998, the Company has not experienced shortages in the
supply of its raw materials. Based on market and economic conditions at that
date, ZERO believes that the supply and availability of these materials will be
adequate to support its level of operations projected through March 31, 1999.
However, the Company can make no assurances that such materials will be
available beyond that period, and any shortage of such materials could have a
significant and material adverse impact on the operations of the Company.
Patents
- -------
Patents, licenses, franchises and concessions are not materially important
factors in ZERO's overall production process and are not material to its
results of operation.
Customers
- ---------
During the three years ended March 31, 1998, the Company has not been dependent
on any single customer or on a few customers, the loss of which would have a
material adverse effect on its operations. During such period, no one customer
accounted for more than 8% of the Company's net sales.
Sales and Backlog
- -----------------
Generally, many of ZERO's products are sold with short lead times, therefore,
backlog is not necessarily indicative as a predictor of ZERO's future sales.
ZERO's backlog at March 31, 1998 and 1997 was $51,739,000 and $57,689,000,
respectively. Backlog is based on contracts which were signed as of the
respective dates set forth. The backlog at March 31, 1998 is scheduled for
delivery during fiscal 1999.
A majority of ZERO's sales orders are in amounts of less than $25,000 each.
These orders generally are delivered 1 to 6 weeks from the time the order is
booked. Larger orders and custom orders may take several weeks to a year or
more depending on the delivery schedule set by the customer. Because of the
large number of customers, the relatively small size of each order and the
relatively short delivery cycles involved, the Company believes the risk is low
of any order being canceled which would have a significant adverse effect on
operations.
In fiscal years 1998 and 1997, there were no material U.S. government contracts
or subcontracts that are subject to renegotiations of profits or termination at
the convenience of the government.
Competition
- -----------
While reliable statistics are not available to permit the Company to accurately
estimate its share of the total market for each of its business segments, the
Company believes it is a leading manufacturer and marketer of products to the
Enclosures and Accessories markets that it serves. ZERO competes with a number
of other larger and smaller companies, including customers which design and
manufacture products for their own use. The degree and type of competition that
ZERO encounters varies for both of these business segments.
The Company believes it effectively competes in both of its business segments
by providing engineering expertise, innovative design, superior quality and on
time delivery at competitive prices. ZERO's ability to successfully compete in
the Enclosures and Accessories segment is also attributable to its broad range
of standard products. Approximately 2,500 dies, capable of producing over
100,000 sizes of standard deep drawn aluminum enclosures, provide ZERO with
both a cost and service advantage in a large portion of its metal case and
enclosures business. In addition, ZERO offers thousands of sizes of fabricated
cases and hundreds of standard configurations for system packaging. The thermal
management systems, which cool or maintain the temperature in a wide range of
electronics, include products such as blowers, fans, air conditioning systems
and electronic control systems. Competitive strength is also derived by the
Company's ability to modify standard products to satisfy a variety of
applications and customer requirements.
Market Trends
- -------------
Three primary trends have increased ZERO's sales activity within the rapidly
growing electronics marketplace. One trend is the miniaturization of
electronics products, which has increased the demand for highly specialized
systems packaging and thermal management solutions. A second trend is lower
priced electronic products, which has increased both unit sales and the size of
markets ZERO serves. A third trend is the worldwide growth in
3
<PAGE>
telecommunications, which has globally expanded the opportunity to both enclose
and cool products used in this industry.
ZERO's sales to the electronics industry increased to $205.8 million from
$175.1 million for the years ended March 31, 1998 and 1997, respectively. This
is primarily due to the strength in the telecommunications and instrumentation
market. In addition to growth in these markets, acquisitions completed during
fiscal 1998 and 1997 contributed to the increase in net sales to the
electronics industry.
Research and Development
- ------------------------
While research and development activities are not a significant part of the
Company's business, the Company works with its customers in providing
engineered solutions to satisfy their specific requirements often resulting in
the development of new products. During fiscal years 1998, 1997 and 1996, the
Company spent less than 1% of net sales on research and development activities.
Environmental Matters
- ---------------------
ZERO has developed and implemented an environmental program to reduce or
eliminate the use of hazardous material in its current operations. Through
changes in production processes, capital expenditures, proper training and the
use of state-of-the-art treatment and monitoring equipment, the Company
believes its program is controlling the use and discharge of hazardous
materials and is in substantial compliance with applicable local, state and
Federal regulations. The Company is not aware of noncompliance with such laws
relating to its current operations that would materially adversely affect its
earnings or competitive position or would require any significant capital
expenditures during fiscal years 1999 and 2000.
For further information with respect to current environmental litigation, refer
to Note 10 - "Contingent Liabilities" of Notes to Consolidated Financial
Statements in Item 8 hereof.
Employees
- ---------
As of May 31, 1998, ZERO employed approximately 2,000 persons. Employee
relations are considered good. Only certain employees at the Company's Samuel
Groves & Co. Limited subsidiary in the United Kingdom are represented by unions.
ITEM 2. PROPERTIES.
As of May 31, 1998, ZERO used manufacturing plants, facilities and office
buildings containing an aggregate of approximately 1,798,000 square feet of
floor space. ZERO's plants and facilities are located in California (Camarillo,
Chino, El Monte, Los Angeles, Oxnard, Pacoima, Rancho Dominguez and San Diego);
Utah (North Salt Lake); Indiana (Monon); Massachusetts (Monson and Shirley);
New Jersey (Princeton Junction and Windsor); Minnesota (Champlin); Connecticut
(Hartford); Tijuana, Mexico; and Birmingham, Feltham and West Midlands,
England. The plants located in Camarillo, El Monte, Oxnard, Pacoima and San
Diego, California; Princeton Junction and Windsor, New Jersey; Champlin,
Minnesota; Monan, Indiana; Shirley, Massachusetts; and West Midlands, England
are used in the production of Enclosures and Accessories segment. The remaining
plants are used by both business segments.
ZERO owns all of its plants and facilities, except for the following leased
properties:
<TABLE>
<CAPTION>
SQUARE
PLANT FOOTAGE LEASE EXPIRES
- -------------------------------------------------------------------------------
<S> <C> <C>
Camarillo, CA 35,000 June 30, 2000*
Chino, CA 7,000 March 31, 1999*
El Monte, CA 72,000 May 31, 2004
Los Angeles, CA 13,000 February 27, 2002
Oxnard, CA 13,000 June 30, 2000
Pacoima, CA 113,000 August 7, 1999
Rancho Dominguez, CA 110,000 September 29, 1999
</TABLE>
4
<PAGE>
<TABLE>
<S> <C> <C>
Shirley, MA 8,000 December 22, 2006*
Windsor, NJ 24,000 June 30, 1998*
Tijuana, Mexico 33,000 July 31, 1998*
Birmingham, England 4,000 July 31, 2006
Feltham, England 18,000 October 1, 2007
West Midlands, England 22,000 August 31, 2010
West Midlands, England 29,000 May 22, 2010
-------
TOTAL 501,000
</TABLE>
* Lease contains renewal option.
ZERO's plants and facilities used in operations are generally constructed of
concrete block, brick, concrete tilt-up, steel or a combination thereof. ZERO's
facilities and equipment are well maintained and are believed to be adequate to
support increases in its operations, assuming a comparable product mix.
ITEM 3. LEGAL PROCEEDINGS.
For information concerning legal proceedings, see Note 10 - "Contingent
Liabilities" of Notes to Consolidated Financial Statements in Item 8 hereof,
which is incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Registrant submitted no matters to a vote of its security holders during the
fiscal quarter ended March 31, 1998.
EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------
Information regarding the Company's executive officers as of June 1, 1998 is as
follows:
<TABLE>
<CAPTION>
EXECUTIVE
NAME AGE POSITION OFFICER SINCE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Howard W. Hill 71 Chairman of the Board 1960
John B. Gilbert 77 Chairman Emeritus and Director 1952
Wilford D. Godbold Jr. 60 President, Chief Executive Officer and Director 1982
Anita J. Cutchall 59 Vice President - Legal and Corporate Secretary 1992
George A. Daniels 60 Vice President and Chief Financial Officer 1987
James F. Hermanson 61 Vice President 1984
Michael D. LeRoy 50 Vice President of Corporate Development 1995
John G. Mogler 58 Vice President 1996
</TABLE>
None of the directors or executive officers are related to one another. All
executive officers except Mr. LeRoy have served in their current capacities or
in other managerial positions with the Company for a minimum of five years. Mr.
LeRoy has held his current position with the Company since January 1995, prior
to which he was Chief Operating Officer of Biner Ellison Packaging Systems,
Inc., a manufacturing company, from 1990 through 1994.
5
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's common stock is traded on the New York Stock Exchange, Inc. and
the Pacific Exchange, Inc. under the ticker symbol ZRO.
<TABLE>
<CAPTION>
Trading Range Dividends
Quarter Ended High Low Paid
- ------------------------------------------------------------------
<S> <C> <C> <C>
1998
March 31, 1998 $29.88 $25.00 $.03
December 31, 1997 32.06 24.63 .03
September 30, 1997 29.19 24.63 .03
June 30, 1997 26.50 17.75 .03
1997
March 31, 1997 $23.75 $18.75 $.03
December 31, 1996 20.88 17.13 .03
September 30, 1996 22.13 17.88 .03
June 30, 1996 22.88 16.63 .03
</TABLE>
On May 19, 1998 the Company had 4,883 stockholders of record.
ITEM 6. SELECTED FINANCIAL DATA.
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended March 31, 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $258,745 $225,442 $206,247 $179,694 $171,821
Net Income 24,380 * 15,888 16,950 14,825 12,851
Working Capital 87,551 70,341 58,174 73,531 66,980
Total Assets 216,998 185,956 165,838 171,524 158,734
Stockholders' Equity 126,065 101,253 84,831 145,594 136,477
Long-Term Debt 50,555 51,503 51,525 - -
Return on Average
Stockholders' Equity 21.5%* 17.1% 14.7% 10.5% 9.7%
Current Ratio 4.1:1 4.3:1 3.9:1 4.8:1 5.0:1
Per Share Data:
Basic EPS $ 1.98 * $ 1.30 $ 1.08 $ 0.93 $ 0.81
Diluted EPS 1.93 * 1.28 1.07 0.93 0.81
Dividends Paid 0.12 0.12 0.44 0.41 0.40
</TABLE>
* Includes Special Items set forth in Note 12 of Notes to Consolidated Financial
Statements in Item 8 hereof.
6
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RECENT DEVELOPMENTS
On April 6, 1998, the Company entered into a definitive merger agreement with
Applied Power Inc. ("API") pursuant to which the Company would become a wholly
owned subsidiary of API (the "Merger"). Stockholders of the Company would
receive 0.85 share of API for each share of the Company's stock. Approved by
the boards of directors of both companies, consummation of the Merger is
subject to approval by the stockholders of both companies and satisfaction of
certain other conditions. The Merger would be accounted for as a pooling of
interests, is structured to be tax free to ZERO stockholders and is expected to
be completed in July 1998. See Note 13 of Notes to Consolidated Financial
Statements in Item 8 hereof.
RESULTS OF OPERATIONS
Overview
- --------
Net sales in fiscal 1998 were $258.7 million, an increase of 14.8% over fiscal
1997. This compares to sales growth of 9.3% in 1997 when compared to 1996. The
increases in both years were primarily attributable to volume growth in the
Enclosures and Accessories segment and to acquisitions, net of a disposition.
Gross profit margin in 1998 increased to 33.8% as compared with 33.0% in 1997
primarily due to increased sale volume and a more favorable product mix. Gross
profit margin decreased in 1997 from 34.2% in 1996, primarily due to losses at
two European operations and a shift in product mix.
Selling and administrative expenses as a percent of net sales was 19.7%, 20.2%
and 21.3%, for fiscal years 1998, 1997 and 1996, respectively. Decreases in
each year were primarily due to sales volume increases.
Results of Operations by Segment
- --------------------------------
ENCLOSURES AND ACCESSORIES. Net sales in the Enclosures and Accessories segment
for fiscal 1998 were $205.8 million, an increase of $30.7 million or 17.5% over
fiscal 1997. This compares to sales growth of $22.7 million or 14.9% in fiscal
1997 as compared with fiscal 1996. The increase in fiscal 1998 was primarily
attributable to higher sales applicable to the
telecommunications/instrumentation market and the incremental effect of
approximately $6 million in sales from acquisitions. The increase in fiscal
1997 was primarily the result of approximately $17 million in sales from
acquisitions, together with increased volume in the
telecommunications/instrumentation and data processing markets.
Gross profit margin increased to 35.1% in fiscal 1998 from 34.7% in fiscal 1997
primarily due to increased sales volume and improved product mix. Gross profit
margin decreased in fiscal 1997 from 37.3% in 1996 primarily due to operating
inefficiencies on decreased sales at a European operation and shift in product
mix.
Selling and administrative expenses as a percent of sales was 16.5% in 1998,
16.8% in 1997 and 17.2% in 1996. The decreases in each year were primarily
due to increased sales volume.
OTHER. Net sales for fiscal 1998 were $52.9 million, an increase of $2.6
million or 5.1% over fiscal 1997. This compares to a decrease in sales of $3.5
million or 6.6% in fiscal 1997 as compared with fiscal 1996. The increase in
fiscal 1998 was primarily attributable to higher sales in the air cargo market.
The decrease in fiscal 1997 was primarily due to the sale of Anvil Cases, Inc.
in April 1996, which had an effect of approximately $7.2 million in net sales,
partially offset by increased volume in consumer and other markets.
Gross profit margin increased to 28.5% in fiscal 1998 from 26.9% in fiscal 1997
due to increased sales volume and cost-containment efforts. Despite the loss at
a European operation, gross profit margin increased in fiscal 1997 from 25.5%
in 1996 due to a shift in product mix primarily from the sale of Anvil Cases,
Inc.
7
<PAGE>
Selling and administrative expenses as a percent of sales was 18.2% in fiscal
1998, 18.5% in fiscal 1997 and 21.0% in 1996. The decrease in 1998 was
primarily due to increased sales volume. The improvement in 1997 over 1996 was
primarily attributable to acquisition costs incurred in fiscal 1996, together
with the sale of Anvil Cases, Inc.
Effects of Inflation
- --------------------
Price increases by ZERO did not contribute significantly to increases in the
Company's net sales during the last three years. The impact of rising costs of
labor, material and supplies, and equipment was mitigated, in part, by changes
in product design, overall manufacturing and purchasing efficiencies, and
effective management and control of operating expenses.
Special Items
- -------------
The Company recognized a non-taxable gain of $1.7 million in the second quarter
of fiscal 1998 from insurance proceeds on the life of its former Vice President
of Marketing and Sales. In March 1998, the Company completed the sale of its
facility in Burbank, California. The sale price consisted of cash of
$8.7 million and a receivable of $4 million, resulting in a pre-tax gain of
$9.8 million.
During the fourth quarter of fiscal 1998, the Company completed its evaluation
of a European subsidiary and approved a plan for its disposition. Based upon
the Company's evaluation of the subsidiary held for sale, a pre-tax $4.5
million nonrecurring charge was recorded in fiscal 1998.
Stock Repurchases
- -----------------
In a Dutch Auction Tender Offer during fiscal 1996, the Company repurchased
approximately 25% of its outstanding shares, funded by the issuance of long
term promissory notes aggregating $50 million, together with approximately $22
million of cash on hand and cash derived from the sale of short-term
investments. As a result, net income for fiscal 1997 was reduced by
approximately $2.8 million due to the interest expense on the $50 million notes
together with the foregone investment income on the $22 million cash used.
In November 1996, the Board of Directors authorized the repurchase of up to an
additional 400,000 shares, as well as shares of "odd lot" stockholders.
During fiscal 1998 and 1997, total shares repurchased were insignificant.
Acquisitions and Divestiture
- ----------------------------
The Company acquired one company in fiscal 1998 and two companies during fiscal
1997, all of which complement existing operations. These acquisitions were
accounted for using the purchase method of accounting. The operating results of
the entities acquired, which were not material, were included in the
consolidated financial statements from their respective acquisition dates. The
Company also completed the sale of Anvil Cases, Inc. in fiscal 1997. The gain
on the sale of Anvil Cases, Inc. was not material.
Liquidity and Capital Resources
- -------------------------------
The Company's source of liquidity is a combination of cash and cash
equivalents, short-term investments and cash provided by operations, together
with an unused $50 million shelf facility available to finance acquisitions.
At March 31, 1998, the Company's cash and cash equivalents and short-term
investments increased to $41 million from $16.2 million at March 31, 1997,
primarily due to cash provided by operating activities which amounted to
$36.7 million in 1998 plus $8.7 million proceeds from sale of assets, partially
offset by cash used for capital expenditures, acquisitions and dividend
payments.
At March 31, 1997, the Company's cash and cash equivalents and short-term
investments increased to $16.2 million from $8 million at March 31, 1996,
primarily due to cash provided by operating activities which amounted to
$19.2 million in 1997, partially offset by cash used for capital expenditures,
acquisitions and dividend payments. Cash dividends paid during fiscal 1997
decreased $5.6 million as compared with fiscal 1996 due to the reduction in the
annual cash dividend rate from $.44 per share to $.12 per share, which was
effective in April 1996, and the reduction in outstanding shares as a result
of the stock repurchases.
8
<PAGE>
During fiscal 1996, the Company used approximately $22 million of cash (in
addition to the $50 million notes) to repurchase its common shares as described
above. Cash provided by operating activities in fiscal 1996 amounted to $17.3
million, which was used for property additions, the acquisition of three
companies and payment of dividends.
During fiscal 1998, capital expenditures totaled $14.6 million, as compared
with $10.8 million in fiscal 1997. The increase in capital expenditures is
primarily due to the new 135,000 square foot thermal management facility near
Princeton, New Jersey, a 70,000 square foot addition to another thermal
management facility near Minneapolis, Minnesota, as well as acquiring equipment
for certain existing businesses. Both thermal management facilities will be
completed in fiscal 1999. Currently, management is negotiating for land
to construct a new 170,000 square foot electronics cabinet facility in
Valencia, California. Capital expenditures during fiscal 1999 are expected to
be approximately $18.7 million.
Management believes cash from operations, together with the Company's cash
and cash equivalents and short-term investments and a $50 million shelf
facility available to finance acquisitions, will provide sufficient funds to
finance current and forecasted operations, including potential smaller
acquisitions, for the next 12-month period. For larger acquisitions, management
believes the balance sheet will sustain additional borrowing. The Company will
continue to invest its cash reserves in liquid, lower-risk investments.
If the proposed Merger is consummated, the Company will have additional
financial commitments, including funding rabbi trusts with respect to ZERO's
deferred compensation plans and joint life insurance plans and any requirements
as a wholly owned subsidiary of API.
Contingencies
- -------------
The Company was notified by certain governmental agencies that it is, or may
be, potentially responsible for costs associated with the investigation and
remediation of five sites where soil and/or groundwater contamination is
alleged. The Company is working with the governmental agencies to resolve these
matters. The Company has provided reserves to cover those costs that can be
reasonably estimated at this time.
ZERO has developed and implemented an environmental program to reduce or
eliminate the use of hazardous material in its current operations. Through
changes in production processes, capital expenditures, proper training and the
use of state-of-the-art treatment and monitoring equipment, the Company
believes its program is controlling the use and discharge of hazardous
materials and that it is in substantial compliance with applicable local, state
and Federal regulations. The Company is not aware of noncompliance with such
laws relating to its current operations that would materially adversely affect
its earnings or competitive position or would require any significant capital
expenditures during fiscal years 1999 and 2000. Refer to Note 10 of Notes to
Consolidated Financial Statements in Item 8 hereof for further discussion of
environmental and other contingencies.
New Accounting Standards
- ------------------------
During the third quarter of fiscal 1998, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." This
statement requires the disclosure of basic and diluted earnings per share. All
prior period earnings per share data reported herein have been restated in
accordance with SFAS No. 128.
In June 1997, Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income" and SFAS No. 131, "Disclosure About Segments
of an Enterprise and Related Information." Both statements are effective for
fiscal years beginning after December 15, 1997. The Company is assessing the
required disclosures and will adopt these statements in fiscal 1999.
Year 2000
- ---------
The Company is taking action to assure that its computer systems are capable of
processing periods for the year 2000 and beyond. The Company is utilizing both
internal and external resources to reprogram or replace and test software and
hardware for Year 2000 modifications. In addition, the Company is communicating
with its significant suppliers and customers to coordinate the Year 2000
conversion. Based on current assessments, the Company
9
<PAGE>
expects to be Year 2000 compliant by the end of fiscal 1999 and the costs
associated with this are not expected to have a material impact on the
financial results or financial condition of the Company.
Safe Harbor Statement
- ---------------------
STATEMENTS THAT ARE NOT HISTORICAL FACTS, INCLUDING WITHOUT LIMITATION,
STATEMENTS ABOUT OUR CONFIDENCE, STRATEGIES, EXPECTATIONS AND BELIEFS,
TECHNOLOGIES AND OPPORTUNITIES, INDUSTRY AND MARKET SEGMENT GROWTH, DEMAND AND
ACCEPTANCE OF NEW AND EXISTING PRODUCTS, AND RETURN ON INVESTMENTS IN PRODUCTS
AND MARKETS, ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES, INCLUDING WITHOUT LIMITATION, THE EFFECT OF GENERAL ECONOMIC AND
MARKET CONDITIONS, CUSTOMER REQUIREMENT FOR OUR PRODUCTS, THE CONTINUING
STRENGTH OF THE ELECTRONICS MARKETS, COMPETITOR PRICING, MAINTENANCE OF OUR
CURRENT MOMENTUM, FOREIGN CURRENCY RISK AND OTHER FACTORS.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Index to and the Consolidated Financial Statements and Financial Statement
Schedule beginning on page 20 are incorporated herein by reference. The
Selected Quarterly Financial Data (Unaudited) schedule for fiscal years 1998
and 1997 is on page 36 and is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
10
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding the Company's directors as of June 1, 1998 is as follows:
<TABLE>
<CAPTION>
TERM
TO DIRECTOR
NAME AGE POSITION/PRINCIPAL OCCUPATION EXPIRE SINCE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Howard W. Hill 71 Director, Chairman of the Board 2000 1960
John B. Gilbert 77 Director, Chairman Emeritus; Chairman, 2000 1952
TOLD Corporation (land development).
Wilford D. Godbold Jr. 60 Director, President and Chief Executive Officer. 2000 1982
Mr. Godbold also serves as director of Pacific
Enterprises, K2 Inc. and the Southern California
Gas Company.
Bruce J. DeBever 62 Director; Consultant. Mr. DeBever also serves as a 1998 1992
director of Hydrel.
Whitney A. McFarlin 57 Director; Chairman, President and Chief Executive 1998 1988
Officer, Angeion Corporation (medical device
company).
Gary M. Cusumano 54 Director; Director and President, The Newhall Land 1999 1994
and Farming Company (real estate and agriculture).
Mr. Cusumano also serves as a director of Watkins
Johnson Company.
</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. DeBever and McFarlin. Mr. DeBever was President of Hydrel
(architectural lighting) from January 1997 through February 1998, prior to
which he was President of Little Tikes Commercial Play Systems (Omni), Inc.
(commercial play equipment), since August 1995. 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.
Information concerning the Company's executive officers is included under the
caption "Executive Officers of the Registrant" following Part I, Item 4 of this
report.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, certain officers and persons who beneficially own 10% or
more of the Company's Common Stock to file initial reports of ownership and
reports of changes of ownership of the Common Stock of the Company with the
Securities and Exchange Commission and the New York Stock Exchange, Inc.
Copies of these reports are required to be furnished to the Company. Based
solely on its review of the reports furnished to the Company or written
representations that no other reports were required, the Company believes that
all of such filing requirements were satisfied with respect to fiscal 1998,
except that Diane N. Kajikami, Controller and Chief Accounting Officer, filed a
late report for an exercise of an employee stock option. This option exercise
was subsequently reported.
11
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE
The following table shows the compensation of the Company's Chief Executive
Officer and other named executive officers during the fiscal years
indicated.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION 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. 1998 $380,000 $465,711 14,000 $137,711
President, Chief Executive 1997 $365,000 $337,561 18,500 $128,808
Officer and Director 1996 $350,000 $367,696 22,000 $104,573
George A. Daniels 1998 $213,500 $209,325 7,000 $ 51,382
Vice President and 1997 $205,500 $152,041 9,100 $ 46,721
Chief Financial Officer 1996 $197,500 $165,988 11,000 $ 38,103
James F. Hermanson 1998 $213,500 $209,325 7,000 $ 59,458
Vice President 1997 $205,500 $152,041 9,100 $ 56,327
1996 $197,500 $165,988 11,000 $ 47,119
Michael D. LeRoy 1998 $213,500 $209,325 7,000 $ 30,680
Vice President of Corporate 1997 $205,500 $152,041 9,100 $ 30,416
Development 1996 $197,500 $165,988 11,000 $ 1,317
John Mogler/3/ 1998 $194,923 $179,489 7,000 $ 51,605
Vice President 1997 $164,653 $131,833 8,000 $ 40,626
</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 (the "Pension 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 fiscal 1998 were:
<TABLE>
<CAPTION>
CONTRIBUTIONS TO INTEREST INSURANCE RESTORATION
PENSION PLAN ACCRUALS PREMIUMS AMOUNTS
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Wilford D. Godbold, Jr. $12,820 $66,271 $13,135 $45,485
George A. Daniels $12,689 $16,097 $ 5,792 $16,804
James F. Hermanson $12,689 $18,682 $11,283 $16,804
Michael D. LeRoy $12,694 $ 1,182 - $16,804
John G. Mogler $12,834 $14,203 $ 9,310 $15,258
</TABLE>
/3/ Mr. Mogler became an executive officer of the Company during fiscal year
1997.
12
<PAGE>
COMPENSATION OF DIRECTORS
Nonemployee directors receive a fee of $4,000 per quarter plus $1,000 for
each board of directors meeting attended. No additional fees are paid for
attendance at committee meetings. Under the Company's 1994 Stock Option Plan,
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.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
On April 6, 1998, the Company entered into a definitive merger agreement with
Applied Power Inc. ("API") (the "Merger Agreement") pursuant to which the
Company would become a wholly owned subsidiary of API (the "Merger"). Approved
by the boards of directors of both companies, the consummation of the Merger is
subject to stockholder approval and certain other conditions. Subject to the
terms and conditions of the Merger Agreement, each share of ZERO Common Stock
outstanding immediately prior to the effective time of the Merger will be
converted into 0.85 of a share of API common stock. Cash will be paid in lieu
of any fractional share of API common stock. The Merger would be accounted for
as a pooling of interests, is structured to be tax free to ZERO stockholders
and is expected to be completed in July 1998.
With regard to the Merger, certain directors and executive officers of the
Company have certain interests in the consummation of the Merger other than
solely as holders of ZERO Common Stock. Generally, (i) ZERO will, prior to the
Merger, enter into one-year employment agreements with its executive officers
and certain other executives, (ii) prior to the "change in control" that will
occur as a result of the Merger, rabbi trusts will be funded with respect to
ZERO's Executive Deferred Compensation Plan, Directors' Deferred Compensation
Plan and Joint Life Insurance Plans, and (iii) at the effective time of the
Merger, each outstanding option to purchase shares of ZERO Common Stock,
including the options held by directors and executive officers, will be assumed
by API and converted into an option to purchase shares of API common stock on
terms adjusted to reflect the exchange ratio. In addition, in the case of
options held by nonemployee directors of ZERO (who will cease to be directors
of ZERO at that time as provided in the Merger Agreement) each option which is
not fully vested will become fully vested at the effective time of the Merger.
Nonvested options held by executive officers of ZERO will become fully vested
if the executive officer's employment with ZERO is terminated without cause (as
defined) within one year after the effective time of the Merger. Also, ZERO
directors and officers will continue to have the benefit of indemnification, as
well as directors' and officers' insurance protection, for six years after the
effective time of the Merger.
Under the Merger Agreement, ZERO has the obligation to retain the services
of its present officers and key employees. ZERO will, therefore, immediately
prior to the Merger, enter into employment agreements for one-year terms with
certain of its executives. The agreements will contain the same terms and
conditions except for specified base salary, position, reporting assignments
and participation in the Joint Life Insurance Plans. The executive officers of
ZERO who will enter into employment agreements, and their respective positions,
and current base salaries are as follows: Wilford D. Godbold, Jr., President
and Chief Executive Officer, $400,000; James F. Hermanson, Vice President -
Operations, $224,000; George A. Daniels, Vice President and Chief Financial
Officer, $224,000; Michael D. LeRoy, Vice President of Corporate Development,
$220,000; John G. Mogler, Vice President, $215,000; and Anita J. Cutchall,
Vice President - Legal and Corporate Secretary, $120,500. Employment agreements
for terms of one year will also be entered into with ZERO's divisions
presidents and general managers.
Each employment agreement provides that the executive will participate in the
ZERO benefit plans and programs including those providing for annual bonus,
long-term incentives, retirement benefits, employment benefits and perquisites.
If an executive's employment terminates prior to the end of the term of the
agreement by reason of retirement after age 55, death, disability, voluntary
termination, or termination by ZERO for cause, the executive will receive
salary through the date of termination, vested benefits and a prorated cash
bonus for the year. If the executive's employment is terminated by ZERO
without cause, or by the executive for good reason, as defined in the
agreement, he or she will receive salary and benefits through the duration of
the one-year term and a cash bonus award equal to awards received in the 12
months preceding the effective date of the agreement prorated for the
13
<PAGE>
original employment term, all benefits and perquisites and all unvested options
held by such employee will become vested. Disputes under the agreement can be
resolved by litigation or arbitration at the election of the executive.
In the Merger Agreement, after the effective time of Merger, API has agreed to
cooperate in taking any actions with respect to those employees of the ZERO
companies with written employment agreements so as to avoid any payments due
pursuant to such agreements becoming "excess parachute payments" within the
meaning of Section 280G of the Internal Revenue Code, provided that such
cooperation shall not include any increase in the obligation of any of the API
companies or any of the ZERO companies pursuant to such employment agreement or
otherwise.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee setting compensation for fiscal year
1998 consisted of Messrs. John B. Gilbert, Bruce J. DeBever, Gary M. Cusumano,
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.
14
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table shows individual grants of stock options made during fiscal
year 1998 to each of the Company's named executive officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES IN BASE PRICE GRANT DATE
NAME GRANTED/1/ FISCAL YEAR ($/SHARE) EXPIRATION DATE PRESENT VALUE/2/
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Wilford D. Godbold, Jr. 14,000 8.7% $27.0625 10/21/2004 $119,140
George A. Daniels 7,000 4.3% $27.0625 10/21/2004 $ 59,570
James F. Hermanson 7,000 4.3% $27.0625 10/21/2004 $ 59,570
Michael D. LeRoy 7,000 4.3% $27.0625 10/21/2004 $ 59,570
John G. Mogler 7,000 4.3% $27.0625 10/21/2004 $ 59,570
</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. Generally, options granted to
employees under the 1994 Stock Option 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, total and permanent disability or death of a participant holding
unexercised options on the date of such event and to certain provisions
discussed above relating to changes in control of the Company. 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 consideration
for the option price. All of the above options were granted on October 22, 1997
do not provide for stock appreciation rights and do provide for payment of the
option price by delivery of already-owned shares. Such options will be assumed
by API and converted into an option to purchase shares of API common stock if
outstanding at the effective time of the Merger. See "Employment Contracts and
Termination of Employment and Change-in-Control Arrangements" above.
/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 22.9%; risk-free rate of return of 6%; dividend
yield of .44%; and time of exercise at seven years. No adjustments have been
made for non-transferability or risk of forfeiture.
15
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION/SAR VALUES
The following table shows the exercise of stock options during fiscal year
1998 by each of the Company's named executive officers and the value of
unexercised options as of March 31, 1998:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT FISCAL IN-THE-MONEY OPTIONS/SARS
SHARES YEAR END AT FISCAL YEAR END/2/
ACQUIRED ON VALUE REALIZED/1/ ----------------------------------------------------------
NAME EXERCISE EXERCISABLE/UNEXERCISEABLE EXERCISABLE/UNEXERCISEABLE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Wilford D. Godbold, Jr. 29,770 $464,340 60,063/33,667 $893,142/$220,506
George A. Daniels 2,571 $ 40,416 33,867/16,733 $473,027/$109,361
James F. Hermanson 17,500 $238,594 22,867/16,733 $313,527/$109,361
Michael D. LeRoy - - 27,701/14,399 $356,611/$106,589
John G. Mogler 8,000 $116,000 20,667/14,433 $284,232/$ 82,680
</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 $28.25, which was the closing market price
of the Company's Common Stock on The New York Stock Exchange Composite Index on
March 31, 1998, minus the exercise price of the option.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Voting Securities and Certain Stockholders
The following table shows the total number of shares of Common Stock
beneficially owned by directors and the named executive officers, and all
directors and executive officers as a group, at the close of business on May
29, 1998, when there were 12,440,752 shares of Common Stock outstanding. The
table also shows the name, address, number and percentage of shares held as of
May 29, 1998 by each person or entity known to the Company to be the beneficial
owner of more than 5% of the Company's Common Stock. Unless otherwise noted,
the specified persons have sole voting power and/or dispositive power over the
shares shown as beneficially owned.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT
TITLE NAME OF BENEFICIAL BENEFICIAL OF
OF CLASS OWNER OWNERSHIP(l) CLASS
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock Gary M. Cusumano(2) 5,000 (6)
Bruce J. DeBever(2) 6,000 (6)
John B. Gilbert(2) 20,133 (6)
Wilford D. Godbold, Jr.(2)(3) 190,326 1.5%
Howard W. Hill(2)(3) 46,000 (6)
Whitney A. McFarlin(2) 9,875 (6)
George A. Daniels(3) 55,551 (6)
James F. Hermanson(3) 38,735 (6)
Michael D. LeRoy(3) 25,926 (6)
John G. Mogler(3) 35,926 (6)
Directors and executive
officers as a group 443,361 3.6%
(11 persons)
Palisade Capital Management,
L.L.C.(4) 626,900 5.0%
Societe Generale Asset
Management Corp.(5) 1,306,700 10.5%
</TABLE>
16
<PAGE>
(1) Includes shares issuable upon exercise of employee stock options that are
exercisable prior to May 29, 1998 or within 60 days thereafter. Such
option shares total 4,500 shares for Gary M. Cusumano, 5,000 shares for
Bruce J. DeBever, 5,000 shares for John B. Gilbert, 54,522 shares for
Wilford D. Godbold, Jr., 5,000 shares for Howard W. Hill, 5,000 shares for
Whitney A. McFarlin, 33,867 shares for George A. Daniels, 10,207 shares for
James F. Hermanson, 25,367 shares for Michael D. LeRoy, 20,667 for
John G. Mogler and 173,330 for all directors and executive officers as a
group.
(2) Director.
(3) Executive officer.
(4) Information based solely on Schedule 13G filed February 10, 1998, by
Palisade Capital Management, L.L.C., a registered investment adviser,
which reports that it has sole voting and dispositive power as to such
shares. The principal business office of Palisade Capital Management,
L.L.C. is One Bridge Plaza, Suite 695, Fort Lee, New Jersey, 07024.
(5) Information based solely on Amendment No. 2 to Schedule 13G filed January
28, 1998, by Societe Generale Asset Management Corp., a registered
investment adviser, which reports that it has shared voting and
dispositive power as to such shares with its investment advisory clients,
including SoGen International Fund, Inc., which owns 9.49% of the Common
Stock reported. The principal business office of Societe Generale Asset
Management Corp. is 1221 Avenue of the Americas, New York, New York
10020.
(6) Less than 1%.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1). Financial Statements.
See "Index to Consolidated Financial Statements and Financial Statement
Schedules" on page 20, the Independent Auditors' Report on page 21 and the
Consolidated Financial Statements on pages 22 to 36, all of which are
incorporated herein by reference.
(a)(2). Financial Statement Schedule.
See "Index to Consolidated Financial Statements and Financial Statement
Schedules" on page 20, and the Financial Statement Schedule on page 37, both of
which are incorporated herein by reference.
(a)(3). Exhibits.
The following exhibits are part of this Form 10-K and are either incorporated
by reference to the prior filings indicated below or are filed herewith under
Item 14(c):
2.1 Agreement and Plan of Merger, dated as of April 6, 1998, by and among
Applied Power Inc., ZERO Corporation and STB Acquisition Corporation filed
as Exhibit 2 to the Company's Form 8-K dated as of April 8, 1998.
3.1 The Restated Certificate of Incorporation filed as Exhibit 3-(3)(a) of the
Company's Form 8-B filed on September 7, 1988, and Certificate of
Amendment of Restated Certificate of Incorporation dated October 23, 1990.
3.2 Bylaws of ZERO Corporation, as amended on July 22, 1992 and April 22, 1994.
17
<PAGE>
4.1a Form of Private Shelf Agreement (the "Private Shelf Agreement") by and
among the Company, the Subsidiary, The Prudential Insurance Company of
America, and each Prudential Affiliate (as defined in the Private Shelf
Agreement) which becomes bound by certain provisions of the Private Shelf
Agreement, dated as of January 31, 1996, filed as Exhibit (b) to the
Company's Schedule 13E-4 filed on February 1, 1996.
4.1b Amendment to Private Shelf Agreement dated November 11, 1996.
4.1c Second Amendment/Consent Under Private Shelf Agreement dated February 10,
1998.
4.2 Specimen form of certificate of common stock $0.01 par value per share
filed as Exhibit 3-(4) of the Company's Form 8-B filed on September 7,
1988.
10.1* ZERO Corporation Management Bonus Plan adopted by the Board of Directors
on April 22, 1994 filed as Exhibit 10.5 to the Company's Form 10-K for
the year ended March 31, 1994.
10.2* ZERO Corporation 1988 Stock Option Plan, as amended, filed on Form S-8
Registration Statements (File Nos. 33-44143 and 33-27929), Amendment No.
1 thereto effective July 24, 1996, and Amendment No. 2 thereto effective
October 22, 1997.
10.3* ZERO Corporation 1994 Stock Option Plan, as amended, filed on Form S-8
Registration Statements (File Nos. 33-56175 and 333-38423), as amended
by Amendment No. 1, effective as of July 24, 1996, and as amended by
Amendment No. 3 thereto effective October 22, 1997.
10.4* ZERO Corporation Pension Restoration Plan adopted by the Board of
Directors on January 19, 1994.
10.7* Directors' Deferred Compensation Plan as adopted October 20, 1993 and as
amended effective as of January 1, 1996, filed as Exhibit 10.7 to the
Company's Form 10-K for the year ended March 31, 1997.
10.8* Executive Deferred Compensation Plan as adopted October 20, 1993 and as
amended effective as of January 1, 1996, filed as Exhibit 10.8 to the
Company's Form 10-K for the year ended March 31, 1997.
10.9* ZERO Corporation Joint Life Insurance Plan and Agreement dated March 31,
1989, as amended effective April 1, 1994 and as further amended on
October 22, 1997 and January 19, 1998.
10.10* ZERO Corporation Joint Life Insurance Plan and Agreement dated April 1,
1994, as amended effective October 22, 1997 and January 19, 1998.
10.11* ZERO Corporation Master Trust Agreement for Joint Life Insurance Plans
filed as Exhibit 10.1 to the Company's Form 10-Q for the quarter ended
December 31, 1997.
10.12* ZERO Corporation Master Trust Agreement for Deferred Compensation Plans
filed as Exhibit 10.2 to the Company's Form 10-Q for the quarter ended
December 31, 1997.
10.13* Form of Employment Agreement filed as Exhibit 10.3 to the Company's Form
10-Q for the quarter ended December 31, 1997, proposed to be entered into
with the executive officers referred to under the heading "Employment
Contracts and Termination of Employment and Change-in-Control
Arrangements" on page 13 hereof.
* Management contract or executive compensation plan or arrangement
required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.
21 Listing of the Company's subsidiaries as of March 31, 1998.
18
<PAGE>
23 Independent Auditors' Consent.
27 Financial Data Schedule.
(b). REPORTS ON FORM 8-K.
Reports on Form 8-K during the quarter ended March 31, 1998:
February 17, 1998 The Company's current report on Form 8-K announced an
agreement to extend the escrow period for the sale of its
property located in Burbank, California.
March 26, 1998 The Company's current report on Form 8-K announced that it
completed the sale of the Burbank property.
(c). EXHIBITS.
See listing of exhibits filed herewith on page 39 of this report.
19
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
Consolidated Financial Statements Page No.
- --------------------------------- --------
<S> <C>
Independent Auditors' Report 21
Statements of Consolidated Income
--Years Ended March 31, 1998, 1997 and 1996 22
Consolidated Balance Sheets--March 31, 1998 and 1997 23 - 24
Statements of Consolidated Stockholders' Equity
--Years Ended March 31, 1998, 1997 and 1996 25
Statements of Consolidated Cash Flows
--Years Ended March 31, 1998, 1997 and 1996 26
Notes to Consolidated Financial Statements 27 - 36
Financial Statement Schedule
- --------------------------------------------------------
Schedule II - Valuation and Qualifying Accounts
--Years Ended March 31, 1998, 1997 and 1996 37
</TABLE>
20
<PAGE>
INDEPENDENT AUDITORS' REPORT
- ----------------------------
To the Stockholders of ZERO Corporation:
We have audited the accompanying consolidated balance sheets of ZERO
Corporation and its subsidiaries as of March 31, 1998 and 1997, and the related
statements of consolidated income, stockholders' equity, and cash flows for
each of the three years in the period ended March 31, 1998. Our audits also
included the financial statement schedule of the Company listed in Item
14(a)(2). These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of ZERO Corporation and its
subsidiaries at March 31, 1998 and 1997, and the results of their operations
and their cash flows for each of the three years in the period ended March
31,1998 in conformity with generally accepted accounting principles. Also in
our opinion, such financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
- -------------------------
Deloitte & Touche LLP
Los Angeles, California
May 11, 1998
21
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CONSOLIDATED INCOME
Years Ended March 31, 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $258,745,000 $225,442,000 $206,247,000
Cost of Sales 171,386,000 151,131,000 135,708,000
- -------------------------------------------------------------------------------------------------------------------
Gross Profit 87,359,000 74,311,000 70,539,000
Selling and Administrative Expenses 50,925,000 45,522,000 43,933,000
Special Items 7,024,000 - -
Other Income 1,236,000 1,847,000 1,077,000
Interest Income 953,000 515,000 1,727,000
Interest Expense 4,747,000 4,670,000 1,163,000
- -------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes 40,900,000 26,481,000 28,247,000
Income Taxes 16,520,000 10,593,000 11,297,000
- -------------------------------------------------------------------------------------------------------------------
Net Income $ 24,380,000 $ 15,888,000 $ 16,950,000
- -------------------------------------------------------------------------------------------------------------------
Basic Earnings Per Share $ 1.98 $ 1.30 $ 1.08
Diluted Earnings Per Share $ 1.93 $ 1.28 $ 1.07
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
22
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
March 31, 1998 1997
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 30,979,000 $ 16,201,000
Short-term investments 9,990,000 -
Receivables (less allowances for doubtful accounts of
$818,000 in 1998 and $607,000 in 1997) 35,002,000 35,966,000
Inventories
Raw materials and supplies 18,967,000 21,504,000
Work in process 7,673,000 7,821,000
Finished goods 4,769,000 5,685,000
Other (including deferred tax assets of $2,608,000 in 1998
and $1,864,000 in 1997) 8,365,000 4,172,000
- -------------------------------------------------------------------------------------------------------
Total Current Assets 115,745,000 91,349,000
- -------------------------------------------------------------------------------------------------------
Property, Plant and Equipment, Net 49,005,000 44,375,000
Goodwill (less accumulated amortization of $13,245,000 in 1998
and $11,844,000 in 1997) 36,505,000 30,602,000
Other Assets 15,743,000 19,630,000
- -------------------------------------------------------------------------------------------------------
Total Assets $216,998,000 $185,956,000
- -------------------------------------------------------------------------------------------------------
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
23
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
March 31, 1998 1997
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES
Current Liabilities
Current portion of long-term debt $ 2,000 $ 35,000
Accounts payable 8,174,000 8,901,000
Income taxes payable 4,371,000 -
Accrued liabilities
Wages and commissions 7,964,000 6,579,000
Workers' compensation 1,666,000 1,128,000
Other 6,017,000 4,365,000
- -----------------------------------------------------------------------------------------------------------------
Total Current Liabilities 28,194,000 21,008,000
- -----------------------------------------------------------------------------------------------------------------
Non-Current Liabilities (including deferred compensation of
$10,787,000 in 1998 and $9,443,000 in 1997) 12,184,000 12,192,000
Long-term Debt 50,555,000 51,503,000
Commitments and Contingencies
STOCKHOLDERS' EQUITY
Preferred stock - authorized 1,000,000 shares of $.01 par
value; none issued
Common stock -- authorized 30,000,000 shares of $.01 par
value; issued shares, 16,611,749 in 1998 and 16,445,332
in 1997; outstanding shares, 12,416,827 in 1998 and
12,250,427 in 1997 166,000 164,000
Additional paid-in capital 40,236,000 37,021,000
Retained earnings 159,366,000 137,750,000
Foreign currency translation adjustment 113,000 132,000
Treasury stock (4,194,922 shares in 1998 and 4,194,905
shares in 1997), at cost (73,816,000) (73,814,000)
- -----------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 126,065,000 101,253,000
- -----------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $216,998,000 $185,956,000
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
24
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
FOREIGN
ADDITIONAL CURRENCY
ISSUED COMMON PAID-IN RETAINED TRANSLATION TREASURY
SHARES* STOCK CAPITAL EARNINGS ADJUSTMENTS STOCK
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1995 16,124,144 $161,000 $31,079,000 $115,754,000 $ 261,000 $(1,661,000)
Net Income for the year - - - 16,950,000 - -
Cash Dividends declared - $.44
per share - - - (7,059,000) - -
Exercise of stock options and
issuance of treasury stock 161,199 2,000 3,169,000 (1,461,000) - 11,000
Stock repurchase - - - - - (71,871,000)
Foreign currency translation
adjustments and other - - - - (504,000) -
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1996 16,285,343 163,000 34,248,000 124,184,000 (243,000) (73,521,000)
Net Income for the year - - - 15,888,000 - -
Cash Dividends declared - $.12
per share - - - (1,460,000) - -
Exercise of stock options and
issuance of treasury stock 159,989 1,000 2,773,000 (862,000) - -
Stock repurchase - - - - - (293,000)
Foreign currency translation
adjustments and other - - - - 375,000 -
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1997 16,445,332 164,000 37,021,000 137,750,000 132,000 (73,814,000)
Net Income for the year - - - 24,380,000 - -
Cash Dividends declared - $.12
per share - - - (1,480,000) - -
Exercise of stock options and
issuance of treasury stock 166,417 2,000 3,215,000 (1,316,000) - -
Stock repurchase - - - - - (2,000)
Foreign currency translation
adjustments and other - - - 32,000 (19,000) -
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1998 16,611,749 $166,000 $40,236,000 $159,366,000 $ 113,000 $(73,816,000)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Outstanding shares at March 31, 1998, 1997 and 1996 were 12,416,827,
12,250,427 and 12,105,840, respectively.
The Notes to Consolidated Financial Statements are an integral part of these
statements.
25
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CONSOLIDATED CASH FLOWS
Years Ended March 31, 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flow From Operating Activities
Net income $ 24,380,000 $ 15,888,000 $ 16,950,000
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization 7,024,000 6,249,000 5,069,000
Amortization of goodwill 1,401,000 1,200,000 1,086,000
Gain from sale of assets (9,899,000) (511,000) (46,000)
Provision for loss from sale of subsidiary 4,500,000 - -
Changes in operating assets and liabilities, net
of effect of business acquisitions
Receivables 277,000 (2,046,000) (4,833,000)
Inventories 1,599,000 (2,711,000) (1,852,000)
Other non-current assets 2,685,000 (2,239,000) (215,000)
Accounts payable 372,000 603,000 (8,000)
Accrued liabilities 7,737,000 49,000 118,000
Other non-current liabilities 948,000 1,417,000 2,639,000
Other (4,308,000) 1,305,000 (1,582,000)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 36,716,000 19,204,000 17,326,000
- ----------------------------------------------------------------------------------------------------------------------------
Cash Flow From Investing Activities
(Purchases) sales of short-term investments, net (9,990,000) 965,000 18,937,000
Purchase of non-cash assets of acquired
businesses (9,022,000) (1,936,000) (11,748,000)
Expenditures for property, plant and equipment (14,585,000) (10,822,000) (8,657,000)
Payment of note from sale of property 2,450,000 - -
Proceeds from sale of assets 8,740,000 1,651,000 1,670,000
Other 75,000 (142,000) 324,000
- ----------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities (22,332,000) (10,284,000) 526,000
- ----------------------------------------------------------------------------------------------------------------------------
Cash Flow From Financing Activities
Stock repurchases (2,000) (293,000) (71,871,000)
Cash dividends paid (1,480,000) (1,460,000) (7,059,000)
Proceeds from issuance of long-term debt - - 50,000,000
Payments of long-term debt (35,000) (273,000) (253,000)
Exercise of stock options 1,901,000 1,912,000 1,710,000
Other (including effect of exchange rate changes) 10,000 377,000 (493,000)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 394,000 263,000 (27,966,000)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 14,778,000 9,183,000 (10,114,000)
Cash and cash equivalents at beginning of period 16,201,000 7,018,000 17,132,000
- ----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 30,979,000 $ 16,201,000 $ 7,018,000
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
NOTE 1
SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany balances and
transactions have been eliminated.
Cash Equivalents
Cash equivalents include mutual funds, treasury bills and other highly liquid
investments with maturities of three months or less. As of March 31, 1998 and
1997, the carrying values of cash equivalents approximated market values.
Short-term Investments
Short-term investments at March 31, 1998 consist primarily of government agency
notes and bonds with maturities greater than three months that are classified
as securities available-for-sale. Market prices, which approximated cost at the
balance sheet date, are reasonable estimates of the portfolio's fair value.
Inventories
Inventories are stated at the lower of cost (first-in, first-out or average) or
market.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Depreciation is computed
principally using the straight-line method over the estimated useful lives of
the assets. Capital leases and leasehold improvements are amortized over the
life of the related assets or the life of the lease, whichever is shorter.
Intangible Assets
Costs in excess of the fair value of net assets acquired in purchase
transactions are recorded as goodwill and amortized over periods of up to 40
years. The Company reviews the recoverability of intangible assets to determine
if there has been any impairment. Such review includes estimating future cash
flows based on operating performance and future prospects of the business.
Earnings Per Share
During the third quarter of fiscal 1998, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." This
statement requires the disclosure of basic and diluted earnings per share. All
prior period earnings per share data in these financial statements have been
restated in accordance with SFAS No. 128.
27
<PAGE>
In accordance with SFAS No. 128, earnings per share were computed as follows:
<TABLE>
<CAPTION>
1998 1997 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Numerator:
Net income $24,380,000 $15,888,000 $16,950,000
Denominator:
Weighted average common shares outstanding for
basic earnings per share 12,340,000 12,177,000 15,719,000
Net effect of dilutive options based on the treasury
stock method using average market price 282,000 238,000 147,000
- ---------------------------------------------------------------------------------------------------------
Weighted average common and equivalent shares
outstanding for diluted earnings per share 12,622,000 12,415,000 15,866,000
- --------------------------------------------------------------------------------------------------------
Basic Earnings Per Share $ 1.98 $ 1.30 $ 1.08
Diluted Earnings Per Share $ 1.93 $ 1.28 $ 1.07
- --------------------------------------------------------------------------------------------------------
</TABLE>
Foreign Currency Translation
Assets and liabilities of foreign subsidiaries are translated into U.S. dollars
at the year-end exchange rate and gains and losses are being accumulated in
stockholders' equity. The related income statement is translated at the average
exchange rate for the year.
Supplemental Cash Flow Information
For the years ended March 31, 1998, 1997 and 1996, cash paid for income taxes,
net of refunds, was $12,157,000, $11,696,000 and $12,065,000, respectively, and
cash paid for interest on long-term debt was $3,555,000, $3,801,000 and
$118,000, respectively.
In connection with acquisitions during fiscal years 1998, 1997 and 1996, the
following liabilities were assumed:
<TABLE>
<CAPTION>
1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Estimated fair value of tangible assets acquired $ 1,216,000 $ 2,488,000 $ 9,696,000
Goodwill and identifiable intangible assets 7,806,000 1,331,000 3,899,000
Net cash paid (9,022,000) (1,936,000) (11,748,000)
- --------------------------------------------------------------------------------------------------------------------
Liabilities assumed $ - $ 1,883,000 $ 1,847,000
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Concentration of Credit Risks
Financial instruments that potentially subject the Company to concentration of
credit risk consist primarily of cash equivalents, short-term investments and
receivables. The Company places its cash equivalents and short-term investments
with high credit quality institutions and limits the amount of credit exposure
with any one institution. Credit risk on trade receivables is minimized as a
result of the diverse nature of the Company's customer base. The Company
performs ongoing credit evaluations of its customers and maintains an allowance
for potential credit losses.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions.
Such estimates and assumptions affect the reported amounts of assets and
liabilities, and the disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
New Accounting Standards
During the third quarter of fiscal 1998, the Company adopted SFAS No. 128,
"Earnings Per Share." This statement requires the disclosure of basic and
diluted earnings per share and supersedes the Company's previous standards for
28
<PAGE>
computing earnings per share under Accounting Principles Board No. 15. All
prior period earnings per share data have been restated in accordance with the
new standard.
In June 1997, Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income" and SFAS No. 131, "Disclosure About Segments
of an Enterprise and Related Information." Both statements are effective for
fiscal years beginning after December 15, 1997. The Company is assessing the
required disclosures and will adopt these statements in fiscal 1999.
Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash and cash
equivalents, short-term investments, receivables, accounts payable and debt
instruments. The carrying values of all financial instruments, other than debt
instruments, are representative of their fair values due to their short
maturities. The estimated fair value of the notes payable has been determined
using quoted prices of debt instruments with similar terms and maturities and
approximates carrying value.
Impairment of Long-lived Assets
During 1996, the Company adopted SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." Under the
provisions of this statement, the Company evaluates long-lived assets for
impairment whenever events or changes in circumstances indicate that the
carrying value of an asset may not be fully recoverable. If the estimated
future cash flows (undiscounted and without interest charges) from the use of
an asset are less than the carrying value, a write down would be recorded to
reduce the related asset to its estimated fair value.
Report Presentation
Certain amounts reported in prior years have been reclassified to conform to
the 1998 presentation.
NOTE 2
Property, Plant and Equipment
Property, plant and equipment and accumulated depreciation and amortization at
March 31, 1998 and 1997 consisted of:
<TABLE>
<CAPTION>
Estimated
Useful Lives 1998/1/ 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Land $ 3,248,000 $ 2,866,000
Buildings/land improvements 10-40 years 20,593,000 20,835,000
Machinery/equipment 3-15 years 71,526,000 68,894,000
Leasehold improvements 5-9 years 4,525,000 4,646,000
- ----------------------------------------------------------------------------------------------------
Total 99,892,000 97,241,000
Less accumulated depreciation and
amortization 50,887,000 52,866,000
- ----------------------------------------------------------------------------------------------------
Property, plant and equipment, net $ 49,005,000 $44,375,000
- ----------------------------------------------------------------------------------------------------
</TABLE>
/1/ Excludes amounts included in net assets held for sale (Note 12)
NOTE 3
Employee Benefits
The Company has a defined contribution pension plan and, as of January 1, 1995,
a 401(k) plan which cover all employees who have completed at least one year of
service and are employed by U.S. divisions that have elected to participate.
The pension plan cost, which is fully funded on a current basis, is based upon
percentages of eligible employees' compensation. The Company's contributions to
the pension plan aggregated $1,758,000, $1,607,000 and $1,539,000
29
<PAGE>
in 1998, 1997 and 1996, respectively, and to the 401(k) plan aggregated
$513,000, $489,000 and $427,000 in 1998, 1997 and 1996, respectively.
The Company has a nonqualified deferred compensation plan for key employees who
can elect to have a portion of their compensation deferred. The amounts set
aside earn interest at rates generally higher than the average prime interest
rate. Interest expense accrued on the participants' accounts totaled
$1,015,000, $862,000 and $714,000 in 1998, 1997 and 1996, respectively.
Generally, payment of a participant's account balance will be deferred until
death, disability, retirement or termination.
NOTE 4
Long-term Debt
At March 31, 1998 and 1997, long-term debt consisted of:
<TABLE>
<CAPTION>
1998 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Senior promissory notes, due March 8, 2011 $50,000,000 $50,000,000
Other notes payable, due July 3, 2002 and March 31, 2005 1,525,000 1,538,000
- -------------------------------------------------------------------------------------------------
Total 51,525,000 51,538,000
Less:
Amount included in net assets held for sale (Note 12) 968,000 -
Current portion 2,000 35,000
- -------------------------------------------------------------------------------------------------
Total long-term debt $50,555,000 $51,503,000
- -------------------------------------------------------------------------------------------------
</TABLE>
The senior promissory notes bear interest at 7.13%, and are payable in 11
annual payments of $4,545,000 beginning March 8, 2001. The proceeds from the
notes were used solely for the repurchase of the Company's common stock in a
Dutch Auction Tender Offer (refer to Note 7) and for payment of related
expenses. Other notes payable have imputed interest rates ranging from 8.5% to
10%.
In March 1998, the Company negotiated a $50,000,000 shelf facility for future
acquisitions. The interest rate for the shelf facility would be based on U.S.
Treasury rates at the time of borrowing.
Aggregate maturities of long-term debt over the next five fiscal years are as
follows: $57,000 in 1999, $239,000 in 2000, $4,826,000 in 2001, $4,870,000 in
2002, $4,915,000 in 2003 and $36,618,000 thereafter.
NOTE 5
Acquisitions and Divestiture
The Company acquired one company during fiscal 1998 and two companies in fiscal
1997, all of which complement existing operations. These acquisitions were
accounted for using the purchase method of accounting. The operating results of
the entities acquired, which were not material, were included in the
consolidated financial statements from their respective acquisition dates. The
purchase prices of these acquisitions were allocated to the net assets
acquired, including intangible assets, based upon their estimated fair values
at the dates of acquisition. Intangible assets, principally the excess of cost
over the fair value of identifiable net assets of these purchased businesses,
are being amortized using the straight-line method over a period of 15 to 20
years.
During fiscal 1997, the Company completed the sale of Anvil Cases, Inc., a
subsidiary of the Company, which manufactures riveted cases primarily for the
music, packaging specialists and audio/video markets. The gain on the sale of
Anvil Cases, Inc. was not material.
The pro forma effect of these transactions on 1998 and 1997 was not material.
30
<PAGE>
NOTE 6
Common Stock
The Company has a stock option plan that provides for the granting of options
to purchase shares of the Company's stock to directors, officers and other key
employees at a price not less than the fair market value on the date of grant.
Options are granted for terms of five to eight years and are exercisable in
annual installments (generally one-third of the total grant) commencing one
year from date of grant, on a cumulative basis.
The Company's stock option plan provides for the granting of qualified and
nonqualified options as well as stock appreciation rights ("SARs") in tandem
with options. The SARs entitle a holder to receive an amount equal to the
excess of the fair market value of the Company's common stock on the date of
exercise over the option price. The exercise of SARs automatically cancels the
option on the related shares. Compensation expense recognized in connection
with SARs during the years ended March 31, 1998, 1997 and 1996 was not
material.
Changes in the number of shares subject to options during the three years
ended March 31, 1998, are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
WEIGHTED WEIGHTED WEIGHTED
AVG. EXERCISE AVG. EXERCISE AVG. EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 810,228 $15.22 826,741 $13.60 866,048 $12.82
Granted 161,732 $26.98 216,900 $19.47 253,500 $15.39
Exercised (211,435) $13.18 (204,378) $13.17 (250,871) $12.74
Cancelled or expired (18,621) $18.96 (29,035) $15.13 (41,936) $13.45
- -------------------------------------------------------------------------------------------------------------------------------
Outstanding at end of year 741,904 $18.23 810,228 $15.22 826,741 $13.60
- -------------------------------------------------------------------------------------------------------------------------------
Options exercisable at year-end 377,589 392,262 370,447
Weighted average fair value of
options granted during the year $ 8.53 $ 6.10 $ 4.62
Options available for future grant 413,657 56,768 255,868
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
In July 1997, the stockholders of the Company approved the increase in the
number of shares available for grant of options by 500,000.
The Company has recognized no compensation cost for its stock option plan. Had
compensation cost for the Company's stock option plan been determined based on
the fair value at the grant dates for awards under this plan consistent with
the method of SFAS No. 123, "Accounting for Stock-Based Compensation," the
Company's pro forma net income and earnings per share would have been as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Pro forma net income $23,777,000 $15,552,000 $16,853,000
Pro forma basic earnings per share $ 1.93 $ 1.28 $ 1.07
Pro forma diluted earnings per share $ 1.88 $ 1.25 $ 1.06
</TABLE>
The fair value of each option granted is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions for fiscal years 1998, 1997 and 1996, respectively: risk-free
interest rate of 6.1%, 6.3% and 5.8%; expected volatility of 22.9%, 22.6% and
23.3%; dividend yield of .4%, .6% and .8%; and an expected life of five years.
No adjustments have been made for non-transferability or risk of forfeiture.
31
<PAGE>
The following table summarizes information about stock options outstanding at
March 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ------------------------------------------------------------- ------------------------------------------
WEIGHTED AVG. WEIGHTED
NUMBER REMAINING AVG.
RANGE OF OUTSTANDING AT CONTRACTUAL EXERCISE NUMBER EXERCISABLE AT WEIGHTED AVG.
EXERCISE PRICES MARCH 31, 1998 LIFE PRICE MARCH 31, 1998 EXERCISE PRICE
- ------------------------------------------------------------- ------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 11.31 - $ 13.75 216,103 2.6 $13.14 216,103 $13.14
$ 15.38 - $ 15.63 176,416 4.6 $15.39 105,050 $15.39
$ 19.38 - $ 21.38 190,303 5.6 $19.48 56,436 $19.49
$ 25.75 - $ 27.69 159,082 6.6 $26.98
</TABLE>
NOTE 7
Common Stock Repurchase
In February 1996, the Company repurchased approximately 4,019,000 shares of its
common stock at a cost of approximately $71,871,000 in a Dutch Auction Tender
Offer. The source of the funds to repurchase the shares was provided by the
issuance of promissory notes totaling $50,000,000 by the Company (refer to
Note 4), together with available cash and cash derived from the sale of short-
term investments.
In November 1996, the Board of Directors authorized the repurchase of up to an
additional 400,000 shares, as well as shares of "odd lot" stockholders.
During fiscal 1998 and 1997, total shares repurchased were insignificant.
NOTE 8
Income Taxes
The Company uses the asset and liability method of accounting for income taxes.
This approach requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of temporary differences between the
financial reporting basis and tax basis of assets and liabilities.
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current
Federal $15,246,000 $ 8,470,000 $10,031,000
State 3,085,000 1,432,000 2,145,000
Deferred
Federal (1,502,000) 708,000 (740,000)
State (309,000) (17,000) (139,000)
- --------------------------------------------------------------------------------
Total $16,520,000 $10,593,000 $11,297,000
- --------------------------------------------------------------------------------
</TABLE>
Deferred tax assets and liabilities comprised the following as of:
<TABLE>
<CAPTION>
March 31, 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
DEFERRED TAX DEFERRED TAX DEFERRED TAX DEFERRED TAX
ASSETS LIABILITIES ASSETS LIABILITIES
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Depreciation/amortization $ - $3,093,000 $ - $2,814,000
Provision for estimated expenses 2,689,000 444,000
Employee benefit plans 6,292,000 5,353,000
State and foreign taxes 135,000 235,000
Other 1,803,000 884,000
- --------------------------------------------------------------------------------------------------------------------------------
Total $8,981,000 $5,031,000 $5,797,000 $3,933,000
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
A reconciliation between the income taxes computed at the federal statutory rate
and the provision for income taxes is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income taxes computed at the Federal statutory rate $14,315,000 $ 9,268,000 $ 9,886,000
State income taxes, net of Federal income tax benefit 1,803,000 909,000 1,304,000
Tax-exempt income (168,000) (97,000) (90,000)
Other 570,000 513,000 197,000
- -----------------------------------------------------------------------------------------------------------------
Total provision $16,520,000 $10,593,000 $11,297,000
- -----------------------------------------------------------------------------------------------------------------
Effective income tax rate 40.4% 40.0% 40.0%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 9
Commitments
Future minimum lease payments under operating leases at March 31, 1998 are
summarized as follows:
<TABLE>
Year Ending March 31,
<S> <C>
1999 $2,306,000
2000 1,809,000
2001 1,460,000
2002 1,382,000
2003 922,000
Thereafter 1,979,000
- ----------------------------------------------
Total $9,858,000
- ----------------------------------------------
</TABLE>
Rental expense under operating leases was $2,346,000, $2,090,000, and
$2,059,000 for 1998, 1997 and 1996, respectively. Obligations under capital
leases at March 31, 1998 were not material.
NOTE 10
CONTINGENT LIABILITIES
Environmental Matters
In November 1996, the Company, along with 39 other potentially responsible
parties ("PRPs"), received an Administrative Order for Remedial Action from the
U.S. Environmental Protection Agency (the "EPA") with regard to implementation
of the interim remedy for the Glendale North and Glendale South Operable Units
of the San Fernando Valley Superfund Site near Los Angeles, California ("the
Site"). An administrative order on consent relating to the design work for the
interim remedies was entered into in March 1994 between the EPA and 24 PRPs,
including the Company. The design work is complete. In addition, the Company,
through the PRP Group, is responding to a unilateral order received on October
1, 1997 from the EPA for the construction, operation and maintenance of the
interim remedy.
An arbitrated award has resulted in the allocation of a 58.8% share of the
total costs associated with the Site to certain Burbank Operable Unit PRPs. The
remaining 41.2% share was allocated to the Glendale PRPs, including the
Company. The Company has provided reserves of approximately $1,400,000 for its
estimated share of the total costs of construction, operation and maintenance
of the EPA selected remedy, as well as certain response and oversight costs of
the EPA and the State of California in connection with the Site. The Company's
liabilities for these costs are based on management's best estimate of
undiscounted future costs, excluding possible insurance recoveries. The
Company's ultimate liability related to environmental matters at the Site is
dependent upon a variety of factors, including changes in the cost of the
construction, operation and maintenance of the interim remedy and the final
remedy, as well as any changes to the allocation of those costs among the PRPs
including any additional participants. The Company has received favorable
rulings from the U.S. District Court in response to its claim for
33
<PAGE>
reimbursement of defense costs related to the Site from its insurance carriers.
These rulings are currently being appealed by the insurance carriers.
The Company is also engaged in remediation and/or environmental monitoring at
three other locations, and has been named by the State of California and/or the
EPA as a de minimus potentially responsible party at two locations. The Company
has provided reserves, which are not deemed to be material, for the cleanup
costs associated with these sites to the extent they could be reasonably
estimated at this time.
Other Matters
The Company is subject to legal proceedings that arise in the ordinary course
of its business activities. In the opinion of management, any liability that may
result from the resolution of these matters will not have a material adverse
effect on its financial statements.
NOTE 11
Segment Information
Business segment information as of and for the years ended March 31, 1998, 1997
and 1996 is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales
Enclosures and Accessories $205,845,000 $175,119,000 $152,378,000
Other 52,900,000 50,323,000 53,869,000
- ---------------------------------------------------------------------------------------------------------------
Consolidated $258,745,000 $225,442,000 $206,247,000
Operating income
Enclosures and Accessories $ 38,240,000 $ 31,312,000 $ 30,547,000
Other 954,000/1/ 4,222,000 2,435,000
Corporate (7,260,000) (6,745,000) (6,376,000)
- ---------------------------------------------------------------------------------------------------------------
Consolidated $ 31,934,000 $ 28,789,000 $ 26,606,000
- ---------------------------------------------------------------------------------------------------------------
Identifiable assets at year end
Enclosures and Accessories $118,563,000 $102,194,000 $ 99,570,000
Other 36,366,000 46,519,000 47,264,000
Corporate 62,069,000 37,243,000 19,004,000
- ---------------------------------------------------------------------------------------------------------------
Consolidated $216,998,000 $185,956,000 $165,838,000
- ---------------------------------------------------------------------------------------------------------------
Depreciation and amortization
Enclosures and Accessories $ 5,244,000 $ 4,283,000 $ 3,280,000
Other 1,780,000 1,966,000 1,789,000
- ---------------------------------------------------------------------------------------------------------------
Consolidated $ 7,024,000 $ 6,249,000 $ 5,069,000
- ---------------------------------------------------------------------------------------------------------------
Capital expenditures
Enclosures and Accessories $ 13,181,000 $ 9,063,000 $ 6,573,000
Other 1,404,000 1,759,000 2,084,000
- ---------------------------------------------------------------------------------------------------------------
Consolidated $ 14,585,000 $ 10,822,000 $ 8,657,000
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ Includes $4,500,000 provision for loss on sale of European subsidiary (Note
12)
The Company's Enclosures and Accessories segment consists of products that
serve the system packaging, thermal management and engineered case requirements
of the telecommunications, instrumentation, data processing and
government/military markets of the electronics industry. These products include
card cages for printed circuit boards, backplanes, filter fan packages and
microprocessor-controlled fan trays, blowers, motorized impellers, heat
exchangers, air conditioners and computerized thermal management controls,
electronic cabinets and consoles, cable management racks, deep drawn aluminum
ZERO boxes and cases, fabricated cases, specialized case hardware
34
<PAGE>
and other specialized enclosures sold to the electronics industry. The Company
also manufactures and sells air cargo enclosures and hardware, aluminum
luggage, camera cases, industrial carrying cases, food service containers and
other custom metal products.
The following presents a summary of operations by geographic area as of and
for the years ended March 31, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales
U.S. operations $ 228,827,000 $201,784,000 $183,662,000
European operations 29,918,000 23,658,000 22,585,000
- ---------------------------------------------------------------------------------------------------------------
Consolidated $ 258,745,000 $225,442,000 $206,247,000
- ---------------------------------------------------------------------------------------------------------------
Net sales between operations $ 3,158,000 $ 2,198,000 $ 3,230,000
- ---------------------------------------------------------------------------------------------------------------
Operating income
U.S. operations $ 34,436,000 $ 29,444,000 $ 25,163,000
European operations (2,502,000)/1/ (655,000) 1,443,000
- ---------------------------------------------------------------------------------------------------------------
Consolidated $ 31,934,000 $ 28,789,000 $ 26,606,000
- ---------------------------------------------------------------------------------------------------------------
Identifiable assets at year end
U.S. operations $ 209,492,000 $168,242,000 $149,394,000
European operations 7,506,000 17,714,000 16,444,000
- ---------------------------------------------------------------------------------------------------------------
Consolidated $ 216,998,000 $185,956,000 $165,838,000
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ Includes $4,500,000 provision for loss on sale of European subsidiary (Note
12)
Total export sales from U.S. operations and net sales from European operations
were $45,817,000, $36,276,000, and $34,323,000, or 18%, 16% and 17% of total
net sales, for the fiscal years ended March 31, 1998, 1997 and 1996,
respectively.
Sales under U.S. government contracts and subcontracts were less than of 10%
of total sales in fiscal 1998, 1997 and 1996.
NOTE 12
Special Items
During 1998, the Company recognized a $7,024,000 pre-tax net gain consisting of
the following:
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------
Gain from life insurance $ 1,709,000
Gain from sale of property 9,815,000
Provision for estimated loss on sale of subsidiary (4,500,000)
- ------------------------------------------------------------------------------
Special Items $ 7,024,000
- ------------------------------------------------------------------------------
</TABLE>
The Company recognized a non-taxable gain of $1,709,000 in the second quarter
of fiscal 1998 from insurance proceeds on the life of its former Vice President
of Marketing and Sales. In March 1998, the Company completed the sale of its
facility in Burbank, California. The sale price consisted of cash of
$8,740,000 and a receivable of $4,000,000 included in Other Current Assets in
the Consolidated Balance Sheet, resulting in a pre-tax gain of $9,815,000.
During the fourth quarter of fiscal 1998, the Company completed its evaluation
of a European subsidiary and approved a plan for its disposition. As of March
31, 1998, this subsidiary is classified as net assets held for sale and is
included in noncurrent Other Assets in the Consolidated Balance Sheet. Based on
the Company's evaluation of this subsidiary, a $4,500,000 nonrecurring charge
was recorded in fiscal 1998.
35
<PAGE>
NOTE 13
Subsequent Events
On April 6, 1998, the Company entered into a definitive merger agreement with
Applied Power Inc. ("API") pursuant to which it would become a wholly owned
subsidiary of API (the "Merger"). Stockholders of the Company would receive
0.85 share of API for each share of ZERO stock. The merger agreement has been
approved by both companies' boards but is subject to stockholder approval and
satisfaction of other conditions. The Merger is structured to be tax free to
ZERO stockholders and will be accounted for as a pooling of interests.
Completion of the Merger is expected in July 1998.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
INCOME BASIC DILUTED
NET GROSS BEFORE NET EARNINGS PER EARNINGS PER
QUARTER ENDED: SALES PROFIT INCOME TAXES INCOME SHARE SHARE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
March 31, 1998 $62,818,000 $22,137,000 $14,553,000 $7,871,000 $ 0.63 $ 0.62
December 31, 1997 66,910,000 22,118,000 8,619,000 5,189,000 0.42 0.41
September 30, 1997 64,465,000 21,526,000 9,723,000 6,517,000 0.53 0.52
June 30, 1997 64,552,000 21,578,000 8,005,000 4,803,000 0.39 0.38
March 31, 1997 $58,845,000 $18,975,000 $ 6,863,000 $4,167,000 $ 0.34 $ 0.33
December 31, 1996 58,546,000 19,210,000 6,878,000 4,199,000 0.34 0.34
September 30, 1996 53,387,000 17,372,000 6,310,000 3,722,000 0.31 0.30
June 30, 1996 54,664,000 18,754,000 6,430,000 3,800,000 0.31 0.31
</TABLE>
36
<PAGE>
SCHEDULE II
ZERO CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED MARCH 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
Doubtful
Balance at Provision Accounts Balance at
Beginning of Charged to Written Other End of
Year Income Off/1/ Deductions/2/ Year
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
April 1, 1997 to March 31, 1998 $607,000 $387,000 $(135,000) $(41,000) $ 818,000
April 1, 1996 to March 31, 1997 $759,000 $101,000 $(253,000) $ 607,000
April 1, 1995 to March 31, 1996 $724,000 $236,000 $(201,000) $ 759,000
</TABLE>
- -----------------------------------
/1/ Net of recoveries
/2/ Adjusted for net assets held for sale (see Note 12 of Notes to Consolidated
Financial Statements)
37
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ZERO Corporation
Dated: June 18, 1998 /s/ Wilford D. Godbold, Jr.
----------------------------
Wilford D. Godbold, Jr.
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Registrant and in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ George A. Daniels Vice President and Chief
- ---------------------------- Financial Officer June 18, 1998
George A. Daniels
/s/ Diane N. Kajikami Controller and Chief
- ---------------------------- Accounting Officer June 18, 1998
Diane N. Kajikami
DIRECTORS:
/s/ Gary M. Cusumano Director June 18, 1998
- ----------------------------
Gary M. Cusumano
/s/ Bruce J. DeBever Director June 18, 1998
- ----------------------------
Bruce J. DeBever
/s/ John B. Gilbert Director June 18, 1998
- ----------------------------
John B. Gilbert
/s/ Wilford D. Godbold, Jr. President, Chief Executive
- ---------------------------- Officer and Director June 18, 1998
Wilford D. Godbold, Jr.
/s/ Howard W. Hill Director June 18, 1998
- ----------------------------
Howard W. Hill
/s/ Whitney A. McFarlin Director June 18, 1998
- ----------------------------
Whitney A. McFarlin
</TABLE>
38
<PAGE>
ZERO CORPORATION AND SUBSIDIARIES
FORM 10-K, ITEM 14(c)
EXHIBITS FILED HEREWITH
3.1 Certificate of Amendment of Restated Certificate of Incorporation dated
October 23, 1990.
3.2 Bylaws of ZERO Corporation, as amended on July 22, 1992 and April 22,
1994.
4.1b Amendment to Private Shelf Agreement dated November 11, 1996.
4.1c Second Amendment/Consent Under Private Shelf Agreement dated February 10,
1998.
10.2 Amendment No. 1 effective July 24, 1996 and Amendment No. 2 effective
October 22, 1997 to the ZERO Corporation 1988 Stock Option Plan.
10.3 Amendment No. 1 effective July 24, 1996 and Amendment No. 3 effective
October 22, 1997 to the ZERO Corporation 1994 Stock Option Plan.
10.4 ZERO Corporation Pension Restoration Plan adopted by the Board of
Directors on January 19, 1994.
10.9 ZERO Corporation Joint Life Insurance Plan and Agreement dated March 31,
1989, as amended effective April 1, 1994 and further amended on October
22, 1997 and January 19, 1998.
10.10 ZERO Corporation Joint Life Insurance Plan and Agreement dated April 1,
1994, as amended effective October 22, 1997 and January 19, 1998.
21 Subsidiaries of Registrant as of March 31, 1998.
23 Independent Auditors' Consent.
27 Financial Data Schedule.
39
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
* * * * *
ZERO CORPORATION, a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of ZERO CORPORATION
resolutions were duly adopted setting forth a proposed amendment to the Restated
Certificate of Incorporation of said corporation, declaring said amendment to be
advisable and calling a meeting of the stockholders of said corporation for
consideration thereof. The resolution setting forth the proposed amendment is
as follows:
RESOLVED, That the Restated Certificate of Incorporation of this
corporation be amended by changing Article V, Section 1. thereof so that,
as amended said Article shall be and read as follows:
"SECTION 1. Number of Authorized Shares. The total number of shares of
all classes of stock which the Corporation shall have authority to issue is
Thirty-one Million (31,000,000) shares, consisting of One Million
(1,000,000) shares of preferred stock, par value $.01 per share ("Preferred
Stock") and Thirty Million (30,000,000) shares of common stock, par value
$.01 per share ("Common Stock")."
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
the annual meeting of the stockholders of said corporation was duly called and
held, upon notice in accordance with Section 222 of the General Corporation Law
of the State of
<PAGE>
Delaware at which meeting the necessary number of shares as required by statute
were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said ZERO CORPORATION has caused this certificate to be
signed by George A. Daniels, its Vice President, and attested by George A.
Daniels, its Secretary, this 23rd day of October, 1990.
ZERO CORPORATION
By /S/ George A. Daniels
-----------------------
George A. Daniels
Vice President
ATTEST:
By Robert H. Borchert
------------------
Robert H. Borchert
Assistant Secretary
<PAGE>
EXHIBIT 3.2
ZERO CORPORATION
A DELAWARE CORPORATION
BYLAWS
ARTICLE I
Offices
Section 1. Registered Office. The registered office of ZERO Corporation
(the "Corporation") shall be at Corporation Trust Center, 1209 Orange Street,
City of Wilmington, County of New Castle, State of Delaware, and the name of the
registered agent in charge thereof shall be The Corporation Trust Company.
Section 2. Principal Office. The principal office for the transaction of
the business of the Corporation shall be at such place as the Board of Directors
of the Corporation (the "Board") may determine. The Board is hereby granted
full power and authority to change said principal office from one location to
another.
Section 3. Other Offices. The Corporation may also have an office or
offices at such other place or places, either within or without the State of
Delaware, as the Board may from time to time determine or as the business of the
Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. All annual meetings of stockholders and all
other meetings of stockholders shall be held either at the principal office or
at any other place within or without the State of Delaware which may be
designated by the Board pursuant to authority hereinafter granted to the Board.
Section 2. Annual Meetings. Annual meetings of stockholders of the
Corporation for the purpose of electing directors and for the transaction of
such other proper business as may come before such meetings may be held at such
time, date and place as the Board shall determine by resolution.
Section 3. Special Meetings. Special meetings of stockholders of the
Corporation for any purpose or purposes may only be called in accordance with
the provisions in the Certificate of Incorporation.
Section 4. Notice of Meetings. Except as otherwise required by law,
notice of each meeting of stockholders, whether annual or special, shall be
given not less than ten (10) nor more than sixty
<PAGE>
(60) days before the date of the meeting to each stockholder of record entitled
to vote at such meeting by delivering a typewritten or printed notice thereof to
such stockholder personally, or by depositing such notice in the United States
mail, in a postage prepaid envelope, directed to such stockholder at such
stockholder's post office address furnished by such stockholder to the Secretary
of the Corporation for such purpose, or, if such stockholder shall not have
furnished an address to the Secretary for such purpose, then at such
stockholder's post office address last known to the Secretary, or by
transmitting a notice thereof to such stockholder at such address by telegraph,
cable or wireless. Except as otherwise expressly required by law, no
publication of any notice of a meeting of the stockholders shall be required.
Every notice of a meeting of stockholders shall state the place, date and hour
of the meeting, and, in the case of a special meeting, shall also state the
purpose for which the meeting is called. Notice of any meeting of stockholders
shall not be required to be given to any stockholder to whom notice may be
omitted pursuant to applicable Delaware law or who shall have waived such
notice, and such notice shall be deemed waived by any stockholder who shall
attend such meeting in person or by proxy, except a stockholder who shall attend
such meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Except as otherwise expressly required by law, notice of any
adjourned meeting of stockholders need not be given if the time and place
thereof are announced at the meeting at which the adjournment is taken.
Section 5. Quorum. Except as otherwise required by law, the holders of
record of a majority in voting interest of the shares of stock of the
Corporation entitled to be voted thereat, present in person or by proxy, shall
constitute a quorum for the transaction of business at any meeting of
stockholders of the Corporation or any adjournment thereof. Subject to the
requirement of a larger percentage vote contained in the Certificate of
Incorporation, these Bylaws or by statute, the stockholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough stockholders to
leave less than a quorum, if any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
In the absence of a quorum at any meeting or any adjournment thereof, a majority
in voting interest of the stockholders present in person or by proxy and
entitled to vote thereat or, in the absence therefrom of all the stockholders,
any officer entitled to preside at, or to act as secretary of, such meeting may
adjourn such meeting from time to time. At any such adjourned meeting at which
a quorum is present, any business may be transacted which might have been
transacted at the meeting as originally called.
<PAGE>
Section 6. Voting.
A. Each stockholder shall, at each meeting of stockholders, be entitled to
vote in person or by proxy each share of the stock of the Corporation having
voting rights on the matter in question and which shall have been held by such
stockholder and registered in such stockholder's name on the books of the
Corporation:
(i) on the date fixed pursuant to Article VI, Section 5 of these
Bylaws as the record date for the determination of stockholders entitled to
notice of and to vote at such meeting, or
(ii) if no such record date shall have been so fixed, then (a) at the
close of business on the day next preceding the day on which notice of the
meeting shall be given or (b) if notice of the meeting shall be waived, at
the close of business on the day next preceding the day on which the
meeting shall be held.
B. Shares of its own stock belonging to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors in such other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for quorum
purposes. Persons holding stock of the Corporation in a fiduciary capacity
shall be entitled to vote such stock. Persons whose stock is pledged shall be
entitled to vote, unless in the transfer by the pledgor on the books of the
Corporation the pledgor shall have expressly empowered the pledgee to vote
thereon, in which case only the pledgee, or the pledgee's proxy, may represent
such stock and vote thereon. Stock having voting power standing of record in
the names of two or more persons, whether fiduciaries, members of a partnership,
joint tenants, tenants in common, tenants by the entirety or otherwise, or with
respect to which two or more persons have the same fiduciary relationship, shall
be voted in accordance with the provisions of the Delaware General Corporation
Law.
C. Any such voting rights may be exercised by the stockholder entitled
thereto in person or by such stockholder's proxy appointed by an instrument in
writing, subscribed by such stockholder or by such stockholder's attorney
thereunto authorized and delivered to the secretary of the meeting; provided,
however, that no proxy shall be voted or acted upon after three years from its
date unless said proxy shall provide for a longer period. The attendance at any
meeting of a stockholder who may theretofore have given a proxy shall not have
the effect of revoking the same unless such stockholder shall in writing so
notify the secretary of the meeting prior to the voting of the proxy. At any
meeting of stockholders, all matters, except as otherwise provided in the
Certificate of Incorporation, in these Bylaws or by law, shall be decided by the
vote of a majority in voting interest of the stockholders present in person or
by proxy and entitled to vote thereat and thereon, a quorum being present. The
vote at any meeting of stockholders on
<PAGE>
any question need not be by ballot, unless so directed by the chairman of the
meeting. On a vote by ballot each ballot shall be signed by the stockholder
voting, or by such stockholder's proxy, if there be such proxy, and it shall
state the number of shares voted.
Section 7. List of Stockholders. The Secretary of the Corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of such stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 8. Judges. If at any meeting of stockholders a vote by written
ballot shall be taken on any question, the chairman of such meeting may appoint
a judge or judges to act with respect to such vote. Each judge so appointed
shall first subscribe an oath faithfully to execute the duties of a judge at
such meeting with strict impartiality and according to the best of such judge's
ability. Such judges shall decide upon the qualification of the voters and
shall report the number of shares represented at the meeting and entitled to
vote on such question, shall conduct and accept the votes, and, when the voting
is completed, shall ascertain and report the number of shares voted respectively
for and against the question. Reports of judges shall be in writing and
subscribed and delivered by them to the Secretary of the Corporation. The
judges need not be stockholders of the Corporation, and any officer of the
Corporation may be a judge on any question other than a vote for or against a
proposal in which such ofiicer shall have a material interest.
ARTICLE III
BOARD OF DIRECTORS
Section 1. General Powers. Subject to any requirements in the Certificate
of Incorporation, these Bylaws, and of the Delaware General Corporation Law as
to action which must be authorized or approved by the stockholders, any and all
corporate powers shall be exercised by or under the authority of, and the
business and affairs of the Corporation shall be under the direction of, the
Board of Directors to the fullest extent permitted by law. Without limiting the
generality of the foregoing, it is hereby expressly declared that the Board
shall have the following powers, to wit:
<PAGE>
A. To select and remove all the officers, agents and employees of the
Corporation, prescribe such powers and duties for them as may not be
inconsistent with law, the Certificate of Incorporation or these Bylaws,
fix their compensation, and require from them security for faithful
service.
B. To conduct, manage and control the affairs and business of the
Corporation, and to make such rules and regulations therefor not
inconsistent with law, the Certificate of Incorporation or these Bylaws, as
it may deem best.
C. To change the location of the registered office of the Corporation
in Article I, Section 1 hereof; to change the principal office and the
principal office for the transaction of the business of the Corporation
from one location to another as provided in Article I, Section 2 hereof; to
fix and locate from time to time one or more subsidiary offices of the
Corporation within or without the State of Delaware as provided in Article
I, Section 3 hereof; to designate any place within or without the State of
Delaware for the holding of any meeting or meetings of stockholders, and to
adopt, make and use a corporate seal, and to prescribe the forms of
certificates of stock, and to alter the form of such seal and of such
certificates from time to time, and in its judgment as it may deem best,
provided such seal and such certificate shall at all times comply with the
provisions of law.
D. To authorize the issue of shares of stock of the Corporation from
time to time, upon such terms and for such considerations as may be lawful.
E. To borrow money and incur indebtedness for the purposes of the
Corporation, and to cause to be executed and delivered therefor, in the
corporate name, promissory notes, bonds, debentures, deeds of trust and
securities therefor.
F. By resolution adopted by a majority of the authorized number of
directors, to designate an executive and other committees, each consisting
of one or more directors, to serve at the pleasure of the Board, and to
prescribe the manner in which proceedings of such committee or committees
shall be conducted.
Section 2. Number and Term of Office. The authorized number of directors
of the Corporation shall be eight (8) until this Section 2 is amended by a
resolution duly adopted by the Board or by the stockholders of the Corporation,
in either case in accordance with the provisions of Article XIV of the
Certificate of Incorporation. Directors need not be stockholders. Each of the
directors of the Corporation shall hold office until such director's successor
shall have been duly elected and qualified or until such director shall resign
or shall have been removed in the manner provided in the Certificate of
Incorporation.
<PAGE>
Section 3. Election of Directors. The directors shall be elected by the
stockholders of the Corporation, and at each election, the persons receiving the
greatest number of votes, up to the number of directors then to be elected,
shall be the persons then elected. The election of directors is subject to any
provisions contained in the Certificate of Incorporation relating thereto,
including any provisions for a classified Board and for cumulative voting.
Section 4. Resignations. Any director of the Corporation may resign at
any time by giving written notice to the Board or to the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified, it shall take effect immediately upon
receipt; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 5. Vacancies. Except as otherwise provided in the Certificate of
Incorporation, any vacancy in the Board, whether because of death, resignation,
disqualification, an increase in the number of directors, or any other cause,
may be filled by vote of the majority of the remaining directors, although less
than a quorum. Each director so chosen to fill a vacancy shall hold office
until such director's successor shall have been elected and shall qualify or
until such director shall resign or shall have been removed.
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of such director's term of office.
Section 6. Place of Meeting. The Board or any committee thereof may hold
any of its meetings at such place or places within or without the State of
Delaware as the Board or such committee may from time to time by resolution
designate or as shall be designated by the person or persons calling the meeting
or in the notice or a waiver of notice of any such meeting. Directors may
participate in any regular or special meeting of the Board or any committee
thereof by means of conference telephone or similar communications equipment
pursuant to which all persons participating in the meeting of the Board or such
committee can hear each other, and such participation shall constitute presence
in person at such meeting.
Section 7. First Meeting. The Board shall meet as soon as practicable
after each annual election of directors, and notice of such first meeting shall
not be required.
Section 8. Regular Meetings. Regular meetings of the Board may be held at
such times as the Board shall from time to time by resolution determine. If any
day fixed for a regular meeting shall be a legal holiday at the place where the
meeting is to be held, then the meeting shall be held at the same hour and place
on the next succeeding business day not a legal holiday. Except as provided by
law, notice of regular meetings need not be given.
<PAGE>
Section 9. Special Meetings. Special meetings of the Board for any
purpose or purposes shall be called at any time by the Chairman of the Board or,
if the Chairman of the Board is absent or unable or refuses to act, by the
President. Except as otherwise provided by law or by these Bylaws, written
notice of the time and place of special meetings shall be delivered personally
to each director, or sent to each director by mail or by other form of written
communication, including but not limited to facsimile transmission and telex,
charges prepaid, addressed to such director at such director's address as it is
shown upon the records of the Corporation, or, if it is not so shown on such
records and is not readily ascertainable, at the place in which the meetings of
the directors are regularly held. In case such notice is mailed, telegraphed,
telexed, facsimiled, or sent by overnight courier it shall be deposited in the
United States mail, delivered to the telegraph company in the County in which
the principal office for the transaction of the business of the Corporation is
located or deposited with an overnight courier service at least forty-eight (48)
hours prior to the time of the holding of the meeting. In case such notice is
delivered personally as above provided, it shall be delivered at least twenty-
four (24) hours prior to the time of the holding of the meeting. Such mailing,
telegraphing, telexing, facsimiling or overnight delivery as above provided
shall be due, legal and personal notice to such director. Except where
otherwise required by law or by these Bylaws, notice of the purpose of a special
meeting need not be given. Notice of any meeting of the Board shall not be
required to be given to any director who is present at such meeting, except a
director who shall attend such meeting for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
Section 10. Quorum and Manner of Acting. Except as otherwise provided in
these Bylaws, the Certificate of Incorporation or by applicable law, the
presence of a majority of the authorized number of directors shall be required
to constitute a quorum for the transaction of business at any meeting of the
Board, and all matters shall be decided at any such meeting, a quorum being
present, by the affirmative votes of a majority of the directors present. A
meeting at which a quorum is initially present may continue to transact business
notwithstanding the withdrawal of directors, provided any action taken is
approved by at least a majority of the required quorum for such meeting. In the
absence of a quorum, a majority of directors present at any meeting may adjourn
the same from time to time until a quorum shall be present. Notice of any
adjourned meeting need not be given. The directors shall act only as a Board,
and the individual directors shall have no power as such.
Section 11. Action by Consent. Any action required or permitted to be
taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if consent in writing is given thereto by all members of the
Board or of such committee, as the case may be, and such consent is filed with
the minutes of proceedings of the Board or committee.
<PAGE>
Section 12. Compensation. Directors who are not employees of the
Corporation or any of its subsidiaries may receive an annual fee for their
services as directors in an amount fixed by resolution of the Board, and, in
addition, a fixed fee, with or without expenses of attendance, may be allowed by
resolution of the Board for attendance at each meeting, including each meeting
of a committee of the Board. Nothing herein contained shall be construed to
preclude any director from serving the Corporation in any other capacity as an
officer, agent, employee, or otherwise, and receiving compensation therefor.
Section 13. Committees. The Board may, by resolution passed by a majority
of the whole Board, designate one or more committees, each committee to consist
of one or more of the directors of the Corporation. Any such committee, to the
extent provided in the resolution of the Board and subject to any restrictions
or limitations on the delegation of power and authority imposed by applicable
Delaware law, shall have and may exercise all the powers and authority of the
Board in the management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it. Any such committee shall keep written minutes of its meetings and
report the same to the Board at the next regular meeting of the Board. Unless
the Board or these Bylaws shall otherwise prescribe the manner of proceedings of
any such committee, meetings of any such committee may be regularly scheduled in
advance and may be called at any time by the chairman of the committee or by any
two members thereof; otherwise, the provisions of these Bylaws with respect to
notice and conduct of meetings of the Board shall govern.
ARTICLE IV
OFFICERS
Section 1. Officers. The officers of the Corporation shall be a Chairman
of the Board, a Vice Chairman of the Board, a President, one or more Vice
Presidents (the number thereof and their respective titles to be determined by
the Board), a Secretary and a Treasurer and such other officers as may be
appointed at the discretion of the Board in accordance with the provisions of
Section 3 of this Article IV.
Section 2. Election. The officers of the Corporation, except such
officers as may be appointed or elected in accordance with the provisions of
Section 3 or Section 5 of this Article IV, shall be chosen annually by the Board
at the first meeting thereof, and each officer shall hold office until such
officer shall resign or shall be removed or otherwise disqualified to serve, or
until such officer's successor shall be elected and qualified.
Section 3. Other Officers. In addition to the officers chosen annually by
the Board at its first meeting, the Board also
<PAGE>
may appoint or elect such other officers as the business of the Corporation may
require, each of whom shall have such authority and perform such duties as are
provided in these Bylaws or as the Board may from time to time specify, and
shall hold office until such officer shall resign or shall be removed or
otherwise disqualified to serve, or until such officer's successor shall be
elected and qualified.
Section 4. Removal and Resignation. Any officer may be removed, either
with or without cause, by resolution of the Board passed by a majority of the
directors at the time in office, at any regular or special meeting of the Board,
or, except in case of an officer chosen by the Board, by any officer upon whom
such power of removal may be conferred by the Board.
Section 5. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in these Bylaws for regular appointments to such office.
Section 6. Chairman of the Board. The Chairman of the Board shall preside
at all meetings of stockholders and at all meetings of the Board.
Section 7. President. The President shall be the chief executive officer
of the Corporation and shall, subject to the control of the Board, have general
supervision, direction and control of the business and affairs of the
Corporation. The President shall have the general powers and duties of
management usually vested in the chief executive officer of a corporation, and
shall have such other powers and duties as may be prescribed by the Board or
these Bylaws.
Section 8. Vice Chairman of the Board. In the absence or disability of
the Chairman of the Board, or in the event and during the period of a vacancy in
that office, the Vice Chairman of the Board shall perform all the duties of the
Chairman of the Board, and when so acting shall have all of the powers of, and
be subject to all of the restrictions upon, the Chairman of the Board of the
Corporation.
Section 9. Vice President. Each Vice President shall have such powers and
perform such duties with respect to the administration of the business and
affairs of the Corporation as may from time to time be assigned to such Vice
President by the President or the Board, or as may be prescribed by these
Bylaws. In the absence or disability of the President, the Vice Presidents in
order of their rank as fixed by the Board, or if not ranked, the Vice President
designated by the Board, shall perform all of the duties of the President, and
when so acting shall have all the powers of, and be subject to all the
restrictions upon, the President.
<PAGE>
Section 10. Secretary. The Secretary shall keep, or cause to be kept, at
the principal office of the Corporation, or such other place as the Board may
order, a book of minutes of all meetings of directors and stockholders, with the
time and place of holding, whether regular or special, and if special, how
authorized and the notice thereof given, the names of those present at meetings
of directors, the number of shares present or represented at meetings of
stockholders, and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office of
the Corporation's transfer agent, a share register, or a duplicate share
register, showing the name of each stockholder, the number of shares of each
class held by such stockholder, the number and date of certificates issued for
such shares, and the number and date of cancellation of every certificate
surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all meetings of
stockholders and of the Board required by these Bylaws or by law to be given,
and shall keep the seal of the Corporation in safe custody and shall affix and
attest the seal to all documents to be executed on behalf of the Corporation
under its seal, and shall have such other powers and perform such other duties
as may be prescribed by these Bylaws or assigned by the Board, the President or
any officer of the Corporation to whom the Secretary may report. If for any
reason the Secretary shall fail to give notice of any special meeting of the
Board called by one or more of the persons identified in Article III, Section 9
hereof, then any such person or persons may give notice of any such special
meeting.
Section 11. Treasurer. The Treasurer shall supervise, have custody of and
be responsible for all funds and securities of the Corporation. The Treasurer
shall deposit all moneys and other valuables in the name and to the credit of
the Corporation with such depositaries as may be designated by the Board or in
accordance with authority delegated by the Board. The Treasurer shall disburse
the funds of the Corporation as may be ordered or authorized by the Board, shall
render to the President or the Board whenever they request it, an account of all
of the Treasurer's transactions, and shall have such other powers and perform
such other duties as may be prescribed by these Bylaws or assigned by the Board,
the President or any officer of the Corporation to whom the Treasurer may
report.
The Treasurer shall keep and maintain, or cause to be kept and maintained,
adequate and correct accounts of the properties and business transactions of the
Corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, surplus and shares. Any surplus,
including earned surplus, paid-in surplus and surplus arising from a reduction
of stated capital, shall be classified according to source and shown in a
separate account. The books of account shall at all reasonable times be open to
inspection by any director.
<PAGE>
The Treasurer also shall supervise the maintenance of adequate and correct
accounts of the properties and business transactions of all subsidiaries of the
Corporation and shall have such other powers and perform such other duties as
may from time to time be prescribed by these Bylaws or assigned to the Treasurer
by the Board, the President or any officer of the Corporation to whom the
Treasurer may report.
Section 12. Chairman Emeritus. The officers of the Corporation shall
include the honorary position of Chairman Emeritus, which position shall be held
by John B. Gilbert, founder of the Corporation. The Chairman Emeritus shall
perform such duties as may from time to time be assigned by the Board.
ARTICLE V
Contracts, Checks, Drafts, Bank Accounts, Etc.
Section 1. Execution of Contracts. The Board, except as in these Bylaws
otherwise provided, may authorize any officer or officers, or agent or agents,
to enter into any contract or execute any instrument in the name of and on
behalf of the Corporation, and such authority may be general or confined to
specific instances; and unless so authorized by the Board or by these Bylaws, no
officer, agent or employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or in any amount.
Section 2. Checks, Drafts, Etc. All checks, drafts or other orders for
payment of money, notes or other evidence of indebtedness, issued in the name of
or payable to the Corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be determined by
resolution of the Board. Each such officer, assistant, agent or attorney shall
give such bond, if any, as the Board may require.
Section 3. Deposits. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as the Board may select, or as may
be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. For the purpose of deposit and for the purpose
of collection for the account of the Corporation, the Chairman of the Board, the
President, any Vice President or the Treasurer (or any other officer or
officers, assistant or assistants, agent or agents, or attorney or attorneys of
the Corporation who shall from time to time be determined by the Board) may
endorse, assign and deliver checks, drafts and other orders for the payment of
money which are payable to the order of the Corporation.
<PAGE>
Section 4. General and Special Bank Accounts. The Board may from time to
time authorize the opening and keeping of general and special bank accounts with
such banks, trust companies or other depositories as the Board may select or as
may be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. The Board may make such special rules and
regulations with respect to such bank accounts, not inconsistent with the
provisions of these Bylaws, as it may deem expedient.
ARTICLE VI
SHARES AND THEIR TRANSFER
Section 1. Certificates for Stock. Every owner of stock of the
Corporation shall be entitled to have a certificate or certificates, to be in
such form as the Board shall prescribe, certifying the number and class of
shares of the stock of the Corporation owned by such owner. The certificates
representing shares of such stock shall be numbered in the order in which they
shall be issued and shall be signed in the name of the Corporation by the
Chairman of the Board, the President or any Vice President, and by the Secretary
or the Treasurer. Any or all of the signatures on the certificates may be a
facsimile. In case any officer, transfer agent or registrar who has signed, or
whose facsimile signature has been placed upon, any such certificate, shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, such certificate may nevertheless be issued by the Corporation with
the same effect as though the person who signed such certificate, or whose
facsimile signature shall have been placed thereupon, were such officer,
transfer agent or registrar at the date of issue. A record shall be kept of the
respective names of the persons, firms or corporations owning the stock
represented by such certificates, the number and class of shares represented by
such certificates, respectively, and the respective dates thereof, and in case
of cancellation, the respective dates of cancellation. Every certificate
surrendered to the Corporation for exchange or transfer shall be cancelled, and
no new certificate or certificates shall be issued in exchange for any existing
certificate until such existing certificate shall have been so cancelled, except
in cases provided for in Section 4 of this Article VI.
Section 2. Transfers of Stock. Transfers of shares of stock of the
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by such holder's attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a transfer clerk or
a transfer agent appointed as provided in Section 3 of this Article VI, and upon
surrender of the certificate or certificates for such shares properly endorsed
and the payment of all taxes thereon. The person in whose name shares of stock
stand on the books of the Corporation shall be deemed the owner thereof for all
purposes as regards the
<PAGE>
Corporation. Whenever any transfer of shares shall be made for collateral
security, and not absolutely, such fact shall be so expressed in the entry of
transfer if, when the certificate or certificates shall be presented to the
Corporation for transfer, both the transferor and the transferee request the
Corporation to do so.
Section 3. Regulations. The Board may make such rules and regulations as
it may deem expedient, not inconsistent with these Bylaws, concerning the issue,
transfer and registration of certificates for shares of the stock of the
Corporation. It may appoint, or authorize any officer or officers to appoint,
one or more transfer clerks or one or more transfer agents and one or more
registrars, and may require all certificates for stock to bear the signature or
signatures of any of them.
Section 4. Lost, Stolen, Destroyed, and Mutilated Certificates. In any
case of loss, theft, destruction, or mutilation of any certificate of stock,
another may be issued in its place upon proof of such loss, theft, destruction,
or mutilation and upon the giving of a bond of indemnity to the Corporation in
such form and in such sum as the Board may direct; provided, however, that a new
certificate may be issued without requiring any bond when, in the judgment of
the Board, it is proper so to do.
Section 5. Fixing Date for Determination of Stockholders of Record.
A. In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, the Board may fix a record date, which record date shall not precede
the date upon which the resolution fixing the record date is adopted by the
Board, and which record date shall not be more than sixty (60) nor less than ten
(10) days before the date of such meeting. If no record date is fixed by the
Board, the record date for determining stockholders entitled to notice of or to
vote at a meeting of stockholders shall be at the close of business on the day
next preceding the day on which the meeting is held. A determination of
stockholders entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of such meeting; provided, however, that the Board may
fix a new record date for the adjourned meeting.
B. In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board may fix a record date, which record date shall not precede the
date upon which the resolution fixing the record date is adopted, and which
record date shall be not more than sixty (60) days prior to such action. If no
record date is fixed, the record date for determining stockholders for any such
purpose shall be at the close of business on the day on which the Board adopts
the resolution relating thereto.
<PAGE>
ARTICLE VII
LIMITATION ON DIRECTOR LIABILITY AND INDEMNIFICATION
Section 1. Limitation of Director Liability. To the fullest extent
permitted by the Delaware General Corporation Law as the same exists or may
hereafter be amended, a director of the Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director.
Section 2. Scope of Indemnification. The Corporation shall indemnify, in
the manner and to the fullest extent permitted by law, any person (or the estate
of any person) who is or was a party to, or is threatened to be made a party to,
any threatened, pending or completed action, suit or proceeding, whether or not
by or in the right of the Corporation, and whether civil, criminal,
administrative, investigative or otherwise, by reason of the fact that such
person is or was a director, officer, employee, agent or fiduciary of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee, agent or fiduciary of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee,
agent or fiduciary of another corporation, partnership, joint venture, trust or
other enterprise. The Corporation may, to the fullest extent permitted by law,
purchase and maintain insurance on behalf of any such person against any
liability which may be asserted against such person. To the fullest extent
permitted by law the indemnification provided herein shall include, expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
and, in the manner provided by law, any such expenses may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding. The indemnification provided herein shall not be deemed to limit
the right of the Corporation to indemnify any other person for any such expenses
to the fullest extent permitted by law, nor shall it be deemed exclusive of any
other rights to which any person seeking indemnification from the Corporation
may be entitled under any agreement, vote of stockholders or disinterested
directors, or otherwise, both as to action in such person's official capacity
and as to action in another capacity while holding such office.
ARTICLE VIII
MISCELLANEOUS
Section 1. Seal. The Board shall adopt a corporate seal, which shall be
in the form of a circle and shall bear the name of the Corporation and words
showing that the Corporation was incorporated in the State of Delaware.
Section 2. Waiver of Notices. Whenever notice is required to be given by
these Bylaws or the Certificate of Incorporation or by
<PAGE>
law, the person entitled to said notice may waive such notice in writing, either
before or after the time stated therein, and such waiver shall be deemed
equivalent to notice.
Section 3. Amendments. Except as otherwise provided herein or in the
Certificate of Incorporation, these Bylaws, or any of them, may be altered,
amended, repealed or rescinded and new Bylaws may be adopted, (A) by the Board,
or (B) by the stockholders, at any annual meeting of stockholders or at any
special meeting of stockholders, provided that notice of such proposed
alteration, amendment, repeal, recission or adoption is given in the notice of
meeting.
Section 4. Representation of Other Corporations. The Chairman or Vice
Chairman of the Board or the President or the Secretary or any Vice President of
the Corporation is authorized to vote, represent and exercise on behalf of the
Corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of the Corporation. The authority herein
granted to said officers to vote or represent on behalf of the Corporation any
and all shares held by the Corporation in any other corporation or corporations
may be exercised either by such officers in person or by any person authorized
so to do by proxy or power of attorney duly executed by such officers.
<PAGE>
<PAGE>
EXHIBIT 4.1b
November 11, 1996
Private Shelf Agreement dated as of January 31, 1996 between Zero
Corporation (the "Company") and Electronic Solutions ("Electronic"), on the one
hand and The Prudential Insurance Company of America ("Prudential") and each
Prudential Affiliate (as defined in the Agreement) which has become bound by
certain provisions of the Agreement
Pursuant to the request of the company and Electronic and paragraph 12C of
the Agreement, Prudential and Pruco Life Insurance Company ("Pruco") hereby
agree with the company and Electronic that the Agreement shall be amended as
follows:
1. Clause (ii) of paragraph 6C(3) is amended and restated in its
entirety as follows:
"Purchased Common Stock and common stock of the Company repurchased
by the Company,".
2. Clause (vii) of paragraph 6C(3) is amended and restated in its
entirety as follows:
"so long as the aggregate amount thereof at no time exceeds
$14,000,000, the book value of claims of the Company on the cash
value of life insurance policies owned by current and former
members of the Company's management, the premiums on which have been
advanced by the Company to such current and former management
members,".
In order to induce Prudential and Pruco to enter into this amendment, the
Company and Electronic hereby represent that (i) other than this amendment, the
parties have not entered into any amendment, waiver or mutual disregard of the
terms and conditions of the Agreement, or any course of dealing or variance with
the terms and provisions thereof, (ii) no consent, waiver, approval or amendment
relating to the subject matter hereof is necessary to avert a default or event
of default under any material agreement of the Company, and (iii) after giving
effect to this letter, no Default or Event of Default exists on the date hereof.
<PAGE>
If you are in agreement with the foregoing, please execute the enclosed
counterpart of this letter in the spaces indicated below and return such
executed counterpart to James F. Evert, Prudential Capital Group, Four Em,
whereupon this letter shall become a binding agreement.
Sincerely,
THE PRUDENTIAL LIFE INSURANCE
COMPANY OF AMERICA
By: /s/
Its: Vice President
PRUCO LIFE INSURANCE COMPANY
By: /s/
Its: Assistant Vice President
<PAGE>
Accepted and agreed to effective
the date first appearing above.
ZERO CORPORATION
By: /s/ G. A. Daniels
Its: Vice President
ELECTRONIC SOLUTIONS
By: /s/ G. A. Daniels
Its: Vice President
<PAGE>
EXHIBIT 4.1c
February 10, 1998
SECOND AMENDMENT/PRIVATE SHELF AGREEMENT
Reference is made to the private shelf agreement ("Agreement") dated as
of January 31, 1996 by and among Zero Corporation (the "Company"), Electronic
Solutions ("Electronic"), The Prudential Insurance Company of America
("Prudential") and each Prudential Affiliate (as defined in the Agreement) which
may become party thereto as contemplated therein. Prudential hereby advises the
Company that Prudential's "Authorized Officers" for purposes of the Agreement
shall be those persons named on Schedule A attached to this letter. Pursuant to
the request of the Company and Electronic and the provisions of paragraph 12C of
the Agreement, Prudential and Pruco Life Insurance Company ("Pruco") hereby
agree with the Company and Electronic that the Agreement shall be amended as
follows:
1. Paragraph 1B is amended by deleting the reference therein to
"$20,000,000" and substituting therefor a reference to
$50,000,000".
2. Clause (i) of paragraph 2B(2) is amended by deleting in its entirety
the existing text thereof and substituting therefor the following:
"(i) January 31, 2001 (or if such date is not a Business Day, the
Business Day next preceding such date)".
3. Paragraph 2C(1) is amended by deleting the reference therein to "Two
Prudential Plaza, Suite 5600, Chicago, IL 60601-6716" and
substituting therefor a reference to "Four Embarcadero Center, Suite
2700, San Francisco, CA 94111".
4. Paragraph 3 is amended by deleting all references therein to
Electronic.
5. Paragraph 6C(3) is amended by (i) deleting the word "and" appearing
at the end of clause (viii) thereof, (ii) recaptioning existing
clause (ix) thereof as clause (x) and (iii) adding thereto a new
clause (ix) providing as follows:
<PAGE>
"(ix) non-hostile investments aggregating (at original cost) not
more than $30,000,000 in the common stock of a single manufacturer
of enclosures and related products, and"
6. Clause (ii) of paragraph 6C(6) is amended by deleting the reference
therein to "February 1, 1998" and substituting therefor a reference
to "January 31, 2000".
7. The defined term "Consolidated Tangible Net Worth" appearing in
paragraph 10B of the Agreement is amended and restated in its
entirety as follows:
"Consolidated Tangible Net Worth" shall mean, as of any time of
determination thereof, the stockholders' equity of the Company,
less the amount of Intangibles which are booked subsequent to
December 31, 1997.
8. The defined term "Prudential Affiliate" appearing in paragraph 10B
of the Agreement is amended and restated in its entirety as follows:
"Prudential Affiliate" shall mean (i) any corporation or other
entity all of the Voting Stock for equivalent voting securities or
interests) of which is owned by Prudential either directly or
through subsidiaries and (ii) any investment fund which is managed
by Prudential or a Prudential Affiliate described in clause (i) of
this definition.
9. Schedules 6C(3), 6C(6), 8A and 8C are amended and restated in their
entirety in the form attached to this letter as Schedules 6C(3),
6C(6), 8A and 8C, respectively.
Pursuant to the request of the Company, Prudential consents that,
notwithstanding paragraph 6C(4) to the contrary, the company may sell 2,518.75
shares of Series A preferred stock of McLean Midwest Corporation.
In order to induce Prudential and Pruco to enter into this letter
agreement, the Company and Electronic hereby represent that (i) other than this
letter agreement and the letter agreement dated November 11, 1996, the parties
have not entered into any amendment, waiver or mutual disregard of the terms and
conditions of the Agreement, or any course of dealing or variance with the terms
and provisions thereof, (ii) no consent, waiver, approval or amendment relating
to the subject matter hereof is necessary to avert a default or event of default
under any material agreement of the Company, and (iii) after giving effect to
this letter, no Default or Event of Default exists on the date hereof.
<PAGE>
The foregoing consent and amendments shall not be effective until
Prudential has received from the Company a $25,000 processing fee.
If you are in agreement with the foregoing, please execute the enclosed
counterpart of this letter in the spaces indicated below and return such
executed counterpart, together with a check made payable to "The Prudential
Insurance Company of America" in the amount of $25,000, to James F. Evert,
Prudential Capital Group, Four Embarcadero Center, Suite 2700, San Francisco, CA
94111, whereupon this letter shall become binding agreement, effective the date
first appearing above.
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /s/
Its: Vice President
PRUCO LIFE INSURANCE COMPANY
By: /s/
Its: Assistant Vice President
<PAGE>
Accepted and agreed effective
the date first appearing above.
ZERO CORPORATION
By: /s/ G. A. Daniels
Its: Vice President
ELECTRONIC SOLUTIONS
By: /s/ G. A. Daniels
Its: Vice President
<PAGE>
EXHIBIT 10.2
AMENDMENT NO.1
TO
ZERO CORPORATION
1988 STOCK OPTION PLAN
This Amendment No. 1 to ZERO Corporation 1988 Stock Option Plan (this
"Amendment") is effective as of July 24, 1996.
WHEREAS, on July 24, 1996 the Board of Directors of ZERO Corporation, a
Delaware corporation, adopted and approved an amendment to the ZERO Corporation
1988 Stock Option Plan (the "Plan"), as set forth herein.
NOW, THEREFORE, the Plan is amended and modified as follows:
1. Section 16 is added and reads in its entirety as follows:
SECTION 16. Vesting Upon Death, Permanent Disability or Retirement of
Employees. Notwithstanding any provision to the contrary in this Plan or
in any grant of stock options or Stock Appreciation Rights hereunder, the
provisions set forth in this section shall govern the time at which stock
options and Stock Appreciation Rights granted hereunder to employees of the
Company shall become exercisable ("vest") in the event of death, Permanent
Disability (as hereinafter defined) or Retirement (as hereinafter defined).
(a) If an employee ceases to be employed by the Company by reason of
such employee's death or Permanent Disability, then (i) all stock options
and Stock Appreciation Rights granted hereunder to such employee that have
not vested shall fully vest as of the date of such employee's death or
Permanent Disability, and (ii) the stock options and Stock Appreciation
Rights granted to such employee shall terminate upon the earlier of the
applicable date of expiration of such stock options and Stock Appreciation
Rights, or the first anniversary of the date of such employee's death or
Permanent Disability. "Permanent Disability" shall mean the inability to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to result
in death or which has lasted or can be expected to last for a continuous
period of not less than 12 months. An employee shall not be deemed to have
a Permanent Disability until proof of the existence thereof shall have been
furnished to the Committee in such form and manner, and at such times, as
the Committee may require. Any determination by the Committee that an
employee does or does not have a Permanent Disability shall be final and
binding upon the Company and such employee.
<PAGE>
(b) If an employee ceases to be employed by the Company by reason of
such employee's retirement at age 55 or older (referred to as
"Retirement"), then (i) all stock options and/or Stock Appreciation Rights
granted hereunder to such employee that have not vested shall continue to
vest at such time and in such manner as set forth in the agreement
pertaining to the stock options or Stock Appreciation Rights, until and
including the day immediately preceding the first anniversary of the date
of such employee's Retirement, and (ii) the stock options and/or Stock
Appreciation Rights granted to such employee, whether or not vested, shall
terminate upon the earlier of the applicable date of expiration of such
stock options and/or stock appreciation rights, or the first anniversary of
the date of such employee's Retirement.
2. Except as hereby amended, the Plan remains unmodified and in full
force and effect.
IN WITNESS WHEREOF, the Company has caused this Amendment No. 1 to be
executed by its duly authorized officer this 24th day of July, 1996.
ZERO CORPORATION
By: S/ANITA J. CUTCHALL
Anita J. Cutchall
Corporate Secretary
<PAGE>
AMENDMENT NUMBER TWO
ZERO CORPORATION
1988 STOCK OPTION PLAN
WHEREAS, ZERO Corporation (the "Company") desires to amend its 1988 Stock
Option Plan (the "Plan") to allow for the naming of death beneficiaries to
exercise remaining options available upon the death of an optionholder so as to
avoid the inclusion of options in an optionholder's probate estate in certain
jurisdictions;
NOW, THEREFORE, the Plan shall be amended as follows, effective October 22,
1997:
1. Section 8 shall be amended to read as follows:
Nontransferability. Any option (and any associated Stock Appreciation
Right) granted under this Plan shall by its terms be nontransferable by the
optionee otherwise than pursuant to a beneficiary designation made under
Section 17(a) hereof or by will or the laws of descent and distribution,
and shall be exercisable, during the optionee's lifetime, only by the
optionee or his guardian or legal representative.
2. A new Section 17 shall be added to read as follows:
Matters Pertaining To The Death Of An Optionee
(a) Effect of Death. In the event of the death of any optionee
hereunder, the term "optionee" as used hereunder shall thereafter be deemed
to refer to the beneficiary or beneficiaries designated pursuant to Section
16(b) hereof, or, if no such designation is in effect, the person to whom
the optionee's rights passed by will or applicable law, or, if no such
person has such right, the executor or administrator of the estate of such
optionee. Further, an Option may be exercised to the extent, and only to
the extent, that the Option or portion thereof was exercisable or became
exercisable on the date of death.
(b) Designation of Beneficiaries. An optionee hereunder may file
with the Committee a written designation of a beneficiary or beneficiaries
under this Plan on a form and in such manner as the Committee prescribes
and may from time to time revoke or amend any such designation. Any
designation of beneficiary under the Plan shall be controlling over any
other disposition, testamentary or otherwise; provided, however that if the
Committee is in doubt as to the entitlement of any such beneficiary to any
option, the Committee may determine to recognize only the legal
representative of the optionee, in which case the Company, the Committee
and the members thereof shall not be under any further liability to anyone.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Amendment Number Two to be
executed by its duly authorized officer this 22nd day of October, 1997.
ZERO CORPORATION
By: /s/ ANITA J. CUTCHALL
----------------------------
Anita J. Cutchall
Vice President-Legal and
Corporate Secretary
<PAGE>
EXHIBIT 10.3
AMENDMENT NO.1
TO
ZERO CORPORATION
1994 STOCK OPTION PLAN
This Amendment No. 1 to ZERO Corporation 1994 Stock Option Plan (this
"Amendment") is effective as of July 24, 1996.
WHEREAS, on July 24, 1996 the Board of Directors of ZERO Corporation, a
Delaware corporation, adopted and approved an amendment to the ZERO Corporation
1994 Stock Option Plan (the "Plan"), as set forth herein.
NOW, THEREFORE, the Plan is amended and modified as follows:
1. Section 11 is added and reads in its entirety as follows:
SECTION 11. VESTING UPON DEATH, PERMANENT DISABILITY OR RETIREMENT OF
EMPLOYEES.
Notwithstanding any provision to the contrary in this Plan or in
any grant of an Award hereunder, the provisions set forth in this
section shall govern the time at which Awards granted hereunder to
Employees shall become exercisable ("vest") in the event of death,
Permanent Disability (as hereinafter defined) or Retirement (as
hereinafter defined).
(a) If an Employee ceases to be employed by the Company by reason
of such Employee's death or Permanent Disability, then
(i) all Awards granted hereunder to such Employee that have
not vested shall fully vest as of the date of such
Employee's death or Permanent Disability, and
(ii) the Awards granted to such Employee shall terminate upon
the earlier of the applicable date of expiration of such
Awards, or the first anniversary of the date of such
Employee's death or Permanent Disability. "Permanent
Disability" shall mean the inability to engage in any
substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be
expected to result in death or which has lasted or can be
expected to last for a continuous period of not less than
12 months. An Employee shall not be deemed to have a
Permanent Disability until proof of the existence thereof
shall have been furnished to the Committee in such form
and manner, and at such times, as the Committee may
require. Any determination
<PAGE>
by the Committee that an Employee does or does not have a
Permanent Disability shall be final and binding upon the
Company and such Employee.
(b) If an employee ceases to be employed by the Company by reason
of such employee's retirement at age 55 or older (referred to
as "Retirement"), then
(i) all Awards granted hereunder to such employee that have
not vested shall continue to vest at such time and in
such manner as originally set forth in the agreement
pertaining to the Award, until and including the day
immediately preceding the first anniversary of the date
of such employee's Retirement, and
(ii) the Awards granted to such employee, whether or not
vested, shall terminate upon the earlier of the
applicable date of expiration of such Awards, or the
first anniversary of the date of such employee's
Retirement.
2. Except as hereby amended, the Plan remains unmodified and in full
force and effect.
IN WITNESS WHEREOF, the Company has caused this Amendment No. 1 to be
executed by its duly authorized officer effective the day and year first above
written.
ZERO CORPORATION
By: S/ANITA J. CUTCHALL
Vice President-Legal
and Corporate Secretary
<PAGE>
AMENDMENT NUMBER THREE
ZERO CORPORATION
1994 STOCK OPTION PLAN
WHEREAS, ZERO Corporation (the "Company") desires to amend its 1994 Stock
Option Plan (the "Plan") to allow for the naming of death beneficiaries to
exercise remaining options available upon the death of an optionholder so as to
avoid the inclusion of options in an optionholder's probate estate in certain
jurisdictions;
NOW, THEREFORE, the Plan shall be amended as follows, effective October 22,
1997:
1. Section 4(j) shall be amended to read as follows:
Each Nonemployee Director Option shall be nontransferable by the
Optionee other than pursuant to a beneficiary designation made under
Section 12(a) hereof or by will or the laws of descent and distribution,
and shall be exercisable, during the optionee's lifetime, only by the
optionee or his guardian or legal representative.
2. A new Section 12 shall be added to read as follows:
SECTION 12. MATTERS PERTAINING TO THE DEATH OF AN OPTIONEE
(a) Effect of Death. In the event of the death of any optionee
hereunder, the term "optionee" as used hereunder shall thereafter be deemed
to refer to the beneficiary or beneficiaries designated pursuant to Section
16(b) hereof, or, if no such designation is in effect, the person to whom
the optionee's rights passed by will or applicable law, or, if no such
person has such right, the executor or administrator of the estate of such
optionee. Further, an Option may be exercised to the extent, and only to
the extent, that the Option or portion thereof was exercisable or became
exercisable on the date of death.
(b) Designation of Beneficiaries. An optionee hereunder may file
with the Committee a written designation of a beneficiary or beneficiaries
under this Plan on a form and in such manner as the Committee prescribes
and may from time to time revoke or amend any such designation. Any
designation of beneficiary under the Plan shall be controlling over any
other disposition, testamentary or otherwise; provided, however that if the
Committee is in doubt as to the entitlement of any such beneficiary to any
option, the Committee may determine to recognize only the legal
representative of the optionee, in which case the Company, the Committee
and the members thereof shall not be under any further liability to anyone.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Amendment Number Three to
be executed by its duly authorized officer this 22nd day of October, 1997.
ZERO CORPORATION
By: /s/ ANITA J. CUTCHALL
---------------------------------
Anita J. Cutchall
Vice President-Legal and
Corporate Secretary
<PAGE>
EXHIBIT 10.4
ZERO CORPORATION
PENSION RESTORATION PLAN
ADOPTED JANUARY 19, 1994
1. TITLE AND EFFECTIVE DATE
This Plan shall be known as the ZERO Corporation Pension Restoration Plan
(the "Plan"), and shall be effective as of January 1, 1994.
2. PLAN ADMINISTRATION
The Plan shall be administered and interpreted by the Corporate Secretary
of ZERO Corporation.
Subject to the terms of the Plan, the Corporate Secretary shall establish
rules, forms and procedures for the administration of the Plan, and shall
interpret the Plan and make, amend, interpret and enforce all provisions adopted
in connection with the Plan.
3. ELIGIBILITY
Participants in the Plan shall be required to be employed in the United
States (except as otherwise designated as set forth below), and shall include
all Corporate officers, and division and subsidiary presidents and general
managers, and such other management employees as may be designated by the
Employee Benefits Committee of the Board of Directors of ZERO Corporation (the
"Participants").
4. ACTION TO PARTICIPATE
The Participants under the Plan shall automatically be entitled to
participate in the Plan, with no action being necessary on the part of such
Participants.
5. BENEFIT FORMULA
Each Participant under the Plan shall be entitled to receive a contribution
from the Company in an amount which equals the reduction in the benefit
contributions as set forth in Article V of the ZERO Corporation Retirement
Savings Plan (the "Pension Plan") account of such eligible Participant as a
result of contribution limitations established by Internal Revenue Code Sections
415 and/or 401(a)(17) (the "Code").
6. COMPUTATION AND CREDITING
On the earlier of the date of separation from employment or December 31 of
each year, the Company shall determine the pension benefit to which the
Participant would be entitled without regard
<PAGE>
to the contribution limitations established by the Code. In addition, the
maximum benefit allowable by the Code for the Participant shall be calculated.
For purposes of determining the maximum benefit allowable and any credits to a
Participant, the term "Compensation" shall be as defined in Section 2.14 of
Article II of the Pension Plan whether or not such Compensation is deferred
under the 1994 ZERO Corporation Executive Deferred Compensation Plan (the "1994
Deferred Compensation Plan"). To the extent that a Participant's benefit may
exceed the Code maximum, any contribution which would have been made under the
Pension Plan on the excess will be credited to the account established for such
Plan Participant under the 1994 Deferred Compensation Plan (the "Bookkeeping
Account") as of the last day of each quarter. For example:
<TABLE>
<CAPTION>
Crediting Restoration
Compensation Rate(a) Credit
------------ ------------ -----------
<S> <C> <C> <C>
1st Quarter $ 50,000 $ ----
2nd Quarter (inc. bonus) 100,000 ----
3rd Quarter 50,000 8% 4,000
4th Quarter 50,000 8% 4,000
-------- ------
Total $250,000 $8,000
-------- ------
</TABLE>
(a) Funds credited to the Bookkeeping Account under this Plan shall earn
interest in accordance with the provisions of Section 5.02 of Article V of the
1994 Deferred Compensation Plan.
7. VESTING
The interest of a Participant in the benefits deposited into such
Participant's Bookkeeping Account under this Plan, and any related interest
calculated thereon, shall be subject to the Vesting requirements of the Pension
Plan.
8. MISCELLANEOUS PROVISIONS INCORPORATED BY REFERENCE
In addition to those terms and conditions of the 1994 Deferred Compensation
Plan specifically set forth above, the Definitions in Article II, and the terms
and conditions of Articles VI, VII, VIII, X, XI and XII are also incorporated
herein by reference.
AS ADOPTED BY THE BOARD OF DIRECTORS
OF ZERO CORPORATION
JANUARY 19, 1994
2
<PAGE>
EXHIBIT 10.9
ZERO CORPORATION
JOINT LIFE INSURANCE PLAN AND AGREEMENT
THIS THIRD AMENDMENT to the JOINT LIFE INSURANCE PLAN AND AGREEMENT dated
as of March 31, 1989, as amended effective as of April 1, 1994 and October 22,
1997 (the "Agreement"), by and between ZERO Corporation, a Delaware corporation
(hereinafter ZERO Corporation or a subsidiary thereof is called the "Company",
the "Corporation" or "ZERO"), and __________________ ("Employee").
WHEREAS, pursuant to the Agreement, Employee receives an insurance benefit,
the premiums for which are paid primarily by the Company; in part, they are paid
by the Employee to the extent of the economic benefit to the Employee as
established by the Internal Revenue Service; and
WHEREAS, the Company and Employee now wish to modify certain terms and
conditions of the Agreement and to set forth certain other agreements and
understandings, as more specifically provided hereinafter.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
1. Amendments to Article SECOND. Article SECOND entitled "Policy
----------------------------
Ownership Subject to Collateral Assignment" is hereby amended by the addition of
the following sentence at the end of Article SECOND:
"For purposes of ownership of the Policy, the term 'Employee' shall include
an irrevocable life insurance trust as may be designated by the Employee."
2. No Further Modifications. Except as expressly amended and modified
------------------------
hereby, the terms of the Agreement remain in full force and effect.
3. Definitions. Unless otherwise defined herein, capitalized terms shall
-----------
have the meanings assigned in the Agreement.
4. Governing Law. This Second Amendment shall be subject to and
-------------
construed according to the laws of the State of California.
1
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third
Amendment to the above described Agreement effective January 19, 1998.
ZERO CORPORATION
a Delaware corporation
By:
-----------------------------
Wilford D. Godbold, Jr.
President and Chief
Executive Officer
EMPLOYEE
------------------------------
(name)
2
<PAGE>
ZERO CORPORATION
JOINT LIFE INSURANCE PLAN AND AGREEMENT
THIS SECOND AMENDMENT to the JOINT LIFE INSURANCE PLAN AND AGREEMENT dated
as of March 31, 1989, as amended effective as of April 1, 1994 (the
"Agreement"), by and between ZERO Corporation, a Delaware corporation
(hereinafter ZERO Corporation or a subsidiary thereof is called the "Company",
the "Corporation" or "ZERO"), and _________________ ("Employee").
WHEREAS, pursuant to the Agreement, Employee receives an insurance benefit,
the premiums for which are paid primarily by the Company; in part, they are paid
by the Employee to the extent of the economic benefit to the Employee as
established by the Internal Revenue Service; and
WHEREAS, the Company and Employee now wish to modify certain terms and
conditions of the Agreement and to set forth certain other agreements and
understandings, as more specifically provided hereinafter.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
1. Amendments to Article FIRST. Article FIRST entitled "Policy(ies)
---------------------------
subject to Agreement" is hereby amended by the addition of the following
sentence at the end of Article FIRST:
"In addition, the Corporation's interest in any such Policy will be
transferred to any grantor or "rabbi" trust ("Rabbi Trust") established
pursuant to Article FOURTH, paragraph F(b); provided that the transfer of
such interest shall be effected by the cancellation by both the Employee
and the Corporation of the Corporation's interest and the creation by the
Employee of a superceding interest in the Policy by execution of a
Collateral Assignment vesting in the Rabbi Trust."
2. Amendments to Article FOURTH. Article FOURTH entitled "Payment of
----------------------------
Premiums" is hereby amended as follows:
(a) The current paragraph appearing at the end of subparagraph E
(beginning "In the event that either...") is hereby changed to be subparagraph
"F", section (a) shall be deleted in its entirety, and "(b)" shall be deleted;
and thereafter subparagraph F shall be amended to read in its entirety:
3
<PAGE>
"Deposit in a Rabbi Trust funds in an amount sufficient to pay 1) Net
Premium Advances and 2) the cash bonus calculated in accordance with
Article FOURTH subparagraph C above to the Employee's attainment of age 65
or the date referred to in Article SIXTH, subparagraph A(ii) hereof."
(b) The following sentence is added at the end of subparagraph F thereof:
"Upon the establishment of a Rabbi Trust, the Company shall require that
the Trustee cooperate with Employee or beneficiary as required in the
exercise by such Employee or beneficiary of all rights provided in the
terms and conditions of this Agreement and the Policy(ies), and shall
direct the Trustee to perform all duties and responsibilities as Collateral
Assignee under the Policies and to perform such duties and responsibilities
respecting administration of this Plan and the Policy(ies) as may be
required in the administration of the Trust, including but not limited to
the following:
(i) Receipt of Trustee copy of all statements and annual reporting
requirements directly from the Consultant, and assure that copies have been
or are delivered to Participants and to the Company, as well as provide
assistance to Participants and/or Beneficiary with respect to questions on
such statements and annual reports.
(ii) Assist Participant in the exercise of rights and options as may
be lawful and permitted by the Plans, including but not limited to
obtaining approvals and signatures as required on a timely basis.
(iii) Assure that the Trustee receives net premium advances in
accordance with the provisions of the Plan and that the Participant and/or
Beneficiary receives its unfettered right to benefits under the Policies.
(iv) Obtain the release from the Company or the Trustee on its behalf
of its interest in any Policy on which the Trustee has or will receive
reimbursement of net premium advances.
(v) Cooperate with the Participants and Consultant in regard to
paperwork and documentation regarding the premiums required to be paid to
the issuer on the Policies and the annual bonuses to be paid to the
Participants.
4
<PAGE>
(vi) Notify Consultant of its obligation to issue notices to
Participants and Trustee as required by the Policies on the anniversary
date which is one year prior to termination of each Policy as provided on
the Payment Schedule.
(vii) On the date of termination of the Agreement, if net premium
advances have not been repaid, initiate steps to borrow or withdraw cash
value from the Policies for repayment of such net premium advances, and
provide a release of the Trust's assignment.
(viii) To assure that a lapse in coverage does not occur, confirm
that all net premium advances are paid to the insurer on each Policy.
(ix) Upon the death of a Participant, Trustee shall obtain a
certificate of death and notify Mullin Consulting, Inc., or its successor
("Consultant") of such death, and assist and cooperate with Consultant and
the insurer in the preparation and filing of any death claim with an
insurer. The Company and Beneficiaries shall also cooperate with the
Trustee in processing any death claims. Any insurance proceeds due under
the terms of this Agreement as the result of such death claim shall be
issued directly by the insurer to (i) the Trustee in the amount required to
reimburse the Trust for all net premium advances for the deceased
Participant by the Company and/or the Trustee, and (ii) to the
Beneficiary."
3. Amendment to Article FIFTH. The Collateral Assignment referred to in
--------------------------
Article FIFTH and attached as Schedule B dated ______________________________
shall be automatically replaced by the Collateral Assignment attached hereto as
Schedule B immediately prior to a Change in Control.
4. Amendment to Article SEVENTH. Article SEVENTH entitled "Obligations on
----------------------------
Termination" is hereby amended to add the following language at the end of
current subparagraph B:
"In the event death occurs after Employee's termination from employment
with the Company but prior to the termination of the Agreement, such base
pay shall be the Employee's annual rate of pay on the April 1 preceding
termination of employment."
5. Amendment to Schedule "B". The following sentence is added as the
-------------------------
sixth paragraph thereof:
"Assignee's interest hereunder may be assigned to one or more Rabbi Trusts,
as described in the Agreement."
5
<PAGE>
6. No Further Modifications. Except as expressly amended and modified
------------------------
hereby, the terms of the Agreement remain in full force and effect.
7. Definitions. Unless otherwise defined herein, capitalized terms shall
-----------
have the meanings assigned in the Agreement.
8. Governing Law. This Second Amendment shall be subject to and construed
-------------
according to the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment to the above described Agreement effective October 22, 1997.
ZERO CORPORATION
a Delaware corporation
By:
----------------------------------
Wilford D. Godbold, Jr.
President and
Chief Executive Officer
EMPLOYEE
-------------------------------------
[Name]
6
<PAGE>
AMENDMENT TO EXECUTIVE RETIREMENT
AND LIFE INSURANCE AGREEMENT
(SPLIT DOLLAR AGREEMENT)
THIS AMENDMENT to the SUPPLEMENTAL EXECUTIVE RETIREMENT AND LIFE INSURANCE
AGREEMENT dated as of March 31, 1989 (the "Agreement"), made and entered into
effective as of the 1st day of April, 1994, by and between ZERO Corporation, a
Delaware corporation (hereinafter ZERO Corporation or a subsidiary thereof is
called the "Corporation" or "ZERO"), and ("Employee").
WHEREAS, pursuant to the Agreement, Employee receives an insurance benefit,
the premiums for which are paid primarily by the Corporation; in part, they are
paid by the Employee to the extent of the economic benefit to the Employee as
established by the Internal Revenue Service; and
WHEREAS, the Corporation and Employee now wish to modify certain terms and
conditions of the Agreement and to set forth certain other agreements and
understandings, as more specifically provided hereinafter.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
1. Amendments to Article FOURTH.
----------------------------
(a) The second full paragraph of subparagraph F of Article FOURTH of the
Agreement is hereby amended to read in its entirety as follows:
"In the event that either the Named Fiduciary (as defined below) or the
Board of Directors determines that a Change of Control appears likely, the
Corporation will take one of the following actions (or another similar
action if the Corporation and Employee mutually agree in writing) which
will be deemed effective automatically and concurrently with the 'Change of
Control':"
(b) Section (b) of subparagraph F of Article FOURTH of the Agreement is
hereby amended to read in its entirety as follows:
"(b) Deposit in a Rabbi Trust funds in an amount sufficient to pay 1) Net
Premium Advances and 2) the cash bonus calculated in accordance with
Article FOURTH subparagraph D above to the later of employee's attainment
of age 65 or the date referred to in Article SIXTH, subparagraph A(ii)
hereof."
7
<PAGE>
2. Amendment to Article SIXTH. Article SIXTH entitled "Termination of
--------------------------
Agreement" is hereby amended to delete the first statement and current
subparagraph A in their entirety and to insert in place thereof the following:
"Subject to the provisions of Article SEVENTH below, this Agreement shall
terminate upon the happening of any of the following events:
"A. (i) The anniversary date of the policy of life insurance provided
under this Agreement (April 1) after the termination of Employee's
employment with the Corporation for any reason, except termination by the
Corporation in anticipation of a 'Change of Control' or termination for any
reason following a 'Change of Control', or (ii) on April 1, 2010 if
termination by the Corporation in anticipation of a 'Change of Control' or
termination for any reason following a 'Change of Control'. Provided,
---------
however, in no event shall the termination date of this Agreement be less
--------
than ninety (90) days following the termination date of Employee's
employment."
3. Amendment to Article SEVENTH. Article SEVENTH entitled "Obligations
----------------------------
on Termination" is hereby amended to change the first sentence of current
subparagraph B in its entirety and to insert in place thereof the following:
"B. In the event that this Agreement is terminated by reason of the death
of the Employee (1) the payment of death benefits equal to the Net Premium
Advances shall be made to the Corporation under the Policy or Policies
issued in 1989, and (2) the payment of death benefits equal to the greater
of (i) the Net Premium Advances or (ii) the total death benefits less an
amount equal to three (3) times Employee's base pay shall be made to the
Corporation under the Policy issued in 1994."
4. Amendment to Article NINTH. The following paragraph shall replace
--------------------------
the last sentence of Article NINTH of the Agreement in its entirety:
"A claimant shall have the right to request a review of a final decision of
the Named Fiduciary by arbitration pursuant to the then rules of the
American Arbitration Association. Such request must be made by the
claimant within twenty (20) days of receipt of the final decision of the
Named Fiduciary. If arbitration is not requested, however, all actions of
the Named Fiduciary shall be conclusive on all persons interested in the
Plan except to the extent otherwise specifically indicated herein."
5. No Further Modifications. Except as expressly amended and modified
------------------------
hereby, the terms of the Agreement remain in full force and effect.
8
<PAGE>
6. Definitions. Unless otherwise defined herein, capitalized terms shall
-----------
have the meanings assigned in the Agreement.
7. Governing Law. This Amendment shall be subject to and construed
-------------
according to the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
above described Agreement as of the day and year first above written.
ZERO CORPORATION, a Delaware
corporation
By:
----------------------------
Wilford D. Godbold, Jr.
President and
Chief Executive Officer
EMPLOYEE
--------------------------------
9
<PAGE>
SUPPLEMENTAL EXECUTIVE
RETIREMENT AND LIFE INSURANCE AGREEMENT
(Split Dollar Agreement)
THIS AGREEMENT dated as of the 3lst day of March, 1989 (the
"Agreement"), is entered into by and between
(hereinafter called "Employee") and Zero Corporation, a Delaware
corporation, having its principal office at 444 South Flower Street, Suite 2100,
Los Angeles, California 90071-2922 (hereinafter Zero Corporation or a subsidiary
thereof is called the "Corporation").
RECITALS
A. Employee is employed by the Corporation and renders valuable services for
the benefit of the Corporation; and
B. Corporation desires to provide a supplemental benefit to the Employee in
order to retain the services of said employee; and
C. Corporation is willing to join with Employee for the mutual benefit of the
Corporation and Employee in an investment in a life insurance policy on
said Employee's life; and
D. Corporation will advance premium payments on the life insurance policy.
E. Employee will be the owner of the policy on Employee's life, will be
entitled to the benefit thereunder and will assign the policy as collateral
security for the repayment of amounts advanced by Corporation that may be
due and payable to Corporation from time to time in accordance with this
Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
FIRST: Policy(ies) subject to Agreement
--------------------------------
Employee owns or has applied to the Insurer named in Schedule A attached
hereto for a certain policy of life insurance on Employee's life in an initial
face amount set forth on schedule "A" attached hereto and made a part hereof.
Both Employee and Corporation will do everything reasonable to cause such policy
to be issued and kept in force. Policies of life insurance or amounts thereof
may be added to or deleted from this Agreement upon agreement of employee,
Corporation and Insurer by appropriate notation thereof on Schedule "A" together
with the respective signatures of Employee and Corporation for each such change,
10
<PAGE>
Page Two
addition or deletion. "Policy" as used hereinafter shall refer to any and all
policies of life insurance on Employee's life described from time to time on
Schedule "A", or which shall otherwise become subject to this Agreement.
SECOND: Policy Ownership Subject to Collateral Assignment
-------------------------------------------------
Employee shall remain the sole owner of the Policy subject to the
"Collateral Assignment" of same to be executed by Employee, as defined in
Article Fifth, as security for the repayment of any amounts advanced by
Corporation that may be or become due and payable to Corporation from time to
time as provided hereinafter. Subject to the terms of this Agreement and the
related Collateral Assignment, Employee may designate or change the beneficiary
of the Policy at any time without restriction by using the form attached hereto
as Schedule "C". The Corporation agrees to immediately notify the Insurer upon
receipt by the Corporation of such designation or change by the Employee.
THIRD: Owner's Other Rights in Policy(ies)
-----------------------------------
Subject to the provisions of Section Fourth Paragraph "D", Employee may
exercise rights of ownership under the terms of the Policy, including the right
to change the beneficiary of the policy, except that the Employee agrees not to
take any dividends in cash or to borrow against the cash value of the Policy,
without the written consent of the Corporation, as long as the Collateral
Assignment in favor of the Corporation shall remain outstanding.
Notwithstanding anything in this Agreement to the contrary, in no event will the
Employee take any action which would cause the cash value of the Policy to be
less than the amount of the Corporation's premium advances less any employee
premium contributions made pursuant to Section Fourth Paragraph "A" less any
amounts received by the Corporation under the Policy ("Net Premium Advances").
FOURTH: Payment of Premiums
-------------------
The premiums on the Policy shall be paid as follows:
A. The employee shall pay a portion of the premium ("Employee Premium
Contribution") equal to the lesser of:
(i) the rate established by the Internal Revenue Service for the cost of
life insurance protection (P.S. 58 rate) from time to time, or
(ii) the rate, if any, established by the Insurer for individual one (1)
year term life insurance available to all standard risks for that
amount of coverage at Employee's then attained age
11
<PAGE>
Page Three
For administrative convenience, the Employee shall remit to the Corporation or
have withheld from amounts due to them by the Corporation the amount of the
Employee Premium Contribution within 30 days of receipt of written notice that
such amount is due. The Corporation shall be responsible for making the premium
payment to the Insurer.
B. The Corporation shall pay the balance of the premium payment and have the
option to make such additional premium payments from time to time, in excess of
the minimum premium necessary to keep the Policy in force, as the Corporation
finds financially desirable with respect to funding the Policy over time.
C. Both Employee and Corporation contemplate that every effort will be made to
ensure that sufficient premiums will be paid hereunder to qualify the Policy for
favorable income tax treatment to both the Corporation and the Employee under
Section 7702 of the Internal Revenue Code of 1986, or as such may be amended
from time to time. Borrowings against the Policy are not permitted without the
written approval of both the Corporation and the Employee as long as the
Corporation shall not have recovered all of its Net Premium Advances.
D. The Corporation agrees to pay a cash bonus to the Employee in an amount
equal to any Employee Premium Contributions. In addition, to the extent that the
employee has compensation from such bonus, the Corporation agrees to pay to the
Employee annually a cash bonus sufficient to pay applicable state and federal
income taxes. Assuming a $1,000 Employee Premium Contribution under Paragraph A.
above and a combined state and federal tax rate of 34.7% (28% + [72% x 9.3%]),
the total cash bonus to the employee would be $1,531 calculated as follows:
$1,000/(100% - 34.7%) $ 1,531
E. If consolidated income from continuing operations of the Corporation before
provision for income taxes in any year that this Agreement is in effect is less
than $10 million, the Board of Directors of the Company may suspend the Net
Premium Advances for a maximum of two years if it is, in the sole judgment of
the Board of Directors, considered essential to maintain the financial well
being of the Corporation. The effect of any such suspension of premiums shall be
made up over the remaining term of the policy. However, notwithstanding the
foregoing, the Corporation will make the premium payments necessary to qualify
the Policy as life insurance under the appropriate provisions of the Internal
Revenue Code.
F. The Corporation and Employee recognize that a substantial portion of the
benefits will accrue in the latter years of the term of the Policy because it is
in the Corporation's interest to fund
12
<PAGE>
Page Four
the Policy premiums in annual increments. The Corporation and Employee also
recognize that in the event of a "Change of Control" during the term of the
Policy, it would be in the interest of both parties to take actions to protect
the Employee's benefits under the Policy. For purposes of this Agreement
"Change of Control" means, after the effective date of this Agreement:
(i) There shall be consummated (A) any consolidation or merger of the
Corporation in which the Corporation is not the continuing or
surviving corporation or pursuant to which shares of the Corporation's
common stock would be converted into cash, securities or other
property, other than a merger of the Corporation in which the holders
of the Corporation's common stock immediately prior to the merger have
substantially the same proportionate ownership of common stock of the
surviving corporation immediately after the merger, or (B) any sales
lease, exchange or other transfer (in one transaction or a series of
transactions) of all, or more than 50%, of the assets of the
Corporation; or
(ii) The stockholders of the Corporation approve a plan or proposal for the
liquidation or dissolution of the Corporation; or
(iii) Any "person" (as defined in Sections 13(d) and 14(d) of the Securities
Exchange Act") other than a person owned by or directly or indirectly
managed by the Corporation, shall become the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), of 25 percent or more
of the Corporation's outstanding common stock
In the event that either the Named Fiduciary (as defined below) or the Board of
Directors determines that a Change of Control appears likely, the Corporation
shall initiate one of the following actions or another similar action, if the
Corporation and Employee mutually agree in writing, which shall be deemed
effective automatically and concurrently with the "Change of Control"
(a) Obtain an irrevocable letter of credit, conditioned only on the passage of
time, to fund 1) Net Premium Advances and 2) the cash bonus calculated in
accordance with Section Fourth Paragraph "D" above to the Employee's
attainment of age 65 ("Normal Retirement Date"), or
(b) Deposit in a Rabbi Trust funds in an amount sufficient to pay 1) Net
Premium Advances and 2) the cash bonus calculated in accordance with
Section Fourth Paragraph D above to the employee's attainment of age 65
(Normal Retirement Date).
13
<PAGE>
Page Five
FIFTH: Execution of Collateral Assignment
----------------------------------
In consideration for the covenants made by the Corporation, Employee agrees
to execute and deliver to the Corporation a Collateral Assignment in favor of
the Corporation in the form set forth in Schedule B attached hereto.
SIXTH: Termination of Agreement
------------------------
Except as provided in Article Seventh below, this Agreement shall terminate upon
the happening of any of the following events:
A. Termination of Employee's employment with the Corporation for any reason,
except termination by the Corporation in anticipation of a "Change of Control"
or termination for any reason following a "Change of Control".
B. Assignment, other than the Collateral Assignment which secures the
repayment of the Corporation's Net Premium Advances, of the Policy by the
Employee.
C. By mutual consent of the parties hereto.
D. Death of the Employee
SEVENTH: Obligations on Termination
--------------------------
In the event that this Agreement is terminated under Article Sixth above,
Employee or Insurance Company shall satisfy the Corporation's collateral
interest in the Policy by paying to the Corporation an amount equal to the Net
Premium Advances provided, however, that the amount paid to the Corporation
shall not exceed the cash value of the Policy if terminated during life or the
death benefit in the event the Agreement terminates for reason of death. The
payment terms under which the Corporation may be reimbursed for its said
collateral interest hereunder by Employee are as follows:
A. In the event of termination for a reason other than Death of Employee,
(i) Employee may, with Corporation's written consent, borrow an amount
equal to the Net Premium Advance from the cash surrender value of the
Policy. The Corporation agrees that it will cooperate with the
Employee to borrow the funds. Such borrowing shall be by a check
payable to the Corporation or,
(ii) Employee may make a lump sum payment to the Corporation of the entire
sum of the Net Premium Advances within ninety (90) days after the
termination of this Agreement. Such payment shall be by a cashiers
check.
14
<PAGE>
Page Six
Upon receipt of the repayment of the Net Premium Advances, the
Corporation shall immediately release the collateral assignment of the
Policy, by the execution and delivery of an appropriate instrument of
release to the Insurer and such assignment thereafter shall be deemed
null and void.
B. In the event of termination for reason of the death of the Employee, the
payment of death benefits in an amount equal to the Net Premium Advances
shall be made to the Corporation. The balance of the death benefit provided
under the Policy, if any, shall be paid directly to the beneficiary or
beneficiaries designated by the Employee, in the manner and in the amount
or amounts provided in the beneficiary designation of the Policy. The
parties hereto agree that the beneficiary designation provision of the
Policy shall conform to the provisions hereof. Within the (10) days of
Corporation's notice of Employee's death, Corporation shall file with the
Insurer the Affidavit required under the Collateral Assignment by and
between Corporation and Employee, stating the Net Premium Advances due to
the Corporation under this Agreement and stating that upon receipt of the
repayment of the Net Premium Advances, the Corporation shall release the
collateral assignment of the Policy, by execution and delivery of an
appropriate instrument of release to the Insurer.
C. The Corporation may pursue all available legal remedies to enforce
collection of the Net Premium Advances under this Agreement if Employee
shall be in default and shall be entitled to, among other things, award of
reasonable attorneys' fees.
EIGHTH: Designation of "Named Fiduciary"
--------------------------------
The Board of Directors of the Corporation shall designate a Named
Fiduciary, who shall be responsible for the management, control and
administration of the Split Dollar plan established under this Agreement. Such
Named Fiduciary may allocate aspects of the management and operational
responsibilities of this plan, including the employment of professional advisors
and the delegation of ministerial duties to qualified individuals from time to
time. Unless otherwise provided the Secretary of this Corporation shall serve as
the Named Fiduciary of this Plan.
NINTH: Claims Procedure
----------------
The following claims procedures shall be used for the Plan:
A. The Named Fiduciary shall notify the employee and, where appropriated the
beneficiaries of the Policy, of their right to claim benefits under the claims
procedures, shall make forms
15
<PAGE>
Page Seven
available for filing of such claims, and shall provide the name of the person or
persons with whom such claims should be filed.
B. The Named Fiduciary shall establish procedures for action upon claims
initially made and the communication of a decision to the claimant promptly and,
in any event, not later than sixty (60) days after the date of the claim. The
claim may be deemed by the claimant to have been denied for purposes of further
review described below in the event a decision is not furnished to the claimant
within such sixty (60) day period. Every claim for benefits which is denied
shall be denied by written notice setting forth in a manner calculated to be
understood by the claimant (1) the specific reason or reasons for the denial,
(2) specific reference to any provisions of this Plan on which denial is based,
(3) description of any additional material or information necessary for the
claimant to perfect his claim with an explanation of why such material or
information is necessary, and (4) an explanation of the procedure for further
reviewing the denial of the claim under the Plan.
C. The Named Fiduciary shall review all claim denials. The review given after
denial of any claim shall be a full and fair review with the claimant or his
duly authorized representative having one hundred eighty (180) days after
receipt of denial of his claim to request such review, having the right to
review all pertinent documents and the right to submit issues and comments in
writing.
D. The Named Fiduciary shall issue a decision not later than sixty (60) days
after receipt of a request for review from a claimant unless special
circumstances, such as the need to hold a hearing, require a longer period of
time, in which case a decision shall be rendered as soon as possible but not
later than one hundred and twenty (120) days after receipt of the claimant's
request for review. The decision on review shall be in writing and shall
include specific reasons for the decision written in a manner calculated to be
understood by the claimant with specific reference to any provisions of this
Plan on which the decision is based. All actions of the Named Fiduciary shall
be conclusive on all persons interested in the Plan except to the extent
otherwise specifically indicated herein.
TENTH: Execution of Necessary Documents
--------------------------------
The parties hereto agree to execute any documents which may be
appropriately necessary to carry out the purpose and the intent of this
Agreement.
16
<PAGE>
Page Eight
ELEVENTH: Amendment
---------
This Agreement may not be amended or modified orally and may only be
amended or modified by a written instrument signed by the parties hereto.
TWELFTH: Private Agreement
-----------------
The parties hereto agree that this is a private agreement to which the
Insurer is not a party and for which it can assume no responsibility, and the
Insurer is not to be deemed a third party beneficiary, hereunder and therefore,
a copy need not be filed with the Insurer. Nothing in this Agreement nor in any
modifications, amendments or supplements hereto shall in any way be construed to
enlarge, charge, vary or in any way effect the obligations of the Insurer as
expressly provided by the Policy of insurance issued by it.
THIRTEENTH: Binding
-------
This Agreement shall be binding upon the parties hereto and their
successors, assigns, executors, or administrators and beneficiaries.
FOURTEENTH: Notices
-------
All notices required by this Agreement must be in writing and sent by
certified or registered mail to the then current or last known address of each
party hereto.
FIFTEENTH: Applicable Law
--------------
This Agreement shall be subject to and construed according to the laws of
the State of California.
Whenever the Policy is referred to in this Agreement, the terms of the
Policy shall supersede the summary description herein.
17
<PAGE>
Page Nine
Executed in Los Angeles, California, as of the date first
above written.
-------------------------------------
Wilford D. Godbold, Jr.
President and Chief Executive Officer
ZERO Corporation
-------------------------------------
Participant
18
<PAGE>
SCHEDULE "A"
ZERO CORPORATION
Supplemental Executive Retirement and Life Insurance Agreement
Summary of Insurance Policies
Issued by: Pacific Mutual Life Insurance Co.
Face Amount:
Policy Number:
Type of Contract: Whole Life
Initially Determined Premium:
Insured:
Beneficiary:
Date of Policy: April 1, 1989
19
<PAGE>
ZERO CORPORATION
Supplemental Executive Retirement and Life Insurance
Collateral Assignment
THIS ASSIGNMENT is made and entered into effective this first day of April,
1989, by the undersigned as owner (the "Owner") of the certain Life Insurance
Policy No. issued by Pacific Mutual Life Insurance Company
("Insurer") and any supplementary contracts issued in connection therewith,
(said policy and contracts being herein called tire "Policy"), to ZERO
CORPORATION (the "Assignee"), a Delaware Corporation with principal offices at
444 South Flower Street, Suite 2100, Los Angeles, California, 90071-2922.
NOW, THEREFORE, for value received, the undersigned Owner hereby assigns,
transfers and sets over to the Assignee, its successors and Assigns, the
specific rights in the Policy as stated in the ZERO CORPORATION Supplemental
Retirement and Life Insurance Plan by and between Assignee and Owner dated March
31, 1989.
Pacific Mutual accepts no responsibility for the determination of the
respective interests or rights of the Owner and Assignee between or among
themselves or their successor or successors. The respective interests or rights
of the Owner and Assignee shall be as their interest may appear under the ZERO
CORPORATION Supplemental Retirement and Life Insurance Plan, Insurer not being a
party to said Plan, or the administration thereof, and shall not be responsible
for such interpretation.
Insurer is not a party to any other document or assignment unless it has
specifically agreed in writing, signed by an officer of the Insurer at its Home
Office, to be bound by such document or assignment.
Insurer shall have the right to rely upon the sole instructions and
representations of assignee (as given to Insurer by AFFIDAVIT signed by Assignee
alone) to exercise each and every right under the policy except that (a)
Assignee may not borrow against the cash value of the policy or (b) change the
beneficiary (ies) without the written consent of the owner of the policy. No
signature of Owner shall be required except as noted above. Owner and Assignee
specifically indemnify Insurer of all actions undertaken by Insurer pursuant to
said AFFIDAVIT. Any such AFFIDAVIT shall be in the form of Appendix A hereto.
---Continued---
20
<PAGE>
IN WITNESS WHEREOF, the undersigned Owner has executed this Assignment on
the date and year first above written. The undersigned Assignee by the
acceptance of this Assignment agrees to the conditions and provisions set forth
herein.
- ------------------------------ ----------------------------------
Witness Owner
ZERO CORPORATION
By:
- ------------------------------ ------------------------------
Wilford D. Godbold, Jr.
President and Chief Executive
Officer
(Seal of Corporation)
The Insurer has retained the original Assignment, dated _______________ and is
returning a copy of this document. The Insurer assumes no responsibility for
the validity of this document.
Pacific Mutual Life Insurance Company
By: _______________________________
21
<PAGE>
EXHIBIT 10.10
ZERO CORPORATION
JOINT LIFE INSURANCE PLAN AND AGREEMENT
THIS SECOND AMENDMENT to the JOINT LIFE INSURANCE PLAN AND AGREEMENT dated
April 1, 1994, as amended effective as of October 22, 1997 (the "Agreement"), by
and between ZERO Corporation, a Delaware corporation (hereinafter ZERO
Corporation or a subsidiary thereof is called the "Company", the "Corporation"
or "ZERO"), and _______________ ("Employee").
WHEREAS, pursuant to the Agreement, Employee receives an insurance benefit,
the premiums for which are paid primarily by the Company; in part, they are paid
by the Employee to the extent of the economic benefit to the Employee as
established by the Internal Revenue Service; and
WHEREAS, the Company and Employee now wish to modify certain terms and
conditions of the Agreement and to set forth certain other agreements and
understandings, as more specifically provided hereinafter.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
1. Amendments to Article SECOND. Article SECOND entitled "Policy
----------------------------
Ownership Subject to Collateral Assignment" is hereby amended by the addition of
the following sentence at the end of Article SECOND:
"For purposes of ownership of the Policy, the term 'Employee' shall include
an irrevocable life insurance trust as may be designated by the Employee."
2. No Further Modifications. Except as expressly amended and modified
------------------------
hereby, the terms of the Agreement remain in full force and effect.
3. Definitions. Unless otherwise defined herein, capitalized terms shall
-----------
have the meanings assigned in the Agreement.
4. Governing Law. This Second Amendment shall be subject to and
-------------
construed according to the laws of the State of California.
1
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment to the above described Agreement effective January 19, 1998.
ZERO CORPORATION
a Delaware corporation
By:
-----------------------------
Wilford D. Godbold, Jr.
President and Chief
Executive Officer
EMPLOYEE
------------------------------
[Name]
2
<PAGE>
ZERO CORPORATION
JOINT LIFE INSURANCE PLAN AND AGREEMENT
THIS FIRST AMENDMENT to the JOINT LIFE INSURANCE PLAN AND AGREEMENT dated
April 1, 1994 (the "Agreement"), by and between ZERO Corporation, a Delaware
corporation (hereinafter ZERO Corporation or a subsidiary thereof is called the
"Company", the "Corporation" or "ZERO"), and ______________ ("Employee").
WHEREAS, pursuant to the Agreement, Employee receives an insurance benefit,
the premiums for which are paid primarily by the Company; in part, they are paid
by the Employee to the extent of the economic benefit to the Employee as
established by the Internal Revenue Service; and
WHEREAS, the Company and Employee now wish to modify certain terms and
conditions of the Agreement and to set forth certain other agreements and
understandings, as more specifically provided hereinafter.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
1. Amendments to Article FIRST. Article FIRST entitled "Policy(ies)
---------------------------
subject to Agreement" is hereby amended by the addition of the following
sentence at the end of Article FIRST:
"In addition, the Corporation's interest in any such Policy will be
transferred to any grantor or "rabbi" trust ("Rabbi Trust") established
pursuant to Article FOURTH, paragraph F(b); provided that the transfer of
such interest shall be effected by the cancellation by both the Employee
and the Corporation of the Corporation's interest and the creation by the
Employee of a superceding interest in the Policy by execution of a
Collateral Assignment vesting in the Rabbi Trust."
2. Amendments to Article FOURTH. Article FOURTH entitled "Payment of
----------------------------
Premiums" is hereby amended as follows:
(a) The current paragraph appearing at the end of subparagraph E
(beginning "In the event that either...") is hereby changed to be subparagraph
"F", section (a) shall be deleted in its entirety, and "(b)" shall be deleted;
and thereafter subparagraph F shall be amended to read in its entirety:
3
<PAGE>
"Deposit in a Rabbi Trust funds in an amount sufficient to pay 1) Net
Premium Advances and 2) the cash bonus calculated in accordance with
Article FOURTH subparagraph C above to the Employee's attainment of age 65
or the date referred to in Article SIXTH, subparagraph A(ii) hereof."
(b) The following sentence is added at the end of subparagraph F thereof:
"Upon the establishment of a Rabbi Trust, the Company shall require that
the Trustee cooperate with Employee or beneficiary as required in the
exercise by such Employee or beneficiary of all rights provided in the
terms and conditions of this Agreement and the Policy(ies), and shall
direct the Trustee to perform all duties and responsibilities as Collateral
Assignee under the Policies and to perform such duties and responsibilities
respecting administration of this Plan and the Policy(ies) as may be
required in the administration of the Trust, including but not limited to
the following:
(i) Receipt of Trustee copy of all statements and annual reporting
requirements directly from the Consultant, and assure that copies have been
or are delivered to Participants and to the Company, as well as provide
assistance to Participants and/or Beneficiary with respect to questions on
such statements and annual reports.
(ii) Assist Participant in the exercise of rights and options as may
be lawful and permitted by the Plans, including but not limited to
obtaining approvals and signatures as required on a timely basis.
(iii) Assure that the Trustee receives net premium advances in
accordance with the provisions of the Plan and that the Participant and/or
Beneficiary receives its unfettered right to benefits under the Policies.
(iv) Obtain the release from the Company or the Trustee on its behalf
of its interest in any Policy on which the Trustee has or will receive
reimbursement of net premium advances.
(v) Cooperate with the Participants and Consultant in regard to
paperwork and documentation regarding the premiums required to be paid to
the issuer on the Policies and the annual bonuses to be paid to the
Participants.
(vi) Notify Consultant of its obligation to issue notices to
Participants and Trustee as required by the
4
<PAGE>
Policies on the anniversary date which is one year prior to termination of
each Policy as provided on the Payment Schedule.
(vii) On the date of termination of the Agreement, if net premium
advances have not been repaid, initiate steps to borrow or withdraw cash
value from the Policies for repayment of such net premium advances, and
provide a release of the Trust's assignment.
(viii) To assure that a lapse in coverage does not occur, confirm
that all net premium advances are paid to the insurer on each Policy.
(ix) Upon the death of a Participant, Trustee shall obtain a
certificate of death and notify Mullin Consulting, Inc., or its successor
("Consultant") of such death, and assist and cooperate with Consultant and
the insurer in the preparation and filing of any death claim with an
insurer. The Company and Beneficiaries shall also cooperate with the
Trustee in processing any death claims. Any insurance proceeds due under
the terms of this Agreement as the result of such death claim shall be
issued directly by the insurer to (i) the Trustee in the amount required to
reimburse the Trust for all net premium advances for the deceased
Participant by the Company and/or the Trustee, and (ii) to the
Beneficiary."
3. Amendment to Article FIFTH. The Collateral Assignment referred to in
--------------------------
Article FIFTH and attached as Schedule B is hereby replaced by the Collateral
Assignment attached hereto as Schedule B.
4. Amendment to Article SEVENTH. Article SEVENTH entitled "Obligations on
----------------------------
Termination" is hereby amended to add the following language at the end of
current subparagraph B:
"In the event death occurs after Employee's termination from employment
with the Company but prior to the termination of the Agreement, such base
pay shall be the Employee's annual rate of pay on the April 1 preceding
termination of employment."
5. Amendment to Schedule "B". The following sentence is added as the
-------------------------
sixth paragraph thereof:
"Assignee's interest hereunder may be assigned to one or more Rabbi Trusts,
as described in the Agreement."
6. No Further Modifications. Except as expressly amended and modified
------------------------
hereby, the terms of the Agreement remain in full force and effect.
5
<PAGE>
7. Definitions. Unless otherwise defined herein, capitalized terms shall
-----------
have the meanings assigned in the Agreement.
8. Governing Law. This Second Amendment shall be subject to and construed
-------------
according to the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment to the above described Agreement effective October 22, 1997.
ZERO CORPORATION
a Delaware corporation
By:
-----------------------------
Wilford D. Godbold, Jr.
President and Chief
Executive Officer
EMPLOYEE
------------------------------
[Name]
6
<PAGE>
ZERO CORPORATION
JOINT LIFE INSURANCE
PLAN AND AGREEMENT
THIS AGREEMENT dated as of the 1st day of April, 1994 (the "Agreement"), is
entered into by and between (hereinafter called
"Employee") and ZERO Corporation, a Delaware corporation, having its principal
office at 444 South Flower Street, Suite 2100, Los Angeles, California 90071-
2922 (hereinafter ZERO Corporation or a subsidiary thereof is called the
"Corporation").
RECITALS
A. Employee is employed by the Corporation and renders valuable
services for the benefit of the Corporation;
B. Corporation desires to provide a benefit to the Employee in order to retain
the services of said Employee;
C. Corporation is willing to join with Employee for the mutual benefit of the
Corporation and Employee in an investment in a life insurance policy on
said Employee's life;
D. Corporation will advance premium payments on the life insurance policy; and
E. Employee will be the owner of the policy on Employee's life,
will be entitled to the benefit thereunder and will assign the policy as
collateral security for the repayment of amounts advanced by the
Corporation that may be due and payable to Corporation from time to time in
accordance with this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
FIRST: Policy(ies) subject to Agreement
--------------------------------
Employee owns or has applied to the Insurer named in Schedule A attached
hereto for a certain policy of life insurance on Employee's life in an initial
face amount set forth on Schedule A attached hereto and made a part hereof.
Both Employee and Corporation will do everything reasonable to cause such Policy
to be issued and kept in force. Policies of life insurance or amounts thereof
may be added to or deleted from this Agreement upon agreement of Employee,
Corporation and Insurer by appropriate notation thereof on Schedule A together
with the respective
7
<PAGE>
signatures of Employee and the Corporation for each such change, addition or
deletion. "Policy" as used hereinafter shall refer to any and all policies of
life insurance on Employee's life described from time to time on Schedule A, or
which shall otherwise become subject to this Agreement.
SECOND: Policy Ownership Subject to Collateral Assignment
-------------------------------------------------
Employee shall remain the sole owner of the Policy subject to the
"Collateral Assignment" of same to be executed by Employee, as defined in
Article FIFTH, as security for the repayment of any amounts advanced by the
Corporation that may be or become due and payable to Corporation from time to
time as provided hereinafter. Subject to the terms of this Agreement and the
related Collateral Assignment, Employee may designate or change the beneficiary
of the Policy at any time without restriction by using the form attached hereto
as Schedule C. The Corporation agrees to immediately notify the Insurer upon
receipt by the Corporation of such designation or change by the Employee.
THIRD: Owner's Other Rights in Policy(ies)
-----------------------------------
Subject to the provisions of Article FOURTH, Paragraph D, Employee may
exercise rights of ownership under the terms of the Policy, including the right
to change the beneficiary of the Policy, except that the Employee agrees not to
take any dividends in cash or to borrow against the cash value of the Policy,
without the written consent of the Corporation, as long as the Collateral
Assignment in favor of the Corporation shall remain outstanding.
Notwithstanding anything in this Agreement to the contrary, in no event will the
Employee take any action which would cause the cash value of the Policy to be
less than the amount of the Corporation's premium advances less any Employee
Premium Contributions made pursuant to Article FOURTH, Paragraph A(1), less any
amounts received by the Corporation under the Policy ("Net Premium Advances").
FOURTH: Payment of Premiums
-------------------
A. The premiums on the Policy shall be paid as follows:
(1) The Employee shall pay a portion of the premium ("Employee Premium
Contribution") equal to the lesser of:
(i) The rate established by the Internal Revenue Service for the cost of
life insurance protection (P.S. 58 rate) from time to time; or
(ii) The rate, if any, established by the Insurer for individual one (1)
year term life insurance available for all standard risks for that
amount of coverage at Employee's then attained age.
8
<PAGE>
For administrative convenience, the Employee shall remit to the Corporation or
have withheld from amounts due to such Employee by the Corporation the amount of
the Employee Premium Contributions within thirty (30) days of receipt of written
notice that such amount is due. The Corporation shall be responsible for making
the premium payments to the Insurer.
(2) The Corporation shall pay the balance of the premium payments and have
the option to make such additional premium payments from time to time, in excess
of the minimum premium necessary to keep the Policy in force, as the Corporation
finds financially desirable with respect to funding the Policy over time.
B. Both Employee and Corporation contemplate that every effort will be
made to ensure that sufficient premiums will be paid hereunder to qualify the
Policy for favorable income tax treatment to both the Corporation and the
Employee under Section 7702 of the Internal Revenue Code of 1986, or as such may
be amended from time to time. Borrowings against the Policy are not permitted
without the written approval of both the Corporation and the Employee as long as
the Corporation shall not have recovered all of its Net Premium Advances.
C. The Corporation agrees to pay a cash bonus to the Employee in an amount
equal to any Employee Premium Contributions. In addition, to the extent that
the Employee has compensation from such bonus, the Corporation agrees to pay to
the Employee annually a cash bonus sufficient to pay applicable state and
federal income taxes. Assuming a $1,000 Employee Premium Contribution under
Paragraph A(1) above and a combined state and federal tax rate of 42.4% (36% +
[64% x 10%]), the total cash bonus to the Employee would be $1,531 calculated as
follows:
$1,000 - (100% - 42.4%) $1,736
D. If consolidated income from continuing operations of the Corporation
before provision for income taxes in any year that this Agreement is in effect
is less than $10 million, the Board of Directors of the Corporation may suspend
the Net Premium Advances for a maximum of two (2) years if it is, in the sole
judgment of the Board of Directors, considered essential to maintain the
financial well being of the Corporation. The effect of any such suspension of
premiums shall be made up over the remaining term of the Policy. However,
notwithstanding the foregoing, the Corporation will make the premium payments
necessary to qualify the Policy as life insurance under the appropriate
provisions of the Internal Revenue Code.
E. The Corporation and Employee recognize that a substantial
portion of the benefits will accrue in the later years of the term of the Policy
because it is in the Corporation's interest to fund the Policy premiums in
annual increments. The Corporation and
9
<PAGE>
Employee also recognize that in the event of a "Change of Control" during the
term of the Policy, it would be in the interest of both parties to take actions
to protect the Employee's benefits under the Policy. For purposes of this
Agreement "Change of Control" means, after the effective date of this Agreement:
(i) There shall be consummated (A) any consolidation or merger of the
Corporation in which the Corporation is not the continuing or
surviving corporation or pursuant to which shares of the Corporation's
common stock would be converted into cash, securities or other
property, other than a merger of the Corporation in which the holders
of the Corporation's common stock immediately prior to the merger have
substantially the same proportionate ownership of common stock of the
surviving corporation immediately after the merger, or (B) any sale,
lease, exchange or other transfer (in one transaction or a series of
transactions) of all, or more than 50 percent, of the assets of the
Corporation; or
(ii) The stockholders of the Corporation approve a plan or proposal for the
liquidation or dissolution of the Corporation; or
(iii) Any "person" (as defined in Sections 13(d) and 14(d) of the Securities
Exchange Act") other than a person owned by or directly or indirectly
managed by the Corporation, shall become the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), of 25 percent or more
of the Corporation's outstanding common stock.
In the event that either the Named Fiduciary (as defined below) or the Board of
Directors determines that a Change of Control appears likely, the Corporation
will take one of the following actions (or another similar action if the
Corporation and Employee mutually agree in writing) which will be deemed
effective automatically and concurrently with the "Change of Control":
(a) Obtain an irrevocable letter of credit, conditioned only on the passage of
time, to fund l) Net Premium Advances and 2) the cash bonus calculated in
accordance with Article FOURTH, Paragraph D, above to the Employee's
attainment of age 65 ("Normal Retirement Date"), or
(b) Deposit in a Rabbi Trust funds in an amount sufficient to pay 1) Net
Premium Advances and 2) the cash bonus calculated in accordance with
Article FOURTH, Paragraph D, above to the Employee's attainment of age 65
(Normal Retirement Date).
10
<PAGE>
FIFTH: Execution of Collateral Assignment
----------------------------------
In consideration for the covenants made by the Corporation, Employee agrees
to execute and deliver to the Corporation a Collateral Assignment in favor of
the Corporation in the form set forth in Schedule B attached hereto.
SIXTH: Termination of Agreement
------------------------
Subject to the provisions in Article SEVENTH below, this Agreement shall
terminate upon the happening of any of the following events:
A. (i) The anniversary date of the policy of life insurance provided under
this Agreement (April 1) after the termination of Employee's employment with the
Corporation for any reason, except termination by the Corporation in
anticipation of a "Change of Control" or termination for any reason following a
"Change of Control", or (ii) on April 1, 2005 if termination by the Corporation
in anticipation of a "Change of Control" or termination for any reason following
a "Change of Control". Provided, however, in no event shall the termination
-----------------
date of this Agreement be less than ninety (90) days following the termination
date of Employee's employment."
B. Assignment, other than the Collateral Assignment which secures the
repayment of the Corporation's Net Premium Advances, of the Policy by the
Employee.
C. By mutual consent of the Employee and the Corporation.
D. Death of the Employee.
SEVENTH: Obligations on Termination
--------------------------
A. In the event that this Agreement is terminated under Article SIXTH
above, Employee or Insurance Company shall satisfy the Corporation's collateral
interest in the Policy by paying to the Corporation an amount equal to the Net
Premium Advances; provided, however, that the amount paid to the Corporation
shall not exceed the cash value of the Policy if terminated during life or the
death benefit in the event the Agreement terminates for reason of death. The
payment terms under which the Corporation may be reimbursed for its said
collateral interest hereunder by Employee are as follows:
(1) In the event of termination for a reason other than death of Employee,
(i) Employee may, with Corporation's written consent, borrow an amount
equal to the Net Premium Advances from the cash surrender value of the
Policy. The Corporation agrees
11
<PAGE>
that it will cooperate with the Employee to borrow the funds. Such
borrowing shall be by a check payable to the Corporation.
OR
(ii) Employee may make a lump sum payment to the Corporation of the entire
sum of the Net Premium Advances within ninety (90) days after the
termination of this Agreement. Such payment shall be by a cashiers
check.
Upon receipt of the repayment of the Net Premium Advances, the Corporation shall
immediately release the Collateral Assignment of the Policy by the execution and
delivery of an appropriate instrument of release to the Insurer and such
Collateral Assignment thereafter shall be deemed null and void.
(2) In the event that this Agreement is terminated by reason of the death
of the Employee, the Corporation shall be paid death benefits equal to the
greater of (i) the Net Premium Advances or (ii) the total death benefit provided
under the Policy issued in 1994 less an amount equal to three (3) times
Employee's base pay. The balance of the death benefit provided under the
Policy, if any, shall be paid directly to the beneficiary or beneficiaries
designated by the Employee, in the manner and in the amount or amounts provided
in the beneficiary designation of the Policy. The parties hereto agree that the
beneficiary designation provision of the Policy shall conform to the provisions
hereof. Within ten (10) days of Corporation's notice of Employee's death,
Corporation shall file with the Insurer the Affidavit required under the
Collateral Assignment by and between Corporation and Employee, stating the Net
Premium Advances due to the Corporation under this Agreement and stating that
upon receipt of the repayment of the Net Premium Advances, the Corporation shall
release the Collateral Assignment of the Policy, by execution and delivery of an
appropriate instrument of release to the Insurer.
B. The Corporation may pursue all available legal remedies to enforce
collection of the Net Premium Advances under this Agreement if Employee shall be
in default and shall be entitled to, among other things, award of reasonable
attorneys' fees.
EIGHTH: Designation of "Named Fiduciary"
--------------------------------
The Board of Directors of the Corporation shall designate a Named
Fiduciary, who shall be responsible for the management, control and
administration of the split dollar life insurance plan established under this
Joint Life Insurance Plan and Agreement (the "Plan"). Such Named Fiduciary may
allocate aspects of the management and operational responsibilities of this
Plan, including
12
<PAGE>
the employment of professional advisors and the delegation of ministerial
duties to qualified individuals from time to time. Unless otherwise provided
the Secretary of the Corporation shall serve as the Named Fiduciary of the Plan.
NINTH: Claims Procedure
----------------
The following claims procedures shall be used for the Plan:
A. The Named Fiduciary shall notify the Employee and, where
appropriate, the beneficiaries of the Policy, of their right to claim benefits
under the claims procedures, shall make forms available for filing of such
claims, and shall provide the name of the person or persons with whom such
claims should be filed.
B. The Named Fiduciary shall establish procedures for action
on claims initially made and the communication of a decision to the claimant
promptly and, in any event, not later than sixty (60) days after the date of the
claim. The claim may be deemed by the claimant to have been denied for purposes
of further review described below in the event a decision is not furnished to
the claimant within such sixty (60) day period. Every claim for benefits which
is denied shall be denied by written notice setting forth in a manner calculated
to be understood by the claimant 1) the specific reason or reasons for the
denial, 2) specific reference to any provisions of this Plan on which denial is
based, 3) description of any additional material or information necessary for
the claimant to perfect his or her claim with an explanation of why such
material or information is necessary, and 4) an explanation of the procedure for
further reviewing the denial of the claim under the Plan.
C. The Named Fiduciary shall review all claim denials. The
review given after denial of any claim shall be a full and fair review, with the
claimant or his or her duly authorized representative having one hundred eighty
(180) days after receipt of denial of his or her claim to request such review,
having the right to review all pertinent documents and the right to submit
issues and comments in writing.
D. The Named Fiduciary shall issue a decision not later than
sixty (60) days after receipt of a request for review from a claimant unless
special circumstances such as the need to hold a hearing, require a longer
period of time, in which case a decision shall be rendered as soon as possible
but not later than one hundred and twenty (120) days after receipt of the
claimant's request for review. The decision on review shall be in writing and
shall include specific reasons for the decision written in a manner calculated
to be understood by the claimant with specific reference to any provisions of
this Plan on which the decision is based.
13
<PAGE>
A claimant shall have the right to request a review of a final decision of the
Named Fiduciary by arbitration pursuant to the then rules of the American
Arbitration Association. Such request must be made by the claimant within
twenty (20) days of receipt of the final decision of the Named Fiduciary. If
arbitration is not requested, however, all actions of the Named Fiduciary shall
be conclusive on all persons interested in the Plan except to the extent
otherwise specifically indicated herein.
TENTH: Execution of Necessary Documents
--------------------------------
The parties hereto agree to execute any documents which may be
appropriately necessary to carry out the purpose and the intent of this
Agreement.
ELEVENTH: Amendment
---------
This Agreement may not be amended or modified orally and may only be
amended or modified by a written instrument signed by the parties hereto.
TWELFTH: Private Agreement
-----------------
The parties hereto agree that this is a private agreement to which the
Insurer is not a party and for which it can assume no responsibility and the
Insurer is not to be deemed a third party beneficiary hereunder and, therefore,
a copy need not be filed with the Insurer. Nothing in this Agreement nor in any
modifications,
amendments or supplements hereto shall in any way be construed to enlarge,
charge, vary or in any way affect the obligations of the Insurer as expressly
provided by the Policy of insurance issued by it.
THIRTEENTH: Binding
-------
This Agreement shall be binding upon the parties hereto and their
successors, assigns, executors or administrators and beneficiaries.
FOURTEENTH: Notices
-------
All notices required by this Agreement must be in writing and delivered
personally or sent by certified or registered mail to the then current or last
known address of each party hereto.
FIFTEENTH: Applicable Law
--------------
This Agreement shall be subject to and construed according to the laws of
the State of California.
14
<PAGE>
SIXTEENTH: Policy
------
Whenever the Policy is referred to in this Agreement, the terms of the
Policy shall supersede the summary description herein.
Executed in Los Angeles, California, as of the date first above written.
EMPLOYEE
---------------------------
ZERO Corporation, a Delaware
corporation
By: _______________________
Title:
15
<PAGE>
SCHEDULE "A"
ZERO CORPORATION
Joint Life Insurance Plan and Agreement
Summary of Insurance Policies
Issued by:
Face Amount:
Policy Number:
Type of Contract:
Initially Determined Premium:
Insured:
Beneficiary:
Date of Policy:
<PAGE>
SCHEDULE "B"
ZERO CORPORATION
Joint Life Insurance Plan and Agreement
COLLATERAL ASSIGNMENT
THIS ASSIGNMENT is made and entered into effective the 1st day of
April, 1994, by the undersigned as owner (the "Owner") of the certain Life
Insurance Policy No. issued by Pacific Mutual Life Insurance
Company ("Insurer") and any supplementary contracts issued in connection
therewith (said policy and contracts being herein called the "Policy"), to ZERO
CORPORATION (the "Assignee"), a Delaware Corporation with principal offices at
444 South Flower Street, Suite 2100, Los Angeles, California, 90071-2922.
NOW, THEREFORE, for value received, the undersigned Owner hereby
assigns, transfers and sets over to the Assignee, its successors and assigns,
the specific rights in the Policy as stated in the ZERO CORPORATION Joint Life
Insurance Plan and Agreement by and between Assignee and Owner dated April 1,
1994 (the "Agreement").
Insurer accepts no responsibility for the determination of the
respective interests or rights of the Owner and Assignee between or among
themselves or their successor or successors. The respective interests or rights
of the Owner and Assignee shall be as their interest may appear under the
Agreement, Insurer not being a party to said Agreement, or the administration
thereof, and shall not be responsible for such interpretation.
Insurer is not a party to any other document or assignment unless it
has specifically agreed in writing, signed by an officer of the Insurer at its
Home Office, to be bound by such document or assignment.
Insurer shall have the right to rely upon the sole instructions and
representations of Assignee (as given to Insurer by AFFIDAVIT signed by Assignee
alone) to exercise each and every right under the Policy except that Assignee
(a) may not borrow against the cash value of the Policy or (b) change the
beneficiary(ies) without the written consent of the Owner of the Policy. No
signature of Owner shall be required except as noted above. Owner and Assignee
specifically indemnify Insurer for all actions undertaken by Insurer pursuant to
said AFFIDAVIT. Any such AFFIDAVIT shall be in the form of Appendix A hereto.
<PAGE>
IN WITNESS WHEREOF, the undersigned Owner has executed this Assignment
as of the date and year first above written. The undersigned Assignee by the
acceptance of this Assignment agrees to the conditions and provisions set forth
herein.
Witness Owner
- --------------------- -----------------------
Witness ZERO CORPORATION
By:
- --------------------- -----------------------
Title:
(Seal of Corporation)
The Insurer has retained the original Collateral Assignment dated as
of April 1, 1994, and is returning a copy of this document. The Insurer assumes
no responsibility for the validity of this document.
------------------------------
By:
--------------------------
<PAGE>
APPENDIX "A" TO SCHEDULE "B"
ZERO CORPORATION
Joint Life Insurance Plan and Agreement
AFFIDAVIT OF ZERO CORPORATION
1. I am _________________, _________________ of ZERO Corporation.
2. This AFFIDAVIT is made this ___ day _________, 199__, by ZERO Corporation
("Assignee") as Assignee of that certain Life Insurance Policy No.
____________ issued by ________________ Insurance Company ("Insurer") and
any supplementary contracts issued in connection therewith (said policy and
contracts being herein called the "Policy") upon the life of __________
_____________ ("Insured") pursuant to a Collateral Assignment from
_______________("Owner"). Assignee hereby certifies that the following
instructions are in accordance with respective interests or rights of the
Owner and Assignee as they appear under that certain ZERO Corporation Joint
Life Insurance Plan and Agreement dated as of April ___, 1994.
3. The undersigned Assignee hereby instructs Insurer to take the following
action with respect to the Policy:
ZERO CORPORATION
By: __________________________
Title:
Subscribed and sworn (affirmed) before me this ____ day of ________,
19___.
------------------------------
Notary Public in and for State
of California and County of
Los Angeles
<PAGE>
APPENDIX "B" TO SCHEDULE "B"
ZERO CORPORATION
Joint Life Insurance Plan and Agreement
AFFIDAVIT OF ZERO CORPORATION AND OWNER
1. This AFFIDAVIT is made jointly this ____ day _________, 199__ by ZERO
Corporation ("Assignee") as Assignee of that certain Life Insurance Policy
No. ________ issued by _______________ Life Insurance Company ("Insurer")
and any supplementary contracts issued in connection therewith (said policy
and contracts being herein called the "Policy"), upon the life of
______________ ("Insured") pursuant to a Collateral Assignment from
________________ ("Owner") and by the Owner. Assignee hereby certifies that
the following instructions are in accordance with respective interests or
rights of the Owner and Assignee as they appear under the ZERO Corporation
Joint Life Insurance Plan and Agreement.
2. The undersigned Assignee and Owner hereby instruct Insurer to take the
following action with respect to the Policy:
Owner ZERO CORPORATION (Assignee)
________________________ By: _________________________
Title:
Subscribed and sworn (affirmed) before me this ____ day of
___________, 199___.
------------------------------
Notary Public in and for the
State of California and County
of Los Angeles
<PAGE>
SCHEDULE "C"
ZERO CORPORATION
Joint Life Insurance Plan and Agreement
CHANGE OF BENEFICIARY FORM
Address of Insurer
Revoking hereby any previous designation which may be inconsistent
herewith, I direct that the insurance proceeds, payable under that certain Life
Insurance Policy No. _____________ issued by the _______________ Life Insurance
Company, in the event of my death, be paid as follows:
Name and Relationship of Beneficiary ___________________________________________
________________________________________________________________________________
________________________________________________________________________________
Age ____ Address if Not Related by blood or marriage:
________________________________________________________________________________
________________________________________________________________________________
The right to change the beneficiary(ies) without the consent of said
beneficiary(ies) is reserved:
Owner:
--------------------------------
(Signature of Insured)
--------------------------------
(Name of Insured - Printed)
--------------------------------
(Social Security Number)
----------------------------
(Policy Number)
----------------------------
(Date)
Assignee:
ZERO CORPORATION
By: ___________________________
Title:
---------------------------------
Notary Public in and for State of
California and County of Los Angeles
<PAGE>
EXHIBIT 21
ZERO CORPORATION
Subsidiaries of Registrant*
As of March 31, 1998
1. Air Cargo Equipment Corporation, a Delaware corporation
2. Air Cargo Equipment (UK) Limited, a U.K. corporation
3. Air Cooling Technology, Inc., a California corporation
4. Cambridge Aeroflo, Inc., a Massachusetts corporation
5. Electronic Solutions, a Nevada corporation
6. McLean Midwest Corporation, a Minnesota corporation
7. Nielsen Hardware Corporation, a Connecticut corporation
8. Precision Fabrication Technologies, Inc., an Indiana corporation
9. Productos Aereos, S.A., a Mexican corporation
10. Samuel Groves & Co. Limited, a U.K. corporation
11. ZERO FSC Corporation, a Virgin Islands corporation
12. ZERO - East Division, ZERO Corporation, a Massachusetts corporation
13. ZERO Enclosures, Inc., a California corporation
14. ZERO Integrated Systems, a California corporation
15. ZERO International, Inc., a California corporation
16. ZERO Manufacturing Corporation, a California corporation
17. ZERO McLean Europe LTD., a U.K. corporation
* All are 100% owned
<PAGE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No. 33-
56175, 33-27929, 33-44143 and 333-38423 on Form S-8 of ZERO Corporation of our
report dated May 11, 1998, appearing in this Annual Report on Form 10-K of ZERO
Corporation for the year ended March 31, 1998.
/s/ DELOITTE & TOUCHE LLP
Los Angeles, California
June 18, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
AUDITED FINANCIAL STATEMENTS OF ZERO CORPORATION FOR THE FISCAL YEAR ENDED MARCH
31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 30,979
<SECURITIES> 9,990
<RECEIVABLES> 35,820
<ALLOWANCES> 818
<INVENTORY> 31,409
<CURRENT-ASSETS> 115,745
<PP&E> 99,892
<DEPRECIATION> 50,887
<TOTAL-ASSETS> 216,998
<CURRENT-LIABILITIES> 28,194
<BONDS> 50,555
0
0
<COMMON> 166
<OTHER-SE> 125,899
<TOTAL-LIABILITY-AND-EQUITY> 216,998
<SALES> 258,745
<TOTAL-REVENUES> 258,745
<CGS> 171,386
<TOTAL-COSTS> 171,386
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,747
<INCOME-PRETAX> 40,900
<INCOME-TAX> 16,520
<INCOME-CONTINUING> 24,380
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,380
<EPS-PRIMARY> 1.98
<EPS-DILUTED> 1.93
</TABLE>
