SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Deflecta-Shield Corporation
----------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
______________________________________________________________________
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
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<PAGE>
April 23, 1997
Dear Stockholder:
On behalf of Deflecta-Shield Corporation, I cordially invite you
to attend the Annual Meeting of Stockholders on Thursday, May 22, 1997,
at the Des Moines Marriott Hotel, 700 Grand Avenue, Des Moines, Iowa
50309, at 10:00 a.m.
At the meeting, stockholders will vote on (i) the election of six
persons to the Board of Directors; and (ii) approval of the appointment
of Price Waterhouse LLP as Deflecta-Shield's independent accountants
for 1997. Further information concerning the meeting and the nominees
for director can be found in the accompanying Notice and Proxy
Statement. In addition, there will be a report on the status of the
Company's business and an opportunity for you to express your views on
subjects related to the Company's business.
The directors and officers of Deflecta-Shield hope that as many
stockholders as possible will be present at the meeting. Because the
vote of each stockholder is important, we ask that you sign and return
the enclosed proxy card in the envelope provided, whether or not you
now plan to attend the meeting. If you attend the meeting, you may
vote in person even if you have previously mailed a proxy card.
We appreciate your cooperation and interest in Deflecta-Shield
Corporation. To assist us in preparation for the meeting, please
return the proxy card at your earliest convenience.
Sincerely yours,
RUSSELL E. STUBBINGS,
President and Chief Executive Officer <PAGE>
<PAGE>
DEFLECTA-SHIELD CORPORATION
1800 N. Ninth Street
Indianola, Iowa 50125
April 23, 1997
To the Holders of Common Stock
of Deflecta-Shield Corporation
NOTICE OF ANNUAL MEETING
The Annual Meeting of stockholders of Deflecta-Shield Corporation
will be held at the Des Moines Marriott Hotel, 700 Grand Avenue, Des
Moines, Iowa 50309, on Thursday, May 22, 1997, at 10:00 A.M., for the
following purposes:
1. to elect six directors to hold office until the next annual
meeting of stockholders and until their respective successors
have been elected and appointed;
2. to approve the appointment of Price Waterhouse LLP as independent
accountants for 1997; and
3. to transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on March 25,
1997, are entitled to vote at the meeting and any adjournment thereof.
A copy of the Company's Annual Report to Stockholders for the
year ended December 31, 1996 is enclosed.
This notice and the accompanying proxy material are sent to you
by order of the Board of Directors.
Ronald C. Fox,
Secretary
You are requested to fill in, sign, date and return the proxy submitted
herewith in the return envelope provided for your use. The giving of
such proxy will not affect your right to revoke such proxy or to vote
in person should you later decide to attend the meeting. <PAGE>
<PAGE>
DEFLECTA-SHIELD CORPORATION
1800 N. Ninth Street
Indianola, Iowa 50125
PROXY STATEMENT
For
ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 22, 1997
This Proxy Statement, dated April 23, 1997, is furnished in
connection with the solicitation by the Board of Directors of Deflecta-
Shield Corporation ("Deflecta-Shield" or the "Company") of proxies to
be voted at the Annual Meeting of Deflecta-Shield stockholders on May
22, 1997, and any adjournment thereof. It is currently anticipated
that definitive copies of this Proxy Statement and the accompanying
Proxy and the Annual Report to Stockholders will be mailed to
stockholders on or about April 23, 1997.
Stockholders of record at the close of business on March 25,
1997, are entitled to receive notice of the meeting and to vote the
shares held on that date. The number of voting securities of Deflecta-
Shield outstanding on March 25, 1997 was 4,800,000 shares of Common
Stock, $0.01 par value ("Common Stock"). Each share of Common Stock is
entitled to one vote.
ELECTION OF DIRECTORS
Pursuant to the General Corporation Law of the State of Delaware,
as implemented by Deflecta-Shield's Certificate of Incorporation and
By-laws, all corporate powers are exercised by and under the direction
of the Board of Directors (the "Board"), and the Company's business,
property and affairs are managed by and under the direction of the
Board.
The following persons have been nominated for election as
directors of the Company: William V. Glastris, Jr., Ronald C. Katz,
Mark C. Mamolen, Douglas T. Mergenthaler, Charles S. Meyer, and Russell
E. Stubbings, all of whom are now in office and nominees for re-
election. The Board recommends a vote for the election of each of such
persons. If elected, directors will serve until the next Annual
Meeting and until their respective successors shall have been elected
and qualified. At his recent request, Leon E. Vinyard, a current
director of the Company, has not been nominated for re-election. Due
to the lack of advance notice of this request, the Board has not yet
found a suitable nominee to serve to fill the vacancy which will be
created by the expiration of Mr. Vinyard's term. Therefore, the number
of members constituting the entire board of directors has been reduced
to six, effective at the Annual Meeting on May 22. The Board intends
to increase the number to seven and fill the vacancy created thereby
upon finding a suitable nominee.
The persons named as proxies intend to vote all shares for which
they receive proxies for the election of those of the nominees
identified above who are so designated and available at the time of the
election, unless such authority is withheld by the stockholders giving
the proxy with respect to one or more of such nominees, in which case
the shares will not be voted for the election of any directors as to
whom such authority is withheld. If any nominee becomes unavailable
for election for any reason, which is not presently anticipated, the
shares represented by the proxies will be voted for any substitute
nominee nominated by the Board or the number of directors will be
reduced accordingly. The persons named as proxies are not permitted to
vote for a greater number of persons than the six persons named as
nominees herein.
<PAGE>
Information with respect to ages of the directors is as of March 25,
1997 and information as to their ownership of shares of Deflecta-Shield
Common Stock as of that date is provided under the caption "OWNERSHIP
OF COMMON STOCK".
The Board of Directors recommends a vote FOR each of the nominees
listed below.
William V. Glastris, Jr., age 36, has been a director of
Deflecta-Shield Corporation since its inception in October 1993 and was
a director of DFM Corp., a wholly-owned subsidiary of the Company, from
June 1990 until May 1996. Mr. Glastris has been a principal of Kenter
Glastris & Company, a private investment firm, since July, 1996. Mr.
Glastris has been a private investor for more than five years and
served as an officer and director of LaSalle Capital Group, Inc., a
private investment firm, from February 1990 to July 1996. Mr. Glastris
is a director and treasurer of Copperfield Chimney Supply, Inc., co-
chairman and a director of Equestrian Products Corporation and a
director of the corporate managing general partners of GolfMark, L.P.
and Elm Packaging Company, L.P.
Ronald C. Katz, age 61, has been a director of Deflecta-Shield
Corporation since October 26, 1994. Throughout the past five years,
Mr. Katz has been Chairman and Chief Executive Officer of Elkay
Manufacturing Company, a plumbing products and kitchen cabinet
manufacturer.
Mark C. Mamolen, age 51, has been a director of Deflecta-Shield
Corporation since its inception in October 1993 and was a director of
DFM Corp. from June 1990 until May 1996. Mr. Mamolen was a director
and Vice President of CSM-Belmor, Inc. ("CSM"), the managing general
partner of Belmor Manufacturing Limited Partnership, the predecessor to
the Company (the "Predecessor Partnership"), and a director, President
and the sole stockholder of MCM Holdings, Inc. ("MCM"), the associate
general partner of the Predecessor Partnership from March 1988 until
the merger of CSM and MCM with and into the Company in January 1994.
Mr. Mamolen founded Carl Street Partners, a private investment firm, in
1987 and has served as the managing general partner of Carl Street
Partners since that time. Mr. Mamolen is a stockholder of several
privately-held corporations.
Douglas T. Mergenthaler, age 48, has been a director of Deflecta-
Shield Corporation since August 23, 1994. Mr. Mergenthaler has been
Chief Executive Officer of Ashton Corporation, a holding company, since
1988, Chief Executive Officer of Kwikee Products Company, Inc., a
transportation accessory manufacturing company, since 1984, and Chief
Executive Officer of Davidson Plastic Corporation since 1993. Since
1991, Mr. Mergenthaler has been a director and a member of the
Executive Committee of the Specialty Equipment Manufacturers
Association ("SEMA"). SEMA is the primary trade association of the
automotive aftermarket industry. From 1989 to 1994, Mr. Mergenthaler
was Chief Executive Officer of Trailmaster Products, Inc. and between
1986 and 1994 he was a director of Summit Savings Bank Corp.
Charles S. Meyer, age 45, has been a director of Deflecta-Shield
Corporation since its inception in October 1993, and was Chairman of
the Board of DFM Corp. from June 1990 until May 1996. He served as a
director, President and sole stockholder of CSM from March 1988 until
the merger of CSM with and into the Company in January 1994. Mr. Meyer
founded LaSalle Capital Group, Inc., a private investment firm, in 1984
and serves as Chairman of LaSalle Capital Group, Inc. Mr. Meyer is
also a director and stockholder of numerous privately-held
corporations.
2
<PAGE>
Russell E. Stubbings, age 57, has been a director of Deflecta-
Shield Corporation since November 1, 1995. Mr. Stubbings has been
President of Deflecta-Shield Corporation since September 6, 1995 and
was appointed Chief Executive Officer of the Company on March 11, 1996.
Prior thereto, he was employed by Lund International Holdings, Inc.
from November 1991 to August 1995 where he served as Vice President of
Sales and Marketing and additionally was promoted to Chief Operating
Officer in February 1993. Mr. Stubbings served in a number of senior
management positions of increasing responsibility with Fey Automotive
Products, a division of Standum Inc., from September 1989 to November
1991. Mr. Stubbings currently serves on the Board of Directors of
SEMA.
Meetings of the Board of Directors
The Board of Directors of the Company holds regular meetings at a
minimum of once each fiscal quarter. The Board held five regular
meetings and no special meetings in 1996. Each of the directors, other
than Mr. Vinyard, the only current director who is not standing for
nomination or re-election to the Board, attended 75% or more of the
aggregate number of meetings held during 1996 of the Board and the
committees of which such Director was a member.
Committees of the Board
The Board of Directors of the Company currently has an Audit
Committee and a Compensation Committee. The Company does not currently
have a nominating committee.
Audit Committee. The Audit Committee of the Company consists of
Messrs. Mamolen, Vinyard and Mergenthaler. The Audit Committee met one
time in 1996 and all of the members attended the meeting. The primary
functions of the Audit Committee are to recommend independent public
accountants to the Board, to review the scope of the independent public
accountants' audit, to review the fees for audit and non-audit services
by the independent public accountants and to consider the results of
the independent public accountants' review of the internal accounting
controls and other matters resulting from the audit.
Compensation Committee. The Compensation Committee of the
Company consists of Messrs. Mamolen, Meyer and Vinyard. The
Compensation Committee met one time in 1996 and all of the members
attended the meeting. The function of the Compensation Committee is to
review and make recommendations upon proposals by management as to
compensation, bonuses, officers' severance arrangements and other
benefits and policies with respect to such matters for the officers and
employees of the Company and its affiliates.
Director Compensation Arrangements
Independent directors of the Company receive an annual retainer
of $10,000, paid quarterly. All directors are reimbursed for out-of-
pocket expenses related to the Company's business. In addition, at the
discretion of the Board, directors may be granted options to purchase
shares of Common Stock of the Company.
3 <PAGE>
<PAGE>
EXECUTIVE COMPENSATION
Compensation Committee Report on Executive Compensation
Compensation Philosophy. The Compensation Committee
("Committee") is composed of independent, non-employee directors. The
Committee reviews and makes recommendations to the Board upon proposals
by management as to compensation, bonuses, officers' severance
arrangements and other benefits and policies with respect to such
matters for the officers and employees of the Company and its
subsidiaries. Effective November 13, 1996, the entire Board, including
the members of the Committee, administers the Company's stock plans.
Two members of the Committee served on the committee administering the
employee stock plan prior to that date.
The Committee and the Board believe that the compensation of the
Chief Executive Officer and other officers of the Company should be
aligned with the performance of the Company and the creation of value
for its stockholders. The Committee and the Board also believe that
the Company must provide competitive levels of compensation to its
officers in order to attract individuals of the highest caliber.
To align pay with performance, a significant portion of the
officers' compensation is in the form of bonuses contingent upon the
Company's financial performance. Stock options are used to provide a
link to the market value of the Company's Common Stock and are used to
a greater extent with respect to the compensation of senior members of
management. In determining bonuses within its discretion, the Board
and the Committee will consider the overall operating performance of
the Company, the overall individual performance of the executive
officers in executing the Company's business plan and the overall
responsibilities of the executive officers.
Base Salaries. Officers' base salaries are reviewed annually by
the Committee. The Committee evaluates management's recommendations
based upon the results achieved by each officer relative to the officer's
assigned responsibilities as well as competitive salary practices of
other similar employers. The Committee does not obtain formal salary
surveys and the employers considered similar for this purpose are
companies included in the Peer Group used for the performance graph that
have similar levels of total sales and are more directly competitive with
the Company.
Mr. Stubbings' base salary was set at $160,000 per annum, at the
time he became an employee of the Company in 1995 and recently
increased to $168,000 for fiscal 1997.
Bonus Program. Executives whom the Board has determined have had
a significant impact on the Company's financial results through their
positions and performance are eligible to participate in the Company's
Bonus Program. The Bonus Program for 1996 was comprised of bonuses
based on two components: (i) achievement of a targeted level of net
income per share established by the Board and (ii) performance of that
portion of the Company's business with respect to which the applicable
employee had management responsibility or in which he or she was
employed.
For 1996, Mr. Stubbings received a bonus of $120,000. The
Committee determined to award Mr. Stubbings with a bonus based upon Mr.
Stubbing's performance as CEO for the year and the Company's favorable
financial performance for the year, which was evidenced by, among other
things, a substantial increase in net income and earnings per share
over the previous year. Other executive officers received bonuses for
1996 as follows: Richard D. Minehart, $55,160; John A. Daniels,
$40,000; Lowell A. Swarthout, $27,000. These bonuses reflected the
substantial improvement in the Company's results in 1996 compared to
1995 when the only bonus paid to an executive officer was a bonus of
$35,000 paid to Mr. Daniels, in keeping with the Committee's view that
4
<PAGE>
the bonuses should be paid for success and creation of value for
shareholders and should only be granted for superior performance. The
Committee considered the contribution of each executive officer toward
achieving the Company's prior year and long-term strategic objectives
and in this connection the Chief Executive Officer made recommendations
regarding the components of each executive officer's compensation
package except his own.
In its considerations the Committee did not assign quantitative
relative weights to different factors or follow mathematical formulae.
Rather the Committee exercised its discretion and made a judgment after
considering the facts it deemed relevant. The Committee's decisions
were designed to: (a) align the interests of executive officers with
the interest of the Company's stockholders by providing awards based on
performance; and (b) allow the Company to compete for and retain
executive officers critical to its success by providing an opportunity
for compensation that is comparable to levels offered by other
companies in its markets.
Section 162(m) of the Internal Revenue Code generally denies a
deduction to any publicly held corporation for compensation paid to a
"covered employee" in a taxable year to the extent that the employee's
compensation (other than qualified performance-based compensation)
exceeds $1 million. In December 1995, the Internal Revenue Service
published regulations governing the $1 million deductibility cap.
Pursuant to those regulations, the Company's "covered employees" will
be those who, at the end of the year, are the chief executive officer
and the four other highest compensated executive officers of the
Company as determined under the Rules of the Securities and Exchange
Commission governing executive compensation disclosure. The Board has
determined that administration of the stock plans by the entire board
is advisable because, under the recent changes to Rule 16b-3 members of
the Committee would not meet the definition of a "non-employee
director" for purposes of exemptions from recapture of short-swing
profits under Section 16(b) with respect to grants of options
thereunder for any year in which a Committee member received fees or
other compensation in excess of $60,000. However, compensation
represented by the spread between fair market value and the exercise price
at the date of exercise of non-qualified share options will not be
performance-based compensation for purposes of Section 162(m) so long
as the entire Board administers the stock plans and any of the
Directors is not an "outside director" as described in Section 162(m)
and the regulations promulgated thereunder.
It is the Committee's policy to consider deductibility under
Section 162(m) in determining compensation arrangements for the
Company's "covered employees," and the Committee intends to optimize
the deductibility of compensation to the extent deductibility is
consistent with the objectives of the executive compensation program.
The Committee, however, intends to weigh the benefits of full
deductibility with the objectives of the executive compensation plan
and, if the Committee believes to do so is in the best interest of the
Company and its stockholders, will make compensation arrangements which
may not be fully deductible under Section 162(m). The Board will also
consider deductibility as well as compensation objectives in
administering the stock plans and this may result in the grant of
incentive stock options, which may not result in tax deductible
compensation, rather than non-qualified stock options, which may
result in tax deductible compensation.
Stock Plans. Beginning in fiscal 1994, long-term incentives have
been provided through the grants of stock options or awards of
restricted stock under the 1993 Stock Plan, and, since last year the
1996 Stock Plan. Options to purchase substantially all of the shares
available under the 1993 Stock Plan have been granted. The Committee
believes that equity ownership provides significant motivation to
executives to maximize value for the Company's shareholders. The 1996
Stock Plan provides that stock options will be granted at no less than
the prevailing market price and, therefore, will only have value if the
Company's stock price increases after the grant. The Committee
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<PAGE>
believes that stock options and stock awards provide a direct link
between compensation and shareholder return, measured by the same index
used by shareholders to measure Company performance. The terms of
options granted as well as the terms of any restrictions on stock
awarded will be determined at the time of the grant or award by the
Committee established under the 1996 Stock Plan.
During 1996, options to purchase 160,000 shares of Common Stock
were granted to executive officers of the Company and options to
purchase 10,000 shares of Common Stock were granted to other employees.
COMPENSATION COMMITTEE
Mark C. Mamolen
Charles S. Meyer
Leon E. Vinyard
BOARD OF DIRECTORS (solely with
respect to the Stock Plans)
William V. Glastris, Jr.
Ronald C. Katz
Mark C. Mamolen
Douglas T. Mergenthaler
Charles S. Meyer
Russell E. Stubbings
Leon E. Vinyard
6 <PAGE>
<PAGE>
Summary of Executive Compensation
The following table sets forth information concerning
compensation paid by the Company and its predecessor, subsidiaries and
affiliates to (i) the Company's chief executive officer (the "CEO") and
(ii) the Company's three most highly compensated executive officers
other than the CEO who were the only other executive officers whose
total annual salary and bonus for the fiscal year ended on December 31,
1996 exceeded $100,000 (collectively, the "Named Executive Officers")
for services in all capacities during the years ended December 31,
1996, 1995 and 1994.
SUMMARY COMPENSATION TABLE
Name and Annual Compensation
Principal Position Year Salary($) Bonus($)
------------------ ---- --------- --------
Russell E. Stubbings(1) 1996 $160,000 $120,000
President 1995 49,231 0
Richard D. Minehart(4) 1996 110,385 55,160
Vice President,
Operations and
Chief Operating Officer
John A. Daniels 1996 110,000 40,000
Vice President, 1995 99,603 35,000
Heavy Truck 1994 82,452 35,000
Operations
Lowell A. Swarthout(6) 1996 90,000 27,000
Vice President, 1995 89,855 0
Secretary and 1994 82,452 35,000
Treasurer
<PAGE>
Long Term
Compensation
------------
Securities
Underlying All Other
Name and Options Compensation
Principal Position Year (#) ($)
------------------ ---- ---------- ------------
Russell E. Stubbings(1) 1996 50,000 46,733(23)
President 1995 50,000 1,267(3)
Richard D. Minehart(4) 1996 50,000 ---
Vice President,
Operations and
Chief Operating
Officer
John A. Daniels 1996 --- 6,354(5)
Vice President, 1995 --- 9,170(5)
Heavy Truck 1994 30,000 12,423(5)
Operations
Lowell A. Swarthout(6) 1996 --- 3,950(5)
Vice President, 1995 --- 8,681(5)
Secretary and 1994 --- 12,615(5)
Treasurer
(1) Mr. Stubbings joined the Company on September 6, 1995.
(2) The Company reimbursed Mr. Stubbings $4,600 in taxes paid by Mr.
Stubbings with respect to moving expenses of $35,279 which the
Company paid to Mr. Stubbings. The Company also paid $2,610 for
the life insurance premium on Mr. Stubbings. The Company
contributed $4,244 to Mr. Stubbings' retirement plan.
(3) The Company paid $1,267 for the life insurance premium on Mr.
Stubbings.
(4) Mr. Minehart joined the Company on March 11, 1996.
(5) The Company contributed to the retirement plans of Messrs.
Daniels and Swarthout in 1996, 1995 and 1994, respectively.
(6) Mr. Swarthout resigned from all his positions with the Company on
April 7, 1997.
7 <PAGE>
<PAGE>
Option Grants and Exercises
The following tables set forth summaries of the terms of stock
options granted to Mr. Stubbings and Mr. Minehart during the Company's
1996 fiscal year and the value of unexercised options held by Messrs.
Stubbings, Minehart, Daniels and Swarthout as of December 31, 1996. No
other Named Executive Officer received options during the 1996 fiscal
year. None of the Named Executive Officers exercised any stock options
during the 1996 fiscal year. No stock appreciation rights were granted
to or exercised by any of the Named Executive Officers during the 1996
fiscal year.
Option Grants In Last Fiscal Year
Individual Grants
------------------------------------------------------
Percentage
No. of of Total
Securities Options
Underlying Granted to Exercise
Options Employees in or Base
Granted Fiscal Price Expiration
Name (#) Year ($/Sh) Date
---- ---------- ------------ -------- ----------
Russell E. 50,000 29.4% $4.50 3/10/06
Stubbings
Richard D. 50,000 29.4% $4.50 3/10/06
Minehart
Potential Realizable Value of
Assumed Annual Rates of Stock
Price Appreciation for Option Term
----------------------------------
Name 5%($) 10%($)
---- -------- --------
Russell E. $141,501 $358,592
Stubbings
Richard D. $141,501 $358,592
Minehart <PAGE>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
Number of Securities
Underlying Unexercised
Options at FY-End(#)
--------------------------------
Name Exercisable Unexercisable
---- ----------- -------------
Russell E. Stubbings 16,667 83,333
Richard D. Minehart 12,500 37,500
John A. Daniels 20,000 10,000
Lowell A. Swarthout - -
Value of Unexercised
In-the-Money Options at
FY-End
-------------------------------
Name Exercisable Unexercisable
---- ----------- -------------
Russell E. Stubbings $14,584 $235,416
Richard D. Minehart $51,563 $154,688
John A. Daniels - -
Lowell A. Swarthout - -
8 <PAGE>
<PAGE>
Compensation Committee Interlocks and Insider Participation
As noted above, the current members of the Compensation Committee
are Messrs. Mamolen, Meyer and Vinyard, none of whom is or has been an
executive officer or employee of the Company or its subsidiaries.
Messrs. Mamolen and Meyer and certain other persons are parties
to a registration rights agreement with the Company pursuant to which
the Company has agreed to register their shares of Common Stock under
the Securities Act of 1933 and state securities laws. See "Other
Transactions and Certain Relationships--Registration Rights Agreement".
Employment and Severance Agreements
Employment Agreements. In connection with the commencement of
his service as President of the Company, Mr. Stubbings and the Company
entered into an Employment Agreement dated as of September 1, 1995 (the
"Stubbings Employment Agreement"), with a term of three years. The
Stubbings Employment Agreement provides that Mr. Stubbings will serve
as President of the Company and will report to the Board of the
Company. The Stubbings Employment Agreement provides for (i) base
salary at an initial rate of $160,000, with annual reviews at the
discretion of the Board; (ii) bonus as determined in the discretion of
the Board, with the financial performance of the Company to be a
significant factor in the determination of such bonus; (iii) a grant of
options to purchase 50,000 shares of Common Stock at an exercise price
equal to the closing price of the Company's Common Stock on The Nasdaq
Stock Market ("Nasdaq") on September 1, 1995; (iv) participation in the
Company's employee benefit plans; (v) Company-paid life insurance with
a death benefit in the amount of $500,000; (vi) reimbursement of
relocation expenses; (vii) three weeks of paid vacation per year; and
(viii) provision of a late-model vehicle. The Stubbings Employment
Agreement also contains certain confidentiality and non-competition
restrictions. The Stubbings Employment Agreement provides that upon
the termination of Mr. Stubbings' employment, other than by reason of
his voluntary resignation or termination for Just Cause (as defined in
the Stubbings Employment Agreement), he will be paid severance pay
equal to six months of his then-current base salary.
In connection with the commencement of his service as Vice
President of Operations and Chief Operating Officer of the Company, Mr.
Minehart and the Company entered into an Employment Agreement dated as
of February 7, 1996 (the "Minehart Employment Agreement"). The
Minehart Employment Agreement provides that Mr. Minehart will serve as
Vice President of Operations and Chief Operating Officer of the Company
and will report to the President of the Company. The Minehart
Employment Agreement provides for (i) base salary at an initial rate of
$140,000, with annual reviews at the discretion of the President of the
Company; (ii) bonus of 60% of base salary if the Company achieves a
targeted goal (earnings per share of $1.00 for 1996), which bonus will
be earned and funded on a prorated basis, plus a discretionary bonus as
determined in the discretion of the Board if such target is met; (iii)
a grant of options to purchase 50,000 shares of Common Stock at an
exercise price equal to the closing price of the Company's Common Stock
on Nasdaq on March 11, 1996; (iv) participation in the Company's
employee benefit plans; (v) reimbursement of reasonable relocation
expenses; (vi) three weeks of paid vacation per year; and (vii)
provision of a late-model light truck. The Minehart Employment
Agreement also contains certain confidentiality and non-competition
restrictions. The Minehart Employment Agreement provides that upon the
termination of Mr. Minehart's employment, other than by reason of his
voluntary resignation or termination for Cause (as defined in the
Minehart Employment Agreement), he will be paid severance pay equal to
nine months of his then-current base salary. In addition, the Minehart
9
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Employment Agreement provides that in the event of the termination of
his employment within two years of a "change of control" (as defined in
the Minehart Employment Agreement) of the Company, Mr. Minehart will be
paid a lump sum severance payment equal to one year of his then-current
base salary.
In connection with the commencement of his service as Vice
President and General Manager of the Company's Autotron Division,
Mr. James T. Jurinak and the Company entered into an Employment Letter
Agreement dated October 14, 1996 (the "Jurinak Employment Agreement").
The Jurinak Employment Agreement provides that Mr. Jurinak will serve
as Vice President and General Manager of the Company's Autotron
Division and will report to the Chief Operating Officer of the Company.
The Jurinak Employment Agreement provides for (i) base salary at an
initial rate of $130,000, with annual reviews at the discretion of the
President of the Company; (ii) bonus of 30% of base salary if the
Company achieves its budgeted goals, plus a discretionary bonus as
determined by the Board if DFM exceeds budgeted goals; (iii) a grant of
options to purchase 40,000 shares of Common Stock at an exercise price
equal to the closing price of the Company's Common Stock on Nasdaq on
December 2, 1996; (iv) participation in the Company's employee benefit
plans; (v) reimbursement of reasonable relocation expenses; (vi) three
weeks of paid vacation per year; and (vii) provision of a late-model
light truck or sport utility vehicle. The Jurinak Employment Agreement
also contains certain confidentiality and non-competition restrictions.
The Jurinak Employment Agreement provides that upon termination of Mr.
Jurinak's employment with the Company, other than by reason of his
voluntary resignation or termination for Cause (as defined in the
Jurinak Employment Agreement), he will be paid severance pay equal to
six months of his then-current base salary.
In connection with the commencement of his service as Vice
President and Chief Financial Officer of the Company, Mr. Ronald C. Fox
and the Company entered into an Employment Letter Agreement dated
October 28, 1996 (the "Fox Employment Agreement"), with a term of three
years. The Fox Employment Agreement provides that Mr. Fox will serve
as Vice President and Chief Financial Officer of the Company. The Fox
Employment Agreement provides for (i) base salary at an initial rate of
$110,000; (ii) bonus comparable to other senior level executives at the
Company's corporate headquarters; (iii) a grant of options to purchase
20,000 shares of Common Stock at an exercise price equal to the closing
price of the Company's Common Stock on Nasdaq on October 28, 1996; (iv)
participation in the Company's employee benefit plans; (v)
reimbursement of all cost of travel expenses from Colorado to Iowa;
(vi) three weeks of paid vacation per year; and (vii) provision of a
late-model light truck or sport utility vehicle. The Fox Employment
Agreement also contains certain confidentiality and non-competition
restrictions. The Fox Employment Agreement provides that upon
termination of Mr. Fox's employment with the Company, other than by
reason of his voluntary resignation or termination for Just Cause (as
defined in the Fox Employment Agreement), he will be paid severance pay
equal to six months of his then-current base salary. Mr. Fox is
permitted to terminate the Fox Employment Agreement at his election and
receive six months severance and group insurance in the event that an
office move to Colorado is not made within eighteen months of his start
date.
Severance Agreements. In connection with the acquisition by the
Predecessor Partnership of DFM Corp., each of Messrs. Swarthout and
Daniels entered into a Severance Agreement (collectively, the
"Severance Agreements") with DFM Corp. Under the Severance Agreements,
in the event of termination of employment without Just Cause (as
defined in such Severance Agreements), each of Messrs. Daniels and
Swarthout will be entitled to receive severance compensation equal to
one-half of their annual base compensation at the rate then paid. Such
severance compensation is to be paid in 12 monthly installments.
10 <PAGE>
<PAGE>
Performance Graph
The graph below compares cumulative total return on investment
(based on the change in year-end stock price from the prior year and
assuming reinvestment of all dividends) assuming a $100 investment in
the Common Stock of the Company, the Nasdaq Market Index and a peer
group of companies consisting of 50 motor vehicle parts and accessories
companies, including the Company (collectively, the "Peer Group") for
the period commencing January 21, 1994 and ended December 31, 1996.
The Peer Group consists of companies with the same Standard Industrial
Classification Code as the Company. Total returns exclude trading
commissions and taxes.
COMPARISON OF CUMULATIVE TOTAL RETURN
Source: Media General Financial Services
January 21, December 31,
1994 1994
---- ----
Deflecta-Shield Corporation $100 $53.17
Peer Group $100 $80.89
Nasdaq Market Index $100 $97.24
December 31, December 31,
1995 1996
---- ----
Deflecta-Shield Corporation $ 30.16 $54.76
Peer Group $ 88.74 $109.49
Nasdaq Market Index $126.13 $156.74
11 <PAGE>
<PAGE>
OWNERSHIP OF COMMON STOCK
The following table sets forth the beneficial ownership, as of
March 25, 1997, of the Company's Common Stock (i) by each person who is
a director of the Company (none of whom, except the individuals listed,
beneficially owns any Common Stock of the Company), (ii) by each of the
Named Executive Officers (none of whom, except the individuals listed,
beneficially owns any Common Stock of the Company), (iii) by each
person who is known to be a beneficial owner of more than 5% of any
class of the Company's equity securities and (iv) by all directors
and executive officers of the Company as a group. A list of current
executive officers of the Company is attached as Exhibit A hereto.
5% Stockholders, Directors, Named Beneficial Ownership
Executive Officers and all Directors ---------------------
and Executive Officers as Group Shares Percent
------------------------------------- ------ -------
Mark C. Mamolen(1) . . . . . . . . . . . 954,687 19.9%
Charles S. Meyer(2) . . . . . . . . . . . 954,687 19.9
William V. Glastris, Jr. . . . . . . . . 120,625 2.5
Douglas T. Mergenthaler(3) . . . . . . . 93,000 1.9
Russell E. Stubbings(4) . . . . . . . . . 16,667 0.3
Ronald C. Katz(5) . . . . . . . . . . . . 14,000 0.3
Leon E. Vinyard(6) . . . . . . . . . . . 3,000 0.1
Richard D. Minehart(7) . . . . . . . . . 25,000 0.5
John A. Daniels(8) . . . . . . . . . . . 54,500 1.1
James T. Jurinak . . . . . . . . . . . . 200 0.0
Lowell A. Swarthout . . . . . . . . . . . 47,000 1.0
First Bank System, Inc.(9) . . . . . . . 517,000 10.8
Woodland Partners LLC(10) . . . . . . . . 510,400 10.6
William Blair & Company, L.L.C (11). . . 358,001 7.5
Gregory J. Pacer(12) . . . . . . . . . . 282,001 5.9
All directors and executive officers
as a group
(12 persons)(13) . . . . . . . . . . . 2,283,366 47.6%
_______________
(1) Mr. Mamolen's business address is 155 W. Burton Place, Chicago,
Illinois.
(2) Mr. Meyer's business address is c/o LaSalle Capital Group, Inc.,
Three First National Plaza, Suite 5710, Chicago, Illinois.
(3) Includes 93,000 shares of Common Stock which may be acquired by
Mr. Mergenthaler pursuant to options exercisable on March 25,
1997.
(4) Includes 16,667 shares of Common Stock which may be acquired by
Mr. Stubbings pursuant to options exercisable on March 25, 1997.
(5) Includes 3,000 shares of Common Stock which may be acquired by
Mr. Katz pursuant to options exercisable on March 25, 1997.
12 <PAGE>
<PAGE>
(6) Includes 3,000 shares of Common Stock which may be acquired by
Mr. Vinyard pursuant to options exercisable on March 25, 1997.
(7) Includes 25,000 shares of Common Stock which may be acquired by
Mr. Minehart pursuant to options exercisable on March 25, 1997.
(8) Includes 30,000 shares of Common Stock which may be acquired by
Mr. Daniels pursuant to options exercisable on March 25, 1997.
(9) Reflects shares beneficially owned as of December 31, 1996,
according to a statement on Schedule 13G filed with the SEC.
First Bank System, Inc.'s business address is 601 Second Avenue
South, Minneapolis, MN 55402-4302.
(10) Reflects shares beneficially owned as of December 31, 1996,
according to a statement on Schedule 13G filed with the U.S.
Securities and Exchange Commission (the "SEC"). Woodland
Partners LLC's business address is 60 South Sixth Street, Suite
3750, Minneapolis, Minnesota 55402.
(11) Reflects shares beneficially owned as of December 31, 1996,
according to a statement on Schedule 13G filed with the SEC.
William Blair & Company, L.L.C.'s business address is 222 West
Adams Street, Chicago, IL 60606-5312.
(12) Reflects shares beneficially owned as of January 27, 1994,
according to a statement on Schedule 13D filed with the SEC. Mr.
Pacer's address is 13 Sugar Creek Lane, Waukee, IA 50263. Mr.
Pacer resigned as a director and President and Chief Executive
Officer of the Company on August 28, 1995.
(13) Includes 170,667 shares of Common Stock which may be acquired by
directors or executive officers pursuant to options exercisable
on March 25, 1997.
OTHER TRANSACTIONS AND CERTAIN RELATIONSHIPS
Registration Rights. Messrs. Mamolen, Meyer, Glastris,
Daniels, and certain other parties and the Company have entered
into a Registration Rights Agreement, pursuant to which each of
Mr. Mamolen and Mr. Meyer has the right to require the Company to file
two registration statements under the Securities Act of 1933, as
amended (the "Securities Act") (on any available form), provided that
the number of shares of Common Stock to be included in each such
registration exceeds 250,000 shares. In addition, under the
Registration Rights Agreement, Mr. Mamolen and Mr. Meyer have the right
to require the Company to file a registration statement which the
Company will be obligated to keep effective under the Securities Act
for a period not to exceed 18 months. Each of Messrs. Mamolen and
Meyer also has the right to require the Company to file two additional
registration statements on Form S-3, provided that the number of shares
of Common Stock to be included in each such registration would exceed
100,000 shares. Registration statements filed pursuant to the
Registration Rights Agreement may cover sales in underwritten offerings
or from time to time in open market transactions. Parties to the
Registration Rights Agreement also have the right to require the
Company to include their shares of Common Stock in any future
registered offering by the Company, subject to certain conditions and
limitations. In addition, the Registration Rights Agreement contains
certain other customary provisions with respect to registration
13
<PAGE>
rights, including indemnification provisions and provisions requiring
the Company to bear the costs and expenses of the registrations
described above.
Mr. Mergenthaler and certain other holders of options to purchase
100,000 shares of Common Stock granted in connection with the
acquisition by the Company of the assets of Trailmaster Products, Inc.
in 1994, have certain "piggy-back" rights to register the shares to be
issued upon exercise of such options.
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has recommended that the firm of Price
Waterhouse LLP be appointed as independent accountants for the Company
and its subsidiaries for the fiscal year ending December 31, 1997.
Price Waterhouse LLP has served as the Company's independent
accountants since the Company's organization in 1993 and as independent
accountants for predecessors of the Company and its subsidiaries since
the inception of the Predecessor Partnership. Subject to stockholder
approval, the Board has appointed Price Waterhouse LLP as the Company's
independent accountants for the 1997 fiscal year.
Representatives of Price Waterhouse LLP are expected to be
present at the annual meeting with an opportunity to make a statement
if they so desire and are expected to be available to respond to
appropriate questions.
The Board of Directors recommends a vote FOR the appointment of
Price Waterhouse LLP as independent accountants for the Company.
OTHER BUSINESS
The Board of Directors of the Company is not aware of any
business or matter other than those indicated above which may properly
be presented at the meeting. If any other matters come before the
meeting or any adjournments thereof, the persons named in the
accompanying form of proxy will vote in accordance with their best
judgment with respect to such matters.
The expense of the Board's proxy solicitation will be borne by
the Company. In addition to the use of the mails, proxies may be
solicited by personal interview or by telephone. Banks, brokerage
houses and other institutions will be requested to forward the
soliciting material to beneficial owners and to obtain authorization
for the execution of proxies; and, if they in turn so request, the
Company will reimburse such banks, brokerage houses and other
institutions, nominees or fiduciaries for their expenses in forwarding
such material. Directors, officers and regular employees of the
Company may also solicit proxies without additional remuneration
therefor. The Company's transfer agent, Harris Trust and Savings Bank,
will aid in the solicitation of proxies and, in addition to its annual
retainer of $12,000, will be reimbursed for out-of-pocket expenses.
Stockholders are urged to read carefully the material in this
Proxy Statement, specify their choice on each matter by marking the
appropriate box on the enclosed Proxy and sign, date and return the
Proxy in the envelope provided for that purpose. If the enclosed Proxy
is properly executed and returned to the Company in time for the Annual
Meeting, the shares represented thereby will be voted in accordance
with the instructions of the stockholder giving the Proxy.
14
<PAGE>
Unless contrary instructions are given, proxies will be voted for the
election of the nominees for director set forth in this Proxy Statement
and for the appointment of Price Waterhouse LLP as independent
accountants for 1997. A stockholder giving a proxy may revoke it at
any time prior to its exercise by written notice of revocation to the
Secretary of the Company, by the execution of a proxy bearing a later
date or by attending the meeting and voting in person. A stockholder
who wishes to give a proxy to someone other than the proxies designated
by the Board may strike out the names appearing on the enclosed form of
proxy, insert the name of some other person, sign the form and transmit
it to that person for use at the Annual Meeting.
Proxies, ballots and voting tabulations identifying stockholders
are kept private and will not be available to anyone except as actually
necessary to meet legal requirements. Access to proxies and other
individual stockholder voting records is limited to the inspectors of
election appointed by the Company and certain of the Company's
employees who must acknowledge in writing their responsibility to
comply with this policy of confidentiality.
Filings under Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended
("Section 16(a)") requires the Company's directors, officers and
beneficial owners of more than 10% of its common stock to file reports
of holdings and transactions of the Company's Common Stock with the
Securities and Exchange Commission. Based upon Company records and
other information, the Company believes that with respect to the fiscal
year ended December 31, 1996, each of the Company's directors, officers
and beneficial owners of more than 10% of its Common Stock were in
compliance with the filing requirements of Section 16(a), except that
James T. Jurinak filed his Form 3, which reported ownership of the
options disclosed herein, four months late and a Form 4 reporting one
transaction one month late.
Quorum and Requisite Vote
The holders of a majority of the outstanding shares of Common
Stock must be represented in person or by proxy at the Annual Meeting
for the meeting to be held. Pursuant to applicable Delaware law, only
votes cast "for" a matter constitute affirmative votes. Votes
"withheld" or abstaining from voting are counted for quorum purposes,
but since they are not cast "for" a particular matter, they will have
the same effect as negative votes or votes "against" a particular
matter. Shares voted by a broker on a routine matter or matters (such
as election of directors or approval of auditors) but as to which the
broker indicates it lacks authority to vote on non-routine matters will
be counted as present for purposes of determining the presence or
absence of a quorum and as entitled to vote, and voted, with respect to
the routine matter(s), but not entitled to vote, and not voted, with
respect to the non-routine matter(s). Shares as to which a broker
indicates it lacks authority to vote, or shares which the broker does
not vote, will not be counted as present for purposes of determining
the presence or absence of a quorum.
The six nominees for director receiving a plurality of the votes
cast at the Annual Meeting in person or by proxy shall be elected. The
appointment of Price Waterhouse LLP requires for approval the
affirmative vote of a majority of the shares of Common Stock
represented and voting at the meeting, in person or by proxy.
15
<PAGE>
Stockholder Proposals
Proposals of stockholders intended to be presented at the 1998
Annual Meeting of stockholders must be received by the Company no later
than December 31, 1997, in order to be considered for inclusion in the
Company's proxy statement and form of proxy relating to such meeting.
16 <PAGE>
<PAGE>
EXHIBIT A
EXECUTIVE OFFICERS OF DEFLECTA-SHIELD
The following individuals are the current executive officers of
the Company. The executive officers of the Company are elected
annually by the Board to serve until the next annual election of
officers and until their respective successors have been elected and
have qualified unless removed by the Board.
Russell E. Stubbings, age 57, has been President of the Company
since September 6, 1995 and was appointed Chief Executive Officer of
the Company on March 11, 1996. See the biography of Mr. Stubbings
included in this Proxy Statement.
Richard D. Minehart, Jr., age 54, has been Vice President of
Operations and Chief Operating Officer of the Company since March 11,
1996. Prior thereto, he served as Vice President of Operations for
Coleman Cable Systems, Inc., a manufacturer of insulated wire and cable
products, from February 1991 to March 1996. Mr. Minehart served as
President and Chief Executive Officer of Fulton Manufacturing
Corporation, a wholly-owned subsidiary of Masco Corporation from
January 1989 to February 1991.
Ronald C. Fox, age 56, has been Vice President and Chief
Financial Officer of the Company since October 28, 1996 and Secretary
and Treasurer of the Company since April 18, 1997. Prior thereto,
he served as Vice President and Chief Financial Officer of SSDS, Inc.,
a computer integration company from December 1994 to October 1996.
Mr. Fox served as Vice President and Chief Financial Officer of
Bestop, Inc., an automotive accessory company from August 1988
to December 1994.
John A. Daniels, age 60, has been Vice President, Heavy Truck
Operations of the Company since its inception in October 1993 and Vice
President of DFM Corp. since June 1990.
James T. Jurinak, age 47, has been Vice President, General
Manager Light Truck Operations since December 13, 1996. Prior thereto,
he served as Vice President, General Manager of Poly Hi Solidun, a
division of Menasha Corporation engaged in the conversion, fabrication
and sale of engineered polymers, from November 1994 to December 1996.
Mr. Jurinak was Vice President, Operations for Tyton Corporation, a
cable television manufacturer, from September 1993 to October 1994.
From August 1991 to August 1993, Mr. Jurinak served as Senior Vice
President, Operations of Cleveland Pneumatic, an aircraft landing gear
manufacturing division of Pneumo Abex Corp. <PAGE>
<PAGE>
PROXY PROXY
DEFLECTA-SHIELD CORPORATION
Proxy for Annual Meeting of Stockholders on May 22, 1997
This Proxy is Solicited on Behalf of the Board
of Directors of Deflecta-Shield Corporation
The undersigned hereby appoints Russell E. Stubbings and Ronald C. Fox,
or either of them, with full power of substitution, the undersigned's
true and lawful attorneys and proxies to vote the shares of Common
Stock of Deflecta-Shield Corporation which the undersigned is entitled
to vote at the 1997 Annual Meeting of Stockholders to be held at the
Des Moines Marriott Hotel, 700 Grand Avenue, Des Moines, Iowa 50309, on
Thursday May 22, 1997 at 10:00 a.m., and at all adjournments or
postponements thereof, with all the powers the undersigned would
possess if personally present, as indicated on this card for the
proposals described in the Notice and Proxy Statement for such meeting
and in their discretion on such other matters as may properly come
before the meeting or any adjournments or postponements thereof.
Unless otherwise instructed, this proxy will be voted FOR the nominees
listed in Proposal 1 and FOR approval of Proposal 2.
(Continued and to be signed on other side.)
DEFLECTA-SHIELD CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER
USING DARK INK ONLY. /X/
1. Election of Directors--
Nominees: William V. Glastris, Jr., Ronald C. Katz, Mark C.
Mamolen, Douglas T. Mergenthaler, Charles S. Meyer and
Russell E. Stubbings.
For Withhold For All
All All Except those whose name(s) are written below.
/ / / / / /
2. Proposal to Approve Appointment of Price Waterhouse LLP as
Deflecta Shield Corporation's independent accountants
For Against Abstain
/ / / / / /
Dated: _____________, 1997
Signature: ____________________________________
Signature: ____________________________________
Capacity/Title: _______________________________
Please sign the exact name of the stockholder
as it appears hereon. If acting as
administrator, trustee or in other
representative capacity, please sign name and
title. If stock is held jointly, each joint
owner should sign.
