SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. ________)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
FinishMaster, Inc.
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(Name of Registrant as Specified In Its Charter)
FinishMaster, Inc.
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
(Paid with Preliminary Proxy Statement)
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3). [ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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1 Set forth the amount on which the filing fee is calculated and state how it
was determined.
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
FINISHMASTER, INC.
4259 40th Street, S.E.
Kentwood, Michigan 49512
(616) 949-7604
Dear Shareholder: August 27, 1996
We cordially invite you to attend the Annual Meeting of Shareholders of
Finishmaster, Inc. (the "Company") to be held at 10:00 a.m. on Wednesday,
September 18, 1996 at the Holiday Inn Crowne Plaza Hotel, 5700 28th Street,
S.E., Grand Rapids, Michigan.
In connection with the Annual Meeting. you are being asked (i) to elect
seven (7) directors for the ensuing year; (ii) to ratify the selection of
Coopers & Lybrand, LLP, as auditors for the fiscal year ending March 31, 1997;
and (iii) to consider and act upon a proposal to change the Company's state of
incorporation from the State of Michigan to the State of Indiana. Please read
the enclosed proxy statement, which describes this proposal and presents other
important information, and complete, sign and return your proxy promptly in the
enclosed envelope.
Whether or not you plan to attend the annual meeting, please return your
signed proxy as soon as possible.
Sincerely,
Andre B. Lacy
Chairman of the Board
and Chief Executive Officer
<PAGE>
This proxy, when properly executed, will be voted in the manner directed herein
and authorizes the Proxies to take action in their discretion upon other matters
that may properly come before the meeting. If no direction is made, this proxy
will be voted FOR each Proposal listed.
1. Election of Directors
Nominees: Margot L. Eccles, William J. Fennessy, Peter L.Frechette,
Andre B. Lacy, Michael J. Siereveld, Walter S. Wiseman,
Thomas U. Young
[ ] FOR [ ] WITHHELD
For all nominees except as noted above:
[ ] ----------------------------------------------------
2. Ratification and approval of the selection of Coopers & Lybrand, LLP, as
auditors for the fiscal year ending March 31, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval and adoption of an Agreement and Plan of Merger pursuant to which
the Company will merge into a newly formed Indiana corporation which is a
wholly-owned subsidiary of the Company, and thereby effect a change in the
corporate domicile of the Company from the State of Michigan to the State
of Indiana.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
MARK HERE FOR ADDRESS
CHANGE AND NOTE AT LEFT [ ]
Please sign exactly as your name appears
hereon. Joint owners should each sign.
When signing as attorney, executor,
administrator, trustee, or guardian,
please give full title as such.
Signature: Date: Signature: Date:
<PAGE>
ANNUAL MEETING OF
FINISHMASTER, INC.
SEPTEMBER 18, 1996
The undersigned hereby constitutes and appoints Andre B. Lacy and
Thomas U. Young, or either of them with power of substitution to each, proxies
to vote and act at the Annual Meeting of Shareholders on September 18, 1996 at
10:00 a.m., and at any adjournments thereof, upon and with respect to the number
of shares of Common Stock of the Company as to which the undersigned may be
entitled to vote or act. The undersigned instructs such proxies, or their
substitutes, to vote in such manner as they may determine on any matters which
may come before the meeting, all as indicated in the accompanying Notice of
Meeting and Proxy Statement, receipt of which is acknowledged, and to vote on
the following as specified by the undersigned.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>
FINISHMASTER, INC.
4259 40TH STREET, S.E.
KENTWOOD, MICHIGAN 49512
(616) 949-7604
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
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TO BE HELD SEPTEMBER 18, 1996
To the Shareholders of FinishMaster, Inc.:
Notice is hereby given that the Annual Meeting of Shareholders of
FinishMaster, Inc., a Michigan corporation (the "Company"), will be held at the
Crowne Plaza Hotel, 5700 28th Street, S.E., Grand Rapids, Michigan on Wednesday,
September 18, 1996, at 10:00 a.m., local time, for the following purposes, all
of which are more completely set forth in the accompanying proxy statement.
1. Election of Directors. To elect seven (7) Directors for the
ensuing year;
2. Ratification of Auditors. To ratify and approve the selection of
Coopers & Lybrand, LLP, as auditors for the fiscal year ending
March 31, 1997.
3. Approval of Change of Corporate Domicile. To consider and act upon
a proposal to change the Company's state of incorporation from the
State of Michigan to the State of Indiana by approval and adoption
of an Agreement and Plan of Merger pursuant to which the Company
will merge into a newly formed Indiana corporation which is a
wholly-owned subsidiary of the Company.
4. Other Business. To transact such other business as may properly
come before the meeting.
In accordance with the Bylaws of the Company and a resolution of the Board
of Directors, the record date for the meeting has been fixed at July 26, 1996.
Only Shareholders of record at the close of business on that date will be
entitled to vote at the meeting or any adjournment thereof.
We urge you to read the enclosed Proxy Statement carefully so that you may
be informed about the business to come before the meeting, or any adjournment
thereof. At your earliest convenience, please sign and return the accompanying
proxy in the postage-paid envelope furnished for that purpose.
A copy of our Annual Report for the fiscal year ended March 31, 1996, is
enclosed. The Annual Report is not a part of the proxy soliciting material
enclosed with this letter.
By Order of the Board of Directors
/s/ Andre B. Lacy
Andre B. Lacy,
Chairman of the Board
and Chief Executive Officer
Indianapolis, Indiana
August 27, 1996
YOUR VOTE IS IMPORTANT
THE PROMPT RETURN OF YOUR SIGNED PROXY, REGARDLESS OF THE NUMBER OF SHARES YOU
HOLD, WILL AID THE COMPANY IN REDUCING THE EXPENSE OF ADDITIONAL PROXY
SOLICITATION. THE GIVING OF SUCH PROXY DOES NOT AFFECT YOUR RIGHT TO VOTE IN
PERSON IN THE EVENT YOU ATTEND THE MEETING. WHETHER OR NOT YOU PLAN TO BE
PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE SIGN, DATE AND COMPLETE THE
ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE
IF MAILED IN THE UNITED STATES.
<PAGE>
FINISHMASTER, INC.
4259 40th Street, S.E.
Kentwood, Michigan 49512
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PROXY STATEMENT
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This Proxy Statement is being furnished to the holders of common stock,
without par value (the "Common Stock"), of FinishMaster, Inc., a Michigan
corporation (the "Company"), in connection with the solicitation of proxies by
the Board of Directors of the Company to be voted at the Annual Meeting of
Shareholders to be held at 10:00 a.m., local time, on Wednesday, September 18,
1996, at the Crowne Plaza Hotel, 5700 28th Street, S.E., Grand Rapids, Michigan,
and at any adjournment of such meeting. This Proxy Statement is expected to be
mailed to shareholders on or about August 23, 1996.
The proxy solicited hereby, if properly signed and returned to the Company
and not revoked prior to its use, will be voted in accordance with the
instructions contained therein. If no contrary instructions are given, each
proxy received will be voted "FOR" each of the matters described below and, upon
the transaction of such other business as may properly come before the meeting,
in accordance with the best judgment of the persons appointed as proxies.
Any shareholder giving a proxy has the power to revoke it at any time
before it is exercised by (i) filing with the Chief Financial Officer of the
Company written notice thereof at least twenty-four (24) hours before the
commencement of the meeting (Roger Sorokin, 4259 40th Street, S.E., Kentwood,
Michigan 49512), (ii) submitting a duly executed proxy bearing a later date, or
(iii) appearing at the Annual Meeting and giving the Secretary notice of his or
her intention to vote in person. Proxies solicited hereby may be exercised only
at the Annual Meeting and any adjournment thereof and will not be used for any
other meeting.
The purpose of this Annual Meeting of Shareholders shall be to elect
Directors, to ratify the selection of the Company's auditors for the fiscal year
ended March 31, 1997, to approve a proposed change of corporate domicile, and to
transact such other business as may properly come before the meeting.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The Common Stock is the only voting stock of the Company. Holders of
record at the close of business on July 26, 1996, are entitled to one (1) vote
for each share of Common Stock held. As of July 26, 1996, there were 6,000,140
shares of the Company's Common Stock issued and outstanding, and the Company had
no other class of equity securities outstanding. Holders of stock entitled to
vote at the meeting do not have cumulative voting rights in respect of the
election of directors.
In an election of directors, each director is elected by a plurality of
the votes cast. Actions other than elections of directors are authorized by a
majority of the votes cast by the holders of shares entitled to vote thereon.
Although state law and the Articles of Incorporation and Bylaws of the Company
are silent on the issue, it is the intent of the Company that proxies received
which contain abstentions or broker non-votes as to any matter will be included
in the calculation of the presence of a quorum, but will not be counted as votes
cast for or against the action to be taken on the matter.
<PAGE>
Security Ownership By Principal Holders
The following table sets forth information regarding the beneficial
ownership of the Common Stock of the Company as of July 26, 1996, by each person
who is known to the Company to own 5% or more of its Common Stock:
Number of Shares of
Name and Address of Common Stock
Beneficial Owner Beneficially Owned % of Class
- -------------------------------- ------------------- ----------
LDI AutoPaints, Inc.(1) 4,045,100(1) 67.4
251 North Illinois, Suite 1800
Indianapolis, Indiana 46204
Edgemont Asset Management 365,000 6.1
Corporation
140 East 45th Street
43rd Floor
New York, New York 10017
Kalmar Investments Inc. 428,000 7.1
1300 Market Street, Suite 500
Wilmington, Delaware 19801
(1) LDI AutoPaints, Inc., an Indiana corporation ("AutoPaints"), is a
wholly-owned subsidiary of Lacy Distribution, Inc., an Indiana corporation
("Lacy"), and an indirect wholly-owned subsidiary of LDI, Ltd., an Indiana
limited partnership ("LDI"). LDI has two managing partners: LDI Management, Inc.
("LDIM"), its corporate managing general partner, and Andre B. Lacy, the
Chairman and Chief Executive Officer of the Company. AutoPaints, Lacy, LDI, LDIM
and Andre B. Lacy have jointly filed a Schedule 13D to report beneficial
ownership of the 4,045,000 shares held of record by AutoPaints. In addition, LDI
also directly owns 100 shares of the Company which were purchased on the open
market in August, 1995.
Change of Control
A change in control of the Company occurred on July 9, 1996 (the "Closing
Date"). On such date, AutoPaints and Maxco, Inc., a Michigan corporation
("Maxco") consummated the purchase and sale of all 4,045,000 shares of Common
Stock of the Company which were owned by Maxco (the "Stock Purchase"). The
shares purchased and sold in the Stock Purchase (the "Shares") represent 67.4%
of the total issued and outstanding shares of Common Stock of the Company.
The Stock Purchase was consummated pursuant to a Stock Purchase Agreement
dated June 5, 1996 (the "Purchase Agreement") among Lacy, Maxco, and LDI. Under
an Assignment and Assumption Agreement dated as of the Closing Date, Lacy
assigned all its right, title and interest in and to the Purchase Agreement to
AutoPaints, and AutoPaints assumed of all obligations, duties, covenants and
conditions of Lacy thereunder with respect to the purchase of the Shares, all
with the consent of LDI and Maxco. As a result of the Stock Purchase, AutoPaints
is now the beneficial owner of 67.4% of the total issued and outstanding shares
of Common Stock of the Company.
AutoPaints purchased the Shares from Maxco at a price of $11.50 per Share,
or $46,517,500 in the aggregate (the "Purchase Price"). Pursuant to the Purchase
Agreement, Maxco and certain directors of the Company prior to the Closing Date
who are also directors of Maxco (the "Individual Restricted Parties") entered
into a Non-Competition Agreement with AutoPaints, effective as of the Closing
Date, pursuant to which Maxco and the Individual Restricted Parties are to
receive consideration in the aggregate amount of $16,500,000 (the "Non-Compete
Consideration"). The Non-Compete Consideration is payable according to the
following schedule: (i) $12,000,000 was paid to Maxco on the Closing Date, and
(ii) $4,500,000 in the aggregate is to be paid to Maxco and the four Individual
Restricted Parties in five annual installments of $900,000 each commencing in
July, 1997. Of each such annual installment of $900,000, $20,000 is payable to
each of the four Individual Restricted Parties and the remainder ($820,000) is
payable to Maxco.
A portion of the Purchase Price was obtained under an existing
$200,000,000 revolving credit facility evidenced by a certain Credit Agreement
dated as of March 29, 1996, as amended from time to time, among LDI,
2
<PAGE>
Lacy and various financial institutions, including Bank of America National
Trust and Savings Association, as agent. The obligation of the lenders to make
the loans under the Credit Agreement is subject to the satisfaction of certain
customary conditions and covenants. Borrowings under the Credit Agreement are
guaranteed by each of LDI's and Lacy's significant operating subsidiaries and
affiliates, but will not be guaranteed by Company. Borrowings under the Credit
Agreement are otherwise unsecured.
In accordance with the Purchase Agreement, six (6) individuals executed
and delivered their resignations as directors of the Company, effective
immediately upon the closing of the Stock Purchase (the "Closing").
Simultaneously therewith, certain individuals designated by Lacy and AutoPaints
were elected to the Board of Directors of the Company to fill the vacancies
created by such resignations. In addition, effective immediately upon the
Closing, certain officers of the Company who are also officers of Maxco executed
and delivered their resignations as officers of the Company.
The following individuals resigned as directors and/or officers of the
Company as of the Closing Date (collectively, the "Resigning Directors"): (i)
Max A. Coon - Chairman of the Board; (ii) Eric L. Cross - Secretary and
Director; (iii) Richard G. Johns - Director; (iv) Vincent Shunsky - Treasurer
and Director, (v) Douglas A.
Milbury - Director; and (vi) Gary W. Ross - Director.
The following individuals were elected to the Board of Directors of the
Company to fill the vacancies created by such resignations (collectively, the
"Designated Directors"): (a) Andre B. Lacy, (b) Thomas U. Young, (c) Margot L.
Eccles, (d) William J. Fennessy and (e) Walter S. Wiseman. The Designated
Directors, together with Messrs. Michael J. Siereveld, James F. White and Ronald
P. White, constituted the interim Board of Directors of the Company immediately
following the Stock Purchase.
At an organizational meeting held on July 10, 1996 (the "Organizational
Meeting"), the interim Board of Directors of the Company nominated the existing
directors for election at the next annual shareholders' meeting. In addition, at
the Organizational Meeting, the Board of Directors of the Company elected the
following individuals as officers of the Company to serve until the next annual
meeting of the Board of Directors and until their successors are duly chosen and
qualified, in part to fill certain vacancies created as a result of the Stock
Purchase:
Name Age Office
- ---------------------- ----- ----------------------------------
Andre B. Lacy 57 Chairman of the Board and
Chief Executive Officer
Thomas U. Young 64 Vice Chairman of the Board
Ronald P. White 46 President and
Chief Operating Officer
Michael J. Siereveld 41 Senior Vice President
Roger A. Sorokin 55 Vice President - Finance
Christopher R. Banner 44 Vice President - Operations
William J. Fennessy 56 Treasurer
Robert H. Reynolds 59 Secretary
Messrs. White, Siereveld, and Banner served as President and Chief Executive
Officer, Senior Vice President, and Vice President-Operations, respectively, for
the five years preceding the Stock Purchase. Roger A. Sorokin was elected Vice
President-Finance in April 1993 after serving as Director of Finance since
joining the Company in 1991.
By a letter dated July 22, 1996, Mr. Ronald P. White resigned as a
director and as President and Chief Operating Officer of the Company. In
response to this resignation, the Board of Directors, by a unanimous written
consent dated as of July 24, 1996, elected Thomas U. Young President and Chief
Operating Officer to hold such office until the next annual meeting of the Board
of Directors and until his successor is duly chosen and qualified. By a letter
dated July 29, 1996, Mr. James F. White announced his resignation as a director
of the Company. The resignations of Mr. Ronald P. White and Mr. James F. White
are referred to herein as the "Resignations." Subsequent to the Resignations,
the Board of Directors has decreased the number of directors of the Company to
seven (7), as authorized by the Bylaws of the Company, and has nominated Mr.
Peter L. Frechette for election as a director at the Annual Meeting, together
with the existing members of the Board of Directors.
3
<PAGE>
PROPOSAL I - ELECTION OF DIRECTORS
The Company's Bylaws provide that the number of directors may be changed
from time to time, as determined by the Board of Directors or shareholders of
the Company. The Board of Directors currently consists of six members, with one
vacancy remaining after giving effect to the Resignations and the decrease in
the total number of directors to seven. Unless otherwise directed, each proxy
executed and returned by a shareholder will be voted for the election of the
following nominees to the Board of Directors, to hold office until the next
Annual Meeting or until their successors are elected. In the event any nominee
should be unable or unwilling to stand for election at the time of the Annual
Meeting, the proxy holders will nominate and vote for a replacement nominee
recommended by the Board of Directors. Proxies will be voted only to the extent
of the number of nominees named. At this time, the Board of Directors knows of
no reason why any nominee may not be able to serve as a director if elected.
Directors are elected to serve until the next Annual Meeting or until their
successors are elected and qualified.
Security Ownership by Directors and Executive Officers
The following table sets forth information as of July 26, 1996 with
respect to the number and percentage of Common Stock beneficially owned by (i)
each director nominee, (ii) each Named Executive Officer (as defined below), and
(iii) all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial Ownership
of Common Stock as of
July 26, 1996 (1)
------------------------------------------
Name of Director of Sole Voting & Shared Voting & Percentage
Beneficial Owner (1) Company Since Investment Power Investment Power of Class
---------------- ------------- ---------------- ---------------- --------
Director Nominees:
<S> <C> <C> <C> <C>
Andre B. Lacy 1996 --- 4,045,100(2) 67.4%
Thomas U. Young 1996 --- --- *
Margot L. Eccles 1996 --- 4,045,100(2) 67.4%
William J. Fennessy 1996 --- --- *
Walter S. Wiseman 1996 --- --- *
Michael J. Siereveld 1993 49,650(3) 350 *
Peter L. Frechette --- --- --- *
Other Executive Officers:
Christopher R. Banner, --- 25,400(4) --- *
Vice President - Operations
Roger A. Sorokin, Vice --- 23,000(5) --- *
President - Finance
Robert H. Reynolds, Secretary --- --- --- *
All directors and executive --- 98,050 4,045,450(2) 69.1%
officers as a group (11)
</TABLE>
- ---------------
* Beneficial ownership does not exceed one percent (1%)
Footnotes on following page
4
<PAGE>
(1) Amounts shown do not include an aggregate of 38,500 issued and outstanding
shares of Common Stock and an aggregate of 79,000 shares of Common Stock
subject to stock options (which options are currently exercisable in
accordance with their terms) held by certain individuals who were serving
as directors and officers of the Company prior to consummation of the
Stock Purchase and the Resignations.
(2) Includes 100 shares of Common Stock held directly by LDI, which is the
ultimate parent entity of AutoPaints, the record owner of 4,045,000 shares
of Common Stock. Mr. Lacy, the Chairman and CEO of the Company, is a
general partner of LDI, Ltd. ("LDI"). Mr. Lacy is also the sole shareholder
and the Chairman, President and Chief Executive Officer of LDI Management,
Inc., the corporate managing general partner of LDI ("LDIM"), and he is the
Chairman and Chief Executive Officer of AutoPaints. Ms. Eccles serves as a
director and as a Vice President of LDIM and as a director of AutoPaints.
Due to their positions with LDIM and AutoPaints, Mr. Lacy and Ms. Eccles
may be deemed to have voting and dispositive power with respect to these
shares, and therefore to own such shares beneficially under applicable
regulations.
(3) Includes 42,000 shares subject to stock options, which are currently
exercisable in accordance with their terms.
(4) Includes 22,550 shares subject to stock options, which are currently
exercisable in accordance with their terms.
(5) Consists of 23,000 Shares subject to stock options, which are currently
exercisable in accordance with their terms.
The following information is furnished concerning the director nominees,
all of whom have been nominated by the Board of Directors.
Mr. Lacy (age 57) was elected Chairman of the Board of Directors and Chief
Executive Officer of the Company in July, 1996. Mr. Lacy is President, Chief
Executive Officer and Chairman of the Board of Directors of LDIM, the corporate
managing general partner of LDI. Mr. Lacy, individually, also serves as a
general partner of LDI, of which he owns less than 1% of the outstanding
partnership units. Mr. Lacy serves as President, Chief Executive Officer and
Chairman of the Board of Directors of Lacy, and he has served as Chairman of the
Board of Directors and Chief Executive Officer of AutoPaints since its formation
in April, 1996. Except for his positions with the Company and AutoPaints, Mr.
Lacy has served in these capacities for more than the previous five years. Mr.
Lacy also serves as a director of Albemarle Corporation, IPALCO Enterprises,
Inc., Patterson Dental Company, and Tredegar Industries, Inc. Mr. Lacy is the
brother of Margot L. Eccles.
Mr. Young (age 63) was named Vice Chairman of the Board of Directors of
the Company in July, 1996, and was subsequently elected President and Chief
Operating Officer of the Company effective July 24, 1996. Mr. Young has served
as a Vice President of LDIM and as President and Chief Operating Officer of
AutoPaints since June, 1996. From 1989 until May 31, 1996, Mr. Young served as
the World Wide Director of the Refinish Business for E.I. duPont Co.,
Wilmington, Delaware.
Ms. Eccles (age 61) has served as a director of the Company since July,
1996. She has served as a director of LDIM and as its Vice President and
Assistant Secretary for more than the previous five years. Ms. Eccles also
serves as a director, Vice President and Assistant Secretary of Lacy, and she
has served as a director and Assistant Secretary of AutoPaints since its
formation in April, 1996. Ms. Eccles is the sister of Andre B. Lacy.
Mr. Fennessy (age 56) has served as the Treasurer and as a director of the
Company since July, 1996. He has served as a Vice President, Treasurer and Chief
Financial Officer of LDIM for more than the previous five (5) years. Mr.
Fennessy also serves as a director and as the Vice President, Treasurer and
Chief Financial Officer of Lacy, and he has served as a director and Treasurer
of AutoPaints since its formation in April, 1996.
Mr. Frechette (age 59) has served as Chairman of the Board, President, and
Chief Executive Officer of Patterson Dental Company, a distributor of dental
supplies and equipment based in St. Paul, Minnesota, for more than the past five
years. In August, 1996, Mr. Frechette was nominated by the Board of Directors
for election as a director at the next annual meeting of shareholders, to fill
the vacancy remaining after giving effect to the Resignations and the decrease
in the number of directors of the Company to seven.
Mr. Siereveld (age 41) has served Senior Vice President of the Company for
more than the previous five years. He was elected to the Board of Directors of
the Company in 1993.
Mr. Wiseman (age 51) has served as a director of the Company since July,
1996. He has served as a Vice President of LDIM and as President of Major Video
Concepts, Inc., a wholesale distributor of videocassettes based in Indianapolis,
Indiana, and a wholly-owned subsidiary of Lacy, for more than the previous five
years.
Except for Mr. Lacy and Ms. Eccles, no director or nominee for director is
related to any other director or nominee for director or executive officer of
the Company by blood, marriage, or adoption, and there are no arrangements or
understandings between any nominee and any other person pursuant to which such
nominee was selected.
5
<PAGE>
THE DIRECTORS SHALL BE ELECTED UPON RECEIPT OF A PLURALITY OF VOTES CAST AT
THE ANNUAL MEETING
Meetings and Committees of the Board of Directors
The management of the Company is under the direction of the Board of
Directors (the "Board"). The Board held four meetings during the Company's
fiscal year ended March 31, 1996. Former directors James F. White and Gary W.
Ross attended fewer than 75% of the meetings of the Board in such fiscal year.
The Board has established an Audit Committee and a Compensation
Committee. The Audit Committee, whose members consisted of Messrs. Milbury,
Shunsky and Ross for the fiscal year ended March 31, 1996, met two times in such
fiscal year. The Audit Committee recommends the annual employment of the
Company's auditors with whom the Audit Committee will review the scope of audit
and non-audit assignments, related fees, the accounting principles used by the
Company in financial reporting, internal financial auditing procedures and the
adequacies of the Company's internal control procedures. At the Organizational
Meeting following the Stock Purchase, the Board appointed all of the members of
the Board to the Audit Committee, with Walter S. Wiseman serving as the Chair of
such committee.
The Compensation Committee, whose members consisted of Messrs. Cross,
Johns and Shunsky for the fiscal year ended March 31, 1996, met four times in
such fiscal year to determine executive officer salaries and bonuses. The
Compensation Committee also administers the Company's stock option plan. At the
Organizational Meeting, the Board appointed Margot L. Eccles and Mr. Wiseman to
the Compensation Committee, to replace those directors who had previously served
on such committee prior to the Stock Purchase, with Ms. Eccles serving as the
Chair of such committee. It is contemplated that, upon his election to the Board
at the Annual Meeting, Peter L. Frechette will be appointed to the Compensation
Committee.
At the Organizational Meeting, the Board established an Executive
Committee consisting of Andre B. Lacy, Thomas U. Young and Ronald P. White,
which committee, in addition to such other duties as may be prescribed from time
to time by the Board, shall have and exercise, during intervals between the
meetings of the Board, all powers invested in the Board, subject to applicable
legal requirements. The vacancy on the Executive Committee created by the
resignation of Mr. White has not been filled.
The Board does not have a standing nominating committee.
Director Compensation
In the fiscal year ended March 31, 1996, the non-employee directors of
the Company who were not also directors or employees of Maxco or its
subsidiaries were paid $1,000 per meeting attended. In such fiscal year, fees
were not paid to directors for attendance at committee meetings. It is
contemplated that the compensation arrangements for independent, non-employee
directors of the Company will be modified, commencing in the current fiscal
year, to consist of an annual retainer of $6,000, a board meeting fee of $1,000
per meeting, a committee meeting fee of $750 per meeting, and a telephonic board
meeting fee of $250 per meeting, all subject to further consideration and
approval by the Company. Directors of the Company who are employees of
FinishMaster, AutoPaints or their affiliates will not receive compensation for
their services as directors.
Compliance with Reporting Requirements
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"1934 Act"), requires the Company's directors and executive officers and
beneficial owners of more than 10% of the Company's equity securities to file
with the Securities and Exchange Commission ("SEC") certain reports regarding
the ownership of the Company's securities or any changes in such ownership.
Officers, directors and greater than 10% shareholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms that
they file.
Based solely on its review of the copies of such forms received by it,
and/or written representations from certain reporting persons that no Forms 5
were required for such persons, the Company believes that, during the fiscal
year ended March 31, 1996, all filing requirements applicable to its officers,
directors and greater than 10% beneficial owners with respect to Section 16(a)
of the 1934 Act were complied with.
6
<PAGE>
Remuneration of Executive Officers
The following table summarizes, for the Company's last three fiscal
years, the compensation of the persons who served as Chief Executive Officer of
the Company during the fiscal year ended March 31, 1996 and each of the other
most highly compensated executive officers of the Company who were serving as
such at the end of such fiscal year and whose salary and bonus compensation
exceeded $100,000 for services rendered in all capacities to the Company and its
subsidiary (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------- ---------------------------------------------
Fiscal Year
Name and Ended Securities Underlying All Other
Principal Position March 31, Salary($) Bonus($) Option Awards (#)(1) Compensation($)(2)
------------------ --------- --------- -------- -------------------- ------------------
<S> <C> <C> <C> <C> <C>
Ronald P. White.................... 1996 $155,000 $24,000 25,000 $3,651
Chief Executive Officer 1995 127,000 48,260 --- 3,348
1994 108,000 60,500 19,000 3,042
Michael J. Siereveld............... 1996 $150,000 $22,000 25,000 $3,581
Senior Vice President 1995 110,000 44,000 --- 3,348
1994 93,000 52,000 17,000 2,618
Roger A. Sorokin................... 1996 $ 92,000 $14,000 12,500 $2,921
Vice President, Finance 1995 79,000 27,650 --- 2,346
1994 --- --- --- ---
Christopher R. Banner.............. 1996 $ 92,000 $15,000 12,500 $2,931
Vice President, Operations 1995 80,132 28,046 --- ---
1994 --- --- --- ---
</TABLE>
- --------------------
(1) Represents the number of shares on which options were granted.
(2) Represents the Company's 20% match of up to 6% of employee deferrals of
currently earned income into the 401(k) Employee Savings Plan and a
profit sharing contribution made by the Company for all of its eligible
employees to the 401(k) Employee Savings Plan at the rate of 1% of
compensation.
7
<PAGE>
The following table sets forth information related to options granted
during the fiscal year ended March 31, 1996 to each of the Named Executive
Officers to whom options have been granted.
Stock Option Grants in Fiscal Year Ended March 31, 1996
Individual Grants
<TABLE>
<CAPTION>
% of Total
Options
Securities Granted to Exercise
Underlying Employees or Base
Options in Fiscal Price Expiration
Name Granted (#) Year 1996 ($/Sh) Date 5%($)(1) 10%($)(1)
---- ----------- --------- ------ ----- -------- ---------
Ronald P.
<S> <C> <C> <C> <C> <C> <C>
White 25,000 25.1% $11.00 12/22/05 $172,947.50 $438,267.50
Michael J.
Siereveld 25,000 25.1% $11.00 12/22/05 $172,947.50 $438,267.50
Christopher J.
Banner 12,500 12.6% $11.00 12/22/05 $86,473.75 $219,133.75
Roger A.
Sorokin 12,500 12.6% $11.00 12/22/05 $86,473.75 $219,133.75
</TABLE>
- -------------------
(1) These gains are based upon assumed rates of annual compound stock
appreciation of 5% and 10% from the date the options were granted over the
full option term. These amounts represent certain assumed rates of
appreciation only. Actual gains, if any, on option exercises are dependent
upon the future performance of the Shares and overall stock market
conditions. There can be no assurance that the amounts reflected on this
table will be achieved.
The following table sets forth certain information regarding the total
number of stock options held by each of the Named Executive Officers, and the
aggregate value of such stock options, as of March 31, 1996. None of such stock
options had been exercised as of such date.
Aggregated Option Exercises in Fiscal Year Ended March 31, 1996
and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities
Shares Underlying Value of In-the-Money
Acquired on Value Unexercised Options Unexercised Options at
Name Exercise (#) Realized ($) at Fiscal Year-End Fiscal Year-End ($)(1)
---- ------------ ------------ ------------------ ----------------------
<S> <C> <C> <C> <C>
Ronald P. White --- --- 44,000 $31,500
Michael J. Siereveld --- --- 42,000 29,500
Christopher J. Banner --- --- 22,550 16,300
Roger A. Sorokin --- --- 23,000 22,000
</TABLE>
- -------------------
(1) Based on the closing price for the Shares on the last business day of the
fiscal year ended March 31, 1996, which was $11.50 per share.
8
<PAGE>
Compensation Committee Interlocks and Insider Participation
For the fiscal year ended March 31, 1996, the Compensation Committee of the
Board (the "Committee") consisted of Eric L. Cross, Richard G. Johns and Vincent
Shunsky. Messrs. Cross and Shunsky, although officers of the Company in the
fiscal year ended March 31, 1996, were also officers and directors of Maxco,
were paid by Maxco, and received no compensation from the Company.
Compensation Committee Report on Executive Compensation
Overview and Philosophy
The Committee is responsible for developing and making recommendations to
the Board with respect to the Company's executive compensation policies. In
addition, the Committee, pursuant to authority delegated by the Board,
determines on an annual basis the compensation to be paid to the Chief Executive
Officer and each of the other executive officers of the Company.
The objectives of the Company's executive compensation program are to:
_ Support the achievement of desired Company performance.
_ Provide compensation that will attract and retain superior talent
and reward performance.
_ Align the executive officers' interests with the success of the
Company by placing a portion of pay at risk, with payout dependent
upon corporate performance.
The executive compensation program provides an overall level of
compensation opportunity that is competitive with companies of comparable size
and complexity. The Committee will use its discretion to set executive
compensation where in its judgment external, internal or an individual's
circumstances warrant it.
Executive Officer Compensation Program
The Company's executive officer compensation program is comprised of base
salary, annual cash incentive compensation, long-term incentive compensation in
the form of stock options, and various benefits, including medical and deferred
compensation plans, generally available to employees of the Company.
Base Salary
Base salary levels for the Company's executive officers are competitively
set relative to other comparable companies. In determining salaries the
Committee also takes into account individual experience and performance.
Annual Incentive Compensation
The Company's annual incentive program for executive officers and key
managers provides direct financial incentives in the form of an annual cash
bonus to executives based on the Company's ability to create economic value.
Economic value is measured by the Company's ability to generate a return in
excess of the Company's cost of capital.
Specific individual performance was also taken into account in determining
bonuses, including meeting department goals, attitude, dependability,
cooperation with co-workers, and creativity or ideas that benefit the Company.
Stock Option Program
The stock option program is the Company's long-term incentive plan for
executive officers and key employees. The objectives of the program are to align
executive and shareholder long-term interests by creating a strong and direct
link between executive pay and shareholder return, and to enable executives to
develop and maintain a significant, long-term stock ownership position in the
Company's Common Stock.
9
<PAGE>
The Company's stock option plan was adopted by the Company's Board of
Directors in November 1993 and was ratified by the sole stockholder on November
30, 1993. The stock option plan provides for the grant of both incentive stock
options intended to qualify for preferential tax treatment under Section 422 of
the Internal Revenue Code of 1986, as amended, and nonqualified stock options
that do not qualify for such treatment. The stock option plan authorizes a
committee of directors to award executive and key employee stock options. Stock
options are granted at an option price equal to the fair market value of the
Company's common stock on the date of grant, have ten year terms and can have
exercise restrictions established by the Committee. A total of 600,000 shares of
common stock have been reserved for issuance under the stock option plan.
Deferred Compensation
The Company's employees participate in FinishMaster Inc.'s 401(k) Employee
Savings Plan. The 401(k) plan is a "cash or deferred" plan under which employees
may elect to contribute a certain portion of their annual compensation which
they would otherwise be eligible to receive in cash. The Company has agreed to
make a matching contribution of 20% of the employees' contributions of up to 6%
of their annual compensation. In addition, the Company intends to contribute 1%
of compensation for each employee, or more or less at the discretion of the
Board. Contributions must be made from current or retained earnings of the
Company. All full time employees of the Company or its subsidiary who have
completed one year of service are eligible to participate in the plan.
Participants are immediately 100% vested in all contributions. The plan does not
contain an established termination date and it is not anticipated that it will
be terminated at any time in the foreseeable future.
Benefits
The Company provides medical benefits to the executive officers that are
generally available to Company employees. The amount of perquisites, as
determined in accordance with the rules of the Securities and Exchange
Commission relating to executive compensation, did not exceed 10% of salary for
the fiscal year ended March 31, 1996.
Chief Executive Officer
Ronald P. White served as the Company's Chief Executive Officer in the
fiscal year ended March 31, 1996, having first been named to such position in
1988. His base salary for the fiscal year ended March 31, 1996 was $155,000. Mr.
White's bonus in fiscal year 1996 was $24,000.
The factors discussed under "Annual Incentive Compensation", above, were
also applied in establishing the amount of Mr. White's bonus. Significant
factors in establishing Mr. White's compensation were the Company's ability to
create economic value, the development and implementation of the Company's
acquisition strategy and general business development.
The Committee believes Mr. White managed the Company well in a challenging
business climate and has achieved above-average results in comparison to other
comparable companies.
The Compensation Committee of the Company
for the Fiscal Year Ended March 31, 1996:
Eric L. Cross
Richard G. Johns
Vincent Shunsky
10
<PAGE>
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total shareholder return on the
Common Stock of the Registrant for the period beginning April 1, 1995 and ending
March 31, 1996, with the cumulative total return on the CRSP Total Return Index
for the Nasdaq Stock Market (US Companies) (1) and the Nasdaq index of
Non-Financial Companies (2) over the same period, assuming the investment of
$100 in the Registrant's Common Stock, the Nasdaq U.S. Index and the Nasdaq
Non-Financial Index on February 23, 1994, and reinvestment of all dividends.
[Table replaces line graph]
Cumulative Total Return
------------------------------
2/23/94 3/94 3/95 3/96
Finishmaster, Inc. FMST 100 83 140 105
NASDAQ Stock Market--US INAS 100 94 105 142
NASDAQ Non-Financial INNF 100 94 103 137
- ----------------------
(1) The CRSP Total Return Index for the Nasdaq Stock Market (US Companies)
is composed of all domestic common shares traded on the Nasdaq National
Market and the Nasdaq Small-Cap Market.
(2) Nasdaq index of non-financial companies.
11
<PAGE>
Certain Transactions With Related Persons
Prior to November 30, 1993, Maxco owned 100% of the outstanding stock of
the Company and of the Company's wholly owned subsidiary, Refinishers Warehouse.
In contemplation of the Company's initial public offering of its common stock,
which became effective on February 23, 1994, the Company and Maxco entered into
an agreement effective November 30, 1993, whereby Maxco transferred all of the
capital stock of Refinishers Warehouse to the Company in exchange for 4,299,000
previously unissued shares of the Company's common stock.
Prior to the Stock Purchase, Maxco provided certain services for its
subsidiaries, including the Company, in the fiscal year ended March 31, 1996.
The services included central purchasing of all insurance, including employee
benefit coverage, general and automobile liability, property and casualty
insurance. While each subsidiary was charged for its pro rata share of the costs
of such services in the fiscal year ended March 31, 1996, there has never been a
management or service fee charged to any of the subsidiaries by Maxco. The
officers of the Company prior to the Stock Purchase who are also officers of
Maxco are not compensated by the Company.
During the period in which Maxco owned shares of common stock of the
Company, the Company from time to time incurred indebtedness to Maxco in
connection with the payment of taxes and the Company's share of the costs of
certain of the above-described services. At March 31, 1996, there was no
outstanding indebtedness of the Company to Maxco.
In addition, Maxco leased during the fiscal year ended March 31, 1996,
and continues to lease, a retail store premises to the Company at prevailing
market rates.
Recent Developments
In anticipation of its initial public offering, the Company entered into
an agreement with Maxco for the purpose of defining the relationship between
them after the offering (the "Inter-Company Agreement"). The Inter-Company
Agreement did not result from arms-length negotiations between independent
parties. In connection with the Stock Purchase, the Company and Maxco
terminated, effective July 9, 1996, all agreements existing between them,
including without limitation the Inter-Company Agreement. In order to allow the
Company to continue to participate in a certain medical plan for the benefit of
its employees, the Company and Maxco entered into an agreement, effective as of
the Closing Date, which provides for the Company's continued participation in
such plan until the termination of the agreement on December 31, 1996. See
"Change of Control," above.
PROPOSAL II - RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors proposes the ratification by the shareholders at
the Annual Meeting of the appointment of the accounting firm of Coopers &
Lybrand, LLP ("Coopers & Lybrand") as independent auditors for the fiscal year
ended March 31, 1997. A representative of Coopers & Lybrand is expected to be
present at the Annual Meeting with the opportunity to make a statement if he so
desires. He will also be available to respond to any appropriate questions
shareholders may have.
Relationship with Independent Public Accountants
The firm of Ernst & Young, LLP ("Ernst & Young") served as auditors for
the Company for the fiscal year ended March 31, 1996. A representative of Ernst
& Young is expected to be present at the Annual Meeting and will be available to
respond to appropriate questions with respect to financial information for such
fiscal year, and will have the opportunity to make a statement if he so desires.
At the Organizational Meeting, the Board of Directors of the Company
replaced Ernst & Young as independent auditors for the Company for the fiscal
year ending March 31, 1997, effective July 10, 1996.
12
<PAGE>
At the same meeting, the Board of Directors of the Company approved the
appointment of Coopers & Lybrand as independent auditors for the Company for the
fiscal year ending March 31, 1997, to replace the firm of Ernst & Young. The
decision to change auditors was recommended and approved by the Board of
Directors of the Company.
Ernst & Young's report on the Company's financial statements during the
two most recent fiscal years contained no adverse opinion or a disclaimer of
opinion, and was not qualified as to uncertainty, audit scope or accounting
principles. During the last two fiscal years and subsequent interim periods
preceding this change, there were no disagreements between the Company and Ernst
& Young on any matters of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of Ernst & Young, would have caused it to make
a reference to the subject matter of the disagreements in connection with its
reports.
At the request of the Company, Ernst & Young has furnished to the Company
a letter addressed to the SEC stating that it agrees with the above statements.
RATIFICATION OF THE APPOINTMENT OF AUDITORS REQUIRES THAT THE VOTES CAST
(IN PERSON OR BY PROXY) AT THE ANNUAL MEETING OR AT ANY ADJOURNMENT THEREOF
IN FAVOR OF RATIFICATION EXCEED THOSE CAST AGAINST.
PROPOSAL III - PROPOSAL TO REINCORPORATE IN INDIANA
The following discussion summarizes certain aspects of the proposed
reincorporation of the Company from the State of Michigan to the State of
Indiana (the "Reincorporation") pursuant to an Agreement and Plan of Merger (the
"Merger Agreement") between the Company and FinishMaster, Inc., an Indiana
corporation ("FinishMaster-Indiana") (the "Reincorporation Proposal"). This
summary is not intended to be complete and is subject to, and is qualified in
its entirety by, reference to the Indiana Business Corporation Law (the "Indiana
Law") and the Michigan Business Corporation Act (the "Michigan Law"), the Merger
Agreement, a copy of which is attached to this Proxy Statement as Exhibit 1,
and, where applicable, the Articles of Incorporation of FinishMaster-Indiana
(the "Indiana Articles"), a copy of which is attached to this Proxy Statement as
Exhibit 2. In this discussion of the Reincorporation, the term "Company" refers
to the existing Michigan corporation and the term "FinishMaster-Indiana" refers
to the new corporation which is the proposed successor to the Company.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED AND, FOR THE REASONS
DESCRIBED BELOW UNDER "PRINCIPAL REASONS FOR THE REINCORPORATION," UNANIMOUSLY
RECOMMENDS THAT THE SHAREHOLDERS APPROVE AND ADOPT THE MERGER AGREEMENT AND THE
REINCORPORATION PROPOSAL.
Principal Reasons for the Reincorporation
In 1986, the State of Indiana adopted the Indiana Law, which is patterned
after the Model Business Corporation Act (the "Model Act"). As such, the Indiana
Law was designed as a comprehensive, modern and flexible corporation law which
would conform to similar statutes in other states that were also based on the
Model Act. As a result, in dealing with corporate issues, Indiana courts have
been able to rely on a substantial body of case law that has developed
construing statutes based on the Model Act and establishing public policies with
respect to corporations. As a result of being based on the Model Act, the
Indiana Law contains state-of-the-art provisions that are comparatively
well-known and understood. Although it follows the Model Act in some respects,
the Michigan Law is more a conglomeration of prior corporation statutes, and
Michigan is generally deemed not to have adopted the Model Act. Consequently,
the Board of Directors believes that reincorporation in Indiana should provide
greater flexibility and certainty with respect to legal aspects of the Company's
corporate affairs.
13
<PAGE>
Another benefit of reincorporating in Indiana is to be found in the broad
and flexible indemnification provisions and standards of conduct for officers
and directors under the Indiana Law. Many states, including Michigan and
Indiana, have addressed the issue of indemnification by passing legislation
designed to reduce the risk of directors' personal liability for damages.
Although the Michigan Law has addressed this problem by reducing director
liability under certain circumstances, the Indiana Law significantly clarifies
the standard of care required of directors that is used by courts to determine
whether the imposition of liability is appropriate in the first instance. The
Indiana Law holds a director liable only if the breach of his duty or failure to
act constitutes willful misconduct or recklessness. See Appendix A: "Comparison
of Michigan and Indiana Corporate Law--Standard of Conduct for Directors." In
addition, the Indiana Law has expanded the rights of a corporation to indemnify
directors by eliminating the restriction that indemnification is only available
where there has been a successful defense and no adverse judgment against the
director.
Finally, the Indiana Law expands the criteria that a Board of Directors may
consider in making corporate decisions through its "other constituents"
provision that allows, but does not mandate, directors to take into account
employees, customers, suppliers, communities, and the like in making such
decisions. The Michigan Law does not allow directors to take into account such
"other constituents."
Although the Corporation has had little difficulty in attracting and
retaining directors, the Board of Directors believes that the indemnification
provisions and standards of conduct available under the Indiana Law will enhance
the likelihood that the Company will continue to be able to attract and retain
qualified persons for such positions and that directors will not be inhibited in
their decision-making because of undue concerns about personal liability. The
Board of Directors believes that the diligence exercised by directors stems
primarily from their fiduciary duty and desire to act in the best interests of
the Corporation and its shareholders and not from fear of monetary damages.
Consequently, they believe that the level of care exercised by them in the
performance of their duties would not be lessened by the adoption of the
Reincorporation Proposal. The Board of Directors recognizes that it and future
members of the Board of Directors could personally benefit from approval of the
proposed change, but for the reasons stated above, the Board of Directors
believes that the proposed change is in the best interests of the Corporation
and its shareholders.
Finally, a very significant factor justifying incorporation in Indiana,
apart from statutory benefits, lies in management's intention to coordinate the
Company's legal compliance and accounting functions through resources and
advisory services utilized by LDI and its affiliates in Indianapolis, Indiana,
which are accustomed to the Indiana legal environment. Management believes that
the prior experience of other companies in LDI's distribution group in using
such an approach establishes a sound precedent for the effective and efficient
administration of the Company's legal and accounting functions from a
centralized location in Indiana.
In summary, the Board of Directors believes that the Indiana Law, as one
of the most flexible and state-of-the-art corporation statutes in the United
States, is likely to foster an environment which will allow the Company to
realize certain efficiencies in the conduct of its corporate affairs and to
attract experienced and talented people to serve on the Company's management
team.
Principal Features of the Reincorporation
The Reincorporation will be effected by the merger (the "Merger") of the
Company with and into FinishMaster-Indiana, a wholly-owned subsidiary of the
Company which will be incorporated under the Indiana Law for purposes of the
Merger. FinishMaster-Indiana will be the surviving corporation in the Merger and
will continue under the name of FinishMaster, Inc. The Company will cease to
exist as a result of the Merger.
The Merger will not become effective until the requisite shareholders'
approval of the Reincorporation Proposal has been obtained and the Merger
Agreement and Articles of Merger are filed with the Secretary of State of the
State of Indiana and the Secretary of State of the State of Michigan. Upon the
effective time of the Merger, FinishMaster-Indiana, as the surviving
corporation, will be governed by the Indiana Articles and the Indiana Law.
14
<PAGE>
Upon completion of the Merger, each outstanding share of Common Stock of
the Company will be converted into one share of Common Stock of
FinishMaster-Indiana. As a result, the existing shareholders of the Company will
automatically become shareholders of FinishMaster-Indiana, the Company will
cease to exist, and FinishMaster-Indiana will continue to operate the business
of the Company under the name FinishMaster, Inc. The stock certificates of the
Company will be deemed to represent the same number of FinishMaster-Indiana
shares as were represented by the Company's stock certificates prior to the
Reincorporation. IT WILL NOT BE NECESSARY FOR SHAREHOLDERS TO EXCHANGE THEIR
STOCK CERTIFICATES FOR FINISHMASTER-INDIANA STOCK CERTIFICATES. Following the
Reincorporation, previously outstanding stock of the Company will constitute
"good delivery" in connection with sales through a broker, or otherwise, of
shares of FinishMaster-Indiana. Upon completion of the Reincorporation, the
authorized capital stock of FinishMaster-Indiana will consist of ten million
(10,000,000) shares of Common Stock, without par value, and one million
(1,000,000) shares of preferred stock, without par value, which is identical to
the authorized capital stock of the Company. The rights, privileges, limitations
and restrictions of the preferred stock authorized in the Indiana Articles are
identical to those of the preferred stock authorized under the Company's current
articles of incorporation.
The Reincorporation will not immediately result in any change to the daily
business operations of the Company or the present location of the principal
executive offices of the Company in Kentwood, Michigan. The consolidated
financial condition and results of operations of FinishMaster-Indiana
immediately after the consummation of the Reincorporation will be identical to
that of the Company immediately prior to the consummation of the
Reincorporation. In addition, at the effective time of the Merger, the Board of
Directors of FinishMaster-Indiana will consist of those persons elected
directors of the Company at the Annual Meeting. The Board of Directors will
consist of seven (7) directors, who will be those persons described above in
"Election of Directors" who were elected at the Annual Meeting. In addition, the
individuals serving as executive officers of the Company immediately prior to
the Merger will serve as executive officers of FinishMaster-Indiana upon the
effectiveness of the Merger.
A vote for approval and adoption of the Merger Agreement and
Reincorporation Proposal will also constitute specific approval of the Indiana
Articles.
Confirmation and adoption of the Merger Agreement and the Reincorporation
Proposal will affect certain rights of shareholders. Accordingly, shareholders
are urged to read carefully this entire Proxy Statement and the Appendices and
Exhibits to the Proxy Statement before voting.
Dissenters' Rights of Appraisal
As discussed under "Appraisal Rights" in the Comparison of Michigan and
Indiana Corporate Law contained in Appendix A attached to this Proxy Statement,
the Michigan Law provides dissenters' rights of appraisal to holders of shares
of a class which is neither listed on a national securities exchange nor held by
more than 2,000 shareholders. Accordingly, the Michigan Law provides for
dissenters' rights of appraisal in connection with the Reincorporation. Any
record holder of shares who does not vote in favor of the Reincorporation
Proposal may elect to receive payment of the value of his or her shares in cash
in accordance with Sections 761 through 774 of the Michigan Law (the
"Dissenters' Rights Provisions").
ANY HOLDER OF SHARES CONTEMPLATING THE EXERCISE OF HIS OR HER RIGHT TO
DISSENT IS URGED TO REVIEW CAREFULLY THE DISSENTERS' RIGHTS PROVISIONS
SUMMARIZED IN APPENDIX B TO THIS PROXY STATEMENT AND REPRINTED IN THEIR ENTIRETY
AS APPENDIX C TO THIS PROXY STATEMENT. THE DISCUSSION SET FORTH IN APPENDIX B IS
NOT A COMPLETE STATEMENT OF MICHIGAN LAW RELATING TO DISSENTERS' RIGHTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO APPENDIX C. EACH REQUIREMENT SET FORTH
IN APPENDIX B AND IN APPENDIX C MUST BE FOLLOWED IN STRICT COMPLIANCE WITH THE
APPLICABLE DISSENTERS' RIGHTS PROVISIONS IN ORDER FOR HOLDERS OF SHARES TO
PERFECT DISSENTERS' RIGHTS.
15
<PAGE>
Amendment, Deferral or Termination of the Merger Agreement
If approved by the shareholders at the Annual Meeting, it is anticipated
that the Reincorporation will become effective at the earliest practicable time.
However, the Merger Agreement provides that it may be amended, modified or
supplemented before or after approval by the shareholders of the Company;
however, no such amendment, modification or supplement may be made if it would
have a material adverse effect upon the rights of the Company's shareholders,
unless it has been approved by the shareholders. The Merger Agreement also
provides that the Company may terminate and abandon the Merger or defer its
consummation for a reasonable period, notwithstanding shareholder approval, if,
in the opinion of the Board of Directors, such action would be advisable. The
Merger Agreement provides that the consummation of the Merger is subject to
certain conditions, including the absence of pending or threatened litigation
regarding the Reincorporation.
Federal Income Tax Consequences of the Reincorporation
The Reincorporation will constitute a reorganization described in Section
368(a)(1)(F) of the Internal Revenue Code of 1986, as amended. Accordingly, no
gain or loss will be recognized by the holders of Common Stock as a result of
the consummation of the Reincorporation and no gain or loss will be recognized
by the Company or FinishMaster-Indiana. Each holder of Common Stock will have
the same basis in the FinishMaster-Indiana Common Stock received pursuant to the
Reincorporation as such holder had in the Common Stock held immediately prior to
the Reincorporation, and the holding period with respect to the
FinishMaster-Indiana Common Stock will include the period during which such
holder held the corresponding Common Stock of the Company, so long as the Common
Stock was held as a capital asset at the time of consummation of the
Reincorporation. FinishMaster-Indiana will succeed without adjustment to the tax
attributes of the Company. Shareholders should consult their own tax advisor as
to any effect the reincorporation may have under state, local or foreign income
tax laws.
The Board of Directors unanimously recommends that the shareholders vote
"FOR" the approval and adoption of the Merger Agreement and the Reincorporation
Proposal.
VOTE REQUIRED TO APPROVE MATTERS
A quorum for the meeting requires the presence in person or by proxy of
holders of a majority of the outstanding shares of the Common Stock of the
Company. Votes cast by proxy or in person at the Annual Meeting will be
tabulated by the inspector(s) of election appointed for the meeting.
Abstentions, "broker non-votes" (i.e., where brokers or nominees indicate that
such persons have not received instructions from the beneficial owner or other
person entitled to vote shares as to a matter with respect to which the brokers
or nominees do not have discretionary power to vote) and votes withheld will be
treated as present for purposes of determining the presence of a quorum, but
will not be counted as votes cast for or against the action to be taken on the
matter.
The election of each director requires a plurality of the votes cast.
Votes withheld will be deemed not to have been cast. The Company's shareholders
do not currently have the power to cumulate votes in the election of directors
by (i) multiplying the number of votes they are entitled to cast by the number
of directors for whom they are entitled to vote and (ii) casting the product for
a single candidate or distributing the product among two or more candidates.
16
<PAGE>
The approval of the Merger Agreement and Reincorporation Proposal requires
the affirmative vote of the holders of shares representing a majority of the
shares outstanding on the record date.
AutoPaints, which is controlled by members of management of the Company,
currently beneficially owns approximately 67.4% of the outstanding Common Stock
of the Company, and Andre B. Lacy, as Chairman and Chief Executive Officer of
AutoPaints, intends to vote its shares in favor of the Reincorporation Proposal.
SHAREHOLDER PROPOSALS
Any proposals which shareholders of the Company intend to present at the
next annual meeting of the Company must be received by the Company by April 29,
1997, for inclusion in the Company's proxy statement and proxy form for that
meeting.
OTHER MATTERS
Management is not aware of any business to come before the Annual Meeting
other than those matters described in the Proxy Statement. However, if any other
matters should properly come before the Annual Meeting, it is intended that the
proxies solicited hereby will be voted with respect to those other matters in
accordance with the judgment of the persons voting the proxies.
The cost of solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy material
to the beneficial owners of the Common Stock. In addition to solicitation by
mail, directors, officers, and employees of the Company may solicit proxies
personally or by telephone without additional compensation.
Each Shareholder is urged to complete, date and sign the proxy and return
it promptly in the enclosed return envelope.
Insofar as any of the information in this Proxy Statement may rest
peculiarly within the knowledge of persons other than the Company, the Company
relies upon information furnished by others for the accuracy and completeness
thereof.
By Order of the Board of Directors
/s/ Andre B. Lacy
Andre B. Lacy, Chairman of the Board
and Chief Executive Officer
August 27, 1996
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APPENDIX A
Comparison of Michigan and Indiana Corporate Law
The Michigan Business Corporation Act (the "Michigan Law") and the Indiana
Business Corporation Law (the "Indiana Law") are similar in many respects, but
there are differences that may affect the rights of shareholders. The following
includes a summary of certain similarities and differences between the Michigan
Law and the Indiana Law. This discussion is not exhaustive and is qualified in
its entirety by reference to the specific provisions of the Indiana Law, the
Michigan Law and, where applicable, the Indiana Articles.
Vote Required for Mergers, Consolidations and Dissolution
The Indiana Law relating to mergers and other corporate reorganizations is
similar to the Michigan Law in several respects. Both the Michigan and the
Indiana Law provide for a shareholder vote (except as indicated below and for
certain "short-form" mergers between a parent corporation and its 90%
subsidiaries) of: (i) both the acquiring and acquired corporations to approve
mergers and (ii) the selling corporation to approve the sale by such corporation
of all or substantially all of its assets. Both the Michigan and the Indiana Law
also provide for a shareholder vote to approve the dissolution of a corporation.
In addition, both the Michigan and the Indiana Law require the approval of the
shareholders of an "acquired corporation" (which is defined as a corporation
whose shares will be acquired in the transaction) in a share exchange
transaction.
The Indiana Law does not require a shareholder vote of the surviving
corporation in a merger if (i) the merger agreement does not amend the existing
articles of incorporation; (ii) each "pre-merger" shareholder will hold the same
proportion of shares (relative to all "pre-merger" shareholders) with identical
designations, preferences, limitations and relative rights immediately after the
merger; (iii) the number of "voting shares" (defined to mean shares that entitle
their holders to vote unconditionally in elections of directors) to be issued by
the surviving corporation in the merger does not exceed 20% of the "voting
shares" outstanding immediately prior to such issuance; and (iv) the number of
"participating shares" (defined to mean shares that entitle their holders to
participate without limitation distributions) to be issued by the surviving
corporation in the merger does not exceed 20% of the "participating shares"
outstanding immediately prior to such issuance. Similarly, the Michigan Law does
not require a shareholder vote of the surviving corporation in a merger if (i)
the merger agreement does not amend the existing articles of incorporation and
(ii) each "pre-merger shareholder" will hold the same number of shares with
identical designations, preferences, limitations, and relative rights
immediately after the merger.
To obtain shareholder approval of a merger, share exchange, sale of all or
substantially all of a corporation's assets, or dissolution, the Indiana Law
requires a corporation to receive an affirmative vote of at least a majority of
the outstanding stock of the corporation entitled to vote thereon, unless the
articles of incorporation or the board of directors require a greater vote or
voting by voting groups. Similarly, the Michigan Law generally requires the
affirmative vote of at least a majority of all shares entitled to vote on a
particular transaction in order to obtain shareholder approval of a merger,
share exchange, sale of all or substantially all assets, or dissolution.
Additionally, under both the Michigan and the Indiana Law, separate voting by
voting groups is required: (i) on a plan of merger if the plan contains a
provision which, if contained in a proposed amendment to the articles of
incorporation, would require action by one or more separate voting groups; or
(ii) on a plan of share exchange by each class or series of shares included in
the exchange, with each class or series constituting a separate voting group.
Both the Michigan and the Indiana Law permit the board of directors to condition
its submission of a proposal for merger, share exchange, sale of all or
substantially all assets, or dissolution on any basis.
Appraisal Rights
Both the Indiana Law and the Michigan Law provide shareholders, under
certain circumstances, to dissent from certain corporate transactions and to
receive fair value for their shares in lieu of the consideration they would
otherwise receive in the transactions. The Indiana Law provides for dissenters'
rights in connection with, among other transactions, (i) a merger requiring
shareholder approval, (ii) a share exchange requiring
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shareholder approval, and (iii) a sale or exchange of all or substantially all
of the assets of the corporation, including a sale in dissolution, but not
including a sale pursuant to a court order. Dissenters' rights are only
available for shareholders entitled to vote on the transaction giving rise to
such rights. The Indiana Law does not provide dissenters' rights to the holders
of shares which are (i) registered on a United States securities exchange
registered under the Securities Exchange Act of 1934, as amended, or (ii) traded
on the National Association of Securities Dealers, Inc. Automated Quotations
System Over-the-Counter Markets - National Market Issues or a similar market.
The Michigan Law provides for dissenters' rights in connection with, among
other transactions: (i) a merger requiring shareholder approval, (ii) a share
exchange requiring shareholder approval and (iii) a sale or exchange of all or
substantially all of the assets of the corporation, including a sale in
dissolution, but not including a sale pursuant to a court order. Dissenters'
rights are only available for shareholders entitled to vote on the transaction
giving rise to such rights. The Michigan Law does not provide dissenters' rights
to (i) holders of shares of a class which is either listed on a national
securities exchange or held by not less than 2,000 shareholders or (ii)
shareholders entitled to vote on transactions where such shareholders are to
receive cash or shares of a class either listed on a national securities
exchange or held by not less than 2,000 shareholders or any combination thereof.
Cumulative Voting
Under both the Indiana Law and the Michigan Law, cumulative voting (which
permits holders of less than a majority of the voting securities of a
corporation to cumulate their votes and elect a director in certain situations)
is not available unless expressly provided for in the corporation's articles of
incorporation. Furthermore, under the Indiana Law, shares otherwise entitled to
vote cumulatively may not be voted cumulatively at a particular meeting unless
the meeting notice or accompanying proxy statement conspicuously states that
cumulative voting is authorized, or at least one shareholder who has the right
to cumulate its votes gives notice of its intention to do so not less than
forty-eight hours before the shareholder meeting. Since neither the Company's
Articles of Incorporation nor the Indiana Articles provide for cumulative
voting, the Company's shareholders do not have cumulative voting rights
currently, nor will they have such rights after the Reincorporation is
consummated.
Preemptive Rights
Under both the Michigan Law and the Indiana Law, shareholders of a
corporation do not have preemptive rights (which would permit them to maintain
their percentage ownership in the corporation by enabling them to purchase a
portion of newly-issued shares), unless expressly provided for in the articles
of incorporation (or, in the case only of the Michigan Law, unless provided for
in an agreement between the corporation and one or more shareholders).
Since neither the Company's Articles of Incorporation nor the Indiana
Articles expressly provide for pre-emptive rights, the Company's shareholders
currently do not possess such rights, nor will they possess such rights after
the Reincorporation is consummated. As a result, the Company will continue to be
able to issue its capital stock to any public or private investor without first
offering such stock to the Company's current shareholders. If any such shares
are issued, the present shareholders' ownership as a percentage of the total
outstanding stock would be diluted. Any such issuances would be on such terms as
determined by the Board of Directors in its lawfully exercised discretion.
Compliance with the requirements of preemptive rights, if the Company
should desire to issue additional common stock or securities convertible into
common stock in the future, would involve considerable delay and substantial
expense to the Company. In most situations, the Company would be required to
initiate and complete a rights offering or solicit and obtain shareholders'
consent to a waiver of the preemptive rights before issuing any shares of stock.
This may limit the Company's flexibility to take advantage of opportunities to
raise capital for business growth or to finance acquisitions that may become
available in the rapidly changing financial markets.
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Historically, preemptive rights originated at a time when companies were
generally small and had relatively few shareholders, shares were not widely
traded and there was little opportunity to purchase additional shares at a
reasonable price except when the company had a new issue. Today, investors
wishing to maintain or increase their holdings of the Company's stock may do so
by purchasing shares through a broker-dealer making a market in the Company's
shares.
The Board of Directors believes that preemptive rights would not be a
significant benefit to the shareholders, and that any benefit to shareholders of
preemptive rights is outweighed by the benefit to the shareholders of increased
flexibility and reduced costs in financing the operations of the Company.
Distributions to Shareholders
Under both the Michigan Law and the Indiana Law, the declaration and/or
payment of dividends, the redemption of shares, or the distribution of
indebtedness is only permitted if, after giving effect to such action, the
corporation is able to pay its debts as they come due in the ordinary course of
business or the corporation's total assets exceed its total liabilities plus
(unless the articles of incorporation permit otherwise) the amount that would be
needed to satisfy preferential shares (i.e., shares which are superior to the
shares participating in the distribution) upon dissolution. The board of
directors may base its determination that these requirements have been met on
the corporation's financial statements prepared on the basis of accounting
practices and principles that are reasonable under the circumstances or a fair
valuation or other method that is reasonable.
Removal of Directors
Under Indiana law, directors or shareholders may remove one or more
directors with or without cause unless the articles of incorporation provide
otherwise. Under both the Indiana Law and the Michigan Law, if a director is
elected by a voting group, only shareholders of that voting group may
participate in a vote to remove that director. Under the Indiana Law, if
cumulative voting is authorized, a director may not be removed if the number of
votes sufficient to elect that director under cumulative voting are voted
against the director's removal. Otherwise, a director may be removed if the
number of votes cast to remove the director exceeds the number of votes cast not
to remove the director.
Similarly, under the Michigan Law, shareholders may, by majority vote,
remove one or more directors with or without cause, unless the articles of
incorporation provide for removal only for cause. Furthermore, under the
Michigan Law, if cumulative voting is authorized, a director may not be removed
(if less than the entire board is to be removed) if the votes cast against his
or her removal would be sufficient to elect him or her under a cumulative vote
for the election of the entire board of directors or if there are classes of
directors at an election of the subject director's class.
Shareholders' Action by Written Consent
The Indiana Law permits shareholders to take any action without a meeting
by unanimous written consent signed by all of the holders of shares entitled to
vote on such action. If nonvoting shares are entitled to notice, and the action
is to be taken by unanimous consent of the voting shares, nonvoting shares shall
be given notice 10 days before the action is taken. Under the Michigan Law, the
articles of incorporation may permit shareholders to take action without a
meeting, without prior notice or a vote, if a written consent is signed by the
minimal number of shareholders necessary to take the action at a meeting at
which all shares entitled to vote on the action are present and voted. The
Michigan Law requires, in the case of action taken by less than unanimous
written consent, that subsequent notice be sent to shareholders who are entitled
to receive notice and who have not consented in writing.
Power to Amend Articles of Incorporation
Generally, under the Indiana Law, unless the articles of incorporation or
board of directors require a greater vote or voting by voting groups, amendments
to the articles of incorporation must receive shareholder approval by (i) a
majority of the votes entitled to vote on the amendment and (ii) a majority of
the votes entitled
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to be cast by any voting group with respect to which the amendment would create
dissenters' rights. The board of directors may condition its submission of the
proposed amendment on any basis.
Under the Michigan Law, all amendments to a corporation's articles of
incorporation must be approved by a majority of the outstanding shares entitled
to vote thereon, plus the majority of the voting shares of any voting group
entitled to vote thereon, unless the articles of incorporation provide
otherwise. The holders of the outstanding shares of a class may vote as a
separate voting group upon a proposed amendment (whether or not the articles of
incorporation entitle to such shares vote thereon) if the amendment would
increase or decrease the aggregate number of authorized shares of such class, or
alter or change the powers, preferences or special rights of the shares of such
class or of another class so as to affect the class adversely. Where a proposed
amendment would not affect the entire class, only shares affected by the
amendment must be included in the voting group.
Power to Adopt, Amend or Repeal Bylaws
Under the Indiana Law, unless the articles of incorporation provide
otherwise, only a corporation's board of directors may amend or repeal the
corporation's bylaws. If expressly authorized by the articles of incorporation,
the shareholders may adopt or amend a bylaw that fixes a greater quorum or
voting requirement for shareholders. Such a bylaw may not be adopted, amended or
repealed by the board of directors. Furthermore, a bylaw that fixes a greater
than majority quorum or voting requirement for action by the board of directors
may be amended or repealed only by shareholders, if adopted by shareholders, and
(ii) only by the board of directors, if adopted by the board of directors,
unless otherwise provided. Action by the board of directors to adopt or amend a
bylaw that changes the quorum or voting requirement for action by the board of
directors must meet the greater of: (a) the requirement then in effect or (b)
the proposed requirement.
Under the Michigan Law, (i) the shareholders or the board of directors may
amend or repeal the bylaws or adopt new bylaws, unless the articles of
incorporation or bylaws provide that the power to adopt new bylaws is reserved
exclusively to the shareholders or that the bylaws or any particular bylaw may
not be altered or repealed by the board.
Demand for a Special Shareholder Meeting
Under the Indiana Law, a special meeting of shareholders may be called by
the board of directors, certain persons authorized in the corporation's articles
of incorporation or bylaws or holders of at least 25% of the shares entitled to
be cast at the proposed meeting. Under the Michigan Law, a special meeting of
shareholders may be called by the board of directors, officers, or shareholders,
as provided in the bylaws. The Michigan Law also provides that, upon application
by the holders of at least 10% of all shares entitled to vote at the proposed
meeting to the circuit court of the county where the principal place of business
or registered agent is located, such court, for good cause shown, may order a
special meeting of shareholders with the shareholders present constituting a
quorum.
Standard Conduct For Directors
Under the Michigan Law, a director or officer is required to discharge his
or her duties: (i) in good faith; (ii) with the care an ordinarily prudent
person in a like position would exercise under similar circumstances; and (iii)
in a manner reasonably believed to be in the best interests of the corporation.
Directors and officers, in discharging their duties, are entitled to rely on
information, opinions, reports, or statements, presented by: (a) one or more
directors, officers or employees of the corporation who the director or officer
reasonably believes to be reliable and competent in the matters presented; (b)
legal counsel, public accountants or other persons as to matters the director or
officer reasonably believes are within that person's professional or expert
competence; and (c) a committee of the board of which he or she is not a member
and which the director or officer reasonably believes merits confidence.
However, a director or officer may not rely on the information set forth above
if facts are known which make such reliance unwarranted.
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Under the Indiana Law, a director must, based on the facts then known to
the director, discharge his or her duties (i) in good faith; (ii) with the care
an ordinarily prudent person in a like position would exercise under similar
circumstances; and (iii) in a manner the director reasonably believes to be in
the best interests of the corporation. In discharging his duties, a director is
entitled to rely on information, opinions, reports, or statements prepared or
presented by (a) one or more officers or employees of the corporation who the
director reasonably believes to be reliable and competent in the matters
presented; (b) legal counsel, public accountants, or other persons as to matters
the director reasonably believes are within such person's professional or expert
competence; or (c) a committee of the board of directors of which the director
is not a member and which the director reasonably believes merits confidence. A
director may not rely on the information provided above if he or she has
knowledge of the matter in question which makes such reliance unwarranted.
Directors, in considering the best interests of the corporation, may consider
the effects of any action on shareholders, employees, suppliers, customers, and
communities in which offices or other facilities of the corporation are located,
and any other factors the director considers pertinent. Furthermore, the Indiana
Law expressly provides that a director is not liable for any action taken as a
director (or any failure to take any action) unless: (1) the director has
breached or failed to perform the duties of the director's office; and (2) the
breach or failure to perform constitutes willful misconduct or recklessness. The
Indiana Law expressly provides that certain judicial decisions in Indiana and
other jurisdictions, which might otherwise be looked to for guidance in
determining Indiana corporate law, including decisions relating to potential
change of control transactions that impose a different or higher degree of
scrutiny on actions taken by directors in response to a proposed acquisition of
control of the corporation, are inconsistent with the proper application of the
business judgment rule under the Indiana Law.
In taking or declining to take any action, or in making or declining to
make any recommendation to the shareholders with respect to any matter, the
board of directors may, in its discretion, consider both the short term and long
term best interests of the corporation, taking into account and weighing, as the
directors deem appropriate, the effects thereof on the corporation, shareholders
and the other corporate constituent groups and interests described above. If
such a determination is made with the approval of a majority of the
disinterested directors, that determination shall be presumed to be valid,
unless it can be demonstrated that the determination was not made in good faith
after reasonable investigation.
Indemnification
The Indiana Law permits indemnification of directors against liabilities
and reasonable expenses incurred in a proceeding, if such person acted in good
faith and in a manner he reasonably believed to be in, or not opposed to, the
best interest of the corporation and, with respect to any criminal action, had
reasonable cause to believe his conduct was lawful or had no reasonable cause to
believe his conduct was unlawful. The Indiana Law requires indemnification
(unless otherwise limited by the articles of incorporation) to the extent such
director is wholly successful, on the merits or otherwise, in any proceeding in
which the person was involved by reason or his or her status as a director.
Unless the articles of incorporation provide otherwise, a director who was a
party to a proceeding may apply for indemnification to the court conducting the
proceeding (or any court with jurisdiction). The court may order indemnification
if it determines that the director is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances, whether or not the
director met the standard of conduct set forth above. The Indiana Law also
provides that statutory indemnification does not exclude any other rights of
indemnification provided in the articles of incorporation, bylaws or a
resolution of the board of directors, or any other authorization adopted by a
majority vote of all voting shares. Unless the articles of incorporation provide
otherwise, the corporation may indemnify an officer, employee, or agent of the
corporation to the same extent as a director. Such persons also benefit from the
mandatory indemnification provision described in this paragraph.
The Michigan Law permits a corporation to indemnify any director, officer,
employee or agent of the corporation against liabilities actually and reasonably
incurred in a proceeding if such person acted in good faith and in a manner
reasonably believed to be in, or not opposed to, the best interest of the
corporation or its shareholders and, with respect to any criminal proceeding, if
the person had no reasonable cause to believe his conduct was unlawful. The
Michigan Law expressly permits a corporation to indemnify a director, officer,
employee or agent of the corporation who was or is a party to any proceeding by
or on behalf of the corporation.
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Such persons must be indemnified against expenses actually and reasonably
incurred in connection with the proceeding if the person acted in good faith and
in a manner reasonably believed to be in or not opposed to the best interests of
the corporation or its shareholders. However, indemnification may not be made if
such person has been found liable to the corporation, except when such person
makes an application with the court conducting the proceeding (or any court with
appropriate jurisdiction) and the court determines that the person is fairly and
reasonably entitled to indemnification (limited to reasonable expenses incurred)
in view of all of the relevant circumstances, whether or not such person has met
the standards described above. The Michigan Law also provides for mandatory
indemnification of directors, officers, employees and agents to the extent
successful, on the merits or otherwise, in proceedings in which the person was
involved by reason of his or her status as a director, officer, employee or
agent, against actual and reasonable expenses incurred. The Michigan Law
provides that statutory indemnification is not exclusive of other rights of
indemnification which may be available under the articles of incorporation,
by-laws or a contractual agreement; however, the total amount of expenses
advanced or indemnified from all sources combined shall not exceed the amount of
actual expenses incurred. Both the Indiana Law and the Michigan Law provide for
advancement of expenses prior to final disposition of a proceeding, under
certain circumstances.
Number of Directors
Under the Indiana Law, the Board of Directors must consist of one or more
individuals with the number specified and/or fixed by the articles of
incorporation or bylaws. The articles of incorporation or bylaws may establish a
variable range for the size of the Board of Directors. If a variable range is
established, the number of directors may be fixed or changed from time to time
by the Board of Directors. Under the Michigan Law, the board shall consist of
one or more members as fixed in the bylaws, unless the articles of incorporation
fix the number. The Michigan Law also permits the shareholders or board to
designate one or more directors as independent directors. An independent
director may communicate with shareholders at the corporation's expense as part
of a communication or report sent by the corporation to shareholders. An
independent director must not, however, have any greater duties or liabilities
than any other director.
The Board believes that it is capable, just as the shareholders are, of
determining the advisability of expansion of the Board of Directors, due to the
Board's familiarity with the Company's management and opportunities. The Board
of Directors desires to continue to have the flexibility to respond quickly to
the availability of an excellent candidate for an additional director position,
without the burden and expense of calling a special meeting of the shareholders,
and therefore wishes to retain its ability to increase or decrease the size of
the Board of Directors from time to time within a range specified in the
Company's Bylaws.
Anti-Takeover Law
Indiana and Michigan have adopted substantially similar "control share
acquisition statutes" which are designed to protect shareholders from the
adverse effects of a takeover attempt by a corporate raider seeking to acquire
control either through market accumulations or partial tender offers. Under both
the Indiana Law and the Michigan Law, a beneficial holder of shares that
acquires a "control share" may be precluded from having voting rights. A
"control share" is defined as (i) one-fifth or more but less than one-third of
the total voting power, (ii) one-third or more but less than a majority of the
total voting power, or (iii) a majority or more of the total voting power.
An acquirer of a control share may submit information regarding the
acquisition to the target company and request, at the acquirer's expense, a
special meeting of shareholders to determine whether the control shareholder
will have voting rights. If the control shareholder is granted voting rights and
has acquired a majority of all voting power, the other shareholders have the
right to have their stock redeemed at fair market value (defined to mean a value
not less than the highest price paid per share by the acquiring person in the
control share acquisition).
Under both the Indiana Law and the Michigan Law, control shares acquired
in a control share acquisition are automatically subject to redemption, if such
redemption is authorized under the articles of incorporation or bylaws and (i)
the acquirer does not deliver the requisite acquisition information to the
target's
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board of directors, or (ii) the acquisition information is delivered to the
directors and voting rights are denied. Both the Indiana Law and the Michigan
Law provide that a corporation may "opt out" of the control share acquisition
statute by amending the articles of incorporation or the bylaws in advance of a
control share acquisition. As a condition precedent to the Stock Purchase, the
Board of Directors of the Company amended the Company's Bylaws to opt out of the
control share acquisition provisions of the Michigan Law.
Both Michigan and Indiana have adopted a business combination statute,
which is designed to prevent a corporation from engaging in a "business
combination" with an "interested shareholder" that would allow a potential
acquirer to use the corporation's assets to finance the acquisition or otherwise
to benefit its own interests rather than the interests of the corporation and
its other shareholders. An "interest shareholder" is defined to mean the direct
or indirect beneficial owner of ten percent or more of the voting power of the
outstanding shares of the corporation or an affiliate of the corporation that at
any time within the five years immediately before the date in question was the
beneficial owner, directly or indirectly, of the same percentage of shares. Both
the Indiana Law and the Michigan Law provide that a corporation may "opt out" of
the business combination statute.
The business combination act under the Michigan Law does not, by its
terms, apply to the Company, because the Company had an "interested shareholder"
at the time the statute was enacted, and the statute expressly excludes such a
situation from its coverage. If the Reincorporation Proposal is approved, the
provisions of the business combination act under the Indiana Law will apply to
FinishMaster-Indiana, unless action is subsequently taken to "opt out" of its
coverage in the manner provided by the Indiana Law.
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APPENDIX B
Rights of Dissenting Shareholders
Any record holder of shares who does not vote in favor of the Merger may
elect to receive payment of the value of his or her shares in cash in accordance
with Sections 761 through 774 of the Michigan Business Corporation Act (the
"Dissenters' Rights Provisions").
Any holder of shares contemplating the exercise of his or her right to
dissent is urged to review carefully the Dissenters' Rights Provisions reprinted
in Appendix C to this Proxy Statement. Set forth below, to be read in
conjunction with the full text of the Dissenters' Rights Provisions, is a
summary of the principal steps to be taken if the right to dissent is to be
exercised. EACH STEP MUST BE TAKEN IN STRICT COMPLIANCE WITH THE APPLICABLE
DISSENTERS' RIGHTS PROVISIONS IN ORDER FOR HOLDERS OF SHARES TO PERFECT
DISSENTERS' RIGHTS.
Written Notice to Company. Written notice of a shareholder's intent to
demand payment for his or her shares pursuant to the Dissenters' Rights
Provisions in the event the Merger is consummated must be received by the
Company before the shareholders vote on the Merger Agreement. Such written
notice should state the number of shares as to which dissenters' rights are
being asserted and should be sent to the attention of the Secretary of the
Company at 4259 40th Street, S.E., Kentwood, Michigan 49512. DISSENTERS' RIGHTS
ARE NOT AVAILABLE UNLESS THIS NOTICE REQUIREMENT IS FULFILLED.
Differing Record and Beneficial Owners. A record shareholder may assert
dissenters' rights as to fewer than all shares registered in that shareholder's
name only if the shareholder dissents (in accordance with the Dissenters' Rights
Provisions) with respect to all the shares beneficially owned by any one person
and notifies the Company in writing of the name and address of each person on
whose behalf the record shareholder is asserting dissenters' rights.
A person owning a beneficial interest in shares (a "Beneficial Owner") may
assert dissenters' rights as to the shares held on such Beneficial Owner's
behalf only if (i) the Beneficial Owner submits to the Company the record
shareholder's written consent to the dissent no later than the time the
Beneficial Owner asserts dissenters' rights, and (ii) the Beneficial Owner
asserts dissenters' rights (in accordance with the Dissenters' Rights
Provisions) with respect to all the Beneficial Owner's shares or all those
shares over which the Beneficial Owner has power to direct the vote.
Voting. Holders of shares who deliver notice of their intent to dissent
from the Merger ("Dissenting Shareholders") must not vote in favor of the
Merger, but such shareholders need not vote against the adopting of the Merger
Agreement. Because a proxy which does not contain voting instructions will not
be counted in the vote for the adoption of the Merger Agreement, a holder of
shares who votes by proxy and who wishes to exercise his appraisal rights must
(i) vote against the adoption of the Merger Agreement, or (ii) abstain from
voting on the adoption of the Merger Agreement.
Notice to Dissenters. If the Merger is approved, the Company will send a
written notice (the "Dissenters' Notice") to each Dissenting Shareholder within
ten (10) days after the Merger is consummated. The Dissenters' Notice must (i)
supply a form for payment demand which includes the date of the first
announcement to news media or to shareholders of the terms of the Merger and
requires that the Dissenting Shareholder certify whether or not beneficial
ownership of his or her shares was acquired before such date; (ii) state where
the payment demand and certificates for the shares must be sent; and (iii) set a
date by which the Company must receive the payment demand and certificates
representing the Dissenting Shareholder's shares, which date may not be fewer
than 30 nor more than 60 days after the date the Dissenters' Notice is
delivered.
Payment Demand. The Dissenting Shareholder must (i) demand payment, (ii)
certify whether beneficial ownership of his or her shares was acquired prior to
the date set forth in the Dissenters' Notice and (iii) deposit the certificates
formerly representing his or her shares, all in accordance with the terms of the
Dissenters' Notice,
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in order to preserve statutory dissenters' rights. A Dissenting Shareholder who
demands payment and deposits stock certificates in accordance with the terms of
the Dissenters' Notice retains all other rights as a shareholder until the
rights are cancelled or modified by the consummation of the Merger. A Dissenting
Shareholder who fails to demand payment or deposit stock certificates as
required by the Dissenters' Notice by the respective dates set forth therein is
not entitled to payment for his or her shares.
Payment by the Company; Results of Termination of Merger. Within seven (7)
days after the consummation of the Merger or demand for payment is received,
whichever occurs later, the Company will pay to each Dissenting Shareholder who
has met all statutory conditions the Company's estimate of the fair value of his
or her shares, plus interest, accompanied by certain information, including
valuation information, required by the Dissenters' Rights Provisions. However,
the Company may elect to withhold such payment from Dissenting Shareholders who
acquired beneficial ownership of Shares after the date set forth in the
Dissenters' Notice as the date of the first announcement to news media or
shareholders of the terms of the Merger (the "Post Announcement Shareholders").
If the Company elects to withhold payment from such shareholders, it will send
each Post Announcement Shareholder an offer, accompanied by certain information
specified in the Dissenters' Rights Provisions, to pay the Company's estimate of
the fair value of the shareholder's shares, provided that such holders agree to
accept the amount offered in full satisfaction of their demands for payment. If
the Company does not consummate the Merger within 60 days after the date set for
demanding payment and depositing share certificates, the Company must return the
deposited certificates.
Optional Secondary Payment Demand. Within 30 days after (i) the Company
pays the Dissenting Shareholders the Company's estimate of the fair value of
their shares or (ii) the Company offers to pay the Post Announcement
Shareholders its estimate of the fair value of their shares, each Dissenting
Shareholder may notify the Company of such shareholder's own estimate of the
value of his or her shares and amount of interest due (if it differs from the
Company's estimate), and demand payment of the shareholder's estimate of the
fair value of the shares (plus interest), less any payment received from the
Company, or reject the Company's offer and demand payment of the shareholder's
estimate of the fair value of the shares (plus interest), as the case may be.
Petition for Determination of Value. If a demand for payment (whether an
original demand or a secondary demand) by a Dissenting Shareholder remains
unsettled 60 days after the receipt by the Company of such demand, the Company
must commence a proceeding in the Circuit Court where the Company's principal
place of business or registered agent is located to determine the fair value of
the dissenting shareholder's shares and accrued interest. All Dissenting
Shareholders whose claims remain unsettled at such time will be made parties to
those proceedings. A Dissenting Shareholder will be entitled to judgment for an
amount, if any, by which the court finds the fair value of his or her shares,
plus interest, exceeds any amount paid by the Company or the fair value, plus
accrued interest, of any Post-Announcement Shareholder's after-acquired shares.
In a judicial proceeding brought to determine the fair value of shares, an
optional dispute resolution mechanism is available upon the agreement of the
parties and the approval of the court.
The court in an appraisal proceeding will determine and assess costs
against all parties in such amounts as the court finds equitable. The court may
assess fees and expenses of counsel and experts against either the Company or a
dissenter if the court finds that the party against whom the fees and expenses
are assessed did not comply with the requirements of the Dissenters' Rights
Provisions or acted arbitrarily, vexatiously, or not in good faith in demanding
payment. In addition, if the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters similarly situated and
that the fees for those services should not be assessed against the Company, the
court may award to such counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
Effect on Dividends and Voting Rights. A dissenting shareholder will
retain his or her rights, if any, to vote and receive dividends until the Merger
is consummated. Upon the consummation of the Merger, any shareholder who has
given proper notice and made a valid demand will cease to be a shareholder and
will have no rights with respect to his or her shares, except the right to
receive payment of the fair value thereof.
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APPENDIX C
Dissenters' Rights Provisions Under Sections 761 Through
774 of the Michigan Business Corporation Act
761 [DEFINITIONS].--As used in sections 762 to 774:
(a) "Beneficial shareholder" means the person who is a beneficial owner of
shares held by a nominee as the record shareholder.
(b) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving corporation by merger of that
issuer.
(c) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under section 762 and who exercises that right when and in the
manner required by sections 764 through 772.
(d) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(e) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
(f) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(g) "Shareholder" means the record or beneficial shareholder.
762 [DISSENTERS' RIGHTS].--(1) A shareholder is entitled to dissent from,
and obtain payment of the fair value of his or her shares in the event of, any
of the following corporate actions:
(a) Consummation of a plan of merger to which the corporation is a party
if shareholder approval is required for the merger by section 703a or the
articles of incorporation and the shareholder is entitled to vote on the merger,
or the corporation is a subsidiary that is merged with its parent under section
711.
(b) Consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired, if the shareholder is
entitled to vote on the plan.
(c) Consummation of a sale or exchange of all, or substantially all, of
the property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution but not including a sale pursuant to court
order.
(d) An amendment of the articles giving rise to a right to dissent
pursuant to section 621.
(e) A transaction giving rise to a right to dissent pursuant to section
754.
(f) Any corporate action taken pursuant to a shareholder vote to the
extent the articles, bylaws, or a resolution of the board provides that voting
or nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(g) The approval of a control share acquisition giving rise to a right to
dissent pursuant to section 799.
(2) Unless otherwise provided in the articles, bylaws, or a resolution of
the board, a shareholder may not dissent from any of the following:
(a) Any corporate action set forth in subsection (1)(a) to (e) as to
shares which are listed on a national securities exchange or held of record by
not less than 2,000 persons on the record date fixed to determine the
shareholders entitled to receive notice of and to vote at the meeting of
shareholders at which the corporate action is to be acted upon.
(b) A transaction described in subsection (1)(a) in which shareholders
receive cash or shares that satisfy the requirements of subdivision (a) or any
combination thereof.
(c) A transaction described in subsection (1)(b) in which shareholders
receive cash or shares that satisfy the requirements of subdivision (a) or any
combination thereof.
(d) A transaction described in subsection (1)(c) which is conducted
pursuant to a plan of dissolution providing for distribution of substantially
all of the corporation's net assets to shareholders in accordance with their
respective interests within 1 year after the date of the transaction, where the
transaction is for cash or shares that satisfy the requirements of subdivision
(a) or any combination thereof.
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(3) A shareholder entitled to dissent and obtain payment for his or her
shares pursuant to subsection (1)(a) to (e) may not challenge the corporate
action creating his or her entitlement unless the action is unlawful or
fraudulent with respect to the shareholder or the corporation.
(4) A shareholder who exercises his or her right to dissent and seek
payment for his or her shares pursuant to subsection (1)(f) may not challenge
the corporate action creating his or her entitlement unless the action is
unlawful or fraudulent with respect to the shareholder or the corporation.
763 [ASSERTION OF RIGHTS AS TO FEWER THAN ALL SHARES; BY BENEFICIAL OWNER;
CONDITIONS].--(1) A record shareholder may assert dissenters' rights as to fewer
than all the shares registered in his or her name only if he or she dissents
with respect to all shares beneficially owned by any 1 person and notifies the
corporation in writing of the name and address of each person on whose behalf he
or she asserts dissenters' rights. The rights of a partial dissenter under this
subsection are determined as if the shares as to which he or she dissents and
his or her other shares were registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on his or her behalf only if all of the following apply:
(a) He or she submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights.
(b) He or she does so with respect to all shares of which he or she is the
beneficial shareholder or over which he or she has power to direct the vote.
764 [NOTICE TO SHAREHOLDERS--CONTENTS].--(1) If proposed corporate action
creating dissenters' rights under section 762 is submitted to a vote at a
shareholders' meeting, the meeting notice must state that shareholders are or
may be entitled to assert dissenters' rights under this act and shall be
accompanied by a copy of sections 761 to 774.
(2) If corporate action creating dissenters' rights under section 762 is
taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in section 766. A shareholder who
consents to the corporate action is not entitled to assert dissenters' rights.
765 [WRITTEN NOTICE OF INTENT TO DEMAND PAYMENT; REQUIREMENTS].--(1) If
proposed corporate action creating dissenters' rights under section 762 is
submitted to a vote at a shareholders' meeting, a shareholder who wishes to
assert dissenters' rights must deliver to the corporation before the vote is
taken written notice of his or her intent to demand payment for his or her
shares if the proposed action is effectuated and must not vote his or her shares
in favor of the proposed action.
(2) A shareholder who does not satisfy the requirements of subsection (1)
is not entitled to payment for his or her shares under this act.
766 [NOTICE TO DISSENTING SHAREHOLDERS; OFFER TO PAY FOR SHARES;
CONTENTS].--(1) If proposed corporate action creating dissenters' rights under
section 762 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of section 765.
(2) The dissenters' notice must be sent no later than 10 days after the
corporate action was taken, and must provide all of the following:
(a) State where the payment demand must be sent and where and when
certificates for shares represented by certificates must be deposited.
(b) Inform holders of shares without certificates to what extent transfer
of the shares will be restricted after the payment demand is received.
(c) Supply a form for the payment demand that includes the date of the
first announcement to news media or to shareholders of the terms of the proposed
corporate action and requires that the person asserting dissenters' rights
certify whether he or she acquired beneficial ownership of the shares before the
date.
(d) Set a date by which the corporation must receive the payment demand,
which date may not be fewer than 30 nor more than 60 days after the date the
subsection (1) notice is delivered.
767 [DEMAND FOR PAYMENT; DEPOSIT OF SHARES; RETENTION OF OTHER
RIGHTS].--(1) A shareholder sent a dissenter's notice described in section 766
must demand payment, certify whether he or she
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acquired beneficial ownership of the shares before the date required to be set
forth in the dissenters' notice pursuant to section 766(2)(c), and deposit his
or her certificates in accordance with the terms of the notice.
(2) The shareholder who demands payment and deposits his or her share
certificates under subsection (1) retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(3) A shareholder who does not demand payment or deposit his or her share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his or her shares under this act.
768 [RESTRICTIONS ON TRANSFER OF UNCERTIFICATED SHARES; RETENTION OF ALL
OTHER RIGHTS].--(1) The corporation may restrict the transfer of shares without
certificates from the date the demand for their payment is received until the
proposed corporate action is taken or the restrictions released under section
770.
(2) The person for whom dissenters' rights are asserted as to shares
without certificates retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
769 [PAYMENT OF FAIR VALUE AND INTEREST -- WHEN; ACCOMPANYING
DOCUMENTS].--(l) Except as provided in section 771, within 7 days after the
proposed corporate action is taken or a payment demand is received, whichever
occurs later, the corporation shall pay each dissenter who complied with section
767 the amount the corporation estimates to be the fair value of his or her
shares, plus accrued interest.
(2) The payment must be accompanied by all of the following:
(a) The corporation's balance sheet as of the end of a fiscal year ending
not more than 16 months before the date of payment, an income statement for that
year, a statement of changes in shareholders' equity for that year, and if
available the latest interim financial statements.
(b) A statement of the corporation's estimate of the fair value of the
shares.
(c) An explanation of how the interest was calculated.
(d) A statement of the dissenter's right to demand payment under section
772.
770 [FAILURE OF CORPORATION TO TAKE ACTION DISSENTED FROM; RETURN OF
DEPOSITED CERTIFICATES; RELEASE OF RESTRICTIONS ON UNCERTIFICATED SHARES; EFFECT
OF NEW ACTION].--(1) If the corporation does not take the proposed action within
60 days after the date set for demanding payment and depositing share
certificates, the corporation shall return the deposited certificates and
release the transfer restrictions imposed on shares without certificates.
(2) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under section 766 and repeat the payment demand procedure.
771 [WITHHOLDING PAYMENT; CONDITIONS; REQUIREMENTS IF PAYMENT
WITHHELD].--(l) A corporation may elect to withhold payment required by section
769 from a dissenter unless he or she was the beneficial owner of the shares
before the date set forth in the dissenters' notice pursuant to section
766(2)(c).
(2) To the extent the corporation elects to withhold payment under
subsection (1), after taking the proposed corporate action, it shall estimate
the fair value of the shares, plus accrued interest, and shall offer to pay this
amount to each dissenter who shall agree to accept it in full satisfaction of
his or her demand. The corporation shall send with its offer a statement of its
estimate of the fair value of the shares, an explanation of how the interest was
calculated, and a statement of the dissenter's right to demand payment under
section 772.
772 [CIRCUMSTANCES UNDER WHICH DISSENTER MAY ESTIMATE FAIR VALUE;
WAIVER].--(1) A dissenter may notify the corporation in writing of his or her
own estimate of the fair value of his or her shares and amount of interest due,
and demand payment of his or her estimate, less any payment under section 769,
or reject the corporation's offer under section 771 and demand payment of the
fair value of his or her shares and interest due, if any 1 of the following
applies:
(a) The dissenter believes that the amount paid under section 769 or
offered under section 771 is less than the fair value of his or her shares or
that the interest due is incorrectly calculated.
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(b) The corporation fails to make payment under section 769 within 60 days
after the date set for demanding payment.
(c) The corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer restrictions imposed
on shares without certificates within 60 days after the date set for demanding
payment.
(2) A dissenter waives his or her right to demand payment under this
section unless he or she notifies the corporation of his or her demand in
writing under subsection (1) within 30 days after the corporation made or
offered payment for his or her shares.
773 [COURT DETERMINATION OF FAIR VALUE; SERVICE OF PROCESS; JURISDICTION;
MEASURE OF JUDGMENT].--(1) If a demand for payment under section 772 remains
unsettled, the corporation shall commence a proceeding within 60 days after
receiving the payment demand and petition the court to determine the fair value
of the shares and accrued interest. If the corporation does not commence the
proceeding within the 60-day period, it shall pay each dissenter whose demand
remains unsettled the amount demanded.
(2) The corporation shall commence the proceeding in the circuit court of
the county in which the corporation's principal place of business or registered
office is located. If the corporation is a foreign corporation without a
registered office or principal place of business in this state, it shall
commence the proceeding in the county in this state where the principal place of
business or registered office of the domestic corporation whose shares are to be
valued was located.
(3) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties shall be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(4) The jurisdiction of the court in which the proceeding is commenced
under subsection (2) is plenary and exclusive. The court may appoint 1 or more
persons as appraisers to receive evidence and recommend decision on the question
of fair value. The appraisers have the powers described in the order appointing
them, or in any amendment to it. The dissenters are entitled to the same
discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his or her
shares, plus interest, exceeds the amount paid by the corporation or for the
fair value, plus accrued interest, of his or her after-acquired shares for which
the corporation elected to withhold payment under section 771.
773a [APPOINTMENT OF REFEREE; POWERS; COMPENSATION; REPORT; OBJECTIONS TO
REPORT].--(1) In a proceeding brought pursuant to section 773, the court may,
pursuant to the agreement of the parties, appoint a referee selected by the
parties and subject to the approval of the court. The referee may conduct
proceedings within the state, or outside the state by stipulation of the parties
with the referee's consent, and pursuant to the Michigan court rules. The
referee shall have powers that include, but are not limited to, the following:
(a) To hear all pretrial motions and submit proposed orders to the court.
In ruling on the pretrial motion and proposed orders, the court shall consider
only those documents, pleadings, and arguments that were presented to the
referee.
(b) To require the production of evidence, including the production of all
books, papers, documents, and writings applicable to the proceeding, and to
permit entry upon designated land or other property in the possession or control
of the corporation.
(c) To rule upon the admissibility of evidence pursuant to the Michigan
rules of evidence.
(d) To place witnesses under oath and to examine witnesses.
(e) To provide for the taking of testimony by deposition.
(f) To regulate the course of the proceeding.
(g) To issue subpoenas, when a written request is made by any of the
parties, requiring the attendance and testimony of any witness and the
production of evidence including books, records, correspondence, and documents
in the possession of the witness or under his or her control, at a hearing
before the referee or at a deposition convened pursuant to subdivision (e). In
case of a refusal to comply with a subpoena, the party on whose behalf the
subpoena was issued may file a petition in the court for an order requiring
compliance.
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(2) The amount and manner of payment of the referee's compensation shall
be determined by agreement between the referee and the parties, subject to the
court's allocation of compensation between the parties at the end of the
proceeding pursuant to equitable principles, notwithstanding section 774.
(3) The referee shall do all of the following:
(a) Made a record and reporter's transcript of the proceeding.
(b) Prepare a report, including proposed findings of fact and conclusions
of law, and a recommended judgment.
(c) File the report with the court, together with all original exhibits
and the reporter's transcript of the proceeding.
(4) Unless the court provides for a longer period, not more than 45 days
after being served with notice of the filing of the report described in
subsection (3), any party may serve written objections to the report upon the
other party. Application to the court for action upon the report and objections
to the report shall be made by motion upon notice. The court, after hearing, may
adopt the report, may receive further evidence, may modify the report, or may
recommit the report to the referee with instructions. Upon adoption of the
report, judgment shall be entered in the same manner as if the action had been
tried by the court and shall be subject to review in the same manner as any
other judgment of the court.
774 [COURT TO DETERMINE FEES AND COSTS; BY WHOM PAYABLE].--(1) The court
in an appraisal proceeding commenced under section 773 shall determine all costs
of the proceeding, including the reasonable compensation and expenses of
appraisers appointed by the court. The court shall assess the costs against the
corporation, except that the court may assess costs against all or some of the
dissenters, in amounts the court finds equitable, to the extent the court finds
the dissenters acted arbitrarily, vexatiously, or not in good faith in demanding
payment under section 772.
(2) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable in the
following manner:
(a) Against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the requirements
of sections 764 through 772.
(b) Against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses are
assessed acted arbitrarily, vexatiously, or not in good faith with respect to
the rights provided by this act.
(3) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to those counsel reasonable fees paid out of the amounts awarded the
dissenters who were benefited.
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EXHIBIT 1
AGREEMENT AND PLAN OF MERGER
FINISHMASTER, INC.
Parties:
THIS AGREEMENT AND PLAN OF MERGER ("Merger Agreement") is entered into by
and between FinishMaster, Inc., a Michigan corporation ("FinishMaster-Michigan")
and FinishMaster, Inc., an Indiana corporation ("FinishMaster-Indiana").
Recitals:
1. FinishMaster-Michigan is a corporation duly organized and existing
under the laws of the State of Michigan.
2. FinishMaster-Indiana is a corporation duly organized and existing under
the laws of the State of Indiana.
3. On the date of this Merger Agreement, the authorized capital stock of
FinishMaster-Michigan consists of (i) ten million (10,000,000) shares of common
stock, without par value (the "FinishMaster-Michigan Common Stock"), of which
six million one hundred forty (6,000,140) shares are issued and outstanding, and
(ii) one million (1,000,000) shares of preferred stock, without par value, of
which none are outstanding.
4. On the date of this Merger Agreement, the authorized capital stock of
FinishMaster-Indiana consists of (i) ten million (10,000,000) shares of common
stock, without par value (the "FinishMaster-Indiana Common Stock"), of which ten
(10) shares are issued and outstanding and owned by FinishMaster-Michigan, and
(ii) one million (1,000,000) shares of preferred stock, without par value, of
which none are outstanding.
5. The respective Boards of Directors of FinishMaster-Michigan and
FinishMaster-Indiana have determined that it is advisable and in the best
interests of each such corporation that FinishMaster-Michigan merge with and
into FinishMaster-Indiana upon the terms and subject to the conditions of this
Merger Agreement for the purpose of effecting the reincorporation of
FinishMaster-Michigan in the State of Indiana.
6. The respective Boards of Directors of FinishMaster-Michigan and
FinishMaster-Indiana have approved and adopted this Merger Agreement.
FinishMaster-Michigan has adopted this Merger Agreement as the sole shareholder
of FinishMaster-Indiana and the Board of Directors of FinishMaster-Michigan has
directed that this Merger Agreement be submitted to a vote of its shareholders.
The affirmative vote of the holders of a majority of the outstanding shares of
FinishMaster-Michigan Common Stock entitled to vote on this Merger Agreement
must approve this Merger Agreement for the merger to become effective.
7. The parties intend by this Merger Agreement to effect a
"reorganization" under Section 368 of the Internal Revenue Code of 1986, as
amended.
Terms and Provisions:
In consideration of the foregoing recitals and of the following terms and
provisions, and subject to the following conditions, it is agreed:
1. Merger. At the Effective Time (as defined in this Section 1),
FinishMaster-Michigan shall be merged with and into FinishMaster-Indiana (the
"Merger"). FinishMaster-Indiana shall be the surviving corporation of the Merger
and the separate corporate existence of FinishMaster-Michigan shall cease. The
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Merger shall become effective upon the filing of Articles of Merger with the
Secretary of State of the State of Indiana. The date and time when the Merger
shall become effective is herein referred to as the "Effective Time."
2. Governing Documents.
a. The Articles of Incorporation of FinishMaster-Indiana as it may be
amended or restated subject to applicable law, as in effect immediately prior to
the Effective Time, shall constitute the Articles of Incorporation of
FinishMaster-Indiana without further change or amendment until thereafter
amended in accordance with the provisions thereof and applicable law.
b. The Bylaws of FinishMaster-Michigan as in effect immediately prior to
the Effective Time shall constitute the Bylaws of FinishMaster-Indiana without
change or amendment until thereafter amended in accordance with the provisions
thereof and applicable law.
3. Officers and Directors. The persons who are officers and directors of
FinishMaster-Michigan immediately prior to the Effective Time shall, after the
Effective Time, be the officers and directors of FinishMaster-Indiana, without
change until their successors have been duly elected or appointed and qualified
or until their earlier death, resignation or removal in accordance with
FinishMaster-Indiana's Articles of Incorporation and Bylaws and applicable law.
4. Name. The name of FinishMaster-Indiana shall continue to be
FinishMaster, Inc.
5. Succession. At the Effective Time, the separate corporate existence of
FinishMaster-Michigan shall cease, and FinishMaster-Indiana shall possess all
the rights, privileges, powers and franchises of a public or private nature and
be subject to all the restrictions, liabilities and duties of
FinishMaster-Michigan and all the rights, privileges, powers and franchises of
FinishMaster-Michigan, and all property, real, personal and mixed, and all debts
due to FinishMaster-Michigan on whatever account, as well for share
subscriptions and all other things in action, shall be vested in
FinishMaster-Indiana; and all property, rights, privileges, powers and
franchises, and all and every other interest shall be thereafter as effectively
the property of FinishMaster-Indiana as the same were of FinishMaster-Michigan,
and the title to any real estate vested by deed or otherwise shall not revert or
be in any way impaired by reason of the Merger, but all rights of creditors and
liens upon any property of FinishMaster-Michigan shall be preserved unimpaired,
and all debts, liabilities and duties of FinishMaster-Michigan shall thenceforth
attach to FinishMaster-Indiana and may be enforced against it to the same extent
as if such debts, liabilities and duties had been incurred or contracted by it;
provided, however, that such liens upon property of FinishMaster-Michigan will
be limited to the property affected thereby immediately prior to the Merger. All
corporate acts, plans, policies, agreements, arrangements, approvals and
authorizations of FinishMaster-Michigan, its shareholders, Board of Directors
and committees thereof, officers and agents which were valid and effective
immediately prior to the Effective Time, shall be taken for all purposes as the
acts, plans, policies, agreements, arrangements, approvals and authorizations of
FinishMaster-Indiana, its shareholders, Board of Directors and committees
thereof, respectively, and shall be as effective and binding thereon as the same
were with respect to FinishMaster-Michigan.
6. Conversion of Shares. At the Effective Time, by virtue of the Merger
and without any action on the part of the holder thereof:
a. Each share of FinishMaster-Michigan Common Stock outstanding
immediately prior to the Effective Time shall be converted into, and shall
become, one fully paid and nonassessable share of FinishMaster-Indiana Common
Stock.
b. The 10 shares of FinishMaster-Indiana Common Stock issued and
outstanding in the name of FinishMaster-Michigan shall be cancelled and retired,
and no payment shall be made with respect thereto, and such shares shall resume
the status of unauthorized and unissued shares of FinishMaster-Indiana Common
Stock.
7. Stock Certificates. At and after the Effective Time, all of the
outstanding certificates which immediately prior to the Effective Time
represented shares of FinishMaster-Michigan Common Stock shall be
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deemed for all purposes to evidence ownership of, and to represent shares of,
FinishMaster-Indiana Common Stock into which the shares of FinishMaster-Michigan
Common Stock formerly represented by such certificates have been converted as
herein provided. The registered owner on the books and records of
FinishMaster-Michigan or its transfer agent of any such outstanding stock
certificate shall, until such certificate shall have been surrendered for
transfer or otherwise accounted for to FinishMaster-Indiana or its transfer
agent, have and be entitled to exercise any voting or other rights with respect
to and to receive any dividends and other distributions upon the shares of
FinishMaster-Indiana Common Stock evidenced by such outstanding certificate as
above provided. Nothing contained herein shall be deemed to require the holder
of any shares of FinishMaster-Michigan Common Stock to surrender the certificate
or certificates representing such shares in exchange for a certificate or
certificates representing shares of FinishMaster-Indiana Common Stock.
8. Other Employee Benefit Plans. As of the Effective Time,
FinishMaster-Indiana hereby assumes all obligations of FinishMaster-Michigan
under any and all employee benefit plans in effect as of the Effective Time or
with respect to which employee rights or accrued benefits are outstanding as of
the Effective Time.
9. Conditions. The consummation of the Merger is subject to satisfaction
of the following conditions prior to the Effective Time.
a. The Merger shall have received the requisite approval of the holders of
FinishMaster-Michigan Common Stock and all necessary action shall have been
taken to authorize the execution, delivery and performance of the Merger
Agreement by FinishMaster-Michigan and FinishMaster-Indiana.
b. All approvals and consents necessary or desirable, if any, in
connection with the consummation of the Merger shall have been obtained.
c. No suit, action, proceeding or other litigation shall have been
commenced or threatened to be commenced which, in the opinion of
FinishMaster-Michigan or FinishMaster-Indiana, would pose a material restriction
on or impair consummation of the Merger, performance of this Merger Agreement or
the conduct of the business of FinishMaster-Indiana after the Effective Time, or
create a risk of subjecting FinishMaster-Michigan or FinishMaster-Indiana, or
their respective shareholders, officers or directors, to material damages,
costs, liability or other relief in connection with the Merger or this Merger
Agreement.
10. Governing Law. This Merger Agreement shall be governed by and
construed in accordance with the laws of the State of Indiana applicable to
contracts entered into and to be performed wholly within the State of Indiana,
except to the extent that the laws of the State of Michigan are mandatorily
applicable to the Merger.
11. Amendment. Subject to applicable law and subject to the rights of
FinishMaster-Michigan's shareholders further to approve any amendment which
would have a material adverse effect on such shareholders, this Merger Agreement
may be amended, modified or supplemented by written agreement of the parties
hereto at any time prior to the Effective Time with respect to any of the terms
contained herein.
12. Deferral or Abandonment. At any time prior to the Effective Time, this
Merger Agreement may be terminated and the Merger may be abandoned or the time
of consummation of the Merger may be deferred for a reasonable time by the Board
of Directors of either FinishMaster-Michigan or FinishMaster-Indiana or both,
notwithstanding approval of this Merger Agreement by the shareholders of
FinishMaster-Michigan or the shareholders of FinishMaster-Indiana or both, if
circumstances arise which, in the opinion of the Board of Directors of
FinishMaster-Michigan or FinishMaster-Indiana, make the Merger inadvisable or
such deferral of the time of consummation thereof advisable.
13. Counterparts. This Merger Agreement may be executed in any number of
counterparts each of which when taken alone shall constitute an original
instrument and when taken together shall constitute one and the same Agreement.
14. Further Assurances. From time to time, as and when required or
requested by either FinishMaster- Michigan or FinishMaster-Indiana, as
applicable, or by its respective successors and assigns, there shall be
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executed and delivered on behalf of the other corporation, or by its respective
successors and assigns, such deeds, assignments and other instruments, and there
shall be taken or caused to be taken by it all such further and other action, as
shall be appropriate or necessary in order to vest, perfect or confirm, of
record or otherwise, in FinishMaster-Indiana title to and possession of all
property, interests, assets, rights, privileges, immunities, powers, franchise
and authority of FinishMaster-Michigan and otherwise to carry out the purposes
of this Merger Agreement, and the officers and directors of each corporation are
fully authorized in the name and on behalf of such corporation or otherwise, to
take any and all such action and to execute and deliver any and all such deeds,
assignments and other instruments.
IN WITNESS WHEREOF, FinishMaster-Michigan and FinishMaster-Indiana have
caused this Merger Agreement to be signed by their respective duly authorized
officers and delivered this ____ day of _____, 1996.
FINISHMASTER INC.,
a Michigan corporation
By:
Its:
ATTEST:
By:
Title:
FINISHMASTER, INC.,
a Indiana corporation
By:
Its:
ATTEST:
By:
Title:
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EXHIBIT 2
ARTICLES OF INCORPORATION
OF
FINISHMASTER, INC.
The undersigned, desiring to form a corporation (the "Corporation")
pursuant to the provisions of the Indiana Business Corporation Law (as amended
from time to time, the "Act"), executes the following Articles of Incorporation.
ARTICLE 1
Identification
Section 1.01. Name. The name of the Corporation is:
FinishMaster, Inc.
ARTICLE 2
Purpose
Section 2.01. Purpose. The purpose for which the Corporation is organized
is to engage in any lawful business for which corporations may be incorporated
under the Act.
ARTICLE 3
Capital Stock
Section 3.01. Amount. The total number of shares which the Corporation
shall have authority to issue is Eleven Million (11,000,000) shares, all of
which are without par value.
Section 3.02. Designation of Classes and Number of Shares. The shares of
authorized capital shall be divided into One Million (1,000,000) shares of
Preferred Stock, without par value, as hereinafter provided ("Preferred Stock"),
and Ten Million (10,000,000) shares of Common Stock, without par value ("Common
Stock"), as hereinafter provided.
Section 3.03. Rights, Privileges, Limitations and Restrictions of
Preferred Stock. Shares of preferred stock may be issued from time to time in
one or more series, each such series to have such distinctive designation or
title and to include such number of shares as may be fixed and determined by the
Board of Directors prior to the issuance of any shares thereof. Each such series
may differ from every other series already outstanding, as may be determined
from time to time by the Board of Directors prior to the issuance of any shares
thereof, in any or all of the following respects:
(i) The rate of dividend which the preferred stock of any such series
shall be entitled to receive and whether such series shall be entitled to
receive a dividend and whether such dividend shall be cumulative or
non-cumulative;
(ii) The amount per share which the preferred stock of any such series
shall be entitled to receive in cash of the redemption thereof or in case
of a voluntary liquidation distribution or sale of assets, dissolution or
winding up of the Corporation, or in case of the involuntary liquidation,
dissolution or sale of assets, dissolution or winding up of the
Corporation;
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(iii) The relative rights, if any, of the holders of preferred stock of
any such series to vote the same, and the extent, terms and conditions of
such voting rights;
(iv) The right, if any, of holders of preferred stock of any such series
to convert the same into other classes of stock, and the terms and
conditions of such conversion; and
(v) The terms of the sinking fund or redemption of purchase account, if
any, to be provided for the preferred stock of any such series.
The description and terms of the preferred stock of each series shall be
fixed and determined by the Board of Directors by appropriate resolution or
resolutions at or prior to the time of the authorization of the issue of the
original shares of each such series, shall be summarized in the certificates
therefor, and articles of amendment containing the resolution of the Board
establishing and designating the series and prescribing the relative rights and
preferences thereof shall be filed with the Indiana Secretary of State, which,
when filed, shall constitute an amendment to the Articles of Incorporation. All
shares of preferred stock shall be of equal rank, and shall be identical in all
respects except in respect of the particulars that may be fixed by the Board of
Directors as hereinabove in this Article 3 provided.
Section 3.04. Rights, Privileges, Limitations and Restrictions of Common
Stock. The authorized shares of Common Stock shall have the same preferences,
limitations and relative rights. Each shareholder of Common Stock shall be
entitled to one vote for each share of Common Stock standing in the
shareholder's name on the books of the Corporation on each matter voted on at a
shareholders' meeting. Holders of outstanding Common Stock shall be entitled to
receive the net assets of the Corporation upon dissolution.
Section 3.05. Distributions. A distribution to shareholders may not be
made if, after giving it effect, the Corporation would not be able to pay its
debts as they become due in the usual course of business or the Corporation's
total assets would be less than the sum of its total liabilities.
ARTICLE 4
Directors
Section 4.01. Number. The number of directors of the Corporation may be
fixed from time to time in accordance with the Code of By-Laws of the
Corporation (the "By-Laws").
ARTICLE 5
Indemnification
Section 5.01. Scope of Indemnity. The Corporation shall indemnify every
person who is or was a director or officer of the Corporation (each of which,
together with such person's heirs, estate, executors, administrators and
personal representatives, is hereinafter referred to as an "Indemnitee") against
all liability to the fullest extent permitted by Indiana Code 23-1-37, provided
that such person is determined in the manner specified by Indiana Code 23-1-37
to have met the standard of conduct specified in Indiana Code 23-1-37. The
Corporation shall, to the fullest extent permitted by Indiana Code 23-1-37, pay
for or reimburse the reasonable expenses incurred by every Indemnitee who is a
party to a proceeding in advance of final disposition of the proceeding, in the
manner specified by Indiana Code 23-1-37. The foregoing indemnification and
advance of expenses for each Indemnitee shall apply to service in the
Indemnitee's official capacity with the Corporation, and to service at the
Corporation's request, while also acting in an official capacity with the
Corporation, as a director, officer, partner, member, manager, trustee,
employee, or agent of another foreign or domestic corporation, partnership,
limited liability company, joint venture, trust, employee benefit plan, or other
enterprise, whether for profit or not.
Section 5.02. Binding Nature. The provisions of this Article shall be
binding upon any successor to the Corporation so that each Indemnitee shall be
in the same position with respect to any resulting, surviving, or
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succeeding entity as the Indemnitee would have been had the separate legal
existence of the Corporation continued; provided, that unless expressly provided
or agreed otherwise, this sentence shall be applicable only to an Indemnitee
acting in an official capacity or in another capacity described in Section 5.01
prior to termination of the separate legal existence of the Corporation. The
foregoing provisions shall be deemed to create a contract right for the benefit
of every Indemnitee if (i) any act or omission complained of in a proceeding
against the Indemnitee, (ii) any portion of a proceeding, or (iii) any
determination or assessment of liability, occurs while this Article is in
effect.
Section 5.03. Interpretation. All references in this Article to Indiana
Code 23-1-37 shall be deemed to include any amendment or successor thereto. When
a word or phrase used in this paragraph is defined in Indiana Code 23-1-37, such
word or phrase shall have the same meaning in this Article that it has in
Indiana Code 23-1-37. Nothing contained in this Article shall limit or preclude
the exercise of any right relating to indemnification or advance of expenses to
any Indemnitee or the ability of the Corporation to otherwise indemnify or
advance expenses to any Indemnitee.
Section 5.04. Severability. If any word, clause, or sentence of the
foregoing provisions regarding indemnification or advancement of expenses shall
be held invalid as contrary to law or public policy, it shall be severable and
the provisions remaining shall not be otherwise affected. If any court holds any
word, clause, or sentence of this paragraph invalid, the court is authorized and
empowered to rewrite these provisions to achieve their purpose to the extent
possible.
ARTICLE 6
Registered Agent and Registered Office
Section 6.01. Registered Agent and Office. The name and street address of
the registered agent at the Corporation's registered office are:
William J. Fennessy
251 N. Illinois Street
Suite 1800
Indianapolis, Indiana 46204
ARTICLE 7
Incorporator
Section 7.01. Identification of Incorporator. The name and address of the
incorporator are:
Andre B. Lacy
251 N. Illinois Street
Suite 1800
Indianapolis, Indiana 46204
ARTICLE 8
Code of By-Laws; Amendments of Articles
Section 8.01. Code of By-Laws. The board of directors of the Corporation
shall have power, without the assent or vote of the shareholders, to make,
alter, amend or repeal the By-Laws, but the affirmative vote of the number of
directors equal to a majority of the number holding such position at the time of
such action shall be necessary to take any action for the making, alteration,
amendment or repeal of the By-Laws.
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Section 8.02. Amendments of Articles. The Corporation may amend these
Articles of Incorporation at any time to add or change a provision that is
required or permitted to be in the Articles of Incorporation or to delete a
provision not required to be in the Articles of Incorporation. Whether a
provision is required or permitted to be in the Articles of Incorporation is
determined as of the effective date of the amendment.
A shareholder of the Corporation does not have a vested property right
resulting from any provision in these Articles of Incorporation, or authorized
to be in the By-Laws by the Act or the Articles of Incorporation including
provisions relating to management, control, capital structure, dividend
entitlement, or purpose or duration of the Corporation.
EXECUTED this ____ day of ________________, 1996.
Andre B. Lacy, Incorporator
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