<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1997 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
Z E R O C O R P O R A T I O N
- --------------------------------------------------------------------------------
(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, Suite #2100, Los Angeles, CA 90071-2922
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(213) 629-7000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
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 [ ]
Common stock outstanding as of December 31, 1997 -- 12,391,197 shares.
<PAGE>
PART I - FINANCIAL INFORMATION
Corporation for which information is given:
This report is filed for ZERO Corporation and its subsidiaries (hereafter
"Registrant" or "Company") for the quarterly period ended December 31, 1997.
Item 1. Financial Statements.
---------------------
a. The Condensed Statements of Consolidated Income required by Rule 10-01 of
Regulation S-X are herewith filed as Exhibit Ia and are incorporated
herein by reference.
The Condensed Consolidated Balance Sheets required by Rule 10-01 of
Regulation S-X are herewith filed as Exhibit Ib and are incorporated
herein by reference.
The Condensed Statements of Consolidated Cash Flows required by Rule
10-01 of Regulation S-X are as follows:
ZERO CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Nine Months Ended
December 31,
1997 1996
------------ -----------
<S> <C> <C>
OPERATING ACTIVITIES:
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 29,711,000 $13,203,000
INVESTING ACTIVITIES:
(INCREASE) DECREASE IN SHORT-TERM INVESTMENTS (4,918,000) 965,000
EXPENDITURES FOR PROPERTY, PLANT AND EQUIPMENT (10,075,000) (7,994,000)
PURCHASE OF NON-CASH ASSETS OF ACQUIRED BUSINESSES (8,860,000) (1,930,000)
PROCEEDS FROM SALE OF ASSETS - 1,258,000
OTHER 119,000 (295,000)
------------ -----------
NET CASH USED IN INVESTING ACTIVITIES (23,734,000) (7,996,000)
------------ -----------
FINANCING ACTIVITIES:
DIVIDENDS PAID (1,107,000) (1,092,000)
OTHER (includes effect of exchange rate changes) 980,000 1,075,000
------------ -----------
NET CASH USED IN FINANCING ACTIVITIES (127,000) (17,000)
------------ -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 5,850,000 5,190,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 16,201,000 7,018,000
------------ -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD* $ 22,051,000 $12,208,000
============ ===========
</TABLE>
* Cash and Cash Equivalents include investments purchased with maturities of
three months or less. At December 31, 1997, short-term investments with
maturities longer than three months totaled $4,918,000. There are no short-term
investments with maturities longer than three months at December 31, 1996.
These Condensed Statements of Consolidated Cash Flows for the nine months ended
December 31, 1997 and 1996 are unaudited but, in the opinion of management,
reflect all adjustments (consisting of normal recurring adjustments) necessary
to present fairly the results for the periods.
2
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Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations.
----------------------
The following should be read in conjunction with the financial statements
included or incorporated herein by reference.
Results of Operations
Net sales for the three and nine months ended December 31, 1997 increased 14.3%
and 17.6%, respectively, when compared to the comparable periods in the prior
year due primarily to increased orders within the telecommunications,
instrumentation and data processing markets, as well as the consumer market.
Operating income as a percent of net sales for the three and nine months ended
December 31, 1997 increased to 14.1% and 13.7%, respectively, from 13.0% and
12.8%, respectively, for the same periods in the prior year primarily due to
higher sales volume and cost containment efforts.
In the second quarter of fiscal 1998, the Company recognized a non-taxable gain
of $1,709,000 from insurance proceeds on the life of the former Vice President
of Marketing and Sales of ZERO Corporation.
Financial Condition and Liquidity
The Company's working capital increased to $78,313,000 at December 31, 1997 when
compared to $70,341,000 at March 31, 1997, primarily due to the increase in cash
and short-term investments of $10,768,000 since March 31, 1997 generated from
operating activities.
Management believes that cash from operations, together with the ability to
obtain financing, will provide sufficient funds to finance current and
forecasted operations, including potential acquisitions, for the next twelve
month period. The Company will continue to invest its available funds in liquid,
low-risk investments.
New Accounting Standard
During the third quarter of fiscal 1998, the Company adopted Statement of
Financial Accounting Standards No. 128, "Earnings Per Share." This Statement
requires the disclosure of basic and diluted earnings per share. Earnings per
share for prior periods has been restated to conform to the required disclosure.
Safe Harbor Statement
STATEMENTS THAT ARE NOT HISTORICAL FACTS, INCLUDING STATEMENTS ABOUT OUR
CONFIDENCE, STRATEGIES AND EXPECTATIONS, 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 WORLDWIDE AND DOMESTIC ECONOMIC AND MARKET CONDITIONS, THE
CONTINUING STRENGTH OF THE ELECTRONICS MARKETS, INCLUDING THE
TELECOMMUNICATIONS/INSTRUMENTATION AND DATA PROCESSING MARKETS, COMPETITOR
PRICING AND STRATEGIES, MAINTENANCE OF OUR CURRENT MOMENTUM AND OTHER FACTORS.
Exhibit Ia - The Company's Condensed Statements of Consolidated Income
(Unaudited) for the Three and Nine Months Ended December 31, 1997
and 1996.
Exhibit Ib - The Company's Condensed Consolidated Balance Sheets (Unaudited)
as of December 31, 1997 and March 31, 1997.
3
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
a. Exhibits:
10.1 ZERO Corporation Master Trust Agreement
for Joint Life Insurance Plans
10.2 ZERO Corporation Master Trust Agreement
for Deferred Compensation Plans
10.3 Employment Agreement
27 Financial Data Schedule
b. Reports on Form 8-K - Form 8-K reporting exercise of an option for
the sale of property dated December 23, 1997.
SIGNATURES
Pursuant to the requirements 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
Date: February 13, 1998 /s/ D. N. KAJIKAMI
------------------
D. N. Kajikami, Controller
and Chief Accounting Officer
Date: February 13, 1998 /s/ G. A. DANIELS
-----------------
G. A. Daniels, Vice President
and Chief Financial Officer
4
<PAGE>
ZERO CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
1997 1996 1997 1996
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $66,910,000 $58,546,000 $195,927,000 $166,597,000
COST OF SALES 44,792,000 39,336,000 130,705,000 111,261,000
SELLING AND ADMIN. EXPENSES 12,710,000 11,597,000 38,397,000 34,080,000
----------- ----------- ------------ ------------
OPERATING INCOME 9,408,000 7,613,000 26,825,000 21,256,000
----------- ----------- ------------ ------------
OTHER INCOME:
Life Insurance Gain, Net - - 1,709,000 * -
Other 176,000 283,000 767,000 1,441,000
INTEREST INCOME 249,000 137,000 634,000 361,000
INTEREST EXPENSE 1,214,000 1,155,000 3,588,000 3,440,000
----------- ----------- ------------ ------------
INCOME BEFORE INCOME TAXES 8,619,000 6,878,000 26,347,000 * 19,618,000
INCOME TAXES 3,430,000 2,679,000 9,838,000 7,897,000
----------- ----------- ------------ ------------
NET INCOME $ 5,189,000 $ 4,199,000 $ 16,509,000 * $ 11,721,000
=========== =========== ============ ============
BASIC EARNINGS PER SHARE $ 0.42 $ 0.34 $ 1.34 * $ 0.96
DILUTED EARNINGS PER SHARE $ 0.41 $ 0.34 $ 1.31 * $ 0.95
DIVIDENDS DECLARED PER SHARE $ 0.03 $ 0.03 $ 0.09 $ 0.09
AVERAGE NUMBER OF SHARES:
OUTSTANDING 12,373,000 12,180,000 12,317,000 12,161,000
ASSUMING DILUTION 12,672,000 12,381,000 12,611,000 12,395,000
</TABLE>
* Includes life insurance gain of $1,709,000 or $.14 per share
These Condensed Statements of Consolidated Income for the Three and Nine Months
Ended December 31, 1997 and 1996 are unaudited but, in the opinion of
management, reflect all adjustments (consisting of normal recurring
adjustments) necessary to present fairly the results for the periods.
Exhibit Ia
5
<PAGE>
ZERO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
December 31, March 31,
1997 1997
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
CASH AND SHORT-TERM INVESTMENTS $ 26,969,000 $ 16,201,000
ACCOUNTS RECEIVABLE (LESS ALLOWANCE
FOR DOUBTFUL ACCOUNTS OF $826,000 AND
$607,000, RESPECTIVELY) 37,537,000 35,966,000
INVENTORIES
RAW MATERIALS AND SUPPLIES 19,342,000 21,504,000
WORK IN PROCESS 9,046,000 7,821,000
FINISHED GOODS 5,749,000 5,685,000
OTHER 3,736,000 4,172,000
------------ ------------
TOTAL CURRENT ASSETS 102,379,000 91,349,000
------------ ------------
PROPERTY, PLANT AND EQUIPMENT 106,776,000 97,241,000
LESS ACCUMULATED DEPRECIATION AND AMORTIZATION (57,444,000) (52,866,000)
------------ ------------
NET PROPERTY, PLANT AND EQUIPMENT 49,332,000 44,375,000
------------ ------------
GOODWILL 37,391,000 30,602,000
OTHER ASSETS 17,259,000 19,630,000
------------ ------------
TOTAL ASSETS $206,361,000 $185,956,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
ACCOUNTS PAYABLE $ 7,827,000 $ 8,901,000
ACCRUED WAGES AND COMMISSIONS 7,246,000 6,579,000
ACCRUED INCOME AND OTHER TAXES 573,000 675,000
OTHER 8,420,000 4,853,000
------------ ------------
TOTAL CURRENT LIABILITIES 24,066,000 21,008,000
------------ ------------
OTHER NON-CURRENT LIABILITIES (INCLUDING
DEFFERED COMPENSATION OF $10,516,000 AND
$9,443,000, RESPECTIVELY) 13,084,000 12,192,000
NOTES PAYABLE 51,573,000 51,503,000
STOCKHOLDERS' EQUITY
PREFERRED STOCK $.01 PAR VALUE; NONE ISSUED
COMMON STOCK $.01 PAR VALUE; ISSUED SHARES,
16,586,119 AND 16,445,332,
RESPECTIVELY;
OUTSTANDING SHARES, 12,391,197 AND 12,250,427,
RESPECTIVELY 166,000 164,000
ADDITIONAL PAID-IN-CAPITAL 39,289,000 37,021,000
RETAINED EARNINGS 151,899,000 137,750,000
------------ ------------
191,354,000 174,935,000
FOREIGN CURRENCY TRANSLATION ADJUSTMENT 100,000 132,000
TREASURY STOCK (4,194,922 AND 4,194,905 SHARES,
RESPECTIVELY), AT COST (73,816,000) (73,814,000)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 117,638,000 101,253,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $206,361,000 $185,956,000
============ ============
</TABLE>
The Condensed Consolidated Balance Sheets as of December 31, 1997 and March 31,
1997 are unaudited but, in the opinion of management, reflects all adjustments
(consisting of normal recurring adjustments) necessary to present fairly the
Company's financial position.
Exhibit Ib
6
<PAGE>
ZERO CORPORATION
MASTER TRUST AGREEMENT
FOR
JOINT LIFE INSURANCE PLANS
EFFECTIVE
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 1 Name, Intentions, Irrevocability, Deposit and
Definitions................................................... 1
1.1 Name....................................................... 1
1.2 Intentions................................................. 1
1.3 Irrevocability; Creditor Claims............................ 1
1.4 Initial Deposit............................................ 2
1.5 Additional Definitions..................................... 2
1.6 Grantor Trust.............................................. 3
ARTICLE 2 General Administration...................................... 4
2.1 Committee Directions....................................... 4
2.2 Administration Upon Change in Control...................... 4
2.3 Contributions.............................................. 5
2.4 Trust Fund................................................. 5
ARTICLE 3 Powers and Duties of Trustee................................ 5
3.1 Investment Directions...................................... 5
3.2 Investment Upon Change in Control.......................... 6
3.3 Management of Investments.................................. 6
3.4 Securities................................................. 9
3.5 Substitution............................................... 9
3.6 Distributions.............................................. 9
3.7 Trustee Responsibility Regarding Payments on
Insolvency................................................. 12
3.8 Costs of Administration.................................... 14
3.9 Trustee Compensation and Expenses.......................... 14
3.10 Professional Advice....................................... 14
3.11 Recovery of Expenses by Trust............................. 14
3.12 Payment on Court Order.................................... 14
3.13 Protective Provision...................................... 15
3.14 Indemnifications.......................................... 15
ARTICLE 4 Trustee's Accounts.......................................... 15
4.1 Records.................................................... 15
4.2 Annual Accounting; Final Accounting........................ 16
4.3 Valuation.................................................. 16
4.4 Delegation of Duties....................................... 17
ARTICLE 5 Resignation or Removal of Trustee........................... 17
5.1 Resignation or Removal..................................... 17
5.2 Successor Trustee.......................................... 17
5.3 Settlement of Accounts..................................... 17
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE 6 Controversies, Legal Actions and Counsel.................. 18
6.1 Controversy............................................... 18
6.2 Joinder of Parties........................................ 18
6.3 Employment of Counsel..................................... 18
ARTICLE 7 Insurers................................................... 18
7.1 Insurer Not a Party....................................... 18
7.2 Authority of Trustee...................................... 19
7.3 Limitation of Liability................................... 19
ARTICLE 8 Amendment and Termination.................................. 19
8.1 Amendment................................................. 19
8.2 Final Termination......................................... 20
ARTICLE 9 Miscellaneous.............................................. 21
9.1 Directions Following Change in Control.................... 21
9.2 Taxes..................................................... 21
9.3 Third Persons............................................. 21
9.4 Nonassignability; Nonalienation........................... 22
9.5 The Plans................................................. 22
9.6 Applicable Law............................................ 22
9.7 Notices and Directions.................................... 22
9.8 Successors and Assigns.................................... 22
9.9 Gender and Number......................................... 22
9.10 Headings................................................. 22
9.11 Counterparts............................................. 23
9.12 Third Party Beneficiaries................................ 23
</TABLE>
<PAGE>
ZERO CORPORATION
MASTER TRUST AGREEMENT
FOR
JOINT LIFE INSURANCE PLANS
THIS MASTER TRUST AGREEMENT ("Master Trust Agreement") is made and
entered into as of __________ ___, 1998, between ZERO Corporation, a Delaware
corporation, and its Affiliates (as defined below) (the "Company"), and
_______________________Corporation, a California corporation (the "Trustee"), to
evidence the master trust (the "Trust") to be established, pursuant to the ZERO
Corporation Joint Life Insurance Plan and Agreements dated as of March 31, 1989,
as amended effective as of April 1, 1994, and as further amended effective as of
October 22, 1997 and January 19, 1998, and the ZERO Corporation Joint Life
Insurance Plan dated April 1, 1994, as amended effective as of October 22, 1997
and January 19, 1998 (each, a "Plan," together, or the "Plans") which require or
authorize the establishment of a trust, for the benefit of Participants of the
Plans.
ARTICLE 1
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Name, Intentions, Irrevocability,
---------------------------------
Deposit and Definitions
-----------------------
1.1 Name. The name of the Trust created by this Agreement (the
-----
"Trust") shall be the ZERO Corporation Master Joint Life Insurance Plans Trust.
1.2 Intentions. The Company wishes to establish the Trust and to
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assign to the Trust the Company's interest in certain life insurance policies
issued on the lives of Participants in the Plans (the "Policies") to be held
therein, subject to the claims of creditors of the Company in the event of its
Insolvency, as herein defined, until the benefits of such Policies are paid in
such manner and at such times as specified in the Plans. In addition, it is the
intention of the Company to make contributions to the Trust, to provide a source
of funds to assist it in the meeting of its liabilities under the Plans, and, to
the extent there are surplus assets in the Trust, to the ZERO Corporation Master
Deferred Compensation Trust, as more fully discussed in Section 2.4 below.
1.3 Irrevocability; Creditor Claims. The Trust hereby
--------------------------------
established shall be irrevocable. Except as otherwise provided in Sections 2.4
and 7.2, the assets of the Trust, and any earnings therein, shall be held
separate and apart from other funds of the Company and shall be used exclusively
for the uses and purposes of the payment of premiums and bonuses required to be
paid under the Policies of the Participants under the Plans, and, to the extent
a surplus exists in the Trust, for funding of the ZERO Corporation
1
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Master Deferred Compensation Trust, and general creditors of the Company as
herein set forth. The Participants and their Beneficiaries shall have no
preferred claim on, or any beneficial ownership interest in, any assets of the
Trust. Any rights created under the Plans and this Master Trust Agreement shall
be unsecured contractual rights of the Participants and their Beneficiaries
against the Company. Any assets held by the Trust will be subject to the claims
of the general creditors of the Company under federal and state law in the event
of Insolvency (as defined below).
1.4 Initial Deposit. The Company hereby deposits with the Trustee in
----------------
trust cash in the amount of $100, which shall become the principal of the Trust
to be held, administered and disposed of by the Trustee as provided in this
Master Trust Agreement.
1.5 Additional Definitions. In addition to the definitions set forth
-----------------------
above, for purposes hereof, unless otherwise clearly apparent from the context,
the following terms have the following indicated meanings:
(a) An "Affiliate" of, or a person "affiliated" with the Company
is a person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control
with, the Company.
(b) "Beneficiary" shall mean, upon the death of a Participant,
one or more persons, trusts, estates or other entities, designated in
accordance with a Plan, that are entitled to receive benefits under a Plan.
(c) "Board" shall mean the board of directors of the Company.
(d) "Change in Control" shall mean the date upon which the first
of the following events occurs:
(1) There shall be consummated (A) any consolidation or
merger of the Company in which the Company is not the continuing or
surviving corporation or pursuant to which shares of the Company's
common stock would be converted into cash, securities or other
property, other than a merger of the Company in which the holders of
the Company'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%, of the assets of the Company;
or
2
<PAGE>
(2) The stockholders of the Company approve a plan or proposal
for the liquidation or dissolution of the Company; or
(3) 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 Company, shall become the beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), of 25 percent or
more of the Company's outstanding common stock.
(e) "Committee" shall mean the Deferred Compensation Committee
appointed by the President and Chief Executive Officer of the Company to
administer the Plan.
(f) "Director" shall mean any member of the Board.
(g) "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as may be amended from time to time.
(h) "Insolvent" shall have the meaning set forth in Section 3.7(a)
below.
(i) "Insolvent Entity" shall have the meaning set forth in Section
3.7(a) below.
(j) "IRS" shall mean the Internal Revenue Service.
(k) "Participant" shall mean a person who is a participant in one or
more of the Plans in accordance with their terms and conditions.
(l) "Payment Schedule" shall have the meaning set forth in Section
3.6(b) below.
(m) "Plan(s)" shall mean the ZERO Corporation Joint Life Insurance
Plan and Agreement dated as of March 31, 1989, as amended effective as of
April 1, 1994 and as further amended effective as of October 22, 1997 and
January 19, 1998, and the ZERO Corporation Joint Life Insurance Plan dated
April 1, 1994, as amended effective as of October 22, 1997 and January 19,
1998.
(n) "Trust Fund" shall mean the assets held by the Trustee pursuant to
the terms of this Master Trust Agreement and for the purposes of the Plans.
1.6 Grantor Trust. The Trust is intended to be a "grantor trust", of
--------------
which the Company is the grantor, within the meaning of subpart E, part I,
subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as
amended, and the Trust shall be construed accordingly.
3
<PAGE>
ARTICLE 2
---------
General Administration
----------------------
2.1 Committee Directions. Immediately before a Change in Control has
---------------------
occurred, this Section 2.1 shall be effective and the Committee shall direct the
Trustee as to the administration of the Trust in accordance with the following
provisions:
(a) The Committee shall be identified to the Trustee by a written
certification of the President and Chief Executive Officer of the Company
prior to the Change in Control. Persons authorized to give directions to
the Trustee on behalf of the Committee shall be identified to the Trustee
by written notice from the Committee, and such notice shall contain
specimens of the authorized signatures. The Trustee shall be entitled to
rely on such written notice as evidence of the identity and authority of
the persons appointed until a written cancellation of the appointment, or
the written appointment of a successor, is received by the Trustee.
(b) Directions by the Committee, or its delegate, to the Trustee shall
be in writing and signed by the Committee or persons authorized by the
Committee, or may be made by such other method as is acceptable to the
Trustee.
(c) The Trustee may conclusively rely upon directions from the
Committee in taking any action with respect to this Master Trust Agreement,
including the making of payments from the Trust Fund and the investment of
the Trust Fund pursuant to this Master Trust Agreement. The Trustee shall
have no liability for actions taken, or for failure to act, on the
direction of the Committee. [The Trustee shall have no liability for
failure to act in the absence of proper written directions.]
(d) The Trustee may request instructions from the Committee and shall
have no duty to act or liability for failure to act if such instructions
are not forthcoming from the Committee. If requested instructions are not
received within a reasonable time, the Trustee may, but is under no duty
to, act on its own discretion to carry out the provisions of this Master
Trust Agreement in accordance with this Master Trust Agreement and the
Plans.
2.2 Administration Upon Change in Control. In the event that the Named
--------------------------------------
Fiduciary of the Plans or the Board determines, in their sole discretion, that a
Change in Control is likely, the Company will, effective automatically and
concurrently with the Change of Control, (a) deposit into the Trust for all
Policies an amount equal to the total of (i) unpaid Net Premium Advances and
(ii) the unpaid cash bonuses for the remaining terms of the
4
<PAGE>
Policies, and will assign its collateral interest in all Policies to the Trust.
Immediately upon the event of a Change in Control, and without any further
action, the authority of the Committee to administer the Trust and direct the
Trustee, as set forth in Section 2.1 above, shall cease, and the Trustee shall
have complete authority to administer the Trust. Such administrative duties
shall include, but shall not be limited to, all duties and responsibilities as
collateral assignees under the Policies, and duties and responsibilities
respecting administration of the Plans.
2.3 Contributions. The Company, in its sole discretion, may at any time,
--------------
or from time to time, make deposits of cash or other property in trust with the
Trustee in addition to amounts required under Section 2.2 hereof to augment the
principal to be held, administered and disposed of by the Trustee as provided in
this Master Trust Agreement, including the payment of premiums, bonuses to
Participants or other amounts required to be paid or transferred under the
Plans. Neither the Trustee nor any Participant or Beneficiary shall have any
right to compel such additional deposits, although such parties can compel the
payment or transfer of amounts required under the Plans. The Trustee shall have
no duty to collect or enforce payment to it of any contributions or to require
that any contributions be made, and shall have no duty to compute any amount to
be paid to it nor to determine whether amounts paid comply with the terms of the
Plan.
2.4 Trust Fund. The assets received by the Trustee from the Company shall
-----------
be held and administered pursuant to the terms of this Master Trust Agreement as
a single fund without distinction between income and principal and without
liability for the payment of interest thereon except as expressly provided in
this Master Trust Agreement. During the term of this Trust, all income received
by the Trust, net of expenses, shall be accumulated and reinvested.
Notwithstanding the foregoing, in the event there exists in the Trust an amount
in excess of that required to fund the obligations of the Trust, including
premiums payable on the Policies and bonuses to Participants as provided under
the Plans, such surplus shall be deposited into the ZERO Corporation Master
Deferred Compensation Trust.
ARTICLE 3
---------
Powers and Duties of Trustee
----------------------------
3.1 Investment Directions. Except as provided in Section 3.2, the
----------------------
Committee shall provide the Trustee with all investment instructions. The
Trustee shall neither affect nor change investments of the Trust Fund, except as
directed in writing by the Committee, and shall have no right, duty or
responsibility to recommend investments or investment changes; provided, that
the Trustee may (i) deposit cash on hand from time to time in any bank savings
account, certificate of deposit, or other instrument
5
<PAGE>
creating a deposit liability for a bank, including the Trustee's own banking
department if the Trustee is a bank, without such prior direction, (ii) invest
in government securities, bonds rated A or above by Moody's Investors Service,
In. (or any successor thereto), or stocks of "Fortune 500" companies, all within
broad investment guidelines established by the Committee from time to time, or
(iii) hold and maintain its interest in the Policies.
3.2 Investment Upon Change in Control. In the event of a Change in
----------------------------------
Control, the authority of the Committee to direct investments of the Trust Fund
shall cease and the Trustee shall have complete authority to direct investments
of the Trust Fund; provided that, except to the extent it is clearly prudent not
to do so, the Trustee shall retain the Policies and do all that is necessary to
maintain such Policies. Either the President and Chief Executive Officer, or
the Corporate Secretary of the Company shall notify the Trustee in writing
immediately prior to the time when a Change in Control will occur. The Trustee
has no duty to inquire whether a Change in Control has occurred and may rely on
notification by the President and Chief Executive Officer or the Corporate
Secretary of the Company of a Change in Control; provided, however, that if any
officer, former officer, director or former director of the Company (other than
the President and Chief Executive Officer or the Corporate Secretary of the
Company), or any Participant notifies the Trustee that there has been or there
may be a Change in Control, the Trustee shall have the duty to satisfy itself as
to whether a Change in Control has in fact occurred. The Company shall
indemnify and hold harmless the Trustee for any damages or costs (including
attorneys' fees) that may be incurred because of reliance on the notice of the
President and Chief Executive Officer or the Corporate Secretary of the Company
or lack thereof.
3.3 Management of Investments. Subject to Section 3.1 above, the Trustee
--------------------------
shall have, without exclusion, all powers conferred on the Trustee by applicable
law, unless expressly provided otherwise herein, and all rights associated with
assets of the Trust shall be exercised by the Trustee or the person designated
by the Trustee, and shall in no event be exercisable by or rest with
Participants. The Trustee shall have full power and authority to invest and
reinvest the Trust Fund in any investment permitted by law, exercising the
judgment and care that persons of prudence, discretion and intelligence would
exercise under the circumstances then prevailing, considering the probable
income and safety of their capital, including, without limiting the generality
of the foregoing, the power:
(a) To invest and reinvest the Trust Fund, together with the income
therefrom, in common stock, preferred stock, convertible preferred stock,
mutual funds, bonds, debentures, convertible debentures and bonds,
mortgages, notes, time certificates of deposit, commercial paper and other
evidences
6
<PAGE>
of indebtedness (including those issued by the Trustee or any of its
affiliates), other securities, policies of life insurance, annuity
contracts, options to buy or sell securities or other assets, and other
property of any kind (personal, real, or mixed, and tangible or
intangible); provided, however, that in no event may the Trustee invest in
securities (including stock or rights to acquire stock) or obligations
issued by the Company or its Subsidiaries, other than a de minimis amount
held in common investment vehicles in which the Trustee invests;
(b) To deposit or invest all or any part of the assets of the Trust
Fund in savings accounts or certificates of deposit or other deposits which
bear a reasonable interest rate in a bank, including the commercial
department of the Trustee, if such bank is supervised by the United States
or any State;
(c) To hold, manage, improve, repair and control all property, real or
personal, forming part of the Trust Fund and to sell, convey, transfer,
exchange, partition, lease for any term, even extending beyond the duration
of this Trust, and otherwise dispose of the same from time to time in such
manner, for such consideration, and upon such terms and conditions as the
Trustee shall determine;
(d) To have, respecting securities, all the rights, powers and
privileges of an owner, including the power to give proxies, pay
assessments and other sums deemed by the Trustee to be necessary for the
protection of the Trust Fund, to vote any corporate stock either in person
or by proxy, with or without power of substitution, for any purpose; to
participate in voting trusts, pooling agreements, foreclosures,
reorganizations, consolidations, mergers and liquidations, and in
connection therewith to deposit securities with and transfer title to any
protective or other committee under such terms as the Trustee may deem
advisable; to exercise or sell stock subscriptions or conversion rights;
and, regardless of any limitation elsewhere in this instrument relative to
investment by the Trustee, to accept and retain as an investment any
securities or other property received through the exercise of any of the
foregoing powers;
(e) To hold in cash, without liability for interest, such portion of
the Trust Fund which, in its discretion, shall be reasonable under the
circumstances, pending investments, or payment of expenses, or the
distribution of benefits;
(f) To take such actions as may be necessary or desirable to protect
the Trust Fund from loss due to the default on mortgages held in the Trust,
including the appointment of agents or trustees in such other jurisdictions
7
<PAGE>
as may seem desirable, to transfer property to such agents or trustees, to
grant such powers as are necessary or desirable to protect the Trust or its
assets, to direct such agents or trustees, or to delegate such power to
direct, and to remove such agents or trustees;
(g) To employ such agents including custodians and counsel as may be
reasonably necessary and to pay them reasonable compensation; to settle,
compromise or abandon all claims and demands in favor of or against the
Trust assets;
(h) To cause title to property of the Trust to be issued, held or
registered in the individual name of the Trustee, or in the name of its
nominee(s) or agents, or in such form that title will pass by delivery;
(i) To exercise all of the further rights, powers, options and
privileges granted, provided for, or vested in trustees generally under the
laws of the State of California, so that the powers conferred upon the
Trustee herein shall not be in limitation of any authority conferred by
law, but shall be in addition thereto;
(j) To borrow money from any source (including the Trustee) and to
execute promissory notes, mortgages or other obligations and to pledge or
mortgage any Trust assets as security;
(k) To lend certificates representing stocks, bonds, or other
securities to any brokerage or other firm selected by the Trustee;
(l) To institute, compromise and defend actions and proceedings; to
pay or contest any claim; to settle a claim by or against the Trustee by
compromise, arbitration, or otherwise; to release, in whole or in part, any
claim belonging to the Trust to the extent that the claim is uncollectible;
(m) To use securities depositories or custodians and to allow such
securities as may be held by a depository or custodian to be registered in
the name of such depository or its nominee or in the name of such custodian
or its nominee;
(n) To invest the Trust Fund from time to time in one or more
investment funds, which funds shall be registered under the Investment
Company Act of 1940; and
(o) To do all other acts necessary or desirable for the proper
administration of the Trust Fund, as if the Trustee were the absolute owner
thereof. However, nothing in this section shall be construed to mean the
Trustee assumes any
8
<PAGE>
responsibility for the performance of any investment made by the Trustee in
its capacity as trustee under the operations of this Master Trust
Agreement.
Notwithstanding any powers granted to the Trustee pursuant to this Master Trust
Agreement or to applicable law, the Trustee shall not have any power that could
give this Trust the objective of carrying on a business and dividing the gains
therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal Revenue Code of
1986, as amended.
3.4 Securities. Voting or other rights in securities shall be exercised by
-----------
the person or entity responsible for directing such investments, and the Trustee
shall have no duty to exercise voting or proxy or other rights relating to any
investment managed or directed by the Committee. If any foreign securities are
purchased pursuant to the direction of the Committee, it shall be the
responsibility of the person or entity responsible for directing such
investments to advise the Trustee in writing of any laws or regulations, either
foreign or domestic, that apply to such foreign securities or to the receipt of
dividends or interest on such securities.
3.5 Substitution. Notwithstanding any provision of any Plan or the Trust
-------------
to the contrary, the Company shall at all times have the power to reacquire the
Trust Fund by substituting securities tradeable on the New York Stock Exchange
or NASDAQ (other than stock, an obligation or other security issued by the
Company or any subsidiary of the Company) of an equivalent value and/or cash of
an equivalent value and such other property shall, following such substitution,
constitute the Trust Fund.
3.6 Distributions.
--------------
(a) The establishment of the Trust and the payment or delivery to the
Trustee of money or other property shall not vest in any Participant or
Beneficiary any right, title, or interest in and to any assets of the
Trust. To the extent that any Participant or Beneficiary acquires the right
to receive payments under any of the Plans, [which shall be subject to the
provisions of Section 1.3 above,] such Participant or Beneficiary shall
have only the unsecured promise of the Company that such payments shall be
made.
(b) Concurrent with the establishment of this Trust, the Company shall
deliver to the Trustee a schedule (the "Payment Schedule") that indicates
the name, address, and amounts payable in respect of each Participant (and
his or her Beneficiaries) on a Plan by Plan basis, that provides a formula
or formulas or other instructions acceptable to the Trustee for determining
the amounts so payable, the form in which such amount is to be paid (as
provided for or available under the applicable Plans), and the time of
commencement for payment of such amounts. The Payment Schedule shall be
9
<PAGE>
updated from time to time as is necessary. Except as otherwise provided
herein, prior to a Change in Control the Trustee shall make payments to the
Participants and their Beneficiaries in accordance with such Payment
Schedule. Despite the foregoing, after a Change in Control, the Trustee
shall make payments in accordance with the terms and provisions of each of
the Plans and related plan agreements. The Trustee, at the direction of
the Committee or, after a Change in Control, on its own volition, may make
any distribution required to be made by it hereunder by delivering:
(i) Its check made payable to the Participant or Beneficiary to
whom such distribution is to be made, to the Participant or
Beneficiary, or, if prior to a Change in Control, to the Company for
redelivery to such person; provided that before a Change in Control,
the Committee may direct the Trustee to deliver one or more lump sum
checks payable to the Company, and the Company shall prepare and
deliver individual checks for each Participant or Beneficiary; or
(ii) Its check payable to an insurer for the benefit of such
person, to the insurer or, if prior to a Change in Control, to the
Company for redelivery to the insurer; or
(iii) Contracts held on the life of the Participant to whom or
with respect to whom the distribution is being made, to the
Participant or Beneficiary, or, if prior to a Change in Control, to
the Company for redelivery to the person to whom such distribution is
to be made; or
(iv) If a distribution is being made, in whole or in part, of
noncash, assignments or other appropriate documents or certificates
necessary to effect a transfer of title to such noncash assets, to the
Participant or Beneficiary, or, if prior to a Change in Control, to
the Company for redelivery to such Participant or Beneficiary.
(c) If the principal of the Trust, and any earnings thereon, are not
sufficient to make payments of benefits in accordance with the terms of the
Plans, the Company shall make the balance of each such payment as it falls
due, or, after a Change in Control, shall make the balance of each such
payment to the Trustee. The Trustee shall determine the amounts payable in
accordance with the Plans one year in advance of the due dates and shall
request funding by the Company. Further, the Trustee shall promptly notify
the Company when principal and earnings are not sufficient.
10
<PAGE>
(d) The insurer may make payment of benefits directly to Participants
or their Beneficiaries as they become due under the terms of the Plans.
The Company shall notify the Trustee of any decisions to make payment of
benefits directly prior to the time amounts are payable to Participants or
their Beneficiaries, and cause appropriate adjustments to be made to the
Payment Schedule.
(e) Notwithstanding anything contained in this Master Trust Agreement
to the contrary, if at any time the Trust is finally determined by the IRS
not to be a "grantor trust with the result that the income of the Trust
Fund is not treated as income of the Company pursuant to Sections 671
through 679 of the Internal Revenue Code of 1986, as amended, or if a tax
is finally determined by the IRS to be payable by one or more Participants
or Beneficiaries with respect to any interest in the Plans or the Trust
Fund prior to payment of such interest to such Participant or Beneficiary,
then the Trust shall immediately terminate, the Trustee shall immediately
determine each Participant's share of the Trust Fund in accordance with the
Plans, and the Trustee shall immediately distribute such share in a lump
sum to each Participant or Beneficiary entitled thereto, regardless of
whether such Participant's employment has terminated and regardless of form
and time of payments specified in or pursuant to the Plans. Any remaining
assets (less any expenses or costs due under Sections 3.8 and 3.9 of this
Master Trust Agreement) shall then be paid by the Trustee to the Company,
and in the manner instructed by the Committee. Prior to a Change in
Control, the Trustee shall rely solely on the directions of the Committee
with respect to the occurrence of the foregoing events and the resulting
distributions to be made, and the Trustee shall not be responsible for any
failure to act in the absence of such direction.
(f) The Trustee shall make provision for the reporting and
withholding of any federal, state or local taxes that may be required to be
withheld with respect to the payment of benefits pursuant to the terms of
the Plans and shall pay amounts withheld to the appropriate taxing
authorities or determine that such amounts have been reported, withheld and
paid by the Company.
(g) Prior to a Change in Control, payments by the Trustee shall be
delivered or mailed to addresses supplied by the Committee and the
Trustee's obligation to make such payments shall be satisfied upon such
delivery or mailing. Prior to a Change in Control, the Trustee shall have
no obligation to determine the identity of persons entitled to benefits or
their mailing addresses. After a Change in Control, the Trustee shall have
such obligations.
11
<PAGE>
(h) Prior to a Change in Control, the entitlement of a Participant or
his or her Beneficiaries to benefits under the Plans shall be determined by
the Company or such party as it shall designate under the Plans, and any
claim for such benefits shall be considered and reviewed under the
procedures set out in the Plans. After a Change in Control, the Trustee
shall make such determination.
(i) A Participant exercising any right under the Plans or the
Policies to purchase from the Trust such Participant's interest in the
Trust at any time provided such Participant shall reimburse the Trust for
all net premium advances made on behalf of such Participant through the
date of purchase and thereby relinquish all rights to future premium
payments by the Trust to any insurer on Participant's behalf. Participant
shall then take the unfettered title to the relevant Policy.
3.7 Trustee Responsibility Regarding Payments on Insolvency.
--------------------------------------------------------
(a) As provided in Section 3.7(b), the Trustee shall cease payment of
benefits to Participants and their Beneficiaries if the Company is
Insolvent. The Company shall be considered "Insolvent" for purposes of this
Master Trust Agreement if:
(i) The Company is unable to pay its debts as they become due, or
(ii) The Company is subject to a pending proceeding as a debtor
under the United States Bankruptcy Code.
The insolvency of a Subsidiary will not cause the Company to be deemed
Insolvent.
(b) At all times during the continuance of this Trust, as provided in
Section 1.3 above, as provided in Section 1.3 above:
(i) The Board and the President and Chief Executive Officer of
the Company shall have the duty to inform the Trustee in writing of
the Company's Insolvency. If a person claiming to be a creditor of
the Company alleges in writing to the Trustee that the Company has
become Insolvent, the Trustee shall determine whether the Company is
Insolvent and, pending such determination, the Trustee shall
discontinue payment of benefits to the Participants or their
Beneficiaries. Prior to a Change in Control, the Trustee may
conclusively rely on any determination it receives from the Board or
the President and Chief Executive Officer of the Company with respect
to the Insolvency of the Company.
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<PAGE>
(ii) Unless the Trustee has actual knowledge of the Company's
Insolvency, or has received notice from the Company, or a person
claiming to be a creditor alleging that the Company solvent, the
Trustee shall have no duty to inquire whether the Company is
Insolvent. The Trustee may in all events rely on such evidence
concerning the Company's solvency as may be furnished to the Trustee
and that provides the Trustee with a reasonable basis for making a
determination concerning the Company's solvency. In this regard, the
Trustee may rely upon a letter from the Company's auditors as to the
Company's financial status.
(iii) If at any time the Trustee has determined that the Company
is Insolvent, the Trustee shall discontinue payments to the Insolvent
Entity's Participants or their Beneficiaries, and shall hold the
portion of the assets of the Trust allocable to the Insolvent Entity
for the benefit of the Insolvent Entity's general creditors. Nothing
in this Master Trust Agreement shall in any way diminish any rights of
Participants or their Beneficiaries to pursue their rights as general
creditors of the Insolvent Entity with respect to benefits due under
the Plans or otherwise.
(iv) The Trustee shall resume the payment of benefits to
Participants or their Beneficiaries in accordance with this Article 3
of this Master Trust Agreement only after the Trustee has determined
that the Company is not Insolvent (or is no longer Insolvent). A plan
of reorganization approved by a bankruptcy court shall be sufficient
to require that the Trustee resume the payment of such benefits to
Participants or their Beneficiaries.
(c) Provided that there are sufficient assets, if the Trustee
discontinues the payment of benefits from the Trust pursuant to Section
3.7(b) hereof and subsequently resumes such payments, the first payment
following such discontinuance shall include the aggregate amount of all
payments which would have been due to Participants or their Beneficiaries
under the terms of the Plans for the period of such discontinuance but for
the Insolvency, less the aggregate amount of any payments made to
Participants or their Beneficiaries by the Company in lieu of the payments
provided for hereunder during any such period of discontinuance. Prior to a
Change in Control, the Committee shall instruct the Trustee as to such
amounts, and after a Change in Control, the Trustee shall determine such
amounts in accordance with the terms and provisions of the Plans.
13
<PAGE>
3.8 Costs of Administration. The Trustee is authorized to incur reasonable
------------------------
obligations in connection with the administration of the Trust, including
attorneys' fees, administrative fees and appraisal fees. Such obligations shall
be paid by the Company.
3.9 Trustee Compensation and Expenses. The Trustee shall be entitled to
----------------------------------
reasonable compensation for its services as from time to time agreed upon
between the Trustee and the Company. If the Trustee and the Company fail to
agree upon a compensation, or following a Change in Control, the Trustee shall
be entitled to compensation at a rate equal to the rate charged by the Trustee
for similar services rendered by it during the Company's then current fiscal
year for other trusts similar to this Trust. The Trustee shall be entitled to
reimbursement for expenses incurred by it in the performance of its duties as
the Trustee, including reasonable fees for legal counsel. The Trustee's
compensation and expenses shall be paid by the Company.
3.10 Professional Advice. The Company specifically acknowledges that the
--------------------
Trustee may find it desirable or expedient to retain legal counsel or other
professional advisors to advise it in connection with the exercise of any duty
under this Master Trust Agreement including, but not limited to, any matter
relating to or following a Change in Control or the Insolvency of the Company or
any Subsidiary. Prior to a Change in Control the engagement of counsel by the
Trustee shall be subject to the approval of the Vice President-Legal of the
Company. After a Change in Control the Trustee shall be responsible to assure
that all fees and expenses of attorneys shall be reasonable, not excessive and
comparable to those charged by attorneys for similar services. The Trustee
shall be fully protected in acting upon the advice of such legal counsel or
advisors.
3.11 Recovery of Expenses by Trust. The Trustee is authorized to pay
-----------------------------
those amounts required to be paid pursuant to Sections 3.8 and 3.10 above, and
to withdraw amounts from the Trust Fund for its compensation and expenses
pursuant to Section 3.9 above if the Company fails to pay such amounts within
60 days of presentation of a statement of the amounts due, and to seek a
judicial order to require that the Company reimburse the Trust Fund for any such
withdrawals.
3.12 Payment on Court Order. To the extent permitted by law, the Trustee
-----------------------
is authorized to make any payments directed by court order in any action in
which the Trustee has been named as a party. The Trustee is not obligated to
defend actions in which the Trustee is named, but shall notify the Company or
Committee of any such action and may tender defense of the action to the
Company, Committee or Participant or Beneficiary whose interest is affected.
The Trustee may in its discretion defend any action in which the Trustee is
named, and any expenses incurred by the Trustee shall be paid by the Company.
The Trustee is authorized to pay such amounts
14
<PAGE>
from the Trust Fund if the Company fails to pay them within 60 days of
presentation of a statement of the amounts due.
3.13 Protective Provision. Notwithstanding any other provision contained
---------------------
in this Master Trust Agreement to the contrary, the Trustee shall have no
obligation to (i) determine the existence of any conversion, redemption,
exchange, subscription or other right relating to any securities purchased of
which notice was given prior to the purchase of such securities and shall have
no obligation to exercise any such right unless the Trustee is advised in
writing by the Committee both of the existence of the right and the desired
exercise thereof within a reasonable time prior to the expiration of the right
to exercise, or (ii) advance any funds to the Trust. Furthermore, the Trustee
is not a party to the Plans.
3.14 Indemnifications.
-----------------
(a) The Company shall indemnify and hold the Trustee harmless from and
against all loss or liability (including expenses and reasonable attorneys'
fees) to which it may be subject by reason of its execution of its duties
under this Trust, or by reason of any acts taken in good faith in
accordance with any directions, or acts omitted in good faith due to
absence of directions, from the Company, the Committee or a Participant,
unless such loss or liability is due to the Trustee's gross negligence or
willful misconduct. The indemnity described herein shall be provided by
the Company.
(b) In the event that the Trustee is named as a defendant in a lawsuit
or proceeding involving one or more of the Plans or the Trust Fund, the
Trustee shall be entitled to receive on a current basis the indemnity
payments provided for in this Section, provided however that if the final
judgment entered in the lawsuit or proceeding holds that the Trustee is
guilty of gross negligence or wilful misconduct with respect to the Trust
Fund, the Trustee shall be required to refund the indemnity payments that
it has received.
(c) All releases and indemnities provided in this Master Trust
Agreement shall survive the termination of this Master Trust Agreement.
ARTICLE 4
---------
Trustee's Accounts
------------------
4.1 Records. The Trustee shall maintain accurate records and detailed
--------
accounts of all investments, receipts, disbursements and other transactions
hereunder. Such records shall be available at all reasonable times for
inspection by the Company or its authorized representative. The Trustee, at the
direction of the Committee, shall submit to the Committee and to any insurer
such valuations, reports or other information as the Committee may reasonably
require and, in the absence of fraud or bad faith, the valuation of the Trust
Fund by the Trustee shall be conclusive.
15
<PAGE>
Notwithstanding the above, following a Change in Control, the Trustee shall
provide an annual accounting to all Participants or Beneficiaries of the Trust
Fund.
4.2 Annual Accounting; Final Accounting.
------------------------------------
(a) Within 30 days following the end of each Plan Year and within 30
days after the removal or resignation of the Trustee or the termination of
the Trust, the Trustee shall file with the Committee a written account
setting forth a description of all properties purchased and sold, all
receipts, disbursements and other transactions effected by it during the
Plan Year or, in the case of removal, resignation or termination, since the
close of the previous Plan Year, and listing the properties held in the
Trust Fund as of the last day of the Plan Year or other period and
indicating their values. Such values shall be either cost or market as
directed by the Committee in accordance with the terms of the Plans.
(b) The Committee may approve such account either by written notice of
approval delivered to the Trustee or by its failure to express written
objection to such account delivered to the Trustee within 30 days after the
date of which such account was delivered to the Committee.
(c) Prior to a Change in Control, the approval by the Committee of an
accounting shall be binding as to all matters embraced in such accounting
on all parties to this Master Trust Agreement and on all Participants and
Beneficiaries, to the same extent as if such accounting had been settled by
a judgment or decree of a court of competent jurisdiction in which the
Trustee, the Committee, the Company, and all persons having or claiming any
interest in any Plan or Trust Fund were made parties.
(d) Despite the foregoing, nothing contained in this Master Trust
Agreement shall deprive the Trustee of the right to have an accounting
judicially settled, if the Trustee, in the Trustee's sole discretion,
desires such a settlement.
4.3 Valuation. The assets of the Trust Fund shall be valued at their
----------
respective fair market values on the date of valuation, as determined by the
Trustee based upon such sources of information as it may deem reliable,
including, but not limited to, stock market quotations, statistical evaluation
services, newspapers of general circulation, financial publications, advice from
investment counselors, brokerage firms or insurance companies, or any
combination of sources. Prior to a Change in Control, the Committee shall
instruct the Trustee as to the value of assets for which market values are not
readily obtainable by the Trustee. If the Committee fails to provide such
values, the Trustee may take whatever action it deems reasonable, including
employment of attorneys, appraisers, life insurance companies or other
professionals, the expense of which shall be an expense of
16
<PAGE>
administration of the Trust Fund and payable by the Company. The Trustee may
rely upon information from the Company, the Committee, appraisers or other
sources and shall not incur any liability for an inaccurate valuation based in
good faith upon such information.
4.4 Delegation of Duties. The Company or the Committee, or both, may at
---------------------
any time employ the Trustee as their agent to perform any act, keep any records
or accounts and make any computations that are required of the Company or the
Committee by this Master Trust Agreement or the Plans. The Trustee may be
compensated for such employment and such employment shall not be deemed to be
contrary to the Trust. Nothing done by the Trustee as such agent shall change or
increase its responsibility or liability as Trustee hereunder.
ARTICLE 5
---------
Resignation or Removal of Trustee
---------------------------------
5.1 Resignation Removal. The Trustee may resign at any time by written
--------------------
notice to the Company, which shall be effective 60 days after receipt of such
notice unless the Company and the Trustee agree otherwise. Prior to a Change in
Control, the Trustee may be removed by the Company on 60 days notice or upon
shorter notice accepted by the Trustee. After a Change in Control, the Trustee
may be removed by a majority vote of the Participants based Upon the dollar
value of the accounts, and if a Participant is dead, his or her Beneficiaries
(who collectively shall have one vote among them and shall vote in place of such
deceased Participant), on 60 days notice or upon shorter notice accepted by the
Trustee. Upon request in writing from any Participant, Trustee shall provide to
such requesting Participant the names and addresses of all Participants and/or
Beneficiaries.
5.2 Successor Trustee. If the Trustee resigns or is removed, a successor
------------------
shall be appointed by the Company, in accordance with this Section, by the
effective date of the resignation or removal under Section 5.1 above. The
successor shall be a bank, trust company, or similar independent third party
with a minimum net worth or assets under management of $________ that is granted
corporate trustee powers under state law. After the occurrence of a Change in
Control, a successor Trustee may not be appointed without the consent of a
majority of the Participants. If no such appointment has been made, the Trustee
may apply to a court of competent jurisdiction for appointment of a successor or
for instructions. All expenses of the Trustee in connection with the proceeding
shall be allowed as administrative expenses of the Trust.
5.3 Settlement of Accounts. Upon resignation or removal of the Trustee and
-----------------------
appointment of a successor Trustee, all assets shall subsequently be transferred
to the successor Trustee. The transfer shall be completed within 90 days after
receipt of notice of resignation, removal or transfer, unless the Company
extends the time limit. Upon the transfer of the assets, the successor Trustee
17
<PAGE>
shall succeed to all of the powers and duties given to the Trustee in this
Master Trust Agreement. The resigning or removed Trustee shall render to the
Committee an account in the form and manner and at the time prescribed in
Section 4.2. The approval of such accounting and discharge of the Trustee shall
be as provided in such Section.
ARTICLE 6
---------
Controversies, Legal Actions and Counsel
----------------------------------------
6.1 Controversy. If any controversy arises with respect to the Trust, the
------------
Trustee shall take action as directed by the Committee or, in the absence of
such direction or after a Change in Control, as it deems advisable, whether by
legal proceedings, compromise or otherwise. The Trustee may retain the funds or
property involved without liability pending settlement of the controversy. The
Trustee shall be under no obligation to take any legal action of whatever nature
unless there shall be sufficient property in the Trust to indemnify the Trustee
with respect to any expenses or losses to which it may be subjected.
6.2 Joinder of Parties. In any action or other judicial proceedings
-------------------
affecting the Trust, it shall be necessary to join as parties the Trustee, the
Committee, and the Company. No Participant or other person shall be entitled to
any notice or service of process. Any judgment entered in such a proceeding or
action shall be binding on all persons claiming under the Trust. Nothing in this
Master Trust Agreement shall be construed as to deprive a Participant or
Beneficiary of his or her right to seek adjudication of his or her rights by
administrative process or by a court of competent jurisdiction.
6.3 Employment of Counsel. Subject to the provisions of Section 3.10
----------------------
above, the Trustee may consult with legal counsel and shall be fully protected
with respect to any action taken or omitted by it in good faith pursuant to the
advice of counsel. Legal counsel consulted by the Trustee, prior to a Change in
Control, may be counsel for the Company or a Subsidiary of the Company; however,
after a Change in Control such counsel must be a firm which does not represent
the Company or a Subsidiary of the Company and may not be general counsel to the
Company or a Subsidiary of the Company.
ARTICLE 7
---------
Insurers
--------
7.1 Insurer Not a Party. No insurer shall be deemed to be a party to the
--------------------
Trust and an insurer's obligations shall be measured and determined solely by
the terms of contracts and other agreements executed by it.
18
<PAGE>
7.2 Authority of Trustee. After a Change in Control an insurer shall
---------------------
accept the signature of the Trustee to any documents or papers executed in
connection with such contracts. The signature of the Trustee shall be
conclusive proof to the insurer that the person on whose life an application is
being made is eligible to have a contract issued on his or her life and is
eligible for a contract of the type and amount requested.
7.3 Limitation of Liability. An insurer shall be fully discharged from any
------------------------
and all liability for any action taken or any amount paid in accordance with the
direction of the Trustee and shall have no obligation to see to the proper
application of the amounts so paid. An insurer shall have no liability for the
operation of the Trust or the Plans, whether or not in accordance with their
terms and provisions.
ARTICLE 8
---------
Amendment and Termination
-------------------------
8.1 Amendment. Subject to the limitations set forth in this Section 8.1,
----------
this Master Trust Agreement may be amended by a written instrument executed by
the Trustee and the Company. Notwithstanding the foregoing, no such amendment
shall conflict with the terms of the Plans or shall make the Trust revocable
after it has become irrevocable in accordance with Section 1.3 above. Any
amendment, change or modification shall be subject to the following rules:
(a) General Rule. Subject to Sections 8.1 (b), (c) and (d) below,
-------------
this Master Trust Agreement may be amended:
(i) By the Company and the Trustee, provided, however, that if an
amendment would in any way adversely affect the rights accrued under
the Plans in the Trust Fund by any Participant or Beneficiary, each
and every Participant and Beneficiary whose rights in the Trust Fund
would be adversely affected must consent to the amendment before this
Master Trust Agreement may be so amended; and
(ii) By the Company and the Trustee as may be necessary to comply
with laws which would otherwise render the Trust void, voidable or
invalid in whole or in part.
(b) Limitation. Notwithstanding that an amendment may be permissible
-----------
under Section 8.1(a) above, this Master Trust Agreement shall not be
amended by an amendment that would:
19
<PAGE>
(i) Cause any of the assets of the Trust to be used for or
diverted to purposes other than for the exclusive benefit of
Participants and Beneficiaries as set forth in the Plans, except as
set forth in Section 1.3; or
(ii) Be inconsistent with the terms of any Plan, including the
terms of any Plan regarding termination, amendment or modification of
the Plan.
(c) Writing and Consent. Any amendment to this Master Trust Agreement
--------------------
shall be set forth in writing and signed by the Company and the Trustee
and, if consent of any Participant or Beneficiary is required under Section
8.l(a), the Participant or Beneficiary whose consent is required. Any
amendment may be current, retroactive or prospective, in each case as
provided therein.
(d) The Company and Trustee. In connection with the exercise of the
------------------------
rights under this Section 8.1:
(i) Prior to a Change in Control, the Trustee shall have no
responsibility to determine whether any proposed amendment complies
with the terms and conditions set forth in Sections 8.1 (a) and (b)
above and may conclusively rely on the directions of the Committee
with respect thereto, unless the Trustee has knowledge of a proposed
transaction or transactions that would result in a Change in Control;
and
(ii) After a Change in Control, the power of the Company to amend
this Master Trust Agreement shall cease, and the power to amend that
was previously held by the Company shall, instead, be exercised by a
majority of the Participants and, if a Participant is dead, his or her
Beneficiaries (who collectively shall have one vote among them and
shall vote in place of such deceased Participant), with the consent of
the Trustee, provided that such amendment otherwise complies with the
requirements of Sections 8.l(a), (b) and (c) above.
(e) Taxation. This Master Trust Agreement shall not be amended,
---------
altered, changed or modified in a manner that would cause the Participants
and/or Beneficiaries under any Plan to be taxed on the benefits under any
Plan in a year other than the year of actual receipt of benefits.
8.2 Final Termination. The Trust shall not terminate until the date on
------------------
which Participants and their Beneficiaries are no longer entitled to any
benefits pursuant to the terms of the Plans, and on such date the Trust shall
terminate. Upon termination of the Trust, any assets remaining in the Trust
after the satisfaction of all liabilities hereunder and under the Plans shall be
returned to the Company. Such remaining assets shall be paid by the Trustee
20
<PAGE>
to the Company in such amounts and in the manner instructed by the Company,
whereupon the Trustee shall be released and discharged from all obligations
hereunder. From and after the date of termination and until final distribution
of the Trust Fund, the Trustee shall continue to have all of the powers provided
herein as are necessary or expedient for the orderly liquidation and
distribution of the Trust Fund.
ARTICLE 9
---------
Miscellaneous
-------------
9.1 Directions Following Change in Control. Despite any other provision of
---------------------------------------
this Master Trust Agreement that may be construed to the contrary, following a
Change in Control, all powers of the Committee, the Company and the Board to
direct the Trustee under this Master Trust Agreement shall terminate, and the
Trustee shall act on its own discretion to carry out the terms of this Master
Trust Agreement in accordance with the Plans and this Master Trust Agreement.
9.2 Taxes. The Company shall from time to time pay taxes of any and all
------
kinds whatsoever that at any time are lawfully levied or assessed upon or become
payable in respect of the Trust Fund, the income or any property forming a part
thereof, or any security transaction pertaining thereto. To the extent that any
taxes lawfully levied or assessed upon the Trust Fund are not paid by the
Company, the Trustee shall have the power to pay such taxes out of the Trust
Fund and shall seek reimbursement from the Company. Prior to making any
payment, the Trustee may require such releases or other documents from any
lawful taxing authority as it shall deem necessary. The Trustee shall contest
the validity of taxes in any manner deemed appropriate by the Company or its
counsel, but at the expense of the Company, and only if it has received an
indemnity bond or other security satisfactory to it to pay any such expenses.
Prior to a Change in Control, the Trustee (i) shall not be liable for any
nonpayment of tax when it distributes an interest hereunder on directions from
the Committee, and (ii) shall have no obligation to prepare or file any tax
return on behalf of the Trust Fund, any such return being the sole
responsibility of the Committee. The Trustee shall cooperate with the Committee
in connection with the preparation and filing of any such return.
9.3 Third Persons. All persons dealing with the Trustee are released from
--------------
inquiring into the decisions or authority of the Trustee and from seeing to the
application of any moneys, securities or other property paid or delivered to the
Trustee.
21
<PAGE>
9.4 Nonassignability; Nonalienation. Benefits payable to Participants and
--------------------------------
their Beneficiaries under this Master Trust Agreement may not be anticipated,
assigned (either at law or in equity), alienated, pledged, encumbered or
subjected to attachment, garnishment, levy, execution or other legal or
equitable process.
9.5 The Plans. The Trust and the Plans are parts of a single, integrated
----------
employee benefit plan system and shall be construed together, except to the
extent the rights of parties to each are determined uniquely under this Master
Trust Agreement or a Plan, as the case may be. In the event of any conflict
between the terms of this Master Trust Agreement and the agreements that
constitute the Plans, such conflict shall be resolved in favor of this Master
Trust Agreement.
9.6 Applicable Law. Except to the extent, if any, preempted by ERISA, this
---------------
Master Trust Agreement shall be governed by and construed in accordance with the
laws of the State of California. Any provision of this Master Trust Agreement
prohibited by law shall be ineffective to the extent of any such prohibition,
without invalidating the remaining provisions hereof.
9.7 Notices and Directions. Whenever a notice or direction is given by
-----------------------
the Committee to the Trustee, it shall be in the form required by Section 2.1.
Actions by the Company shall be by the Board or a duly authorized officer, with
such actions certified to the Trustee by an appropriately certified copy of the
action taken. The Trustee shall be protected in acting upon any such notice,
resolution, order, certificate or other communication believed by it to be
genuine and to have been signed by the proper party or parties. Notices to
Participants and/or Beneficiaries as required under this Master Trust Agreement
shall be deemed to have been given if to such parties' last recorded address on
the records of the Trustee, or, if given by facsimile or by telephone followed
by receipt of a signed acknowledgment in writing by the Trustee.
9.8 Successors and Assigns. This Master Trust Agreement shall be binding
-----------------------
upon and inure to the benefit of the Company and the Trustee and their
respective successors and assigns.
9.9 Gender and Number. Words used in the masculine shall also apply to
------------------
the feminine where applicable, and when the context requires, the plural shall
be read as the singular and the singular as the plural.
9.10 Headings. Headings in this Master Trust Agreement are inserted for
---------
convenience of reference only and any conflict between such headings and the
text shall be resolved in favor of the text.
22
<PAGE>
9.11 Counterparts. This Master Trust Agreement may be executed in an
-------------
original and any number of counterparts, each of which shall be deemed to be an
original of one and the same instrument.
9.12 Third Party Beneficiaries. It is intended that wherever the rights
--------------------------
and obligations of the parties hereto require, or may be exercised only with,
the consent of any Participant or Beneficiary of a Plan, such third party shall
be a third party beneficiary of the parties' agreement hereunder and may
initiate an action in law or in equity in a court of competent jurisdiction to
enforce any right granted hereunder. If any action is initiated by a third
party hereunder, he or she shall be entitled to recover reasonable attorneys'
fees, costs and necessary disbursements in addition to any other relief to which
the Trust may be entitled.
IN WITNESS WHEREOF the Company and the Trustee have signed this Master
Trust Agreement as of the date first written above.
TRUSTEE: THE COMPANY:
- -------- ------------
ZERO CORPORATION, a
Company, a California Delaware corporation
corporation
By: ________________________ By: _________________________
Title: Wilford D. Godbold, Jr.
President and Chief
Executive Officer
23
<PAGE>
ZERO CORPORATION
MASTER TRUST AGREEMENT
FOR
DEFERRED COMPENSATION PLANS
EFFECTIVE
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1 Name, Intentions, Irrevocability, Deposit and
Definitions.................. 1
1.1 Name........................................................ 1
1.2 Intentions.................................................. 1
1.3 Irrevocability; Creditor Claims............................. 1
1.4 Initial Deposit............................................. 2
1.5 Additional Definitions...................................... 2
1.6 Grantor Trust............................................... 4
ARTICLE 2 General Administration...................................... 4
2.1 Committee Directions........................................ 4
2.2 Administration Upon Change in Control....................... 4
2.3 Contributions............................................... 5
2.4 Trust Fund.................................................. 5
ARTICLE 3 Powers and Duties of Trustee................................ 5
3.1 Investment Directions....................................... 5
3.2 Investment Upon Change in Control........................... 6
3.3 Management of Investments................................... 6
3.4 Securities.................................................. 9
3.5 Substitution............................................... 9
3.6 Distributions.............................................. 9
3.7 Trustee Responsibility Regarding
Payments on Insolvency..................................... 12
3.8 Costs of Administration.................................... 13
3.9 Trustee Compensation and Expenses.......................... 13
3.10 Professional Advice....................................... 14
3.11 Payment on Court Order.................................... 14
3.12 Protective Provision...................................... 14
3.13 Indemnifications.......................................... 14
ARTICLE 4 Trustee's Accounts.......................................... 15
4.1 Records.................................................... 15
4.2 Annual Accounting; Final Accounting........................ 15
4.3 Valuation.................................................. 16
4.4 Delegation of Duties....................................... 16
ARTICLE 5 Resignation or Removal of Trustee........................... 17
5.1 Resignation or Removal..................................... 17
5.2 Successor Trustee.......................................... 17
5.3 Settlement of Accounts..................................... 17
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE 6 Controversies, Legal Actions and Counsel.................... 18
6.1 Controversy................................................ 18
6.2 Joinder of Parties......................................... 18
6.3 Employment of Counsel...................................... 18
ARTICLE 7 Amendment and Termination................................... 18
7.1 Amendment.................................................. 18
7.2 Final Termination.......................................... 20
ARTICLE 8 Miscellaneous............................................... 20
8.1 Directions Following Change in Control..................... 20
8.2 Taxes...................................................... 20
8.3 Third Persons.............................................. 21
8.4 Nonassignability; Nonalienation............................ 21
8.5 The Plans.................................................. 21
8.6 Applicable Law............................................. 21
8.7 Notices and Directions..................................... 21
8.8 Successors and Assigns..................................... 22
8.9 Gender and Number.......................................... 22
8.10 Headings.................................................. 22
8.11 Counterparts.............................................. 22
8.12 Third Party Beneficiaries................................. 22
</TABLE>
<PAGE>
ZERO CORPORATION
MASTER TRUST AGREEMENT
FOR
DEFERRED COMPENSATION PLANS
THIS MASTER TRUST AGREEMENT ("Master Trust Agreement") is made and
entered into as of __________ ___, 1997, between ZERO Corporation, a Delaware
corporation, and its Affiliates (as defined below) (the "Company"), and
_______________________Company, a California corporation (the "Trustee"), to
evidence the master trust (the "Trust") to be established, pursuant to the ZERO
Corporation Executive Deferred Compensation Plan and the Directors' Deferred
Compensation Plan, each as Adopted October 20, 1993 and as Amended Effective as
of January 1, 1996 (each, a "Plan," together, the "Plans") that require or
authorize the establishment of a trust, for the benefit of Participants of the
Plans.
ARTICLE 1
---------
Name, Intentions, Irrevocability,
---------------------------------
Deposit and Definitions
-----------------------
1.1 Name. The name of the Trust created by this Agreement (the
-----
"Trust") shall be the ZERO Corporation Master Deferred Compensation Trust.
1.2 Intentions. The Company wishes to establish the Trust and to
-----------
contribute to the Trust assets that shall be held therein, subject to the claims
of creditors of the Company in the event of its Insolvency, as herein defined,
until paid to Participants or to their respective Beneficiaries as specified in
the Plans. It is the intention of the parties that this Trust shall not affect
the status of the Plans as unfunded plans maintained for the purpose of
providing deferred compensation choice for a select group of management, highly
compensated employees and/or Directors for purposes of Title I of ERISA (as
defined below). In addition, it is the intention of the Company to make
contributions to the Trust under certain circumstances, to provide a source of
funds to assist it in the meeting of its liabilities under the Plans from
sources including assets available for transfer under the ZERO Corporation
Master Joint Life Insurance Trust (the "Joint Life Trust").
1.3 Irrevocability; Creditor Claims. The Trust hereby established
--------------------------------
shall be irrevocable. Except as otherwise provided in Section 7.2, the principal
of the Trust, and any earnings thereon, shall be held separate and apart from
other funds of the Company and shall be used exclusively for the uses and
purposes of the Participants and general creditors of the Company as herein set
forth. The Participants and their Beneficiaries shall have no preferred claim
on, or any beneficial ownership interest in, any assets of the Trust. Any rights
created under the Plans and this
1
<PAGE>
Master Trust Agreement shall be unsecured contractual rights of the Participants
and their Beneficiaries against the Company. Any assets held by the Trust will
be subject to the claims of the Company's general creditors under federal and
state law in the event of Insolvency (as defined below).
1.4 Initial Deposit. The Company hereby deposits with the Trustee in
----------------
trust cash in the amount of $100, which shall become the principal of the Trust
to be held, administered and disposed of by the Trustee as provided in this
Master Trust Agreement.
1.5 Additional Definitions. In addition to the definitions set forth
-----------------------
above, for purposes hereof, unless otherwise clearly apparent from the context,
the following terms have the following indicated meanings:
(a) An "Affiliate" of, or a person "affiliated" with the Company is a
person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the
Company.
(b) "Beneficiary" shall mean, upon the death of a Participant, one or
more persons, trusts, estates or other entities, designated in accordance
with a Plan, that are entitled to receive benefits under a Plan.
(c) "Board" shall mean the board of directors of the Company.
(d) "Change in Control" shall mean the date upon which the first of
the following events occurs:
(1) Consummation of (i) any consolidation or merger of the
Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's common stock
would be converted into cash, securities or other property, other than
a merger of the Company in which the holders of the Company'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 (ii) any sale, lease, exchange or
other transfer (in one transaction or a series of transactions) of
all, or more than fifty percent (50%), of the assets of the Company;
(2) The stockholders of the Company approve a plan or proposal
for the liquidation or dissolution of the Company; or
2
<PAGE>
(3) Any "person" (as such term is used in Sections 13 and
14(d)(2) of the Securities Exchange Act of 1934) other than a person
owned by or directly or indirectly managed by the Company, shall
become the beneficial owner, directly or indirectly, of twenty-five
percent (25%) or more of the common stock of the Company.
(e) "Committee" shall mean the Deferred Compensation Committee
appointed by the President and Chief Executive Officer of the Company to
administer the Plan.
(f) "Director" shall mean any member of the Board.
(g) "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as may be amended from time to time.
(h) "Insolvent" shall have the meaning set forth in Section 3.7(a)
below.
(i) "Insolvent Entity" shall have the meaning set forth in Section
3.7(a) below.
(j) "IRS" shall mean the Internal Revenue Service.
(k) "Participant" shall mean a person who is a participant in one or
more of the Plans in accordance with their terms and conditions.
(l) "Payment Schedule" shall have the meaning set forth in Section
3.6(b) below.
(m) "Plan(s)" shall mean the ZERO Corporation Executive Deferred
Compensation Plan and the ZERO Corporation Directors' Deferred Compensation
Plan as Adopted October 20, 1993 and as Amended Effective as of January 1,
1996.
(n) "Trust Fund" shall mean the assets held by the Trustee pursuant to
the terms of this Master Trust Agreement and for the purposes of the Plans.
1.6 Grantor Trust. The Trust is intended to be a "grantor trust", of
--------------
which the Company is the grantor, within the meaning of subpart E, part I,
subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as
amended, and the Trust shall be construed accordingly.
3
<PAGE>
ARTICLE 2
---------
General Administration
----------------------
2.1 Committee Directions. Immediately before a Change in Control has
---------------------
occurred, this Section 2.1 shall be effective and the Committee shall direct the
Trustee as to the administration of the Trust in accordance with the following
provisions:
(a) The Committee shall be identified to the Trustee by a written
certification of the President and Chief Executive Officer. Persons
authorized to give directions to the Trustee on behalf of the Committee
shall be identified to the Trustee by written notice from the Committee,
and such notice shall contain specimens of the authorized signatures. The
Trustee shall be entitled to rely on such written notice as evidence of the
identity and authority of the persons appointed until a written
cancellation of the appointment, or the written appointment of a successor,
is received by the Trustee.
(b) Directions by the Committee, or its delegate, to the Trustee shall
be in writing and signed by the Committee or persons authorized by the
Committee, or may be made by such other method as is acceptable to the
Trustee.
(c) The Trustee may conclusively rely upon directions from the
Committee in taking any action with respect to this Master Trust Agreement,
including the making of payments from the Trust Fund and the investment of
the Trust Fund pursuant to this Master Trust Agreement. The Trustee shall
have no liability for actions taken, or for failure to act, on the
direction of the Committee. The Trustee shall have no liability for
failure to act in the absence of proper written directions.
(d) The Trustee may request instructions from the Committee and shall
have no duty to act or liability for failure to act if such instructions
are not forthcoming from the Committee. If requested instructions are not
received within a reasonable time, the Trustee may, but is under no duty
to, act on its own discretion to carry out the provisions of this Master
Trust Agreement in accordance with this Master Trust Agreement and the
Plans.
2.2 Administration Upon Change in Control. In the event that the Named
--------------------------------------
Fiduciary of the Plan(s) or the Employee Benefits Committee of the Board
determines, in their sole discretion, that a Change in Control is likely, the
Company will, effective automatically and concurrently with the Change of
Control, deposit into the Trust taking into account other funding sources for
the Trust, including but not limited to assets from the Joint Life Insurance
Trust, an amount sufficient to pay Participants the
4
<PAGE>
amounts which equals the value of all Participants' accounts. Immediately upon
the event of a Change in Control, and without any further action, the authority
of the Committee to administer the Trust and direct the Trustee, as set forth in
Section 2.1 above, shall cease, and the Trustee shall have complete authority to
administer the Trust.
2.3 Contributions. The Company in its sole discretion, may at any time, or
--------------
from time to time, make deposits of cash or other property in trust with the
Trustee in addition to amounts required under Section 2.2 hereof to augment the
principal to be held, administered and disposed of by the Trustee as provided in
this Master Trust Agreement. Neither the Trustee nor any Participant or
Beneficiary shall have any right to compel such additional deposits into the
Trust; however, although such parties can compel the payment or transfer of
amounts required to be made to the Trust under the Plans. The Trustee shall
have no duty to collect or enforce payment to it of any contributions or to
require that any contributions be made, and shall have no duty to compute any
amount to be paid to it nor to determine whether amounts paid comply with the
terms of the Plans.
2.4 Trust Fund. The contributions received by the Trustee from the Company
-----------
shall be held and administered pursuant to the terms of this Master Trust
Agreement as a single fund without distinction between income and principal and
without liability for the payment of interest thereon except as expressly
provided in this Master Trust Agreement. During the term of this Trust, all
income received by the Trust, net of expenses, shall be accumulated, unless
required to be distributed pursuant to Section 3.6, and reinvested.
Notwithstanding the foregoing, in the event there exists in the Trust an amount
in excess of one-hundred twenty-five percent (125%) of that required to fund the
obligations of the Trust, such excess shall be returned to the Company.
ARTICLE 3
---------
Powers and Duties of Trustee
----------------------------
3.1 Investment Directions. Except as provided in Section 3.2, the
----------------------
Committee shall provide the Trustee with all investment instructions. The
Trustee shall neither affect nor change investments of the Trust Fund, except as
directed in writing by the Committee, and shall have no right, duty or
responsibility to recommend investments or investment changes; provided, that
the Trustee may (i) deposit cash on hand from time to time in any bank savings
account, certificate of deposit, or other instrument creating a deposit
liability for a bank, including the Trustee's own banking department if the
Trustee is a bank, without such prior direction, or (ii) invest in government
securities, bonds rated A
5
<PAGE>
or above by Moody's Investors Service, Inc. (or any successor thereto), or
stocks of "Fortune 500" companies, all within broad investment guidelines
established by the Committee from time to time.
3.2 Investment Upon Change in Control. In the event of a Change in
----------------------------------
Control, the authority of the Committee to direct investments of the Trust Fund
shall cease and the Trustee shall have complete authority to direct investments
of the Trust Fund. Either the President and Chief Executive Officer, or the
Corporate Secretary of the Company shall notify the Trustee in writing
immediately prior to the occurrence of a Change in Control. The Trustee has no
duty to inquire whether a Change in Control has occurred and may rely on
notification by such officers of the Company of a Change in Control; provided,
however, that if any officer, former officer, director or former director of the
Company (other than the President and Chief Executive Officer or the Corporate
Secretary of the Company), or any Participant notifies the Trustee that there
has been or there may be a Change in Control, the Trustee shall have the duty to
satisfy itself as to whether a Change in Control has in fact occurred. The
Company shall indemnify and hold harmless the Trustee for any damages or costs
(including attorneys' fees) that may be incurred because of reliance on the
notice of the President and Chief Executive Officer or the Corporate Secretary
of the Company or lack thereof.
3.3 Management of Investments. Subject to Section 3.1 above, the Trustee
--------------------------
shall have, without exclusion, all powers conferred on the Trustee by applicable
law, unless expressly provided otherwise herein, and all rights associated with
assets of the Trust shall be exercised by the Trustee or the person designated
by the Trustee, and shall in no event be exercisable by or rest with
Participants. The Trustee shall have full power and authority to invest and
reinvest the Trust Fund in any investment permitted by law, exercising the
judgment and care that persons of prudence, discretion and intelligence would
exercise under the circumstances then prevailing, considering the probable
income and safety of their capital, including, without limiting the generality
of the foregoing, the power:
(a) To invest and reinvest the Trust Fund, together with the income
therefrom, in common stock, preferred stock, convertible preferred stock,
mutual funds, Standard & Poor's 500 index funds, bonds, debentures,
convertible debentures and bonds, mortgages, notes, time certificates of
deposit, commercial paper and other evidences of indebtedness (including
those issued by the Trustee or any of its affiliates), other securities,
annuity contracts, options to buy or sell securities or other assets, and
other property of any kind (personal, real, or mixed, and tangible or
intangible); provided, however, that in no event may the Trustee invest in
securities (including stock or rights to
6
<PAGE>
acquire stock) or obligations issued by the Company, other than a de
minimis amount held in common investment vehicles in which the Trustee
invests;
(b) To deposit or invest all or any part of the assets of the Trust
Fund in savings accounts or certificates of deposit or other deposits which
bear a reasonable interest rate in a bank, including the commercial
department of the Trustee, if such bank is supervised by the United States
or any State;
(c) To hold, manage, improve, repair and control all property, real or
personal, forming part of the Trust Fund and to sell, convey, transfer,
exchange, partition, lease for any term, even extending beyond the duration
of this Trust, and otherwise dispose of the same from time to time in such
manner, for such consideration, and upon such terms and conditions as the
Trustee shall determine;
(d) To have, respecting securities, all the rights, powers and
privileges of an owner, including the power to give proxies, pay
assessments and other sums deemed by the Trustee to be necessary for the
protection of the Trust Fund, to vote any corporate stock either in person
or by proxy, with or without power of substitution, for any purpose; to
participate in voting trusts, pooling agreements, foreclosures,
reorganizations, consolidations, mergers and liquidations, and in
connection therewith to deposit securities with and transfer title to any
protective or other committee under such terms as the Trustee may deem
advisable; to exercise or sell stock subscriptions or conversion rights;
and, regardless of any limitation elsewhere in this instrument relative to
investment by the Trustee, to accept and retain as an investment any
securities or other property received through the exercise of any of the
foregoing powers;
(e) To hold in cash, without liability for interest, such portion of
the Trust Fund which, in its discretion, shall be reasonable under the
circumstances, pending investments, or payment of expenses, or the
distribution of benefits;
(f) To take such actions as may be necessary or desirable to protect
the Trust Fund from loss due to the default on mortgages held in the Trust,
including the appointment of agents or trustees in such other jurisdictions
as may seem desirable, to transfer property to such agents or trustees, to
grant such powers as are necessary or desirable to protect the Trust or its
assets, to direct such agents or trustees, or to delegate such power to
direct, and to remove such agents or trustees;
7
<PAGE>
(g) To employ such agents including custodians and counsel as may be
reasonably necessary and to pay them reasonable compensation; to settle,
compromise or abandon all claims and demands in favor of or against the
Trust assets;
(h) To cause title to property of the Trust to be issued, held or
registered in the individual name of the Trustee, or in the name of its
nominee(s) or agents, or in such form that title will pass by delivery;
(i) To exercise all of the further rights, powers, options and
privileges granted, provided for, or vested in trustees generally under the
laws of the State of California, so that the powers conferred upon the
Trustee herein shall not be in limitation of any authority conferred by
law, but shall be in addition thereto;
(j) To borrow money from any source (including the Trustee) and to
execute promissory notes, mortgages or other obligations and to pledge or
mortgage any Trust assets as security;
(k) To lend certificates representing stocks, bonds, or other
securities to any brokerage or other firm selected by the Trustee;
(l) To institute, compromise and defend actions and proceedings; to
pay or contest any claim; to settle a claim by or against the Trustee by
compromise, arbitration, or otherwise; to release, in whole or in part, any
claim belonging to the Trust to the extent that the claim is uncollectible;
(m) To use securities depositories or custodians and to allow such
securities as may be held by a depository or custodian to be registered in
the name of such depository or its nominee or in the name of such custodian
or its nominee;
(n) To invest the Trust Fund from time to time in one or more
investment funds, which funds shall be registered under the Investment
Company Act of 1940; and
(o) To do all other acts necessary or desirable for the proper
administration of the Trust Fund, as if the Trustee were the absolute owner
thereof. However, nothing in this section shall be construed to mean the
Trustee assumes any responsibility for the performance of any investment
made by the Trustee in its capacity as trustee under the operations of this
Master Trust Agreement.
8
<PAGE>
Notwithstanding any powers granted to the Trustee pursuant to this Master Trust
Agreement or to applicable law, the Trustee shall not have any power that could
give this Trust the objective of carrying on a business and dividing the gains
therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal Revenue Code of
1986, as amended.
3.4 Securities. Voting or other rights in securities shall be exercised by
-----------
the person or entity responsible for directing such investments pursuant to
Sections 3.1 and 3.2 hereof, and the Trustee shall have no duty to exercise
voting or proxy or other rights relating to any investment managed or directed
by the Committee. If any foreign securities are purchased pursuant to the
direction of the Committee, it shall be the responsibility of the person or
entity responsible for directing such investments to advise the Trustee in
writing of any laws or regulations, either foreign or domestic, that apply to
such foreign securities or to the receipt of dividends or interest on such
securities.
3.5 Substitution. Notwithstanding any provision of any Plan or the Trust
-------------
to the contrary, the Company shall at all times have the power to reacquire the
Trust Fund by substituting securities tradeable on the New York Stock Exchange
or NASDAQ (other than stock, an obligation or other security issued by the
Company or any subsidiary of the Company) of an equivalent value and/or cash of
an equivalent value and such other property shall, following such substitution,
constitute the Trust Fund.
3.6 Distributions.
--------------
(a) The establishment of the Trust and the payment or delivery to the
Trustee of money or other property shall not vest in any Participant or
Beneficiary any right, title, or interest in and to any assets of the
Trust. To the extent that any Participant or Beneficiary acquires the
right to receive payments under any of the Plans, which shall be subject to
the provisions of Section 1.3 above, such Participant or Beneficiary shall
have only the unsecured promise of the Company that such payments shall be
made.
(b) Concurrent with the establishment of this Trust, the Company shall
deliver to the Trustee a schedule (the "Payment Schedule") that indicates
the amounts payable in respect of each Participant (or Beneficiary) on a
Plan by Plan basis, that provides a formula or formulas or other
instructions acceptable to the Trustee for determining the amounts so
payable, the form in which such amount is to be paid (as provided for or
available under the applicable Plans), and the time of commencement for
payment of such amounts. The Payment Schedule shall be updated from time
to time as is necessary. Except as otherwise provided herein, prior to a
Change in
9
<PAGE>
Control the Trustee shall make payments to the Participants or their
Beneficiaries in accordance with such Payment Schedule. Despite the
foregoing, after a Change in Control, the Trustee shall make payments in
accordance with the terms and provisions of each of the Plans and related
plan agreements. The Trustee, at the direction of the Committee or, after
a Change in Control, on its own volition, shall make any distribution
required to be made by it hereunder by delivering:
(i) Its check made payable to the Participant or Beneficiary to
whom such distribution is to be made, to the Participant or
Beneficiary, or, if prior to a Change in Control, to the Company for
redelivery to such person; provided that before a Change in Control,
the Committee may direct the Trustee to deliver one or more lump sum
checks payable to the Company, and the Company shall prepare and
deliver individual checks for each Participant or Beneficiary; or
(ii) If a distribution is being made, in whole or in part, of
noncash, assignments or other appropriate documents or certificates
necessary to effect a transfer of title to such noncash assets, to the
Participant or Beneficiary, or, if prior to a Change in Control, to
the Company for redelivery to such Participant or Beneficiary.
(c) The Trustee shall determine the amounts payable in accordance with
the Plans one year in advance of the due dates and shall request
appropriate funding, if necessary, by the Company. Within ten (10) days of
receipt of the Trustee's request, if the principal of the Trust, and any
earnings thereon, are not sufficient to make payments of benefits in
accordance with the terms of the Plans, the Company shall make the balance
of each such payment as it falls due, or, after a Change in Control, shall
make the balance of each such payment to the Trustee. Further, the Trustee
shall promptly notify the Company when principal and earnings are not
sufficient for future payments.
(d) The Company may make payment of benefits directly to Participants
or Beneficiaries as they become due under the terms of the Plans. The
Company shall notify the Trustee of its decisions to make payment of
benefits directly prior to the time amounts are payable to Participants or
Beneficiaries, and cause appropriate adjustments to be made to the Payment
Schedule.
(e) Notwithstanding anything contained in this Master Trust Agreement
to the contrary, if at any time the Trust is finally determined by the IRS
not to be a "grantor trust" with
10
<PAGE>
the result that the income of the Trust Fund is not treated as income of
the Company pursuant to Sections 671 through 679 of the Internal Revenue
Code of 1986, as amended, or if a tax is finally determined by the IRS to
be payable by one or more Participants or Beneficiaries with respect to any
interest in the Plans or the Trust Fund prior to payment of such interest
to such Participant or Beneficiary, then the Trust shall immediately
terminate, the Trustee shall immediately determine each Participant's share
of the Trust Fund in accordance with the Plans, and the Trustee shall
immediately distribute such share in a lump sum to each Participant or
Beneficiary entitled thereto, regardless of whether such Participant's
employment has terminated and regardless of form and time of payments
specified in or pursuant to the Plans. Any remaining assets (less any
expenses or costs due under Sections 3.8 and 3.9 of this Master Trust
Agreement) shall then be paid by the Trustee to the Company in such
amounts, and in the manner instructed by the Committee. Prior to a Change
in Control, the Trustee shall rely solely on the directions of the
Committee with respect to the occurrence of the foregoing events and the
resulting distributions to be made, and the Trustee shall not be
responsible for any failure to act in the absence of such direction.
(f) The Trustee shall make provision for the reporting and
withholding of any federal, state or local taxes that may be required to be
withheld with respect to the payment of benefits pursuant to the terms of
the Plans and shall pay amounts withheld to the appropriate taxing
authorities or determine that such amounts have been reported, withheld and
paid by the Company.
(g) Prior to a Change in Control, payments by the Trustee shall be
delivered or mailed to addresses supplied by the Committee and the
Trustee's obligation to make such payments shall be satisfied upon such
delivery or mailing. Prior to a Change in Control, the Trustee shall have
no obligation to determine the identity of persons entitled to benefits or
their mailing addresses. After a Change in Control, the Trustee shall have
such obligations.
(h) Prior to a Change in Control, the entitlement of a Participant or
his or her Beneficiaries to benefits under the Plans shall be determined by
the Company or such party as it shall designate under the Plans, and any
claim for such benefits shall be considered and reviewed under the
procedures set out in the Plans. After a Change in Control, the Trustee
shall make such determination.
11
<PAGE>
3.7 Trustee Responsibility Regarding Payments on Insolvency.
--------------------------------------------------------
(a) As provided in Section 3.7(b), the Trustee shall cease payment of
benefits to Participants and their Beneficiaries if the Company is
Insolvent. The Company shall be considered "Insolvent" for purposes of
this Master Trust Agreement if:
(i) The Company is unable to pay its debts as they become due, or
(ii) The Company is subject to a pending proceeding as a debtor
under the United States Bankruptcy Code.
The insolvency of a Subsidiary of the Company will not cause the Company to
be deemed Insolvent.
(b) At all times during the continuance of this Trust, as provided in
Section 1.3 above:
(i) The Board and the President and Chief Executive Officer of
the Company shall have the duty to inform the Trustee in writing of
the Company's Insolvency. If a person claiming to be a creditor of
the Company alleges in writing to the Trustee that the Company has
become Insolvent, the Trustee shall determine whether the Company is
Insolvent and, pending such determination, the Trustee shall
discontinue payment of benefits to the Participants or their
Beneficiaries. Prior to a Change in Control, the Trustee may
conclusively rely on any determination it receives from the Board or
the President and Chief Executive Officer of the Company with respect
to the Insolvency of the Company.
(ii) Unless the Trustee has actual knowledge of the Company's
Insolvency, or has received notice from the Company, or a person
claiming to be a creditor alleging that the Company is Insolvent, the
Trustee shall have no duty to inquire whether the Company is
Insolvent. The Trustee may in all events rely on such evidence
concerning the Company's solvency as may be furnished to the Trustee
and that provides the Trustee with a reasonable basis for making a
determination concerning the Company's solvency. In this regard, the
Trustee may rely upon a letter from the Company's auditors as to the
Company's financial status.
(iii) If at any time the Trustee has determined that the Company
is Insolvent, the Trustee shall discontinue payments to the
Participants or their Beneficiaries, and shall hold the portion of the
assets of the Trust allocable to the Company for the benefit of
12
<PAGE>
the general creditors of the Company. Nothing in this Master Trust
Agreement shall in any way diminish any rights of Participants or
their Beneficiaries to pursue their rights as general creditors of the
Company with respect to benefits due under the Plans or otherwise.
(iv) The Trustee shall resume the payment of benefits to
Participants or their Beneficiaries in accordance with this Article 3
of this Master Trust Agreement only after the Trustee has determined
that the Company is not Insolvent (or is no longer Insolvent). A
plan of reorganization approved by a bankruptcy court shall be
sufficient to require that the Trustee resume the payment of such
benefits to Participants or their Beneficiaries.
(c) Provided that there are sufficient assets, if the Trustee
discontinues the payment of benefits from the Trust pursuant to Section
3.7(b) hereof and subsequently resumes such payments, the first payment
following such discontinuance shall include the aggregate amount of all
payments which would have been due to Participants or their Beneficiaries
under the terms of the Plans for the period of such discontinuance but for
the Insolvency, less the aggregate amount of any payments made to
Participants or their Beneficiaries by the Company in lieu of the payments
provided for hereunder during any such period of discontinuance. Prior to a
Change in Control, the Committee shall instruct the Trustee as to such
amounts, and after a Change in Control, the Trustee shall determine such
amounts in accordance with the terms and provisions of the Plans.
3.8 Costs of Administration. The Trustee is authorized to incur reasonable
------------------------
obligations in connection with the administration of the Trust, including
attorneys' fees, administrative fees and appraisal fees. Such obligations shall
be paid by the Company. The Trustee is authorized to pay such amounts from the
Trust Fund if the Company fails to pay them within 60 days of presentation of a
statement of the amounts due. In the event the Trustee has an obligation to pay
benefits under the Plans and the Company has refused or neglected to fund such
benefit payments, the Trustee is authorized to seek a judicial order to require
that the Company fund such benefit payments.
3.9 Trustee Compensation and Expenses. The Trustee shall be entitled to
----------------------------------
reasonable compensation for its services as from time to time agreed upon
between the Trustee and the Company. If the Trustee and the Company fail to
agree upon a compensation, or following a Change in Control, the Trustee shall
be entitled to compensation at a rate equal to the rate charged by the Trustee
for similar services rendered by it during the Company's then current fiscal
year for other trusts similar to this Trust. The Trustee
13
<PAGE>
shall be entitled to reimbursement for expenses incurred by it in the
performance of its duties as the Trustee, including reasonable fees for legal
counsel. The Trustee's compensation and expenses shall be paid by the Company.
The Trustee is authorized to withdraw such amounts from the Trust Fund if the
Company fails to pay them within 60 days of presentation of a statement of the
amounts due, and seek a judicial order to require that the Company reimburse the
Trust Fund for any such withdrawals.
3.10 Professional Advice. The Company specifically acknowledges that the
--------------------
Trustee may find it desirable or expedient to retain legal counsel or other
professional advisors to advise it in connection with the exercise of any duty
under this Master Trust Agreement including, but not limited to, any matter
relating to or following a Change in Control or the Insolvency of the Company.
The Trustee shall be fully protected in acting upon the advice of such legal
counsel or advisors.
3.11 Payment on Court Order. To the extent permitted by law, the Trustee
-----------------------
is authorized to make any payments directed by court order in any action in
which the Trustee has been named as a party. The Trustee is not obligated to
defend actions in which the Trustee is named, but shall notify the Company or
Committee of any such action and may tender defense of the action to the
Company, Committee or Participant or Beneficiary whose interest is affected.
The Trustee may in its discretion defend any action in which the Trustee is
named, and any expenses incurred by the Trustee shall be paid by the Company.
The Trustee is authorized to pay such amounts from the Trust Fund if the Company
fails to pay them within 60 days of presentation of a statement of the amounts
due, and shall have the right to seek a judicial order to require that the
Company reimburse the Trust Fund for any such payments.
3.12 Protective Provision. Notwithstanding any other provision contained
---------------------
in this Master Trust Agreement to the contrary, the Trustee shall have no
obligation to (i) determine the existence of any conversion, redemption,
exchange, subscription or other right relating to any securities purchased of
which notice was given prior to the purchase of such securities and shall have
no obligation to exercise any such right unless the Trustee is advised in
writing by the Committee both of the existence of the right and the desired
exercise thereof within a reasonable time prior to the expiration of the right
to exercise, or (ii) advance any funds to the Trust. Furthermore, the Trustee is
not a party to the Plans.
3.13 Indemnifications.
-----------------
(a) The Company shall indemnify and hold the Trustee harmless from and
against all loss or liability (including expenses and reasonable attorneys'
fees) to which it may be subject by reason of its execution of its duties
under this Trust, or by reason of any acts taken in good faith in
14
<PAGE>
accordance with any directions, or acts omitted in good faith due to
absence of directions, from the Company, the Committee or a Participant,
unless such loss or liability is due to the Trustee's gross negligence or
willful misconduct. The indemnity described herein shall be provided by
the Company.
(b) In the event that the Trustee is named as a defendant in a lawsuit
or proceeding involving one or more of the Plans or the Trust Fund, the
Trustee shall be entitled to receive on a current basis the indemnity
payments provided for in this Section, provided however that if the final
judgment entered in the lawsuit or proceeding holds that the Trustee is
guilty of gross negligence or wilful misconduct with respect to the Trust
Fund, the Trustee shall be required to refund the indemnity payments that
it has received.
(c) All releases and indemnities provided in this Master Trust
Agreement shall survive the termination of this Master Trust Agreement.
ARTICLE 4
---------
Trustee's Accounts
------------------
4.1 Records. The Trustee shall maintain accurate records and detailed
--------
accounts of all investments, receipts, disbursements and other transactions
hereunder, as well as records of all deferred compensation accounts. Such
records shall be available at all reasonable times for inspection by the Company
or its authorized representative. The Trustee, at the direction of the
Committee, shall submit to the Committee such valuations, reports or other
information as the Committee may reasonably require and, in the absence of fraud
or bad faith, the valuation of the Trust Fund by the Trustee shall be
conclusive. Notwithstanding the above, after a Change in Control, the Trustee
shall provide an annual accounting to all Participants or Beneficiaries of the
Trust Fund.
4.2 Annual Accounting; Final Accounting.
------------------------------------
(a) Within 30 days following the end of each Plan Year and within 30
days after the removal or resignation of the Trustee or the termination of
the Trust, the Trustee shall file with the Committee a written accounting
setting forth a description of all properties purchased and sold, all
receipts, disbursements and other transactions effected by it during the
Plan Year or, in the case of removal, resignation or termination, since the
close of the previous Plan Year, and listing the properties held in the
Trust Fund as of the last day of the Plan Year or other period and
indicating their values. Such values shall be either cost or market as
directed by the Committee in accordance with the terms of the Plans.
15
<PAGE>
(b) The Committee may approve such written accounting either by written
notice of approval delivered to the Trustee or by its failure to express
written objection to such accounting delivered to the Trustee within 30
days after the date of which such accounting was delivered to the
Committee.
(c) Prior to a Change in Control, the approval by the Committee of an
accounting shall be binding as to all matters embraced in such accounting
on all parties to this Master Trust Agreement and on all Participants and
Beneficiaries, to the same extent as if such accounting had been settled by
a judgment or decree of a court of competent jurisdiction in which the
Trustee, the Committee, the Company, and all persons having or claiming any
interest in any Plan or Trust Fund were made parties.
(d) Despite the foregoing, nothing contained in this Master Trust
Agreement shall deprive the Trustee of the right to have an accounting
judicially settled, if the Trustee, in the Trustee's sole discretion,
desires such a settlement.
4.3 Valuation. The assets of the Trust Fund shall be valued at their
----------
respective fair market values on the date of valuation, as determined by the
Trustee based upon such sources of information as it may deem reliable,
including, but not limited to, stock market quotations, statistical evaluation
services, newspapers of general circulation, financial publications, advice from
investment counselors, brokerage firms or insurance companies, or any
combination of sources. Prior to a Change in Control, the Committee shall
instruct the Trustee as to the value of assets for which market values are not
readily obtainable by the Trustee. If the Committee fails to provide such
values, the Trustee may take whatever action it deems reasonable, including
employment of attorneys, appraisers, life insurance companies or other
professionals, the expense of which shall be an expense of administration of the
Trust Fund and payable by the Company. The Trustee may rely upon information
from the Company, the Committee, appraisers or other sources and shall not incur
any liability for an inaccurate valuation based in good faith upon such
information.
4.4 Delegation of Duties. The Company or the Committee, or both, may at
---------------------
any time employ the Trustee as their agent to perform any act, keep any records
or accounts and make any computations that are required of the Company, or the
Committee by this Master Trust Agreement or the Plans. The Trustee may be
compensated for such employment and such employment shall not be deemed to be
contrary to the Trust. Nothing done by the Trustee as such agent shall change or
increase its responsibility or liability as Trustee hereunder.
16
<PAGE>
ARTICLE 5
---------
Resignation or Removal of Trustee
---------------------------------
5.1 Resignation or Removal. The Trustee may resign at any time by
-----------------------
written notice to the Company, which shall be effective 60 days after receipt of
such notice unless the Company and the Trustee agree otherwise. Prior to a
Change in Control, the Trustee may be removed by the Company on 60 days notice
or upon shorter notice accepted by the Trustee. After a Change in Control, the
Trustee may be removed by a majority vote of the Participants or their legal
agents based upon the dollar value of the accounts, and if a Participant is
dead, his or her Beneficiaries (who collectively shall have one vote among them
and shall vote in place of such deceased Participant), on 60 days notice or upon
shorter notice accepted by the Trustee. Upon request in writing from any
Participant, Trustee will promptly provide to such requesting Participant the
names and addresses of all Participants and/or Beneficiaries.
5.2 Successor Trustee. If the Trustee resigns or is removed, a
------------------
successor shall be appointed by the Company, in accordance with this Section, by
the effective date of the resignation or removal under Section 5.1 above. The
successor shall be a bank, trust company, or similar independent third party
with a minimum net worth or assets under management of $250,000,000 that is
granted corporate trustee powers under state law. After the occurrence of a
Change in Control, a successor Trustee may not be appointed without the consent
of a majority of the Participants. If no such appointment has been made, the
Trustee may apply to a court of competent jurisdiction for appointment of a
successor or for instructions. All expenses of the Trustee in connection with
the proceeding shall be allowed as administrative expenses of the Trust.
5.3 Settlement of Accounts. Upon resignation or removal of the
-----------------------
Trustee and appointment of a successor Trustee, all assets shall subsequently be
transferred to the successor Trustee. The transfer shall be completed within 90
days after receipt of notice of resignation, removal or transfer, unless the
Company extends the time limit. Upon the transfer of the assets, the successor
Trustee shall succeed to all of the powers and duties given to the Trustee in
this Master Trust Agreement. The resigning or removed Trustee shall render to
the Committee an account in the form and manner and at the time prescribed in
Section 4.2. The approval of such accounting and discharge of the Trustee shall
be as provided in such Section.
17
<PAGE>
ARTICLE 6
---------
Controversies. Legal Actions and Counsel
----------------------------------------
6.1 Controversy. If any controversy arises with respect to the Trust,
------------
the Trustee shall take action as directed by the Committee or, in the absence of
such direction or after a Change in Control, as it deems advisable, whether by
legal proceedings, compromise or otherwise. The Trustee may retain the funds or
property involved without liability pending settlement of the controversy. The
Trustee shall be under no obligation to take any legal action of whatever nature
unless there shall be sufficient property in the Trust to indemnify the Trustee
with respect to any expenses or losses to which it may be subjected.
6.2 Joinder of Parties. In any action or other judicial proceedings
-------------------
affecting the Trust, it shall be necessary to join as parties the Trustee, the
Committee, and the Company. No Participant or other person shall be entitled to
any notice or service of process. Any judgment entered in such a proceeding or
action shall be binding on all persons claiming under the Trust. Nothing in this
Master Trust Agreement shall be construed as to deprive a Participant or
Beneficiary of his or her right to seek adjudication of his or her rights by
administrative process or by a court of competent jurisdiction.
6.3 Employment of Counsel. The Trustee may consult with legal counsel
----------------------
and shall be fully protected with respect to any action taken or omitted by it
in good faith pursuant to the advice of counsel. Legal counsel consulted by the
Trustee, prior to a Change in Control, may be counsel for the Company or a
Subsidiary of the Company; however, after a Change in Control such counsel must
be a firm which does not represent the Company or a Subsidiary of the Company
and may not be general counsel to the Company or a Subsidiary of the Company.
ARTICLE 7
---------
Amendment and Termination
-------------------------
7.1 Amendment. Subject to the limitations set forth in this Section
----------
7.1, this Master Trust Agreement may be amended by a written instrument executed
by the Trustee and the Company. Notwithstanding the foregoing, no such amendment
shall conflict with the terms of the Plans or shall make the Trust revocable
after it has become irrevocable in accordance with Section 1.3 above. Any
amendment, change or modification shall be subject to the following rules:
(a) General Rule. Subject to Sections 7.1(b), (c) and (d) below, this
-------------
Master Trust Agreement may be amended:
18
<PAGE>
(i) By the Company and the Trustee, provided, however, that if an
amendment would in any way adversely affect the rights under the Plans
in the Trust Fund by any Participant or Beneficiary, each and every
Participant and Beneficiary whose rights in the Trust Fund would be
adversely affected must consent to the amendment before this Master
Trust Agreement may be so amended; and
(ii) By the Company and the Trustee as may be necessary to comply
with laws which would otherwise render the Trust void, voidable or
invalid in whole or in part.
(b) Limitation. Notwithstanding that an amendment may be permissible
-----------
under Section 7.1(a) above, this Master Trust Agreement shall not be
amended by an amendment that would:
(i) Cause any of the assets of the Trust to be used for or
diverted to purposes other than for the exclusive benefit of
Participants or Beneficiaries as set forth in the Plans, except as set
forth in Section 1.3; or
(ii) Be inconsistent with the terms of any Plan, including the
terms of any Plan regarding termination, amendment or modification of
the Plan.
(c) Writing and Consent. Any amendment to this Master Trust Agreement
--------------------
shall be set forth in writing and signed by the Company and the Trustee
and, if consent of any Participant or Beneficiary is required under Section
7.l(a), the Participant or Beneficiary whose consent is required. Any
amendment may be current, retroactive or prospective, in each case as
provided therein.
(d) The Company and Trustee. In connection with the exercise of the
------------------------
rights under this Section 7.1:
(i) Prior to a Change in Control, the Trustee shall have no
responsibility to determine whether any proposed amendment complies
with the terms and conditions set forth in Sections 7.1(a) and (b)
above and may conclusively rely on the directions of the Committee
with respect thereto, unless the Trustee has knowledge of a proposed
transaction or transactions that would result in a Change in Control;
and
(ii) After a Change in Control, the power of the Company to amend
this Master Trust Agreement shall cease, and the power to amend that
was previously held by the Company shall, instead, be exercised by a
majority in interest of the Participants and, if a Participant is
19
<PAGE>
dead, his or her Beneficiaries (who collectively shall have one vote
among them and shall vote in place of such deceased Participant), or
such other legal representative, with the consent of the Trustee,
provided that such amendment otherwise complies with the requirements
of Sections 7.l(a), (b) and (c) above.
(e) Taxation. This Master Trust Agreement shall not be amended,
---------
altered, changed or modified in a manner that would cause the Participants
and/or Beneficiaries under any Plan to be taxed on the benefits under any
Plan in a year other than the year of actual receipt of benefits.
7.2 Final Termination. The Trust shall not terminate until the date on
------------------
which Participants and their Beneficiaries are no longer entitled to any
benefits pursuant to the terms of the Plans, and on such date the Trust shall
terminate. Upon termination of the Trust, any assets remaining in the Trust
after the satisfaction of all liabilities hereunder and under the Plans shall be
returned to the Company. Such remaining assets shall be paid by the Trustee to
the Company in such amounts and in the manner instructed by the Company,
whereupon the Trustee shall be released and discharged from all obligations
hereunder. From and after the date of termination and until final distribution
of the Trust Fund, the Trustee shall continue to have all of the powers provided
herein as are necessary or expedient for the orderly liquidation and
distribution of the Trust Fund.
ARTICLE 8
---------
Miscellaneous
-------------
8.1 Directions Following Change in Control. Despite any other provision of
---------------------------------------
this Master Trust Agreement that may be construed to the contrary, following a
Change in Control, all powers of the Committee, the Company and the Board to
direct the Trustee under this Master Trust Agreement shall terminate, and the
Trustee shall act on its own discretion to carry out the terms of this Master
Trust Agreement in accordance with the Plans and this Master Trust Agreement.
8.2 Taxes. The Company shall from time to time pay taxes of any and all
------
kinds whatsoever that at any time are lawfully levied or assessed upon or become
payable in respect of the Trust Fund, the income or any property forming a part
thereof, or any security transaction pertaining thereto. To the extent that any
taxes lawfully levied or assessed upon the Trust Fund are not paid by the
Company, the Trustee shall have the power to pay such taxes out of the Trust
Fund and shall seek reimbursement from the Company. Prior to making any
payment, the Trustee may require such releases or other documents from any
lawful taxing authority as it shall deem necessary. The Trustee shall contest
the validity of taxes in
20
<PAGE>
any manner deemed appropriate by the Company or its counsel, but at the expense
of the Company, and only if it has received an indemnity bond or other security
satisfactory to it to pay any such expenses. Prior to a Change in Control, the
Trustee (i) shall not be liable for any nonpayment of tax when it distributes an
interest hereunder on directions from the Committee, and (ii) shall have no
obligation to prepare or file any tax return on behalf of the Trust Fund, any
such return being the sole responsibility of the Committee. The Trustee shall
cooperate with the Committee in connection with the preparation and filing of
any such return.
8.3 Third Persons. All persons dealing with the Trustee are released from
--------------
inquiring into the decisions or authority of the Trustee and from seeing to the
application of any moneys, securities or other property paid or delivered to the
Trustee.
8.4 Nonassignability; Nonalienation. Benefits payable to Participants and
--------------------------------
their Beneficiaries under this Master Trust Agreement may not be anticipated,
assigned (either at law or in equity), alienated, pledged, encumbered or
subjected to attachment, garnishment, levy, execution or other legal or
equitable process.
8.5 The Plans. The Trust and the Plans are parts of a single, integrated
----------
employee benefit plan system and shall be construed together, except to the
extent the rights of parties to each are determined uniquely under this Master
Trust Agreement or a Plan, as the case may be. In the event of any conflict
between the terms of this Master Trust Agreement and the agreements that
constitute the Plans, such conflict shall be resolved in favor of this Master
Trust Agreement.
8.6 Applicable Law. Except to the extent, if any, preempted by ERISA, this
---------------
Master Trust Agreement shall be governed by and construed in accordance with the
laws of the State of California. Any provision of this Master Trust Agreement
prohibited by law shall be ineffective to the extent of any such prohibition,
without invalidating the remaining provisions hereof.
8.7 Notices and Directions. Whenever a notice or direction is given by
-----------------------
the Committee to the Trustee, it shall be in the form required by Section 2.1.
Actions by the Company shall be by the Board or a duly authorized officer, with
such actions certified to the Trustee by an appropriately certified copy of the
action taken. The Trustee shall be protected in acting upon any such notice,
resolution, order, certificate or other communication believed by it to be
genuine and to have been signed by the proper party or parties. Notices to
Participants and/or Beneficiaries as required under this Master Trust Agreement
shall be deemed to have been given if to such parties' last recorded address on
the records of the Trustee, or, if given by facsimile or by telephone followed
by receipt of a signed acknowledgment in writing by the Trustee.
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8.8 Successors and Assigns. This Master Trust Agreement shall be binding
-----------------------
upon and inure to the benefit of the Company and the Trustee and their
respective successors and assigns.
8.9 Gender and Number. Words used in the masculine shall also apply to
------------------
the feminine where applicable, and when the context requires, the plural shall
be read as the singular and the singular as the plural.
8.10 Headings. Headings in this Master Trust Agreement are inserted for
---------
convenience of reference only and any conflict between such headings and the
text shall be resolved in favor of the text.
8.11 Counterparts. This Master Trust Agreement may be executed in an
-------------
original and any number of counterparts, each of which shall be deemed to be an
original of one and the same instrument.
8.12 Third Party Beneficiaries. It is intended that wherever the rights
--------------------------
and obligations of the parties hereto require, or may be exercised only with,
the consent of any Participant or Beneficiary of a Plan, such third party shall
be a third party beneficiary of the parties' agreement hereunder and may
initiate an action in law or in equity in a court of competent jurisdiction to
enforce any right granted hereunder. If any action is initiated by a third
party hereunder, he or she shall be entitled to recover reasonable attorneys'
fees, costs and necessary disbursements in addition to any other relief to which
the Trust may be entitled.
IN WITNESS WHEREOF the Company and the Trustee have signed this Master
Trust Agreement as of the date first written above.
TRUSTEE: THE COMPANY:
- -------- ------------
ZERO CORPORATION, a
Company, a California Delaware corporation
corporation
By: ________________________ By: _________________________
Title: Wilford D. Godbold, Jr.
President and Chief
Executive Officer
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EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is made, entered into, and is effective as of
this day of , 199__ (hereinafter referred to as the "Effective Date"), by
and between ZERO Corporation, a Delaware corporation (hereinafter referred to as
the "Company") having its principal offices in Los Angeles, California, and
_____________________ (hereinafter referred to as the "Executive").
WHEREAS, the Executive is presently employed by the Company in the capacity
of ______________ of the Company;
WHEREAS, the Executive possesses considerable experience and an intimate
knowledge of the business and affairs of the Company, its policies, methods,
personnel, and operations; and
WHEREAS, the Company recognizes that the Executive's contribution has been
substantial and meritorious and, as such, the Executive has demonstrated unique
qualifications to act in an executive capacity for the Company; and
WHEREAS, the Company is desirous of assuring the continued employment of
the Executive in the above stated capacity, and Executive is desirous of having
such assurance.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements of the parties set forth in this Agreement, and of
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
SECTION 1. TERM OF EMPLOYMENT
The Company hereby agrees to employ the Executive and the Executive hereby
agrees to continue to serve the Company, in accordance with the terms and
conditions set forth herein, for a period of ______ (__) year[s], commencing as
of the Effective Date of this Agreement, as indicated above (the "original
Employment Term"); subject, however, to earlier termination as expressly
provided in Section 6 herein.
This Agreement, along with all corresponding rights, duties, and covenants,
shall automatically expire at the end of the Employment Term, with the exception
of the Executive's obligations contained in Section 7 and the payment provisions
in Section 6 herein (each of which shall survive such expiration).
SECTION 2. POSITION AND RESPONSIBILITIES
During the term of this Agreement, the Executive agrees to serve as
________________ of the Company. In his capacity as __________________ of the
Company, the Executive shall report directly to
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the ________________, and shall maintain the level of duties and
responsibilities as in effect as of the Effective Date, or such higher level of
duties and responsibilities as he may be assigned during the term of this
Agreement. The Executive shall have the same status, privileges, and
responsibilities normally inherent in such capacities in companies of similar
size and character.
SECTION 3. STANDARD OF CARE
During the term of this Agreement, the Executive agrees to devote
substantially all of his/her business time, attention, and energies to the
Company's business and shall not be engaged in any other business activity,
whether or not such business activity is pursued for gain, profit, or other
pecuniary advantage; provided, however, subject to Section 7 herein, the
Executive may serve as a director of other companies so long as such service is
not injurious to the Company. The Executive covenants, warrants, and represents
that he/she shall devote his/her best efforts to the fulfillment of his/her
employment obligations.
Notwithstanding the foregoing, this Section 3 shall not be construed as
preventing the Executive from engaging in outside activities, such as
involvement with trade associations, business and professional organizations and
activities, and charitable and other community activities, which do not
substantially interfere with the fulfillment of his employment obligations under
Section 2. In addition, subject to Section 7 hereof, this Section 3 shall not be
construed as preventing the Executive from investing assets in such form or
manner as will not require his services in the daily operations of the affairs
of the companies in which such investments are made.
SECTION 4. COMPENSATION
As remuneration for all services to be rendered by the Executive during the
term of this Agreement, and as consideration for complying with the covenants
herein, the Company will pay and provide to the Executive the following:
4.1 BASE SALARY. The Company will pay the Executive an annual base salary
in an amount which shall be established from time to time by the Board of
Directors of the Company or the Board's designee; provided, however, that such
base salary will not be less than $_________ per year. This base salary will be
paid to the Executive in equal semi-monthly installments throughout the year,
consistent with the normal payroll practices of the Company.
The annual base salary will be reviewed annually in March following the
Effective Date of this Agreement, while this Agreement is in force, to ascertain
whether, in the judgment of the Board or the Board's designee, such base salary
should be increased, based primarily on the performance of the Executive
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during the year, consideration of competitive levels of pay for similar
executives, and the then current rate of inflation. If so increased, the base
salary as stated above will, likewise, be increased for all purposes of this
Agreement (such base salary, with any such increases, shall be the "Base
Salary"). Adjustments to Base Salary will become effective on April 1st of each
year.
4.2 ANNUAL BONUS. The Company will provide the Executive with the
opportunity to earn an annual cash bonus on the basis of the executive bonus
plan in effect on the Effective Date.
4.3 LONG-TERM INCENTIVES. The Company will provide the Executive the
opportunity to earn a long-term incentives on the basis of the Company's Stock
Option Plan effective on the Effective Date.
4.4. RETIREMENT BENEFITS. The Company will provide the Executive with the
opportunity to participate in the Company's retirement benefits which the
Executive is receiving on the Effective Date, including the ZERO Corporation
Retirement Savings Plan, the ZERO Corporation Executive Deferred Compensation
Plan, [the Joint Life Insurance Plan], subject, in each case, to the eligibility
and participation requirements of such plans.
4.5. EMPLOYEE BENEFITS. The Company will provide the Executive with the
opportunity to participate in the Company's employee benefits which the
Executive is receiving on the Effective Date, including group term life
insurance, comprehensive health and major medical insurance, dental insurance,
short-term and long-term disability, and vacation, subject, in each case, to the
eligibility and participation requirements of such plans.
4.6. PERQUISITES. The Company will provide the Executive, at the cost of
the Company, the perquisites, including expense reimbursement, which the
Executive is receiving on the Effective Date.
4.7. ADDITIONAL COMPENSATION/RIGHT TO CHANGE PLANS AND/OR BENEFITS.
Nothing in Sections 4.1 to 4.6 herein to the contrary, the Company may provide
the Executive the opportunity to participate in such additional plans and
benefits as the Company deems appropriate. Nothing in Sections 4.2 to 4.6 to
the contrary, the Company may modify, amend or replace plans or benefits therein
described so long as such modifications, amendments or replacements provide the
Executive with benefits which are commensurate with the opportunity typically
offered to executives having the same or similar duties and responsibilities as
the executives at companies similar in size and in character to the Company.
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SECTION 5. EXPENSES
The Company will pay, or reimburse the Executive, for all ordinary and
necessary expenses, in a reasonable amount, which the Executive incurs in
performing his duties under this Agreement including, but not limited to,
travel, entertainment, professional dues and subscriptions, and all dues, fees,
and expenses associated with membership in various professional, business, club
memberships and civic associations and societies for which the Executive is
receiving reimbursement as of the Effective Date.
SECTION 6. EMPLOYMENT TERMINATIONS
6.1. EXECUTIVE TERMINATION DUE TO RETIREMENT. After the age of 55, the
Executive may terminate Executive's employment under this Agreement by reason of
retirement.
Upon such termination, the Company will pay and provide to the Executive
those amounts and benefits set forth in Section 6.8(a) herein.
6.2. EXECUTIVE TERMINATION DUE TO DEATH. Immediately upon the death of
the Executive, Executive's employment shall be deemed terminated.
Upon such termination, the Company will pay and provide to the beneficiary
of Executive, as designated by the Executive during the Executive's lifetime, or
to the Executive's estate, as appropriate, those amounts and benefits set forth
in Section 6.8(a) herein.
6.3 COMPANY TERMINATION OF EXECUTIVE DUE TO DISABILITY. Immediately upon
the date the Executive becomes "Disabled", as defined below, the Executive's
employment shall be deemed terminated.
Upon such termination, the Company will pay and provide to the Executive
those amounts and benefits set forth in Section 6.8(a) herein.
The term "Disability" shall mean the incapacity of the Executive, due to
injury, illness, disease, or bodily or mental infirmity to engage in the
performance of substantially all of the usual duties of employment with the
Company as contemplated by Section 2 herein for a period of more than ninety
(90) calendar days, in the aggregate, during any period of twelve (12)
consecutive months, or in the event of the Board's reasonable expectation that
the Executive's Disability will exist for more than a period of ninety (90)
calendar days, upon receipt and in reliance on competent written medical advice
from one or more individuals, selected by the Board, who are qualified to give
such professional medical advice. The date of the Executive's Disability shall
be a date specified in a notice from the Board,
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provided such notice is delivered to the Executive at least sixty (60) calendar
days prior to the effective date of such termination.
It is expressly understood that the Disability of the Executive will not
constitute a failure by Executive to perform Executive's duties hereunder and
will not be deemed a breach or default by the Executive hereunder.
6.4. EXECUTIVE'S VOLUNTARY TERMINATION. The Executive may terminate the
Executive's employment for any reason at any time by giving the Board of
Directors of the Company written notice of intent to terminate, delivered at
least ninety (90) calendar days prior to the effective date of such termination
(such period not to include vacation). The termination will automatically
become effective upon the expiration of the ninety (90) day notice period.
Upon such termination, the Company will pay and provide to the Executive
those amounts and benefits set forth in Paragraph 6.8(a) herein.
6.5. COMPANY TERMINATION FOR CAUSE. The Board may terminate the
Executive's employment at any time for "Cause", as defined below, by giving the
Executive written notice of the Company's intent to terminate Executive's
employment for Cause, provided the Board delivers such notice to the Executive.
Upon such termination, the Company will pay and provide to the Executive
the amounts and benefits set forth in Section 6.8(a) herein.
"Cause" shall be determined by the Board in the exercise of good faith and
reasonable judgment; and shall mean the willful, illegal or gross misconduct,
fraud, conviction of a felony, consistent gross neglect of duties, or wanton
negligence by the Executive in the performance of his duties hereunder which is
materially and demonstrably injurious to the Company, or the material breach by
the Executive of this Agreement. The Company's Board of Directors, by majority
vote, shall make the determination of whether Cause exists, after providing the
Executive with notice of the reasons the Board believes Cause may exist and the
underlying facts and circumstances, and after giving the Executive the
opportunity to respond to the Board regarding the allegation that Cause exists.
6.6. COMPANY INVOLUNTARY TERMINATION WITHOUT CAUSE. The Board may
terminate the Executive's employment at any time by giving the Executive written
notice of the Company's intent to terminate Executive's employment without
cause, provided the Board delivers such notice to the Executive at least one
hundred eighty (180) calendar days prior to the effective date of such
termination.
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Upon the effective date of such termination, the Company will pay and
provide to Executive those amounts and benefits set forth in Section 6.8(b)
herein.
6.7. EXECUTIVE TERMINATION FOR GOOD REASON. The Executive may terminate
Executive's employment under this Agreement at any time for "Good Reason", as
defined below, by giving the Board written notice of Executive's intent to
terminate Executive's employment for Good Reason, provided the Executive
delivers such notice to the Board.
Upon the effective date of such termination, the Company will pay and
provide to Executive those amounts and benefits set forth in Section 6.8(b)
herein.
"Good Reason" shall mean the occurrence of any one or more of the following
without the Executive's express written consent:
(a) The assignment of the Executive to duties materially inconsistent
with the Executive's authorities, duties, responsibilities, and status
(including offices, titles, and reporting requirements) as an officer of
the Company, or a reduction or alteration in the nature or status of the
Executive's authorities, duties, or responsibilities in each case from
those in effect at the effective date;
(b) The Company's requiring the Executive to be based at a location
which is at least twenty-five (25) miles further from the Executive's
current primary residence than is such residence from the Company's current
headquarters, except for required travel on the Company's business to an
extent substantially consistent with the Executive's business obligations
prior to the Effective Date; or
(c) A reduction by the Company in the Executive's Base Salary as
provided in Section 4.1 herein.
The Executive's right to terminate employment for Good Reason will not be
affected by the Executive's incapacity due to physical or mental illness. The
Executive's continued employment will not constitute consent to, or a waiver of
rights with respect to, any circumstance constituting Good Reason herein.
6.8 PAYMENTS UPON TERMINATION.
(a) Upon termination of Executive's employment under Sections 6.1,
6.2, 6.3, 6.4 or 6.5 herein, the Company will pay to the Executive the
following:
(i) Base Salary, at the rate in effect immediately prior to such
termination, as calculated in Section 4.1 herein, to and including the
date of termination, and
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(ii) A cash bonus payment, as calculated in Section 4.2 herein,
pro rated to and including the date of termination.
In addition, the Company will provide to the Executive all other benefits
to which the Executive has a vested right under Sections 4.3, 4.4, 4.5 and
4.6 herein.
With the exception of the Company's obligations under this Section
6.8(a) herein (which will survive such termination), the Company and the
Executive will thereafter have no further obligations under this Agreement.
(b) Upon termination of Executive's employment under Paragraphs 6.6
or 6.7 herein, the Company will pay to the Executive the following:
(i) Base Salary, at the rate in effect immediately prior to such
termination, as calculated in Section 4.1 herein, to and including the
original Employment Term, and
(ii) A cash bonus payment based upon the annual cash bonus award
made to the Executive in the 12 months preceding the Effective Date
pro rated for the original Employment Term.
In addition, the Company will provide to the Executive, to and including
for the original Employment Term, a continuation of the Executive's
benefits under Sections 4.3, 4.4 and 4.5 herein and thereafter will provide
the Executive all other benefits to which the Executive has a vested right
under Sections 4.3, 4.4, 4.5 and 4.6 herein.
With the exception of the Executive's covenants contained in Section 7
herein and the Company's obligations under this Section 6.8(b) herein (each
of which will survive such termination), the Company and the Executive will
thereafter have no further obligations under this Agreement.
SECTION 7. NONCOMPETITION
7.1. PROHIBITION ON COMPETITION. Without the prior written consent of the
Company, during the term of this Agreement or any period during which Base
Salary and annual cash bonus amounts are paid hereunder, the Executive will not,
as an employee or an officer, engage directly or indirectly in any business or
enterprise which is "in competition" with the Company or its successors or
assigns.
However, the Executive will be allowed to purchase and hold for investment
less than three percent (3%) of the shares of any
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corporation whose shares are regularly traded on a national securities exchange
or in the over-the-counter market which are "in competition" with the Company.
7.2. DISCLOSURE OF INFORMATION. The Executive recognizes that Executive
has access to and knowledge of certain confidential and proprietary information
of the Company which is essential to the performance of Executive's duties under
this Agreement. The Executive will not, during the periods described in Section
7.1 hereof, in whole or in part, disclose such information to any person, firm,
corporation, association, or other entity for any reason or purpose whatsoever,
nor will he make use of any such information for his own purposes unless
compelled to do so by legal process.
7.3. COVENANTS REGARDING OTHER EMPLOYEES. During the period described in
Section 7.1 hereof, the Executive agrees not to induce or attempt to induce any
employee of the Company to terminate his or her employment with the Company,
accept employment with any competitor of the Company, or to interfere in a
similar manner with the business of the Company.
SECTION 8. INDEMNIFICATION
The Company hereby covenants and agrees to indemnify and hold harmless the
Executive fully, completely, and absolutely against and in respect to any and
all actions, suits, proceedings, claims, demands, judgments, costs, expenses
(including attorney's fees), losses, and damages resulting from the Executive's
good faith performance of Executive's duties and obligations under the terms of
this Agreement.
SECTION 9. ASSIGNMENT
9.1. ASSIGNMENT BY COMPANY. This Agreement shall be deemed assigned or
transferred to, and will be binding upon and will inure to the benefit of, any
successor of the Company, and any such entity will be deemed substituted for all
obligations of the "Company" under the terms of this Agreement. Additionally,
the Company agrees that the ultimate parent of the Company will agree in writing
to unconditionally guaranty the performance of the Company or such successor.
Notwithstanding such assignment, the Company will remain, with such successor,
jointly and severally liable for all its obligations hereunder.
As used in this Agreement, the term "successor" shall mean any person,
firm, corporation, or business entity which at any time, whether by merger,
purchase of stock, or otherwise, acquires all or substantially all of the assets
or business of the Company or any affiliate thereof. As used in this Agreement,
the terms "parent" and "affiliate" shall have the meanings ascribed thereto in
Rule 405 of the Securities Act of 1933.
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Except as herein provided, this Agreement may not otherwise be assigned by
the Company, and any such purported assignment is void.
9.2. ASSIGNMENT BY EXECUTIVE. This Agreement is not assignable by
Executive and any attempt to assign by Executive is void. However, the payment
provisions of this Agreement will inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, executors, and
administrators, successors, heirs, distributees, devisees, and legatees. If the
Executive should die while any amounts payable to the Executive hereunder remain
outstanding, all such amounts, unless otherwise provided herein, will be paid in
accordance with the terms of this Agreement to the Executive's devisee, legatee,
or other designee or, in the absence of such designee, to the Executive's
estate.
SECTION 10. DISPUTE RESOLUTION AND NOTICE
10.1. DISPUTE RESOLUTION. The Executive shall have the right and option
to elect to have any good faith dispute or controversy arising under or in
connection with this Agreement settled by litigation or by arbitration.
If arbitration is selected, such proceeding will be conducted before a
panel of three (3) arbitrators sitting in a location selected by the Executive
within fifteen (15) miles from the location of his principal place of
employment, in accordance with the rules of the American Arbitration Association
then in effect. Judgment may be entered on the award of the arbitrator in any
court having jurisdiction.
All expenses of such litigation or arbitration, including the reasonable
fees and expenses of the legal representative for the Executive, and necessary
costs and disbursements incurred as a result of such dispute or legal
proceeding, and any prejudgment interest, will be borne by the Company.
10.2. NOTICE. Any notices, requests, demands, or other communications
provided for by this Agreement will be sufficient if in writing and if sent by
registered or certified mail to the Executive at the last address he has filed
in writing with the Company or, in the case of the Company, at its principal
offices.
SECTION 11. MISCELLANEOUS
11.1. ENTIRE AGREEMENT. This Agreement supersedes any prior agreements or
understandings, oral or written, between the parties hereto or between the
Executive and the Company with respect to the subject matter hereof and
constitutes the entire Agreement of the parties with respect thereto.
11.2. MODIFICATION. This Agreement will not be varied, altered, modified,
canceled, changed, or in any way amended except
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by mutual agreement of the parties in a written instrument executed by each of
the parties hereto or their legal representatives.
11.3. SEVERABILITY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect.
11.4. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.
11.5. TAX WITHHOLDING. The Company may withhold from any benefits payable
under this Agreement all federal, state, city, or other taxes as may be required
pursuant to any law or governmental regulation or ruling.
11.6. BENEFICIARIES. The Executive may designate one or more persons or
entities as the primary and/or contingent beneficiaries of any amounts to be
received under this Agreement. Such designation must be in the form of a signed
writing sent to the Company to the attention of the Corporate Secretary or to
the Board or the Board's designee. The Executive may make or change such
designation at any time.
SECTION 12. GOVERNING LAW
To the extent not preempted by federal law, the provisions of this
Agreement shall be construed and enforced in accordance with the laws of the
State of California.
IN WITNESS WHEREOF, the Executive and the Company (pursuant to a resolution
adopted at a duly constituted meeting of its Board of Directors) have executed
this Agreement, as of the day and year first above written.
Executive:
----------------------------
ATTEST ZERO CORPORATION
By: _____________________ By: ________________________
Corporate Secretary Chairman, Compensation
Committee of the Board of
Directors
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AND CONDENSED STATEMENTS OF CONSOLIDATED
INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> DEC-31-1997
<CASH> 22,051
<SECURITIES> 4,918
<RECEIVABLES> 38,363
<ALLOWANCES> 826
<INVENTORY> 34,137
<CURRENT-ASSETS> 102,379
<PP&E> 106,776
<DEPRECIATION> 57,444
<TOTAL-ASSETS> 206,361
<CURRENT-LIABILITIES> 24,066
<BONDS> 0
0
0
<COMMON> 166
<OTHER-SE> 117,472
<TOTAL-LIABILITY-AND-EQUITY> 206,361
<SALES> 195,927
<TOTAL-REVENUES> 195,927
<CGS> 130,705
<TOTAL-COSTS> 130,705
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,588
<INCOME-PRETAX> 26,347
<INCOME-TAX> 9,838
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<NET-INCOME> 16,509
<EPS-PRIMARY> 1.31
<EPS-DILUTED> 1.31
</TABLE>
