AGREEMENT AND PLAN OF MERGER
BY AND AMONG
FINISHMASTER, INC.,
LDI AUTOPAINTS, INC.
AND
XXXX DISTRIBUTION, INC.
Dated as of February 16, 1998
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER................................................1
SECTION 1.1 The Merger...............................................1
SECTION 1.2 Effective Time...........................................1
SECTION 1.3 Effects of the Merger....................................1
SECTION 1.4 Articles of Incorporation and By-Laws....................1
SECTION 1.5 Directors................................................1
SECTION 1.6 Officers.................................................1
SECTION 1.7 Conversion of Shares.....................................1
SECTION 1.8 Reorganization...........................................2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF AP AND
DISTRIBUTION..............................................2
SECTION 2.1 Organization.............................................2
SECTION 2.2 Capitalization...........................................2
SECTION 2.3 Authority Relative to This Agreement.....................2
SECTION 2.4 No Violation.............................................3
SECTION 2.5 Financial Statements.....................................3
SECTION 2.6 Information. ...........................................4
SECTION 2.7 Absence of Certain Changes;
No Undisclosed Liabilities............................4
SECTION 2.8 Litigation...............................................4
SECTION 2.9 Compliance with Applicable Law...........................4
SECTION 2.10 Taxes...................................................5
SECTION 2.11 Termination, Severance and Employment Agreements........6
SECTION 2.12 Employee Benefit Plans; ERISA...........................6
SECTION 2.13 Environmental Matters...................................7
SECTION 2.14 Assets, Real Property, Intellectual Property............7
SECTION 2.15 Labor Matters...........................................8
SECTION 2.16 Certain Fees............................................8
SECTION 2.17 No Default..............................................8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF FMST....................9
SECTION 3.1 Organization.............................................9
SECTION 3.2 Authority Relative to This Agreement.....................9
SECTION 3.3 No Violation.............................................9
SECTION 3.4 Proxy Statement, Other Information.....................10
SECTION 3.5 Certain Fees............................................10
ARTICLE IV COVENANTS................................................10
SECTION 4.1 Conduct of Business of AP...............................10
SECTION 4.2 Access to Information...................................12
SECTION 4.3 Shareholders' Meeting...................................12
SECTION 4.4 Cooperation.............................................13
SECTION 4.5 Notification of Certain Matters.........................13
SECTION 4.6 Public Announcements....................................13
ARTICLE V CONDITIONS TO CONSUMMATION OF THE MERGER.................14
SECTION 5.1 Conditions to Each Party's Obligation
To Effect the Merger.................................14
ARTICLE VI TERMINATION; AMENDMENT; WAIVER...........................14
SECTION 6.1 Termination.............................................14
SECTION 6.2 Fees and Expenses.......................................15
SECTION 6.3 Effect of Termination...................................15
SECTION 6.4 Amendment...............................................15
SECTION 6.5 Extension; Waiver.......................................16
ARTICLE VII MISCELLANEOUS............................................16
SECTION 7.1 Non-Survival of Representations,
Warranties and Agreements............................16
SECTION 7.2 Indemnification.........................................16
SECTION 7.3 Entire Agreement; Assignment............................16
SECTION 7.4 Validity................................................16
SECTION 7.5 Notices.................................................17
SECTION 7.6 Governing Law...........................................18
SECTION 7.7 Interpretation..........................................18
SECTION 7.8 Parties in Interest.....................................18
SECTION 7.9 Counterparts............................................18
SECTION 7.10 Expenses...............................................18
SECTION 7.11 Obligation of Distribution.............................18
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement") is dated as of
February ___, 1998, by and among FinishMaster, Inc., an Indiana corporation
("FMST"), LDI AutoPaints, Inc., an Indiana corporation ("AP"), and Xxxx
Distribution, Inc., an Indiana corporation ("Distribution").
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the Indiana Business Corporation Law ("IBCL"), AP
shall be merged with and into FMST (the "Merger") as soon as practicable
following the satisfaction of the conditions set forth in Section 6.1 hereof.
Following the Merger, FMST shall continue as the surviving corporation (the
"Surviving Corporation") and the separate corporate existence of AP shall cease.
SECTION 1.2 Effective Time. The Merger shall be consummated by filing,
and shall be effective at the time of acceptance for filing by the Indiana
Secretary of State of, articles of merger (the "Articles of Merger") in such
form as is required by, and executed in accordance with, the relevant provisions
of the IBCL, and such other documents as shall be required by the provisions of
the IBCL (the time of such filing being the "Effective Time").
SECTION 1.3 Effects of the Merger. The Merger shall have the effects
set forth in the IBCL.
SECTION 1.4 Articles of Incorporation and By-Laws. The Articles of
Incorporation and Amended and Restated Code of By-Laws of FMST as in effect at
the Effective Time shall be the articles of incorporation and code of by-laws of
the Surviving Corporation.
SECTION 1.5 Directors. The directors of FMST at the Effective Time
shall be the directors of the Surviving Corporation, until the next annual
shareholders' meeting of the Surviving Corporation and until their successors
shall be elected or appointed and shall duly qualify.
SECTION 1.6 Officers. The officers of FMST at the Effective Time shall
be the officers of the Surviving Corporation and will hold office from the
Effective Time until their respective successors are duly elected or appointed
and qualify in the manner provided in the articles of incorporation and code of
by-laws of the Surviving Corporation, or as otherwise provided by law.
SECTION 1.7 Conversion of Shares. At the Effective Time, all of the
issued and outstanding shares of AP (the "Shares") and the Four Million
Forty-Five Thousand One Hundred (4,045,100) shares of the common stock of FMST
owned by AP immediately prior to the Effective Time, shall, by virtue of the
Merger and without any action on the part of the holder thereof, be cancelled
and
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converted into the right to receive (i) Four Million Forty-Five Thousand One
Hundred (4,045,100) shares of common stock of FMST, issued in respect of the
Shares owned by AP which were cancelled in connection with the Merger, and (ii)
One Million Five Hundred Forty-Two Thousand Four Hundred Sixteen (1,542,416)
additional shares of the common stock of FMST (collectively the "Merger
Consideration").
SECTION 1.8 Reorganization. The parties intend that the transaction to
be effected under this Agreement will be and is a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, and
each of the provisions of this Agreement shall be limited and construed in a
manner consistent with that intention and result.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF AP AND DISTRIBUTION
Distribution represents and warrants to FMST as follows:
SECTION 2.1 Organization. Distribution and AP are corporations duly
organized and validly existing under the laws of the State of Indiana. AP is in
good standing as a foreign corporation in each jurisdiction where the properties
owned, leased or operated, or the business conducted, by it require such
qualification and where failure to be in good standing or to so qualify would
have a material adverse effect on the financial condition, results of
operations, business or prospects of AP or on the ability of AP to consummate
the transaction contemplated by this Agreement (which for all purposes hereof
consists solely of the Merger) (a "Company Material Adverse Effect"). AP has
made available to FMST true and correct copies of its articles of incorporation
and code of by-laws.
SECTION 2.2 Capitalization.
(a) AP Capitalization. The authorized shares of AP consists of One
Thousand (1,000) shares of common stock. As of the date hereof, there are One
Hundred (100) shares issued and outstanding. Since December 31, 1997 through the
date hereof, no shares have been issued. There are not now, and at the Effective
Time there will not be, any existing options, warrants, calls, subscriptions, or
other rights, or other agreements or commitments, obligating AP to issue,
transfer or sell any shares of AP. All issued and outstanding Shares are validly
issued, fully paid, nonassessable and free of preemptive rights.
SECTION 2.3 Authority Relative to This Agreement.
(a) Approvals. The execution and approval of this Agreement by
Distribution and AP and the consummation of the transaction contemplated hereby
have been duly authorized by the Board of Directors of Distribution and AP, and
by Distribution in its capacity as the sole shareholder of AP. No other
corporate proceedings on the part of Distribution or AP are necessary for the
execution and delivery of this Agreement by AP and the consummation of the
transactions contemplated hereby.
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This Agreement has been duly executed and delivered by AP and Distribution and,
assuming this Agreement constitutes a valid and binding obligation of FMST, this
Agreement constitutes a valid and binding agreement of AP and Distribution
enforceable against AP and Distribution in accordance with its terms, except to
the extent that its enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or other laws affecting the enforcement of creditors'
rights generally or by equitable principles.
(b) Other Authorizations. Other than in connection with, or in
compliance with, applicable requirements of the IBCL with respect to the
transaction contemplated hereby, no authorization, consent or approval of, or
filing with, any court or any public body or authority is necessary for the
consummation by AP of the transaction contemplated by this Agreement other than
authorizations, consents and approvals the failure to obtain, or filings the
failure to make, which would not, in the aggregate, cause or result in a Company
Material Adverse Effect.
SECTION 2.4 No Violation. Neither the execution or delivery of this
Agreement by AP, the performance by AP of its obligations hereunder nor the
consummation by AP of the transaction contemplated hereby will (a) constitute a
breach or violation of any provision of the articles of incorporation or code of
by-laws of AP, (b) constitute a breach, violation or default (or any event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the performance required by, or
result in the creation of any lien or encumbrance upon any of the properties or
assets of AP under, any note, bond, mortgage, indenture, deed of trust, license,
agreement or other instrument to which AP is a party or by which it or any of
its respective properties or assets is bound or (c) constitute a violation of
any order, writ, injunction, decree, statute, rule or regulation of any court or
governmental authority applicable to AP, or any of its properties or assets,
other than, in the case of clauses (b) and (c) above, such breaches, violations,
defaults, terminations, accelerations or creation of liens and encumbrances
which, in the aggregate, would not have a Company Material Adverse Effect. No
representation or warranty is made regarding whether or not any consent may be
required in respect of any AP site lease.
SECTION 2.5 Financial Statements. The audited financial statements of
LDI AutoPaints - Florida Division as of December 31, 1997 have been prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis (except as otherwise stated in such financial statements,
including the related notes) and fairly present in all material respects the
financial position of LDI AutoPaints - Florida Division as of the date thereof
and the results of its operations and cash flows for the period then ended. The
unaudited financial statements of AP as of January 31, 1998 have been prepared
in accordance with GAAP applied on a consistent basis (except as otherwise
stated in such financial statements, including the related notes, and except
that such financial statements do not contain all of the footnote disclosures
required by GAAP) and fairly presents, in all material respects, the financial
position of AP as of the date thereof. The unaudited balance sheet of AP as of
January 31, 1998 excludes certain assets and liabilities of AP which have been
distributed to and assumed by Distribution as of January 31, 1998 (which assets
and liabilities were not, as of December 31, 1997, a part of the assets and
liabilities of LDI AutoPaints - Florida), and are not, at the time of the
execution of this Agreement, and will not be, at the Effective Time, a part of
the assets
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or liabilities of AP. The assets and liabilities of AP shown on such balance
sheet of AP as of January 31, 1998 consist of (1) all of the assets and
liabilities of LDI AutoPaints - Florida Division, and (2) the Four Million Forty
Five Thousand One Hundred (4,045,100) shares of FMST owned by AP. Neither AP nor
any of its assets, businesses, or operations, is a party to, or is bound or
affected by, or receives benefits under, any material contract or agreement or
amendment thereto, except those contracts and agreements copies of which have
been made available to FMST.
SECTION 2.6 Information. None of the information supplied in writing by
AP specifically for inclusion or incorporation by reference in the Proxy
Statement, if any, or any other document filed or to be filed by or on behalf of
FMST with the SEC or any other governmental entity in connection with the
transaction contemplated by this Agreement, contains, or will contain, any
untrue statement of a material fact or omits, or will omit, to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
SECTION 2.7 Absence of Certain Changes; No Undisclosed Liabilities.
Since December 31, 1997, there has not been a Company Material Adverse Effect.
Since December 31, 1997, AP has not (i) except in the ordinary course of
business, incurred any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, or suffered any event or occurrence which,
individually or in the aggregate, would have a Company Material Adverse Effect
or (ii) made any material changes in accounting methods, principles or practices
or (iii) declared, set aside or paid any dividend or other the distribution with
respect to its shares other than the distribution to Distribution, as of January
31, 1998, of all assets and liabilities of AP other than (x) the business of LDI
AutoPaints - Florida Division and (y) the Four Million Forty Five Thousand One
Hundred (4,045,100) shares of FMST owned by AP. Since December 31, 1997, AP has
conducted its operations in the ordinary course of business consistent with past
practice in all material respects.
SECTION 2.8 Litigation. There is no suit, claim, action, proceeding, or
investigation pending or threatened in writing or, to the knowledge of AP,
otherwise threatened against AP or any of its properties or assets before any
court or governmental entity which, individually or in the aggregate, could, if
determined adversely, reasonably be expected to have a Company Material Adverse
Effect or delay the consummation of the transaction contemplated by this
Agreement in any material respect. AP is not subject to any outstanding order,
writ, injunction or decree which, insofar as can be reasonably foreseen,
individually or in the aggregate, in the future would have a Company Material
Adverse Effect or would delay the consummation of the transaction contemplated
hereby in any material respect.
SECTION 2.9 Compliance with Applicable Law. AP holds all permits,
licenses, variances, exemptions, orders and approvals of all governmental
entities necessary for the lawful conduct of its businesses, if any (the "AP
Permits"), except where such failures to hold such permits, licenses, variances,
exemptions, orders and approvals would not, individually or in the aggregate,
reasonably be expected to result in a Company Material Adverse Effect. AP is in
compliance with the terms of the AP Permits, except where the failure so to
comply would not, individually or in the aggregate,
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reasonably be expected to result in a Company Material Adverse Effect. The
business of AP is not being conducted in violation of any law, ordinance or
regulation of any governmental entity except for violations or possible
violations which individually or in the aggregate are not reasonably expected to
result in a Company Material Adverse Effect. No investigation or review by any
governmental entity with respect to AP is pending or threatened in writing or,
to the knowledge of AP, otherwise threatened, other than, in each case, those
which would not, individually or in the aggregate, reasonably be expected to
result in a Company Material Adverse Effect.
SECTION 2.10 Taxes. AP has filed, or caused to be filed, all federal,
state, local and foreign income and other tax returns required to be filed by
it, has paid or withheld, or caused to be paid or withheld, all taxes of any
nature whatsoever, with any related penalties, interest and liabilities (any of
the foregoing being referred to herein as a "Tax"), that are shown on such tax
returns as due and payable, or otherwise required to be paid, other than such
Taxes as are being contested in good faith and for which reserves have been
established in accordance with GAAP except where the failure so to file or pay
would not, individually or in the aggregate, reasonably be expected to result in
a Company Material Adverse Effect. AP has or will have paid all Taxes due with
respect to any period ending on or prior to the Effective Time, or where the
payment of Taxes is not yet due, have or will have established, or with respect
to Taxes incurred after the date hereof, will timely establish in accordance
with past practices, an adequate accrual in accordance with GAAP except for
failures to pay or accrue that would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect. There are no
claims, assessments or audits pending or threatened in writing, or to AP's
knowledge otherwise threatened, against AP for any alleged deficiency in any
Tax, and AP does not know of any Tax claims or assessments threatened against AP
which if upheld could, individually or in the aggregate, reasonably be expected
to have a Company Material Adverse Effect (after giving effect to any reserves
maintained by AP). AP has not filed a consent under Section 341(f) of the
Internal Revenue Code of 1986, as amended (the "Code"). There is no material
inter-company item which would be taken into account by, or excess loss account
which would be includable in income of, AP as a result of the transaction
contemplated by this Agreement pursuant to the Treasury Regulations promulgated
under Section 1502 of the Code. There are no waivers or extensions of any
applicable statute of limitation to assess any Taxes. All returns filed by or on
behalf of AP with respect to Taxes are true and correct in all material
respects. There are no outstanding requests by AP for any extension of time
within which to file any return (except for normal automatic extensions) or
within which to pay any Taxes shown to be due on any return. There are no liens
for any Taxes upon the assets of AP (other than statutory liens for Taxes not
yet due and payable and liens for real estate taxes being contested in good
faith) which individually or in the aggregate could have a Company Material
Adverse Effect. AP is not a party to, is not bound by or does not have any
obligation under, a tax sharing or tax allocation agreement or arrangement for
the allocation, apportionment, sharing, indemnification or payment of taxes. The
cancellation of the 4,045,100 shares of FMST held by AP, and the issuance in the
Merger of a like number of shares to Distribution as part of the Merger
Consideration, will not result in an adverse tax consequence to FMST of a
magnitude greater than $50,000.
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SECTION 2.11 Termination, Severance and Employment Agreements. AP has
provided to FMST a complete and accurate list of each employment or severance
agreement of any officer of LDI AutoPaints - Florida not terminable by the terms
thereof without material liability or obligation (either individually or
collectively) on 60 days' or less notice.
SECTION 2.12 Employee Benefit Plans; ERISA.
(a) Except as previously disclosed to the FMST in writing, (i) each
"employee benefit plan" (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), and all other employee
benefit, bonus, incentive, stock option (or other equity- based), severance,
change in control, welfare (including post-retirement medical and life
insurance) and fringe benefit plans (whether or not subject to ERISA) maintained
or sponsored by AP or any member of Distribution's controlled group of entities
(within the meaning of Code Sections 414(b), (c), (m) or (o)) (each, an "ERISA
Affiliate"), for the benefit of any employee or former employee of AP or any of
its ERISA Affiliates (individually, a "Plan," and collectively, the "Plans") is,
and has been operated in accordance with its terms and in compliance (including
the making of governmental filings) with all applicable laws, including ERISA
and the applicable provisions of the Code, except for failures that would not,
individually or in the aggregate, have a Company Material Adverse Effect, (ii)
each of the Plans presently maintained by AP and intended to be "qualified"
within the meaning of Section 401(a) of the Code has been determined by the
Internal Revenue Service to be so qualified, (iii) no "reportable event," as
such term is defined in Section 4043(c) of ERISA (for which the 30-day notice
requirement to the Pension Benefit Guaranty Corporation ("PBGC") has not been
waived), has occurred with respect to any Plan that is subject to Title IV of
ERISA which presents a risk of liability to any governmental entity or other
person which, individually or in the aggregate, may reasonably be expected to
have a Company Material Adverse Effect, and (iv) there are no pending or
threatened in writing or to AP's knowledge otherwise threatened, claims (other
than routine claims for benefits) by, on behalf of or against, any of the Plans
or any trust related thereto which would, individually or in the aggregate, have
a Company Material Adverse Effect. No Plan is a "multiemployer plan" (within the
meaning of ERISA) nor to the knowledge of AP has AP or any ERISA Affiliate ever
contributed or been required to contribute to any multiemployer plan.
(b) (i) No Plan has incurred a material "accumulated funding
deficiency" (as defined in Section 302 of ERISA or Section 412 of the Code)
whether or not waived and (ii) neither AP nor any ERISA Affiliate has incurred
any liability under Title IV of ERISA except for required premium payments to
the PBGC, which payments have been made when due, and no events have occurred
which are reasonably likely to give rise to any liability of AP or an ERISA
Affiliate under Title IV of ERISA or which could reasonably be anticipated to
result in any claims being made against AP by the PBGC, in any such case, which
presents a risk of liability which would, individually or in the aggregate, have
a Company Material Adverse Effect.
(c) With respect to each Plan, if any, that is subject to Title IV of
ERISA, (i) AP has provided to FMST copies of the most recent actuarial valuation
report prepared for such Plan prior to the date hereof, (ii) the assets and
liabilities in respect of the accrued benefits as set forth in the
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most recent actuarial valuation report prepared by the Plan's actuary fairly
presented the funded status of such Plan in all material respects, and (iii)
since the date of such valuation report there has been no adverse change in the
funded status of any such Plan which would, individually or in the aggregate,
have a Company Material Adverse Effect.
(d) Neither AP nor any ERISA Affiliate has failed to make any
contribution or payment to any Plan which has resulted or could result in the
imposition of a lien or the posting of a bond or other security under ERISA or
the Code which would have a Company Material Adverse Effect.
(e) AP has not sponsored, maintained, administered or contributed to or
participated in a Plan subject to Title VI of ERISA within the last seven years.
SECTION 2.13 Environmental Matters. AP has obtained and is in
substantial compliance with the terms and conditions of all required permits,
licenses and other authorizations required under Environmental Laws (as
hereinafter defined), except for failures or noncompliance which would not
reasonably be expected to, individually or in the aggregate, have a Company
Material Adverse Effect. AP is in substantial compliance with all applicable
Environmental Laws, except for failures to comply which would not reasonably be
expected to, individually or in the aggregate, have a Company Material Adverse
Effect. AP has disclosed past and present noncompliance with, or liability
under, Environmental Laws and discharges, emissions, leaks, releases or
disposals of any substance or waste regulated under or defined by Environmental
Laws that have formed the basis of any claim, action, suite, proceeding, hearing
or investigation under any applicable Environmental Laws which, in any such
case, individually or in the aggregate, would have a Company Material Adverse
Effect. AP has not received notice of any past or present events, conditions,
circumstances, activities, practices, incidents, actions or plans that have
resulted in any common law or legal liability, or otherwise form the basis of
any material liability under, any applicable Environmental Laws, which would,
individually or in the aggregate, have a Company Material Adverse Effect. For
purposes of this Section 2.13, (a) "Environmental Laws" mean applicable federal,
and local laws, regulations and codes relating in any respect to pollution or
protection of the environment and (b) "Hazardous Substances" means any toxic,
caustic, or otherwise dangerous substance (whether or not regulated under
federal, state or local environmental statutes, rules, ordinances, or orders),
including (i) "hazardous Substance" as defined in 42 U.S.C. ss. 9601, and (ii)
petroleum products, derivatives, byproducts and other hydrocarbons.
SECTION 2.14 Assets, Real Property, Intellectual Property.
(a) AP owns or has rights to use all assets necessary to permit AP to
conduct its business as it is currently being conducted except where the failure
to own or have the right to use such assets would not, individually or in the
aggregate, have a Company Material Adverse Effect.
(b) Except as previously disclosed to FMST, AP has, (i) good, valid and
marketable or indefeasible title to all real property material to its business
operations, free and clear of any liens, encumbrances, mortgages and security
interests other than Permitted Liens (as hereinafter defined),
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or (ii) rights by lease or other agreement to use all such real property. The
term "Permitted Liens" shall mean (i) liens or encumbrances for water, sewage
and similar charges and current taxes and assessments not yet due and payable or
being contested in good faith, (ii) mechanics', carriers', workers', repairers',
materialmen's, warehousemen's and other similar liens or encumbrances arising or
incurred in the ordinary course of business, (iii) liens, encumbrances,
mortgages and security interests arising or resulting from any action taken by
FMST, (iv) liens, encumbrances, mortgages and security interests of record or
securing indebtedness, (v) liens, encumbrances, mortgages and security interests
incurred in the ordinary course of business since December 31, 1997, (vi)
easements, rights of way, restrictions and other similar charges or
encumbrances, and any other liens, encumbrances, mortgages and security
interests, that do not materially interfere with the ordinary conduct of AP's
business. All real property leases under which AP is a lessee or lessor are, as
of the date hereof, valid, binding and enforceable in accordance with their
terms, and there are not existing defaults thereunder which would, individually
or in the aggregate, have a Company Material Adverse Effect.
(c) As presently used by AP, none of the Intellectual Property owned by
AP is infringed or challenged or threatened in any way, except for
infringements, challenges or threats which would not individually or in the
aggregate, have a Company Material Adverse Effect. "Intellectual Property" means
trademarks, trade names, service marks, service names, xxxx registrations,
logos, assumed names, copyright registrations, patents and all applications
therefor and all other similar proprietary rights.
SECTION 2.15 Labor Matters. AP has not (i) been subject to, threatened
in writing, or to AP's knowledge otherwise threatened, with any strike, lockout
or other labor dispute the result of which had or could reasonably be expected
to have or constitute, a Company Material Adverse Effect, or (ii) received
written notice of any pending petition for certification before the National
Labor Relations Board with respect to any group of employees of AP who are not
currently organized. AP is not a party to any collective bargaining agreement
with a labor union.
SECTION 2.16 Certain Fees. Neither AP nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any financial advisory, brokerage or finder's fees or commissions
in connection with the transaction contemplated herein.
SECTION 2.17 No Default. Except for defaults or violations which, in
the aggregate, would not reasonably be expected to constitute a Company Material
Adverse Effect, AP is not in default or violation (and no event has occurred
which with notice or lapse of time or both would constitute a default or
violation) of any material term, condition or provision of (i) its articles of
incorporation, code of by-laws, or other governing documents, (ii) any note,
mortgage, indenture or other evidence of indebtedness, guarantee, license,
agreement or other contract, instrument or contractual obligation to which AP is
now a party or by which it or any of its assets may be bound, or (iii) any
order, writ, injunction, decree, statute, rule or regulation applicable to AP on
the date hereof.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FMST
FMST represents and warrants to AP and Distribution as follows:
SECTION 3.1 Organization. FMST is a corporation duly organized and
validly existing under the laws of the State of Indiana and is in good standing
as a foreign corporation in each other jurisdiction where the properties owned,
leased or operated, or the business conducted, by it require such qualification
and where failure to be in good standing or so to qualify would have a material
adverse effect on the financial condition, results of operations or businesses
of FMST.
SECTION 3.2 Authority Relative to This Agreement.
(a) Approvals. FMST has full corporate power and authority to execute
and deliver this Agreement and, subject to obtaining the necessary approval of
this Agreement by its shareholders to the extent required by applicable law or
the NASDAQ National Market System ("NMS"), to consummate the transaction
contemplated hereby. The execution and delivery of this Agreement by FMST and
the consummation of the transactions contemplated hereby have been duly
authorized by the Board of Directors of FMST, and no other corporate proceedings
on the part of FMST are necessary for the execution and delivery of this
Agreement by FMST and, subject to the filing of the Articles of Merger pursuant
to Section 1.2 and obtaining the necessary approvals of FMST's shareholders to
the extent required by applicable law or the NMS, the performance by FMST of its
obligations hereunder and the consummation by FMST of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by FMST
and, assuming this Agreement constitutes a valid and binding obligation of each
of AP and Distribution, this Agreement constitutes a valid and binding agreement
of FMST, enforceable against FMST in accordance with its terms, except to the
extent that its enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or other laws affecting the enforcement of creditors
rights generally or by general equitable principles.
(b) Other Authorizations. Other than in connection with, or in
compliance with applicable requirements of the IBCL with respect to the
transaction contemplated hereby, the Exchange Act, the securities laws of the
various states, no authorization, consent or approval of, or filing with, any
court or any public body or authority is necessary for the consummation by FMST
of the transactions contemplated by this Agreement other than authorizations,
consents and approvals of which the failure to obtain, or filings of which the
failure to make, would not, in the aggregate, have a material adverse effect on
the financial condition, results of operations or business of FMST or on the
ability of FMST to consummate the transaction contemplated hereby.
SECTION 3.3 No Violation. Neither the execution or delivery of this
Agreement by FMST, the performance by FMST of its respective obligations
hereunder nor the consummation by it of the transaction contemplated hereby will
(a) constitute a breach or violation under the Articles of Incorporation or Code
of By-Laws of FMST or (b) constitute a breach, violation or default (or any
event which, with notice or lapse of time or both, would constitute a default)
under, or result in the
9
termination of, or accelerate the performance required by, or result in the
creation of any lien or encumbrance upon any of the properties or assets of FMST
under, any note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument to which either FMST is a party or by which they
or any of their properties or assets are bound or (c) constitute a violation of
any order, writ, injunction, decree, statute, rule or regulation of any court or
governmental authority applicable to FMST or any of their properties or assets,
other than, in the case of clauses (b) and (c) above, such breaches. violations,
defaults, terminations, accelerations or creation of liens and encumbrances
which, in the aggregate, would not have a material adverse effect on the
financial condition, results of operations or business of FMST taken as a whole
or on the ability of FMST to consummate the transaction contemplated hereby.
SECTION 3.4 Proxy Statement, Other Information. No document filed or to
be filed by or on behalf of FMST with the SEC or any other governmental entity
in connection with the transaction contemplated by this Agreement, contained
when filed, or will contain, at the respective times filed with the SEC or other
governmental entity, any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements made therein, in light of the circumstances under which they were
made, not misleading; provided that the foregoing shall not apply to information
supplied by AP in writing specifically for inclusion or incorporation by
reference in any such document. None of the information supplied in writing by
FMST specifically for inclusion or incorporation by reference in the Proxy
Statement, if any, or any other document filed or to be filed by or on behalf of
FMST with the SEC or any other governmental entity in connection with the
transaction contemplated by this Agreement, contains, or will contain, any
untrue statement of a material fact or omits, or will omit, to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
SECTION 3.5 Certain Fees. Neither FMST nor its officers, directors or
employees has employed any broker or finder or incurred any liability for any
financial advisory, brokerage or finder's fees or commissions in connection with
the transaction contemplated herein for which AP could have any liability,
except for the financial advisory fee payable to McDonald & Company in
connection with the rendering of its fairness opinion to the Independent
Committee.
ARTICLE IV
COVENANTS
SECTION 4.1 Conduct of Business of AP. Except as contemplated by this
Agreement, as previously disclosed to FMST or as otherwise agreed by the parties
hereto, during the period from the date of this Agreement to the Effective Time,
AP will conduct its operations in accordance with its ordinary and usual course
of business and consistent with past practice in all material respects. Without
limiting the generality of the foregoing, and except as contemplated by this
Agreement or as previously disclosed to FMST, prior to the Effective Time, AP
will not, without the prior written consent of FMST (such consent not to be
unreasonably withheld):
10
(a) issue, sell or repurchase, or authorize or propose the issuance,
sale or repurchase of any shares of common stock of AP, or securities
convertible into such shares, or any rights, warrants or options to acquire such
shares or other convertible securities;
(b) declare or pay any dividend or distribution on its shares;
(c) except for such transactions in the ordinary course of business or
fees and expenses related to the transaction contemplated hereby, authorize or
enter into any agreement with respect to any commitment or transaction which
requires AP to pay in excess of $50,000 in the aggregate;
(d) except in the ordinary course of business consistent with past
practice and except as previously disclosed to FMST or as may be required by
law, adopt or amend in any material respect or terminate any profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, agreement, trust, plan, fund or other
arrangement (collectively, "Compensation Plans"), or grant, or become obligated
to grant, any general increase in the compensation of executive officers or any
increase in the compensation payable or to become payable to any executive
officer or institute any material new welfare program or Compensation Plan, or
make any material change in any Compensation Plan;
(e) except as required by the consummation of the Merger, pay,
discharge or satisfy any material claims, liabilities or obligations (absolute,
accrued, contingent or otherwise) other than the payment, discharge or
satisfaction in the ordinary course of business;
(f) except for transactions in the ordinary course of business (i)
incur, assume or prepay any long-term or short-term debt or issue any debt
securities except for borrowing under existing lines of credit or prepayments or
other borrowings not to exceed $100,000 in the aggregate; (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for any material obligations of any other person;
(iii) make any loans, advances or capital contributions to, or investments in,
any other person (other than advances to customers in amounts not to exceed
$25,000 in the aggregate, or customary loans to employees in amounts not
material to the maker of such loan); (iv) pledge or otherwise encumber shares of
AP; or (v) mortgage or pledge any of its material assets, tangible or
intangible, or create or suffer to exist any lien thereupon, excluding Permitted
Liens;
(g) propose or adopt any amendments to its article of incorporation or
code of by-laws;
(h) except for transactions in the ordinary course of business,
contemplated hereby or otherwise disclosed herein, acquire, sell, lease or
dispose of any assets which in the aggregate are material to AP taken as a
whole, or enter into or modify, amend, terminate or waive any rights under any
commitments, contracts, agreements or transactions which would, individually or
in the aggregate, be material to AP taken as a whole;
11
(i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof or any equity interest therein;
(j) make any material tax election or settle or compromise any material
federal, state or local tax liability or assent to the assessment of any
federal, state or local tax;
(k) authorize any new capital expenditure or expenditures not reflected
in the capital expenditure budget provided to FMST and which in the aggregate
are in excess of $25,000; or
(1) agree, in writing or otherwise, to take any of the foregoing
actions.
SECTION 4.2 Access to Information. So long as this Agreement has not
been terminated, between the date of this Agreement and the Effective Time, AP
will give FMST and its authorized representatives access during normal business
hours to all stores, offices, warehouses and other facilities and to all books
and records, will permit FMST to make such inspections as it may reasonably
require and will cause its officers and use reasonable best efforts to cause its
accountants promptly to furnish FMST with such financial and operating data and
other information with respect to the business and properties of AP as FMST may
from time to time reasonably request.
SECTION 4.3 Shareholders' Meeting.
(a) Shareholder Approval of FMST. If required by applicable law or the
NMS in order to consummate the Merger, FMST, acting through its Board of
Directors, shall, in accordance with its articles of incorporation and such
requirements:
(i) duly call, give notice of, convene and hold a meeting of
its shareholders as soon as practicable after the execution of this
Agreement or to take such actions necessary to cause the Merger to be
considered at its next annual meeting of shareholders;
(ii) subject to its fiduciary duties under applicable law as
advised by counsel, include in the Proxy Statement the recommendation
of its Board of Directors that shareholders of FMST vote in favor of
the approval and adoption of this Agreement; and
(iii) use its reasonable best efforts (x) to obtain and
furnish the information required to be included by it in the Proxy
Statement, to respond promptly to any comments made by the SEC with
respect to the Proxy Statement and any preliminary version thereof and
to cause the Proxy Statement to be mailed to its shareholders at the
earliest practicable time following the execution of this Agreement and
(y) subject to its fiduciary duties under applicable law as advised by
counsel, to obtain the necessary approval of the Merger by its
shareholders.
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(b) Voting of Shares by AP. AP agrees that, at the meeting of the
shareholders of FinishMaster at which the Merger is considered, all of the
shares of FinishMaster owned by AP will be voted in favor of the Merger.
SECTION 4.4 Cooperation. Subject to the terms and conditions herein
provided and to the fiduciary duties of FMST's directors as advised by counsel
to FMST, each of the parties hereto agrees to use its reasonable best efforts
(and to use its reasonable best efforts to cause its affiliates) (a) to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transaction contemplated by this Agreement
including, without limitation, (i) promptly making any filings that are required
to be made or seeking any consents, approvals, permits or authorizations that
are required to be obtained under any federal, state or other law or regulation,
(ii) using its reasonable best efforts to respond promptly and fully to any and
all inquiries of government officials or agencies and to endeavor to resolve any
inquiries or objections made by any such officials or agencies, and (iii) using
its reasonable best efforts to prevent or ameliorate the effects of any Order or
Injunction to refrain from taking, directly or indirectly, any action contrary
to or inconsistent with the provisions of this Agreement, including action which
would impair such party's ability to consummate the transactions contemplated
hereby. In case at any time before or after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers and directors of each party to this Agreement shall use
their respective reasonable best efforts to take all such necessary action.
SECTION 4.5 Notification of Certain Matters. Each of the parties hereto
shall give the others prompt notice of (i) the occurrence, or non-occurrence, of
any event which causes or has caused any representation or warranty of any party
contained in this Agreement to be untrue or inaccurate in any material respect
at any time from the date hereof to the Effective Time, and (ii) any material
failure of AP or FMST, as the case may be, or any officer, director, employee,
representative or agent thereof, to comply with or satisfy any material
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 4.5 shall not limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
SECTION 4.6 Public Announcements. FMST and AP will consult with each
other before issuing any press release or otherwise making any public statements
with respect to the Merger and shall not issue any such press release or make
any such public statement prior to such consultation except as may be required
by law or any securities exchange or similar authority. The parties agree that,
upon execution of this Agreement, they will cause to be disseminated a joint
press release.
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ARTICLE V
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 5.1 Conditions to Each Party's Obligation To Effect the Merger.
The respective obligations of each party to effect the Merger are subject to the
satisfaction or waiver, where legally permissible, prior to the Effective Time
of the following conditions:
(a) This Agreement shall have been adopted by the requisite vote of the
shareholders of FMST in accordance with applicable law and the requirements of
NMS, if such vote is required by applicable law or the NMS;
(b) No statute, rule, regulation, order, decree or injunction shall
have been enacted, entered, promulgated or enforced by any court or governmental
authority of competent jurisdiction which restrains, enjoins or otherwise
prohibits the consummation of the Merger; provided, however, that AP and FMST
shall use their reasonable best efforts to have any such order, decree or
injunction vacated and otherwise take all actions required pursuant to Section
4.4;
(c) delivery of fairness opinion rendered by McDonald & Company to the
Independent Directors; and
(d) the representations and warranties of AP and Distribution (which
may be waived by FMST) and of FMST (which may be waived by Distribution) shall
be true and correct in all material respects.
ARTICLE VI
TERMINATION; AMENDMENT; WAIVER
SECTION 6.1 Termination. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time prior to the Effective
Time, notwithstanding approval thereof by the shareholders of FMST:
(a) by mutual written consent duly authorized by the boards of
directors of AP, Distribution and FMST (including, if required, the Independent
Committee);
(b) by FMST, Distribution or AP if the Effective Time shall not have
occurred on or before June 30, 1998; provided, however, that the right to
terminate this Agreement pursuant to this Section 6.1(b) shall not be available
to any party whose failure to fulfill any obligation under this Agreement has
been the cause of, or resulted in, the failure of the Effective Time to occur on
or before such date;
(c) by FMST, Distribution or AP if any court of competent jurisdiction
in the United States or other United States governmental body shall have issued
an order, decree or ruling or taken
14
any other action restraining, enjoining or otherwise prohibiting the Merger and
such order, decree, ruling or other action shall have become final and
nonappealable;
(d) by FMST if (i) there shall have been a breach of any representation
or warranty on the part of the AP or Distribution under this Agreement having a
Company Material Adverse Effect, which shall not have been cured prior to 10
days following notice of such breach (provided, however, that if any of the
representations and warranties is already qualified in any respect by
materiality or as to the Company Material Adverse Effect for purposes of this
Section 6.1(d) such materiality or the Company Material Adverse Effect
qualification will be in all respects ignored (but subject to the overall
standard as to materiality set forth immediately prior to this proviso)), or
(ii) there shall have been a material breach of any covenant or agreement in
this Agreement on the part of the AP or Distribution, which materially adversely
affects the consummation of the Merger which shall not have been cured prior to
10 days following notice of such breach;
(e) by AP or Distribution if (i) there shall have been a breach of any
representation or warranty in this Agreement on the part of FMST which
materially adversely affects the consummation of the Merger, which shall not
have been cured prior to 10 days following notice of such breach (provided,
however, that if any of the representations and warranties is already qualified
in any respect by materiality or as to a material adverse effect for purposes of
this Section 6.1(e) such materiality or material adverse effect qualification
will be in all respects ignored (but subject to the overall standard as to
materiality set forth immediately prior to this proviso)), or (ii) there shall
have been a material breach of any covenant or agreement in this Agreement on
the part of FMST which materially adversely affects the consummation of the
Merger which shall not have been cured prior to 10 days following notice of such
breach.
SECTION 6.2 Fees and Expenses. Except as set forth in this Agreement,
whether or not the Merger is consummated, all legal and other costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such costs and expenses.
SECTION 6.3 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 6.1 hereof, this Agreement
shall forthwith become void and have no effect, without any liability on the
part of any party or its directors, officers or shareholders, other than the
provisions of Sections 4.7, 6.2 and 7.9. Nothing contained in this Section 6.3
shall relieve AP or Distribution, or FMST, from liability for any breach of this
Agreement.
SECTION 6.4 Amendment. To the extent permitted by applicable law, this
Agreement may be amended by action taken by AP, Distribution and FMST (and the
shareholders of FMST, if required by applicable law) at any time before or after
adoption of this Agreement by the shareholders of FMST, but no amendment shall
be made which increases the consideration, changes the form of consideration to
be received by the holder of the Shares in the Merger, or which adversely
affects the rights of shareholders of FMST hereunder without the approval of
such shareholders and, if required,
15
the Independent Committee. This Agreement may not be amended except by an
instrument in writing signed on behalf of all the parties.
SECTION 6.5 Extension; Waiver. At any time prior to the Effective Time,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document, certificate or writing delivered pursuant hereto or (c) waive
compliance with any of the agreements or conditions contained herein unless
waiver is unlawful or specifically prohibited. Any agreement on the part of any
party to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1 Non-Survival of Representations, Warranties and Agreements.
The representations and warranties made herein shall terminate on the first
anniversary of the Effective Time or the earlier termination of this Agreement
pursuant to Section 6.1 as the case may be; provided, however, that if the
Merger is consummated, the representation and warranty contained in Section 2.10
shall survive for a period equal to the applicable statute of limitations for
tax matters (each of the above referenced time periods being hereinafter
referred to as a "Survival Period").
SECTION 7.2 Indemnification. During the Survival Period applicable to
that certain representation and warranty, Distribution agrees to indemnify and
hold harmless FMST from any and all claims, action, damages, losses, costs and
expenses (including reasonably attorneys' fees) incurred by FMST in connection
with any representation or warranty made by Distribution in this agreement
having been untrue in any material respect at the time made. During the Survival
Period applicable to that certain representation and warranty, FMST hereby
agrees to indemnify and hold harmless Distribution from any and all claims,
actions, damages, losses, costs and expenses (including reasonably attorneys'
fees) incurred by Distribution in connection with any representation or warranty
made by FMST in this agreement having been untrue in any material respect as of
the date made.
SECTION 7.3 Entire Agreement; Assignment. This Agreement (a)
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersede all other prior agreements and understandings, both
written and oral, among the parties or any of them with respect to the subject
matter hereof and (b) shall not be assigned by operation of law or otherwise.
SECTION 7.4 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
16
SECTION 7.5 Notices. All notices and other communications among the
parties shall be in writing and shall be deemed to have been duly given when (i)
delivered in person, or (ii) one business day after delivery to a reputable
overnight courier service (e.g. Federal Express), postage pre-paid, or (iii)
delivered by telecopy and promptly confirmed by telephone and by delivery of a
copy in person or overnight as aforesaid, in each case with postage prepaid,
addressed as follows:
If to FMST:
FinishMaster, Inc.
00 Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxx, Chairman of the Board
with a copy to:
Xxxxxx & Xxxxxxxxx
00 X. Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxxx, Xxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx, Esquire
and
Xxxxxx & Xxxxxxx
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxxx, Xxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Strain, Esquire
If to AP or Distribution:
LDI AutoPaints, Inc.
00 Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxx, Chairman of the Board
17
with a copy to:
Xxxxxx & Xxxxxxxxx
00 X. Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxxx, Xxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx, Esquire
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
SECTION 7.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Indiana, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 7.7 Interpretation. When a reference is made in this Agreement
to the "knowledge of AP," such reference shall mean the actual knowledge of the
Chief Executive Officer or President of AP. For purposes of this Agreement AP
shall not be deemed to be an affiliate of FMST. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. If an ambiguity or question of
intent or interpretation arises, then this Agreement will be construed as if
drafted jointly by the parties to this Agreement, and no presumption or burden
of proof will arise favoring or disfavoring any party to this Agreement by
virtue of the authorship of any of the provisions of this Agreement.
SECTION 7.8 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and except for the
provisions of Section 1.7 and 4.7, which are intended to be for the benefit of
the persons referred to therein and their beneficiaries (and may be enforced by
such persons as intended third-party beneficiaries), nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
SECTION 7.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
SECTION 7.10 Expenses. All costs and expenses incurred in connection
with the transactions contemplated by this Agreement shall be paid by the party
incurring such expenses.
SECTION 7.11 Obligation of Distribution. Whenever this Agreement
requires AP to take any action, such requirement will be deemed to include an
undertaking on the part of Distribution to cause AP to take such action.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
day and year first above written.
FINISHMASTER, INC.
("FMST")
By: /s/ Xxxxx X. Xxxx
---------------------------------
Name: Xxxxx X. Xxxx
Title: Chairman of the Board & CEO
LDI AUTOPAINTS, INC. (" AP ")
By: /s/ Xxxxx X. Xxxx
---------------------------------
Name: Xxxxx X. Xxxx
Title: Chairman of the Board & CEO
XXXX DISTRIBUTION, INC.
("Distribution")
By: /s/ Xxxxx X. Xxxx
---------------------------------
Name: Xxxxx X. Xxxx
Title: Chairman of the Board & CEO
