ZYTEC CORPORATION
A MINNESOTA CORPORATION
7575 MARKET PLACE DRIVE
EDEN PRAIRIE, MINNESOTA 55344
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 9, 1996, AT 3:00 P.M.
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TO ZYTEC CORPORATION SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of Zytec
Corporation (the "Company"), will be held on Wednesday, October 9, 1996 at 3:00
o'clock p.m., C.D.T., at the offices of the Company at 7575 Market Place Drive,
Eden Prairie, Minnesota 55344, for the following purposes:
1. To consider and act upon a proposal to approve the Zytec
Corporation 1996 Employee Stock Purchase Plan.
2. To transact such other business as may properly come before
the Special Meeting or any adjournments thereof.
In accordance with the Bylaws of the Company, the Board of Directors has set the
close of business on September 16, 1996 as the record date for the determination
of the shareholders entitled to notice of and to vote at the Special Meeting or
any adjournments thereof.
Your attention is respectfully directed to the attached Proxy Statement and the
Proxy. IF YOU DO NOT EXPECT TO BE PRESENT AT THE SPECIAL MEETING, PLEASE FILL IN
THE ATTACHED PROXY AND DATE, SIGN AND MAIL IT AS PROMPTLY AS POSSIBLE IN ORDER
TO SAVE THE COMPANY FURTHER SOLICITATION EXPENSE.
By order of the Board of Directors
SHERMAN WINTHROP
Secretary
Dated: September 18, 1996
ZYTEC CORPORATION
A MINNESOTA CORPORATION
7575 MARKET PLACE DRIVE
EDEN PRAIRIE, MINNESOTA 55344
612-941-1100
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PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 9, 1996
------------------------------------
SOLICITATION OF PROXIES
This Proxy Statement is submitted in support of the solicitation of the enclosed
proxy by the Board of Directors of Zytec Corporation, a Minnesota corporation
(the "Company"), for use at a special meeting of the shareholders of the Company
(the "Special Meeting") to be held on October 9, 1996 at 3:00 o'clock p.m. at
the Company's offices at 7575 Market Place Drive, Eden Prairie, Minnesota 55344,
and at any adjournments thereof. The cost of solicitation will be borne by the
Company. This Proxy Statement and the accompanying Proxy and Notice of Special
Meeting of Shareholders is intended by the Company to be mailed to its
shareholders on or about September 18, 1996. The Company may reimburse brokerage
firms, banks, and other custodians, nominees, and fiduciaries for expenses
reasonably incurred in forwarding solicitation materials to beneficial owners of
shares.
The Company may have one or more of its officers or employees communicate by
telephone, telegraph, or mail with shareholders who have not returned proxies.
VOTING AND REVOCATION OF PROXY
The Special Meeting is being held to consider and act upon a proposal to approve
the Zytec Corporation 1996 Employee Stock Purchase Plan, and to transact such
other business as may properly come before the meeting or any adjournments
thereof.
Only holders of record of shares of the Company's no par value common stock (the
"Common Stock") at the close of business on September 16, 1996 will be entitled
to notice of and to vote at the Special Meeting and any adjournment thereof. The
securities of the Company outstanding as of September 16, 1996, the record date
for the Special Meeting, and which are entitled to vote at the meeting, consist
of 9,144,023 shares of Common Stock, each share being entitled to one vote.
The enclosed Board of Directors' proxy, when properly signed and returned to the
Company, will be voted at the Special Meeting as directed therein. Proxies in
which no direction is given with respect to the matters of business to be
transacted at the meeting will be voted FOR the approval of the Zytec
Corporation 1996 Employee Stock Purchase Plan. While the Board of Directors
knows of no other matters to be presented at the Special Meeting or any
adjournment thereof, all proxies returned to the Company will be voted on any
such matter in accordance with the judgment of the proxy holders.
The enclosed proxy may be revoked at any time before it is voted by the
execution and delivery of a proxy bearing a later date or by notification in
writing given to the Secretary of the Company prior to the meeting. The enclosed
proxy may also be revoked by attending the meeting and electing to vote in
person.
A quorum, consisting of a majority of the shares of Common Stock entitled to
vote at the Special Meeting, must be present in person or by proxy before action
may be taken at the Special Meeting. If an executed proxy is returned and the
shareholder has abstained from voting on any matter, the shares represented by
such proxy will be considered present at the meeting for purposes of determining
a quorum and for purposes of calculating the vote, but will not be considered to
have been voted in favor of such matter. If an executed proxy is returned by a
broker holding shares in "street name" which indicates that the broker does not
have discretionary authority as to certain shares to vote on one or more
matters, such shares will be considered present at the meeting for purposes of
determining a quorum, but will not be considered to be represented at the
meeting for purposes of calculating the vote with respect to such matter.
APPROVAL OF ZYTEC CORPORATION
1996 EMPLOYEE STOCK PURCHASE STOCK PLAN
(PROPOSAL 1)
On August 23, 1996, the Company's Board of Directors adopted the Zytec
Corporation 1996 Employee Stock Purchase Plan (the "Stock Purchase Plan"),
subject to the approval of the Company's shareholders within one year. The
purpose of the Stock Purchase Plan is to encourage and enable employees of the
Company and any "Subsidiary" or "Parent" of the Company (as those terms are
defined in the Stock Purchase Plan) to acquire a proprietary interest in the
Company through ownership of shares of Common Stock. The Stock Purchase Plan
allows employees of the Company and any Subsidiary or Parent to make
contributions to the Stock Purchase Plan as described below to purchase shares
of Common Stock. Management believes that employees who elect to participate in
the Stock Purchase Plan will have a closer identification with the Company and
more motivation to work for the Company's success by reason of their ability as
shareholders to participate in the Company's growth and earnings.
The following discussion of the principal features and effects of the Stock
Purchase Plan is qualified in its entirety by reference to the text of the Stock
Purchase Plan.
GENERAL
The Stock Purchase Plan provides for voluntary contributions by eligible
employees of the Company through payroll deductions. On the last day of each
Phase (as defined below) during the term of the Stock Purchase Plan (the "Stock
Purchase Date"), a participating employee shall be deemed to have purchased a
number of shares of the Common Stock of the Company which the balance of the
accumulated payroll deductions in such employee's account at the Stock Purchase
Date will purchase at the applicable purchase price. The first Phase will
commence on October 10, 1996 or, if later, the day following the date of the
approval of the Stock Purchase Plan by the Company's shareholders and end at
5:00 p.m., Minneapolis, Minnesota time, on December 31, 1996. Each succeeding
Phase will commence on the first day of each calendar quarter immediately
following the completion of the preceding Phase and will end at 5:00 p.m.,
Minneapolis, Minnesota time, on the last day of that calendar quarter.
ELIGIBLE EMPLOYEES
The Stock Purchase Plan is available to any person who is customarily employed
on a full-time or part-time basis by the Company or any Subsidiary or Parent to
work at least 20 hours per week and who has been continuously employed for a
period of 12 months. However, no employee will be granted the right to purchase
Common Stock under the Stock Purchase Plan (i) if, immediately after the grant,
such employee would own Common Stock, and/or hold outstanding options to
purchase Common Stock, possessing 5% or more of the total combined voting power
or value of all classes of stock of the Company; or (ii) if the grant would
cause his or her rights to purchase Common Stock under all employee stock
purchase plans of the Company to accrue at a rate which exceeds $25,000 in fair
market value of such Common Stock (determined at the time such right is granted)
for the calendar year in which such right is outstanding.
EMPLOYEE CONTRIBUTIONS
Each eligible employee who enrolls in the Stock Purchase Plan will elect to make
contributions to the Stock Purchase Plan by payroll deductions (in full dollar
amounts), in an aggregate amount not less than $10.00 and not in excess of
$500.00 for each complete two-week payroll period during each Phase. A
participant may not make any separate cash payment into the Stock Purchase Plan.
The purchase price of the Company's Common Stock acquired by participants under
the Stock Purchase Plan will be equal to the lesser of 85% of the fair market
value of the Common Stock at the time such option is granted or 85% of the fair
market value of the Common Stock on the Stock Purchase Date. Under the Stock
Purchase Plan, with the Common Stock quoted on the Nasdaq National Market, fair
market value is the officially quoted closing price of the Common Stock as
quoted on the Nasdaq National Market.
SHAREHOLDER RIGHTS OF PARTICIPANTS
Each participant in the Stock Purchase Plan has the right to vote and, subject
to applicable law, dispose of the shares of Common Stock purchased under the
Stock Purchase Plan. However, no employee will have any rights as a shareholder
with respect to shares of Common Stock purchasable upon the exercise of an
option granted under the Stock Purchase Plan until that option is exercised.
Stock purchases will be recorded in the Company's records on the Stock Purchase
Date, but certificates evidencing the Common Stock purchased by employees under
the Stock Purchase Plan will only be prepared and delivered pursuant to written
request.
EFFECTS OF WITHDRAWAL, TERMINATION OF EMPLOYMENT AND DEATH
WITHDRAWAL FROM STOCK PURCHASE PLAN. A participant in the Stock Purchase Plan
may terminate his or her participation in the Stock Purchase Plan and withdraw
all payroll deductions credited to his or her account thereunder at any time
prior to the next Stock Purchase Date by giving twenty-one days written notice
to the Company as provided in the Stock Purchase Plan. All of such participant's
payroll deductions credited to his or her account which have not theretofore
been used to purchase Common Stock under the Stock Purchase Plan then will be
paid to him or her within twenty-one days after receipt of his or her notice of
withdrawal, no further payroll deductions will be made from his or her pay under
the Stock Purchase Plan, and that person will be deemed to have withdrawn from
participation in the Stock Purchase Plan. A participant's withdrawal from
participation in the Stock Purchase Plan at any time will not affect his or her
eligibility to participate in the Stock Purchase Plan on any subsequent
enrollment date or in any similar plan of the Company. Upon withdrawal from the
Plan, the withdrawing participant, or in the case of the death of a participant,
the person designated by the participant, may elect either (i) to receive a
certificate for the number of whole shares credited to the participants share
account plus the cash value of any fractional share, or (ii) to have the shares
sold and to receive a cash payment for such sale.
TERMINATION OF EMPLOYMENT. Upon termination of the participant's employment with
the Company for any reason, including retirement or death while in the employ of
the Company, the Company will deliver to such participant or, in the case of
death of such participant, to the person or persons entitled thereto, the
payroll deductions credited to the participant's account under the Stock
Purchase Plan (without interest) which were not used for the purchase of Common
Stock thereunder.
NUMBER OF SHARES SUBJECT TO STOCK PURCHASE PLAN; ADJUSTMENT
The maximum number of shares of Common Stock that may be issued under the Stock
Purchase Plan, subject to adjustment as described below, is 600,000 shares. Such
shares will be authorized but unissued shares of Common Stock. Subject to any
required action by shareholders of the Company, the number of shares covered by
each outstanding option, and the exercise price per share, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a subdivision or consolidation of shares
or the payment of a share dividend or any other such increase or decrease in the
number of such shares effected without receipt of consideration by the Company.
TRANSFERABILITY
A participant's rights to purchase shares under the Stock Purchase Plan shall be
exercisable only by that participant. Neither payroll deductions credited to a
participant's account nor any rights to purchase or receive shares under the
Stock Purchase Plan may be assigned, transferred, pledged, or otherwise disposed
of in any way by the participant other than by will or by the laws of descent or
distribution.
The Stock Purchase Plan provides that in the event of a Public Offering of the
Common Stock of the Company or in the event of a Control Transaction, the
Company may require that a holder of an option granted under the Stock Purchase
Plan, a holder of shares of Common Stock acquired upon the exercise of such an
option, or a holder of equity securities obtained in exchange for such shares of
Common Stock, shall not sell, transfer, gift, or otherwise dispose of all or any
of such options, shares of Common Stock or equity securities (i) for a period of
up to 180 days from the effective date of a Public Offering, or (ii) such period
of time after a Control Transaction as shall be necessary or advisable, in the
Company's judgment after consultation with any experts as it shall deem
advisable, to assure, if and as necessary, that the Control Transaction is
treated as a "pooling of interests" under generally accepted accounting
principles, assuming such treatment is intended in connection with the Control
Transaction. The terms "Public Offering" and "Control Transaction" are defined
in the Stock Purchase Plan.
MERGER, CONSOLIDATION, REORGANIZATION OR LIQUIDATION
Upon (i) any merger of the Company as a result of which the Company is not the
continuing or surviving corporation; (ii) any sale or other transfer of all or
substantially all of the assets of the Company, or (iii) any liquidation or
dissolution of the Company, the Board of Directors may elect to accelerate the
termination date of any Phase effective on the date specified by the Board of
Directors. However, if, in the opinion of the certified public accountants of
the Company or the "successor" entity where the Company's business is
transferred to another entity pursuant to a Control Transaction, acceleration of
the ending date of any Phase would preclude a "pooling of interests" treatment
for the Control Transaction under generally accepted accounting principles, the
ending date of a Phase may not accelerate but will continue according to the
provisions of the Plan, and the options granted under the Plan shall continue to
be subject to the termination, restrictions on transferability, and other
provisions of the Plan.
ADMINISTRATION
The Stock Purchase Plan will be administered by the Board of Directors or by the
Compensation Committee of the Board of Directors (the "Committee"). In
particular, decisions made under the Stock Purchase Plan with respect to the
Company's executive officers and directors shall be made by the Committee. No
member of the Committee will be eligible to purchase Common Stock under the
Stock Purchase Plan. Subject to the provisions of the Stock Purchase Plan, the
Board of Directors or the Committee shall have authority in its discretion to
interpret and construe any and all provisions thereof, to adopt rules and
regulations for administering the Stock Purchase Plan, and to make all other
determinations deemed necessary or advisable for administering the Stock
Purchase Plan. The determinations of the Board of Directors or the Committee on
the foregoing matters shall be final, conclusive and binding upon all
participants and any and all persons claiming rights under the Stock Purchase
Plan under or through any participant.
AMENDMENT AND TERMINATION
The Board of Directors of the Company will have the power and authority to
terminate or amend the Stock Purchase Plan. However, the Board cannot, without
the approval of the shareholders of the Company, (i) increase the maximum number
of shares which may be issued under the Stock Purchase Plan (unless otherwise
expressly provided therein); or (ii) impair any outstanding option granted under
the Stock Purchase Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following description is a general summary of the current federal income tax
provisions relating to the rights granted under the Stock Purchase Plan and the
sale of shares of Common Stock acquired thereunder. The provisions summarized
below are subject to changes in federal income tax laws and regulations, and the
effects of such provisions may vary with individual circumstances. Under Section
423(a) of the Internal Revenue Code of 1986, as amended (the "Code"), the
transfer of a share of Common Stock to a participant pursuant to the Stock
Purchase Plan is entitled to the benefits of Section 421(a) of the Code.
Under Section 421(a), a participant will not be required to recognize income at
the time he or she acquires the right to purchase Common Stock under the Stock
Purchase Plan or when Common Stock is purchased thereunder. However, to the
extent the purchase price of the shares of Common Stock under the Stock Purchase
Plan is less than the fair market value of such Common Stock on the date of
purchase, Section 423(c) of the Code provides that if the holding periods
described below are met, the participant will recognize compensation income
(taxed as ordinary income) at the time the shares are sold or otherwise disposed
of in a taxable transaction (or in the event of the death of the participant
while owning such shares, whether or not the holding period requirements are
met). The amount of such compensation income will be equal to the lesser of (i)
the excess of the fair market value of the Common Stock at the time of such
disposition or death over the amount paid for the shares, or (ii) the excess of
the fair market value of the shares at the time the option was granted over the
option price. Such recognition of compensation income upon disposition shall
have the effect of increasing the basis of the shares in the participant's hands
by an amount equal to the amount of compensation income recognized. The Company
will not be entitled to any business expense deduction with respect to the Stock
Purchase Plan except in connection with a disqualifying disposition, as
discussed below. Any additional gain or loss resulting from the disposition (if
it is not a disqualifying disposition), which is measured by the difference
between the amount paid for the shares and the amount realized (less the amount
recognized as compensation income as described above), will be recognized by the
participant as long-term capital gain or loss. No portion of the amount received
pursuant to such a disposition will be subject to withholding for federal income
taxes or be subject to federal Social Security or federal unemployment taxes.
In order for a participant in the Stock Purchase Plan to receive the favorable
tax treatment provided in Section 421(a) of the Code, Section 423(a) requires
that the participant make no disposition of the shares within two years from the
date the participant obtains the right to purchase shares under the Stock
Purchase Plan nor within one year from the date the shares were purchased. In
addition, the participant must, with the exceptions noted above with respect to
death or disability, be an employee of the Company granting the rights under the
Stock Purchase Plan (or a parent or subsidiary of such corporation, as defined
in Sections 425(e) and (f) of the Code) at all times within the period beginning
on the date of the right to acquire shares under the Stock Purchase Plan arises
and ending on a date within three months before the date shares are acquired
under the Stock Purchase Plan.
If a participant disposes of Common Stock acquired pursuant to the Stock
Purchase Plan before the expiration of the holding period requirements set forth
above, the participant will realize, at the time of the disposition, ordinary
income to the extent the fair market value of the Common Stock on the date the
shares were purchased exceeds the purchase price of such shares. The difference
between the fair market value of the Common Stock on the date the shares were
purchased and the amount realized upon disposition also will be treated as
ordinary income. Such income may be subject to the income tax withholding
requirements of the Code and federal Social Security withholding requirements.
At the time of the disqualifying disposition, the Company will be allowed a
corresponding business expense deduction under Section 162 of the Code to the
extent of the amount of the participant's ordinary income.
The Stock Purchase Plan is not subject to the provisions of the Employment
Retirement Income Security Act of 1974, as amended, and is not qualified under
Section 401(a) of the Code.
SHAREHOLDER APPROVAL
The affirmative vote of a majority of the shares of Common Stock of the Company
represented at the Special Meeting either in person or by proxy, assuming a
quorum is present, is required to approve the Stock Purchase Plan. If the
shareholders do not approve the Stock Purchase Plan, it will not be adopted.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
APPROVAL OF THE ZYTEC CORPORATION 1996 STOCK PURCHASE PLAN AS SET FORTH
IN PROPOSAL 1.
EXECUTIVE COMPENSATION
The following Table sets forth the cash and noncash compensation for 1995, 1994
and 1993 awarded to or earned by Zytec's Chief Executive Officer and its four
other highest paid executives whose salary earned in 1995 exceeded $100,000:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL -----------------
COMPENSATION NUMBER OF
------------------ STOCK OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY GRANTED (1) COMPENSATION (2)
- ----------------------------------------- -------- ------------------ ----------------- ------------------
<S> <C> <C> <C> <C>
Ronald D. Schmidt 1995 $241,130 0 $4,620
Chairman, President and 1994 229,664 0 4,620
Chief Executive Officer 1993 194,274 0 3,182
John M. Steel 1995 182,330 0 3,110
Vice President--Marketing and Sales 1994 173,664 0 3,096
1993 148,666 0 2,440
Josef J. Matz 1995 196,587 0 0
Managing Director of Zytec GmbH 1994 178,000 0 0
1993 163,900 0 0
N. Charles Wussow 1995 124,621 0 2,521
Vice President--Engineering 1994 112,879 0 1,498
1993 87,887(3) 100,000 44,146(4)
John B. Rogers 1995 134,200 0 2,684
Treasurer and Vice President--Finance 1994 120,225 0 2,404
1993 108,335 0 1,744
</TABLE>
- ------------------
(1) Mr. Wussow was granted a stock option under one of the Company's Incentive
Stock Option Plans ("ISOPs") on March 1, 1993, with an exercise price equal
to the fair market value of the Common Stock on the date of grant, which
becomes exercisable with respect to 20% of the shares subject to the option
each year thereafter. Options become exercisable under the ISOPs over five
years, beginning one year after the date of grant, so long as the employee
remains in the employ of the Company. No stock options were granted in
1993, 1994 or 1995 to any other executive officer named above.
(2) Except as otherwise noted, consists of contributions made by Zytec under
the Company's Section 401(k) defined contribution plan.
(3) Mr. Wussow's employment with the Company commenced on March 1, 1993.
(4) Represents relocation costs in connection with the hiring of Mr. Wussow.
STOCK OPTIONS
The Company currently maintains six Employee Incentive Stock Option Plans (the
"Plans" or the "ISOPs"). The six Plans now in existence were approved by the
Company's Board of Directors on December 16, 1983, September 24, 1984, October
25, 1985, February 6, 1987, January 29, 1993, and February 16, 1996. All of the
existing ISOPs were approved by the Company's shareholders within one year after
their adoption by the Board of Directors. The ISOPs are intended to assist the
Company in hiring and retaining well-qualified employees by allowing them to
participate in the ownership and growth of the Company through the grant of
options. Options granted under the ISOPs are intended to be "incentive stock
options" within the meaning of Section 422 of the Internal Revenue Code.
Management feels that the granting of options will serve as partial
consideration for, and give employees an additional inducement to, remain in the
service of the Company and provide them with an increased incentive to work for
the Company's success.
The ISOPs are administered by the Company's Board of Directors or, in certain
circumstances, by the Compensation Committee of the Board of Directors. The
Compensation Committee has authority to select the Company's executive officers
who will receive options and to determine the number and exercise price of such
options. In all other cases, the Board of Directors determines the employees who
will be granted options under the ISOPs and, subject to the provisions of the
ISOPs, determines the number of shares subject to each option and the exercise
price of the option. In addition, and subject to the authority of the
Compensation Committee as discussed above, the Board of Directors makes any
other determinations necessary or advisable for the administration of the ISOPs
consistent with their terms. Determinations by the Board of Directors or the
Compensation Committee, as the case may be, are final and conclusive. Grants of
options and other decisions of the Board of Directors or the Compensation
Committee are not required to be made on a uniform basis.
At June 30, 1996, an aggregate of 6,000,000 shares had been reserved for
issuance pursuant to the exercise of options under the ISOPs, of which 2,241,258
shares had been issued upon the exercise of stock options, 1,905,192 shares were
subject to outstanding options and 1,767,882 shares were available for future
grants under the ISOPs. The shares to be issued upon the exercise of options
granted under the ISOPs are currently authorized but unissued shares. The number
of shares of the Company's Common Stock available under the ISOPs and
purchasable upon the exercise of options issued under the Plans will be adjusted
to prevent dilution in the event of a stock split, combination of shares, stock
dividend or certain other similar events.
The following Table sets forth information concerning each exercise in 1995 by
the individuals named in the Summary Compensation Table of stock options granted
under the Plans and the value at December 31, 1995 of unexercised options held
by such individuals.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN 1995 AND YEAR-END OPTION VALUES
NUMBER OF VALUE ($) OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED VALUE AT YEAR-END AT YEAR-END
NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
- ----------------- ----------- -------- ------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
Ronald D. Schmidt 0 $0 0 / 0 $0 / $0
John M. Steel 0 0 0 / 0 0 / 0
Josef J. Matz 80,000 272,500(2) 40,000 / 80,000 200,000 / 400,000
N. Charles Wussow 0 0 40,000 / 60,000 190,000 / 285,000
John B. Rogers 0 0 0 / 0 0 / 0
</TABLE>
- ------------------
(1) Based on the difference between the December 29, 1995 closing price of
$5.75 per share, as reported on the Nasdaq National Market, and the
exercise price of the options.
(2) Based on the difference between the closing prices of $3.69 per share on
May 30, 1995, and $4.625 per share on November 1, 1995, the dates of
exercise, as reported on the Nasdaq National Market, and the exercise price
of the option.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
Recommendations regarding compensation paid to Zytec's executive
officers in 1995 were made to the Board of Directors by a Compensation Committee
consisting of Lawrence J. Matthews, John V. Titsworth, Sherman Winthrop, and
James S. Womack, all of whom are or were non-employee directors of Zytec. All
executive officers who serve on the Board of Directors abstain from voting on
executive officers' compensation affecting those executive officers who are
Board members.
COMPENSATION OF DIRECTORS
In 1995, the Company's Board of Directors authorized payment to all non-employee
directors of a $5,000 per year consulting fee, a $500 per meeting fee, and the
reimbursement of all out-of-pocket expenses incurred by them in attending
meetings of the Board of Directors. The non-employee directors of the Company
currently consist of Messrs. Gary C. Flack, Lawrence J. Matthews, Sherman
Winthrop, James S. Womack, and Dr. Fred C. Lee. Mr. Matthews is a non-employee
director as of his retirement in May 1993 and is not paid directors' fees. Total
directors fees paid in 1995 were $7,000 to each of Messrs. Flack, Womack,
Winthrop, Dr. Lee, and John V. Titsworth, who resigned from the Board of
Directors in August 1996. Beginning with the Company's 1996 fiscal year,
non-employee directors will receive an annual retainer of $7,500, a $500 per
meeting fee, and an additional fee of $14,500 to be paid in shares of the
Company's Common Stock valued as of the end of the year.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock of the Company as of August 30, 1996,
except as otherwise noted, by (i) each shareholder who is known by the Company
to own beneficially more than 5% of the outstanding Common Stock, (ii) each
director and each executive officer included in the Summary Compensation Table,
and (iii) all executive officers and directors as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) CLASS (2)
- ------------------------ ------------------------ ----------
<S> <C> <C>
Stein Roe & Farnham Incorporated 509,000 (3) 5.6%
One South Wacker Drive
Chicago, IL 60606
Ronald D. Schmidt 951,950 (4)(5) 10.4
7575 Market Place Drive
Eden Prairie, MN 55344
John M. Steel 864,952 (5) 9.5
7575 Market Place Drive
Eden Prairie, MN 55344
Lawrence J. Matthews 890,620 9.7
7601 Fifth Avenue
Richfield, MN 55423
Gary C. Flack 251,250 (4) 2.8
John B. Rogers 93,804 (5) 1.0
Sherman Winthrop 60,000 *
James S. Womack 60,000 *
Dr. Fred C. Lee 29,000 *
Josef J. Matz 156,000 (6) 1.7
N. Charles Wussow 60,000 (6) *
Max Davis 21,000 (6) *
All executive officers and directors as a
group (11 persons) 3,438,576 (7) 37.2%
</TABLE>
- ---------------
* Less than 1%.
(1) Unless otherwise indicated, each person or group has sole voting and
investment power with respect to all outstanding shares. The table includes
shares not outstanding but which may be acquired within 60 days of August
30, 1996 pursuant to the exercise of options to purchase Common Stock.
(2) The percentage calculation is based upon 9,135,623 shares outstanding at
August 30, 1996. The number of shares which may be acquired within 60 days
of August 30, 1996 pursuant to the exercise of options is deemed
outstanding for purposes of computing the percent of class owned by such
person.
(3) Reflects information as of December 31, 1995, based on a Schedule 13G,
dated February 12, 1996, filed by such company with the Securities and
Exchange Commission, which indicates that the shareholder has no voting
power and sole dispositive power with respect to said shares.
(4) Includes shares held by a partnership consisting of the individual and
members of his family, as follows: Mr. Schmidt (400,000 shares); and Mr.
Flack (25,650).
(5) Includes shares held by the individual's spouse and children, as follows:
Mr. Schmidt (1,700 shares); Mr. Steel (200,000), Mr. Flack (95,600), and
Mr. Rogers (48,502).
(6) Includes, for each individual named, the following number of shares subject
to non-qualified options or options granted under the ISOPs: Mr. Matz
(40,000), Mr. Wussow (60,000), and Mr. Davis (20,000).
(7) Includes 120,000 shares subject to non-qualified options or options granted
under the ISOPs.
COMPLIANCE WITH SECTION 16(A)
The Company's directors, executive officers, and any persons holding more than
10% of outstanding Common Stock are required to file reports concerning their
initial ownership of Common Stock and any subsequent changes in that ownership.
The Company believes that the filing requirements were satisfied for 1995. In
making this disclosure, the Company has relied solely on written representations
of its directors, executive officers and beneficial owners of more than 10% of
Common Stock and copies of the reports they have filed with the Securities and
Exchange Commission.
OTHER BUSINESS
All items of business intended by the management to be brought before the
meeting are set forth in this Proxy Statement, and the management knows of no
other business to be presented. If other matters of business not presently known
to the Board of Directors shall be properly raised at the Special Meeting, the
person named as the proxies will vote on such matters in accordance with their
best judgment.
FUTURE SHAREHOLDER PROPOSALS
Under the Securities Exchange Act of 1934, the shareholders of the Company have
certain rights to have shareholder proposals included in the Proxy Statement of
the Company for the Company's Annual Shareholders' Meeting in 1997. Any voting
shareholder desiring to submit a proposal for consideration at the 1997 Annual
Meeting should forward the proposal so that it will be received in the Company's
principal executive offices no later than November 27, 1996. Proposals received
by that date that are proper for consideration at the Annual Meeting and
otherwise conform to the rules of the Securities and Exchange Commission will be
included in the 1997 Proxy Statement. Due to the technical nature of the rights
of shareholders and the Company in this area, a shareholder desiring to make a
shareholder proposal should consider consulting his or her personal legal
counsel with respect to such rights.
By Order of the Board of Directors
SHERMAN WINTHROP
Dated: September 18, 1996 Secretary
Appendix A
ZYTEC CORPORATION
1996 EMPLOYEE STOCK PURCHASE PLAN
1. ESTABLISHMENT OF PLAN.
The Zytec Corporation 1996 Employee Stock Purchase Plan (the "Plan") is
intended to provide the employees of Zytec Corporation (the "Company") and its
Subsidiaries the opportunity to purchase common stock, no par value (the "Common
Stock"), of the Company, and thus to develop a stronger incentive to work for
the continued success of the Company. The Company intends that the Plan shall
qualify as an "employee stock purchase plan" under Section 423 of the Internal
Revenue Code of 1986, as amended (the "Code"). Therefore, the Plan shall be
construed in a manner consistent with the requirements of Section 423 of the
Code and the regulations thereunder.
2. PURPOSE.
The Plan is intended to encourage stock ownership by employees of the
Company, and thus provide an incentive to them to remain employed with the
Company, improve operations, increase profits, and contribute more significantly
to the Company's continued success.
3. DEFINITIONS.
(a) "Committee" shall mean the group of individuals described in
Section 6 of the Plan.
(b) "Employee" shall mean any employee, including an officer, of
the Company or its Subsidiaries who as of the day immediately
preceding the Enrollment Date for that Employee is customarily
employed by the Company for at least twenty (20) hours per
week.
(c) "Parent" shall mean any corporation defined as a parent of the
Company in Section 424(e) of the Code.
(d) "Phase" shall mean one of the phases of time occurring during
the term of this Plan, with the first phase ("Phase 1")
commencing on October 1, 1996, and ending at 5:00 o'clock
p.m., Minneapolis, Minnesota, time, on December 31, 1996, and
each succeeding phase commencing immediately on the first day
of the calendar quarter after the termination of the first
Phase and each preceding Phase thereafter and ending at 5:00
o'clock p.m., Minneapolis, Minnesota, time, on the last day of
that calendar quarter. Each Phase shall commence immediately
after the termination of the preceding Phase.
(e) "Subsidiary" shall mean any corporation defined as a
subsidiary of the Company in Section 424(f) of the Code.
4. ELIGIBILITY.
All Employees, as defined in Section 3 hereof, who are employed by the
Company or its Subsidiaries for a period of at least twelve (12) continuous
months prior to an Enrollment Date shall be eligible to participate in the Plan.
5. PARTICIPATION.
(a) ENROLLMENT. Participation in the Plan is voluntary. An
Employee may elect to participate in the Plan, and thereby
become a "Participant" in the Plan, by completing the Plan
payroll deduction form provided to him or her by the Company
and delivering it to the Company or its designated
representative not less than thirty (30) calendar days prior
to January 1, April 1, July 1, and October 1 of each year
during the term of the Plan (collectively, the "Enrollment
Dates" and each an "Enrollment Date"). Such enrollment shall
be effective on the first Enrollment Date occurring after the
date of the receipt by the Company of a payroll deduction form
from an Employee. Payroll deductions for a Participant in the
Plan shall commence on the first payday on or after an
Enrollment Date. Payroll deductions for each Phase shall
terminate on the last payday immediately prior to or
coinciding with the ending date of such Phase unless sooner
terminated by the Participant as provided in Section 10
hereof. After a Participant enrolls in the Plan, the
Participant shall continue to participate in the Plan until
such participation is terminated by the Participant as
provided in Section 10 hereof or is otherwise terminated
pursuant to the terms of this Plan.
(b) LEAVE OF ABSENCE. For purposes of participation in the Plan, a
person on leave of absence shall be deemed to be an Employee
unless or until such person's leave of absence is classified
as a long-term disability leave. Such Employee's participation
shall be deemed to have terminated on the first day during
such leave of absence on which such Employee is classified as
being on a long-term disability leave. Termination by the
Company of any Employee's leave of absence, other than
termination of such leave of absence on return to full-time or
part-time employment, shall terminate an Employee's employment
for all purposes of the Plan and shall terminate such
Employee's participation in the Plan.
6. ADMINISTRATION.
Decisions made under the Plan with respect to the Company's executive
officers and directors (as the terms "executive officers" and "directors" are
used in Section 16(a) of the Securities Exchange Act of 1934) shall be made by
the Compensation Committee of the Company's Board of Directors (the "Committee")
consisting of not fewer than two directors of the Company who are not Employees,
as designated by the Board of Directors of the Company (the "Board of
Directors"). No member of the Committee shall be eligible to purchase Common
Stock under the Plan. The Board of Directors shall fill all vacancies in the
Committee and may remove any member of the Committee at any time, with or
without cause. The Committee shall select its own chairman and hold its meetings
at such times and places as it may determine. All determinations of the
Committee shall be made by a majority of its members. Any decision which is made
in writing and signed by a majority of the members of the Committee shall be
effective as fully as though made by a majority vote at a meeting of the members
of the Committee duly called and held. The determinations of the Committee shall
be made in accordance with its judgment as to the best interests of the Company,
its employees and its stockholders and in accordance with the purposes of the
Plan; provided, however, that the provisions of the Plan shall be construed in a
manner consistent with the requirements of Section 423 of the Code. Such
determinations shall be binding upon the Company and the participants in the
Plan unless otherwise determined by the Board of Directors. The Company shall
pay all expenses of administering the Plan; however, each Participant shall pay
all expenses and commissions associated with his or her individual transactions.
The Company's Board of Directors may retain an agent to record and effect the
grants and exercises of options under the Plan and the enrollment and
termination of enrollment of Participants in the Plan, and to perform such any
other ministerial functions as the Board shall deem appropriate. No member of
the Board of Directors or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any option granted
under it.
7. DURATION AND PHASES OF THE PLAN.
(a) TERM OF THE PLAN. The Plan will commence on October 1, 1996,
and will terminate at 5:00 o'clock p.m., Minneapolis,
Minnesota, on September 30, 2006, unless earlier terminated by
the Committee. Notwithstanding the foregoing, this Plan shall
be considered of no force and effect, and any options granted
hereunder shall be considered null and void, unless the
holders of the issued and outstanding shares of the Common
Stock of the Company duly approve the Plan within twelve (12)
months after the date of its adoption by the Board of
Directors.
(b) CANCELLATION OF PHASES. If all of the shares of Common Stock
reserved for the grant of options hereunder are issued
pursuant to the terms hereof prior to the commencement of one
or more Phases, or if the number of shares remaining is so
small, in the opinion of the Committee, as to render
administration of any succeeding Phase impracticable, such
Phase or Phases may be canceled by the Committee in its
discretion.
(c) ACCELERATION OF PHASES. The Board of Directors may elect (but
is not obligated to elect) to accelerate the ending date of
any Phase effective on the date specified by the Board of
Directors in the event of a Control Transaction (as the term
"Control Transaction" is hereinafter defined in Section 14(b)
hereof). In addition, the Board of Directors, in its sole
discretion, may (but is not required to) choose not to
accelerate the ending date of any Phase if, in the opinion of
the certified public accountants of the Company or the
"successor" entity where the Company's business is transferred
to another entity pursuant to a "Control Transaction" (as the
term "Control Transaction" is hereinafter defined in Section
14(b) hereof), acceleration of the ending date of any Phase
would preclude a "pooling of interests" treatment for a
Control Transaction under generally accepted accounting
principles. If the ending date of a Phase is not accelerated
by the Board of Directors, the Phase shall continue according
to the provisions of the Plan, and the options granted under
the Plan shall continue to be subject to the termination,
restrictions on transferability, and other provisions of the
Plan.
8. PAYROLL DEDUCTIONS.
(a) AMOUNT OF PAYROLL DEDUCTIONS. Upon enrollment, a Participant
shall elect to make contributions to the Plan by payroll
deductions (in full dollar amounts), in the aggregate amount
of not less than $10.00 and not in excess of $500.00 for each
complete payroll period which is paid during each Phase. For
the purpose of determining the number of shares covered by
each option granted pursuant to Section 9(a) and to be issued
pursuant to Section 9(b), the total accumulated payroll
deduction for any Phase shall be determined on the last payday
falling within the Phase. Deductions will not be prorated for
partial payroll periods.
(b) EFFECT OF CHANGE IN COMPENSATION. If there is a change in the
pay period of any Participant, such as from biweekly to
monthly, an appropriate adjustment shall be made by the
Company to the deduction on each payday so as to assure as
closely as possible the deduction of the proper amount
authorized by the Participant.
(c) PARTICIPANTS' ACCOUNTS. All payroll deductions made for
Participants shall be credited to their accounts under the
Plan. A Participant may not make any separate cash payments
into such account.
(d) DISCONTINUANCE OF, AND CHANGE IN, PARTICIPATION IN PLAN. A
Participant may discontinue his or her participation in the
Plan at any time as provided in Section 10. Subject to the
limitations of Section 8(a), and upon thirty (30) days written
notice to the Company, a Participant may increase or decrease
the amount of his or her payroll deduction under the Plan,
with such change to take effect on the first payday during the
next Phase.
(e) LEAVE OF ABSENCE. If a Participant goes on a leave of absence
as provided in Section 5(b), such Participant shall have the
right to elect: (i) to withdraw the balance in his or her
account pursuant to Section 10(a) or (ii) to remain a
Participant in the Plan during such leave of absence,
authorizing deductions to be made from regular payroll
payments, if any, made by the Company to the Participant
during such leave of absence.
9. OPTIONS.
(a) GRANT OF OPTION.
(i) A Participant who is an Employee of the Company as of
the first day of a Phase as provided in Section 3(d)
hereof, and who has properly elected to participate
in the Plan prior to such day, shall be granted an
option as of such day to purchase a number of shares,
including fractional shares, of Common Stock to be
determined by dividing the total amount to be
credited to that Participant's account under Section
8 hereof by the option price set forth in Section
9(a)(ii)(A) hereof.
(ii) The option price for such shares of Common Stock
shall be the lower of:
A. Eighty-five percent (85%) of the fair market
value of the shares of Common Stock on the
first day of each Phase; or
B. Eighty-five percent (85%) of the fair market
value of such shares of Common Stock on the
ending day of the Phase as provided in
Section 3(d) hereof.
(iii) If the Common Stock of the Company is traded
publicly, the fair market value of a share of Common
Stock, on each valuation date, shall be the
officially quoted closing sales price of the Common
Stock on The Nasdaq National Market or a national
stock exchange, if the Common Stock is quoted on The
Nasdaq National Market or traded on such an exchange;
or if the Common Stock is traded on the Nasdaq
SmallCap Market, the average of the representative
closing bid and asked prices as quoted by the
National Association of Securities Dealers, Inc. as
of the valuation date. If the Common Stock is not
traded publicly, the fair market value of a share of
Common Stock on the valuation date shall be
determined in good faith by the Committee in a manner
acceptable under Section 423 of the Code.
(iv) Anything herein to the contrary notwithstanding, no
Employee shall be granted an option hereunder:
A. Which permits his or her rights to purchase
Common Stock under all employee stock
purchase plans of the Company, or a
Subsidiary or a Parent of the Company, if
any, to accrue at a rate which exceeds
Twenty-Five Thousand and 00/100 Dollars
($25,000.00) of the fair market value of
such Common Stock (determined at the time
such option is granted) for each calendar
year in which such option is outstanding at
any time;
B. If immediately after the grant, such
Employee would own shares of Common Stock,
and/or hold outstanding options to purchase
Common Stock, possessing five percent (5%)
or more of the total combined voting power
or value of all classes of stock of the
Company, its Parent, if any, or a Subsidiary
(for purposes of determining stock ownership
under this Paragraph, the rules of Section
424(d) of the Code shall apply); or
C. Which can be exercised after the expiration
of 27 months from the date the option is
granted.
(b) EXERCISE OF OPTION.
(i) Unless a Participant gives written notice to the
Company pursuant to Section 10 prior to the ending
day of a Phase, his or her option for the purchase of
shares of Common Stock granted at the first day of
such Phase as determined pursuant to Section 3(d)
will be exercised automatically for him or her as of
the ending day of that Phase (the "Stock Purchase
Date") for the purchase of the number of shares,
including fractional shares, of the Company's Common
Stock which the accumulated payroll deductions in his
or her account at the Stock Purchase Date will
purchase at the applicable option price, subject to
the limitations set forth in Section 11 hereof.
(ii) Stock certificates for the Common Stock purchased by
Participants under the Plan shall be caused by the
Company to be prepared and delivered to Participants
only upon the written request of Participants given
to the Company or upon termination of the
Participant's participation in the Plan.
10. WITHDRAWAL OR TERMINATION OF PARTICIPATION.
(a) GENERAL. A Participant may, at any time prior to a Stock
Purchase Date, withdraw all (but not less than all) payroll
deductions then credited to his or her account by giving
twenty-one (21) days written notice of such withdrawal to the
Company. Within twenty-one (21) days of receipt of such notice
of withdrawal, all (but not less than all) payroll deductions
credited to the Participant's account during a Phase which
have not been used for the purchase of shares, will be paid to
him or her, such withdrawal shall serve as the Participant's
withdrawal from the Plan, and no further payroll deductions
will be made during the Plan unless the Employee later enrolls
in the Plan as permitted herein. In the event of such
withdrawal of a Participant's payroll deductions, the option
granted to the Participant for that Phase of the Plan shall
lapse immediately. Partial withdrawals of payroll deductions
hereunder may not be made.
(b) EFFECT OF SUBSEQUENT PARTICIPATION. A Participant's withdrawal
from participation in the Plan at any time will not have any
effect upon his or her eligibility to participate in the Plan
during any subsequent Phase or in any similar employee stock
purchase plan which may hereafter be adopted by the Company.
(c) DEATH OF PARTICIPANT. In the event of the death of a
Participant, the accumulated payroll deductions in the account
of such deceased Participant will be distributed to the person
or persons specified in Section 15 in full in cash.
(d) TERMINATION OF PARTICIPANT'S EMPLOYMENT. Upon termination of a
Participant's employment with the Company for any reason,
including retirement and the death of the Participant while in
the employ of the Company, the payroll deductions credited to
that Participant's account during a Phase which have not been
used for the purchase of shares, shall be returned to him or
her without interest or, in the case of a Participant's death,
to the person or persons entitled thereto under Section 15
hereof, and the Participant's option under the Plan shall be
terminated. Upon termination or withdrawal from the Plan, the
Participant or, in the case of the death of the Participant
the person designated by the Participant pursuant to Section
15 hereof, shall elect to receive either (i) a certificate for
the number of whole shares credited to the Participant's share
account plus the cash value of any fractional share, or (ii)
to have such shares sold and to receive a cash payment for
such sale less brokerage commissions and fees.
(e) LEAVE OF ABSENCE. A Participant on leave of absence shall,
subject to the election made by such Participant pursuant to
Section 8(e), continue to be a Participant in the Plan so long
as such Participant is on a continuous leave of absence. Such
Participant's participation in the Plan shall terminate on the
first day during such leave of absence on which such Employee
is classified as being on a long-term disability leave. If the
Participant's participation in the Plan is terminated pursuant
to this Section 10(e), the Company shall return, within
twenty-one (21) days of such termination, all payroll
deductions credited to such Participant's account which have
not been used for the purchase of shares. Any unexercised
option granted to such Participant under the Plan shall lapse
immediately upon the termination of such Participant's
participation under the Plan.
11. STOCK RESERVED FOR OPTIONS.
(a) MAXIMUM SHARES. The maximum number of shares of Common Stock
which shall be issued under the Plan, subject to adjustment
upon changes in capitalization of the Company as provided in
Section 13 hereof, shall be 600,000 shares of Common Stock
(which reflects the two-for-one stock split effective on June
3, 1996). Such shares shall be authorized and unissued shares
of the Company's Common Stock. Shares of Common Stock subject
to the unexercised portion of any lapsed or expired option may
again be subject to options granted under the Plan.
(b) ADJUSTMENT IN NUMBER OF SHARES. If the total number of shares
of the Common Stock for which options are to be granted for a
given Phase as specified in Section 9 exceeds the number of
shares then remaining available under the Plan (after
deduction of all shares for which options have been exercised
or are then outstanding), and if the Committee does not elect
to cancel such Phase pursuant to Section 7, the Committee
shall make a pro rata allocation to Participants of the shares
remaining available in as uniform and equitable a manner as it
shall consider practicable. In such event, the options to be
granted and the payroll deductions to be made pursuant to the
Plan which would otherwise be effected may, in the discretion
of the Committee, be reduced accordingly, and the balance of
payroll deductions credited to the account of each Participant
under the Plan shall be returned to each Participant as
promptly as possible. The Committee shall give written notice
of such reduction to each Participant affected.
(c) RIGHTS AS STOCKHOLDER. The Participant shall have no rights as
a stockholder with respect to any shares of Common Stock
subject to the Participant's option until the date of the
exercise of the option to purchase shares of Common Stock as
provided in Section 9(b). No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash,
securities or other property), distributions or other rights
for which the record date is prior to the date such option is
exercised, except as otherwise provided in Section 13 hereof.
(d) OWNERSHIP OF STOCK. The shares of the Common Stock to be
delivered to a Participant pursuant to the exercise of an
option under the Plan will be registered only in the name of
the Participant.
(e) RESTRICTIONS ON EXERCISE. The Board of Directors may, in its
discretion, require as conditions to the issuance of any
shares of Common Stock under the Plan that such shares shall
have been duly listed, upon official notice of issuance, upon
a stock market, and that a Registration Statement under the
Securities Act of 1933, as amended, with respect to said
shares shall then be effective.
12. ACCOUNTING AND USE OF FUNDS.
Payroll deductions for each Participant shall be credited to an account
established for him or her under the Plan. A Participant may not make any
separate cash payments into such account. Such account shall be solely for
bookkeeping purposes, and no separate fund or trust shall be established
hereunder and the Company shall not be obligated to segregate such funds. All
funds from payroll deductions received or held by the Company under the Plan may
be used, without limitation, for any corporate purpose by the Company.
13. ADJUSTMENT PROVISIONS.
(a) RECAPITALIZATIONS. Subject to any required action by the
stockholders of the Company, the number of shares of Common
Stock covered by each outstanding option granted hereunder,
and the exercise price per share thereof, shall be
proportionately adjusted for any increase or decrease in the
number of issued shares of the Common Stock resulting from a
subdivision or consolidation of shares or the payment of a
share dividend (but only on such shares) or any other increase
or decrease in the number of such shares effected without
receipt of consideration by the Company.
(b) OTHER SHARES OF STOCK. In the event of a change in the shares
of Common Stock of the Company as presently constituted which
is limited to a change of all its authorized shares with par
value into the same number of shares with a different par
value or without par value, the shares resulting from any such
change shall be deemed to be the shares within the meaning of
this Plan.
14. NON-TRANSFERABILITY OF OPTIONS AND SHARES OF COMMON STOCK.
(a) OPTIONS. Options granted under the Plan shall not be
transferable except under the laws of descent and distribution
and shall be exercisable only by the Participant during his
lifetime and after his death only by his beneficiary or the
representative of his estate as provided in Section 10(c)
hereof. Neither payroll deductions credited to a Participant's
account, nor any rights with regard to the exercise of an
option or to receive Common Stock under the Plan, may be
assigned, transferred, pledged, or otherwise disposed of in
any way by the Participant except under the laws of descent
and distribution. Any such attempted assignment, transfer,
pledge or other disposition shall be null and void and without
effect, except that the Company may, at its option, treat such
act as an election to withdraw funds in accordance with
Section 10(a).
(b) OPTIONS AND SHARES. To be accorded the tax treatment under the
Code made available by compliance with the provisions of
Section 423 of the Code, shares acquired upon exercise of an
option granted hereunder may not be disposed of within two
years after the date of grant of that option or one year after
the date of exercise of such option, whichever is longer;
provided, however, that transfers during such periods are not
prohibited hereunder. In the event of a Public Offering of the
Common Stock or in the event of a Control Transaction (as the
terms "Public Offering" and "Control Transaction" are
hereinafter defined), the Board of Directors may require (but
is not obligated to require) that a holder of an option
granted hereunder, a holder of shares of Common Stock acquired
upon the exercise of such an option, and/or (but only in the
case of a Control Transaction) a holder of equity securities
received in exchange for such shares of Common Stock, shall
not sell, transfer, gift, or otherwise dispose of all or any
of such options, shares of Common Stock, or equity securities
(i) for a period of up to one hundred eighty (180) days from
the effective date of a Public Offering, or (ii) such period
of time after a Control Transaction as shall be necessary or
advisable, in the Company's judgment after consultation with
any experts as it shall deem advisable, to assure, if and as
necessary, that the Control Transaction is treated as a
"pooling of interests" under generally accepted accounting
principles, assuming such treatment is intended in connection
with the Control Transaction. As used herein, the term "Public
Offering" shall mean an underwritten public offering of the
Common Stock of the Company under the Securities Act of 1933,
as amended, and the term "Control Transaction" shall mean a
transaction which involves the liquidation or dissolution of
the Company, the sale of all or substantially all of the
assets or Common Stock of the Company, the merger of the
Company into another entity where the Company is not the
survivor thereof, or any other similar reorganization of the
Company. Such restrictions may survive the Employee's term as
a Participant in the Plan or as an Employee of the Company.
15. DESIGNATION OF BENEFICIARY.
A Participant may file a written designation of a beneficiary who is to
receive any cash to the Participant's credit under any Phase of the Plan in the
event of such Participant's death prior to exercise of his option pursuant to
Section 9(b) hereof. The beneficiary designation may be changed by the
Participant at any time by written notice to the Company. Upon the death of a
Participant and upon receipt by the Company of proof deemed adequate by it of
the identity and existence at the Participant's death of a beneficiary validly
designated under the Plan, the Company shall deliver to such beneficiary the
accumulated payroll deductions in the account of the deceased Participant. If
there is no validly designated beneficiary under the Plan who is living at the
time of the Participant's death, the Company shall deliver the cash credited to
the account of the Participant to the executor or administrator of the estate of
the Participant, or, if no such executor or administrator has been appointed to
the knowledge of the Company, it may, in its discretion, deliver such cash to
the spouse or to any one or more dependents or relatives of the Participant, or
if no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate. The Company shall not be responsible for or
be required to give effect to the disposition of any cash or shares of Common
Stock or the exercise of any option in accordance with any will or other
testamentary disposition made by such Participant or in accordance with the
provision of any law concerning intestacy, or otherwise. No designated
beneficiary shall, prior to the death of a Participant by whom he has been
designated, acquire any interest in any shares of Common Stock or in any option
or in the cash credited to the Participant under the Plan.
16. AMENDMENT AND TERMINATION.
The Plan may be terminated at any time by the Board of Directors
provided that, except as permitted in Section 7(c) with respect to an
acceleration of the ending date of any Phase, no such termination will take
effect with respect to any options then outstanding. Also, the Board may, from
time to time, amend the Plan as it may deem proper and in the best interests of
the Company or as may be necessary to comply with Section 423 of the Code, or
other applicable laws or regulations; provided, however, that no such amendment
shall, without prior approval of the stockholders of the Company (i) increase
the total number of shares for which options may be granted under the Plan
(except as provided in Section 13 herein), or (ii) impair any outstanding
option. Upon termination of the Plan for any reason (including expiration of its
term), any excess balance in a Participant's account not used to acquire shares
of Common Stock on such date will be distributed to the Participant or, in the
case of a Participant's death subsequent to the termination of his or her
employment with the Company, to the person or persons entitled thereto under
Section 15 hereof.
17. NOTICES.
All notices or other communications in connection with the Plan or any
Phase thereof shall be in the form specified by the Committee and shall be
deemed to have been duly given when received by the Participant or his
designated personal representative or beneficiary or by the Company or its
designated representative, as the case may be.
18. PARTICIPATION OF EMPLOYEES OF PARENTS AND SUBSIDIARIES.
The Employees of any Parent or Subsidiary of the Company shall be
entitled to participate in the Plan on the same basis as Employees of the
Company, unless the Board of Directors determines otherwise. Effective as of the
date of coverage of any Parent or Subsidiary, any references herein to the
"Company" shall be interpreted as referring to such Parent or Subsidiary as well
as to Zytec Corporation. If any Parent or Subsidiary which is covered under the
Plan ceases to be a Parent or Subsidiary of Zytec Corporation, the employees of
such Parent or Subsidiary shall be considered to have terminated their
employment for purposes of Section 10 hereof as of the date such Parent or
Subsidiary ceases to be such a Parent or Subsidiary.
19. BINDING EFFECT OF PLAN.
The provisions of the Plan shall, in accordance with its terms, be
binding upon, and inure to the benefit of, each Participant in the Plan,
including, without limitation, each such Participant's estate and the executors,
administrators or trustees thereof, heirs and legatees, and any receiver,
trustee in bankruptcy or representative of creditors of such Participant.
20. GOVERNING LAW.
The laws of the State of Minnesota will govern all matters relating to
this Plan except to the extent that they are superseded by the laws of the
United States.
21. WEEKENDS AND HOLIDAYS.
If any Enrollment Date, date of valuation, Stock Purchase Date,
beginning day of any Phase, ending date of a Phase, termination date of the
Plan, or any other date used in the Plan, falls on a weekend or a holiday on
which stocks are not traded on the New York Stock Exchange, or on any holiday
declared by the Company, the effective date of any such determination or event
shall be the next succeeding business day.
PROXY ZYTEC CORPORATION
A Minnesota Corporation
7575 Market Place Drive
Eden Prairie, Minnesota 55344
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ZYTEC CORPORATION
Ronald D. Schmidt and John B. Rogers, and either of them, are hereby
appointed proxies (the "Proxies"), each with the power to appoint his
substitute, to represent and to vote as designated below, all shares of common
stock of Zytec Corporation held of record by the undersigned on September 16,
1996 at the Special Meeting of Shareholders to be held on October 9, 1996, or
any adjournment thereof.
APPROVAL OF THE ZYTEC CORPORATION 1996 EMPLOYEE STOCK PURCHASE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Special Meeting; management is not
presently aware of any such matters to be presented for action at the Special
Meeting. The undersigned hereby ratifies and confirms all the parties shall
lawfully do or cause to be done by virtue hereof and hereby revokes all proxies
previously given to vote such shares.
(CONTINUED, AND TO BE COMPLETED AND SIGNED ON THE REVERSE SIDE)
(CONTINUED FROM THE OTHER SIDE)
This Proxy, when properly executed, shall be voted in the manner
indicated by the undersigned shareholder. If no direction is made, this Proxy
will be voted FOR the proposal to approve the Zytec Corporation 1996 Employee
Stock Purchase Plan.
DATED: _______________________________, 1996
____________________________________________
Signature
____________________________________________
Signature if held jointly
Please sign exactly as name appears at
left. When shares are held by joint
tenants, both must sign. When signing as
attorney, executor, administrator,
trustee, guardian, or in some other
fiduciary capacity, please give full
title as such. If a corporation, please
sign in full corporate name by president
or other authorized officer. If a
partnership, please sign in partnership
name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY,
USING THE ENCLOSED ENVELOPE.
