MANAGEMENT & SERVICES AGREEMENT
This Management and Services Agreement is by and between FinishMaster,
Inc., an Indiana corporation with headquarters at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("FMST"), and LDI AutoPaints, Inc. ("LDI A/P"), an
Indiana corporation with headquarters at ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇.
Recitals
A. FMST and LDI A/P have agreed to a merger, subject to the approval of
the shareholders of FMST. That vote is expected to occur at the annual meeting
of FMST in May, 1998.
B. The merger would satisfy an affirmative covenant of FMST to its
lending institutions.
C. The merger is anticipated to provide synergies to FMST that will
have a favorable impact on its financial performance.
D. FMST is losing the services of the division management of its
Mid-Atlantic and Southern operations. FMST has use for access to existing
inventory. Rather than hire an interim manager pending the merger, and rather
than purchase inventory in the open market, FMST would prefer to utilize
available management assistance from LDI A/P and to purchase inventory at cost
from LDI A/P.
E. LDI A/P is prepared to provide such management assistance and to
provide mutual access to inventory at cost.
F. Both FMST and LDI A/P require that the terms of such a relationship
be temporary and be of a nature so as to inure to the benefit of FMST.
Agreement
1. Effective Date and Term. This agreement shall be effective March 1,
1998 until the earlier of (a) a vote by the shareholders of FMST on the proposed
merger of FMST and LDI A/P or (b) June 30, 1998.
2. Management Services. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, the President of the Florida
Division of LDI A/P, shall provide management services to FMST as its Acting
Senior Vice-President for the Mid-Atlantic and Southern operations of FMST.
(a) Activities. In such capacity, VanSlaars shall undertake
such management activities as the President of FMST shall direct.
(b) Computer. At LDI A/P's expense, FMST will set up a
computer terminal
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at VanSlaar's office, to allow him access to the information necessary
for him to provide management services to FMST.
(b) Management Reports. VanSlaars shall provide weekly reports
of his activities on behalf of FMST to the President of FMST. Such
reports shall distinguish between activities that do and activities
that do not involve LDI A/P.
(c) No Compensation. For providing VanSlaars to FMST, LDI A/P
shall receive no financial compensation.
(d) Indemnity. FMST shall indemnify and hold harmless LDI A/P,
its parent and affiliated entities, and its and their directors,
officers and employees from any and all claims, actions and causes of
action arising from or as a result of the management services provided
by VanSlaars to FMST.
2. Access To Inventory.
(a) FMST shall have access to acquire available inventory of
LDI A/P and FMST shall have opportunity to provide available inventory
of FMST to LDI A/P.
(I) The price of the inventory shall be the cost per
books of the inventory item(s) as purchased, with no markup,
plus a shipping and handling charge of ten percent (10%) of
such cost. Cost shall be defined as the amount normally used
by LDI A/P or FMST, whichever is the seller, to value its
existing inventory for financial reporting purposes, applied
on a consistent basis.
(II) The credit terms shall be the same as the
provider makes available to its customers in good standing.
(b) No inventory shall be acquired by FMST or provided to LDI
A/P except through the normal processes, systems and controls that
would be used by each party in a purchase and sale of product from or
to a third party.
(I) Each shipment of product must be invoiced from
the providing organization to the receiving organization in
the same manner as a normal customer, with the pricing in
compliance with Section 2.(a)(I) of this Agreement.
(II) The receiving organization must reflect the
receipt against the open purchase order in the same manner as
normal supplier receipts.
(III) The invoice must be recorded by the receiving
organization in accounts payable and paid in accordance with
the credit terms of Section 2.(a)(II) of this Agreement.
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(c) No inventory may be transferred from FMST to LDI A/P if
the effect is to divert any customer shipment or order from FMST to LDI
A/P.
3. Special Circumstances. The following possible circumstances may
arise. If they do, they shall be handled in the following manner:
(a) Store Closing. ▇▇▇▇▇▇▇▇ P.B.E., a subsidiary of FMST,
previously determined to close one store within its Mid-Atlantic and
Southern operations. For that store, and in the event the President of
FMST determines that it is in the best interests of FMST, independently
of the possible merger, to close any other store within its Mid-
Atlantic and Southern operations, the following procedures shall be
followed:
(I) An inventory of all assets of the store must be
completed by FMST.
(II) Inventory from the closed store shall be
considered by FMST as available to other FMST stores in the
region. In the event none of such stores has need for the
inventory, it may be declared as surplus and made available to
LDI A/P in the sole discretion of the President of FMST, upon
the terms and subject to the procedures of Section 2 of this
Agreement.
(III) Employees from the closed store may be assigned
by FMST to continue after the closure to take such action as
is necessary for or useful to FMST in concluding activities at
the store. If such action results in an assignment of such
employee(s) to provide services to or for LDI A/P, LDI A/P
shall compensate FMST for the services of such employee(s),
including but not limited to reimbursement of FMST for such
employee(s)'s full wage or salary for the time of such
services, payroll taxes, and benefit costs.
(IV) Such other activities as are useful to and
requested by FMST may be undertaken concerning the process of
closing the store, subject to the mutual approval of the Chief
Financial Officer or Controller of FMST and the Controller of
LDI A/P.
(b) Consolidation of Management and Operations Within FMST. It
is possible that while VanSlaars is serving as acting Senior
Vice-President for the Mid- Atlantic and Southern operations FMST may
determine that it is in the best interests of FMST to consolidate its
management and/or operations in the region.
(I) In all circumstances, such decisions and the
communication of such decisions must be made by and authored
by the President of FMST.
(II) In the event such consolidation involves
management, VanSlaars
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may assist the President, Chief Financial Officer and/or
Controller of FMST in accomplishing the consolidation of
management.
(III) In the event such consolidation involves
locations outside of Southern Florida, VanSlaars may assist
the President, Chief Financial Officer and/or Controller of
FMST in accomplishing the consolidation of locations.
(IV) Except for store closings handled in the manner
prescribed in Section 3.(a) above, no such consolidation of
locations may take place involving locations in Southern
Florida (where LDI A/P has locations).
(c) Other. In the event other actions involving FMST and LDI
A/P not covered by the terms of this Agreement are contemplated, such
other actions must be initiated by the President, Chief Financial
Officer or Controller of FMST.
4. Prohibited Transactions. The parties agree there shall be no
commingling of assets or liabilities, and no diversion of customer orders or
shipments from FMST to LDI A/P. Each party will treat the other as a
supplier/purchaser using their normal processes, systems and controls.
5. Cooperation. The Chief Financial Officer and Controller of FMST and
the Controller of LDI A/P shall cooperate to resolve any issues that arise
concerning inventory or other transactions between the parties during the term
of this Agreement.
6. General Provisions.
(a) Modification or Amendment. This agreement may not be
modified or amended except by an instrument in writing specifically
referring to this agreement and executed by the parties to this
agreement.
(b) Governing Law. This agreement shall be construed and
enforced in accordance with the laws of the State of Indiana.
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Agreed to and accepted by:
FINISHMASTER, INC. LDI AUTOPAINTS, INC.
By: [▇▇▇▇▇▇ ▇. ▇▇▇▇▇] By: [▇▇▇▇▇ ▇. ▇▇▇▇]
Title: President/Chief Operating Officer Title: Chairman/President/CEO
Date: February 28, 1998 Date: February 28, 1998
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