FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number: 0-23238
DEFLECTA-SHIELD CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 42-1411117
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1800 North 9th Street, Indianola, 50125
Iowa (Zip Code)
(Address of principal executive
offices)
(515) 961-6100
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
As of November 13, 1996, 4,800,000 shares of the registrant's
Common Stock were outstanding.<PAGE>
<PAGE>
DEFLECTA-SHIELD CORPORATION
INDEX
Page
PART I. Financial Information . . . . . . . . . . . . . . . . . . 3
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Balance Sheets at December 31, 1995 and
September 30, 1996 . . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations for the Three
Months ended September 30, 1995 and 1996 . . . . . . . . . . . 4
Condensed Consolidated Statements of Operations for the Nine
Months ended September, 1995 and 1996 . . . . . . . . . . . . . 5
Condensed Consolidated Statements of Cash Flows for the Nine
Months ended September 30, 1995 and 1996 . . . . . . . . . . . 6
Notes to Condensed Consolidated Financial Statements . . . . . 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . 8
PART II. Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . 14
Item 5. Other Information . . . . . . . . . . . . . . . . . . . 14
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 14
2<PAGE>
<PAGE>
DEFLECTA-SHIELD CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 31, September 30,
1995 1996
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
-------
Current assets:
Cash . . . . . . . . . . . . . . $ 533 $486
Accounts receivable, less
allowance for doubtful
accounts of $623 and
$800, respectively . . . . . . . 9,708 10,314
Inventories . . . . . . . . . . . 10,580 10,184
Deferred income taxes . . . . . . 1,635 1,635
Prepaid expenses . . . . . . . . 912 164
------- -------
Total current assets . . . . 23,368 22,783
Property and equipment, net . . . . 9,344 9,268
Intangible assets . . . . . . . . . 12,601 12,229
Other assets . . . . . . . . . . . 97 93
------- -------
$45,410 $44,373
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current maturities of long-term
debt . . . . . . . . . . . . . $1,523 $ 81
Accounts payable . . . . . . . . 4,233 4,883
Accrued expenses . . . . . . . . 2,423 2,722
------- -------
Total current liabilities . 8,179 7,686
Deferred taxes . . . . . . . . . . 275 275
Long-term debt, less current maturities 12,345 8,877
Stockholders' equity (Note 2):
Common stock . . . . . . . . . . 48 48
Additional paid-in capital . . . 18,556 18,556
Retained earnings . . . . . . . . 6,007 8,931
------- -------
Total stockholders equity . 24,611 27,535
------- -------
$45,410 $44,373
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
DEFLECTA-SHIELD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended September 30,
1995 1996
<S> <C> <C>
Net sales . . . . . . . . . . . . . $16,007 $18,465
Cost of sales . . . . . . . . . . . 11,167 12,035
------- -------
Gross profit . . . . . . . . . . . 4,840 6,430
Operating expenses:
Selling . . . . . . . . . . . . . 2,552 2,386
General and administrative . . . 1,593 1,707
Amortization of other assets . . 131 113
------- -------
Income from operations . . . . . . 564 2,224
Interest expense . . . . . . . . . 407 250
------- -------
Income before income taxes . . . . 157 1,974
Income tax expense . . . . . . . . 61 729
------- -------
Net income . . . . . . . . . . . . $ 96 $ 1,245
======= ========
Net income per share . . . . . . . $ .02 $ 26
======= ========
Weighted average common
shares outstanding . . . . . . . . 4,800 4,800
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
DEFLECTA-SHIELD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1996
---- ----
<S> <C> <C>
Net sales . . . . . . . . . . . . . . . $52,704 $54,743
Cost of sales . . . . . . . . . . . . . 34,733 36,185
------- -------
Gross profit . . . . . . . . . . . . . 17,971 18,558
Operating expenses:
Selling . . . . . . . . . . . . . . . 8,063 7,681
General and administrative . . . . . 4,864 5,066
Amortization of other assets . . . . 357 372
------- -------
Income from operations . . . . . . . . 4,687 5,439
. . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . 1,059 799
------- -------
Income before income taxes . . . . . . 3,628 4,640
Income tax expense . . . . . . . . . . 1,415 1,716
------- -------
Net income . . . . . . . . . . . . . . $2,213 $2,924
======= =======
Net income per share . . . . . . . . . $ .46 $ .61
======= =======
Weighted average common
shares outstanding . . . . . . . . . . 4,800 4,800
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
DEFLECTA-SHIELD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1996
---- ----
<S> <C> <C>
Cash flow from operating activities:
Net income . . . . . . . . . . . . . . $ 2,213 $2,924
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation . . . . . . . . . . . 1,085 1,471
Amortization of other assets . . . 357 372
Change in deferred tax liability 395 -
Add (deduct) changes in assets and
liabilities:
Accounts receivable . . . . . . 942 (606)
Inventories . . . . . . . . . . (3,515) 396
Prepaid expenses . . . . . . . (658) 748
Other Assets . . . . . . . . . (436) 4
Accounts payable . . . . . . . (1,138) 650
Accrued expenses . . . . . . . (277) 299
------- -------
Net cash (used) provided by operating
activities . . . . . . . . . . . . . . . (1,032) 6,258
------- -------
Cash flows from investing activities:
Purchases of property and equipment . . (3,731) (1,395)
------- -------
Cash used by investing activities . . . (3,731) (1,395)
------- -------
Cash flows from financing activities: . .
Net proceeds (repayment) on line of credit 5,636 (3,461)
Repayment of debt . . . . . . . . . . . (1,059) (1,449)
------- -------
Net cash provided (used) by
financing activities . . . . . . . . . . 4,577 (4,910)
------- -------
Net decrease in cash . . . . . . . . . . (186) (47)
Cash at beginning of period . . . . . . . 747 533
------- -------
Cash at end of period . . . . . . . . . . $ 561 $ 486
======= =======
Cash paid during the period for interest $ 1,050 $ 815
Cash paid during the period for income taxes $ 2,237 $1,263
</TABLE>
The accompanying notes are an integral part of this statement.
6
<PAGE>
DEFLECTA-SHIELD CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION OF UNAUDITED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements of
Deflecta-Shield Corporation and its subsidiaries (collectively, the
"Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information. In the
opinion of management, all adjustments (which were of a normal
recurring nature) considered necessary for a fair presentation have
been included. Operating results for the three and nine months ended
September 30, 1996 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1996. For further
information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-
K for the fiscal year ended December 31, 1995.
NOTE 2 - CHANGES IN STOCKHOLDERS' EQUITY (in thousands)
<TABLE>
<CAPTION>
Additional
Common Paid-In Retained
Stock Capital Earnings
------- ------- --------
<S> <C> <C> <C>
Balance at December 31, 1995 . . $ 48 $18,556 $6,007
Net income for the nine months
ended September 30, 1996 . . . -- -- 2,924
------- ------- -------
Balance at September 30, 1996 . $ 48 $18,556 $8,931
======= ======= =======
</TABLE>
7
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition
and results of operations should be read in conjunction with the
condensed consolidated financial statements included elsewhere herein
and in conjunction with the Management's Discussion and Analysis of
Financial Condition and Results of Operations contained in the
Company's Annual Report on Form 10-K for the Fiscal Year ended
December 31, 1995.
Results of Operations
The following tables set forth, for the periods indicated, certain
operating data as a percentage of net sales and the percentage change
in the dollar amounts of such items compared to the prior period.
<TABLE>
<CAPTION>
Percentage of Net Sales Percentage
Increase (Decrease)
Three Months Ended Three Months Ended
September 30, September 30,
1996 over
1995 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net sales . . . . . . . . 100.0% 100.0% 15.4%
Cost of sales . . . . . . 69.8 65.2 7.8
----- ----- -----
Gross profit . . . . . . 30.2 34.8 32.9
Selling expenses . . . . 15.9 12.9 (6.5)
General and administrative
expenses . . . . . . . . 10.0 9.3 7.2
Amortization of other
assets . . . . . . . . . .8 .6 (13.7)
----- -----
Income from operations . 3.5 12.0 294.3
Interest expense . . . . 2.5 1.3 (38.6)
----- -----
Income before income
taxes . . . . . . . . . . 1.0% 10.7% 1,157.3
===== =====
</TABLE>
<TABLE>
<CAPTION>
Percentage of Net Sales Percentage
Increase (Decrease)
Nine Months Ended Nine Months Ended
September 30, September 30,
1996 over
1995 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net sales . . . . . . . . 100.0% 100.0% 3.9%
Cost of sales . . . . . . 65.9 66.1 4.2
------ ------
Gross profit . . . . . . 34.1 33.9 3.3
Selling expenses . . . . 15.3 14.0 (4.7)
General and administrative
expenses . . . . . . . . 9.2 9.3 4.2
Amortization of other
assets . . . . . . . . . .7 .7 4.2
------ ------
Income from operations . 8.9 9.9 16.0
Interest expense . . . . 2.0 1.4 (24.6)
------ ------
Income before income
taxes . . . . . . . . . . 6.9% 8.5% 27.9
====== ====== ======
</TABLE>
8
<PAGE>
Three Months ended September 30, 1996 Compared to Three Months Ended
September 30, 1995
Net Sales. Net sales were $18,465,000 for the three months ended
September 30, 1996, compared to $16,007,000 for the three months
ended September 30, 1995, an increase of $2,458,000, or 15.4%. Net
sales of light truck products increased by $2,192,000 and net sales
of heavy truck products increased by $266,000. Net sales of Delta
III products increased by $289,000 in the three months ended
September 30, 1996, as compared to the three months ended September
30, 1995. The remainder of the change in net sales of light truck
products, a net increase of $1,903,000, was primarily attributable to
bug deflectors and running board products.
Gross Profit. Gross profit was $6,430,000 for the three months ended
September 30, 1996, compared to $4,840,000 for the three months ended
September 30, 1995, an increase of $1,590,000, or 32.9%. The increase
in gross profit was primarily attributable to an increase in
manufacturing efficiency and an increase in the average sale price of
some light truck products. As a percentage of net sales, gross
profit increased to 34.8% for the three months ended September 30,
1996, compared to 30.2% for the three months ended September 30,
1995, an increase of 4.6% of net sales. This increase in gross
profit percentage was primarily attributable to increased sales of
light truck products.
Selling Expenses. Selling expenses were $2,386,000 for the three
months ended September 30, 1996, compared to $2,552,000 for the three
months ended September 30, 1995, a decrease of $166,000, or 6.5%. As
a percentage of net sales, selling expense decreased to 12.9% for the
three months ended September 30, 1996, from 15.9% for the three
months ended September 30, 1995. This decrease of 3.0% of net sales
was primarily attributable to a decrease in variable selling expenses
of 2.1% of net sales for the three months ended September 30, 1996,
compared to the three months ended September 30, 1995. The remaining
change in selling expenses, a decrease of 0.9% of net sales was
primarily attributable to a decrease in advertising expense.
General and Administrative Expenses. General and administrative
expenses were $1,707,000 for the three months ended September 30,
1996, compared to $1,593,000 for the three months ended September 30,
1995, an increase of $114,000, or 7.2%. This increase was primarily
attributable to an increase in product development expense of
$125,000 for the three months ended September 30, 1996, compared to
the three months ended September 30, 1995. As a percentage of net
sales, general and administrative expense decreased to 9.3% for the
three months ended September 30, 1996, from 10.0% for the three
months ended September 30, 1995.
Interest Expense. Interest expense was $250,000 for the three
months ended September 30, 1996, compared to $407,000 for the three
months ended September 30, 1995, a decrease of $157,000, or 38.6%.
Interest bearing debt averaged approximately $9,269,000 for the three
months ended September 30, 1996, compared to approximately
$17,422,000 for the three months ended September 30, 1995.
9
<PAGE>
Nine Months ended September 30, 1996 Compared to Nine Months Ended
September 30, 1995
Net Sales. Net sales were $54,743,000 for the nine months ended
September 30, 1996, compared to $52,704,000 for the nine months ended
September 30, 1995, an increase of $2,039,000, or 3.9%. Net sales of
light truck products increased by $2,862,000 and net sales of heavy
truck products decreased by $823,000. The increase in net sales of
light truck products was attributable to sales increases of $985,000
in Delta III products, $467,000 in Trailmaster products, and $466,000
in Fibernetics products. The remainder of the change in net sales of
light truck products, an increase of $944,000, was primarily
attributable to bug deflector products. Sales of heavy truck
products in the nine months ended September 30, 1996 were affected by
lower sales of new heavy trucks during the first six months of 1996
which adversely affected demand for the Company's heavy truck
products.
Gross Profit. Gross profit was $18,558,000 for the nine months
ended September 30, 1996, compared to $17,971,000 for the nine months
ended September 30, 1995, an increase of $587,000, or 3.3%. The
increase in gross profit was primarily attributable to an increase in
manufacturing efficiency and an increase in the average sale price of
some light truck products, offset by cost increases in raw materials,
the incurrence of additional overhead to accommodate planned business
consolidations, and the decrease in heavy truck product sales. As a
percentage of net sales, gross profit decreased to 33.9% for the nine
months ended September 30, 1996, compared to 34.1% for the nine
months ended September 30, 1995, a decrease of 0.2% of net sales.
This decrease in gross profit percentage was primarily attributable
to decreased sales of heavy truck products, offset in part by an
increase in gross profit on sales of light truck products.
Selling Expenses. Selling expenses were $7,681,000 for the nine
months ended September 30, 1996, compared to $8,063,000 for the nine
months ended September 30, 1995, a decrease of $382,000, or 4.7%. As
a percentage of net sales, selling expense decreased to 14.0% for the
nine months ended September 30, 1996, from 15.3% for the nine months
ended September 30, 1995. This decrease of 1.3% of net sales was
primarily attributable to a decrease in variable selling expenses of
1.6% of net sales for the nine months ended September 30, 1996
compared to the nine months ended September 30, 1995, and a decrease
in sales personnel expense (compensation and associated costs,
including travel, decreased as a percentage of net sales by 0.4% for
the nine months ended September 30, 1996, compared to the nine months
ended September 30, 1995). The remaining change in selling expenses,
an increase of 0.7% of net sales, was primarily attributable to an
increase in advertising expense and an increase in bad debts expense.
General and Administrative Expenses. General and administrative
expenses were $5,066,000 for the nine months ended September 30,
1996, compared to $4,864,000 for the nine months ended September 30,
1995, an increase of $202,000, or 4.2%. As a percentage of net
sales, general and administrative expenses increased to 9.3% for the
nine months ended September 30, 1996, from 9.2% for the nine months
ended September 30, 1995. This increase of 0.1% of net sales was
primarily attributable to an increase of 0.8% of net sales for
product development expense. The remaining change in general and
administrative expenses, a decrease of 0.7% of net sales, was
primarily attributable to a decrease of general and administrative
wages and associated costs, including travel.
10
<PAGE>
Interest Expense. Interest expense was $799,000 for the nine
months ended September 30, 1996, compared to $1,059,000 for the nine
months ended September 30, 1995, a decrease of $260,000, or 24.6%.
Interest bearing debt averaged approximately $11,221,000 for the nine
months ended September 30, 1996, compared to approximately
$15,367,000 for the nine months ended September 30, 1995.
Seasonality and Quarterly Data
Although the Company deviated from the pattern in 1995, it has
historically generated the majority of its net sales and income from
operations in the second and third quarters of each year. The
Company expects results to move toward the historical pattern in 1996
and future years. This seasonal pattern combined with effects of new
product introductions and the timing of customer orders can cause the
Company s results of operations to vary from quarter to quarter.
Liquidity and Capital Resources
The Company's primary sources of working capital are cash flow
from operations and borrowings by the Company under its credit
facility. As of September 30, 1996, the Company had cash balances of
approximately $486,000 and working capital of approximately
$15,097,000.
Net cash provided (used) by operating activities was approximately
$6,258,000 and ($1,032,000) for the nine months ended September 30,
1996, and September 30, 1995, respectively.
The Company's capital expenditures totaled approximately
$1,395,000 and $3,731,000 for the nine months ended September 30,
1996, and September 30, 1995, respectively.
In August 1994, the Company initiated the construction of a new
distribution facility in Indianola, Iowa. Total capital expenditures
of the Company associated with the Indianola, Iowa facility,
including computer hardware and software, were $3.7 million, with
approximately $1.6 million expended in 1994 and approximately $2.1
million expended in 1995. Phase I of the facility was operational in
early January, 1995. Phase II of the facility, an expansion of
approximately 60,000 square feet was completed and occupied in July
1995. The costs incurred in the fourth quarter of 1994 and in the
first six months of 1995 in connection with this project, primarily
consisting of costs and expenses associated with acquiring and
training the initial workforce for the Indianola facility, were
expensed as these costs were incurred. The Company is currently
studying the appropriate means of consolidating portions of its
manufacturing and distribution facilities. The locations into which
various activities would be consolidated have not been determined.
The Company anticipates that costs and expenses associated with any
relocation and consolidation of the Company s distribution and
manufacturing functions would be substantially offset by cost savings
generated through such relocation and consolidation. The timing of
the incurrence of such charges in relation to the generation of such
savings may cause the Company's results of operations to vary from
quarter to quarter.
On July 21, 1994, the Company entered in to a $24 million
Revolving Credit and Acquisition Facility (the "Credit Agreement")
with Heller Financial, Inc. (the "Lender"), pursuant to which the
Lender is providing Deflecta-Shield with a $6.0 million revolving
credit facility (the "Revolver") and an $18.0 million acquisition
facility (the "Acquisition Facility"). Approximately $2 million of
the Revolver was used to finance the purchase of the assets of
11
<PAGE>
Trailmaster Products, Inc., with the balance of the purchase price
paid with cash generated from operations of Deflecta-Shield's
subsidiaries. Approximately $5.8 million of the Acquisition Facility
was used to finance the purchase of Delta III, Inc., with the balance
of the purchase price paid with a note made by the acquired
subsidiary for approximately $1.5 million. Deflecta-Shield's
obligations under the Credit Agreement are guaranteed by its direct
and indirect wholly owned subsidiaries. Some of these guarantees are
secured by the assets of certain subsidiaries. Availability under
the Acquisition Facility is subject to the sole and absolute
discretion of the Lender. It is anticipated that future acquisitions
by Deflecta-Shield and its subsidiaries will be funded primarily
through the Acquisition Facility. No such acquisitions are currently
contemplated.
The Credit Agreement provides for the revolving credit and
acquisition loans up to the amount of the respective commitments
until July 21, 1999. Under the terms of the Credit Agreement,
Deflecta-Shield paid a closing fee of $60,000, and is obligated to
pay a fee of .5% per annum of the unused Revolver and .2% per annum
of the unused portion of the Acquisition Facility during the term of
the Credit Agreement. The Revolver is limited by levels of inventory
and receivables which, together with other assets, secure the
borrowings under the Credit Agreement. Interest on all loans under
the Credit Agreement is payable at varying rates, ranging from the
Lender's base rate (the "Base Rate") plus .5% for loans under the
Revolver, to a maximum of the Base Rate plus 2% for the final $6
million drawn under the Acquisition Facility.
The Credit Agreement contains certain covenants covering Deflecta-
Shield and its subsidiaries on a consolidated basis, including,
without limitation, covenants relating to the maximum amount of
indebtedness which the entities may incur and limitations on capital
expenditures and payment of dividends by Deflecta-Shield.
As of September 30, 1996, the outstanding principal balance,
together with accrued interest, under the credit facility was
approximately $8,934,000. During 1995, the Lender agreed to make
$3,000,000 of the Acquisition Facility available on a revolving
basis. At September 30, 1996, the aggregate amount available under
the revolving credit facility and the revolving portion of the
acquisition facility was approximately $66,000. The Company believes
that cash flow from operations and available borrowings under the
credit facility are adequate to meet the Company's liquidity needs
for the next 12 months.
In the ordinary course of business, the Company is subject to
examination by the Internal Revenue Service (the IRS ). In October
1993, the IRS initiated an examination of the 1990 Federal income tax
return of DFM Corp. The examination was subsequently expanded to
include the 1991 and 1992 Federal income tax returns. As of
September 1996, the examination has been substantially completed, and
the Company anticipates settlement of all matters in connection with
this examination for a total assessment of between $245,000 and
$300,000 in additional Federal income tax for the periods examined.
The Company believes that it has made adequate provisions for the
additional assessment of taxes.
12
<PAGE>
Forward Looking Information
Information included in this Report on Form 10-Q relating to sales
and earnings expectations constitutes forward-looking statements that
involve a number of risks and uncertainties. From time to time,
information provided by the Company or statements made by its
employees may contain other forward-looking statements. Factors that
could cause actual results to differ materially from the forward-
looking statements include but are not limited to: general economic
conditions, including their impact on the sale of new light trucks;
sales of new heavy trucks, which are cyclical; competitive factors,
including pricing pressures; changes in product and sales mix; the
timely development and introduction of competitive new products by
the Company and market acceptance of those products; inventory risks
due to changes in market demand or the Company's business strategies;
difficulties which may be encountered in the consolidation of the
Company's manufacturing and distribution facilities; changes in
effective tax rates; and the fact that a substantial portion of the
Company's sales are generated from orders received during the
quarter, making prediction of quarterly revenues and earnings
difficult. The words believe, expect, anticipate, project,
and similar expressions identify froward looking statements. Readers
are cautioned not to place undue reliance on these forward looking
statements, which speak only as of the date made. The Company
undertakes no obligation to publicly update or revise any forward-
looking statements, whether as a result of new information, future
events or otherwise.
13
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company's insurer has, along with the other defendants to the
suit, reached a settlement in the case of Emitee v. Toyota, et al.
Pursuant to the settlement, the Company's insurer will contribute
$30,000 to a global settlement of the claim.
The Company's Trailmaster subsidiary has been named a defendant in
Nyilos v. Trailmaster Products Inc., et al., a breach of warranty and
negligence lawsuit pending in Macomb County, Michigan. The suit arises
out of a rollover accident which occurred on October 1, 1994. The
complaint alleges that Trailmaster had made and breached certain
warranties and that it was negligent and claims unspecified damages in
excess of $10,000. This case is at a very early stage and the ultimate
outcome cannot yet be determined.
Item 5. Other Information
Ronald C. Fox was hired as Chief Financial Officer of the Company
effective October 28, 1996.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.(iii)(A)(1) Amended and Restated Deflecta-Shield
Corporation 1993 Stock Plan.
Exhibit 10.(iii)(A)(1)(a) Amended and Restated Deflecta-Shield
Corporation 1996 Stock Plan.
Exhibit 10.(iii)(A)(7) Employment Letter Agreement dated October
28, 1996 between the Company and Ronald C.
Fox.
Exhibit 27. Financial Data Schedule.
(b) Reports on Form 8-K
None during the fiscal quarter ended September 30, 1996.
14<PAGE>
<PAGE>
SIGNATURE
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 13, 1996
DEFLECTA-SHIELD CORPORATION
By: /s/ RONALD C. FOX
--------------------
Ronald C. Fox,
Chief Financial Officer
(Duly authorized officer
and Principal Financial
and Accounting Officer)
15<PAGE>
Exhibit 10.(iii)(A)(1)
AMENDED AND RESTATED
DEFLECTA-SHIELD CORPORATION 1993 STOCK PLAN
1. Name. Effective as of November 13, 1996, the name of the
Deflecta-Shield Corporation Stock Program which was adopted
effective November 4, 1993 is changed to the Deflecta-Shield
Corporation 1993 Stock Plan (herein called the "Plan").
2. Purpose. The purpose of the Plan is to attract and retain
outstanding individuals as key employees, advisors, consultants
and directors of Deflecta-Shield Corporation, a Delaware
corporation ("Company"), and its subsidiaries and affiliates
(Company and its subsidiaries and affiliates, collectively or
individually, "Employer"), and to provide incentives for such key
employees, advisors, consultants and directors to expand and
improve the profits and achieve the objectives of Employer by
providing to such individuals opportunities to acquire shares of
common stock ($.01 par value as of the date hereof) of the
Company ("Shares") through awards and the exercise of options and
thereby provide such individuals with a greater proprietary
interest in and closer identity with Employer and its financial
success. (Awards of Shares under the Plan, collectively or
individually, "Awards") Options granted under this Plan may be
either nonqualified stock options or incentive stock options
("Incentive Options"). (Nonqualified stock options and Incentive
Options, collectively or individually, "Options") Options
granted under this Plan and designated as Incentive Options by
the Committee (as herein defined) are intended to be "incentive
stock options" within the meaning of that term in section 422 of
the Internal Revenue Code of 1986, as amended ("Code"). The
provisions of this Plan with respect to Incentive Options and of
each Incentive Option granted hereunder shall be interpreted in a
manner consistent with that section and all valid regulations
issued thereunder. Incentive Options may not be granted under
the Plan to directors, except to those directors who are also
employees of Employer at the time of the grant.
3. Administration. This Plan will be administered by the Board
of Directors of the Company (the "Board") or a committee thereof
designated by the Board. (The Board or such committee
hereinafter the "Committee") The Committee shall interpret the
Plan and shall prescribe, amend and rescind rules and regulations
relating thereto and make all other determinations necessary or
advisable for the administration of the Plan. Any such action
shall be final and conclusive on all persons having any interest
in the Awards, Options or Shares to which such action relates. A
majority of the members of the Committee shall constitute a
quorum and all determinations of the Committee shall be made by a
majority of its members. Any determination of the Committee
under this Plan may be made without notice of meeting of the
Committee by a unanimous written consent of the members of the
Committee.<PAGE>
<PAGE>
The Committee shall determine, within the limits of the express
provisions of this Plan, those key employees, advisors,
consultants and directors to whom, and the time or times at
which, Awards and Options shall be granted to such key employees,
advisors, consultants or directors. The Committee shall also
determine the number of Shares to be subject to each Award and
Option, whether an Option will be a nonqualified stock option or
an Incentive Option, the duration of each Option, the time or
times within which (during the term of the Option) all or
portions of each Option may be exercised, the restrictions
applicable to each Award and Option, and whether cash, Shares, or
other property may be accepted in full or partial payment upon
exercise of an Option. In making such determinations, the
Committee may take into account the nature of the services
rendered by the Participants (hereinafter defined), their present
and potential contributions to Employer's success and such other
factors as the Committee in its discretion shall deem relevant.
4. Participants. The "Participants" in the Plan will consist
of such key employees, advisors, consultants and directors of
Employer as the Committee in its sole discretion from time to
time designates within the limits of the express provisions of
this Plan. The Committee's designation of a Participant at any
time shall not require the Committee to designate such person at
any other time. The Committee shall consider such factors as it
deems pertinent in selecting Participants and in determining the
terms of their respective Awards and Options, including without
limitation: (i) the financial condition of Employer,
(ii) anticipated profits of the current or future years,
(iii) contributions of Participants to the profitability and
development of Employer, both present and future, and (iv) other
compensation provided to Participants.
5. Terms and Conditions of Awards. Awards granted under this
Plan shall be in such form and upon such terms and conditions as
the Committee shall from time to time determine, subject to the
provisions of this Plan. Awards may be subject to provisions
(whether or not applicable to the Awards granted to any other
Participant) as the Committee, in its sole discretion determines
appropriate, including, without limitation, restrictions on
resale or other disposition, vesting schedules with respect to
the ownership of Shares, such provisions as may be appropriate to
comply with federal or state securities laws and stock exchange
requirements, and undertakings or conditions as to the
Participant's employment in addition to those specifically
provided for under this Plan.
6. Terms and Conditions of Options. The Options granted under
this Plan shall be in such form and upon such terms and
conditions as the Committee shall from time to time determine,
subject to the provisions of this Plan, including the following:
2<PAGE>
<PAGE>
a. Option Price
The Option price shall in no event be less than 85% of
the value of the Shares subject to such Option. The
Option price of each Incentive Option to purchase
Shares shall be at least 100% of the fair market value
of the Shares subject to such Incentive Option at the
time such Incentive Option is granted. In the case of
an Incentive Option granted to a Participant who at the
time of grant owns (directly or indirectly) stock of
the Company or of its parent or its subsidiaries
possessing more than 10% of the total combined voting
power of all classes of stock of such corporations
("10% Owner"), the Option price shall be at least 110%
of such fair market value of the Shares subject to such
Incentive Option at the time such Incentive Option is
granted.
b. Option Term
Each Option granted under this Plan shall be for such
period as the Committee shall determine, which period
may include, without limitation, early termination of
the Option upon the Participant's termination of
employment or cessation as a director. No Incentive
Option, however, may be for a period more than ten (10)
years from the date the Incentive Option is granted;
provided, however, for a 10% Owner, no Incentive Option
may be for a period more than five (5) years from the
date the Incentive Option is granted. In no event will
a Participant who ceases to be employed by Employer for
any reason other than death or disability have the
right to exercise his or her Incentive Options at any
time after three (3) months after such cessation of
employment. A Participant who ceases to be employed by
Employer because of disability shall have no more than
one (1) year after such cessation of employment to
exercise his or her Incentive Options.
c. Method of Exercise
Options may be exercised by giving written notice to
the Treasurer of the Company, stating the number of
Shares with respect to which the Option is being
exercised and tendering payment therefor. In the
discretion of the Committee, payment for Shares may be
made in cash, other Shares, retention of Shares which
would otherwise be issued upon Option exercise, a
combination of the foregoing, or by any other means
which the Committee determines. Upon receipt of the
payment, the Company shall deliver to the person
exercising such Option a certificate or certificates
3<PAGE>
<PAGE>
for such Shares. It shall be a condition to the
performance of the Company's obligation to issue or
transfer Shares upon exercise of an Option that the
person exercising the Option pay, or make provision
satisfactory to Employer for the payment of, any taxes
(other than stock transfer taxes) which Employer is
obligated to collect with respect to the issue or
transfer of Shares upon such exercise.
The Committee may establish a program through which
Participants in the Plan may borrow funds with which to
purchase Shares pursuant to the exercise of an Option.
Eligibility of any Participant for such borrowing will
be determined solely at the discretion of the
Committee. Any such loan shall bear interest at a rate
determined by the Committee.
The Committee may determine to grant additional Options
to those Participants in the Plan who exercise their
Options with Shares.
d. Value of Shares
The aggregate fair market value (determined at the time
the Incentive Options are granted) of the Shares with
respect to which Incentive Options are exercisable for
the first time by a Participant during any calendar
year shall not exceed one hundred thousand dollars
($100,000).
The award of any Option may be subject to other provisions
(whether or not applicable to the Option awarded to any other
Participant) as the Committee, in its sole discretion determines
appropriate, including, without limitation, restrictions on
resale or other disposition, installment exercise limitations,
such provisions as may be appropriate to comply with federal or
state securities laws and stock exchange requirements, and
undertakings or conditions as to the Participant's employment in
addition to those specifically provided for under this Plan.
7. Shares. The total number of Shares allocated to this Plan
and available to designated Participants under this Plan is Two
Hundred Fifty Thousand (250,000) Shares, except as such number of
Shares shall be adjusted in accordance with the provisions of
Section 10. The maximum number of Shares available to any one
Participant under this Plan through Awards and Options is One
Hundred Thousand (100,000) Shares. Each Award and Option when
granted shall state the number of Shares to which it pertains.
Such Shares may be either authorized but unissued Shares or
treasury Shares. If any Option granted under this Plan expires
unexercised, or is terminated or ceases to be exercisable for any
other reason without having been fully exercised prior to the end
4<PAGE>
<PAGE>
of the period during which Options may be granted under this
Plan, or if any Option is cancelled, the Shares theretofore
subject to such Option or to the unexercised portion of such
Option shall again become available for new Awards and Options to
be granted under this Plan to any eligible person (including the
holder of such former Option). Shares reacquired or Shares which
were never issued due to a forfeiture under any Award shall again
become available for new Awards and Options to be granted under
this Plan to any eligible person (including the holder of such
former Award) to the extent permitted by Rule 16b-3 promulgated
under Section 16 of the Exchange Act or any successor provision
("Rule 16b-3").
8. Notices.
a. Awards
Awards granted pursuant to this Plan shall be
authorized by the Committee and shall be evidenced by
notices ("Award Notices") in such form as the Committee
shall from time to time determine. Such Award Notices
shall state: (i) the number of Shares awarded,
(ii) the restrictions applicable to the Shares awarded,
and (iii) such other information as the Committee deems
appropriate or necessary. The terms and conditions of
each Award Notice must be consistent with the
provisions of this Plan and will be applicable only to
the Award that it announces.
b. Options
Options granted pursuant to this Plan shall be
authorized by the Committee and shall be evidenced by
notices ("Option Notices") in such form as the
Committee shall from time to time determine. Such
Option Notices shall state: (i) the number of Shares
with respect to which the Option is granted, (ii) the
type of Option - nonqualified stock option or Incentive
Option, (iii) the Option price, (iv) the Option
exercise schedule, (v) the Option term, (vi) the method
of exercising such Option, and (vii) such other
information as the Committee deems appropriate or
necessary. The terms and conditions of each Option
Notice must be consistent with the provisions of this
Plan and will be applicable only to the grant that it
announces.
9. Non-Assignability of Options. Options granted to a
Participant subject to the Exchange Act and all Incentive Options
shall be exercisable during the lifetime of a Participant only by
the Participant. The Committee in its discretion may permit
Participants in the Plan not subject to Section 16 of the
5<PAGE>
<PAGE>
Exchange Act to transfer nonqualified stock options to (i) family
members, (ii) custodianships under the Uniform Transfers to
Minors Act or any similar statute, (iii) trusts for the benefit
of any family member, (iv) trusts by such Participant for the
Participant's primary benefit and (v) upon termination of a
custodianship under the Uniform Transfers to Minors Act or
similar statute or the termination of a trust, by the custodian
or trustee thereof, to the person or persons who, in accordance
with the terms of such custodianship or trust are entitled to
receive Options held in custody or trust.
10. Adjustments.
a. Capital Adjustments
If the Shares should, as a result of any stock
dividend, stock split, other subdivision or combination
of Shares, or any reclassification, recapitalization or
otherwise, be increased or decreased, the number of
Shares covered by each outstanding Award and Option,
the Option price under each outstanding Option, and the
total number of Shares reserved for issuance under this
Plan shall be adjusted as determined by the Committee
to reflect such action. Any new Shares or other
securities issued with respect to Shares shall be
deemed Shares.
b. Sale or Reorganization
In the event Employer is merged or consolidated with
another corporation, or in the event the property or
stock of Employer is acquired by another corporation,
or in the event of a reorganization or liquidation of
Employer, or in case of any extraordinary transaction,
the board of directors of any corporation assuming the
obligations of the Company hereunder or the Committee,
as applicable, shall have the right to provide for the
continuation of Awards or Options granted under the
Plan or for other equitable adjustments as determined
by the board of directors of such corporation assuming
the obligations of the Company hereunder or the
Committee, as applicable (by means, such as, for
example, cash payment in an amount equal to the
difference between the Share price and the Option
price, conversion into other property or securities,
removal of any or all restrictions on Awards, or giving
written notice to holders of Options that their Options
will become immediately exercisable, notwithstanding
any waiting period otherwise prescribed by the board of
directors of any such corporation or the Committee, as
applicable, and that such Options must be exercised
6<PAGE>
<PAGE>
within a specified period of days of such notice or
they will be terminated).
11. Legal and Other Requirements. Each Award and Option granted
under this Plan shall be subject to the requirement that if at
any time the Committee shall determine, in its discretion, that
the listing, registration or qualification of the Shares issuable
or transferable upon the Award or exercise of the Option upon any
securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with
the granting of such Award or Option, or the issuance, transfer
or purchase of Shares thereunder, such Award shall not be made
and such Option may not be exercised in whole or in part unless
such listing, registration, qualification, consent, or approval
shall have been effected or obtained free of any conditions not
acceptable to the Committee. The Company shall not be obligated
to sell or issue any Shares in any manner in contravention of the
Securities Act of 1933, as amended, or any state securities law.
Each Participant shall agree to such terms and conditions in
connection with an Award or the exercise of an Option, including
restrictions on the disposition of Shares acquired pursuant to
the Award or upon exercise of the Option, as the Committee may
deem appropriate. Shares acquired pursuant to an Award or upon
exercise of an Option may be legended as the Committee shall deem
appropriate to reflect the restrictions imposed by the Committee,
this Plan or by securities laws generally. A Participant shall
have no rights as a stockholder with respect to any Shares
covered by Options granted to or Options exercised by, the
Participant until the date of delivery of a stock certificate to
the Participant for such Shares. No adjustment with respect to
any Shares covered by Options other than pursuant to Section 10
hereof shall be made for dividends or other rights for which the
record date is prior to the date such stock certificate is
delivered. This Plan is intended to comply with Rule 16b-3 with
respect to persons subject to Section 16 of the Exchange Act and
any provision which would prevent compliance with Rule 16b-3
shall be deemed invalid to the extent permitted by law and deemed
appropriate by the Committee.
12. Restriction on Sale of Shares. Without prior written notice
to the Company, no Shares acquired by a Participant upon exercise
of an Incentive Option granted hereunder shall be disposed of by
the Participant within two years from the date such Incentive
Option was granted, nor within one year after the transfer of
such Shares to the Participant; provided, however, that a
transfer to a trustee, receiver, or other fiduciary in any
insolvency proceeding, as described in section 422(c)(3) of the
Code, shall not be deemed to be such a disposition.
13. Tax Withholding. Employer shall comply with the obligations
imposed on Employer under applicable tax withholding laws, if
7<PAGE>
<PAGE>
any, with respect to Awards and Options granted hereunder, and
shall be entitled to do any act or thing to effectuate any such
required compliance, including, without limitation, withholding
from amounts payable by Employer to a Participant and including
making demand on a Participant for the amounts required to be
withheld.
If the Committee so permits, a Participant, or upon the
Participant's death, the Participant's beneficiary, may satisfy,
in whole or in part, the obligation to pay Employer any amount
required to be withheld under the applicable federal, state and
local income tax laws in connection with an Award or exercise of
an Option under this Plan by either: (i) having Employer
withhold from the Shares to be acquired pursuant to the Award or
upon the exercise of the Option, or (ii) delivering to Employer
either previously acquired Shares or Shares acquired pursuant to
the Award or upon the exercise of the Option which the
Participant or beneficiary was unconditionally obligated to
deliver to Employer. The Shares withheld or delivered shall be
valued at their fair market value as of the date the amount of
tax to be withheld is determined. The fair market value of
Shares shall be determined in accordance with procedures
established by the Committee. Any amounts required to be
withheld in excess of the value of Shares withheld or delivered
shall be paid in cash or withheld from other compensation paid by
Employer.
14. No Contract of Employment. Neither the adoption of this
Plan nor the grant of any Awards or Options, nor ownership of
Shares shall be deemed to obligate Employer to continue the
appointment, employment, or engagement of any eligible person for
any particular period.
15. Indemnification of Committee. The members of the Committee
shall be indemnified by the Company to the fullest extent
permitted by Delaware law, the Company's Certificate of
Incorporation and the Company's by-laws.
16. Amendment and Termination of Plan. The Company may amend
this Plan from time to time or terminate this Plan at any time,
but no such action shall reduce the number of Shares subject to
the then outstanding Awards or Options granted to any Participant
or adversely to the Participant change the terms and conditions
of outstanding Awards or Options without the Participant's
consent; provided, however, that shareholder approval shall be
necessary to adopt any amendment if the adoption of such
amendment without shareholder approval would cause this Plan to
no longer comply with Rule 16b-3 or any successor rule or
regulatory requirement. No Award or Option may be granted after
ten (10) years from the original effective date of adoption of
this Plan.
8<PAGE>
<PAGE>
17. Delaware Law to Govern. This Plan shall be governed by and
construed in accordance with the laws of the State of Delaware.
18. Effective Date of Plan. The original effective date of the
Plan was November 4, 1993. The effective date of this Amendment
and Restatement is November 13, 1996.
51451_04 -- 11/14/96, 10:48 am
9<PAGE>
Exhibit 10.(iii)(A)(1)(a)
AMENDED AND RESTATED
DEFLECTA-SHIELD CORPORATION 1996 STOCK PLAN
1. Name. Effective as of November 13, 1996, the name of the
Deflecta-Shield Corporation 1996 Stock Program is changed to the
Deflecta-Shield Corporation 1996 Stock Plan (herein called the
"Plan").
2. Purpose. The purpose of the Plan is to attract and retain
outstanding individuals as key employees, advisors, consultants
and directors of Deflecta-Shield Corporation, a Delaware
corporation (the "Company"), and its subsidiaries and affiliates
(the Company and its subsidiaries and affiliates, collectively or
individually, "Employer"), and to provide incentives for such key
employees, advisors, consultants and directors to expand and
improve the profits and achieve the objectives of Employer by
providing to such individuals opportunities to acquire shares of
common stock ($.01 par value as of the date hereof) of the
Company ("Shares") through awards and the exercise of options and
thereby provide such individuals with a greater proprietary
interest in and closer identity with Employer and its financial
success. (Awards of Shares under the Plan, collectively or
individually, "Awards") Options granted under this Plan may be
either nonqualified stock options or incentive stock options
("Incentive Options"). (Nonqualified stock options and Incentive
Options, collectively or individually, "Options") Options
granted under this Plan and designated as Incentive Options by
the Committee (as herein defined) are intended to be "incentive
stock options" within the meaning of that term in section 422 of
the Internal Revenue Code of 1986, as amended ("Code"). The
provisions of this Plan with respect to Incentive Options and of
each Incentive Option granted hereunder shall be interpreted in a
manner consistent with that section and all valid regulations
issued thereunder. Incentive Options may not be granted under
the Plan to directors, except to those directors who are also
employees of Employer at the time of the grant.
3. Administration. This Plan will be administered by the Board
of Directors of the Company (the "Board") or a committee thereof
designated by the Board. (The Board or such committee
hereinafter the "Committee") The Committee shall interpret the
Plan and shall prescribe, amend and rescind rules and regulations
relating thereto and make all other determinations necessary or
advisable for the administration of the Plan. Any such action
shall be final and conclusive on all persons having any interest
in the Awards, Options or Shares to which such action relates. A
majority of the members of the Committee shall constitute a
quorum and all determinations of the Committee shall be made by a
majority of its members. Any determination of the Committee
under this Plan may be made without notice of meeting of the
Committee by a unanimous written consent of the Committee.<PAGE>
<PAGE>
The Committee shall determine, within the limits of the express
provisions of this Plan, those key employees, advisors,
consultants and directors to whom, and the time or times at
which, Awards and Options shall be granted to such key employees,
advisors, consultants or directors. The Committee shall
determine the number of Shares to be subject to each Award and
Option, whether an Option will be a nonqualified stock option or
an Incentive Option, the duration of each Option, the time or
times within which (during the term of the Option) all or
portions of each Option may be exercised, the restrictions
applicable to each Award and Option, and whether cash, Shares, or
other property may be accepted in full or partial payment upon
exercise of an Option. In making such determinations, the
Committee may take into account the nature of the services
rendered by the Participants (hereinafter defined), their present
and potential contributions to Employer's success and such other
factors as the Committee in its discretion shall deem relevant.
4. Participants. The "Participants" in the Plan will consist
of such key employees, advisors, consultants and directors of
Employer as the Committee in its sole discretion from time to
time designates within the limits of the express provisions of
this Plan. The Committee's designation of a Participant at any
time shall not require the Committee to designate such person at
any other time. The Committee shall consider such factors as it
deems pertinent in selecting Participants and in determining the
terms of their respective Awards and Options, including without
limitation: (i) the financial condition of Employer, (ii)
anticipated profits of the current or future years, (iii)
contributions of Participants to the profitability and
development of Employer, both present and future, and (iv) other
compensation provided to Participants.
5. Terms and Conditions of Awards. Awards granted under this
Plan shall be in such form and upon such terms and conditions as
the Committee shall from time to time determine, subject to the
provisions of this Plan. Awards may be subject to provisions
(whether or not applicable to the Awards granted to any other
Participant) as the Committee, in its sole discretion determines
appropriate, including, without limitation, restrictions on
resale or other disposition, vesting schedules with respect to
the ownership of Shares, such provisions as may be appropriate to
comply with federal or state securities laws and stock exchange
requirements, and undertakings or conditions as to the
Participant's employment in addition to those specifically
provided for under this Plan.
6. Terms and Conditions of Options. The Options granted under
this Plan shall be in such form and upon such terms and condi-
tions as the Committee shall from time to time determine, subject
to the provisions of this Plan, including the following:
2<PAGE>
<PAGE>
a. Option Price
The Option price shall in no event be less than 100% of
the value of the Shares subject to such Option at the
time such Option is granted. In the case of an
Incentive Option granted to a Participant who at the
time of grant owns (directly or indirectly) stock of
the Company or of its parent or its subsidiaries
possessing more than 10% of the total combined voting
power of all classes of stock of such corporations
("10% Owner"), the Option price shall be at least 110%
of such fair market value of the Shares subject to such
Incentive Option at the time such Incentive Option is
granted.
b. Option Term
Each Option granted under this Plan shall be for such
period as the Committee shall determine, which period
may include, without limitation, early termination of
the Option upon the Participant's termination of
employment or cessation as a director. No Incentive
Option, however, may be for a period more than ten (10)
years from the date the Incentive Option is granted;
provided, however, for a 10% Owner, no Incentive Option
may be for a period more than five (5) years from the
date the Incentive Option is granted. In no event will
a Participant who ceases to be employed by Employer for
any reason other than death or disability have the
right to exercise his or her Incentive Options at any
time after three (3) months after such cessation of
employment. A Participant who ceases to be employed by
Employer because of disability shall have no more than
one (1) year after such cessation of employment to
exercise his or her Incentive Options.
c. Method of Exercise
Options may be exercised by giving written notice to
the Treasurer of the Company, stating the number of
Shares with respect to which the Option is being
exercised and tendering payment therefor. In the
discretion of the Committee, payment for Shares may be
made in cash, other Shares, retention of Shares which
would otherwise be issued upon Option exercise, a
combination of the foregoing, or by any other means
which the Committee determines. Upon receipt of the
payment, the Company shall deliver to the person
exercising such Option a certificate or certificates
for such Shares. It shall be a condition to the
performance of the Company's obligation to issue or
transfer Shares upon exercise of an Option that the
3<PAGE>
<PAGE>
person exercising the Option pay, or make provision
satisfactory to Employer for the payment of, any taxes
(other than stock transfer taxes) which Employer is
obligated to collect with respect to the issue or
transfer of Shares upon such exercise.
The Committee may establish a program through which
Participants in the Plan may borrow funds with which to
purchase Shares pursuant to the exercise of an Option.
Eligibility of any Participant for such borrowing will
be determined solely at the discretion of the
Committee. Any such loan shall bear interest at a rate
determined by the Committee.
The Committee may determine to grant additional options
to those Participants in the Plan who exercise their
Options with Shares.
d. Value of Shares
The aggregate fair market value (determined at the time
the Incentive Options are granted) of the Shares with
respect to which Incentive Options are exercisable for
the first time by a Participant during any calendar
year shall not exceed one hundred thousand dollars
($100,000).
The award of any Option may be subject to other provisions
(whether or not applicable to the Option awarded to any other
Participant) as the Committee, in its sole discretion determines
appropriate, including, without limitation, restrictions on
resale or other disposition, installment exercise limitations,
such provisions as may be appropriate to comply with federal or
state securities laws and stock exchange requirements, and
undertakings or conditions as to the Participant's employment in
addition to those specifically provided for under this Plan.
7. Shares. The total number of Shares allocated to this Plan
and available to designated Participants under this Plan is Two
Hundred Thousand (200,000) Shares, except as such number of
Shares shall be adjusted in accordance with the provisions of
Section 10. The maximum number of Shares available to any one
Participant under this Plan through Awards and Options is One
Hundred Thousand (100,000) Shares in any one calendar year. Each
Award and Option when granted shall state the number of Shares to
which it pertains. Such Shares may be either authorized but
unissued Shares or treasury Shares. If any Option granted under
this Plan expires unexercised, or is terminated or ceases to be
exercisable for any other reason without having been fully
exercised prior to the end of the period during which Options may
be granted under this Plan, or if any Option is cancelled, the
Shares theretofore subject to such Option or to the unexercised
4<PAGE>
<PAGE>
portion of such Option shall again become available for new
Awards and Options to be granted under this Plan to any eligible
person (including the holder of such former Option). Shares
reacquired or Shares which were never issued due to a forfeiture
under any Award shall again become available for new Awards and
Options to be granted under this Plan to any eligible person
(including the holder of such former Award) to the extent
permitted by Rule 16b-3 promulgated under Section 16 of the
Exchange Act or any successor provision ("Rule 16b-3").
8. Notices.
a. Awards
Awards granted pursuant to this Plan shall be
authorized by the Committee and shall be evidenced by
notices ("Award Notices") in such form as the Committee
shall from time to time determine. Such Award Notices
shall state: (i) the number of Shares awarded, (ii) the
restrictions applicable to the Shares awarded, and
(iii) such other information as the Committee deems
appropriate or necessary. The terms and conditions of
each Award Notice must be consistent with the
provisions of this Plan and will be applicable only to
the Award that it announces.
b. Options
Options granted pursuant to this Plan shall be
authorized by the Committee and shall be evidenced by
notices ("Option Notices") in such form as the
Committee shall from time to time determine. Such
Option Notices shall state: (i) the number of Shares
with respect to which the Option is granted, (ii) the
type of Option - nonqualified stock option or Incentive
Option, (iii) the Option price, (iv) the Option
exercise schedule, (v) the Option term, (vi) the method
of exercising such Option, and (vii) such other
information as the Committee deems appropriate or
necessary. The terms and conditions of each Option
Notice must be consistent with the provisions of this
Plan and will be applicable only to the grant that it
announces.
9. Non-Assignability of Options. Options granted to a
Participant subject to Section 16 of the Exchange Act and all
Incentive Options shall be exercisable during the lifetime of a
Participant only by the Participant. The Committee in its
discretion may permit Participants in the Plan not subject to
Section 16 of the Exchange Act to transfer nonqualified stock
options to (i) family members, (ii) custodianships under the
Uniform Transfers to Minors Act or any similar statute, (iii)
5<PAGE>
<PAGE>
trusts for the benefit of any family member, (iv) trusts by such
Participant for the Participant's primary benefit and (v) upon
termination of a custodianship under the Uniform Transfers to
Minors Act or similar statute or the termination of a trust, by
the custodian or trustee thereof, to the person or persons who,
in accordance with the terms of such custodianship or trust are
entitled to receive Options held in custody or trust.
10. Adjustments.
a. Capital Adjustments
If the Shares should, as a result of any stock divi-
dend, stock split, other subdivision or combination of
Shares, or any reclassification, recapitalization or
otherwise, be increased or decreased, the number of
Shares covered by each outstanding Award and Option,
the Option price under each outstanding Option, and the
total number of Shares reserved for issuance under this
Plan shall be adjusted as determined by the Committee
to reflect such action. Any new Shares or other
securities issued with respect to Shares shall be
deemed Shares.
b. Sale or Reorganization
In the event Employer is merged or consolidated with
another corporation, or in the event the property or
stock of Employer is acquired by another corporation,
or in the event of a reorganization or liquidation of
Employer, or in the event of any extraordinary
transaction, the board of directors of any corporation
assuming the obligations of the Company hereunder or
the Committee, as applicable, shall have the right to
provide for the continuation of Awards or Options
granted under the Plan or for other equitable
adjustments as determined by the board of directors of
such corporation assuming the obligations of the
Company hereunder or the Committee, as applicable (by
means, such as, for example, cash payment in an amount
equal to the difference between the Share price and the
Option price, conversion into other property or
securities, removal of any or all restrictions on
Awards, or giving written notice to holders of Options
that their Options will become immediately exercisable,
notwithstanding any waiting period otherwise prescribed
by the board of directors of any such corporation or
the Committee, as applicable, and that such Options
must be exercised within a specified period of days of
such notice or they will be terminated).
6<PAGE>
<PAGE>
11. Legal and Other Requirements. Each Award and Option granted
under this Plan shall be subject to the requirement that if at
any time the Committee shall determine, in its discretion, that
the listing, registration or qualification of the Shares issuable
or transferable upon the Award or exercise of the Option upon any
securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with
the granting of such Award or Option, or the issuance, transfer
or purchase of Shares thereunder, such Award shall not be made
and such Option may not be exercised in whole or in part unless
such listing, registration, qualification, consent, or approval
shall have been effected or obtained free of any conditions not
acceptable to the Committee. The Company shall not be obligated
to sell or issue any Shares in any manner in contravention of the
Securities Act of 1933, as amended, or any state securities law.
Each Participant shall agree to such terms and conditions in
connection with an Award or the exercise of an Option, including
restrictions on the disposition of Shares acquired pursuant to
the Award or upon exercise of the Option, as the Committee may
deem appropriate. Shares acquired pursuant to an Award or upon
exercise of an Option may be legended as the Committee shall deem
appropriate to reflect the restrictions imposed by the Committee,
this Plan or by securities laws generally. A Participant shall
have no rights as a stockholder with respect to any Shares
covered by Options granted to or Options exercised by, the
Participant until the date of delivery of a stock certificate to
the Participant for such Shares. No adjustment with respect to
any Shares covered by Options other than pursuant to Section 10
hereof shall be made for dividends or other rights for which the
record date is prior to the date such stock certificate is
delivered. This Plan is intended to comply with Rule 16b-3 with
respect to persons subject to Section 16 of the Exchange Act and
any provision which would prevent compliance with Rule 16b-3
shall be deemed invalid to the extent permitted by law and deemed
appropriate by the Committee.
12. Restriction on Sale of Shares. Without prior written notice
to the Company, no Shares acquired by a Participant upon exercise
of an Incentive Option granted hereunder shall be disposed of by
the Participant within two years from the date such Incentive
Option was granted, nor within one year after the transfer of
such Shares to the Participant; provided, however, that a
transfer to a trustee, receiver, or other fiduciary in any
insolvency proceeding, as described in section 422(c)(3) of the
Code, shall not be deemed to be such a disposition.
13. Tax Withholding. Employer shall comply with the obligations
imposed on Employer under applicable tax withholding laws, if
any, with respect to Awards and Options granted hereunder, and
shall be entitled to do any act or thing to effectuate any such
required compliance, including, without limitation, withholding
7<PAGE>
<PAGE>
from amounts payable by Employer to a Participant and including
making demand on a Participant for the amounts required to be
withheld.
If the Committee so permits, a Participant, or upon the
Participant's death, the Participant's beneficiary, may satisfy,
in whole or in part, the obligation to pay Employer any amount
required to be withheld under the applicable federal, state and
local income tax laws in connection with an Award or exercise of
an Option under this Plan by either: (i) having Employer
withhold from the Shares to be acquired pursuant to the Award or
upon the exercise of the Option, or (ii) delivering to Employer
either previously acquired Shares or Shares acquired pursuant to
the Award or upon the exercise of the Option which the
Participant or beneficiary was unconditionally obligated to
deliver to Employer. The Shares withheld or delivered shall be
valued at their fair market value as of the date the amount of
tax to be withheld is determined. The fair market value of
Shares shall be determined in accordance with procedures
established by the Committee. Any amounts required to be
withheld in excess of the value of Shares withheld or delivered
shall be paid in cash or withheld from other compensation paid by
Employer.
14. No Contract of Employment. Neither the adoption of this
Plan nor the grant of any Awards or Options, nor ownership of
Shares shall be deemed to obligate Employer to continue the
appointment, employment, or engagement of any eligible person for
any particular period.
15. Indemnification of Committee. The members of the Committee
shall be indemnified by the Company to the fullest extent
permitted by Delaware law, the Company's Certificate of
Incorporation and the Company's by-laws.
16. Amendment and Termination of Plan. The Company may amend
this Plan from time to time or terminate this Plan at any time,
but no such action shall reduce the number of Shares subject to
the then outstanding Awards or Options granted to any Participant
or adversely to the Participant change the terms and conditions
of outstanding Awards or Options without the Participant's
consent; provided, however, that shareholder approval shall be
necessary to adopt any amendment if the adoption of such
amendment without shareholder approval would cause this Plan to
no longer comply with Rule 16b-3 or any successor rule or
regulatory requirement. No Award or Option may be granted after
ten (10) years from the original effective date of adoption of
this Plan.
17. Delaware Law to Govern. This Plan shall be governed by and
construed in accordance with the laws of the State of Delaware.
8<PAGE>
<PAGE>
18. Effective Date of Plan. The original effective date of the
Plan was April 22, 1996. The effective date of this Amendment
and Restatement is November 13, 1996.
51503_04 -- 11/13/96, 7:54 pm
9<PAGE>
Exhibit 10.(iii)(A)(7)
DEFLECTA-SHIELD CORPORATION
1800 NORTH 9TH STREET
INDIANOLA, IOWA 50125
TELEPHONE 515 961-6100
FAX 515 961-5928
October 28, 1996
Mr. Ronald C. Fox
807 Rees Ct.
Longmont, Colorado 80501
Dear Ron:
This letter sets forth the basic terms of your employment with
Deflecta-Shield Corporation (the "Company"):
Position: You will serve as Chief Financial Officer of the
Company. In this capacity, all Financial,
Accounting, & MIS/Data Processing will report to
you.
Start Date: October 28, 1996
Compensation: $110,000 per annum base salary. Once the
Corporate Office is moved to Colorado, we will
revisit the salary and substitute a portion of
the cash salary for a leased light truck
vehicle. The commensurate reduction in salary
would be equal to the annualized fair market
value, plus operating cost of a leased vehicle.
Term: Three (3) years.
Bonus: Bonus starting FY 97, comparable to other senior
level executives at Corporate Headquarters.
Stock Options: The option plan committee will be requested to
grant you 20,000 options with the following
terms. A qualified plan vesting equally over 3
years beginning on your 1st anniversary date.
Benefits: You will be eligible to participate in employee
benefits (including 401(k) and medical insurance
coverage provided to all of the Company's
employees, subject to the terms and conditions
of such plans and applicable law. The 31 day
waiting period for medical insurance coverage
will be waived.<PAGE>
<PAGE>
Vacation: You will be entitled to three (3) weeks paid
vacation per year.
Other 1: The initial base of operations will be the
Corporate Offices in Iowa until such time as the
offices are moved to Colorado. Realistically,
actual travel is dependent on job requirements,
expectations, and performance. The Company will
pay all costs of travel from Colorado.
Other 2: A termination agreement will be invoked at your
election that guarantees six months severance
and group insurance in the event that the office
move to Colorado is not made within eighteen
months of your employment start date.
You acknowledge and agree that as an employee of the Company, you
will be provided with confidential information, trade secrets, and
proprietary information of the Company and its subsidiaries and
affiliates. Confidential information, trade secrets, and proprietary
information includes, but is not limited to, any and all: sales
activities, sales records, sales histories, customer lists or
knowledge of the Company's customers and/or potential customers,
sales volume by customer, territory, state, or representative;
marketing activities, potential sales and/or markets, market
strategies; product specifications, materials and costs; development
of new products; inventions and information pertaining to research
and development; the quantity of various products and/or product mix
of the Company as it relates to overall sales and/or any particular
product; manufacturing processes and/or costs and/or time studies;
product designs, dimensions, tolerances; suppliers, quantity of
materials purchased from suppliers, use of materials purchased from
suppliers; shipping methods; pricing; profit margins, whether per
product or otherwise; financial information which is non-public;
information concerning management, financial condition, financial
operations, purchasing activities, and business plans; and all other
types and categories of information which are generally understood by
persons involved in the industry and/or by general business practice
to be confidential information, trade secrets and/or proprietary
information.
You agree that you will not disclose or use in any manner any
confidential information, trade secrets and/or proprietary
information of the Company or any subsidiary, affiliate, or any
company acquired by the Company during your employment and thereafter
for the longest time permitted by applicable law, and that in the
event your employment is terminated, for whatever reason, you will
promptly deliver and return to the Company all records, drawings,
blueprints, notes, notebooks, memoranda, specifications, property and
documents or materials of any kind or nature whatsoever which pertain
in any way to the Company, its subsidiaries, its affiliates, or any
company acquired by the Company during your employment.<PAGE>
<PAGE>
Notwithstanding anything to the contrary contained in this letter,
you may terminate your employment with the Company at any time for
any reason or no reason, and your employment may be terminated at any
time by the Company for any reason or no reason. Upon termination of
your employment with the Company, you will be paid all base salary
due to you as of the date of termination. In addition, you will
receive six (6) months severance pay ("Severance Payments") following
the effective date of such termination, which shall include only your
base salary, provided, however, that if you voluntarily terminate
your employment with the Company, or your employment is terminated by
the Company for "Just Cause" means: you will not be entitled to
Severance Payments of any kind. These Severance Payments will be
made in the same manner as your salary. As used in this letter,
"Just Cause" means: gross negligence or willful misconduct in the
performance of your duties; conviction or admission of a felony or an
offense involving dishonesty or moral turpitude; embezzlement or
misappropriation of the property of the Company or any of its
subsidiaries or affiliates or any other act involving dishonesty or
fraud with respect to the Company or any of its subsidiaries or
affiliates; willful or knowing unauthorized dissemination of
confidential information; the repeated failure to perform such duties
as are reasonably requested by the President of the Company, or a
breach of this letter agreement, which not cured by you within 30
days following written notice by the Company to your describing such
breach.
You agree that, for a period of six (6) months from the date of your
termination of employment with the Company (for any reason
whatsoever), you will not engage or participate in, directly or
indirectly (whether as an employee, owner, partner, shareholder,
officer, member, director, 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 or indirectly,
competitive with the business of the Company and its subsidiaries as
conducted before or at the time of the termination of your employment
with the Company in any geographic area in which the Company or any
of its subsidiaries is doing business. Further, you will agree that
for a period of six (6) months from the date of your termination of
employment with the Company, you will not solicit or attempt to
solicit: (i) any person or entity who is or has been a customer,
supplier, distributor, licenser, licensee, or other business relation
of the Company or any subsidiary to cease to 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 to purchase any
product or service which may be provided by the Company or any
subsidiary; or (iii) any person who is an employee or agent of the
Company or any subsidiary to perform services for, or accept
employment with, any entity other than the Company, its subsidiaries
or its affiliates.
This letter agreement, which shall be governed by Illinois law,
supersedes and replaces all written and oral agreements between us. <PAGE>
<PAGE>
Please sign this letter if you accept and agree to the above
described terms and conditions for your employment.
Sincerely,
DEFLECTA-SHIELD CORPORATION Accepted:
By: /s/ Russell E. Stubbings /s/ Ronald C. Fox
------------------------ -------------------
Ronald C. Fox
Title: President & CEO Date: 10/28/96<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000914605
<NAME> DEFLECTA SHIELD CORP
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 486
<SECURITIES> 0
<RECEIVABLES> 11,114
<ALLOWANCES> 800
<INVENTORY> 10,184
<CURRENT-ASSETS> 22,783
<PP&E> 18,873
<DEPRECIATION> 9,605
<TOTAL-ASSETS> 44,373
<CURRENT-LIABILITIES> 7,686
<BONDS> 8,877
0
0
<COMMON> 48
<OTHER-SE> 27,484
<TOTAL-LIABILITY-AND-EQUITY> 44,373
<SALES> 54,743
<TOTAL-REVENUES> 54,743
<CGS> 36,185
<TOTAL-COSTS> 36,185
<OTHER-EXPENSES> 13,119
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 799
<INCOME-PRETAX> 4,640
<INCOME-TAX> 1,716
<INCOME-CONTINUING> 2,924
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,924
<EPS-PRIMARY> .61
<EPS-DILUTED> .61
</TABLE>
