SCHEDULE 14A
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant: Yes.
Filed by a Party other than the Registrant: No.
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 Section 240.14a-11(c) or
Section 240.14a-12
FINISHMASTER, INC.
(Name Of Registrant As Specified In Its Charter)
FINISHMASTER, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] 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: N/A
(2) Aggregate number of securities to which transaction
applies: N/A
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth
the amount on which the filing fee is calculated and
state how it was determined): N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total fee paid:
[ ] 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. N/A
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
FINISHMASTER, INC.
54 MONUMENT CIRCLE, SUITE 600
INDIANAPOLIS, INDIANA 46204
(317) 237-3678
----------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
----------------------------------------
TO BE HELD MAY 11, 2000
To the Shareholders of FinishMaster, Inc.:
Notice is hereby given that the Annual Meeting of Shareholders of
FinishMaster, Inc., an Indiana corporation (the "Company"), will be held at the
Columbia Club, 121 Monument Circle, 10th Floor, Indianapolis, Indiana on
Thursday, May 11, 2000, at 9:30 a.m., local time, for the following purposes,
which are more completely set forth in the accompanying proxy statement.
1. Election of Directors. To elect eight (8) Directors for the
ensuing year.
2. 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 March 31,
2000. 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.
By Order of the Board of Directors
/s/ Andre B. Lacy
Andre B. Lacy, Chairman of the Board
and Chief Executive Officer
Indianapolis, Indiana
April 7, 2000
YOUR VOTE IS IMPORTANT
IT IS IMPORTANT THAT THE PROXIES BE RETURNED PROMPTLY. THEREFORE, 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.
54 Monument Circle, Suite 600
Indianapolis, Indiana 46204
---------------
PROXY STATEMENT
---------------
This Proxy Statement is being furnished to the holders of common stock,
without par value (the "Common Stock"), of FinishMaster, Inc., an Indiana
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 9:30 a.m., local time, on Thursday, May 11, 2000, at
the Columbia Club, 121 Monument Circle, 10th Floor, Indianapolis, Indiana, and
at any adjournment of such meeting. This Proxy Statement is expected to be
mailed to shareholders on or about April 7, 2000.
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 Secretary of the Company written
notice of the shareholder's revocation at any time before the commencement of
the meeting (Robert R. Millard, 54 Monument Circle, Suite 600, Indianapolis,
Indiana 46204), (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 (i)
elect Directors and (ii) 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 March 31, 2000, are entitled to one (1) vote
for each share of Common Stock held. As of March 1, 2000, there were 7,539,140
shares of the Company's Common Stock issued and outstanding, and the Company had
no other class of equity securities outstanding. Holders of Common 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. Other actions are authorized by the affirmative vote of a
majority of the votes cast by the holders of shares of Common Stock represented
in person or by proxy at the meeting. Although Indiana 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. Therefore, abstentions or broker non-votes will have no
effect in the election of Directors, but will have the same effect as a vote
against a particular issue with regard to the other matters to be considered.
Security Ownership By Principal Holders
The following table sets forth information regarding the beneficial
ownership of the Common Stock of the Company as of March 1, 2000, 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
- ---------------------------- ------------------ ----------
Lacy Distribution, Inc.(1) 5,587,516(1) 74.1%
54 Monument Circle, Suite 800
Indianapolis, Indiana 46204
Dimensional Fund Advisors Inc. (2)(3) 515,500(2) 6.8%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
(1) Lacy Distribution, Inc., an Indiana corporation ("Distribution"), is a
wholly-owned subsidiary of LDI, Ltd., an Indiana limited partnership
("LDI"). LDI has two general partners: LDI Management, Inc. ("LDIM"),
its corporate managing general partner, and Andre B. Lacy, the Chairman
and Chief Executive Officer of the Company. Distribution, LDI, LDIM and
Andre B. Lacy have jointly filed a Schedule 13D to report beneficial
ownership of the 5,587,516 shares held of record by Distribution. Andre
B. Lacy, individually, owns an additional 25,000 shares of the
Company's Common Stock and has 28,800 shares subject to options
exercisable within 60 days.
(2) This information is based on Schedules 13D or 13G filed by the
beneficial owner with the Securities and Exchange Commission. It does
not reflect changes in those shareholdings which may have occurred
since the dates of those filings.
(3) Dimensional Fund Advisors Inc. ("Dimensional"), an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940,
furnishes investment advice to four investment companies registered
under the Investment Company Act of 1940, and serves as investment
manager to certain commingled group trusts and separate accounts.
(These investment companies, trusts and accounts are the "Funds.") In
its role as investment advisor and investment manager, Dimensional
possesses both voting and investment power over the securities of the
Issuer described above that are owned by the Funds. All securities
reported here are owned by the Funds, and Dimensional disclaims
beneficial ownership of such securities.
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 eight
members. Unless otherwise directed, each proxy executed and returned by a
shareholder will be voted for the election of the nominees to the Board of
Directors listed below under the caption "Director Nominees," 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 March 1, 2000, with
respect to the number and percentage of shares of Common Stock beneficially
owned by (i) each Director and 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
March 1, 2000 (1)
----------------------------------------
Name of Director of Sole Voting & Shared Voting & Percentage
Beneficial Owner (1) Company Since Investment Power Investment Power of Class
- ---------------------- ------------- ---------------- ------------------ ----------
Directors and
Director Nominees:
<S> <C> <C> <C> <C>
Andre B. Lacy 1996 53,800 (3) 5,587,516 (2) 74.1%
Thomas U. Young 1996 72,000 (4)
Margot L. Eccles 1996 1,000 5,587,516 (2) 74.1%
Walter S. Wiseman 1996 5,377 (5) - *
Peter L. Frechette 1996 10,377 (5) - *
Michael L. Smith 1997 7,877 (5) - *
David W. Knall 1998 40,827 (5) - *
Wesley N. Dearbaugh 1999 15,000 (6) - *
Other Executive Officers:
Thomas E. Case
Senior Vice President - 15,000 (6) - *
J.A. Lacy
Senior Vice President - 11,000 (7) - *
Robert R. Millard
Senior Vice President,
Secretary, Treasurer &
Chief Financial Officer - 10,000 (7) - *
Roger A. Sorokin
Senior Vice President - 44,000 (8) - *
Charles R. Stephenson,
Senior Vice President - 21,000 (9) - *
Charles VanSlaars
Senior Vice President - 17,000 (10) - *
All directors and executive
officers as a group (14) - 324,258 5,587,516(2) 4.2%
</TABLE>
* Beneficial ownership does not exceed one percent (1%).
(1) Based upon information furnished by the respective directors, director
nominees and executive officers. Under applicable regulations, shares
are deemed to be beneficially owned by a person if he directly or
indirectly has or shares the power to vote or dispose of the shares and
if he has the right to acquire such power with respect to shares within
60 days. Accordingly, shares subject to options are only included if
exercisable within 60 days. Includes shares beneficially owned by
members of the immediate families of the director nominees or executive
officers residing in their homes.
Footnotes continued on following page.
<PAGE>
(2) Includes all 5,587,516 shares of Common Stock held directly by
Distribution. Mr. Lacy, the Chairman and CEO of the Company, is a
general partner of LDI, the parent entity of Distribution. Mr. Lacy is
also the sole shareholder and the Chairman, President and Chief
Executive Officer of LDIM, and he is the Chairman and Chief Executive
Officer of Distribution. Ms. Eccles serves as a Director and as a Vice
President of LDIM and as a Director and Vice President of Distribution.
Due to their positions with LDIM and Distribution, 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 28,800 shares subject to option.
(4) Includes 72,000 shares subject to option.
(5) Includes 4,556 shares subject to option.
(6) Includes 15,000 shares subject to option.
(7) Includes 10,000 shares subject to option.
(8) Includes 44,000 shares subject to option.
(9) Includes 21,000 shares subject to option.
(10) Includes 17,000 shares subject to option.
Director Nominees
The following information is furnished concerning the Director
nominees, all of whom have been nominated by the Board of Directors.
Mr. Lacy (age 60) 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. Mr. Lacy serves as President, Chief Executive
Officer and Chairman of the Board of Directors of Distribution. Except for his
positions with the Company, Mr. Lacy has served in these capacities for more
than the previous five years. Mr. Lacy is also the Chairman of the Board of
Directors and Chief Executive Officer of Thompson PBE, Inc., a Delaware
corporation ("Thompson"), which was acquired by the Company in November, 1997.
Mr. Lacy also serves as a director of IPALCO Enterprises, Inc., Herff Jones,
Inc., The National Bank of Indianapolis, and Patterson Dental Company. Mr. Lacy
is the brother of Margot L. Eccles and the father of J.A. Lacy.
Mr. Young (age 67) serves as Vice Chairman of the Board of Directors of
the Company. From July 1996 until May 1999, Mr. Young served as President and
Chief Operating Officer of the Company. Mr. Young also served as President,
Chief Operating Officer and a director of Thompson from July 1996 to February
2000. From 1989 until May 31, 1996, Mr. Young served as the World Wide Director
of the Refinish Business for E.I. duPont de Nemours and Company, Wilmington,
Delaware.
Ms. Eccles (age 64) 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 Distribution.
She has served as a Director of Thompson since its acquisition by the Company in
November, 1997. Ms. Eccles is the sister of Andre B. Lacy and the aunt of J. A.
Lacy.
Mr. Frechette (age 62) has served as a Director of the Company since
August, 1996. He has also 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.
Mr. Smith (age 51) has served as a Director of the Company since
October, 1997. Mr. Smith was named Executive Vice President and Chief Financial
Officer of Anthem, Inc., a Blue Cross Blue Shield licensee and provider of
health care services, effective in April 1999, having served as a Senior Vice
President of such organization since March 1998. Mr. Smith served as Chief
Operating Officer and Chief Financial Officer of American Health Network, Inc.,
a physician practice management company and wholly owned subsidiary of Anthem,
Inc., from April 1996 to March 1998. Between January, 1996 and March, 1996, Mr.
Smith served as President of Somerset Financial Services, an Indianapolis-based
provider of financial services and a division of Somerset Group, Inc. Mr. Smith
served as Chairman of the Board, President and Chief Executive Officer of
Mayflower Group, Inc., an Indianapolis-based holding company with operations in
the moving and storage and student transportation industries, between June, 1990
and March, 1995. Mr. Smith also serves as a Director of First Indiana
Corporation and Somerset Group, Inc.
Mr. Wiseman (age 54) has served as a Director of the Company since
July, 1996. Effective February 28, 1997, Mr. Wiseman retired as a Vice President
of LDIM and as President of Major Video Concepts, Inc. ("MVC"), a wholesale
distributor of videocassettes based in Indianapolis, Indiana, and a wholly-owned
subsidiary of Distribution, having held such positions for more than the
previous five years. From March 1, 1997 to February 28, 1998, Mr. Wiseman served
as a consultant to Distribution. In connection with his services for
Distribution, Mr. Wiseman was engaged to provide consulting services related to
certain administrative and systems functions of the Company following the
acquisition of Thompson.
Mr. Knall (age 55) has served as a Director of the Company since
October 1998. Mr. Knall is a Senior Managing Director of McDonald Investments
Inc., a regional investment banking, brokerage and investment advisory company.
He has held that position since 1983. Mr. Knall first joined McDonald
Investments, Inc. in 1969, and he became the manager of that firm's Indianapolis
office in 1976. Mr. Knall is a member of the Indianapolis Society of Securities
Analysts and of the Board of Arbitrators of the National Association of
Securities Dealers (NASD). He serves as a Director of Indianapolis Zoological
Foundation, T.M. Englehart, Regenstrief Institute and the Indianapolis Public
Library Foundation. He is also a trustee of the Indianapolis Museum of Art,
Wabash College and the Christian Theological Seminary.
Mr. Dearbaugh (age 48) was named President, Chief Operating Officer and
a Director of the Company in May, 1999. Prior to joining the Company, Mr.
Dearbaugh was president of ATC Distribution Group, a division of ATC Corp., a
distributor of transmission parts since 1996. Prior to 1996, Mr. Dearbaugh was a
principal with Cummins Southwest Inc., an independent distributor of Cummins
diesel engines and parts.
Except for Andre B. Lacy, J.A. 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.
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"). During the year ended December 31, 1999, the Board met
four (4) times in addition to taking a number of actions by unanimous written
consent. During such period, no incumbent Director of the Company attended fewer
than 75% of the aggregate of the total number of Board meetings and the total
number of meetings held by the committees of the Board of Directors on which he
or she served.
The Board has established an Audit Committee, a Compensation Committee,
an Executive Committee and an Independent Directors Committee. For the year
ended December 31, 1999, Michael L. Smith (serving as Chair), Peter L.
Frechette, David W. Knall and Walter S. Wiseman were appointed to the Audit
Committee. The Audit Committee met twice in the year ended December 31, 1999.
The Audit Committee recommends the annual appointment of the Company's auditors
and reviews 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.
The Compensation Committee consisted of Mr. Wiseman (serving as Chair),
Mr. Frechette, Mr. Knall and Mr. Smith. The Compensation Committee determines
executive officer salaries and bonuses and administers the Company's stock
option plan (acting as the Stock Option Committee). The Compensation Committee
met once during the year ended December 31, 1999.
The Executive Committee has all authority of the Board of Directors
during intervals between meetings of the Board subject to such limitations as
may be imposed by law, by subsequent resolution of the Board or by the By-Laws.
The members of the Executive Committee are Andre B. Lacy, Thomas U. Young and
Wesley N. Dearbaugh (added in June, 1999). The Executive Committee met seven (7)
times during the year ended December 31, 1999.
The Independent Directors Committee considers issues in which LDI or
its affiliates have a real or apparent conflict of interest with the Company.
The Independent Directors Committee for the year ended December 31, 1999
consisted of Mr. Frechette (serving as Chair), Mr. Wiseman, Mr. Smith and Mr.
Knall. The committee met once during the year ended December 31, 1999.
The Board does not have a standing nominating committee.
Director Compensation
Prior to April, 1999, as compensation for serving as Directors, the
non-employee Directors were granted options to purchase 1,000 shares of Common
Stock annually upon their election to the Board. Since April, 1999, each
non-employee Director is given an annual retainer of $19,000 in stock options
pursuant to the FinishMaster, Inc. Stock Option Plan, priced as of the first
trading day after the Annual Meeting of Shareholders each year. Each
non-employee Director also receives $1,250 in Common Stock pursuant to the
FinishMaster, Inc. Stock Option Plan, priced and issued as of the first trading
day after each quarterly meeting of the Board of Directors. In addition, the
non-employee Directors receive $1,000 in cash for each quarterly meeting
attended, $750 in cash for each committee meeting attended and $250 for each
meeting attended by telephone. All travel expenses for attendance at meetings
are reimbursed.
Directors of the Company who are employees of FinishMaster,
Distribution, LDI, LDIM or their affiliates do 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.
Specific due dates for these reports have been established, and the
Company is required to disclose in this Proxy Statement any failure to file by
those dates during the last year. To the Company's knowledge, based solely on
its review of the copies of such reports furnished to the Company and written
representations that no other reports were required, all Section 16(a) filing
requirements applicable to the Company's officers, directors and greater than
10% beneficial owners were complied with in prior years, except that Thomas U.
Young reported a gift of shares made in 1998 on an amended Form 5 in April 2000.
Remuneration of Executive Officers
The following table summarizes, for the Company's last three completed
years ended December 31, 1999, the compensation of the persons who served as
Chief Executive Officer of the Company during the year ended December 31, 1999
and each of the other most highly compensated executive officers of the Company
who were serving as such at the end of such period and whose salary and bonus
compensation exceeded $100,000 for services rendered in all capacities to the
Company and its subsidiaries during the most recent year (collectively, the
"Named Executive Officers"). With the exception of Mr. Lacy, who serves as Chief
Executive Officer, employees of LDI who serve as officers of the Company serve
without compensation from the Company. See "Certain Relationships and Related
Transactions."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
-------------------------- Securities All Other
Name and Fiscal Underlying Compen-
Principal Position Year Salary Bonus Options(1) sation
- ------------------- ------- ------------ -------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Andre B. Lacy.............................. 1999 $ -- (2) $ -- -- $ --
Chief Executive Officer 1998 -- (2) -- 72,000 --
1997 -- (2) -- -- --
Thomas U. Young............................ 1999 $314,879 $97,466 -- $12,054 (3)
Vice Chairman 1998 323,000 (4) -- 72,000 73,000 (4)
1997 64,000 (4) -- -- --
Robert R. Millard.......................... 1999 $171,864 $75,000 -- $ 1,595 (5)
Senior Vice President, Secretary, 1998 39,231 (6) -- 15,000 --
Treasurer & Chief Financial Officer 1997 -- -- -- --
Charles VanSlaars.......................... 1999 $124,780 $35,500 2,000 $ 2,694 (5)
Senior Vice President 1998 62,500 (7) -- 15,000 1,418 (5)
1997 -- -- -- --
Roger A. Sorokin........................... 1999 $126,282 $32,000 1,000 $ 6,574 (3)
Senior Vice President 1998 122,307 28,450 15,000 12,259 (8)
1997 100,500 -- 5,000 3,211
</TABLE>
(1) Represents the number of shares for which options were granted.
(2) Mr. Lacy serves as Chairman and Chief Executive Officer of the Company
with no compensation other than the grant of stock options as
determined by the Compensation Committee. See "Compensation Report on
Executive Compensation."
(3) Consists of supplemental medical reimbursement, 401(k) plan matching
contribution and car allowance.
(4) Represents sums paid by the Company to LDI AutoPaints, Inc.
("AutoPaints") for services provided to the Company by Mr. Young
through June 30, 1998 at which time AutoPaints was merged with and into
the Company. Represents sums paid by the Company to Distribution for
services provided to the Company by Mr. Young after June 30, 1998.
During 1998, the sum of salary and all other compensation was invoiced
periodically to the Company by AutoPaints and Distribution based on Mr.
Young's 1998 salary and other employee fringe benefits.
(5) Consists of supplemental medical reimbursement and 401(k) plan matching
contribution.
(6) Mr. Millard joined the Company in October of 1998.
(7) Mr. VanSlaars became an employee of the Company upon the merger of
AutoPaints with and into the Company on June 30, 1998.
(8) Consists of 401(k) plan matching contribution, car allowance and moving
expenses and related costs associated with Mr. Sorokin's relocation to
Indiana.
<PAGE>
Stock Options Granted in Year Ended December 31, 1999
The following table sets forth information related to options granted
during the year ended December 31, 1999 to each of the Named Executive Officers
to whom options have been granted.
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of Stock Price
Appreciation
Individual Grants for Option Term
% of Total
Options
Securities Granted to
Underlying Employees in Exercise or
Options Year Base Price Expiration
Name Granted (#) 1999 ($Sh) Date 5%($)(1) 10%($)(1)
- ----------------- ----------- ----------- ---------- ----------------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Charles VanSlaars 2,000 2.4% $6.59 February 24, 2009 $8,280 $21,006
Roger A. Sorokin 1,000 1.2% $6.59 February 24, 2009 $4,140 $10,503
</TABLE>
(1) These gains are based upon assumed rates of annual compound stock
appreciation of 5% and 10% from the date the options were granted over the
full option term. These amounts represent certain assumed rates of
appreciation only. Actual gains, if any, on option exercises are dependent
upon the future performance of the Shares and overall stock market
conditions. There can be no assurance that the amounts reflected on this
table will be achieved.
The following table sets forth certain information regarding the total
number of stock options held by each of the Named Executive Officers, and the
aggregate value of such stock options, as of December 31, 1999. None of such
stock options had been exercised as of such date.
Aggregated Option Exercises in the Year Ended December 31, 1999
and Year-End Option Values
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of In-the-Money
Unexercised Options at Unexercised Options
Shares the Year Ended at the Year Ended
Acquired on Value December 31, 1999 December 31, 1999 ($)
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Andre B. Lacy -- -- 28,800 43,200 $ 0 (1) $ 0 (1)
Thomas U. Young -- -- 48,000 24,000 $93,000.00 $46,500.00
Robert R. Millard -- -- 10,000 5,000 $23,125.00 $11,562.50
Charles Van Slaars -- -- 12,000 5,000 $ 0 (1) $ 2,695.00
Roger A. Sorokin -- -- 39,000 5,000 $ 4,687.50 $ 1,347.50
</TABLE>
(1) Since the fair market value of the shares subject to option was less
than the exercise price of the options at December 31,
1999, such options were not "in the money."
Compensation Committee Interlocks and Insider Participation
Mr. Lacy, the Company's Chief Executive Officer, is a member of the
Compensation Committee of Patterson Dental Company. Mr. Frechette, who is a
Director and member of the Company's Compensation Committee, is the Chief
Executive Officer of Patterson Dental 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 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 meet or exceed a target
return on investment. Specific individual performance is also taken into account
in determining bonuses.
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 ownership position in the
Company's Common Stock.
The Stock Option Plan was adopted by the Company's Board of Directors
in November 1993, and was ratified by the then sole stockholder on November 30,
1993. The Stock Option Plan was amended and restated by the Board of Directors
on April 30, 1997 and June 30, 1998. The Stock Option Plan was further amended
by the Board of Directors and approved by the Company's shareholders on April
29, 1999. 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 non-qualified 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. The
Committee functions as the Stock Option Plan committee. Stock options are
granted at an option price no less than 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 750,000 shares of Common
Stock have been reserved for issuance under the Stock Option Plan.
During the year ended December 31, 1999, options for 81,800 shares were
granted to officers and key employees.
Deferred Compensation
The Company's employees participate in the FinishMaster, Inc. 401(k)
Employees 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 may also
make a discretionary profit-sharing contribution in the proportion the
participant's compensation bears to all eligible plan compensation. The Company
has agreed to make a matching contribution on the first 6% of employee
contributions on a tiered formula based on years of eligibility (first year -
10%, second year - 15%, third year - 20%, fourth year and beyond - 25%). For
employees who were participating in the 401(k) plan on December 31, 1998, the
Company will make a matching contribution of the employees' contributions of up
to 6% of their annual compensation. Contributions must be made from current or
retained earnings of the Company and may be contributed in cash or Company
Common Stock. All full time employees of the Company or its subsidiary who have
completed 90 days of service are eligible to participate in the plan.
Participants are immediately 100% vested in all participant contributions and
vest 25% per year over five years with respect to company match and
discretionary profit-sharing 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.
Special Prerequisites
The executive officers also receive supplemental life insurance (in an
amount equal to their annual salaries) and supplemental medical reimbursement up
to certain limits ranging from $750 to $2,500 depending on the employee and the
number of dependents.
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 SEC relating to executive
compensation, did not exceed 10% of salary for the year ended December 31, 1999.
Chief Executive Officer
Andre B. Lacy served as the Company's Chief Executive Officer for year
ended December 31, 1999, having first been named to such position in July, 1996.
Mr. Lacy did not receive any monetary compensation from the Company for the year
ended December 31, 1999 for his services as a Director and the Chief Executive
Officer of the Company.
The Compensation Committee of the Company as of the year ended December
31, 1999:
Peter L. Frechette
David W. Knall
Michael L. Smith
Walter S. Wiseman - Chairman
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total shareholder return on the
Common Stock of the Company for the period beginning January 1, 1995 and ending
December 31, 1999, with the cumulative total return on the Nasdaq Stock Market
(U.S. Companies) and the Nasdaq Index of Non-Financial Companies over the same
period, assuming the investment of $100 in the Company's Common Stock, the
Nasdaq Market Index (U.S. Companies) and the Nasdaq Non-Financial Index on
January 1, 1995, and reinvestment of all dividends. The peer group chosen was
the Nasdaq Non-Financial Index. The broad market index chosen was the Nasdaq
Market Index (U.S. Companies).
COMPARISON OF CUMULATIVE TOTAL RETURN
OF COMPANY, PEER GROUP AND BROAD MARKET
[graph omitted]
<TABLE>
<CAPTION>
12/94 3/95 6/95 9/95 12/95 3/96 6/96 9/96 12/96 3/97 6/97
----- ---- ---- ---- ----- ---- ---- ---- ----- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Nasdaq - U.S. 100 108.951 124.622 139.634 141.335 147.952 160.005 165.704 173.892 164.463 194.59
Nasdaq - Non Financial 100 108.407 125.352 139.766 139.257 146.266 159.147 163.151 169.159 157.747 186.969
FinishMaster, Inc. 100 168.493 172.603 167.123 142.466 126.027 120.548 101.37 79.452 89.041 95.89
9/97 12/97 3/98 6/98 9/98 12/98 3/99 6/99 9/99 12/99
---- ----- ---- ---- ---- ----- ---- ---- ---- -----
Nasdaq - U.S. 227.521 213.073 249.365 256.214 231.347 300.184 336.019 367.463 375.966 545.673
Nasdaq - Non Financial 218.999 198.093 236.693 244.156 220.195 290.275 329.142 359.74 373.643 562.309
FinishMaster, Inc. 82.192 128.767 102.74 115.068 63.704 76.712 67.123 66.444 71.233 86.992
</TABLE>
Certain Relationships and Related Transactions
In connection with the acquisition of Thompson, the Company entered
into a Subordinated Note Agreement with LDI dated November 19, 1997, pursuant to
which LDI loaned the Company $30 million on an unsecured basis. The obligation
bears interest at a rate of 9%, with interest payable quarterly and with
principal due on May 19, 2004. Repayment of this obligation is subordinated to
the Company's bank credit facility. During December 1999, LDI sold $10.2 million
of the Subordinated Note Agreement to two unaffiliated trusts. On March 27,
1998, the Company entered into a Credit Agreement with LDI pursuant to which LDI
agreed to make available to the Company a $10 million unsecured, revolving line
of credit for a one year period. The Credit Agreement expired on June 29, 1999
and is no longer available to the Company. The Company believes that the
Subordinated Note Agreement and the Credit Agreement are on terms at least as
favorable as those that could be obtained by arms-length negotiations with an
unaffiliated third party.
Effective March 1, 1998, the Company relocated its administrative
headquarters from Kentwood, Michigan to newly renovated office space located in
Indianapolis, Indiana and leased by the Company from LDI. In the year ended
December 31, 1999, the Company made lease and repair and maintenance payments to
LDI for this space of $214,000. The Independent Directors Committee has reviewed
the terms of the lease, completed an analysis of comparable market rates and has
determined that such lease terms are fair to the Company. The Board of Directors
has also considered the terms of the lease and believes that the terms of the
lease are at least as favorable as those that could be obtained by arms-length
negotiations with an unaffiliated third party.
The Company receives certain managerial services (e.g., insurance and
certain employees) from LDI. Expenses related to such services amounted to
$158,000 for the year ended December 31, 1999. The Company believes the cost of
those services is as fair as if they were provided by an unaffiliated third
party.
ACCOUNTANTS
PricewaterhouseCoopers LLP has served as auditors for the Company for
the year ended December 31, 1999. A representative of PricewaterhouseCoopers LLP
is expected to be present at the Annual Meeting with the opportunity to make a
statement if the representative so desires. Such representative will also be
available to respond to any appropriate questions shareholders may have. The
Board of Directors of the Company has not yet completed the process of selecting
an independent public accounting firm to audit its books, records and accounts
for the fiscal year ended December 31, 2000.
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
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. Therefore,
abstentions or broker non-votes will have no effect in the election of
Directors, but will have the same effect as a vote against a particular issue
with regard to any other matters to be considered.
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 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.
Other actions are authorized by the affirmative vote of a majority of
the votes cast by the holders of shares of Common Stock represented in person or
by proxy at the Annual Meeting.
SHAREHOLDER PROPOSALS
Under Rule 14a-8 of the Securities Exchange Act of 1934, shareholders
of the Company may present proper proposals for inclusion in the Company's proxy
statement and for consideration at the next annual meeting of shareholders by
submitting their proposals to the Company in a timely manner. In order to be
included for the next annual meeting, shareholder proposals must be received at
the Company's principal office, 54 Monument Circle, Suite 600, Indianapolis,
Indiana 46204, Attention: Secretary, no later than December 8, 2000, and must
otherwise comply with the requirements of Rule 14a-8.
In addition, if a shareholder intends to present a proposal at the next
annual meeting of shareholders without including the proposal in the proxy
materials for that meeting, and if the proposal is not received by the Company
by February 21, 2001, then the proxies designated by the Board of Directors for
that meeting may vote in their discretion on any proposal any shares for which
they have been appointed proxies without mention of such matter in the Company's
proxy statement or on the proxy card 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
<PAGE>
[ X ] Please mark votes as in this example.
The Board of Directors recommends a vote "FOR" the listed proposition.
1. The election as directors of all nominees listed below for a one year term
expiring at the next annual meeting, except as marked to the contrary.
Nominees: (01) Andre B. Lacy, (02) Thomas U. Young, (03) Wesley N.
Dearbaugh, (04) Margot L. Eccles, (05) Walter S. Wiseman, (06) Peter L.
Frechette, (07) Michael L. Smith and (08) David W. Knall
For All Nominees [ ] [ ] Withheld From all Nominees
[ ] _______________________________________________
For all nominees except as noted above
2. In their discretion, the proxies are authorized to vote on any other
business that may properly come before the Meeting or any adjournment
thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
This Proxy may be revoked at any time prior to the voting thereof.
The undersigned acknowledges receipt from the Company, prior to the execution of
the proxy, a notice of the meeting, a proxy statement, an Annual Report on Form
10-K and an Investment Brief to Shareholders.
Please sign as your name appears on this card. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title. If
shares are held jointly, each holder should sign.
Signature:__________________________ Date:_______________________
Signature:__________________________ Date:_______________________
