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 September 30, 1998
[ ] 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 0-16319
LUND INTERNATIONAL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 41-1568618
(State or other jurisdiction (I.R.S. Employer
Of organization) Identification No.)
911 LUND BOULEVARD
ANOKA, MINNESOTA 55303
Registrant's telephone number, including area code: (612) 576-4200
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to the filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes __X__ No _____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the latest practicable date.
As of November 16, 1998, 5,263,370 shares of the registrant's common stock, $.10
par value, and 1,493,398 shares of the Company's Class B-1 common stock, $.01
par value, were issued and outstanding.
<PAGE>
LUND INTERNATIONAL HOLDINGS, INC.
QUARTERLY REPORT ON FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<S> <C>
Condensed Consolidated Balance Sheets 1-2
At September 30, 1998 (Unaudited) and December 31, 1997
Consolidated Statements of Operations (Unaudited) 3
Three Months ended September 30, 1998 and 1997
Consolidated Statements of Operations (Unaudited) 4
Nine months ended September 30, 1998 and 1997
Consolidated Statements of Cash Flows (Unaudited) 5
Nine Months ended September 30, 1998 and 1997
Notes to Condensed Consolidated Financial Statements (Unaudited) 6-9
Report of Independent Accountants 10
Item 2. Management's Discussion and Analysis of Financial 11-20
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 6. Exhibits and Reports on Form 8-K 21
Signatures 22
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LUND INTERNATIONAL HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands)
September 30, December 31,
1998 1997
-------- --------
(unaudited)
ASSETS
Current assets:
Cash and temporary cash investments $ 565 $ 6,790
Restricted cash 24 1,123
Accounts receivable, net 22,923 21,450
Inventories 17,635 17,994
Deferred income taxes 3,107 3,517
Other current assets 2,743 1,591
-------- --------
Total current assets 46,997 52,465
Property and equipment, net 21,054 20,621
Intangibles, net 67,004 68,778
Restricted cash and marketable securities 547 595
Other assets 2,018 1,568
-------- --------
Total assets $137,620 $144,027
======== ========
The accompanying notes are an integral part
of the consolidated financial statements.
1
<PAGE>
LUND INTERNATIONAL HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS, CONTINUED
($ in thousands, except per share data)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
--------- ---------
(unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade $ 8,563 $ 7,521
Accrued expenses 7,035 15,786
Long-term debt, current portion 55,227 1,700
--------- ---------
Total current liabilities 70,825 25,007
Long-term debt, less current portion 3,110 52,927
Deferred income taxes 2,360 2,352
Other liabilities 110 1,227
--------- ---------
Total liabilities 76,405 81,513
--------- ---------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value;
authorized 2,000 shares; 1,493 issued and outstanding
at December 31, 1997 -- 15
Common stock, $.10 par value;
authorized 25,000 shares; 5,263 issued and outstanding
at September 30, 1998, and 5,268 issued and outstanding
at December 31, 1997 526 527
Class B common stock, $.01 par value;
authorized 3,000 shares; 1,493 issued and outstanding
at September 30, 1998 15 --
Additional paid-in capital 30,856 30,884
Unearned deferred compensation -- (57)
Retained earnings 29,818 31,145
--------- ---------
Total stockholders' equity 61,215 62,514
--------- ---------
Total liabilities and stockholders' equity $ 137,620 $ 144,027
========= =========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
2
<PAGE>
LUND INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
Three Months Ended
September 30,
1998 1997
-------- --------
Net sales $ 29,342 $ 10,028
Cost of goods sold 21,326 6,624
-------- --------
Gross profit 8,016 3,404
-------- --------
Operating expenses
General and administrative 2,909 2,304
Selling and marketing 3,586 1,550
Research and development 737 347
Amortization of intangibles 591 43
-------- --------
Total operating expenses 7,823 4,244
-------- --------
Income (loss) from operations 193 (840)
-------- --------
Other income (expense)
Interest expense (1,393) (76)
Interest income 23 163
Other, net 10 (13)
-------- --------
Other (expense) income, net (1,360) 74
-------- --------
Loss before income taxes (1,167) (766)
Income tax expense (benefit) 62 (248)
-------- --------
Net loss $ (1,229) $ (518)
======== ========
Basic net loss
per share $ (0.18) $ (0.12)
======== ========
Diluted net loss
per share $ (0.18) $ (0.12)
======== ========
Weighted average common shares 6,757 4,376
======== ========
Weighted average common and
common equivalent shares 6,757 4,376
======== ========
The accompanying notes are an integral part
of the consolidated financial statements.
3
<PAGE>
LUND INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
Nine Months Ended
September 30,
1998 1997
-------- --------
Net sales $ 86,424 $ 32,581
Cost of goods sold 61,150 21,433
-------- --------
--------
Gross profit 25,274 11,148
-------- --------
Operating expenses
General and administrative 8,416 4,511
Selling and marketing 10,275 4,817
Research and development 2,187 1,006
Amortization of intangibles 1,758 105
-------- --------
Total operating expenses 22,636 10,439
-------- --------
Income from operations 2,638 709
-------- --------
Other income (expense)
Interest expense (4,118) (227)
Interest income 104 518
Other, net (3) (48)
-------- --------
Other (expense) income, net (4,017) 243
-------- --------
(Loss) income before income taxes (1,379) 952
Income tax (benefit) expense (52) 199
-------- --------
Net (loss) income $ (1,327) $ 753
======== ========
Basic net (loss) income
per share $ (0.22) $ 0.17
======== ========
Diluted net (loss) income
per share $ (0.22) $ 0.17
======== ========
Weighted average common shares 6,150 4,375
======== ========
Weighted average common and
common equivalent shares 6,150 4,394
======== ========
The accompanying notes are an integral part
of the consolidated financial statements.
4
<PAGE>
LUND INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
($ in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (1,327) $ 753
Adjustments to reconcile net (loss) income to
net cash (used in) provided by operating activities:
Depreciation 2,780 842
Amortization 2,063 184
Deferred income taxes 418 72
Provision for (reduction in) doubtful accounts 213 (11)
Provision for obsolete inventories 123 240
Other 43 (11)
Changes in operating assets and liabilities:
Accounts receivable (1,686) (599)
Inventories 236 87
Other assets (784) (256)
Accounts payable, trade (248) 232
Accrued expenses (6,833) 285
Other liabilities (61) (110)
-------- --------
Net cash (used in) provided by operating activities (5,063) 1,708
-------- --------
Cash flows from investing activities:
Purchase of Deflecta-Shield common stock (2,840) --
Purchases of property and equipment (3,280) (895)
Change in restricted cash and marketable securities 1,146 107
Purchase of marketable securities -- (9,374)
Proceeds from sales and redemptions of marketable securities -- 8,771
Proceeds from sales of property and equipment 24 --
Other investing activities (17) (107)
-------- --------
Net cash used in investing activities (4,967) (1,498)
-------- --------
Cash flows from financing activities:
Principal payments on long-term debt (52,634) (460)
Proceeds from long-term debt 56,344 --
Change in book overdraft 1,296 --
Proceeds from issuance of common stock -- 11
Payment of other liabilities (140) (79)
Debt issuance costs (1,061) --
-------- --------
Net cash provided by (used in) financing activities 3,805 (528)
-------- --------
Net decrease in cash and
temporary cash investments (6,225) (318)
Cash and temporary cash investments:
Beginning of period 6,790 678
-------- --------
End of period $ 565 $ 360
======== ========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
5
<PAGE>
LUND INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands except per share amounts)
A - Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Lund
International Holdings, Inc. and its wholly-owned subsidiaries, Deflecta-Shield
Corporation (and its subsidiaries), Lund Industries, Incorporated, Lund
Acquisition Corp., and Lund FSC, Inc. (collectively referred to as "Holdings" or
the "Company"). The consolidated balance sheet as of September 30, 1998, the
consolidated statements of operations for the three and nine months ended
September 30, 1998 and 1997, and the consolidated statements of cash flows for
the nine months ended September 30, 1998 and 1997 are unaudited. In the opinion
of management, all adjustments necessary for a fair presentation of such
financial statements have been included. Such adjustments consisted only of
normal recurring items. The results of operations for any interim period are not
necessarily indicative of results for the full year.
The December 31, 1997 condensed consolidated balance sheet data was derived from
audited financial statements, but does not include all disclosures required by
generally accepted accounting principles. These financial statements should be
read in conjunction with the Company's audited consolidated financial statements
and related notes for the six month transition period ended December 31, 1997,
which were included in the Company's Transition Report on Form 10-K for the six
month period ended December 31, 1997.
The financial statements and notes are presented as permitted by Form 10-Q, and
do not contain certain information included in the Company's annual financial
statements and notes.
B - Acquisition of Deflecta-Shield Corporation
Effective December 30, 1997, Holdings, through a wholly-owned subsidiary,
acquired Deflecta-Shield Corporation ("Deflecta-Shield"), a manufacturer of
fiberglass, plastic and aluminum appearance accessories and supplier of
suspension systems for light trucks. Deflecta-Shield also supplies accessories
to the heavy truck market. The aggregate purchase price of $78,919 represents
cash paid of $76,800 for 100% of the outstanding shares of Deflecta-Shield
common stock at $16 per share and direct acquisition costs of $2,119. As of
December 31, 1997, the Company had paid $75,879 in cash to acquire 98.8% of the
outstanding shares of Deflecta-Shield. During the three months ended March 31,
1998, the Company made payments of $921 to purchase the remaining 1.2% of
Deflecta-Shield common stock.
In connection with the acquisition, the Company obtained $42,000 in bridge
financing in the form of a tender loan facility to acquire 98.8% of the
outstanding shares of Deflecta-Shield. On February 27, 1998, Holdings refinanced
its tender loan facility with a new consolidated $87,000 loan facility. The
consolidated loan facility includes two long-term notes totaling $41,600, a
revolving credit facility of $30,000 and an acquisition facility of $15,000.
6
<PAGE>
LUND INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands except per share amounts)
The following selected unaudited pro forma information is being provided to
present a summary of the combined results of Lund and Deflecta-Shield as if the
acquisition had occurred as of January 1, 1997, giving effect to purchase
accounting adjustments. The pro forma data is for informational purposes only
and may not necessarily reflect the results of operations of Holdings had the
acquired business operated as part of the Company for the period presented.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1997 September 30, 1997
------------------ ------------------
<S> <C> <C>
Net sales $28,442 $86,313
Net loss (2,570) (317)
Basic and diluted net income per share (.38) (.05)
</TABLE>
C - Inventories
Inventories consisted of the following:
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
------------------ ------------------
<S> <C> <C>
Raw materials $ 9,526 $ 9,949
Finished goods and work in process 8,109 8,045
------------------ ------------------
$17,635 $ 17,994
================== ==================
</TABLE>
D - Earnings per Share
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share", and has disclosed basic and
diluted net income (loss) per share for the three and nine months ended
September 30, 1998 and 1997, in accordance with this standard. The Company
incurred a net loss for the three and nine months ended September 30, 1998 and,
accordingly, excluded common equivalent shares from the diluted earnings per
share computation as their effect is anti-dilutive. The Company was profitable
for the nine months ended September 30, 1997, consequently, the calculation of
diluted income per share includes 19,000 of common equivalent shares
representing the dilutive impact of stock options. At September 30, 1998, the
Company had 559,200 stock options outstanding that may be dilutive in future
periods.
E - Contingencies
Discussion of legal matters is cross-referenced to this Form 10-Q, Part II, Item
1, Legal Proceedings and should be considered an integral part of the
consolidated financial statements and notes thereto.
7
<PAGE>
LUND INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands except per share amounts)
F - New Accounting Standards
In the first quarter of 1998, the Company adopted SFAS No. 130, "Reporting of
Comprehensive Income". This standard requires the display and reporting of
comprehensive income, which includes all changes in stockholders' equity with
the exception of additional investments by or distributions to stockholders.
Comprehensive income for the Company includes net income (loss), and the changes
in unrealized holding gains (losses) on marketable securities that are charged
or credited to the respective account within stockholders' equity. Comprehensive
income for the three and nine months ended September 30, 1998 and 1997 was as
follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1998 1997 1998 1997
-------------- ------------- ------------ ----------
<S> <C> <C> <C> <C>
Net (loss) income $(1,229) $ (518) $(1,327) $ 753
Changes in unrealized holding gains
on marketable securities 0 40 0 65
-------------- ------------- ------------ ----------
$(1,229) $ (478) $(1,327) $ 818
============== ============= ============ ==========
</TABLE>
The Financial Accounting Standards Board issued SFAS No. 131 "Disclosures about
Segments of an Enterprise and Related Information". SFAS No. 131 establishes
standards for reporting operating segment information in both annual reports and
interim financial reports issued to shareholders. The Company is reviewing the
requirements of SFAS No. 131, but has not determined if it will present segment
information beyond the one segment currently presented. SFAS No. 131 is required
to be adopted effective with year-end 1998 reporting.
G - Stock Transaction
In April 1998, the 1,493,398 shares of Series A Preferred Stock outstanding at
December 31, 1997 were converted on a one-to-one basis to Class B-1 common
stock.
H - Credit Agreement
As of September 30, 1998, the Company was not in compliance with several of the
financial covenants of its credit agreement between the Company and Heller
Financial, Inc. ("Lender"). In November 1998, the Company received a waiver of
the violations that have occurred through September 30, 1998. The Company does
not believe that it will be in compliance with all of the financial covenants
under the current credit agreement in the fourth quarter of 1998. Accordingly,
as required by generally accepted accounting principles, the Company has
classified all borrowings as of September 30, 1998 under the credit agreement
with the Lender as a current liability. The Company is currently in negotiations
to restructure its current financing, including the financial covenants included
herein, as well as to finance the Company's proposed acquisition of Ventshade
Holdings, Inc. (See Note I)
8
<PAGE>
I - Subsequent Event
On November 4, 1998, the Company announced an agreement in principle under which
Lund International Holdings, Inc. will acquire 100% of the capital stock of
Ventshade Holdings, Inc., the parent of Auto Ventshade Company for $66 million
in cash. Auto Ventshade Company, headquartered in Lawrenceville, GA, is a
leading manufacturer and supplier of window shades, hood shields, light covers,
and other accessories for light trucks, sport utility vehicles, and passenger
cars.
* * * * *
PricewaterhouseCoopers LLP, the Company's independent accountants, have
performed a review of the unaudited interim consolidated financial statements
included herein and their report thereon accompanies this filing.
9
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Lund International Holdings, Inc.:
We have reviewed the accompanying condensed consolidated balance sheet of Lund
International Holdings, Inc. (the Company) as of September 30, 1998, the related
consolidated statements of operations for the three months and nine months ended
September 30, 1998 and 1997, and consolidated statements of cash flows for the
nine months ended September 30, 1998 and 1997. These consolidated financial
statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for the financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1997, and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for the six month period then ended (not presented herein); and
in our report dated March 17, 1998, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying condensed consolidated balance sheet as of December 31, 1997,
is fairly stated in all material respects in relation to the consolidated
balance sheet from which it has been derived.
/s/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
Minneapolis, Minnesota
November 12, 1998
10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
GENERAL OVERVIEW:
Lund International Holdings, Inc. ("Holdings" or the "Company"), through its
wholly-owned subsidiaries, Lund Industries, Incorporated and its subsidiaries
("Lund") and Deflecta-Shield Corporation and its subsidiaries
("Deflecta-Shield"), designs, manufactures, markets and distributes appearance
automotive aftermarket accessories and other products for light trucks, sport
utility vehicles and vans ("light trucks") and for heavy trucks. The products
directed at the light truck market include visors, bug shields/hood protectors,
running boards, tonneau covers and other appearance accessories. In addition,
Deflecta-Shield is a leading original equipment manufacturer ("OEM") and
supplier to the OEMs aftermarket accessory divisions for light truck and heavy
truck markets and also supplies suspension systems for light trucks.
The Company acquired 98.8% of the outstanding common stock of Deflecta-Shield in
December 1997 and the balance of its shares in February 1998 (the
"Acquisition"). The Company paid $76.8 million for the outstanding shares of
Deflecta-Shield, approximately $2.1 million for direct transaction costs, and
$9.4 million to retire Deflecta-Shield's long-term debt. The Acquisition was
accounted for under the purchase method of accounting, which required the
Company to recognize a $572,000 increase in cost of goods sold in the first
quarter of 1998 to reflect the write-up of Deflecta-Shield's finished goods and
work-in-process acquired by the Company. Effective January 1, 1998, the Company
began reporting consolidated results of operations, which include the results of
Deflecta-Shield's operations.
During 1997, in connection with the Acquisition, the Company entered into a
credit facility syndicated to ten financial institutions for an aggregate of $87
million. At September 30, 1998, the Company had drawn down $41.2 million
outstanding against the term loan component and $13.24 million against the $30
million revolver component of the credit facility. The credit facility also
includes an acquisition facility of $15 million.
In September 1997, the Company's Board of Directors approved a change in fiscal
year end from June 30 to December 31.
RESULTS OF OPERATIONS:
(In thousands, except earnings per share)
Certain pro forma information is included for comparative purposes. The pro
forma information assumes the Acquisition was completed on January 1, 1997.
11
<PAGE>
The following tables set forth the percentage relationship to net sales of
certain items in the Company's consolidated statements of operations and pro
forma operations for the periods indicated.
The pro forma information gives effect to the Company's acquisition of
Deflecta-Shield and the financing thereof as if such transactions occurred on
January 1, 1997. In addition, the pro forma information excludes the
non-recurring transaction costs incurred by the Company and the restructuring
costs incurred by Deflecta-Shield in the third quarter of 1997. The pro forma
information is included for comparison purposes and is not necessary indicative
of the results of operations that would have actually been achieved.
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------------------------------------------------------
September 30, 1998 September 30, 1997 Pro Forma September 30, 1997
----------------------------- ----------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 29,342 100.0% $ 10,028 100.0% $ 28,442 100.0%
Gross profit 8,016 27.3 3,404 33.9 9,416 33.1
General and administrative 2,909 9.9 2,304 22.9 2,523 8.9
Selling and marketing 3,586 12.2 1,550 15.5 3,600 12.6
Research and development 737 2.5 347 3.5 757 2.7
Amortization of intangibles 591 2.1 43 .4 601 2.1
-------- -------- -------- -------- -------- --------
Income (loss) from operations 193 .6 (840) (8.4) 1,935 6.8
Other income (expense), net (1,360) (4.6) 74 .7 (1,387) (4.9)
Income tax (benefit) expense 62 .2 (248) (2.5) 270 .9
-------- -------- -------- -------- -------- --------
Net (loss) income $ (1,229) (4.2%) $ (518) (5.2%) $ 278 1.0%
======== ======== ======== ======== ======== ========
Nine Months Ended
-----------------------------------------------------------------------------------------
September 30, 1998 September 30, 1997 Pro Forma September 30, 1997
-------------------------- ------------------------- --------------------------
Net sales $ 86,424 100.0% $ 32,581 100.0% $ 86,313 100.0%
Gross profit 25,274 29.2 11,148 34.2 28,392 32.9
General and administrative 8,416 9.7 4,511 13.8 8,013 9.3
Selling and marketing 10,275 11.9 4,817 14.8 10,493 12.2
Research and development 2,187 2.5 1,006 3.1 2,015 2.3
Amortization of intangibles 1,758 2.1 105 .3 1,822 2.1
-------- -------- -------- -------- -------- --------
Income from operations 2,638 3.0 709 2.2 6,049 7.0
Other income (expense), net (4,017) (4.6) 243 .7 (3,989) (4.6)
Income tax (benefit) expense (52) (.1) 199 .6 1,014 1.2
-------- -------- -------- -------- -------- --------
Net (loss) income $ (1,327) (1.5%) $ 753 2.3% $ 1,046 1.2%
======== ======== ======== ======== ======== ========
</TABLE>
The following tables set forth the Company's net sales by product line:
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------------------------------------------------------
September 30, 1998 September 30, 1997 Pro Forma September 30, 1997
----------------------------- ----------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
Light Truck Accessories:
Hood Shields/Bug
Deflectors $7,318 24.9% $2,400 23.9% $6,979 24.5%
Running Boards 3,068 10.5 1,432 14.3 3,407 12.0
External Visors 3,222 11.0 3,263 32.5 3,452 12.1
Tool Boxes 3,185 10.9 N/A N/A 1,624 5.7
Tonneau Covers 1,387 4.7 974 9.7 1,238 4.4
Other External Light Truck
Appearance Accessories 4,838 16.5 1,959 19.6 4,881 17.2
----- ---- ----- ---- ----- ----
Light Truck Products 23,018 78.5 10,028 100.0 21,581 75.9
Suspension Products 2,127 7.2 N/A N/A 2,709 9.5
Heavy Truck Products 4,197 14.3 N/A N/A 4,152 14.6
----- ---- --- --- ----- ----
Total $29,342 100.0% $10,028 100.0% $28,442 100.0%
======= ====== ======= ===== ======= ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------------------------------------------------------------------------------
September 30, 1998 September 30, 1997 Pro Forma September 30, 1997
----------------------------- ----------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
Light Truck Accessories:
Hood Shields/Bug
Deflectors $21,642 25.0% $ 7,787 23.9% $21,852 25.3%
Running Boards 10,403 12.0 6,050 18.6 12,898 14.9
External Visors 9,642 11.2 9,832 30.2 10,432 12.1
Tool Boxes 7,976 9.2 N/A N/A 4,363 5.0
Tonneau Covers 3,769 4.4 2,512 7.7 3,340 3.9
Other External Light Truck
Appearance Accessories 12,831 14.9 6,400 19.6 14,375 16.7
------- ------- ------- ------- ------- -------
Light Truck Products 66,263 76.7 32,581 100.0 67,260 77.9
Suspension Products 7,552 8.7 N/A N/A 7,984 9.3
Heavy Truck 12,609 14.6 N/A N/A 11,069 12.8
------- ------- ------- ------- ------- -------
Total $86,424 100.0% $32,581 100.0% $86,313 100.0%
======= ======= ======= ======= ======= =======
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1997 (ACTUAL AND PRO FORMA):
NET SALES: Net sales for the three month period ended September 30, 1998 were
$29,342, an increase of $19,314 over net sales of $10,028 for the three month
period ended September 30, 1997, reflecting the consolidation of
Deflecta-Shield's results in 1998. Compared to 1997 pro forma results, net sales
for the three month period ended September 30, 1998 increased $900, or 3.2%. Net
sales of light and heavy truck accessory products increased $1,482, or 5.8%, and
net sales of suspension products were $582, or 21.5%, below last year's pro
forma comparable period. In the light truck product category, net sales of
aluminum accessory products (toolboxes and running boards) were up 59.2% as a
result of new product lines and new customers compared to the comparable pro
forma period. While net sales of hood shields and tonneau covers increased 6.0%,
other plastic and fiberglass products were below the comparable pro forma period
with the majority of the shortfall occurring in fiberglass running boards. The
decline in the plastic and fiberglass product lines corresponded to a drop in
sales to warehouse distributors, which are realizing more competition from
original equipment manufacturers and retail chains.
COST OF GOODS SOLD AND GROSS PROFIT: The gross profit margin for the three
months ended September 30, 1998 was 27.3% compared to 33.9% for the three months
ended September 30, 1997. The gross profit margin for the three months ended
September 30, 1997 on a pro forma basis was 33.1%. The 5.8 percentage points
decrease in gross margin in 1998 compared to pro forma 1997 is attributable to
product promotions for aftermarket plastic and fiberglass products, product
rationalization costs, a sales mix shift to lower margin products, labor rate
increases, increased product returns resulting from rationalizing product lines,
added overhead costs of new facilities in Illinois and Indiana, and reduced
fixed overhead absorption due to lower production levels in aftermarket plastic
and fiberglass products in order to reduce inventory levels in those product
lines.
GENERAL AND ADMINISTRATIVE EXPENSES: General and administrative expenses were
$2,909, or 9.9% of net sales for the three month period ended September 30,
1998, compared to $2,304 or 22.9% of net sales for the comparable three month
period ended September 30, 1997. On a pro forma basis for 1997, general and
administrative expenses were $2,523 or 8.9% of net sales. The increase of $386
for the three months ended September 30, 1998 over the 1997 comparable pro forma
period is due to personnel increases in heavy truck operations, salary
increases, management fees from Harvest Partners, training and implementation of
a
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new information system, and non-recurring personnel severance costs. These
increases have been partially offset by reduced bonus accruals.
SELLING AND MARKETING EXPENSES: Selling and marketing expenses were $3,586 or
12.2% of net sales for the three month period ended September 30, 1998, compared
to $1,550, or 15.5% of net sales, for the three month period ended September 30,
1997. Selling and marketing expenses were $3,600, or 12.6% of net sales for the
1997 comparable pro forma period. The small drop of $14 in 1998 from the 1997
pro forma period is the result of higher spending in 1997 for magazine
advertising and catalog costs in suspension products.
RESEARCH AND DEVELOPMENT EXPENSES: Research and development expenses were $737,
or 2.5% of net sales for the three months ended September 30, 1998, compared to
$347 or 3.5% of net sales for the three month period ended September 30, 1997.
On a pro forma basis, research and development expenses were $757, or 2.7% of
net sales for the three months ended September 30, 1997. The decrease of $20
between the three month period ended September 30, 1998 and the pro forma three
month period ended September 30, 1997 is the result of a temporary decline in
research and development personnel.
AMORTIZATION OF INTANGIBLES: Amortization expense was $591 for the three month
period ended September 30, 1998, compared to $43 for the three month period
ended September 30, 1997. On a pro forma basis, amortization was $601 for the
three months ended September 30, 1997. The increase in amortization in 1998 and
pro forma 1997 over actual 1997 reflects the increased goodwill associated with
the Acquisition.
OTHER INCOME (EXPENSE), NET: Other income (expense), net, was $1,360 of expense
for the three month period ended September 30, 1998, compared to $74 of income
for the three month period ended September 30, 1997. On a pro forma basis for
1997, other income (expense), net, was $1,387 of expense. The increase in
expense in 1998 and pro forma 1997 over actual 1997 reflects the increased
interest on borrowings related to the Acquisition and the reduction of interest
income due to the use of the Company's cash reserves to help fund the
Acquisition.
INCOME TAX EXPENSE (BENEFIT): The Company's effective tax rate has substantially
changed from the prior period and statutory federal income tax rate of 34% due
to amortization of non-deductible goodwill recorded in connection with the
Acquisition and the elimination of tax exempt interest generated from marketable
securities in the prior year. The tax expense for the three months ended
September 30, 1998 reflects an adjustment in the Company's annual effective
income tax rate.
NET INCOME PER SHARE: The Company's net loss for the three months ended
September 30, 1998 increased $711 to $1,229, or $.18 per share, from a net loss
of $518, or $.12 per share, for the three months ended September 30, 1997. On a
pro forma basis, net income was $278, or $.06 per share, for the comparable
period of 1997.
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NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1997 (ACTUAL AND PRO FORMA):
NET SALES: Net sales for the nine month period ended September 30, 1998 were
$86,424, an increase of $53,843 over net sales of $32,581 for the nine month
period ended September 30, 1997, reflecting the consolidation of
Deflecta-Shield's results in 1998. Compared to 1997 pro forma, net sales for the
nine month period ended September 30, 1998 increased $111, or .1%. Net sales of
heavy truck accessory products increased $1,540, or 13.9%, suspension products
decreased $432, or 5.4%, and light truck accessory products decreased $997, or
1.5%. Within light truck products, new product lines and new customers pushed
sales of aluminum accessories up 52.1%. While net sales of tonneau covers
increased $429, or 12.8%, plastic and fiberglass products were 8.2% below the
comparable pro forma period, with the majority of the decline in fiberglass
running boards, external visors, and other appearance accessories. The decline
in the plastic and fiberglass product lines corresponds to a drop in sales to
the warehouse distributor market channel that is realizing more competition from
original equipment manufacturers and retail chains. In addition, fiberglass
running boards are facing competition from the interchangeable metal tubular
products.
COST OF GOODS SOLD AND GROSS PROFIT: The gross profit margin for the nine months
ended September 30, 1998 was 29.2% compared to 34.2% for the nine months ended
September 30, 1997. The gross profit margin for the nine months ended September
30, 1997 on a pro forma basis was 32.9%. The 3.7 percentage points decrease in
gross margin in 1998 compared to pro forma 1997 was attributable to product
promotions for aftermarket plastic and fiberglass products, a sales mix shift to
lower margin products, labor rate increases, increased product returns resulting
from rationalizing product lines, added overhead costs of new facilities in
Illinois and Indiana, reduced fixed overhead absorption due to lower production
levels in aftermarket plastic and fiberglass products in order to reduce
inventory levels in those product lines, and the incremental $572,000 impact of
inventory write-offs from recording inventories at fair market value as a result
of the Acquisition.
GENERAL AND ADMINISTRATIVE EXPENSES: General and administrative expenses were
$8,416 or 9.7% of net sales for the nine month period ended September 30, 1998,
compared to $4,511 or 13.8% of net sales for the comparable nine month period
ended September 30, 1997. On a pro forma basis for 1997, general and
administrative expenses were $8,013, or 9.3% of net sales. The increase of $403
for the nine months ended September 30, 1998 over the 1997 comparable pro forma
period is due to salary increases, management fees, training and implementation
of a new information system, and non-recurring personnel severance costs,
recruiting and relocations, relocation of the Oklahoma tonneau production to
Illinois, and a contractual indemnification of a legal judgment against a former
shareholder on the sale of his stock. These increases have been partially offset
by reductions in expenses for professional fees, headcount, and bonuses.
SELLING AND MARKETING EXPENSES: Selling and marketing expenses were $10,275 or
11.9% of net sales for the nine month period September 30, 1998, compared to
$4,817, or 14.8% of net sales for the nine month period ended September 30,
1997. Selling and marketing expenses were $10,493 or 12.2% of net sales for the
1997 comparable pro forma period. The decrease in 1998 of $218 from the 1997 pro
forma period was the result of synergistic reductions in spending and personnel
resulting from merging the sales and marketing groups of Lund and
Deflecta-Shield.
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RESEARCH AND DEVELOPMENT EXPENSES: Research and development expenses were
$2,187, or 2.5% of net sales for the nine months ended September 30, 1998,
compared to $1,006 or 3.1% of net sales for the nine month period ended
September 30, 1997. On a pro forma basis, research and development expenses were
$2,015, or 2.3% of net sales for the nine months ended September 30, 1997. The
increase of $172 between the nine month period ended September 30, 1998 and the
pro forma nine month period ended September 30, 1997 was due to increased
personnel and development costs for new products and applications.
AMORTIZATION OF INTANGIBLES: Amortization expense was $1,758 for the nine month
period ended September 30, 1998, compared to $105 for the nine month period
ended September 30, 1997. On a pro forma basis, amortization was $1,822 for the
nine months ended September 30, 1997. The increase in amortization in 1998 and
pro forma 1997 over actual 1997 reflects the increased goodwill associated with
the Acquisition.
OTHER INCOME (EXPENSE), NET: Other income (expense), net, was $4,017 of expense
for the nine month period ended September 30, 1998, compared to $243 of income
for the nine month period ended September 30, 1997. On a pro forma basis for
1997, other income (expense), net, was $3,989 of expense. The increase in
expense in 1998 and pro forma 1997 over actual 1997 reflects the increased
interest on borrowings related to the Acquisition and the reduction of interest
income due to the use of the Company's cash reserves to help fund the
Acquisition.
INCOME TAX EXPENSE (BENEFIT): The Company's effective tax rate has substantially
changed from the prior period and statutory federal income tax rate of 34% due
to amortization of non-deductible goodwill recorded in connection with the
Acquisition and the elimination of tax exempt interest generated from marketable
securities in the prior year.
NET INCOME PER SHARE: The Company's net income for the nine months ended
September 30, 1998 decreased $2,080 to a net loss of $1,327, or $.22 per share,
from a net income of $753, or $.17 per share, for the nine months ended
September 30, 1997. On a pro forma basis, net income was $1,014, or $.24 per
share, for the comparable period of 1997.
LIQUIDITY AND CAPITAL RESOURCES:
Cash used in operating activities for the nine months ended September 30, 1998
was $5,063 compared to cash provided by operating activities of $1,708 for the
nine months ended September 30, 1997. The significant cash used in operating
activities in 1998 reflects the net loss for the nine months, increased trade
accounts receivable, and the payment of Acquisition related liabilities in 1998,
such as the settlement of Deflecta-Shield stock options and acquisition fees.
Cash used in investing activities was $4,967 and $1,498 for the nine months
ended September 30, 1998 and 1997, respectively. The 1998 amount principally
reflects aggregate payments of $2,840 to purchase the remaining 1.2% of
Deflecta-Shield common stock on February 27, 1998 and the payment of direct
acquisition costs. In addition, the Company purchased property and equipment of
$3,280 in the first nine months of 1998.
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Net cash provided by financing activities for the nine months ended September
30, 1998 was $3,805. Cash provided by financing activities reflected the
increased borrowings under the Company's $87,000 loan facility to pay off its
interim tender loan facility and Deflecta-Shield's revolving credit loan, and
finance the remaining Acquisition costs and Acquisition-related expenses.
The Company expects to fund its operations through operating cash flow and the
use of a revolving credit line. As of September 30, 1998, the Company had
borrowed $13,242 and had availability of $16,758 under its current credit
facility. The Company believes that operating cash flows and borrowings under a
revolving credit facility will be sufficient to satisfy its working capital
requirements, required debt principal payments and operating capital
expenditures. However, the Company will require additional capital to finance
the acquisition of Ventshade Holdings, Inc. In July 1998, the Company announced
that it will construct a 104,000 square foot addition to its corporate
headquarters in Anoka, Minnesota with a completion date in early 1999. The
expansion, which will be financed from its revolving credit facility at a cost
of approximately $4.2 million, will allow for the consolidation of its 130,000
square foot distribution facility currently located in Indianola, Iowa.
As of September 30, 1998, the Company was not in compliance with the financial
covenants of its credit agreement between the Company and Heller Financial, Inc.
("Lender"). The Company has received a waiver from the Lender for the covenant
violations. Because the Company does not anticipate that it will be able to
comply with the Lender's financial covenants, as currently defined, prior to the
end of fourth quarter 1998, the Lender's long term debt has been reclassified to
short term in the Company's consolidated balance sheet. However, in conjunction
with the Company's agreement in principle to acquire 100% of the capital stock
of Ventshade Holdings, Inc., the Company plans to restructure its debt and
expects to modify the related financial covenants. As a part of the transaction,
Harvest Partners, a New York private equity investment firm, and affilitated
entities of Harvest Partners, have committed to invest additional equity in the
Company.
Under the terms of the current credit facility with the Lender, individual
acquisitions of less than $5,000 can be financed under the $15,000 Acquisition
line. For any significant future acquisitions, or capital expenditures, the
Company will be required to raise funds through re-negotiation of the current
facility, a new credit facility or new equity offerings.
YEAR 2000
Many financial information and operational systems in use today may not be able
to interpret dates after December 31, 1999 because such systems allow only two
digits to indicate the year in a date. As a result, such systems are unable to
distinguish January 1, 2000 from January 1, 1900, which would have adverse
consequences on the operations of an entity and the integrity of information
processing. This potential problem is referred to as the "Year 2000" or "Y2K"
issue.
The Company is in process of its assessment of Y2K readiness. This is a four
phased approach which addresses its information systems, production systems,
non-production office support systems, vendor, and customer readiness. The
phases are (i) inventory, (ii) assessment, (iii) remediation, and (iv) testing
for compliance.
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At the present time, the Company's IT business operating system (BPCS 4.05CD)
resident on an AS400 at its corporate headquarters in Anoka, MN, is Y2K
compliant. The Company has multi-state operations of which some have been
converted to BPCS and, therefore, are also Y2K compliant. Presently,
approximately 50% of the Company's IT multi-state operations are Y2K compliant.
The remaining operations will be converted to BPCS with completion of all
operations scheduled by July 1999. The Company has also constructed a wide area
network (WAN) to effect the conversion and allow processing from the central
processor located in Anoka. All components of the WAN are Y2K compliant.
There are numerous supporting software programs resident both on the central
processor and at the desktop that have yet to be assessed. None of the Company's
products that are offered for sale have electronics embedded and, therefore,
there is no Y2K risk related to the sale of its products. The Company will begin
its assessment of production and non-production support systems in the fourth
quarter of 1998. Suppliers and customers will be polled during the first quarter
of 1999. The Company plans to complete remediation and testing of all internal
systems by July 1999. Contingency plans relating to customers and vendors at
risk are dependent on their response to the information request.
At this time, the Company believes that its systems will be generally Year 2000
compliant in a timely manner. The business operating system is compliant now,
all elements of the WAN are compliant, production systems utilizing computer
controlled technology are limited and known, and non-production systems
dependent on computer processing of data have been identified. The Company has
between five and ten mission critical material suppliers. Lastly, the Company
has approximately 100 customers, which account for a substantial portion of its
sales. While vendor and customer base readiness is unknown at the present time,
the Company anticipates its contingency plans will allow for systematic
solutions to their issues.
Costs to be incurred for Year 2000 compliance were estimated at approximately
$600 to $900 over 1998 and 1999, of which a portion will be capitalized and the
remainder charged to earnings in the respective years. The Company does not
expect these activities to materially impact earnings.
OUTLOOK:
In October 1998, the Company received a notice from The Nasdaq Stock Market that
its shares of common stock may no longer meet the net tangible asset requirement
for continued listing on the Nasdaq National Market. The Company's noncompliance
with the net tangible asset requirement resulted primarily from goodwill of
$61.5 million in connection with the Deflecta-Shield acquisition. The Company is
preparing a response and considering appropriate measures; however, no assurance
can be given that the Company will be able to avoid delisting. Although the
Company believes its shares will continue to qualify for listing in the Nasdaq
National Market, no assurance can be given that the trading market for the
Company's shares would not be adversely affected if the Company's shares are
delisted from the Nasdaq National Market.
The acquisition of Deflecta-Shield brought to the Company significant new
product lines and operational strengths to address new market channels.
Historically, Lund had distributed its products principally through warehouse
distributors. With increased sales of light trucks over the past few years, both
the national automotive retailers and OEMs are participating in the distribution
of automotive appearance accessories. The consolidation of Lund and
Deflecta-Shield provides the Company with the ability to integrate Lund's design
and marketing strengths with Deflecta-Shield's operational and
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engineering strengths, ultimately allowing the Company to effectively
participate with the traditional warehouse distributors as well as the
automotive retail and OEM channels.
The shifting of a portion of sales away from warehouse distributors to retail
and OEM channels has resulted in increased competition within the warehouse
distributor channel and created pricing pressures, especially as it relates to
the Company's plastic and fiberglass product lines. The Company traditionally
had a strong presence with the majority of the warehouse distributors and is
attempting to maintain its relationships with them by responding to their need
for competitively priced products and increased service levels.. This may
require some changes in the Company's product lines and product mix. The
Deflecta-Shield acquisition brings an increased OEM presence in both the light
truck and heavy truck markets, especially in key product lines such as bug
shields/hood protectors. In 1998, the Company began rolling out a retail sales
program to the major retail automotive chains, which are integrating accessories
into their product offerings. To date, however, the Company has been unable to
offset the decline in sales to warehouse distributors with direct sales into the
retail channel. The Company continues to address this issue and believes that it
will be able to increase sales to this channel in 1999.
The automotive accessory market is currently going through significant
consolidation in both the manufacturing and distribution areas. The Company
expects to take advantage of this consolidation with both new product
development and acquisitions to become the market leader in all product
categories in which it competes. The long-term goal of the Company is to become
the low cost producer by increasing product line sales volume through
acquisition, product line rationalization and facility consolidation to improve
capacity utilization. This effort will be enhanced by improved plant
efficiencies, consolidation of purchasing and quality improvements through
improved engineering and QS9000 initiatives.
During the balance of 1998 and 1999, the Company will continue to incur
expenditures to maximize the synergistic benefits it hopes to obtain from the
Acquisition by consolidating and internalizing bug shield production,
consolidating operations with Deflecta-Shield's existing cut and sew operations,
integrating information systems into a single platform, centralizing accounting
and combining the aftermarket marketing and sales functions. The full potential
of the Acquisition savings will not be realized until 1999 at the earliest.
EFFECTS OF INFLATION:
Although increases in costs of certain materials and labor could adversely
affect operations, the Company generally has been able to increase its selling
prices to offset increased costs. Price competition, however, particularly in
the plastic and fiberglass product lines, could affect the ability of the
Company to increase its selling prices and thus such increased costs may be
absorbed by the Company and have an impact on gross profit.
FORWARD LOOKING STATEMENTS:
Statements made herein relating to future financial results, the effects of the
Acquisition, company operations, trends and market analysis, Year 2000
compliance, among others, and statements which use the words "believe",
"anticipate", "expect", or similar words, are forward-looking statements made
under the Private Securities Litigation Reform Act of 1995. These statements
involve risks and uncertainties which could cause results to differ materially
from those anticipated. Among the factors
19
<PAGE>
that could cause anticipated results of the Acquisition to differ materially are
the following: inability to obtain expected efficiencies, or to obtain them in a
timely manner; inability to effectively manage a larger enterprise, to integrate
Lund and Deflecta-Shield, or to control costs associated with such integration;
and the representations, warranties and covenants made in the merger agreement
proving to be materially untrue. In addition, both Lund's and Deflecta-Shield's
business and operations (and anticipated results) include the following risk
factors: consumer preference changes; risk of expansion into new distribution
channels; delays in designing, developing, testing or shipping of products;
increased competition; general economic developments and trends; developments
and trends in the light truck and automotive accessory market; sales of heavy
trucks, which are cyclical; the timely development and introduction of
competitive new products by the Company and acceptance of those products; and
increased costs. This is not an exhaustive list and the Company may supplement
this list in future filings or releases or in connection with the making of
forward-looking statements.
20
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
15 An awareness letter from the Company's independent
accountants regarding unaudited interim financial
statements.
10.65 Complete and permanent waiver agreement and general
release of claims between the Company and Richard D.
Minehart, Jr.
10.66 Complete and permanent waiver agreement and general
release of claims between the Company and Jay M.
Allsup.
10.67 Resignation and severance agreement between the
Company and William J. McMahon.
10.68 Employment agreement between the Company and Dennis
W. Vollmershausen.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
September 30, 1998.
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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.
Date: November 16, 1998
LUND INTERNATIONAL HOLDINGS, INC.
(Registrant)
By: /s/ Dennis W. Vollmershausen
Dennis W. Vollmershausen
President and Chief Executive Officer
By: /s/ Ronald C. Fox
Ronald C. Fox
Chief Financial Officer
22
COMPLETE AND PERMANENT WAIVER
AGREEMENT AND GENERAL RELEASE OF CLAIMS
This Complete and Permanent Waiver and General Release of Claims
("Waiver and Release Agreement") is executed on this 23rd day of July, 1998, by
and among Lund International Holdings, Inc. a Delaware corporation, and its
respective subsidiaries, including but not limited to Deflecta-Shield
Corporation, a Delaware Corporation and its respective subsidiaries, and their
subsidiaries, (hereinafter "Company"), and Richard Minehart, Jr., a resident of
the State of Illinois (hereinafter "Minehart").
WHEREAS, Minehart had an employment agreement with Deflecta-Shield
Corporation which contained certain change in control provisions if
Deflecta-Shield Corporation was sold; and
WHEREAS, in late 1997 Deflecta-Shield Corporation's stock was sold to
Lund International Holdings, Inc.; and
WHEREAS, Minehart was employed by Lund International Holdings, Inc. on
or about March 23, 1998, in the position of Chief Operating Officer; and
WHEREAS, Minehart entered into an employment agreement with Lund
International Holdings, Inc.; and
WHEREAS, the Company is requiring that Minehart execute this Waiver and
Release Agreement before it provides Minehart with certain benefits which
Minehart admits he would not be entitled to absent Minehart's execution of this
Waiver and Release Agreement; and
WHEREAS, the parties have had a full and open discussion of the terms
of this Waiver and Release Agreement, a copy of which Minehart acknowledges he
received on June 26, 1998; and
WHEREAS, Minehart agrees that this Waiver and Release Agreement shall
not be construed as an admission by the Company, its officers, directors,
agents, counsel, employees, shareholders, partners, divisions, subsidiaries,
parent corporations, predecessors, successors, affiliates, and assigns,
individually and in their representative capacities, and any entity affiliated
with any of the foregoing of any actions of discrimination, breach of contract,
or any other unlawful, intentional, or negligent conduct against Minehart, and
that the Company specifically denies any such alleged conduct;
NOW THEREFORE, in accordance with and subject to the terms and
conditions contained herein and for other good and valuable consideration, the
Company and Minehart agree as follows:
1. SEPARATION OF EMPLOYMENT. Effective July 23, 1998, Minehart is no
longer an officer and an employee of Lund International Holdings, Inc. or any of
its subsidiaries, and except
<PAGE>
as otherwise provided in this Waiver and Release Agreement, all benefits and
privileges of his employment end as of the close of business on July 4, 1998.
Minehart shall be allowed to provide a letter of resignation from his employment
and from his position as Officer of Lund International Holdings, and all of its
subsidiaries.
2. AGREEMENT NOT TO BRING CLAIMS AGAINST THE COMPANY. Except as set
forth in Paragraphs 8 and 9 herein, Minehart agrees not to institute, at any
time, any action against the Company, its officers, directors, agents, counsel,
employees, shareholders, partners, divisions, subsidiaries, parent corporations,
predecessors, successors, affiliates, and assigns, individually and in their
representative capacities, and any entity affiliated with any of the foregoing,
asserting any claims, demands, and/or any actions, arising out of events that
allegedly occurred before Minehart executes this Waiver and Release Agreement,
whether related to his employment with Deflecta-Shield Corporations or its
subsidiaries, or Lund International Holdings, Inc. or its subsidiaries, or any
liability for damages from whatever source.
3. PAYMENTS AND CONSIDERATION.
BY THE COMPANY UNDER THE CHANGE OF CONTROL PROVISIONS. On or before
August 14, 1998, after this Waiver and Release Agreement is signed by Minehart,
and if Minehart has not rescinded this Waiver and Release Agreement, as set-out
in Paragraph 8 and 9 herein, confirming this in writing to the Company, the
Company shall immediately pay to Minehart for the change of control payments as
set forth in his employment agreement the total sum of One Hundred Sixty
Thousand Dollars ($160,000) subject to the withholding of all State and Federal
taxes. Minehart and the Company agree that Minehart is not entitled to any bonus
payments under the change of control provisions of his employment agreement with
the Company. Minehart and the Company agree that the deferral of the change of
control payment shall not effect Minehart's employment with the Company, which
is terminated on July 23, 1998, and that such deferral shall not operate or be
construed in any way to mean that Minehart continues to be an employee of or
employed by the Company for the deferral period.
BY THE COMPANY FOR SETTLEMENT CONSIDERATION. On August 14, 1998, once
this Waiver and Release Agreement is signed by Minehart, and if Minehart has not
rescinded this Waiver and Release Agreement, as set-out in Paragraph 8 and 9
herein, confirming this in writing to the Company, the Company shall immediately
pay to Minehart for settlement purposes the sum of Ninety-six Thousand Dollars
($96,000) subject to the withholding of all State and Federal taxes. This
settlement consideration is in part based upon a calculation of any potential
bonus payment Minehart might have received if he had been entitled to a bonus
payment, which he agrees he is not entitled to. Minehart and the Company agree
that the deferral of the change of control payment shall not effect Minehart's
employment with the Company, which is terminated on July 23, 1998, and that such
deferral shall not operate or be construed in any way to mean that Minehart
continues to be an employee of or employed by the Company for the deferral
period.
NON-COMPETE PROVISION CONSIDERATION. The Company partially releases
Minehart from the non-compete agreements to which he is subject arising out of
his employment with the Company, including but not limited to Deflecta-Shield
Corporation and its subsidiaries to the
2
<PAGE>
narrowly limited extent that he is prohibited from working for a competitor of
the Company and as modified in Paragraph 5, p. 5 of this Agreement and General
Release of Claims. Otherwise, Minehart is not released from his non-competition
restrictions as set forth below in Paragraph 5 of this Waiver and Release
Agreement and his employment agreement.
PRESS RELEASE CONSIDERATION. The Company and Minehart agree that the
following language shall be used for any press releases:
LUND INTERNATIONAL HOLDINGS, INC. ANNOUNCES RESIGNATION OF RICHARD
MINEHART AS CHIEF OPERATING OFFICER --- Anoka, Minnesota, July 23,
1998, -- Lund International Holdings, Inc. (NASDAQ:LUND) announced
today that Richard Minehart, Chief Operating Officer, has resigned from
Lund International Holdings, Inc., and its subsidiaries. William J.
McMahon, President and Chief Executive Officer of Lund, will assume the
responsibilities of Chief Operating Officer. Prior to joining Lund in
March of this year, Mr. Minehart served as Chief Operating Officer of
Deflecta-Shield Corporation, which was recently acquired by Lund. Lund
is a leading designer, manufacturer and marketer of a broad line of
appearance accessories for new and used light trucks, including pickup
trucks, sport utility vehicles, mini-vans and other vans. The
corporation is headquartered in 911 Lund Boulevard, Anoka, Minnesota
55303. Company Contact: William J. McMahon, President and Chief
Executive Officer (612) 576-4200.
OTHER CUSTOMARY AND USUAL BENEFITS.Minehart has the right to continue,
for the period of time provided by federal law (COBRA), the medical and dental
insurance benefits covering Minehart and his dependents, as applicable, in
accordance with Company policy and the insurance policies and any other benefits
required to be continued under law.
Minehart shall be responsible for the total premiums for any and all
benefits without any match or partial payment by the Company the day after his
date of separation from the Company.
Minehart shall receive all of his benefits under the terms of
Deflecta-Shield Corporation's 401(k) plan for 1998 up through July 4, 1998,
including any match by the Company through July 4, 1998, as required under the
terms of Deflecta-Shield Corporation's 401(k) plan. Minehart is not entitled to
any benefits under the terms of Lund Industries, Incorporated's or Lund
International Holdings, Inc.'s 401(k) plans, if any, because he agrees he is not
a participant in either plan.
Minehart shall receive all three weeks of accrued vacation owed by the
Company.
4. ADVICE OF COUNSEL AND VOLUNTARY EXECUTION. Minehart represents that
he has been advised to seek advice of counsel and has had the opportunity to and
has done so before signing this Waiver and Release Agreement. Minehart also
represents that he understands the provisions of this Waiver and Release
Agreement and their effect on any rights he may have arising out of his
employment, the terms of his employment, his separation from
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employment with the Company, and any other claims against the Company, and that
he is voluntarily executing this Waiver and Release Agreement.
5. CONFIDENTIALITY, COMPANY PROPERTY, TRANSFER OF INFORMATION AND
NON-COMPETE
CONFIDENTIALITY. Minehart acknowledges that in the course of his
employment with the Company Minehart has had access to confidential information
and trade secrets relating to the business affairs of the Company and/or its
related companies and entities. "Trade Secrets" means any information which (i)
derives economic value, actual or potential, from not being generally known to,
and not being readily ascertainable by proper means by, other persons who can
obtain economic value from its disclosure, or use or (ii) would reasonably be
considered a trade secret by persons involved in a business similar to the
Company's, or (iii) scientific or technical information, design, process,
procedure, formula, improvement, confidential business or financial information
relating to Company business which is secret and of value. Minehart also
recognizes that he has a continuing duty of loyalty to the Company.
The term "Confidential Information" includes, but is not limited to the
following proprietary, trade secret, and confidential information: products;
manufacturing processes and/or costs and/or time studies; marketing activities,
sales activities and records; customer lists and/or vendor lists; the quantities
and pricing of products; purchasing activities, advertising and promotional
activities, product specifications; material costs; information pertaining to
all aspects of the Company's research and development and intellectual property;
product mix as that relates to overall sales of a product line; products'
designs, dimensions, and tolerances; financial information which is not made
public in either Company's press releases, quarterly reports, and/or Securities
and Exchange Commission filings, if any, and/or any annual reports; information
concerning the Company's' management, financial condition, banking or credit
relationships or reporting obligations, financial operation, purchasing
activities, business plans; and all other types and categories of information
which are generally understood to be confidential, trade secret and/or
proprietary information.
Minehart agrees that at all times, not to be extended beyond time
limits prohibited by law, that he is obligated to NOT use, or disclose, or
otherwise make available to any person, company or other party, Confidential
Information or Trade Secrets. This Waiver and Release Agreement shall not limit
any obligations Minehart has under any employee Confidentiality Agreement, or
any other law or regulation.
COMPANY PROPERTY. Minehart represents that prior to his execution of
this Waiver and Release Agreement, he has already delivered to the Company all
proprietary information, including but not limited to any and all equipment,
documents, data, customer lists, product catalogues, procedure manuals, sales
information or data, marketing information or data, strategic plans and/or
strategic planning documents, information on the Company's processes,
operational matters, computer systems or data, financial information, accounting
practices, credit arrangements with Heller Financial or the status of any
reporting requirements, trade secrets,
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business and trade practices, sales or distribution methods or any strategies
regarding the Company's sales or distribution methods, and other confidential
information pertaining to the Company's business, operational, or financial
affairs. Minehart agrees to assist the Company in identifying and explaining any
financial or operational information or documents, or current projects or
responsibilities.
Minehart represents that prior to his execution of this Waiver and
Release Agreement, he has returned all Company property in his possession,
custody, or control, including but not limited to any Company credit cards,
keys, computer, cellular telephone, fax or printer. Further, Minehart agrees to
repay to the Company, within fifteen (15) days of his separation from the
Company, the amount of any permanent or temporary advances and balances owing on
any credit cards or any moneys due and owing to the Company for which the
Company is a guarantor. In the event Minehart does not make these payments, any
sum due the Company will be deducted from the payment to be made under this
Waiver and Release Agreement.
NON-COMPETE. Minehart agrees that for a period of nine (9)
months from the date of separation of employment, or July 4, 1998, which ever is
earlier, he will not hire or offer to hire any of the Company's directors,
officers, employees, and/or agents, or attempt to and/or entice them to
discontinue their relationship with the Company, and/or attempt to divert and/or
divert from their relationship with the Company any customer, distributor,
manufacturer, and/or supplier of the Company's that he has had contact with for
the one (1) year preceding his separation from employment. This restriction
encompasses any business which engages in the invention, design, development,
marketing, and/or selling, and/or distributing and/or manufacturing of products
competitive with those which are now listed in the Company's current catalog or
marketing materials, and/or such products which the Company has, in the
preceding one (1) year before his separation from employment, or at the time of
his separation from employment, under design, development, modification,
alteration or purchase from another company, or for which conception has
occurred.
Minehart's obligations under this covenant not to compete shall apply
to any geographical area in which the Company has engaged in business before and
during his employment through production, operations, promotional, sales,
distribution, marketing activities, or has otherwise established its good will,
business reputation, or any potential or actual product designer, or customer,
or supplier, or distributor or manufacturing relations during the one (1) year
preceding his separation from employment.
6. GENERAL RELEASE.
AS AN INDUCEMENT FOR THE COMPANY TO ENTER INTO THIS WAIVER AND RELEASE
AGREEMENT, MINEHART HEREBY IRREVOCABLY AND UNCONDITIONALLY RELEASES, ACQUITS,
AND FOREVER DISCHARGES THE COMPANY, ITS OFFICERS, DIRECTORS, AGENTS, COUNSEL,
EMPLOYEES, SHAREHOLDERS, PARTNERS, DIVISIONS, SUBSIDIARIES, PARENT CORPORATIONS,
PREDECESSORS, SUCCESSORS, AFFILIATES, AND ASSIGNS, INDIVIDUALLY AND IN THEIR
REPRESENTATIVE CAPACITIES, AND ANY ENTITY AFFILIATED WITH ANY OF THE FOREGOING,
FROM ANY AND ALL LIABILITY FOR PAST OR PRESENT, KNOWN OR UNKNOWN, CLAIMS,
DEMANDS, OBLIGATIONS, ACTIONS, DAMAGES, EXPENSES, OR COMPENSATION OF ANY NATURE
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AND FROM WHATEVER SOURCE, WHETHER BASED IN TORT, CONTRACT, INCLUDING BUT NOT
LIMITED TO ANY OPTION AGREEMENTS, EMPLOYMENT AGREEMENTS, BONUS PLANS OR BONUS
PAYMENTS, STOCK OPTION PLANS, OR ANY OTHER THEORY OF RECOVERY, AND WHETHER FOR
COMPENSATORY OR ACTUAL OR PUNITIVE OR OTHER DAMAGES, THAT MINEHART NOW HAS OR
THAT MAY HEREAFTER ACCRUE THROUGH THE DATE OF MINEHART'S EXECUTION OF THIS
WAIVER AND RELEASE AGREEMENT.
MINEHART UNDERSTANDS AND AGREES THAT UNDER THE TERMS OF THIS WAIVER AND
RELEASE AGREEMENT HE IS GIVING UP CLAIMS, COMPLAINTS, CAUSES OF ACTIONS, OR
DEMANDS ARISING UNDER OR BASED ON, INCLUDING BUT NOT LIMITED TO, MINEHART'S
EMPLOYMENT RELATIONSHIP WITH THE COMPANY, INCLUDING BUT NOT LIMITED TO ANY
EMPLOYMENT RELATIONSHIP WITH DEFLECTA-SHIELD CORPORATION AND ITS SUBSIDIARIES
AND THEIR RESPECTIVE SUBSIDIARIES, AND LUND INTERNATIONAL HOLDINGS, AND ITS
SUBSIDIARIES, THE TERMS OF MINEHART'S EMPLOYMENT THEREWITH, AND THE SEPARATION
OF MINEHART FROM HIS EMPLOYMENT THEREWITH; THE MINNESOTA HUMAN RIGHTS ACT
SECTIONS 363 ET. SEQ.; ILLINOIS HUMAN RIGHTS ACT SECTIONS 5/1-101, CHAPTER 775,
ET SEQ.; THE COLORADO ANTI-DISCRIMINATION ACT, TITLE 24, ARTICLE 34, ET. SEQ.;
DELAWARE FAIR EMPLOYMENT PRACTICES ACT, TITLE 19, SECTION 710, ET. SEQ.; IOWA
CIVIL RIGHTS ACT, CHAPTER 216, ET. SEQ.; THE MICHIGAN HUMAN OR CIVIL RIGHTS ACT;
THE INDIANA HUMAN OR CIVIL RIGHTS ACT; THE AMERICANS WITH DISABILITIES ACT 42
U.S.C. SECTIONS 12101, ET SEQ.; TITLE VII OF THE 1964 CIVIL RIGHTS ACT 42 U.S.C.
SECTIONS 2000E, ET SEQ.; THE FAIR LABOR STANDARDS ACT 29 U.S.C. SECTIONS 201 ET
SEQ.; THE EMPLOYEE RETIREMENT INCOME SECURITY ACT 29 U.S.C. SECTIONS 1001, ET
SEQ.; OR ANY OTHER FEDERAL LAW, OR STATE LAW OR CITY ORDINANCE.
MINEHART FURTHER UNDERSTANDS AND AGREES THAT UNDER THE TERMS OF THIS
WAIVER AND RELEASE AGREEMENT HE IS GIVING UP CLAIMS, COMPLAINTS, CAUSES OF
ACTIONS, OR DEMANDS ARISING UNDER OR BASED ON, INCLUDING BUT NOT LIMITED TO ALL
CLAIMS FOR WRONGFUL DISCHARGE, CLAIMS OF DISCRIMINATION, DEFAMATION, INTENTIONAL
OR NEGLIGENT INFLICTION OF EMOTIONAL DISTRESS, NEGLIGENT SUPERVISION OR HIRING,
OR PROMISSORY ESTOPPEL, OR WRONGFUL TERMINATION, FOR ANY BREACH OF CONTRACT
RIGHTS, OR BREACH OF ANY EMPLOYMENT CONTRACTS, EMPLOYEE HANDBOOKS OR EMPLOYEE
POLICY TERMS, OR ANY BREACH OF AN EXPRESS OR IMPLIED PROMISE, OR BREACH OF ANY
COMPANY STOCK OPTION PLANS OR OFFERS, OR FOR ANY MISREPRESENTATION, OR FRAUD, OR
RETALIATION, OR CLAIMS FOR RETALIATORY DISCHARGE, WITH NO RESERVATION OF ANY
RIGHTS OR CLAIMS BY MINEHART, WHETHER STATED OR IMPLIED, DEVELOPED OR
UNDEVELOPED, KNOWN OR UNKNOWN, OR ANY OTHER FACT OR MATTER OCCURRING PRIOR TO
MINEHART'S EXECUTION OF THIS WAIVER AND RELEASE AGREEMENT.
MINEHART FURTHER AGREES THAT MINEHART WILL NOT INSTITUTE ANY CLAIM FOR
DAMAGES, BY CHARGE OR OTHERWISE, NOR OTHERWISE AUTHORIZE ANY OTHER PARTY,
GOVERNMENTAL OR OTHERWISE, TO INSTITUTE ANY CLAIM FOR DAMAGES VIA ADMINISTRATIVE
OR LEGAL PROCEEDINGS AGAINST THE COMPANY, ITS OFFICERS, DIRECTORS, AGENTS,
COUNSEL, EMPLOYEES, SHAREHOLDERS, PARTNERS, DIVISIONS, SUBSIDIARIES, PARENT
CORPORATIONS, PREDECESSORS, SUCCESSORS, AFFILIATES, AND ASSIGNS, INDIVIDUALLY
AND IN THEIR REPRESENTATIVE CAPACITIES, AND ANY ENTITY AFFILIATED WITH ANY OF
THE FOREGOING. MINEHART ALSO WAIVES THE RIGHT TO MONEY DAMAGES OR OTHER LEGAL OR
EQUITABLE RELIEF AWARDED BY ANY GOVERNMENTAL AGENCY RELATED TO ANY SUCH CLAIM.
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7. AGE DISCRIMINATION IN EMPLOYMENT RELEASE. AS AN INDUCEMENT FOR THE
COMPANY TO ENTER INTO THIS WAIVER AND RELEASE AGREEMENT, MINEHART HEREBY
IRREVOCABLY AND UNCONDITIONALLY RELEASES, ACQUITS, AND FOREVER DISCHARGES THE
COMPANY, ITS OFFICERS, DIRECTORS, AGENTS, COUNSEL, EMPLOYEES, SHAREHOLDERS,
PARTNERS, DIVISIONS, SUBSIDIARIES, PARENT CORPORATIONS, PREDECESSORS,
SUCCESSORS, AFFILIATES, AND ASSIGNS, INDIVIDUALLY AND IN THEIR REPRESENTATIVE
CAPACITIES, AND ANY ENTITY AFFILIATED WITH ANY OF THE FOREGOING, FROM ANY AND
ALL LIABILITY FOR PAST OR PRESENT, KNOWN OR UNKNOWN, CLAIMS, DEMANDS,
OBLIGATIONS, ACTIONS, DAMAGES, EXPENSES, OR COMPENSATION OF ANY NATURE AND FROM
WHATEVER SOURCE, AND WHETHER FOR COMPENSATORY OR ACTUAL OR PUNITIVE OR OTHER
DAMAGES, ARISING UNDER THE FEDERAL AGE DISCRIMINATION IN EMPLOYMENT ACT 29
U.S.C. SECTIONS 621 ET SEQ. THAT MINEHART NOW HAS OR THAT MAY HEREAFTER ACCRUE
THROUGH THE DATE OF MINEHART'S EXECUTION OF THIS WAIVER AND RELEASE AGREEMENT.
MINEHART UNDERSTANDS AND AGREES THAT UNDER THE TERMS OF THIS WAIVER AND
RELEASE AGREEMENT HE IS GIVING UP CLAIMS, COMPLAINTS, CAUSES OF ACTIONS, OR
DEMANDS ARISING UNDER OR BASED ON, INCLUDING BUT NOT LIMITED TO THOSE SET FORTH
IN PARAGRAPH 6, CLAIMS UNDER THE FEDERAL AGE DISCRIMINATION IN EMPLOYMENT ACT 29
U.S.C. SECTIONS 621 ET SEQ.
8. RECISSION AND/OR REVOCATION RIGHTS UNDER THE MINNESOTA HUMAN RIGHTS
ACT. Minehart acknowledges that he has been informed of his right to rescind
this Waiver and Release Agreement, insofar as it extends to potential claims
under the MINNESOTA HUMAN RIGHTS ACT, MINNESOTA STATUTES CHAPTER 363, within
fifteen (15) calendar days following the execution of this Waiver and Release
Agreement. This fifteen (15) day time period encompasses the seven (7) day
rescission or revocation period referenced below under the FEDERAL AGE
DISCRIMINATION IN EMPLOYMENT ACT. Minehart has fifteen (15) calendar days after
he has signed this Waiver and Release Agreement to rescind this Waiver and
Release Agreement. The fifteen (15) calendar days shall be counted from the date
of the signing (i.e. the day after it is signed is counted as day one). Minehart
understands that for any rescission to be effective he must comply with the
terms of the Notice which appear on the last page of this Waiver and Release
Agreement, and that this Waiver and Release Agreement is not effective until the
fifteen (15) day rescission period has passed.
9. RECISSION AND/OR REVOCATION RIGHTS UNDER THE FEDERAL AGE
DISCRIMINATION IN EMPLOYMENT ACT. Minehart acknowledges the following:
That he received a copy of this Waiver and Release Agreement
on June 26, 1998.
That he has been informed of his right to consider this Waiver
and Release Agreement for twenty-one (21) days before signing this Waiver and
Release Agreement, insofar as it extends to potential claims under THE FEDERAL
AGE DISCRIMINATION IN EMPLOYMENT ACT 29 U.S.C. SECTION 621 ET. SEQ., executing
this Waiver and Release Agreement on the date set-out above, and (ii) he has
been informed of this right to rescind or revoke this Waiver and Release
Agreement under the Federal Age Discrimination in Employment Act within seven
(7) calendar days following his execution of this Waiver and Release Agreement.
Although the Federal Age Discrimination in Employment Act only provides for a
seven (7) day recission or revocation period,
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the Company agrees to extend this seven (7) day period to fifteen (15) days to
run parallel with the recission or revocation rights under the Minnesota Human
Rights Act. Consequently, the agreed upon fifteen (15) calendar days shall be
counted from the date of the signing (i.e. the day after it is signed is counted
as day one). Minehart understands that for any rescission to be effective, he
must comply with the terms of the Notice which appear on the last page of this
Waiver and Release Agreement, and this Waiver and Release Agreement is not
effective until the fifteen (15) day rescission period has passed.
10. EXERCISE OF RECISSION AND/OR REVOCATION RIGHTS.
It is agreed by the parties that if Minehart exercises these rescission
and/or revocation rights, as set-out above in Paragraph 8 and 9, the Company may
at its option either nullify this Waiver and Release Agreement in its entirety
or keep it in effect as to all claims not rescinded or revoked in accordance
with the Recission and/or Revocation rights set forth in this Waiver and Release
Agreement.
Whether or not Minehart exercises these Recission and/or Revocation
rights, (or the payments to be made hereunder are deferred as agreed) Minehart
's separation of employment from the Company shall be and shall remain
effective. For this reason, Minehart shall not be entitled to receive any
payment under this Waiver and Release Agreement until the seven (7) calendar day
rescission period, which the Company has agreed will be a fifteen (15) day
recission period to run parallel with the recission period under Minnesota law,
has passed, since this Waiver and Release Agreement is not effective until that
time. The deferral of payments under Paragraph 3 of this Waiver and Release
Agreement shall not extend either the MINNESOTA HUMAN RIGHTS ACT or THE AGE
DISCRIMINATION IN EMPLOYMENT ACT recission and/or revocation rights beyond the
fifteen (15) day period, and once this fifteen (15) day period has passed, the
parties agree that this Waiver and Release Agreement shall be and shall remain
effective.
The twenty-one (21) day consideration period may be waived by Minehart
if Minehart signs the Waiver and Release Agreement before the twenty-one (21)
days have passed.
Minehart's early execution of this Waiver and Release Agreement shall be deemed
an admission and agreement by Minehart that his early execution of this Waiver
and Release Agreement is a voluntary and knowing waiver by Minehart of his right
to consider this Waiver and Release Agreement for twenty-one (21) days.
Minehart agrees that changes to this Waiver and Release Agreement,
whether material or immaterial, will not restart the running of the twenty-one
(21) day period.
Minehart agrees that his separation from employment from the Company
shall be and remain effective even if he rescinds this Waiver and Release
Agreement within the fifteen (15) calendar day rescission period.
11. CONFIDENTIALITY OF THE WAIVER AND RELEASE AGREEMENT. The parties
agree that the terms and conditions of, and the amounts paid under, this Waiver
and Release Agreement shall be completely confidential subject to the following:
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A party's right to discuss this Waiver and Release Agreement
with his or its attorney, executive or Company employee with a need to know, tax
adviser, accountant, and spouse; and
A party's right to make disclosure pursuant to any lawfully
issued court order and as may be required by state or federal law or regulation,
in which case the disclosing party shall notify the other promptly of such
disclosure; and
A party's right to make disclosure in the event it is
necessary to commence any action to force compliance with the terms of the
Waiver and Release Agreement or in the event a party is made a defendant in any
action commenced by the other party, his or its heirs, directors, officers,
employees, agents, or shareholders.
12. GOVERNING LAW. This Waiver and Release Agreement shall be governed
by and construed in accordance with the laws of the State of Minnesota.
13. EFFECT OF BREACH.
The parties expressly agree that any breach of any part of Paragraph 5
or Paragraph 3, the Non-Compete provision, of this Waiver and Release Agreement
is a material breach causing irreparable harm to the Company. Minehart expressly
agrees that Paragraph 5 and the Non-Compete provision of Paragraph 3 may be
enforced by injunction, or otherwise. Further, Minehart agrees that the Company
does not have to prove irreparable harm or actual damages to be awarded
injunctive relief and that the Company is entitled to the attorneys' fees and
costs incurred by the Company to seek injunctive relief. The Company shall also
be entitled to any other legal or equitable remedy necessary in order to compel
compliance with Paragraph 5, and/or Paragraph 3, the Non-Compete provision, of
this Waiver and Release Agreement or any other provision of this Waiver and
Release Agreement. Such remedies shall be cumulative and non-exclusive and shall
be in addition to any other remedy or remedies to which the Company may be
entitled.
14. BINDING EFFECT. This Waiver and Release Agreement shall be binding
upon and inure to the benefit of each party and upon his or its heirs,
administrators, representatives, executors, successors and assigns.
15. SEVERABILITY. If any provision of this Waiver and Release Agreement
is found to be unenforceable, this shall not affect the other provisions, which
are severable. The introductory Paragraphs are part of this Waiver and Release
Agreement's terms and are incorporated into its terms.
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IN WITNESS WHEREOF, the parties have caused this Waiver and Release
Agreement to be executed on the day and year first written above.
LUND INTERNATIONAL HOLDINGS, INC. and its respective SUBSIDIARIES, and
DEFLECTA-SHIELD CORPORATION and its respective SUBSIDIARIES
By : /s/ William J. McMahon
Their: President and Member of the Board of Directors
I, Richard Minehart, Jr., have fully informed myself of the contents and meaning
of this Waiver and Release Agreement. I have had the opportunity for assistance
and advice of counsel and I have carefully read and understand this Waiver and
Release Agreement. I further understand that this is a complete and final
release of all my claims and damages against LUND INTERNATIONAL HOLDINGS, INC.
and its respective SUBSIDIARIES, and DEFLECTA-SHIELD CORPORATION and its
respective SUBSIDIARIES.
By: /s/ Richard Minehart, Jr.
Richard Minehart, Jr.
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NOTICE UNDER FEDERAL AGE DISCRIMINATION & EMPLOYMENT ACT
Under Federal law, you have twenty-one (21) calendar days to consider signing
this Waiver and Release Agreement. You may rescind this Waiver and Release
Agreement for any reason within seven (7) calendar days after you have signed
it. The Company has agreed to allow you fifteen (15) calendar days to rescind
this Waiver and Release Agreement. To be effective the rescission must be in
writing and hand delivered or mailed by certified mail and postmarked within the
fifteen (15) calendar day rescission period to
William J. McMahon
Lund International Holdings, Inc.
Deflecta-Shield Corporation
911 Lund Boulevard
Anoka, MN 55303
NOTICE UNDER MINNESOTA STATUTES, SECTION 363
Under Minnesota law, you may rescind this Waiver and Release Agreement for any
reason within fifteen (15) calendar days after you have signed it. To be
effective, the rescission must be in writing and hand delivered or mailed by
certified mail within the fifteen (15) calendar day rescission period to:
William J. McMahon
Lund International Holdings
Deflecta-Shield Corporation
911 Lund Boulevard
Anoka, MN 55303
COMPLETE AND PERMANENT WAIVER
AGREEMENT AND GENERAL RELEASE OF CLAIMS
This Complete and Permanent Waiver and General Release of Claims
("Waiver and Release Agreement") is executed on this 7th day of September, 1998,
by and among Lund International Holdings, Inc. a Delaware corporation, and its
respective subsidiaries, including but not limited to Deflecta-Shield
Corporation, a Delaware Corporation and its respective subsidiaries, and their
subsidiaries, (hereinafter "Company"), and Jay Allsup, a resident of the State
of Minnesota (hereinafter "Allsup").
WHEREAS, the parties have had a full and open discussion of the terms of this
Waiver and Release Agreement, a copy of which Allsup acknowledges he received on
June 1, 1998; and
WHEREAS, the Company is requiring that Allsup execute this Waiver and Release
Agreement before it provides Allsup with certain benefits to which Allsup would
not be entitled absent Allsup's execution of this Waiver and Release Agreement;
WHEREAS, Allsup agrees that this Waiver and Release Agreement shall not be
construed as an admission by the Company, its officers, directors, agents,
counsel, employees, shareholders, partners, divisions, subsidiaries, parent
corporations, predecessors, successors, affiliates, and assigns, individually
and in their representative capacities, and any entity affiliated with any of
the foregoing of any actions of discrimination, breach of contract, or any other
unlawful, intentional, or negligent conduct against Allsup, and that the Company
specifically denies any such alleged conduct;
NOW THEREFORE, in accordance with and subject to the terms and conditions
contained herein and for other good and valuable consideration, the Company and
Allsup agree as follows:
1. SEPARATION OF EMPLOYMENT. Effective May 29, 1998, Allsup is no
longer an officer and an employee of the Company, and except as otherwise
provided in this Waiver and Release Agreement, all benefits and privileges of
his employment end as of the close of business on May 29, 1998. Allsup shall
provide a letter of resignation from his employment and from his position as
Officer of Lund International Holdings, and all of its subsidiaries, including
but not limited to Deflecta-Shield Corporation and its subsidiaries.
2. AGREEMENT NOT TO BRING CLAIMS AGAINST THE COMPANY. Except as set
forth in Paragraphs 8 and 9 herein, Allsup agrees not to institute, at any time,
any action against the Company, its officers, directors, agents, counsel,
employees, shareholders, partners, divisions, subsidiaries, parent corporations,
predecessors, successors, affiliates, and assigns, individually and in their
representative capacities, and any entity affiliated with any of the foregoing,
asserting any claims, demands, and/or any actions, arising out of events that
allegedly occurred before Allsup executes this Waiver and Release Agreement, for
any liability for damages from whatever source.
<PAGE>
3. PAYMENTS.
BY THE COMPANY. Seventeen (17) days after this Waiver and Release
Agreement is signed by Allsup, if Allsup has not rescinded this Waiver and
Release Agreement, as set-out in Paragraph 8 and 9 herein, and confirms this to
the Company in writing, the Company shall immediately pay to Allsup on the
seventeenth day (17th) for severance and settlement benefits equal to six (6)
months of his base salary the sum of Sixty-Five Thousand Dollars ($65,000.00)
subject to the withholding of all State and Federal taxes.
BY ALLSUP. At or before the time Allsup receives payment of the sum
above, Allsup shall immediately pay the Company the total sum of Sixty-One
Thousand Dollars ($61,000.00) for the following debts owed by Allsup to the
Company: 1) Thirty-Nine Thousand Dollars ($39,000.00) that Allsup owes the
Company for a loan it provided to him on his home in California; 2) Twenty-Two
Thousand Dollars ($22,000.00) that he owes the Company for a loan it provided to
him to pay taxes on the restricted stock he received from the Company.
OTHER CUSTOMARY AND USUAL BENEFITS.Allsup has the right to continue,
for the period of time provided by federal law (COBRA), the medical and dental
insurance benefits covering Allsup and his dependents, as applicable, in
accordance with Company policy and the insurance policies and any other benefits
required to be continued under law.
Allsup shall be responsible for the total premiums for any and all benefits
without any match or partial payment by the Company the day after his date of
separation from the Company.
Allsup shall receive all of his benefits under the terms of the Company's 401(k)
plan for 1998 up through the last day of his employment, May 29, 1998, including
any match by the Company through May 29, 1998, as required under the terms of
the Company's 401(k) plan.
Allsup shall receive all accrued vacation owed by the Company.
4. ADVICE OF COUNSEL AND VOLUNTARY EXECUTION. Allsup represents that he
has been advised to seek advice of counsel and has had the opportunity to and
has done so before signing this Waiver and Release Agreement. Allsup also
represents that he understands the provisions of this Waiver and Release
Agreement and their effect on any rights he may have arising out of his
employment, the terms of his employment, his separation from employment with the
Company, and any other claims against the Company, and that he is voluntarily
executing this Waiver and Release Agreement.
5. CONFIDENTIALITY, COMPANY PROPERTY, TRANSFER OF INFORMATION AND
NON-COMPETE
CONFIDENTIALITY. Allsup acknowledges that in the course of his
employment with the Company Allsup has had access to confidential information
and trade secrets relating to the business affairs of the Company and/or its
related companies and entities. "Trade Secrets" means any information which (i)
derives economic value, actual or potential, from not being generally known to,
and not being readily ascertainable by proper means by, other persons who can
obtain economic value from its disclosure, or use or (ii) would reasonably be
considered a trade
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secret by persons involved in a business similar to the Company's, or (iii)
scientific or technical information, design, process, procedure, formula,
improvement, confidential business or financial information relating to Company
business which is secret and of value. Allsup also recognizes that he has a
continuing duty of loyalty to the Company.
The term "Confidential Information" includes, but is not limited to the
following proprietary, trade secret, and confidential information: products;
manufacturing processes and/or costs and/or time studies; marketing activities,
sales activities and records; customer lists and/or vendor lists; the quantities
and pricing of products; purchasing activities, advertising and promotional
activities, product specifications; material costs; information pertaining to
all aspects of the Company's research and development and intellectual property;
product mix as that relates to overall sales of a product line; products'
designs, dimensions, and tolerances; financial information which is not made
public in either Company's press releases, quarterly reports, and/or Securities
and Exchange Commission filings, if any, and/or any annual reports; information
concerning the Company's' management, financial condition, banking or credit
relationships or reporting obligations, financial operation, purchasing
activities, business plans; and all other types and categories of information
which are generally understood to be confidential, trade secret and/or
proprietary information.
Allsup agrees that at all times, not to be extended beyond time limits
prohibited by law, that he is obligated to NOT use, or disclose, or otherwise
make available to any person, company or other party, Confidential Information
or Trade Secrets. This Waiver and Release Agreement shall not limit any
obligations Allsup has under any employee Confidentiality Agreement, or any
other law or regulation.
COMPANY PROPERTY. Allsup represents that prior to his execution of this
Waiver and Release Agreement, he has already delivered to the Company all
proprietary information, including but not limited to any and all equipment,
documents, data, customer lists, product catalogues, procedure manuals, sales
information or data, marketing information or data, strategic plans and/or
strategic planning documents, information on the Company's processes, computer
systems or data, financial information, accounting practices, credit
arrangements with Heller Financial or the status of any reporting requirements,
trade secrets, business and trade practices, sales or distribution methods or
any strategies regarding the Company's sales or distribution methods, and other
confidential information pertaining to the Company's business or financial
affairs. Allsup agrees to assist the Company in identifying and explaining any
financial information or documents or accounting procedures that he has worked
on to assist the Company and its employees in effectively performing the Chief
Financial Officer duties.
Allsup represents that prior to his execution of this Waiver and Release
Agreement, he has returned all Company property in his possession, custody, or
control, including but not limited to any Company credit cards, keys, computer,
cellular telephone, fax or printer. Further, Allsup agrees to repay to the
Company, within fifteen (15) days of his separation from the Company, the amount
of any permanent or temporary advances and balances owing on any credit cards or
any moneys due and owing to the Company for which the Company is a guarantor. In
the event Allsup does not make these payments, any sum due the Company will be
deducted from the payment to be made under this Waiver and Release Agreement.
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TRANSFER OF INFORMATION. Allsup agrees that he shall provide unlimited
access and shall assist the Company and its employees or agents in creating,
identifying, accessing, retrieving, understanding, and transferring all
information and data, whether documentary or electronic (however stored),
including but not limited to the data Allsup has or has had on his laptop and
personal computer or the Company's computer system or otherwise, so that the
Company may effectively and in a timely fashion execute all functions of the
Chief Financial Officer and the functions of any of the employees reporting to
the Chief Financial Officer.
NON-COMPETE. Allsup agrees that, for a period of six (6) months from
the date of his termination (for any reason whatsoever), of employment with the
Company or May 29, 1998, he will not engage or participate in, directly or
indirectly (whether as an employee, owner, partner, shareholder, director,
officer, member, advisor, consultant, agent or, without limitation by the
specific enumeration of the foregoing, otherwise), or render services for or
assist, directly or indirectly, any business which is in whole or in part,
directly competitive with the business of the Company and its subsidiaries as
conducted at the time of the termination of Allsup's employment with the Company
in any geographic area in which the Company or any of its subsidiaries is doing
business. Further, he agrees that for a period of six (6) months from the date
of termination of employment with the Company, he will not solicit or attempt to
solicit: (i) any person or entity who is or has been, a consultant, customer or
supplier or distributor of the Company or any subsidiary for the last two (2)
years, to cease to do business or to not do business with the Company or any
subsidiary; (ii) any person or entity who is or has been, a customer of the
Company or any subsidiary for the last two (2) years, to purchase any product
which may be provided by the Company or any subsidiary. Notwithstanding the
foregoing, the Company acknowledges and agrees that Allsup may accept employment
with the "Automotive Accessories Group", with its principal place of business
located at ______________________________________________, or act in any other
capacity with said "Automotive Accessories Group". The Company agrees that such
activities shall not be a violation of this Non-Compete provision.
6. GENERAL RELEASE.
AS AN INDUCEMENT FOR THE COMPANY TO ENTER INTO THIS WAIVER AND RELEASE
AGREEMENT, ALLSUP HEREBY IRREVOCABLY AND UNCONDITIONALLY RELEASES, ACQUITS, AND
FOREVER DISCHARGES THE COMPANY, ITS OFFICERS, DIRECTORS, AGENTS, COUNSEL,
EMPLOYEES, SHAREHOLDERS, PARTNERS, DIVISIONS, SUBSIDIARIES, PARENT CORPORATIONS,
PREDECESSORS, SUCCESSORS, AFFILIATES, AND ASSIGNS, INDIVIDUALLY AND IN THEIR
REPRESENTATIVE CAPACITIES, AND ANY ENTITY AFFILIATED WITH ANY OF THE FOREGOING,
FROM ANY AND ALL LIABILITY FOR PAST OR PRESENT, KNOWN OR UNKNOWN, CLAIMS,
DEMANDS, OBLIGATIONS, ACTIONS, DAMAGES, EXPENSES, OR COMPENSATION OF ANY NATURE
AND FROM WHATEVER SOURCE, WHETHER BASED IN TORT, CONTRACT, INCLUDING BUT NOT
LIMITED TO ANY OPTION AGREEMENTS, BONUS PLANS, OR ANY OTHER THEORY OF RECOVERY,
AND WHETHER FOR COMPENSATORY OR PUNITIVE OR OTHER DAMAGES, THAT ALLSUP NOW HAS
OR THAT MAY HEREAFTER ACCRUE THROUGH THE DATE OF ALLSUP'S EXECUTION OF THIS
WAIVER AND RELEASE AGREEMENT.
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ALLSUP UNDERSTANDS AND AGREES THAT UNDER THE TERMS OF THIS WAIVER AND RELEASE
AGREEMENT HE IS GIVING UP CLAIMS, COMPLAINTS, CAUSES OF ACTIONS, OR DEMANDS
ARISING UNDER OR BASED ON, INCLUDING BUT NOT LIMITED TO, ALLSUP'S EMPLOYMENT
RELATIONSHIP WITH THE COMPANY, THE TERMS OF ALLSUP'S EMPLOYMENT, AND THE
SEPARATION OF ALLSUP FROM HIS EMPLOYMENT; THE MINNESOTA HUMAN RIGHTS ACT
SECTIONS 363 ET. SEQ.; ILLINOIS HUMAN RIGHTS ACT SECTIONS 5/1-101, CHAPTER 775,
ET SEQ.; THE COLORADO ANTI-DISCRIMINATION ACT, TITLE 24, ARTICLE 34, ET. SEQ.;
DELAWARE FAIR EMPLOYMENT PRACTICES ACT, TITLE 19, SECTION 710, ET. SEQ.; IOWA
CIVIL RIGHTS ACT, CHAPTER 216, ET. SEQ.; THE MICHIGAN HUMAN OR CIVIL RIGHTS ACT;
THE INDIANA HUMAN OR CIVIL RIGHTS ACT; THE AMERICANS WITH DISABILITIES ACT 42
U.S.C. SECTIONS 12101, ET SEQ.; TITLE VII OF THE 1964 CIVIL RIGHTS ACT 42 U.S.C.
SECTIONS 2000E, ET SEQ.; THE FAIR LABOR STANDARDS ACT 29 U.S.C. SECTIONS 201 ET
SEQ.; THE EMPLOYEE RETIREMENT INCOME SECURITY ACT 29 U.S.C. SECTIONS 1001, ET
SEQ.; OR ANY OTHER FEDERAL LAW, OR STATE LAW OR CITY ORDINANCE.
ALLSUP FURTHER UNDERSTANDS AND AGREES THAT UNDER THE TERMS OF THIS WAIVER AND
RELEASE AGREEMENT HE IS GIVING UP CLAIMS, COMPLAINTS, CAUSES OF ACTIONS, OR
DEMANDS ARISING UNDER OR BASED ON, INCLUDING BUT NOT LIMITED TO ALL CLAIMS FOR
WRONGFUL DISCHARGE, CLAIMS OF DISCRIMINATION, DEFAMATION, INTENTIONAL OR
NEGLIGENT INFLICTION OF EMOTIONAL DISTRESS, NEGLIGENT SUPERVISION OR HIRING, OR
PROMISSORY ESTOPPEL, OR WRONGFUL TERMINATION, FOR ANY BREACH OF CONTRACT RIGHTS,
OR BREACH OF ANY EMPLOYEE HANDBOOKS OR EMPLOYEE POLICY TERMS, OR ANY BREACH OF
AN EXPRESS OR IMPLIED PROMISE, OR BREACH OF ANY COMPANY STOCK OPTION PLANS, OR
FOR ANY MISREPRESENTATION, OR FRAUD, OR RETALIATION, OR CLAIMS FOR RETALIATORY
DISCHARGE, WITH NO RESERVATION OF ANY RIGHTS OR CLAIMS BY ALLSUP, WHETHER STATED
OR IMPLIED, DEVELOPED OR UNDEVELOPED, KNOWN OR UNKNOWN, OR ANY OTHER FACT OR
MATTER OCCURRING PRIOR TO ALLSUP'S EXECUTION OF THIS WAIVER AND RELEASE
AGREEMENT.
ALLSUP FURTHER AGREES THAT ALLSUP WILL NOT INSTITUTE ANY CLAIM FOR DAMAGES, BY
CHARGE OR OTHERWISE, NOR OTHERWISE AUTHORIZE ANY OTHER PARTY, GOVERNMENTAL OR
OTHERWISE, TO INSTITUTE ANY CLAIM FOR DAMAGES VIA ADMINISTRATIVE OR LEGAL
PROCEEDINGS AGAINST THE COMPANY, ITS OFFICERS, DIRECTORS, AGENTS, COUNSEL,
EMPLOYEES, SHAREHOLDERS, PARTNERS, DIVISIONS, SUBSIDIARIES, PARENT CORPORATIONS,
PREDECESSORS, SUCCESSORS, AFFILIATES, AND ASSIGNS, INDIVIDUALLY AND IN THEIR
REPRESENTATIVE CAPACITIES, AND ANY ENTITY AFFILIATED WITH ANY OF THE FOREGOING.
ALLSUP ALSO WAIVES THE RIGHT TO MONEY DAMAGES OR OTHER LEGAL OR EQUITABLE RELIEF
AWARDED BY ANY GOVERNMENTAL AGENCY RELATED TO ANY SUCH CLAIM.
7. AGE DISCRIMINATION IN EMPLOYMENT RELEASE. AS AN INDUCEMENT FOR THE
COMPANY TO ENTER INTO THIS WAIVER AND RELEASE AGREEMENT, ALLSUP HEREBY
IRREVOCABLY AND UNCONDITIONALLY RELEASES, ACQUITS, AND FOREVER DISCHARGES THE
COMPANY, ITS OFFICERS, DIRECTORS, AGENTS, COUNSEL, EMPLOYEES, SHAREHOLDERS,
PARTNERS, DIVISIONS, SUBSIDIARIES, PARENT CORPORATIONS, PREDECESSORS,
SUCCESSORS, AFFILIATES, AND ASSIGNS, INDIVIDUALLY AND IN THEIR REPRESENTATIVE
CAPACITIES, AND ANY ENTITY AFFILIATED WITH ANY OF THE FOREGOING, FROM ANY AND
ALL LIABILITY FOR PAST OR PRESENT, KNOWN OR UNKNOWN, CLAIMS, DEMANDS,
OBLIGATIONS, ACTIONS, DAMAGES, EXPENSES, OR COMPENSATION OF ANY NATURE AND FROM
WHATEVER SOURCE, AND WHETHER FOR COMPENSATORY OR PUNITIVE OR OTHER DAMAGES,
ARISING UNDER THE FEDERAL AGE DISCRIMINATION IN EMPLOYMENT ACT 29 U.S.C.
SECTIONS 621 ET SEQ. THAT ALLSUP NOW HAS OR
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THAT MAY HEREAFTER ACCRUE THROUGH THE DATE OF ALLSUP'S EXECUTION OF THIS WAIVER
AND RELEASE AGREEMENT.
ALLSUP UNDERSTANDS AND AGREES THAT UNDER THE TERMS OF THIS WAIVER AND RELEASE
AGREEMENT HE IS GIVING UP CLAIMS, COMPLAINTS, CAUSES OF ACTIONS, OR DEMANDS
ARISING UNDER OR BASED ON, INCLUDING BUT NOT LIMITED TO THOSE SET FORTH IN
PARAGRAPH 6, CLAIMS UNDER THE FEDERAL AGE DISCRIMINATION IN EMPLOYMENT ACT 29
U.S.C. SECTIONS 621 ET SEQ.
8. RECISSION AND/OR REVOCATION RIGHTS UNDER THE MINNESOTA HUMAN RIGHTS
ACT. Allsup acknowledges that he has been informed of his right to rescind this
Waiver and Release Agreement, insofar as it extends to potential claims under
the MINNESOTA HUMAN RIGHTS ACT, MINNESOTA STATUTES CHAPTER 363, within fifteen
(15) calendar days following the execution of this Waiver and Release Agreement.
This fifteen (15) day time period encompasses the seven (7) day rescission or
revocation period referenced below under the FEDERAL AGE DISCRIMINATION IN
EMPLOYMENT ACT. Allsup has fifteen (15) calendar days after he has signed this
Waiver and Release Agreement to rescind this Waiver and Release Agreement. The
fifteen (15) calendar days shall be counted from the date of the signing (i.e.
the day after it is signed is counted as day one). Allsup understands that for
any rescission to be effective he must comply with the terms of the Notice which
appear on the last page of this Waiver and Release Agreement, and that this
Waiver and Release Agreement is not effective until the fifteen (15) day
rescission period has passed.
9. RECISSION AND/OR REVOCATION RIGHTS UNDER THE FEDERAL AGE
DISCRIMINATION IN EMPLOYMENT ACT. Allsup acknowledges the following:
That he received a copy of this Waiver and Release Agreement
on June 1, 1998.
That he has been informed of his right to consider this Waiver
and Release Agreement for twenty-one (21) days before signing this Waiver and
Release Agreement, insofar as it extends to potential claims under THE FEDERAL
AGE DISCRIMINATION IN EMPLOYMENT ACT 29 U.S.C. SECTION 621 ET. SEQ., executing
this Waiver and Release Agreement on the date set-out above, and (ii) he has
been informed of this right to rescind or revoke this Waiver and Release
Agreement under the Federal Age Discrimination in Employment Act within seven
(7) calendar days following his execution of this Waiver and Release Agreement.
Although the Federal Age Discrimination in Employment Act only provides for a
seven (7) day recission or revocation period, the Company agrees to extend this
seven (7) day period to fifteen (15) days to run parallel with the recission or
revocation rights under the Minnesota Human Rights Act. Consequently, the agreed
upon fifteen (15) calendar days shall be counted from the date of the signing
(i.e. the day after it is signed is counted as day one). Allsup understands that
for any rescission to be effective, he must comply with the terms of the Notice
which appear on the last page of this Waiver and Release Agreement, and this
Waiver and Release Agreement is not effective until the fifteen (15) day
rescission period has passed.
10. EXERCISE OF RECISSION AND/OR REVOCATION RIGHTS.
It is agreed by the parties that if Allsup exercises these rescission and/or
revocation rights, as set-out above in Paragraph 8 and 9, the Company may at its
option either nullify this Waiver and Release Agreement in its entirety or keep
it in effect as to all claims not rescinded or revoked in
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accordance with the Recission and/or Revocation rights set forth in this Waiver
and Release Agreement.
Whether or not Allsup exercises these Recission and/or Revocation rights, Allsup
's separation of employment from the Company shall be and remain effective. For
this reason, Allsup shall not be entitled to receive any payment under this
Waiver and Release Agreement until the seven (7) calendar day rescission period,
which the Company has agreed will be a fifteen (15) day recission period to run
parallel with the recission period under Minnesota law, has passed, since this
Waiver and Release Agreement is not effective until that time. The twenty-one
(21) day consideration period may be waived by Allsup if Allsup signs the Waiver
and Release Agreement before the twenty-one (21) days have passed. Allsup's
early execution of this Waiver and Release Agreement shall be deemed a voluntary
and knowing waiver by Allsup of his right to consider this Waiver and Release
Agreement for twenty-one (21) days.
Allsup agrees that changes to this Waiver and Release Agreement, whether
material or immaterial, will not restart the running of the twenty-one (21) day
period.
Allsup agrees that his separation from employment from the Company shall be and
remain effective even if he rescinds this Waiver and Release Agreement within
the fifteen (15) calendar day rescission period.
11. CONFIDENTIALITY OF THE WAIVER AND RELEASE AGREEMENT. The parties
agree that the terms and conditions of, and the amounts paid under, this Waiver
and Release Agreement shall be completely confidential subject to the following:
A party's right to discuss this Waiver and Release Agreement
with his or its attorney, executive or Company employee with a need to know, tax
adviser, accountant, and spouse; and
A party's right to make disclosure pursuant to any lawfully
issued court order and as may be required by state or federal law or regulation,
in which case the disclosing party shall notify the other promptly of such
disclosure; and
A party's right to make disclosure in the event it is
necessary to commence any action to force compliance with the terms of the
Waiver and Release Agreement or in the event a party is made a defendant in any
action commenced by the other party, his or its heirs, directors, officers,
employees, agents, or shareholders.
12. GOVERNING LAW. This Waiver and Release Agreement shall be governed
by and construed in accordance with the laws of the State of Minnesota.
13. PUBLICATIONS. Allsup agrees that he will not make disparaging
statements or publications about the Company or its products.
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14. EFFECT OF BREACH.
In the event that Allsup breaches any provision of this Waiver and
Release Agreement, the Company will have no further obligations under Paragraph
3 of this Waiver and Release Agreement.
The parties expressly agree that any breach of any part of Paragraph 5
of this Waiver and Release Agreement is a material breach causing irreparable
harm to the Company. Allsup expressly agrees that Paragraph 5 may be enforced by
injunction, or otherwise. Further, Allsup agrees that the Company does not have
to prove irreparable harm or actual damages to be awarded injunctive relief and
that the Company is entitled to the attorneys' fees and costs incurred by the
Company to seek injunctive relief. The Company shall also be entitled to any
other legal or equitable remedy necessary in order to compel compliance with
Paragraph 5 of this Waiver and Release Agreement or any other provision of this
Waiver and Release Agreement. Such remedies shall be cumulative and
non-exclusive and shall be in addition to any other remedy or remedies to which
the Company may be entitled.
15. BINDING EFFECT. This Waiver and Release Agreement shall be binding
upon and inure to the benefit of each party and upon his or its heirs,
administrators, representatives, executors, successors and assigns.
16. SEVERABILITY. If any provision of this Waiver and Release Agreement
is found to be unenforceable, this shall not affect the other provisions, which
are severable. The introductory Paragraphs are part of this Waiver and Release
Agreement's terms and are incorporated into its terms.
IN WITNESS WHEREOF, the parties have caused this Waiver and Release
Agreement to be executed on the day and year first written above.
LUND INTERNATIONAL HOLDINGS, INC. and its respective SUBSIDIARIES, and
DEFLECTA-SHIELD CORPORATION and its respective SUBSIDIARIES
By : /s/ Ronald C. Fox
Their: Ronald Fox, Chief Financial Officer
I, Jay Allsup, have fully informed myself of the contents and meaning of this
Waiver and Release Agreement. I have had the opportunity for assistance and
advice of counsel and I have carefully read and understand this Waiver and
Release Agreement. I further understand that this is a complete and final
release of all my claims and damages against LUND INTERNATIONAL HOLDINGS, INC.
and its respective SUBSIDIARIES, and DEFLECTA-SHIELD CORPORATION and its
respective SUBSIDIARIES.
By: /s/ Jay M. Allsup
Jay Allsup
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NOTICE UNDER FEDERAL AGE DISCRIMINATION & EMPLOYMENT ACT
Under Federal law, you have twenty-one (21) calendar days to consider signing
this Waiver and Release Agreement. You may rescind this Waiver and Release
Agreement for any reason within seven (7) calendar days after you have signed
it. The Company has agreed to allow you fifteen (15) calendar days to rescind
this Waiver and Release Agreement. To be effective the rescission must be in
writing and hand delivered or mailed by certified mail and postmarked within the
fifteen (15) calendar day rescission period to :
Ronald Fox
Lund International Holdings, Inc.
Deflecta-Shield Corporation
911 Lund Boulevard
Anoka, MN 55303
NOTICE UNDER MINNESOTA STATUTES, SECTION 363
Under Minnesota law, you may rescind this Waiver and Release Agreement for any
reason within fifteen (15) calendar days after you have signed it. To be
effective, the rescission must be in writing and hand delivered or mailed by
certified mail within the fifteen (15) calendar day rescission period to:
Ron Fox
Lund International Holdings
Deflecta-Shield Corporation
911 Lund Boulevard
Anoka, MN 55303
9
LUND INTERNATIONAL HOLDINGS, INC.
911 Lund Boulevard
Anoka, Minnesota 55303
September 10, 1998
Mr. William J. McMahon
Lund International Holdings, Inc.
911 Lund Boulevard
Anoka, Minnesota 55303
Dear Bill:
This will confirm the understanding we reached today.
1. Effective this date, you hereby resign as (i) President and
Chief Executive Officer of Lund International Holdings, Inc., a Delaware
corporation (the "Company"), (ii) as an officer, director and employee of any
and all subsidiaries of the Company and (iii) as a director of the Company.
2. Except as set forth in Paragraph 4 of this letter, you
agree to release and discharge the Company and its subsidiaries, and their
respective affiliates, stockholders, officers, directors, employees,
representatives and agents from any and all claims, whether known or unknown,
statutory or arising under common law or any rule or regulation, arising from or
related to your employment with or separation from the Company or any subsidiary
thereof or any agreement concerning your employment thereby which you may have
or ever had based upon any act or omission at any time except that you will
retain any rights to indemnity you may have under the certificate of
incorporation and by-laws of the Company.
3. The Employment Agreement between you and the Company dated
August 30, 1994 (the "Employment Agreement") shall be deemed terminated except
that Paragraphs 8, 9 and 10 of the Employment Agreement relating to
confidentiality, noncompetition and materials will continue to be applicable to
you in accordance with their terms.
4. In consideration of the foregoing:
(i) The Company shall pay to you your current Annual
Salary for a period of one year from the date hereof, such
payment to be made in installments in accordance with the
Company's normal payroll payments and practices.
(ii) The Company shall continue, at its expense, the
auto
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allowance you are presently receiving for a period of one
year from the date hereof.
(iii) The Company shall continue to cover you under
applicable medical and health insurance plans, at its expense,
for a period of one year from the date hereof.
(iv) Any stock options you hold for the Company's
securities will continue to be exercisable in accordance with
their terms.
Very truly yours,
LUND INTERNATIONAL HOLDINGS, INC.
By: /s/ Ira Kleinman
Ira Kleinman,
Chairman of the Board
Agreed to this 14th day of
September, 1998
/s/ William J. McMahon
William J. McMahon
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 5th day of October, 1998 by and
between DENNIS W. VOLLMERSHAUSEN (the "Executive"), and LUND INTERNATIONAL
HOLDINGS, INC., a Delaware corporation (the "Company").
W I T N E S S E T H
WHEREAS, in order to acquire the Executive's knowledge,
experience and abilities, the Company desires to employ the Executive as the
President and Chief Executive Officer of the Company, and the Executive desires
to be so employed, subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and of the
respective covenants and agreements herein contained, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto intending to be legally bound hereby agree as
follows:
I. Employment. Subject to the terms and conditions hereinafter
set forth, the Company hereby agrees to employ the Executive, and the Executive
hereby agrees to serve as the President and Chief Executive Officer of the
Company, effective on the later of October 1, 1998 or the date of grant of an
H-1B Visa from the U.S. Department of Justice Immigration and Naturalization
Service (the "Effective Date"). The Executive agrees to perform such services
customary to such office and as shall from time to time be assigned to him in
the sole reasonable discretion of the Company's Board of Directors. The
Executive shall perform such services in compliance with the Company's policies,
including without limitations as such policies may be amended or supplemented
from time to time. At the request of the Company's Board of Directors, Executive
also will serve, without further compensation, as a director or officer of any
of the Company's subsidiaries. Executive shall perform such services at the
Company's principal place of business in Anoka, Minnesota or such other place as
may be designated by the Company's Board of Directors, from time to time, in its
sole reasonable discretion. The Executive further agrees to use his best efforts
to promote the interests of the Company and to devote his full business time and
energies and skill to the business and affairs of the Company in accordance with
the directions and orders of the Board of Directors of the Company, subject to
such time he shall devote to continuing to serve as a director of the following
companies: Eagle Precision Technologies, Inc., Clayton Group Inc., Newell
Industrial Corp. and London Machinery, Inc.
2. Term of Employment. The term of employment of the Executive
pursuant to this Agreement (including any renewal periods hereof, the
"Employment Term") shall commence on the Effective Date and shall terminate upon
the earlier of (a) the third anniversary date of the Effective Date (such period
being referred to as the "Initial Term"), unless this Agreement is automatically
renewed as provided below in this Section 2, or (b) the
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date on which the employment of the Executive is terminated pursuant to Section
4 hereof. Commencing on the third anniversary of the Effective Date, and on each
subsequent anniversary date thereafter, the Employment Term hereunder shall be
renewed automatically for successive periods of one (1) year (each such period
being referred to herein as a "Renewal Term"), unless either the Company or the
Executive elects not to renew such term by giving written notice thereof at
least one hundred twenty (120) days prior to the Expiration Date (as herein
defined). For purposes hereof, the last day of the Initial Term or of each
Renewal Term, if any, (including in the event of termination pursuant to Section
4 or resignation pursuant to Section 5.5) shall be deemed the "Expiration Date".
3. Compensation and Other Related Matters.
3.1 Base Salary. As compensation for the services
rendered by the Executive hereunder, the Company shall pay, or shall cause to be
paid, to the Executive during the Employment Term, and the Executive shall
accept, compensation at the rate of Two Hundred Fifty Thousand Dollars
($250,000.00) per annum (the "Annual Base Salary"). The Company's obligation to
pay the Annual Base Salary shall begin to accrue on the Effective Date and shall
be paid in accordance with the Company's customary payroll practices which are
in effect from time to time during the Employment Term. The Annual Base Salary
may be increased at any time during the Employment Term by action of the Board
of Directors of the Company in its sole discretion. The Executive's Annual Base
Salary shall be subject to all applicable withholding and other taxes.
3.2 Annual Bonus. In addition to the Annual Base
Salary set forth above, during the Employment Term, the Executive shall be
entitled to receive an annual bonus (the "Annual Bonus") according to the terms
of the Company's Short Term Incentive Plan for each fiscal year; provided, that
the Annual Bonus shall in no event be less [THAN AN AMOUNT EQUAL TO 10% OF THE
ANNUAL BASE SALARY THEN PAYABLE TO THE EXECUTIVE UNDER SECTION 3.1 HEREOF BASED
UPON CERTAIN MINIMUM FINANCIAL RESULTS ACHIEVED BY THE COMPANY AND AGREED TO BY
THE EXECUTIVE AND COMPANY FOR EACH YEAR DURING THE TERM HEREOF.] The Annual
Bonus shall be payable by the Company to the Executive with respect to each year
ending on December 31, by March 31 of the following fiscal year. The Company's
Short Term Incentive Plan is determined by the Company's Board of Directors for
each fiscal year.
3.3 Other Employment Benefits. During the Employment
Term, the Executive shall be entitled to the following employment benefits:
(a) four (4) weeks of paid vacation in each fiscal
year of the Company while the Executive is employed hereunder (two weeks of
which if not used by the Executive in any given fiscal year may be carried over
to the next fiscal year; provided, that the Executive shall not have more than
six (6) weeks paid vacation in any given fiscal year as a result of such carry
over) and sick leave in accordance with the Company's policies from time to time
in effect for executive officers of the Company; provided, that, except as
provided herein, vacation and/or sick leave time not used in any year may not be
carried over or
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transferred from one year to another or converted to cash;
(b) participation, subject to qualification
requirements, in medical, life or other insurance or hospitalization plans and
long-term disability policies which are presently in effect or hereinafter
instituted by the Company and applicable to its executive officers generally;
provided, that, the Company shall pay all premium, copayment and deductible
expenses of the Executive in respect of such Company plans and policies;
(c) participation, subject to classification
requirements and continued maintenance thereof by the Company in other employee
benefit plans, such as pension and profit sharing plans, which are from time to
time applicable to the Company's executive officers generally; and
(d) an automobile allowance in accordance with the
Company's regular policy for senior executive officers.
(e) The Company will reimburse the Executive for (i)
the reasonable cost of the preparation of his annual income tax returns for the
United States and Canada, (ii) a one time reasonable fee for estate planning
consultation as a result of his U.S. and Canadian tax status, and (iii) the
rental expense for a period of six months after the Effective Date for the use
of an apartment by the Executive in the Minneapolis, Minnesota area, and (iv)
the Company will pay the cost of a complete annual physical examination of the
Executive.
3.4 Expenses. During the Employment Term, the
Executive shall be entitled to receive prompt reimbursement from the Company of
all travel, entertainment and out-of-pocket expenses which are reasonably and
necessarily incurred by the Executive in the performance of his duties
hereunder; provided, that, the Executive properly accounts therefor in
accordance with the Company's policies as in effect from time to time and such
expenses are approved by the Board of Directors of the Company.
3.5 Options. The Executive shall be granted on the
Effective Date options to purchase up to 250,000 shares of Common Stock of the
Company (the "Option Shares") pursuant to and in accordance with the terms of
the Company's 1998 Stock Option Incentive Plan and the option agreement dated as
of the Effective Date; such options shall have an exercise price equal to the
fair market value (determined in accordance with the Plan) per share on the
Effective Date, with 20% of the Option Shares vesting on the anniversary of the
Effective Date for each of the next five (5) years, provided that the Executive
continues to be employed by the Company on each such vesting date.
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4. Termination.
4.1 Disability. In the event that at any time during
the Employment Term, the Executive, due to physical or mental injury, illness,
disability or incapacity, including "disability" within the meaning of the
disability plan which the Company then has in effect entitling the Executive to
benefits thereunder, shall fail to perform satisfactorily and continuously the
duties assigned to him and the services to be performed by him hereunder for a
period of three (3) consecutive months or for a non-consecutive period of five
(5) months within any twelve (12) month period, the Company, in accordance with
appropriate disability discrimination laws and regulations of the State of
Minnesota, may terminate his employment for "Disability" upon not less than
thirty (30) days prior written notice (such notice referred to herein as a
"Termination Notice") to the Executive.
4.2 Death. The Executive's employment shall terminate
immediately upon the death of the Executive.
4.3 Cause. The Company may, at any time and in its
sole discretion, terminate the Executive's employment for Cause (as herein
defined) by delivery to the Executive of a Termination Notice specifying the
nature of such Cause, effective as of the date (the effective date of any
termination by the Company pursuant to this Section 4 being referred to herein
as the "Termination Date") of such Termination Notice. For purposes hereof,
termination for "Cause" shall mean (i) a conviction of, a plea of nolo
contendere, a guilty plea or confession by the Executive to an act of fraud,
misappropriation or embezzlement or to a felony; (ii) the commission of a
fraudulent act or practice by the Executive affecting the Company; (iii) the
willful failure by the Executive to follow the directions of the Board of
Directors; (iv) the Executive's violation of the Company's drug and alcohol
policy or illegal drug use; (v) the material breach by the Executive of this
Agreement; or (vi) an act of gross neglect or gross or willful misconduct that
relates to the affairs of the Company; provided, that the Executive shall
receive a Termination Notice with respect to a termination for Cause pursuant to
subsections (iii), (v) and/or (vi) hereof and the Executive shall have thirty
(30) days following his receipt of such Termination Notice to cure the breach
specified therein prior to his employment being terminated for Cause pursuant
thereto.
4.4 Voluntary Termination by Company. The Company
may, at any time, and in its sole discretion, terminate the employment of the
Executive hereunder for any reason other than for Cause by the delivery to the
Executive of a Termination Notice, effective as of the date of such Termination
Notice.
5. Compensation During Disability, and Upon Termination.
During a Disability Period (as herein defined) or upon the termination of the
Executive's employment hereunder, the Executive shall be entitled to the
following benefits:
5.1 Disability. During any period (the "Disability
Period") that the Executive, due to physical or mental injury, illness,
disability or incapacity, including "disability" within the meaning of the
disability plan which the Company then has in effect
<PAGE>
entitling the Executive to benefits thereunder, fails to perform satisfactorily
and continuously the duties assigned to him and the services to be performed by
him hereunder, the Company shall continue to pay to the Executive the Annual
Base Salary (as in effect at such time) in accordance with the provisions of
Section 3.1 hereof, less any compensation payable to the Executive under the
applicable disability insurance plan of the Company during such Disability
Period. Thereafter, if the Executive's employment hereunder is terminated
pursuant to Section 4.1 hereof, the Company shall have no further obligations
hereunder after the Termination Date other than the payment of (a) the Annual
Base Salary (as in effect during the year of such termination) payable in
accordance with the Company's customary payroll practices (less any compensation
payable to the Executive under the applicable disability insurance plan of the
Company), for the 12-month period immediately following the Termination Date,
and (b) the Executive's PRO RATA portion of the Annual Bonus due pursuant to
Section 3.2 hereof for the year in which such termination occurs (equal to the
Annual Bonus that would have been due pursuant to Section 3.2 hereof if
Executive had not been terminated, multiplied by a fraction equal to the number
of days during such year that the Executive was employed divided by 365 days),
payable on the same date as such Annual Bonus would have been payable for such
year pursuant to Section 3.2 hereof had the Employment Term not been so
terminated.
5.2 Death. If the Executive's employment is
terminated pursuant to Section 4.2 hereof as a result of the Executive's death,
the Company shall have no further obligations hereunder after the date of the
Executive's death other than the payment to the Executive's estate, legal
representative, heirs or other beneficiaries of (a) the Annual Base Salary (as
in effect during the year of such death) payable in accordance with the
Company's customary payroll practices, for the 12-month period immediately
following the date of the Executive's death, and (b) the Executive's PRO RATA
portion of the Annual Bonus due pursuant to Section 3.2 hereof for the year in
which such death occurred (equal to the Annual Bonus that would have been due
pursuant to Section 3.2 hereof if Executive's death had not occurred, multiplied
by a fraction equal to the number of days during such year that the Executive
was employed divided by 365 days), payable on the same date as such Annual Bonus
would have been payable for such year pursuant to Section 3.2 hereof had the
Employment Term not been so terminated.
5.3 Cause. If the Executive's employment is
terminated by the Company for Cause pursuant to Section 4.3 hereof, the Company
shall have no further obligations hereunder after the Termination Date other
than the payment to the Executive of the Annual Base Salary accrued and unpaid
through the Termination Date. The Company shall not be obligated to make any
bonus payments to the Executive pursuant to Section 3.2 hereof for the year in
which such termination occurs or to provide any of the benefits set forth in
Section 3.3 of this Agreement after the Termination Date, except as may be
required by applicable law.
5.4 Voluntary Termination by Company. If the Company
voluntarily terminates the Executive's employment hereunder pursuant to Section
4.4 hereof, the Company shall have no further obligations hereunder after the
Termination Date other than the payment of (a) for the greater of the 12-month
period immediately following the Termination
<PAGE>
Date, or the remainder of the Initial Term or a Renewal Term, as the case may
be, (i) the Annual Base Salary (as in effect during the year of such
termination) payable in accordance with the Company's customary payroll
practices, and (ii) at no greater out-of-pocket expense to the Company than
incurred prior to termination, the Company-sponsored medical and health benefits
previously made available to the Executive, but only to the extent permitted by
such policies or plans, or as otherwise required by law, and (b) the Annual
Bonus due pursuant to Section 3.2 hereof for the year in which such termination
occurs, payable on the same date as such Annual Bonus would have been payable
for such year pursuant to Section 3.2 hereof had the Employment Term not been so
terminated; provided, however, that such amounts will not be payable by the
Company unless Executive executes and delivers to the Company a full and
complete release, in form satisfactory to the Company, of all claims by
Executive, against the Company, its subsidiaries and affiliates and their
respective stockholders, partners, members, directors, officers, employees and
representatives and agents.
5.5 Resignation by Executive. If at any time during
the Initial Term or any Renewal Term, the Executive resigns from the employ of
the Company for any reason whatsoever, the Company shall have no further
obligations hereunder after the Expiration Date other than the payment to the
Executive of the Annual Base Salary accrued and unpaid through the Expiration
Date. The Company shall not be obligated to make any bonus payments to the
Executive pursuant to Section 3.2 hereof for the year in which such resignation
occurs.
6. Confidentiality. The Executive acknowledges that it is the
policy of the Company to maintain as secret and confidential all Confidential
Information (as defined herein). For purposes of this Section 6, the term
"Company" shall be deemed to include all subsidiaries owned directly or
indirectly by the Company. The parties hereto recognize that the services to be
performed by the Executive pursuant to this Agreement are special and unique,
and that by reason of his employment by the Company after the Effective Date,
the Executive will acquire, or may have acquired, Confidential Information. The
Executive recognizes that all such Confidential Information is and shall remain
the sole property of the Company, free of any rights of the Executive, and
acknowledges that the Company has a vested interest in assuring that all such
Confidential Information remains secret and confidential. Therefore, in
consideration of the Executive's employment with the Company pursuant to this
Agreement, the Executive agrees that at all times from after the Effective Date,
except as limited by applicable law, he will not, directly or indirectly,
disclose to any person, firm, company or other entity (other than the Company or
any of its subsidiaries or affiliates) any Confidential Information, except as
required in the performance of his duties hereunder, without the prior written
consent of the Company, except to the extent that (i) any such Confidential
Information becomes generally available to the public, other than as a result of
a breach by the Executive of this Section 6, or (ii) any such Confidential
Information becomes available to the Executive on a non-confidential basis from
a source other than the Company or any of its affiliates or advisors; provided,
that such source is not known by the Executive to be bound by a confidentiality
agreement with, or other obligation of secrecy to, the Company or another party.
In addition, it shall not be a breach of the confidentiality obligations hereof
if the Executive is required by law to disclose any Confidential Information;
provided, that in such case, the Executive shall (a) give the Company the
earliest notice
<PAGE>
possible that such disclosure is or may be required and (b) cooperate with the
Company, at the Company's expense, in protecting, to the maximum extent legally
permitted, the confidential or proprietary nature of the Confidential
Information which must be so disclosed. The obligations of the Executive under
this Section 6 shall survive any termination of this Agreement. During the
Employment Term, the Executive shall exercise all due and diligent precautions
to protect the integrity of the business plans, customer lists, statistical data
and compilation, agreements, contracts, manuals or other documents of the
Company which embody the Confidential Information, and upon the expiration or
the termination of the Employment Term, the Executive agrees that all
Confidential Information in his possession, directly or indirectly, that is in
writing or other tangible form (together with all duplicates thereof) will
forthwith be returned to the Company and will not be retained by the Executive
or furnished to any person, either by sample, facsimile, film, audio or video
cassette, electronic data, verbal communication or any other means of
communication. The Executive agrees that the provisions of this Section 6 are
reasonably necessary to protect the proprietary rights of the Company in its
Confidential Information, trade secrets, goodwill and reputation.
For purposes hereof, the term "Confidential
Information" means all information developed or used by the Company or any of
its respective affiliates relating to the Business (as herein defined),
operations, employees, customers, suppliers and distributors of the Company,
including, but not limited to, manufacturing techniques, processes and methods,
customer lists, purchase orders, financial data, pricing information and price
lists, business plans and market strategies and arrangements, all books,
records, manuals, advertising materials, catalogues, correspondence, mailing
lists, production data, sales materials and records, purchasing materials and
records, personnel records, quality control records and procedures included in
or relating to the Business or any of the assets of the Company and all
trademarks, copyrights and patents, and applications therefor, all trade
secrets, inventions, processes, procedures, research records, market surveys and
marketing know-how and other technical papers. The term "Confidential
Information" also includes any other information heretofore or hereafter
acquired by the Company and deemed by it to be confidential. For purposes
hereof, the term "Business" shall mean the business of designing, manufacturing,
marketing, distributing, and selling, automotive or vehicle accessories in the
automotive or vehicle accessories industry or market.
7. Noncompetition; Nonsolicitation. (a) The Executive agrees
that, during the Employment Term and for a period of twenty-four (24) months
following the Expiration Date of the Executive's employment with the Company,
(i) the Executive will not, directly or indirectly, own, manage, operate,
control or participate in the ownership, management or control of, or otherwise
be connected as an officer, employee, stockholder, partner, director, or
otherwise with, or have any financial interest in, or aid or assist anyone else
in the conduct of, any entity or business which competes with the Business
conducted by the Company in the State of Minnesota or in any other state or area
where such Business is being conducted on the Expiration Date the Executive's
employment is terminated hereunder, and (ii) the Executive will not, either
personally or by his agent or by letters, circulars or advertisements, and
whether for himself or on behalf of any other person, company, firm or other
entity, except in his capacity as an employee of the Company, canvass or
solicit, or enter into or effect (or
<PAGE>
cause or authorize to be solicited, entered into or effected), directly or
indirectly, for or on behalf of himself or any other person, company, firm or
other entity, any business relating to services or products of the type provided
by, or orders for business or services or products similar to those provided by,
the Company or any of its subsidiaries, affiliates or divisions from any person,
company, firm or other entity who is, or has at any time within two years prior
to the date of such action been, a customer or supplier of the Company or any of
its subsidiaries, affiliates or divisions. Notwithstanding the foregoing, the
Executive's ownership of securities of a public company engaged in competition
with the Company not in excess of 5% of any class of such securities shall not
be considered a breach of the covenants set forth in this Section 7(a) above.
(b) The Executive agrees that, at all times from after the
Effective Date, the Executive will not, either personally or by his agent or by
letters, circulars or advertisements, and whether for himself or on behalf of
any other person, company, firm or other entity, except in his capacity as an
employee of the Company (i) seek to persuade any employee of the Company or any
of its subsidiaries or divisions to discontinue his or her status or employment
therewith or to become employed in a business or activities likely to be
competitive with the Business; or (ii) solicit or employ any such person at any
time within twelve (12) months following the date of cessation of employment of
such person with the Company or any of its subsidiaries or divisions throughout
the State of Minnesota and in every other area where the Company conducts its
Business.
8. Inventions. Any and all inventions made, developed or
created by the Executive (whether at the request or suggestion of the Company or
otherwise, whether alone or in conjunction with others, and whether during
regular working hours or otherwise) during the period of his employment with the
Company, which may be directly or indirectly useful in, or relate to, the
Business or the business of any of the Company's subsidiaries or affiliates,
shall be promptly and fully disclosed by the Executive to the Board of Directors
of the Company, and shall be the Company's exclusive property as against the
Executive. The Executive shall promptly deliver to the Board of Directors of the
Company all papers, drawings, models, data and other material relating to any
invention made, developed or created by him as aforesaid. The Executive hereby
assigns any and all such inventions to the Company and hereby agrees to execute
and deliver such agreements, certificates, assignments or other documents as may
be necessary to effect the assignment to the Company of any and all such
inventions as contemplated by this Section 8. The Executive shall, upon the
Company's request and without any payment therefor, execute any documents
necessary or advisable in the opinion of the Company's counsel to direct
issuance of patents or copyrights of the Company with respect to such inventions
as are to be in the Company's exclusive property as against the Executive under
this Section 8 or to vest in the Company title to such inventions as against the
Executive, the expense of securing any such patent or copyright, to be borne by
the Company. The Executive is hereby notified that this Agreement does not apply
to an invention for which no equipment, supplies, facility or trade secret
information of the Company was used and which was developed entirely on the
Executive's own time, and (i) which does not relate (a) directly to the business
of the Company or (b) to the Company's actual or demonstrably anticipated
research or development, or (ii) which does not result from
<PAGE>
any work performed by the Executive for the Company.
9. Breach by the Executive. Both parties recognize that the
services to be rendered under this Agreement by the Executive are special,
unique and extraordinary in character, and that in the event of a breach by
Executive of the material terms and conditions of the obligations to be
performed by him hereunder, the Company shall be entitled, if it so elects, to
institute and prosecute proceedings in any court of competent jurisdiction,
either in law or in equity, to obtain damages for any breach of this Agreement,
or to enforce the specific performance thereof by the Executive. Without
limiting the generality of the foregoing, the parties acknowledge that a breach
by the Executive of his material obligations under Sections 6, 7 or 8 could
cause the Company irreparable harm for which no adequate remedy at law would be
available in respect thereof and that therefore upon proof of the same the
Company would be entitled to seek injunctive relief with respect thereto.
10. Insurance. The Executive acknowledges and agrees that the
Company may obtain a life insurance policy on the life of the Executive with the
Company named as the beneficiary. If the Company so elects, the Executive
covenants and agrees to cooperate fully with the Company's efforts to obtain
such insurance policy.
11. Conflicting Agreements. The Executive hereby represents
and warrants to the Company that (a) neither the execution of this Agreement by
the Executive nor the performance by the Executive of any of his obligations or
duties hereunder will conflict with or violate or constitute a breach of the
terms of any employment or other agreement to which the Executive is a party or
by which the Executive is bound, and (b) the Executive is not required to obtain
the consent of any person, firm, corporation or other entity in order to enter
into this Agreement or to perform any of his obligations or duties hereunder.
12. Further Assurances. The Executive hereby agrees to execute
and deliver such agreements, certificates or other documents as may be
reasonably requested by the Company which may be necessary or are required
hereunder.
13. Miscellaneous.
13.1 Successors; Binding Agreement. This Agreement
and all rights of the Executive hereunder shall inure to the benefit of the
parties hereto and their respective heirs, personal representatives, successors
and assigns; provided, that the duties of the Executive hereunder are personal
to the Executive and may not be delegated or assigned by him.
13.2 Notice. All notices and other communications
provided for in this Agreement shall be in writing and shall be deemed to have
been duly given when delivered personally, by registered or certified mail,
postage prepaid, or by a nationally recognized overnight courier service as
follows:
<PAGE>
(a) If to the Executive:
with a copy to:
(b) If to the Company:
Lund International Holdings, Inc.
911 Lund Boulevard
Anoka, Minnesota 55303
Attention: Ira D. Kleinman
with a copy to:
Thelen Reid & Priest LLP
40 West 57th Street
New York, New York 10019
Attention: Leonard Gubar, Esq.
or to such other address as any party may have furnished to the other parties in
writing in accordance herewith.
13.3 Governing Law. This Agreement shall be governed
by and in accordance with the laws of the State of Minnesota without regard to
conflict of law rules thereof.
13.4 Waivers. The waiver of either party hereto of
any right hereunder or of any failure to perform or breach by the other party
hereto shall not be deemed a waiver of any other right hereunder or of any other
failure or breach by the other party hereto, whether of the same or a similar
nature or otherwise. No waiver shall be deemed to have occurred unless set forth
in a writing executed by or on behalf of the waiving party. No such written
waiver shall be deemed a continuing waiver unless specifically stated therein,
and each such waiver shall operate only as to the specific term or condition
waived and shall not constitute a waiver of such term or condition for the
future or as to any act other than that specifically waived.
13.5 Validity. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall otherwise remain in full
force and effect. Moreover, if any one or
<PAGE>
more of the provisions contained in this Agreement is held to be excessively
broad as to duration or scope, such provisions shall be construed by limiting
and reducing them so as to be enforceable to the maximum extent compatible with
applicable law.
13.6 Entire Agreement. This Agreement sets forth the
entire agreement and understanding of the parties in respect of the subject
matter contained herein, and supersedes all prior agreements, promises,
covenants, arrangements, communications, representations or warranties, whether
oral or written, by any officer, employee or representative of either party in
respect of said subject matter.
13.7 Headings Descriptive. The headings of the
several paragraphs of this Agreement are inserted for convenience only and shall
not in any way affect the meaning or construction of any provision of this
Agreement.
<PAGE>
13.8 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 shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first above written.
EXECUTIVE
/s/ Dennis W. Vollmershausen
Dennis W. Vollmershausen
LUND INTERNATIONAL HOLDINGS, INC.
By: /s/ Ira D. Kleinman
Ira D. Kleinman
Chairman of the Board
EXHIBIT 15
Securities and Exchange Commission
450 Fifth Street N.W.
Washington D.C. 20549
RE: Lund International Holdings, Inc.
Registrations on Form S-8
We are aware that our report dated October 30, 1998 on our reviews of the
interim consolidated financial information of Lund International Holdings, Inc.
(the Company) for the three and nine month periods ended September 30, 1998 and
1997, and included in the Company's Quarterly Report on Form 10-Q for the nine
months ended September 30, 1998, is incorporated by reference in the Company's
Registration Statements on Form S-8 (Registration Nos. 333-46263, 33-64083 and
33-37160). Pursuant to Rule 436(c), under the Securities Act of 1933, this
report should not be considered part of the Registration Statements prepared or
certified by us within the meaning of Section 7 and 11 of that Act.
/s/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
Minneapolis, Minnesota
November 16, 1998
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