<PAGE> 1
As filed with the Securities and Exchange Commission on October 7, 1996
Registration No. 333-09799
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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LASON, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE
(State or other jurisdiction of
incorporation or organization)
7398
(Primary Standard Industrial
Classification Code Number)
38-3214743
(I.R.S. Employer
Identification Number)
1305 STEPHENSON HIGHWAY
TROY, MICHIGAN 48083
TELEPHONE: (810) 597-5800
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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GARY L. MONROE, CHIEF EXECUTIVE OFFICER
1305 STEPHENSON HIGHWAY
TROY, MICHIGAN 48083
TELEPHONE: (810) 597-5800
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
H. KURT VON MOLTKE
KIRKLAND & ELLIS
200 EAST RANDOLPH DRIVE
CHICAGO, ILLINOIS 60601
LAURENCE B. DEITCH
SEYBURN, KAHN, GINN,
BESS, DEITCH AND SERLIN
2000 TOWN CENTER, SUITE 1500
SOUTHFIELD, MICHIGAN 48075
LELAND E. HUTCHINSON
WINSTON & STRAWN
35 WEST WACKER DRIVE
CHICAGO, ILLINOIS 60601
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this
Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED OCTOBER 7, 1996
LASON
3,000,000 SHARES
COMMON STOCK
All of the shares of Common Stock offered hereby are being sold by Lason,
Inc. ("Lason" or the "Company"). Prior to this offering, there has been no
public market for the Common Stock of the Company. It is currently estimated
that the initial public offering price will be between $14.50 and $16.50 per
share. See "Underwriting" for information relating to the method of determining
the initial public offering price. Approximately $11.7 million of the net
proceeds of the sale by the Company of the Common Stock offered hereby will be
used to redeem a portion of the Common Stock owned by the Company's principal
stockholder. The Common Stock has been approved for trading on the NASDAQ
National Market under the symbol "LSON," subject to official notice of issuance.
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THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 8.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
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Per Share....................... $ $ $
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Total(3)........................ $ $ $
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</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting."
(2) Before deducting offering expenses payable by the Company, estimated at
$900,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
an additional 450,000 shares of Common Stock solely to cover
over-allotments, if any. See "Underwriting." If such option is exercised in
full, the total Price to Public, Underwriting Discounts and Commissions and
Proceeds to Company will be $ , $ and
$ , respectively.
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The Common Stock is offered by the Underwriters, as stated herein, subject
to receipt and acceptance by them and subject to their right to reject any order
in whole or in part. It is expected that delivery of such shares will be made
through the offices of Robertson, Stephens & Company LLC, San Francisco,
California, on or about , 1996.
ROBERTSON, STEPHENS & COMPANY WILLIAM BLAIR & COMPANY
The date of this Prospectus is , 1996
<PAGE> 3
LASON LOGO
"THE IMAGING COMPANY"
<TABLE>
<S> <C>
- ----------------------------------------------- ------------------------------------------
RECORDS MANAGEMENT
- ----------------------------------------------- [PICTURE OF SEVERAL OF THE
- ELECTRONIC DOCUMENT CONVERSIONS COMPANY'S EMPLOYEES AT
- MICROGRAPHIC DOCUMENT CONVERSIONS COMPUTER WORKSTATIONS]
- ELECTRONIC DOCUMENT STORAGE AND RETRIEVAL
------------------------------------------
- ----------------------------------------------- ------------------------------------------
DOCUMENT MANAGEMENT
- ----------------------------------------------- [PICTURES OF COMPACT DISKS AND OF
- ON-SITE FACILITIES MANAGEMENT COMPUTER CONTROL PANEL OF
- HIGH VOLUME REPROGRAPHICS HIGH SPEED COPIER/PRINTER]
- LASON DOCUMENT EXPRESS(TM) PRINT ON DEMAND
- DIGITAL GRAPHICS ------------------------------------------
- ----------------------------------------------- ------------------------------------------
BUSINESS COMMUNICATIONS
- ----------------------------------------------- [PICTURE OF MULTIPLE
- COLLECTION LETTER PROCESSING COMPUTER TERMINALS]
- EVENT-DRIVEN DIRECT MAIL
- DATABASE MANAGEMENT ------------------------------------------
- CO-MINGLING OF MAIL
</TABLE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER
TO, OR SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO
THE DATE HEREOF.
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE SHARES OF COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
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TABLE OF CONTENTS
<TABLE>
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PAGE
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Prospectus Summary.................................................................... 4
Risk Factors.......................................................................... 8
The Company........................................................................... 16
Recent Acquisitions................................................................... 17
Use of Proceeds....................................................................... 19
Dividend Policy....................................................................... 19
Capitalization........................................................................ 20
Dilution.............................................................................. 21
Selected Consolidated Financial Data.................................................. 22
Management's Discussion and Analysis of Financial Condition and Results of
Operations.......................................................................... 23
Business.............................................................................. 31
Management............................................................................ 44
Certain Relationships and Related Transactions........................................ 52
Principal Stockholders................................................................ 56
Description of Credit Agreement....................................................... 58
Description of Capital Stock.......................................................... 60
Shares Eligible for Future Sale....................................................... 63
Underwriting.......................................................................... 65
Validity of Common Stock.............................................................. 66
Experts............................................................................... 66
Additional Information................................................................ 66
Index to Unaudited Pro Forma Condensed Consolidated Financial Information, Financial
Statements and Consolidated Financial Statements.................................... F-1
</TABLE>
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The Company intends to furnish to its stockholders annual reports
containing audited consolidated financial statements examined by its independent
public accountants and quarterly reports containing unaudited consolidated
financial statements for each of the first three quarters of each fiscal year.
Lason Document Express(TM) is a trademark of the Company.
3
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed
information, including "Risk Factors" and the consolidated financial statements
of the Company and notes thereto (the "Consolidated Financial Statements"), the
unaudited pro forma condensed consolidated financial information of the Company
and the notes thereto (the "Pro Forma Financial Information"), the financial
statements of the Company's predecessor and the notes thereto, and the financial
statements of certain companies acquired by the Company and the notes thereto,
appearing elsewhere in this Prospectus. This Prospectus contains forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially from those discussed herein. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
in "Risk Factors," "Management's Discussions and Analysis of Financial Condition
and Results of Operations" and "Business," as well as those discussed elsewhere
in this Prospectus. Except as otherwise indicated, all information contained in
this Prospectus (i) assumes no exercise of the Underwriters' over-allotment
option, (ii) assumes all of the Acquisitions (as defined in "Recent
Acquisitions") have been completed and (iii) has been adjusted to give effect to
the Recapitalization (as defined in "Description of Capital Stock -- The
Recapitalization") and a 2.5 for one stock split. See "Description of Capital
Stock -- The Recapitalization." As used in this Prospectus, unless the context
otherwise requires, the terms "Lason" and the "Company" refer to Lason, Inc. and
include Lason, Inc. and all of its subsidiaries and its and their respective
predecessors and subsidiaries.
THE COMPANY
Lason provides integrated outsourcing services for records management,
document management and business communications. The investments the Company has
made in imaging and communications technology, personnel, equipment and systems
over the past decade have given it the capabilities and expertise to meet the
growing and increasingly complex document management requirements of its
customers. The Company primarily serves customers in the manufacturing,
healthcare, financial services and professional services industries. The
Company's core competencies in input processing, data management and output
processing enable it to provide a broad range of services across a wide range of
media types and allow customers to fulfill their document management outsourcing
needs with a single vendor. For the year ended December 31, 1995, and the six
months ended June 30, 1996, the Company had net revenues of approximately $46.6
million and $27.1 million, respectively. Today, the Company employs over 1,150
people, has operations in eight states and provides services to over 2,200
customers at 15 multi-functional imaging centers and at 40 facility management
sites located on customers' premises. The Company's strategy has been to offer a
wide range of services to its customers and to use technology to expand its
service offerings.
The document management industry is highly fragmented, consisting of a
large number of small companies providing limited service offerings. Therefore,
an important element of the Company's growth strategy is to make selected
acquisitions of companies with complementary technologies or customer bases to
consolidate its position as a provider of complete document management services.
Since June 1995, the Company has acquired eight companies. See "Recent
Acquisitions." The Company will continue to seek and evaluate additional
acquisition opportunities.
Lason's service offerings generally can be divided into the areas of
records management, document management and business communications. The
Company's records management services include the scanning and converting of
documents from a variety of input media to a digital format. The Company also
provides traditional microfilm and microfiche services. The Company's newest
records management offering, Visions computer output to laser disk ("COLD")
service, provides laser disk storage and retrieval of records. The Company's
document management services include high-volume, quick turn-around optical and
digital printing, as well as facility management operations at customer sites.
The Company's newest document management service offering, Lason Document
Express (print on demand), allows documents to be stored digitally, accessed
on-line and printed and distributed locally or centrally, depending on end-user
requirements. The Company's business communications services provide customers
with rapid, reliable and cost-effective methods for making
4
<PAGE> 6
large-scale distributions of statements, reports and letters to consumers and
other target audiences in response to specific events. The Company also provides
customized processing services for over 400 collection agencies located
throughout the United States.
Lason believes that companies will continue to increase their use of
outsourced document management services. To efficiently manage complex or large
volumes of documents, a customer would be required to make a significant
investment in equipment, process and technology which may only be fully utilized
occasionally by a single user. Through outsourcing, companies can avoid this
capital investment, as well as the risks of obsolescence that arise from rapid
changes in document management technology. As companies seek to focus on their
core competencies and maximize asset utilization, they are increasingly turning
to outside parties who have the technological expertise, service focus, rapid
turn-around capacity and full range of capabilities necessary to manage
efficiently complex or large volumes of documents. In addition, the Company
believes that customers will seek a single vendor capable of furnishing all or
many of their document management needs rather than relying on multiple vendors
with varying areas of expertise.
The Company intends to take advantage of the trend toward increased
outsourcing of document management and the highly fragmented nature of the
document management services industry by pursuing the following business
strategy:
- Provide a broad range of services that will allow both existing and new
customers to secure all of their needed document management services from
one source;
- Implement a comprehensive marketing program to facilitate the
cross-selling of additional services to customers who are now purchasing
only a limited number of services and to develop national brand
recognition of the quality of Lason's services;
- Make selective acquisitions to further broaden its geographic reach,
customer base and technological capabilities and to attain economies of
scale in purchasing, facility utilization and management;
- Develop additional high value-added applications, such as Lason Document
Express (print on demand), digital imaging services and COLD, within its
core service offerings; and
- Develop scalable applications utilizing an open architecture and modular
approach that will enable the Company to service the unique needs of
various customers across a broad range of volume requirements.
5
<PAGE> 7
THE OFFERING
Common Stock offered by the
Company............................. 3,000,000 shares
Common Stock outstanding after the
Offering(1)....................... 8,162,462 shares
Use of proceeds..................... To repay indebtedness under the
Company's credit agreement, to redeem a
portion of its capital stock and for
general corporate purposes, including
working capital and financing of
possible acquisitions. See "Use of
Proceeds."
NASDAQ National Market Symbol....... LSON
- ------------
(1) Includes 81,290 shares and 68,387 shares of Common Stock issuable in
connection with the acquisition of Information & Image Technology of
America, Inc. and Great Lakes Micrographics Corporation, respectively,
assuming an initial public offering price of $15.50 per share (see "Recent
Acquisitions") and excludes 555,740 shares of Common Stock issuable upon
exercise of stock options outstanding after the Offering, 450,000 shares of
Common Stock issuable upon exercise of the Underwriters' over-allotment
option and, assuming an initial public offering price of $15.50 per share,
25,806 shares of Common Stock issuable upon conversion of a convertible
promissory note in the amount of $400,000 issued by the Company in
connection with the acquisition of National Reproductions Corp. (see
"Recent Acquisitions") and 755,933 shares of Common Stock to be redeemed
upon consummation of the Offering using a portion of the net proceeds from
the Offering (see "Use of Proceeds" and "Description of Capital
Stock -- The Recapitalization").
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<PAGE> 8
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------------------------------ ------------------------------------------------
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
--------------------------------------------------------- ----------------------------
PRO FORMA PRO FORMA
HISTORICAL AS HISTORICAL AS
---------------------------------------------- ADJUSTED ----------------- ADJUSTED
1991 1992 1993 1994 1995 1995(1) 1995 1996 1996(1)
------ ------- ------- ------- ------- --------- ------- ------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues, net of postage...... $9,909 $18,852 $31,151 $41,151 $46,605 $75,052 $23,695 $27,089 $41,677
Cost of revenues.............. 6,484 13,176 20,684 27,238 31,227 53,314 15,484 17,696 28,895
------ ------- ------- ------- ------- ------- ------- ------- -------
Gross profit.................. 3,425 5,676 10,467 13,913 15,378 21,738 8,211 9,393 12,782
Selling, general and
administrative expenses..... 2,207 3,139 6,980 8,377 9,406 14,260 4,563 5,273 7,579
Compensatory option expense... -- -- -- -- 308 976 32 167 131
Amortization of intangibles... -- 87 163 266 817 1,396 465 379 669
------ ------- ------- ------- ------- ------- ------- ------- -------
Income from operations........ 1,218 2,450 3,324 5,270 4,847 5,106 3,151 3,574 4,403
Interest expense.............. 54 83 126 185 1,760 683 764 885 330
Other (income) expense, net... (23) 93 (21) (21) (66) (107) (78) (25) (145)
------ ------- ------- ------- ------- ------- ------- ------- -------
Income before income taxes.... 1,187 2,274 3,219 5,106 3,153 4,530 2,465 2,714 4,218
Provision for income taxes.... -- -- -- -- 1,139 1,693 890 992 1,520
------ ------- ------- ------- ------- ------- ------- ------- -------
Net income.................... $1,187 $ 2,274 $ 3,219 $ 5,106 $ 2,014 2,837 1,575 1,722 2,698
====== ======= ======= ======= ======= ======= ======= ======= =======
Primary and fully diluted
earnings per share(2)....... $ .32 $ .33 $ .25 $ .28 $ .31
======= ======= ======= ======= =======
Pro forma compensatory option
expense(3).................. -- -- -- -- 441 -- 142 422 --
Pro forma provision for income
taxes(4).................... 429 821 1,162 1,843 -- -- -- -- --
------ ------- ------- ------- ------- ------- ------- ------- -------
Pro forma net income.......... $ 758 $ 1,453 $ 2,057 $ 3,263 $ 1,573 2,837 1,433 1,300 2,698
====== ======= ======= ======= ======= ======= ======= ======= =======
Pro forma primary and fully
diluted earnings per
share....................... $ .25 $ .33 $ .23 $ .21 $ .31
======= ======= ======= ======= =======
Weighted average number of
common and common equivalent
shares outstanding.......... 6,248 8,644 6,248 6,244 8,640
------- ------- ------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
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DECEMBER 31,
----------------------
JUNE 30, 1996
HISTORICAL ----------------------------------
---------------------- PRO AS
1994 1995 ACTUAL FORMA(5) ADJUSTED(6)
----------- ------- ------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.................................... $ 3,218 $ 4,911 $ 5,791 $ 5,336 $ 7,964
Total assets....................................... 15,692 37,309 40,684 65,612 65,871
Long-term obligations, less current portion........ 261 18,547 19,146 35,925 7,292
Total stockholders' equity......................... 6,623 9,214 11,108 12,368 43,260
</TABLE>
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(1) Gives effect to the Acquisitions, the sale of 3,000,000 shares of Common
Stock offered by the Company hereby (the "Offering") and the application of
the net proceeds from the Offering as if each had occurred as of January 1,
1995. See "Use of Proceeds" and Pro Forma Financial Information.
(2) Historical earnings per share are not presented for the Predecessor (as
defined in "The Company") as such information is not representative of the
capital structure of the Company.
(3) Gives effect to a noncash expense, net of tax, related to the accelerated
vesting of compensatory stock options granted to certain officers and
directors. See "Risk Factors -- Charges Relating to Compensatory Stock
Options," "Management -- Stock Options" and Note 13 to the Notes to the
Consolidated Financial Statements.
(4) From its inception to January 17, 1995, the Company was an S corporation
and, accordingly, was not subject to federal and state income taxes. The pro
forma provision for income taxes has been computed as if the Company was
subject to federal and state corporate income taxes for the periods
presented and based on the statutory tax rates then in effect. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note 7 to the Notes to the Consolidated Financial
Statements.
(5) Gives effect to the Acquisitions as if each had occurred as of June 30,
1996. See Pro Forma Financial Information.
(6) Gives effect to the Acquisitions, the Offering and the application of the
net proceeds from the Offering as if each had occurred as of June 30, 1996.
See "Use of Proceeds" and Pro Forma Financial Information.
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RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating the Company and its
business before purchasing shares of the Common Stock offered hereby.
RELIANCE ON MAJOR CUSTOMERS; RISK OF CUSTOMER LABOR INTERRUPTIONS
For the years ended December 31, 1993, 1994 and 1995 and for the six months
ended June 30, 1996, General Motors Corporation accounted for approximately
57.4%, 54.9%, 48.6% and 41.8%, respectively, Ford Motor Company accounted for
14.5%, 12.2%, 11.8% and 12.9%, respectively, and Chrysler Corporation accounted
for 4.5%, 4.0%, 4.6% and 4.3%, respectively, of the Company's net revenues.
General declines in the automotive industry could cause a material reduction in
demand by such customers for the Company's products and services, and any such
reduction in demand or loss of or material decrease in the business from these
customers could have a material adverse effect on the Company's business,
financial condition or results of operations. See "Business -- Customers."
The collective bargaining agreements of the United Automobile, Aerospace
and Agricultural Implement Workers of America (the "UAW") and General Motors
Corporation, Ford Motor Company and Chrysler Corporation are scheduled to expire
in September 1996. The failure of any such company or companies to reach
agreement with the UAW relating to the terms of a labor contract could result in
either a work stoppage or strike at any or all of their production facilities,
which could have a material adverse effect on the Company's business, financial
condition or results of operations.
RISKS OF ACQUISITIONS AND FAILURE TO INTEGRATE ACQUIRED BUSINESSES
One of the Company's principal strategies is to increase its revenues and
the markets it serves through the acquisition of complementary businesses. There
can be no assurance that the Company will be able to identify and acquire
attractive acquisition candidates, profitably manage such acquired companies or
successfully integrate such acquired companies into the Company without
substantial costs, delays or other problems. Acquisitions may involve a number
of special risks, including, but not limited to, adverse short-term effects on
the Company's reported financial condition or results of operations, diversion
of management's attention, dependence on retention, hiring and training of key
personnel, risks associated with unanticipated problems or liabilities and
amortization of acquired intangible assets, some or all of which could have a
material adverse effect on the Company's business, financial condition or
results of operations. In addition, there can be no assurance that companies
acquired in the future will be profitable at the time of acquisition or that the
companies recently acquired or acquired in the future will achieve sales and
profitability justifying the Company's investment therein or that the Company
will recognize the synergies expected from such acquisitions. The failure to
obtain any or all of which could have a material adverse effect on the Company's
businesses, financial condition or results of operations. See "Recent
Acquisitions" and "Business -- Acquisition Strategy."
The Company currently does not own 100% of the ownership interests in
certain of its consolidated subsidiaries and may in the future acquire
additional companies with outstanding minority ownership interests. The
existence of such minority interests may limit the benefits the Company will
recognize as a result of its ownership of such assets and may limit the
Company's utilization and disposition of such assets. In addition, certain of
the holders of such minority interests have the right, under certain
circumstances, to cause the Company to purchase such interests at a specified or
formula purchase price. There can be no assurance that the purchase price will
not exceed the then fair market value of such interests or that the Company will
have sufficient funds or be able to obtain financing if and when it is needed
for such purchases or that, if available, such financing will be on terms
acceptable to the Company. A default on the Company's obligations to purchase
such interests could have a material adverse effect on the Company. In addition,
in connection with certain recent acquisitions, the Company is contractually
obligated to pay to the prior owners of certain of
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<PAGE> 10
such acquired companies a portion of net earnings or gross revenues of such
companies recognized in connection with obtaining specified new customers or
contract expansions during a specified period. The existence of such obligations
may limit the benefits the Company could recognize as a result of such
acquisitions or could adversely affect the profitability of such customer
contracts. See "Recent Acquisitions" and Notes to the Pro Forma Financial
Information.
RISK OF INADEQUATE FINANCING FOR FUTURE ACQUISITIONS
The Company currently finances acquisitions, and intends to finance future
acquisitions, by using cash from operations, by issuing shares of Common Stock
and through borrowings under the Company's then existing credit facilities. The
Company will need additional debt or equity financing to continue its
acquisition strategy. There can be no assurance that the Company will be able to
obtain such financing if and when it is needed or that, if available, such
financing will be available on terms the Company deems acceptable. If the
Company does not have sufficient cash resources or availability under its then
existing credit facilities, or if the Common Stock does not maintain sufficient
value or potential acquisition candidates are unwilling to accept Common Stock
as part of the consideration for the sale of their businesses, the Company will
be unable to continue its acquisition strategy. Promptly after consummation of
the Offering, the Company plans to file a registration statement covering up to
2,500,000 shares of Common Stock for use as consideration in future
acquisitions. The issuance of Common Stock in connection with any such
acquisition may be dilutive to the holders of the Common Stock. See "Dilution"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
COMPETITION IN THE COMPANY'S MARKETS
The Company's businesses are highly competitive. A significant source of
competition is the in-house document handling capability of the Company's target
customer base. There can be no assurance that these businesses will outsource
more of their document management, records management and business communication
services needs or that such businesses will not bring in-house services that
they currently outsource. In addition, with respect to those services that are
outsourced, the Company competes with a variety of competitors, including large
national or multinational companies, which have greater financial resources than
the Company, and smaller regional or local companies. The Company's major
competitors, in addition to various regional competitors, include ALCO Standard
Corp., Pitney Bowes Management Services, Inc. (a subsidiary of Pitney Bowes,
Inc.) and Xerox Business Services with respect to its document management
services; Dataplex Corp., F.Y.I. Incorporated and ALCO Standard Corp. with
respect to its records management services; and First Financial Management Corp.
(First Image), Sun Guard Mailing Services and Diversified Data & Communications
with respect to its business communications services. There can be no assurance
that the Company will be able to compete successfully against current or future
competitors or that competitive pressures will not have a material adverse
effect on the Company's business, financial condition or results of operations.
EFFECT OF POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS; SEASONALITY
The Company has experienced, and in the future may experience, significant
quarter to quarter fluctuations in its results of operations. Quarterly results
of operations may fluctuate as a result of a variety of factors, including, but
not limited to, the size and timing of customer contracts, changes in customer
budgets, variations in the cost of paper, the size and timing of acquisitions,
the integration of acquired businesses into the Company's operations, the number
and timing of new hires, the demand for the Company's services, the timing of
introduction of new services and service enhancements by the Company or its
competitors, the market acceptance of new services, competitive conditions in
the industry and general economic conditions. The Company's businesses are also
typically seasonal as sales and profitability are typically lower during the
third and fourth quarters of the year resulting primarily from the shut-downs in
the automotive industry in July and December. In addition, the
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Company has experienced substantial growth in recent periods and there can be no
assurance that such rate of growth in revenues and profits can be maintained in
the future.
As a result, the Company believes that period to period comparisons of
results of operations are not necessarily meaningful and not necessarily
indicative of the results that the Company may achieve in any subsequent quarter
or a full year. Such fluctuations may result in volatility in the price of the
Common Stock, and it is possible that in future quarters the Company's results
of operations could be below the expectations of public market analysts and
investors. Such an event could have a material adverse effect on the market
price of the Common Stock. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Selected Quarterly
Information."
FLUCTUATIONS IN PAPER PRICES
The price of paper increased significantly during 1995 and early 1996, and
may increase in the future. The Company generally has not been able to change
its prices to customers to include increases in paper prices. There can be no
assurance that the price of paper will not change in the future. Any significant
increase in the price of paper that cannot be passed on to customers could have
a material adverse effect on the Company's business, financial condition or
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
IMPORTANCE OF CONTINUED DEVELOPMENT OF NEW SERVICES
The introduction of competing services incorporating new technologies and
the emergence of new technical standards could render some or all of the
Company's services unmarketable. The Company believes that its future success
depends on its ability to enhance its current services and develop new services
that address the increasingly sophisticated needs of its customers. The failure
of the Company to develop and introduce enhancements and new services in a
timely and cost-effective manner in response to changing technologies or
customer requirements could have a material adverse effect on the Company's
business, financial condition or results of operations.
POTENTIAL LIABILITY FOR UNAUTHORIZED DISCLOSURE OF CONFIDENTIAL INFORMATION
A substantial portion of the Company's business involves the handling of
documents containing confidential and other sensitive information. Although the
Company has established procedures intended to eliminate any unauthorized
disclosure of confidential information and, in some cases, has contractually
limited its potential liability for unauthorized disclosure of such information,
there can be no assurance that unauthorized disclosures will not result in
liability to the Company. It is possible that such liabilities could have a
material adverse effect on the Company's business, financial condition or
results of operations.
RISK OF BUSINESS INTERRUPTIONS AND DEPENDENCE ON SINGLE FACILITIES FOR CERTAIN
SERVICES
The Company believes that its success to date has been, and future results
of operations will be, dependent in large part upon its ability to provide
prompt and efficient services to its customers. Certain of the Company's
operations are performed at a single location and are dependent on continuous
computer, electrical and telephone service. As a result, any disruption of the
Company's day-to-day operations could have a material adverse effect upon the
Company. There can be no assurance that a fire, flood, earthquake, power loss,
phone service loss or other disaster affecting one or more of the Company's
facilities would not disable these functions. Any significant damage to any such
facility or other failure that causes significant interruptions in the Company's
operations may not be covered by insurance and could have a material adverse
effect on the Company's business, financial condition or results of operations.
See "Business -- Facilities."
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CONTROL BY PRINCIPAL STOCKHOLDERS
Upon consummation of the Offering, certain of the Company's officers and
employees, and persons affiliated with them (the "Executive Group"), and Golder,
Thoma, Cressey, Rauner Fund IV, L.P. ("GTCR Fund IV" and, together with the
Executive Group, the "Existing Stockholders"), will own or control an aggregate
of approximately 57.6% of the outstanding shares of Common Stock (or
approximately 54.9% if the Underwriters' over-allotment option is exercised in
full). These stockholders are likely to continue to exercise substantial control
over the affairs of the Company and acting together would likely be able to
elect a sufficient number of directors to control the Company's Board of
Directors (the "Board") and to approve or to disapprove any matter submitted to
a vote of the stockholders. See "Principal Stockholders."
In addition, the Existing Stockholders are parties to a Voting Agreement
(the "Voting Agreement"), providing for, among other things, the designation of
and the voting with respect to the election of directors of the Board by the
Existing Stockholders. Under the Voting Agreement, the Existing Stockholders
agree to vote their shares such that the Board at all times shall consist of two
directors designated by GTCR Fund IV, two directors designated by the Executive
Group, the Company's Chief Executive Officer and two outside directors jointly
designated by GTCR Fund IV and the Executive Group. The Existing Stockholders
may not vote to remove the two directors nominated by GTCR Fund IV and the two
directors nominated by the Executive Group and must vote to remove such
directors if directed to do so by GTCR Fund IV or the Executive Group,
respectively, subject to the provisions of the Company's Amended and Restated
Certificate of Incorporation. The voting provisions of the Voting Agreement
terminate when either GTCR Fund IV or the Executive Group holds in the aggregate
less than 10% of the Common Stock on a fully diluted basis. Upon consummation of
the Offering, the Existing Stockholders will hold, in the aggregate, a majority
of the voting power of the Common Stock and will be able to elect all members of
the Board. The Voting Agreement may render more difficult or tend to discourage
mergers, acquisitions, tender offers, proxy contests or assumptions of control
and changes of incumbent management, even when stockholders other than the
Existing Stockholders consider such a transaction to be in their best interest.
See "Certain Relationships and Related Transactions -- Voting Agreement."
CHARGES RELATING TO COMPENSATORY STOCK OPTIONS
The Company expects to record a significant noncash expense of
approximately $639,000 in the second half of 1996 in connection with the
accelerated vesting of compensatory stock options granted to certain of its
executive officers as a result of the consummation of the Offering. This expense
is not included in the Company's historical consolidated financial statements
for the year ended December 31, 1995, or the six months ended June 30, 1996. The
market price of the Common Stock could be adversely affected when the Company
reports such expenses, if any. See "Management -- Stock Options," Pro Forma
Financial Information and Note 13 to the Notes to the Consolidated Financial
Statements.
In addition, the Company will incur similar noncash expenses from time to
time through December 31, 2001, in an aggregate amount of approximately $343,000
in connection with the scheduled vesting of compensatory stock options
previously granted to certain of its officers and employees. Similar expenses
are included in the Company's consolidated financial statements for the year
ended December 31, 1995, and for the six months ended June 30, 1996. The market
price of the Common Stock could be adversely affected when the Company reports
such expenses, if any. See "Management -- Stock Options," Pro Forma Financial
Information and Note 13 to the Notes to the Consolidated Financial Statements.
BENEFITS TO GTCR FUND IV
Approximately $11.7 million of the net proceeds from the sale by the
Company of the Common Stock offered hereby will be used to redeem a portion of
the Common Stock owned by GTCR Fund IV.
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See "Certain Relationships and Related Transactions -- The Recapitalization" and
"Description of Capital Stock -- The Recapitalization."
LEVERAGE
As of August 31, 1996, the Company had total outstanding long-term
indebtedness of approximately $40.2 million, resulting in significant debt
service obligations. After giving effect to the Recapitalization and the
Offering at an assumed initial public offering price of $15.50 per share and the
application of the estimated net proceeds therefrom as described in "Use of
Proceeds," the Company would have had total outstanding long-term indebtedness
of $9.6 million. Following completion of the Offering, the Company may incur
additional indebtedness in connection with future acquisitions or otherwise. The
degree to which the Company is leveraged has had and in the future could have
important consequences to holders of Common Stock, including: (i) the Company's
ability to obtain additional financing for working capital, capital
expenditures, acquisitions, general corporate purposes or other purposes may be
impaired in the future; (ii) a substantial portion of the Company's net cash
flows from operations must be dedicated to the payment of principal and interest
on such borrowings, thereby reducing the funds available to the Company for its
operations and other purposes; (iii) certain of the Company's borrowings are and
will continue to be at variable rates of interest, which will expose the Company
to the risk of increased interest rates; (iv) the Company may be substantially
more leveraged than certain of its competitors, which may place the Company at a
relative competitive disadvantage; (v) the Credit Agreement (as defined)
contains and the New Credit Agreement (as defined) will contain certain
financial and restrictive covenants, which, if not complied with, may result in
an event of default, possibly having a material adverse effect on the Company;
and (vi) because of its lesser financial flexibility, the Company may be unable
to adjust to rapidly changing market conditions and could be vulnerable in the
event of a downturn in general economic conditions or its business.
SIGNIFICANT INTANGIBLE ASSETS
At June 30, 1996, approximately $18.9 million or 46% of the Company's total
assets were intangible assets consisting primarily of goodwill and contract
rights (approximately $36.3 million or 55% on a pro forma basis after giving
effect to the Recapitalization, the Acquisitions as if they had occurred on June
30, 1996 and the sale by the Company of the 3,000,000 shares of Common stock
offered hereby at an assumed initial public offering price of $15.50 per share
and the application of the estimated net proceeds therefrom as described in "Use
of Proceeds"). The Company will incur noncash charges as a result of
amortization of such assets over their life. If the value of any such asset is
impaired, the Company could incur a significant noncash charge in the period of
such impairment, and the market price of the Common Stock could be adversely
affected when the Company reports such charges, if any. In addition, in the
event of a sale or liquidation of the Company or its assets, there can be no
assurance that the value of such intangible assets would be recovered.
POTENTIAL LIABILITY FOR VIOLATIONS OF REGULATIONS; LITIGATION
Certain of the Company's customers, and certain of the Company's services
as used by those customers, such as collection letter processing, are subject to
various consumer protection laws, including the Fair Debt Collection Practices
Act. The format and wording of many of the collection letters distributed by the
Company, including its Priority Gram, are developed by the Company. From time to
time, certain of the Company's customers are subject to claims or are parties to
litigation under such laws involving services supplied by the Company to such
customers, such as collection letter processing. These actions sometimes relate
to the form and content of the collection letters distributed by the Company.
There can be no assurance that the Company will not be determined to be liable
under such laws, be made a party to any such litigation or be asked to indemnify
such customers for losses such customers incur in connection with any such
violation, claim or litigation. Any such occurrence could have a material
adverse effect on the Company's business, financial condition or results of
operations. See "Business -- Regulation" and "-- Litigation."
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DEPENDENCE ON PROPRIETARY RIGHTS; RISKS OF INFRINGEMENT
The Company regards the systems, information and know-how underlying its
services as proprietary and relies primarily on a combination of contract, trade
secrets, confidentiality agreements and contractual provisions to protect its
proprietary rights. Despite the Company's efforts to protect its proprietary
rights, unauthorized parties may attempt to obtain and use information that the
Company regards as proprietary, and policing unauthorized use of the Company's
proprietary information is difficult. There can be no assurance that the
obligations to maintain the confidentiality of the Company's proprietary
information will effectively prevent disclosure or provide meaningful protection
or that the Company's proprietary information will not be independently
developed by the Company's competitors. Litigation may be necessary for the
Company to protect its proprietary information and could result in substantial
cost to, and diversion of efforts by, the Company. There can be no assurance
that the Company would prevail in any such litigation. If the Company is unable
to protect its proprietary rights, it could have a material adverse effect on
the Company's business, financial condition or results of operations.
In addition, there can be no assurance that third parties will not assert
claims against the Company alleging that the Company's proprietary rights
infringe on their proprietary rights. Any infringement claims, whether with or
without merit, can be time consuming and expensive to defend or may require the
Company to enter into royalty or licensing agreements or cease the infringing
activities. The failure to obtain such royalty agreements, if required, and the
Company's involvement in such litigation could have a material adverse effect on
the Company's business, financial condition or results of operations.
DEPENDENCE ON KEY PERSONNEL
The Company's continued success will depend largely on the efforts and
abilities of its executive officers and certain other key employees.
Furthermore, the Company will likely be dependent on the senior management and
key employees of companies that may be acquired in the future. The failure of
any of these people to continue in their present roles, or the failure of the
Company to attract and retain other skilled employees, could have a material
adverse effect on the Company's business, financial condition or results of
operations. The Company currently does not have employment agreements providing
for a definite term of employment with any of its executive officers or key
employees (other than its Chief Executive Officer) and does not intend to obtain
key man life insurance covering any of its executive officers or key employees.
See "Management."
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
No prediction can be made as to the effect, if any, that future sales of
shares of Common Stock or availability of such shares for future sale will have
on the market price of the Common Stock prevailing from time to time. Sales of
substantial amounts of Common Stock, or the perception that such sales could
occur, could adversely effect prevailing market prices for the Common Stock.
Upon consummation of the Offering, 8,162,462 shares of Common Stock will be
outstanding (8,612,462 if the Underwriters' over-allotment option is exercised
in full). The 3,000,000 shares of Common Stock sold in the Offering (plus up to
450,000 additional shares of Common Stock if the Underwriters' over-allotment
option is exercised in full) will be freely tradeable without restriction or
further registration under the Securities Act, unless such shares are held by an
"affiliate" of the Company as that term is defined under Rule 144 under the
Securities Act ("Rule 144"). Other than the shares of Common Stock being offered
hereby, the currently outstanding shares of Common Stock have not been
registered under the Securities Act and may not be sold unless such shares are
registered or unless an exemption from registration, such as the exemption
provided by Rule 144, is available. 4,999,997 of such unregistered shares would,
but for the lockup arrangements described below, be eligible for sale not
earlier than January 17, 1997, subject to certain volume and other limitations
under Rule 144.
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The Company and certain of its stockholders, which as of the consummation
of the Offering will hold an aggregate of 4,703,265 shares of Common Stock, have
agreed, for a period beginning from the date of the effectiveness of the
Registration Statement of which this Prospectus is a part and continuing to and
including the date 180 days after the date of the effectiveness of the
Registration Statement (the "Lockup Period"), not sell or otherwise dispose of,
and the Company has agreed not to register, any shares of Common Stock or any
securities of the Company which are substantially similar to the shares of
Common Stock, including, but not limited to, any securities that are convertible
into or exchangeable for, or represent the right to receive, Common Stock or any
such substantially similar securities (other than the grant of options with
respect to, and the issuance and registration of up to 1,000,000 shares of
Common Stock by the Company in connection with, the Company's 1995 Stock Option
Plan and the issuance and registration of up to 2,500,000 shares of Common Stock
by the Company for use as consideration in future acquisitions), without the
prior written consent of Robertson, Stephens & Company LLC, except for the
shares of Common Stock offered in connection with the Offering. Upon the
expiration of such Lockup Period, such shares will be freely tradeable subject
to the holding period, volume and other limitations of Rule 144.
In connection with the formation of the Company, the Company and certain of
its stockholders, including GTCR Fund IV, certain members of the Company's
management, and persons affiliated with them, entered into a Registration
Agreement, dated as of January 17, 1995 (the "Registration Agreement"). Pursuant
to the Registration Agreement, such stockholders and their transferees, who hold
in the aggregate 4,999,997 shares of Common Stock, are entitled to certain
demand and piggy-back registration rights with respect to such shares of Common
Stock which may be exercised after the expiration of the Lockup Period. Such
rights could be used to force the Company to file a registration statement with
respect to the Common Stock owned by such persons. In addition, the holders of
an additional 149,677 shares of Common Stock (assuming an initial public
offering price of $15.50) have certain piggy-back registration rights. The
existence of the Registration Agreement and such other registration rights and
the perception that sales of Common Stock could occur thereunder could adversely
effect the prevailing market price of the Common Stock and could impair the
Company's future ability to raise capital through the sale of its equity
securities. See "Certain Relationships and Related Transactions -- Registration
Agreement," "Recent Acquisitions" and "Shares Eligible for Future Sale."
Promptly after consummation of the Offering, the Company expects to file a
registration statement on Form S-8 covering up to 1,000,000 shares of Common
Stock in connection with its 1995 Stock Option Plan and a registration statement
covering up to 2,500,000 shares of Common Stock for use as consideration in
future acquisitions. Such shares, when issued and registered, will be freely
tradeable without restriction or further registration under the Securities Act.
Prior to the Offering, there has been no public market for the Common
Stock, and no assurances can be given as to the effect, if any, that public
market sales of shares of Common Stock or the availability of such shares for
sale will have on the trading price prevailing from time to time. Nevertheless,
sales of substantial amounts of Common Stock in the public market, or the
perception that such sales could occur, could adversely affect the market price
of the Common Stock and could impair the Company's future ability to raise
capital through the sale of its equity securities. See "Shares Eligible for
Future Sale."
ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER, BY-LAW AND STATUTORY PROVISIONS
The Company's Amended and Restated Certificate of Incorporation and By-Laws
to be effective upon consummation of the Offering provide for a classified board
of directors, restrict the ability of stockholders to call special meetings or
take stockholder action by written consent, contain advance notice requirements
for stockholder proposals and nominations and special voting requirements for
the amendment of the Company's Amended and Restated Certificate of Incorporation
and By-Laws. These provisions could delay or hinder the removal of incumbent
directors and could discourage or make more difficult a proposed merger, tender
offer or proxy contest involving the Company or may
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otherwise have an adverse effect on the market price of the Common Stock. The
Company also will be subject to provisions of the Delaware General Corporation
Law that will restrict the Company from engaging in certain business
combinations with a person who, together with affiliates and associates, owns
15% or more of the Common Stock (an "Interested Stockholder") for three years
after the person becomes an Interested Stockholder, unless certain conditions
are met or the business combination is approved by the Board and/or the
Company's stockholders in a prescribed manner. These provisions also could
render more difficult or discourage a merger, tender offer or other similar
transaction. The Board intends to adopt a resolution approving any acquisition
of shares of Common Stock by GTCR Fund IV and its affiliates that would
otherwise result in GTCR Fund IV and its affiliates becoming an Interested
Stockholder. See "Description of Capital Stock -- Certain Provisions of the
Amended and Restated Certificate of Incorporation and By-Laws and Statutory
Provisions."
Pursuant to the Amended and Restated Certificate of Incorporation, shares
of preferred stock may be issued in the future by the Company without
stockholder approval and upon such terms and conditions, and having such rights,
privileges and preferences, as the Board may determine in the exercise of its
business judgment. The rights of the holders of Common Stock will be subject to,
and may be adversely effected by, any preferred stock that may be issued in the
future. The issuance of preferred stock may render more difficult or tend to
discourage a merger, tender offer or proxy contest or the assumption of control
by a holder of a large block of the Company's securities or the incumbent
management. See "Description of Capital Stock -- Preferred Stock."
ABSENCE OF PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Common
Stock, and there can be no assurance given as to the liquidity of the trading
market for the Common Stock, that an active public market will develop for the
Common Stock or that the Common Stock will trade in the public market subsequent
to the Offering at or above the initial public offering price. If an active
public market for the Common Stock does not develop, the market price and
liquidity of the Common Stock may be materially adversely affected. The initial
public offering price of the Common Stock offered hereby will be determined
through negotiations among the Company and the Underwriters and may not be
indicative of the market price for the Common Stock after the Offering. See
"Underwriting." The trading price of the Common Stock could be subject to wide
fluctuations in response to variations in the Company's quarterly operating
results, changes in earnings estimates by analysts, conditions in the Company's
businesses, general market or economic conditions or other factors. In addition,
in recent years the stock market has experienced extreme price and volume
fluctuations. These fluctuations have had a substantial effect on the market
prices for many emerging growth companies, often unrelated to the operating
performance of the specific companies. Such market fluctuations could have a
material adverse effect on the market price of the Common Stock.
DILUTION TO NEW INVESTORS
Investors purchasing shares of Common Stock in the Offering will experience
immediate and substantial dilution in net tangible book value of $14.65 per
share based on an initial public offering price of $15.50 per share. See
"Dilution." To the extent outstanding options to purchase the Company's Common
Stock are exercised, there will be further dilution. See "Management -- Stock
Options."
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THE COMPANY
Lason Systems, Inc., a Michigan corporation and the predecessor to the
Company (the "Predecessor"), was formed in 1985 as a result of a management
buyout of the direct mail division of McKesson Corporation's 3PM subsidiary. The
founders and principal stockholders of the Predecessor were Allen J. Nesbitt,
the current President of the Company and the then Vice President of 3PM, and
Robert A. Yanover, the current Chairman of the Board of the Company and the
founder of 3PM. Annual revenues at the time of the buyout were approximately
$1.0 million, primarily from small, direct mail projects.
Today, the Company employs over 1,150 people, has operations in eight
states and provides services to over 2,200 customers at 15 multi-functional
imaging centers and at 40 facility management sites located on customers'
premises. For the year ended December 31, 1995, and the six months ended June
30, 1996, the Company had net revenues of approximately $46.6 million and $27.1
million, respectively. The Company's strategy has been to offer a wide range of
services to its customers and to use technology to expand its service offerings.
In January 1995, the founders recapitalized the Predecessor (the
"Recapitalization") by selling substantially all of its assets to Lason
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Lason, Inc., which was then named Lason Holdings, Inc. In August 1996, Lason
Holdings, Inc. changed its name to Lason, Inc. After the acquisition, Lason
Acquisition Corp. changed its name to Lason Systems, Inc. and continued the
business operation of the Predecessor. Shortly thereafter, the Company appointed
Gary L. Monroe, the former President of Kodak Imaging Services, Inc., a leading
international imaging business, as Chief Executive Officer of the Company. As
part of the recapitalization, GTCR Fund IV became the majority stockholder of
the Company. Messrs. Yanover and Nesbitt retained a major stock ownership
interest in the Company and continue to be active in its management. In
connection with the Offering, the Company's capital stock will be reclassified.
See "Description of Capital Stock -- The Recapitalization."
Since June 1995, the Company has completed the acquisition of eight
companies. These acquisitions include the acquisition of substantially all of
the assets of Adcom Mailers, Inc. and an affiliated company in June 1995,
substantially all of the assets of Mail-Away Corporation in January 1996,
substantially all of the assets of Diversified Support Services, Inc. in
February 1996, 65% of the outstanding common stock of Delaware Legal Copy, Inc.
in April 1996, 100% of the outstanding common stock of Information & Image
Technology of America, Inc. in July 1996, 80% of the outstanding common stock of
Micro-Pro, Inc. and MP Services, Inc. (two affiliated companies) in July 1996,
100% of the outstanding common stock of Great Lakes Micrographics Corporation in
July 1996 and 100% of the outstanding common stock of National Reproductions
Corp. in August 1996. See "Recent Acquisitions."
Lason, Inc. was incorporated in Delaware in January 1995. The Company's
principal executive office is located at 1305 Stephenson Highway, Troy, Michigan
48083, and its telephone number is (810) 597-5800.
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RECENT ACQUISITIONS
Since June 1995, the Company has completed acquisitions of either
substantially all of the assets or a controlling stock ownership interest in
eight companies (the "Acquired Companies"), which complement the Company's core
competencies. These acquisitions (the "Acquisitions") involve: (i) certain
assets of Adcom Mailers, Inc. and an affiliated company (collectively, "Adcom"),
specializing in the sorting of mass mailings through electronic devices, in June
1995; (ii) substantially all of the assets of Mail-Away Corporation
("Mail-Away"), specializing in overnight and priority mail creation and
distribution services, in January 1996; (iii) substantially all of the assets of
Diversified Support Services, Inc. ("Diversified"), involved in reprographics
facilities management in the Chicago, Illinois and Cleveland, Ohio regional
markets, in February 1996; (iv) 65% of the outstanding common stock of Delaware
Legal Copy, Inc. ("Delaware Legal"), an imaging company and leader in the
litigation support services business in Wilmington, Delaware, in April 1996; (v)
100% of the outstanding common stock of Information & Image Technology of
America, Inc. ("IITA"), involved in providing records management services,
traditional micrographic and scanning and conversion services to the healthcare
and financial services industries, with facilities in Jacksonville, Florida, in
July 1996; (vi) 80% of the outstanding common stock of Micro-Pro, Inc. and MP
Services, Inc., two affiliated companies that the Company intends to merge
(collectively, "Micro-Pro"), involved in providing records management services,
principally in traditional micrographic services, with facilities in the
Rochester, Buffalo and Albany, New York areas, in July 1996; (vii) 100% of the
outstanding common stock of Great Lakes Micrographics Corporation ("Great
Lakes"), a leader in item processing and item research services (check
processing, storage and archiving) for the financial services industry with
facilities in Chicago, Illinois, Indianapolis, Indiana and Grand Rapids,
Kalamazoo and Livonia, Michigan, in July 1996; and (viii) 100% of the
outstanding common stock of National Reproductions Corp. ("NRC"), involved in
providing imaging, reprographics and facilities management services with
facilities in Madison Heights, Detroit and Southfield, Michigan, in August 1996.
In connection with the purchase of certain assets of Adcom, the Company
entered into a consulting agreement with John J. Morad, a former manager of
Adcom (the "Consulting Agreement"). Pursuant to the Consulting Agreement, the
Company retained Mr. Morad to analyze market conditions, consult on supplier
selection and purchase terms, and develop and market the business. The term of
the Consulting Agreement is five years and provides for annual compensation of
$140,000.
The stock purchase agreement with respect to the acquisition of Micro-Pro
(the "Micro-Pro Stock Purchase Agreement") provides that the selling
stockholders (the "Micro-Pro Stockholders") retain 20% of the capital stock of
Micro-Pro. The Micro-Pro Stock Purchase Agreement also provides that at any time
subsequent to the 18 month anniversary of the closing of the acquisition, the
Company may purchase the remaining 20% of the capital stock of Micro-Pro from
the Micro-Pro Stockholders at a formula price based on Micro-Pro's financial
performance for the 12-month period prior to such purchase. If the Company does
not exercise its right to purchase the remaining 20% of the capital stock of
Micro-Pro, at any time after the 30 month anniversary of the closing of the
acquisition, the Micro-Pro Stockholders have the right to cause the Company to
purchase such shares at a lower formula price which is also based on Micro-Pro's
financial performance for the 12-month period prior to such purchase. The
acquisition of the remaining 20% of the capital stock of Micro-Pro, through the
exercise of the Company's call option or the exercise of the Micro-Pro
Stockholders' put option, will be accounted for as the acquisition of a minority
interest using the purchase method of accounting on the date the shares are
acquired.
The stock purchase agreement with respect to the acquisition of Delaware
Legal (the "Delaware Legal Stock Purchase Agreement") provides that one of the
selling stockholders (the "Delaware Legal Stockholder") retains 35% of the
capital stock of Delaware Legal. The Delaware Legal Stock Purchase Agreement
also provides that at any time subsequent to the 18 month anniversary of the
closing of the acquisition, the Company may purchase the remaining 35% of the
capital stock of Delaware Legal at a formula price based on Delaware Legal's
financial performance for the 12-month period prior to such purchase. If the
Company does not exercise its right to purchase the remaining 35% of the capital
stock
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of Delaware Legal, at any time after the 30 month anniversary of the closing of
the acquisition, the Delaware Legal Stockholder holding the remaining 35% of the
capital stock of Delaware Legal has the right to cause the Company to purchase
such shares at a lower formula price also based on Delaware Legal's financial
performance for the 12-month period prior to such purchase. The acquisition of
the remaining 35% of the capital stock of Delaware Legal, through the exercise
of the Company's call option or the exercise of the Delaware Legal Stockholder's
put option, will be accounted for as the acquisition of a minority interest
using the purchase method of accounting on the date the shares are acquired.
The stock purchase agreement with respect to the acquisition of IITA (the
"IITA Stock Purchase Agreement") provides for a purchase price adjustment based
on IITA's financial performance for the period from March 1, 1996 through
February 28, 1997. If IITA's performance exceeds a specified target, the
purchase price will be increased by a percentage equal to the percentage by
which IITA's actual performance exceeded the target, but not more than $945,000,
or will be decreased by a percentage equal to the percentage by which IITA's
actual performance was below the target, but not more than $472,500. The
preceding earnings contingency will be recorded as an adjustment to the purchase
price when the contingency is resolved. The adjustment would increase or
decrease goodwill depending on IITA's actual earnings performance compared to
the target. In addition, $1.26 million of the consideration to be paid by the
Company to the selling stockholders (the "IITA Stockholders") is to be in the
form of Common Stock valued at the initial public offering price. Assuming an
initial public offering price of $15.50 per share, the Company will issue 81,290
shares of Common Stock to the IITA Stockholders. The Company granted to the IITA
Stockholders certain piggy-back registration rights with respect to their Common
Stock exercisable in the event certain of the Existing Stockholders register
more than 25% of their Common Stock. The IITA Stock Purchase Agreement also
provides that for a period of three years from the date work is first performed
for a specified customer by IITA, provided that a binding letter of intent with
such customer is executed within 12 months of the closing, 50% of the net
earnings recognized by IITA from such customer shall be paid to the IITA
Stockholders.
The stock purchase agreement with respect to the acquisition of Great Lakes
(the "Great Lakes Stock Purchase Agreement") provides that $530,000 of the
consideration to be paid by the Company to each of the two selling stockholders
(the "Great Lakes Stockholders") is to be in the form of Common Stock valued at
the initial public offering price. Assuming an initial public offering price of
$15.50 per share, the Company will issue 68,387 shares of Common Stock to the
Great Lakes Stockholders. The Company granted to the Great Lakes Stockholders
certain piggy-back registration rights with respect to their Common Stock
exercisable in the event certain of the Existing Stockholders register more than
25% of their Common Stock. The Great Lakes Stock Purchase Agreement also
provides that each of the Great Lakes Stockholders have the right, beginning six
months after the closing of the acquisition and for the next 30 months
thereafter, to require the Company to purchase all of the Common Stock issued to
such Great Lakes Stockholder in connection with the acquisition then held by
such Great Lakes Stockholder at a price equal to $530,000 minus the amount of
consideration received in connection with any prior sales of such Common Stock
by such Great Lakes Stockholder.
The stock purchase agreement with respect to the acquisition of NRC (the
"NRC Stock Purchase Agreement") provides that $400,000 of the consideration to
be paid by the Company to one of the selling stockholders (the "NRC
Stockholders") is to be in the form of a promissory note issued by the Company
and due on the earlier of the first anniversary of the Company's initial public
offering and October 1, 1997. The promissory note does not bear interest, but is
convertible at any time into Common Stock at a price equal to the initial public
offering price. Assuming an initial public offering price of $15.50 per share,
the promissory note is convertible into 25,806 shares of Common Stock. The NRC
Stock Purchase Agreement also provides that in the event NRC is awarded a
contract for work from a specified customer within six months after the closing
date of the acquisition, the NRC Stockholders will be paid an additional amount
equal to 5% of the gross revenues recognized by NRC from such contract for a
period of three years from and after the commencement of such contract.
18
<PAGE> 20
USE OF PROCEEDS
The net proceeds from the sale by the Company of the 3,000,000 shares of
Common Stock offered hereby will be approximately $42.3 million ($48.8 million
if the Underwriters' over-allotment option granted by the Company is exercised
in full), based upon an assumed initial public offering price of $15.50 per
share and after deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by the Company. The Company intends to use
approximately $30.6 million of such net proceeds to repay a portion of its
indebtedness under the Company's Loan Agreement, dated January 17, 1995, as
amended, with First Union National Bank of North Carolina (the "Credit
Agreement") and approximately $11.7 million to redeem a portion of the Common
Stock owned by GTCR Fund IV. The Company expects to use the net proceeds, if
any, from the sale of Common Stock as a result of the exercise of the
Underwriters' over-allotment option to repay indebtedness outstanding under the
Credit Agreement or the New Credit Agreement (as defined below). Any remaining
net proceeds will be used for general corporate purposes. The Company also
expects to terminate the Credit Agreement shortly after the consummation of the
Offering and to enter into a credit facility with First Union National Bank of
North Carolina (the "New Credit Agreement") in the aggregate amount of $30
million to be used to repay the remaining portion of the indebtedness
outstanding under the Credit Agreement and to finance additional acquisitions,
working capital, capital expenditures and other general corporate purposes.
There can be no assurance that the Company will enter into the New Credit
Agreement. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources -- Credit Agreement and
Borrowings," "Certain Relationships and Related Transactions -- The
Recapitalization," "Description of Credit Agreement" and "Description of Capital
Stock -- The Recapitalization."
The Credit Agreement provides for an aggregate of up to $15 million of term
loans payable in 26 quarterly installments ending June 30, 2001, a $13 million
revolving credit facility, subject to a borrowing base limitation, expiring on
June 30, 2001, an additional $10 million acquisition credit facility expiring on
the earlier of June 30, 2001 or an initial public offering of the Company, and
an interim term loan of up to $8.5 million payable upon the earlier of March 31,
1997 or an initial public offering by the Company. As of July 31, 1996, there
was approximately $12.5 million, $6.9 million and $9.0 million outstanding under
the term loans, the revolving credit facility and the acquisition credit
facility, respectively, with a weighted average annual interest rate of 8.18%,
8.23% and 8.16%, respectively, and no amounts were outstanding under the interim
term loan. The amounts outstanding under the term loans, the revolving credit
facility and the acquisition credit facility were used to finance the
acquisition of Lason Systems, Inc., for working capital and to finance the
acquisitions of Delaware Legal, IITA, Great Lakes and Micro-Pro, respectively.
See "Certain Relationships and Related Transactions -- Acquisition of Lason
Systems, Inc." and "Recent Acquisitions." In August 1996, the Company borrowed
approximately $8.2 million under the interim term loan in connection with the
acquisition of NRC. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources -- Credit
Agreement and Borrowings" and "Description of Credit Agreement."
DIVIDEND POLICY
The Company currently intends to retain any earnings to finance operations
and expansion and, therefore, does not anticipate paying any cash dividends on
the Common Stock in the foreseeable future. Future cash dividends, if any, will
be determined by the Board and will be based upon the Company's earnings,
capital requirements, financial condition and other factors deemed relevant by
the Board. The Credit Agreement does not permit the payment of dividends without
the consent of the lenders. See "Description of Credit Agreement." Except for
the payment of certain constructive dividends in connection with the Offering,
the Company has not paid any cash or other dividends on its capital stock.
19
<PAGE> 21
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1996, (i) giving effect to the Reclassification and the Stock Split as
discussed in "Description of Capital Stock -- The Recapitalization" ("Actual"),
(ii) pro forma to give effect to each of the Acquisitions not closed by June 30,
1996, as if each had occurred as of June 30, 1996 ("Pro Forma") and (iii) as
adjusted to give effect to the sale by the Company of the 3,000,000 shares of
Common Stock offered hereby at an assumed initial public offering price of
$15.50 per share and the application of the estimated net proceeds therefrom as
described in "Use of Proceeds" ("As Adjusted"). This table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," Pro Forma Financial Information and the Consolidated
Financial Statements appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
-----------------------------------
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(UNAUDITED, IN THOUSANDS)
<S> <C> <C> <C>
Short-term debt and current portion of long-term debt......... $ 2,000 $ 3,225 $ 1,225
======== ======== ========
Long-term debt, less current portion.......................... $19,146 $35,925 $ 7,292
Common stock with a put option................................ 1,060 1,060
Stockholders' equity:
Preferred Stock, $0.01 par value; 5,000,000 shares
authorized, no shares issued and outstanding............. -- -- --
Common Stock, $0.01 par value; 20,000,000 shares authorized,
5,012,785, 5,162,462 and 8,162,462 shares issued and
outstanding (Actual, Pro Forma and As Adjusted,
respectively)............................................ 50 51 81
Additional paid-in capital.................................. 8,622 9,881 40,484
Loans to stockholders....................................... (628) (628) --
Retained earnings........................................... 3,064 3,064 2,695
-------- -------- --------
Total stockholders' equity............................... 11,108 12,368 43,260
-------- -------- --------
Total capitalization................................... $32,254 $52,578 $52,837
======== ======== ========
</TABLE>
20
<PAGE> 22
DILUTION
The net tangible book value (deficit) of the Company as of June 30, 1996,
was approximately $(24.5 million), or $(4.15) per share of Common Stock. Net
tangible book value (deficit) per share is equal to the Company's total tangible
assets less its total liabilities, divided by the number of shares of Common
Stock outstanding not giving effect to the redemption of 755,933 shares of
Common Stock upon consummation of the Offering. After giving effect to the sale
by the Company of 3,000,000 shares of Common Stock offered hereby at an assumed
initial public offering price of $15.50 per share and the application of the
estimated net proceeds therefrom as described under "Use of Proceeds," including
the redemption of the 755,933 shares of Common Stock, the pro forma net tangible
book value of the Company at June 30, 1996, would have been approximately $6.9
million, or approximately $.85 per share. This represents an immediate increase
of $5.00 per share in the net tangible book value to existing stockholders and
an immediate dilution of $14.65 per share in the net tangible book value to new
investors purchasing Common Stock in the Offering. The following table
illustrates the per share dilution to new investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.............. $15.50
Net tangible book value (deficit) per share before
the Offering............................................ (4.15)
Increase per share attributable to new investors........... $ 5.00
-------
Pro forma net tangible book value per share after the
Offering................................................... .85
-------
Dilution per share to new investors.......................... $14.65
=======
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1996,
the number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price per share paid by the existing
stockholders and new investors, adjusted to give effect to the sale of 3,000,000
shares of Common Stock offered hereby at an assumed initial public offering
price of $15.50 per share, and before deducting estimated underwriting discounts
and commissions and estimated offering expenses payable by the Company:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)............. 5,918,395 66% $13,325,115 22% $ 2.25
New investors........................ 3,000,000 34 46,500,000 78 15.50
---------- ---- ----------- -----
Total(1)........................... 8,918,395 100% $59,825,115 100%
========== ==== =========== =====
</TABLE>
- ------------
(1) Does not give effect to the redemption of 755,933 shares of Common Stock
upon consummation of Offering. See "Description of Capital Stock -- The
Recapitalization."
21
<PAGE> 23
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data of the
Company and financial data of its Predecessor. The selected consolidated data
for the Company as of and for the year ended December 31, 1995, and selected
financial data for the Predecessor as of and for the years ended December 31,
1993 and 1994, has been derived from the consolidated financial statements of
the Company and the financial statements of the Predecessor, respectively,
included elsewhere in this Prospectus and which have been audited by Coopers &
Lybrand LLP, independent public accountants, as indicated in their reports
included elsewhere in this Prospectus. The selected financial data for the
Predecessor as of and for the years ended December 31, 1991 and 1992, has been
derived from financial statements of the Predecessor audited by other
independent accountants and not included in this Prospectus. The selected
consolidated financial data for the Company for the six months ended June 30,
1995 and 1996, has been derived from unaudited consolidated financial
statements, included elsewhere in this Prospectus, that include, in the opinion
of management, all adjustments (consisting of normal recurring adjustments)
necessary to fairly present the data for such periods. Data for the six months
ended June 30, 1996, is not necessarily indicative of future results. The table
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," the Pro Forma Financial
Information, the consolidated financial statements of the Company and the
financial statements of the Predecessor and related notes to each, and the other
financial information included elsewhere in this Prospectus.
SELECTED CONSOLIDATED FINANCIAL DATA
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------------------------------------ -------------------------
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------
HISTORICAL PRO FORMA
------------------------------------------------------ AS ADJUSTED
1991 1992 1993 1994 1995 1995(1)
------ ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues, net of postage............................. $9,909 $18,852 $31,151 $41,151 $46,605 $75,052
Cost of revenues..................................... 6,484 13,176 20,684 27,238 31,227 53,314
Gross profit......................................... 3,425 5,676 10,467 13,913 15,378 21,738
Selling, general and administrative expenses......... 2,207 3,139 6,980 8,377 9,406 14,260
Compensatory option expense.......................... -- -- -- -- 308 976
Amortization of intangibles.......................... -- 87 163 266 817 1,396
------ -------- -------- -------- -------- --------
Income from operations............................... 1,218 2,450 3,324 5,270 4,847 5,106
Interest expense..................................... 54 83 126 185 1,760 683
Other (income) expense, net.......................... (23) 93 (21) (21) (66) (107)
------ -------- -------- -------- -------- --------
Income before taxes.................................. 1,187 2,274 3,219 5,106 3,153 4,530
Provision for income taxes........................... -- -- -- -- 1,139 1,693
------ -------- -------- -------- -------- --------
Net income........................................... $1,187 $ 2,274 $ 3,219 $ 5,106 $ 2,014 $ 2,837
====== ======== ======== ======== ======== ========
Primary and fully diluted earnings per share(2)...... $ .32 $ .33
======== ========
Pro forma compensatory option expense(3)............. -- -- -- -- 441 --
Pro forma provision for income taxes(4).............. 429 821 1,162 1,843 -- --
------ -------- -------- -------- -------- --------
Pro forma net income................................. $ 758 $ 1,453 $ 2,057 $ 3,263 $ 1,573 $ 2,837
====== ======== ======== ======== ======== ========
Pro forma primary and fully diluted earnings per
share............................................... $ .25 $ .33
Weighted average number of common and common
equivalent shares outstanding....................... 6,248 8,644
-------- --------
<CAPTION>
COMPANY
-------------------------------------
SIX MONTHS ENDED JUNE 30,
-------------------------------------
HISTORICAL PRO FORMA
------------------- AS ADJUSTED
1995 1996 1996(1)
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues, net of postage............................. $23,695 $27,089 $41,677
Cost of revenues..................................... 15,484 17,696 28,895
Gross profit......................................... 8,211 9,393 12,782
Selling, general and administrative expenses......... 4,563 5,273 7,579
Compensatory option expense.......................... 32 167 131
Amortization of intangibles.......................... 465 379 669
-------- -------- --------
Income from operations............................... 3,151 3,574 4,403
Interest expense..................................... 764 885 330
Other (income) expense, net.......................... (78) (25) (145)
-------- -------- --------
Income before taxes.................................. 2,465 2,714 4,218
Provision for income taxes........................... 890 992 1,520
-------- -------- --------
Net income........................................... $ 1,575 $ 1,722 $ 2,698
======== ======== ========
Primary and fully diluted earnings per share(2)...... $ .25 $ .28 $ .31
======== ======== ========
Pro forma compensatory option expense(3)............. 142 422 --
Pro forma provision for income taxes(4).............. -- -- --
-------- -------- --------
Pro forma net income................................. $ 1,433 $ 1,300 $ 2,698
======== ======== ========
Pro forma primary and fully diluted earnings per
share............................................... $ .23 $ .21 $ .31
Weighted average number of common and common
equivalent shares outstanding....................... 6,248 6,244 8,640
-------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------------------------------------ -------
DECEMBER 31,
------------------------------------------------------
HISTORICAL
------------------------------------------------------
1991 1992 1993 1994 1995
------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................................... $2,098 $ 2,444 $ 3,307 $ 3,218 $ 4,911
Total assets.................................................. 4,671 10,814 13,877 15,692 37,309
Long-term obligations, less current portion................... 159 65 320 261 18,547
Total stockholders' equity.................................... 3,163 4,934 6,567 6,623 9,214
<CAPTION>
COMPANY
-----------------------------------------
JUNE 30, 1996
-----------------------------------------
PRO
ACTUAL FORMA(5) AS ADJUSTED(6)
------- -------- --------------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................................... $ 5,791 $ 5,336 $ 7,964
Total assets.................................................. 40,684 65,612 65,871
Long-term obligations, less current portion................... 19,146 35,925 7,292
Total stockholders' equity.................................... 11,108 12,368 43,260
</TABLE>
- ------------
(1) Gives effect to the Acquisitions, the Offering and the application of the
net proceeds from the Offering as if each had occurred as of January 1,
1995. See "Use of Proceeds" and Pro Forma Financial Information.
(2) Historical earnings per share are not presented for the Predecessor as such
information is not representative of the capital structure of the Company.
(3) Gives effect to a noncash expense, net of tax, related to the accelerated
vesting of compensatory stock options granted to certain officers and
directors. See "Risk Factors -- Charges Relating to Compensatory Stock
Options," "Management -- Stock Options" and Note 13 to the Notes to the
Consolidated Financial Statements.
(4) From its inception to January 17, 1995, the Company was an S corporation
and, accordingly, was not subject to federal and state income taxes. The pro
forma provision for income taxes has been computed as if the Company was
subject to federal and state corporate income taxes for the periods
presented and based on the statutory tax rates then in effect. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note 7 to the Notes to the Consolidated Financial
Statements.
(5) Gives effect to the Acquisitions as if each had occurred as of June 30,
1996. See Pro Forma Financial Information.
(6) Gives effect to the Acquisitions, the Offering and the application of the
net proceeds from the Offering as if each had occurred as of June 30, 1996.
See "Use of Proceeds" and Pro Forma Financial Information.
22
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements of the Company and the related notes, the Pro
Forma Financial Information of the Company and the related notes, and the other
related financial information included elsewhere in this Prospectus. The
discussion in this section of the Prospectus contains forward-looking statements
that involve risks and uncertainties. The Company's actual results could differ
materially from those discussed herein. Factors that could cause or contribute
to such differences include, but are not limited to, those discussed in "Risk
Factors" and "Business," as well as those discussed elsewhere in this section
and elsewhere in this Prospectus.
OVERVIEW
The Company provides integrated outsourcing services for records
management, document management and business communications. The Company's
records management services include specialized solutions relating to the
process of scanning and converting documents and other inputs to a variety of
digital formats and micrographic services. The Company's document management
services include high-volume, quick turn-around optical and digital printing and
fulfillment, as well as facility management operations at customer sites. The
Company's business communications services provide customers with a reliable and
cost-effective method of distributing statements, reports and letters to
consumers and other target audiences. See "Business."
For the year ended December 31, 1995, and the six months ended June 30,
1996, the Company had net revenues of approximately $46.6 million and $27.1
million, respectively. The Company's strategy has been to offer a wide range of
services to its customers and to use technology to expand its service offerings.
Prior to 1992, the Company's growth was principally the result of internal
expansion of its direct mail operations. The Company began offering facility
management services in 1992, which during the period from 1992 through 1994,
provided a substantial component of the Company's growth. Since 1994, increases
in the Company's collection letter operations and scanning and conversion
services, which became practicable as a result of advances in digital
technology, have been significant components of the Company's growth. Since June
1995, the Company has acquired eight companies. The Company believes it has
developed an infrastructure and strategy to successfully integrate acquired
companies into its financial, purchasing and operating systems. The Company
believes that it can serve as a consolidator of the highly fragmented document
management services industry and that it can achieve economies of scale through
volume purchasing, enhanced facilities utilization and consolidation of support
staff and infrastructure. The Company's objective is to cross-sell its full
range of services to its existing customer base and to the customer base of
acquired companies. See "Recent Acquisitions" and "Business -- Acquisition
Strategy."
The Company's revenues are generally recorded when it provides the goods or
services specified by a customer. Revenues are presented net of postage since
postage and similar delivery costs are generally passed through for
reimbursement directly from the customer. Costs of revenues consist principally
of wages and related benefits associated with providing the Company's services,
paper products and related supplies, and building and equipment expenses. The
price of paper increased significantly during 1995 and early 1996, and the
Company generally has not been able to change its prices to customers to include
increases in paper prices. Selling, general and administrative expenses include
wages and related benefits associated with the Company's executive and middle
management, marketing and selling activities (principally wages and related
costs), and financial and other administrative expenses.
23
<PAGE> 25
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
financial data of the Company as a percentage of net revenues:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-------------- -----------------------------------------------------
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------------------- -----------------------------
PRO FORMA PRO FORMA
AS ADJUSTED AS ADJUSTED
1993 1994 1995 1995 1995 1996 1996
----- ----- ----- ----------- ----- ----- -----------
(UNAUDITED)
--------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net revenues........................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues.................... 66.4 66.2 67.0 71.0 65.3 65.3 69.3
Gross profit........................ 33.6 33.8 33.0 29.0 34.7 34.7 30.7
Selling, general
and administrative expenses....... 22.4 20.4 20.2 19.0 19.3 19.5 18.2
Income from operations.............. 10.7 12.9 10.4 6.8 13.3 13.2 10.6
Net income.......................... 10.3 12.4 4.3 3.8 6.6 6.4 6.5
</TABLE>
PRO FORMA SIX MONTHS ENDED JUNE 30, 1996
Pro forma net revenues were approximately $41.7 million for the six months
ended June 30, 1996, including consolidated revenues of the Company and the
Acquisitions.
The pro forma gross profit for the six months ended June 30, 1996 was
approximately $12.8 million, or 30.7% of pro forma net revenues, which is lower
than actual gross profit percentage primarily due to the sales mix and lower
economies of scale of the Acquired Companies.
Selling, general and administrative expenses on a pro forma basis were
approximately $7.6 million, or 18.2% of pro forma net revenues for the six
months ended June 30, 1996. This amount includes a reduction in compensation
expenses of $366,000 for the six months ended June 30, 1996 related to the
Acquisitions. The reduction is a result of the renegotiation of compensation
arrangements with the former owners prior to, or in connection with, the
closings of the Acquisitions.
Amortization of approximately $669,000 includes $284,000 related to
amortized pro forma goodwill and covenants not to compete resulting from the
Acquisitions.
Interest expense was $885,000 before the pro forma adjustment for the six
months ended June 30, 1996. This expense includes interest on borrowings of the
Company and borrowings to finance the Acquisitions closed before June 30, 1996.
The pro forma adjustment to decrease interest expense assumes that a portion of
the proceeds of the Offering will be used to repay a portion of the Company's
outstanding indebtedness. See "Use of Proceeds."
Pro forma income tax expense has been estimated at $1.5 million for the six
months ended June 30, 1996. This amount represents an effective tax rate of
36.0%, which includes applicable anticipated federal and state tax expenses of
the Acquisitions. For future periods, the Company anticipates filing as a
consolidated group, including the Acquisitions, for federal income tax purposes.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1995
Net Revenues. Net revenues increased 14.3% from approximately $23.7 million
in the six months ended June 30, 1995 to approximately $27.1 million in the
comparable 1996 period. The approximate $3.4 million increase resulted
principally from growth in the Company's event-driven direct mail, collection
letter processing, and document conversion revenues of approximately $1.6
million, $500,000 and $1.0 million, respectively. In addition, the areas showing
the largest percentage period
24
<PAGE> 26
over period growth were digital imaging (79%, from approximately $970,000 to
approximately $1.7 million), digital graphics (61%, from approximately $290,000
to approximately $460,000) and collection letter processing (20%, from
approximately $2.6 million to approximately $3.1 million).
Gross Profit. Gross profit increased from approximately $8.2 million in the
six months ended June 30, 1995 to approximately $9.4 million in the comparable
1996 period primarily as a result of increased net revenues. Gross profit as a
percentage of net revenues was 34.7% for both periods.
Selling, General and Administrative. Selling, general and administrative
expenses increased from approximately $4.6 million for the six months ended June
30, 1995 to approximately $5.2 million in the comparable 1996 period. As a
percentage of net revenues, selling, general and administrative expenses
increased from 19.3% in the six months ended June 30, 1995 to 19.5% for the
comparable 1996 period. The increase in selling, general and administrative
expenses as a percentage of net revenues was primarily due to an increase of
approximately $400,000 in administrative expenses as a result of the hiring of
several key executives in late 1995 and in the six months ended June 30, 1996,
including Messrs. Monroe and Rauwerdink and a vice president of operations.
Amortization. Amortization of intangibles expense decreased from
approximately $465,000 in the six months ended June 30, 1995 to approximately
$379,000 in the comparable 1996 period. The decrease primarily resulted from
completion in 1995 of the amortization of purchase price allocated to a three
year supply agreement.
Interest. Interest expense increased from approximately $764,000 in the six
months ended June 30, 1995 to approximately $885,000 in the comparable 1996
period. The increase primarily resulted from an increase in average borrowings
related to the Company's growth and the Acquisitions.
YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED DECEMBER 31, 1994
Net Revenues. From 1994 to 1995, net revenues increased from approximately
$41.2 million to approximately $46.6 million, an increase of approximately $5.4
million or 13.1%. The increase resulted principally from growth in the Company's
collection letter processing, facilities management and document conversion
revenues of approximately $2.0 million, $1.2 million and $1.0 million,
respectively. In addition, the areas showing the largest percentage period over
period growth were collection letter processing (58%, from approximately $3.4
million to approximately $5.4 million), digital imaging (84%, from approximately
$1.0 million to approximately $1.9 million) and micrographics (33%, from
approximately $3.2 million to approximately $4.2 million). In general, of the
total revenue increase in 1995, approximately 60% was the result of increases in
sales to existing customers and approximately 40% of the increase was due to
sales to new customers.
Gross Profit. From 1994 to 1995, gross profit increased from approximately
$14.0 million to approximately $15.4 million, an increase of approximately $1.4
million or 10.0%. Gross profit as a percentage of net revenues decreased from
33.8% in 1994 to 33.0% in 1995. The decrease in gross profit as a percentage of
net revenues primarily resulted from an increase of approximately $1.0 million
in the cost of paper and related products, partially offset by increased
operating efficiencies.
Selling, General and Administrative. From 1994 to 1995, selling, general
and administrative expenses increased from approximately $8.4 million to
approximately $9.4 million, an increase of approximately $1.0 million or 11.9%.
In connection with the 1995 Recapitalization, the Company recorded approximately
$275,000 in non-recurring professional services and other expenses. Also in
1995, several key executives were hired, including Mr. Monroe and a vice
president of operations, resulting in an increase of approximately $300,000 in
administrative expenses. As a percentage of net revenues, selling, general and
administrative expenses decreased from 20.4% in 1994 to 20.2% in 1995. The
decrease in selling, general and administrative expenses as a percentage of net
revenues primarily resulted from increased revenues without a proportionate
increase in expenses.
Amortization. From 1994 to 1995, amortization of intangible assets
increased from approximately $266,000 to $817,000. The increase primarily
resulted from the amortization of intangibles created as a
25
<PAGE> 27
result of the GTCR Fund IV investment and the 1995 Recapitalization. See "The
Company" and "Certain Relationships and Related Transactions."
Interest. From 1994 to 1995, interest expense increased from $185,000 to
approximately $1.8 million. The increase in interest expense primarily resulted
from borrowings incurred as part of the 1995 Recapitalization and growth in the
Company's business. See "The Company" and "Certain Relationships and Related
Transactions."
YEAR ENDED DECEMBER 31, 1994 COMPARED WITH YEAR ENDED DECEMBER 31, 1993
Net Revenues. From 1993 to 1994, net revenues increased from approximately
$31.2 million to approximately $41.2 million, an increase of approximately $10
million or 32.1%. The $10 million increase resulted principally from growth in
the Company's event-driven direct mail, collection letter processing,
micrographics and facilities management revenues of approximately $1.8 million,
$1.7 million, $3.3 million and $300,000, respectively. In addition, the areas
showing the largest percentage period over period growth were collection letter
processing (104%, from approximately $1.7 million to approximately $3.4
million), micrographics (66%, from approximately $1.9 million to approximately
$3.2 million), facilities management (37%, from approximately $8.8 million to
approximately $12.1 million) and event-driven direct mail (36%, from
approximately $4.9 million to approximately $6.7 million). In general, of the
total revenue increase in 1994, approximately 80% was due to growth of sales to
existing customers and approximately 20% of the increase was due to sales to new
customers.
Gross Profit. From 1993 to 1994, gross profit increased from approximately
$10.4 million to approximately $14.0 million, an increase of approximately $3.6
million or 34.6%. Gross profit as a percentage of net revenues increased from
33.6% in 1993 to 33.8% in 1994. The increase in gross profit as a percentage of
net revenues primarily resulted from increases in facilities management and
collection letter margins.
Selling, General and Administrative. From 1993 to 1994, selling, general
and administrative expenses increased from approximately $7.0 million to
approximately $8.4 million, an increase of approximately $1.4 million or 20.0%.
As a percentage of net revenues, selling, general and administrative expenses
decreased from 22.4% in 1993 to 20.4% in 1994. The decrease in selling, general
and administrative expenses as a percentage of net revenues primarily resulted
from increased revenues without a proportionate increase in expenses.
Amortization. From 1993 to 1994, amortization of intangible assets
increased from approximately $163,000 to approximately $266,000. The increase
primarily resulted from increased amortization of intangibles related to
acquired businesses.
Interest. From 1993 to 1994, interest expense increased from approximately
$126,000 to approximately $185,000. The increase primarily resulted from
increased borrowings related to growth of the Company's business.
SELECTED QUARTERLY INFORMATION
The following tables set forth certain unaudited quarterly financial data
of the Company for each of the four fiscal quarters in 1994 and 1995, and the
first and second fiscal quarters in 1996. The information for each of these
quarters is prepared on the same basis as the consolidated financial statements
of the Company and the financial statements of the Predecessor and related notes
included elsewhere in this Prospectus and include, in the opinion of management,
all adjustments (consisting of normal recurring adjustments) necessary to fairly
present the data for such periods. The information in the following tables is
not necessarily indicative of future results. See "Risk Factors -- Effect of
Potential Fluctuations in Quarterly Operating Results; Seasonality." The tables
should be read in conjunction with "Selected Consolidated Financial Data," the
consolidated financial statements of the
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<PAGE> 28
Company and the financial statements of the Predecessor and related notes, and
the other financial information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
QUARTERS ENDED
(UNAUDITED, IN THOUSANDS)
--------------------------------------------------------------------------------------------------------------
PREDECESSOR COMPANY
------------------------------------------ ----------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1994 1994 1994 1994 1995 1995 1995 1995 1996 1996
-------- -------- --------- -------- -------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
INCOME DATA:
Net revenues..... $10,241 $10,203 $ 9,992 $10,715 $11,764 $11,931 $11,525 $11,385 $13,005 $14,084
Cost of
revenues....... 6,540 6,935 6,742 7,021 7,588 7,729 7,927 7,983 8,659 9,037
Gross profit..... 3,701 3,268 3,250 3,694 4,176 4,202 3,598 3,402 4,346 5,047
Selling, general
and
administrative
expenses....... 2,151 1,987 2,004 2,235 2,375 2,220 2,205 2,606 2,491 2,782
Income from
operations..... 1,542 1,272 1,239 1,217 1,597 1,779 1,189 282 1,597 1,977
</TABLE>
<TABLE>
<CAPTION>
QUARTERS ENDED
(UNAUDITED)
--------------------------------------------------------------------------------------------------------------
PREDECESSOR COMPANY
------------------------------------------ ----------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1994 1994 1994 1994 1995 1995 1995 1995 1996 1996
-------- -------- --------- -------- -------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
INCOME DATA AS
A PERCENTAGE OF
NET REVENUES:
Net revenues..... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of
revenues....... 63.9 68.0 67.5 65.5 64.5 64.8 68.8 70.1 66.6 64.2
Gross profit..... 36.1 32.0 32.5 34.5 35.5 35.2 31.2 29.9 33.4 35.8
Selling, general
and
administrative
expenses....... 21.0 19.5 20.1 20.9 20.2 18.6 19.1 22.9 19.2 19.8
Income from
operations..... 15.1 12.5 12.4 11.4 13.6 14.9 10.3 2.5 12.3 14.0
</TABLE>
- ------------
Income from operations in the fourth quarter of 1995 compared to other
periods presented includes an increase in administrative expenses of
approximately $230,000 due to the recruitment, hiring and relocation of certain
key executives, including Mr. Monroe and a vice president of operations,
approximately $260,000 in noncash compensatory stock option expense, primarily
resulting from the hiring of certain key executives, and approximately $400,000
in various expense accruals.
Revenues from the Company's services are subject to quarterly variations.
Net revenues can vary from period to period due to the effect of the timing of
specific projects. Quarterly results may also vary as a result of the timing of
acquisitions, if any, and the timing and magnitude of costs related to such
acquisitions. See "Risk Factors -- Effect of Potential Fluctuations in Quarterly
Operating Results; Seasonality" and "-- Fluctuations in Paper Prices."
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operations and acquisitions through a
combination of cash flow from operations, bank borrowings and the issuance of
shares of Common Stock.
OPERATING ACTIVITIES
Net cash provided by operating activities decreased $4.4 million from $5.7
million in 1994 to $1.3 million in 1995. The decrease resulted primarily from:
(i) an approximate $3.1 million decrease in net
27
<PAGE> 29
income between 1995 and 1994; (ii) a net increase in accounts receivable and
income tax refund receivable of approximately $2.7 million; (iii) an approximate
$1.0 million increase in supplies and prepaid expenses and other. This decrease
was partially offset by noncash charges of approximately $1.8 million for
depreciation and amortization, $781,000 for deferred income taxes and $308,000
for compensatory stock option expense.
Net cash provided by operating activities increased approximately $1.1
million from $1.3 million in 1995 to $2.4 million for the six months ended June
30, 1996. This increase was due primarily to collections on accounts receivable,
a federal income taxes refund and increased customer deposits.
INVESTING AND FINANCING
Net cash flows used in investing activities were approximately $1.8
million, $1.8 million and $2.8 million for the years ended December 31, 1994 and
1995 and the six months ended June 30, 1996, respectively. The net cash flows
used in investing activities resulted primarily from: (i) payments for assets of
acquired companies of approximately $1.0 million, $1.4 million and $1.6 million
during the years ended December 31, 1994 and 1995 and the six months ended June
30, 1996, respectively; and (ii) capital expenditures of approximately $758,000,
$1.1 million and $1.2 million during the years ended December 31, 1994 and 1995
and the six months ended June 30, 1996, respectively.
Net cash flows (used in) provided by financing activities were
approximately $(3.9) million, $(224,000) and $974,000 for the years ended
December 31, 1994 and 1995 and the six months ended June 30, 1996, respectively.
The approximate $(3.9) million net cash flows used in financing activities
during 1994 resulted primarily from an approximate $5.2 million distribution to
shareholders partially offset by approximately $1.2 million in short term bank
borrowings. Substantially all of the net cash flows (used in) provided by
financing activities for the year ended December 31, 1995 and the six months
ended June 30, 1996 were provided under the Credit Agreement.
CREDIT AGREEMENT AND BORROWINGS
On January 17, 1995, the Company and First Union National Bank of North
Carolina (the "Bank") entered into a Credit Agreement, pursuant to which the
Bank provided for an aggregate of $15 million of term loans payable in 26
quarterly installments ending June 30, 2001 and a $10 million revolving credit
facility, subject to a borrowing base limitation, expiring on June 30, 2001. The
Company had unused and available revolving credit of approximately $3.0 million
and approximately $697,000, at December 31, 1995 and June 30, 1996,
respectively. In July 1996, the Credit Agreement was amended to include an
additional $10 million acquisition credit facility, expiring on the earlier of
June 30, 2001 or an initial public offering by the Company. To finance the
Acquisitions closed after June 30, 1996 other than NRC, the Company borrowed an
additional $7.5 million under the acquisition credit facility and, at July 31,
1996, had unused and available revolving credit of approximately $2.4 million.
In addition, in August 1996, the Company amended the Credit Agreement to provide
for up to an additional $8.5 million of interim term loans, payable upon the
earlier of March 31, 1997 or an initial public offering by the Company, and
borrowed approximately $8.2 million under the interim term loan facility in
connection with the acquisition of NRC. In August 1996, the Company also amended
the Credit Agreement to increase the existing $10 million revolving credit
facility to $13 million. At August 31, 1996, the Company had approximately $40.2
million of debt outstanding. See "Description of Credit Agreement," Pro Forma
Financial Information and Note 6 to the Notes to the Consolidated Financial
Statements. Borrowings under such facilities are secured by all of the assets of
the Company.
Upon consummation of the Offering, the Company plans to repay a portion of
its outstanding indebtedness under its Credit Agreement using a portion of the
net proceeds from the Offering. The Company also expects to terminate the Credit
Agreement shortly after consummation of the Offering and to enter into the New
Credit Agreement with the Bank providing for a revolving line of credit of up to
$30 million to be used to repay the remaining portion of the indebtedness
outstanding under the Credit Agreement and to finance additional acquisitions,
working capital, capital expenditures and
28
<PAGE> 30
other general corporate purposes. The New Credit Agreement would expire on June
30, 1999. Interest on amounts outstanding, if any, under the New Credit
Agreement will be calculated using rates determined at the time of borrowing.
Borrowings would bear interest at rates ranging from a base percentage rate plus
1.25% (9.5% at June 30, 1996) to a LIBOR plus 1.0% (6.6875% at June 30, 1996),
depending upon the Company's leverage ratio. The Company would pay a monthly fee
at an annual rate of 0.25% of the unused balance on the New Credit Agreement.
The Company would not be required to make principal payments prior to the end of
the term of the proposed loan. Borrowings, if any, under the New Credit
Agreement would be collateralized by substantially all of the Company's assets.
The New Credit Agreement would contain restrictions on the acquisition of stock
or assets, disposal of assets, incurrence of other liabilities, minimum
requirements for cash flow and certain financial ratios. There can be no
assurance, however, that such New Credit Agreement will be obtained or that, if
obtained, it will be on terms that are favorable to the Company or sufficient
for the Company's needs. See "Description of Credit Agreement."
The Company expects that amounts available under the expected New Credit
Agreement will be used to implement its acquisition program. However, the
Company expects that additional funds may be required in the future to
successfully continue its acquisition program. Promptly after the consummation
of the Offering, the Company expects to register 2,500,000 shares of Common
Stock for use as consideration in future acquisitions.
CAPITAL EXPENDITURES
The Company continues to invest in capital equipment, principally to
improve its reprographic capability and capacity. The Company has expended
approximately $1.1 million, $800,000, $1.1 million and $1.2 million for capital
equipment for the years ended December 31, 1993, 1994 and 1995, and the six
months ended June 30, 1996, respectively. At June 30, 1996, the Company had no
commitments to purchase equipment. The Company expects to make additional
capital expenditures of up to approximately $1.0 million in 1996, none of which
is pursuant to a firm commitment. Capital expenditures will generally be funded
from operations.
RECENT ACQUISITIONS
The Company's liquidity and capital resources have been significantly
affected by acquisitions and, given the Company's acquisition strategy, may be
significantly affected for the foreseeable future. To capitalize on the industry
consolidation opportunity, the Company has adopted a more active acquisition
strategy. See "Recent Acquisitions," "Business -- Acquisition Strategy" and Pro
Forma Financial Information. Since June 1995, the Company has acquired eight
companies. The Company has to date financed its acquisitions with borrowings
under the Credit Agreement, with shares of its capital stock and with cash from
operations. Borrowings for acquisitions during 1995 and the first six months of
1996 totaled $1.4 million and $2.0 million, respectively. In addition, the
Company borrowed approximately $7.5 million in July 1996 to fund certain of the
Acquisitions and approximately $8.2 million in August 1996 to fund the
acquisition of NRC. See "Recent Acquisitions."
As of June 30, 1996, on a pro forma basis, after giving effect to the
Acquisitions, the Recapitalization, the application of the net proceeds from the
Offering and the repayment of $6.3 million of indebtedness using funds from the
New Credit Agreement, the Company would have had an aggregate of $23.7 million
available under its proposed New Credit Agreement. See "Use of Proceeds,"
"-- Credit Agreement and Borrowings" and Pro Forma Financial Information.
FUTURE CAPITAL NEEDS
The Company's ability to obtain cash adequate to fund its needs depends
generally on the results of its operations and the availability of financing.
Management believes that cash flow from operations, in conjunction with
borrowings from existing and possible future credit facilities and the net
proceeds from the Offering, will be sufficient at least through the end of 1998
to meet debt service requirements,
29
<PAGE> 31
make possible future acquisitions, and fund capital expenditures. However, there
can be no assurance in this regard or that the terms available for any future
financing, if required, would be favorable to the Company.
INFLATION
Certain of the Company's expenses, such as wages and benefits, occupancy
costs and equipment repair and replacement, are subject to normal inflationary
pressures. Although the Company to date has been able to offset inflationary
cost increases through increased operating efficiencies, there can be no
assurance that the Company will be able to offset any future inflationary cost
increases through similar efficiencies or increased charges for its products and
services.
EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS
Stock-Based Compensation. In October 1995, the FASB issued Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation," which requires adoption of the disclosure provisions no later
than fiscal years beginning after December 15, 1995 and adoption of the
measurement and recognition provisions for non-employee transactions no later
than after December 15, 1995. The new standard defines a fair value method of
accounting for the issuance of stock options and other equity instruments. Under
the fair value method, compensation cost is measured at the grant date based on
the fair value of the award and is recognized over the service period, which is
usually the vesting period. Pursuant to SFAS No. 123, companies are encouraged,
but not required, to adopt the fair value method of accounting for employee
stock-based transactions. Companies are also permitted to continue to account
for such transactions under Accounting Principles Board Opinion ("APB") No. 25,
"Accounting for Stock Issued to Employees," but would be required to disclose in
a note to the financial statements pro forma net income and per share amounts as
if the company had applied the new method of accounting. SFAS No. 123 also
requires increased disclosures for stock-based compensation arrangements
regardless of the method chosen to measure and recognize compensation for
employee stock-based arrangements. The Company has elected to continue to
account for such transactions under APB No. 25 and will disclose the required
pro forma effect on net income and earnings per share.
Long-Lived Assets. SFAS No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Assets to be Disposed of" is effective for fiscal
years beginning after December 15, 1995. The statement establishes standards for
measuring impairment losses of long-lived assets, certain identifiable
intangibles and goodwill related to those assets to be held and those to be
disposed of. The Company does not expect the adoption of SFAS No. 121 to have a
material effect on its financial position or results of operations.
30
<PAGE> 32
BUSINESS
The discussion in this section of the Prospectus contains forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially from those discussed herein. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
in "Risk Factors" and "Management's Discussion of Financial Condition and
Results of Operations," as well as those discussed elsewhere in this section and
in this Prospectus.
OVERVIEW
Lason provides integrated outsourcing services for records management,
document management and business communications. The investments the Company has
made in imaging and communications technology, personnel, equipment and systems
over the past decade have given it the capabilities and expertise to meet the
growing and increasingly complex document management requirements of its
customers. The Company primarily serves customers in the manufacturing,
healthcare, financial services and professional services industries. The
Company's core competencies in input processing, data management and output
processing enable it to provide a broad range of services across a wide range of
media types and allow customers to fulfill their document management outsourcing
needs with a single vendor. For the year ended December 31, 1995 and the six
months ended June 30, 1996, the Company had net revenues of approximately $46.6
million and $27.1 million, respectively. Today, the Company employs over 1,150
people, has operations in eight states and provides services to over 2,200
customers at 15 multi-functional imaging centers and at 40 facility management
sites located on customers' premises. The Company's strategy has been to offer a
wide range of services to its customers and to use technology to expand its
service offerings.
The document management industry is highly fragmented, consisting of a
large number of small companies providing limited service offerings. Therefore,
an important element of the Company's growth strategy is to make selected
acquisitions of companies with complementary technologies or customer bases to
consolidate its position as a provider of complete document management services.
Since June 1995, the Company has acquired eight companies. The Company will
continue to seek and evaluate additional acquisition opportunities. See "Recent
Acquisitions."
Lason's service offerings generally can be divided into the areas of
records management, document management and business communications. The
Company's records management services include the scanning and converting of
documents from a variety of input media to a digital format. The Company also
provides traditional microfilm and microfiche services. The Company's newest
records management offering, Visions computer output to laser disk ("COLD")
service, provides laser disk storage and retrieval of records. The Company's
document management services include high-volume, quick turn-around optical and
digital printing, as well as facility management operations at customer sites.
The Company's newest document management service offering, Lason Document
Express (print on demand), allows documents to be stored digitally, accessed
on-line and printed and distributed locally or centrally, depending on end-user
requirements. The Company's business communications services provide customers
with rapid, reliable and cost-effective methods for making large-scale
distributions of statements, reports and letters to consumers and other target
audiences in response to specific events. The Company also provides customized
processing services for over 400 collection agencies located throughout the
United States.
Lason believes that companies will continue to increase their use of
outsourced document management services. To efficiently manage complex or large
volumes of documents, a customer would be required to make investments in
equipment and technology which may only be fully utilized occasionally by a
single user. Through outsourcing, companies can avoid this capital investment,
as well as the risks of obsolescence that arise from rapid changes in document
management technology. As companies seek to focus on their core competencies and
maximize asset utilization, they are increasingly turning to outside parties who
have the technological expertise, service focus, rapid turn-around capacity and
full range of capabilities necessary to efficiently manage complex or large
volumes
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<PAGE> 33
of documents. In addition, the Company believes that customers will seek a
single vendor capable of furnishing all or many of their document management
needs rather than relying on multiple vendors with varying areas of expertise.
MARKET AND INDUSTRY OVERVIEW
The Company believes the market for its services is growing due to a
variety of factors including: (i) continuing advancements in computer,
networking, facsimile, printing and other technologies which have greatly
facilitated the production and distribution of documents; (ii) government
regulations that require lengthy document retention periods and rapid
accessibility for many types of records; (iii) increased customer expectations
of low cost access to records on short notice at different locations; and (iv)
an increasingly litigious society, necessitating access to relevant documents
and records for extended periods. In addition, the Company's customer base of
manufacturing firms, healthcare institutions, professional service firms and
financial institutions routinely generate large volumes of documents that
require efficient processing, distribution, storage and retrieval. The Company
believes that these customer segments have increased, and will continue to
increase, their outsourcing of document management services in order to maintain
a focus on core operating competencies and revenue generating activities, reduce
fixed costs, including labor and equipment costs, and gain access to new
technologies without incurring the expense and risk of near-term obsolescence of
such technologies.
The Company also believes that the market for its services will expand as
technology evolves for the scanning and conversion of paper or microfilm
documents into digital formats. Electronic imaging is generally used because of
the storage media's high speed of retrieval, its multiple indexing and text
search formatting capabilities, its ability to be used to distribute electronic
documents to multiple locations and, once input, its lower cost per retrieval.
The Company believes that many of the small businesses with which it
competes lack the capital for expansion; cannot keep abreast of rapidly changing
technologies; lack the ability to manage large, complex projects; lack effective
marketing programs; and are unable to meet the needs of large, geographically
dispersed customers. As a result of these barriers to continued growth, the
Company believes that many owners of such competing firms will be receptive to
being acquired by the Company as a means of providing the owners of such
companies with liquidity. In addition, to the extent the Company finances all or
a portion of the purchase price by issuing shares of Common Stock, the Company
will also be providing such owners with an opportunity to participate in the
potential growth of the Company.
BUSINESS STRATEGY
The Company's goal is to become a national, single source provider of
document management, records management and business communication services for
its customers. To achieve this goal, the Company intends to implement a focused
business strategy based on the following elements:
Provide a broad range of services that will allow both existing and
new customers to secure all of their needed document management services
from one source. The Company's broad range of services and its significant
investment in technology and capacity enables it to compete successfully
for large, complex projects for large customers because it has capabilities
that its competitors lack. The Company intends to focus on obtaining
additional business by offering its full service capabilities to firms now
being serviced by several document management service companies with a
limited range of service offerings and by enabling customers to consolidate
various vendor relationships into a single relationship with the Company.
Implement a comprehensive marketing program to facilitate the
cross-selling of additional services to customers who are now purchasing
only a limited number of services and to develop national brand recognition
of the quality of Lason's services. The Company has leveraged its existing
customer relationships to sell its other document management services. For
example, the
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<PAGE> 34
Company has been able to expand customer relationships initially developed
through its facilities management services into providing a full range of
document management services. Moreover, the successful development of a
national brand image for Lason will enhance the sales potential of acquired
companies, thus increasing the benefits of integrating these acquired
companies into the Lason system and strengthening Lason's attractiveness as
a potential acquiror.
Make selective acquisitions to further broaden its geographic reach,
customer base and technological capabilities and to attain economies of
scale in purchasing, facilities utilization and management. The Company's
strategy is to serve as a consolidator of the highly fragmented document
management services industry. Since its founding in 1985, the Company has
acquired several companies which have expanded its services offerings and
increased its technological capabilities. Since June 1995, the Company has
acquired eight companies involved in records management, duplication,
conversion services, facilities management, item processing and item
research, micrographics, litigation support document management services,
electronic sorting of mass mailings and mail creation and distribution. The
Company intends to acquire additional companies with attractive,
complementary customer bases or technologies. The Company's goal is to
increase the utilization of its assets and to cross-sell additional
services through acquired companies. See "Risk Factors -- Risks of
Acquisitions and Failure to Integrate Acquired Businesses" and "-- Risk of
Inadequate Financing for Future Acquisitions," "Recent Acquisitions" and
"Business -- Acquisition Strategy."
Develop additional high value-added applications, such as Lason
Document Express, digital imaging services and COLD, within its core
services offerings. The Company has developed a variety of technologically
advanced products and services that provide creative solutions to difficult
customer problems. Examples of these high value-added applications are
Lason Document Express, an electronic print-on-demand system that allows
documents to be stored digitally, accessed on-line and printed and
distributed locally or centrally depending on end-user requirements,
Visions computer output to laser disk ("COLD") system, which writes
computer output files to an optical disk; and digital imaging services,
which involves the conversion of paper or film documents to digital
information through optical scanners.
Develop scalable applications utilizing an open architecture and
modular approach that will enable the Company to service the unique needs
of various customers across a broad range of volume requirements. To meet
the diverse needs of its current and potential customers, the Company
utilizes an open architecture and modular approach in developing its
applications and incorporates the equipment of a variety of hardware and
software manufacturers. The modular aspects of the Company's technology and
approach enable it to combine different portions of its document management
technologies and capacities in numerous configurations to meet the diverse
and changing document management needs of its customers. In addition, the
scalable aspects of the Company's technology permit the Company to process
both large and small volumes of documents in a cost-effective manner.
Scalability of its applications is also important with respect to acquired
companies. Because Lason's technology is applicable to both large and small
production volumes, acquired companies will be able to apply and benefit
immediately from Lason's technology regardless of their current production
volumes and will be able to benefit in the future as they are able to
obtain customers with diverse volume needs.
ACQUISITION STRATEGY
The Company believes that it can serve as a consolidator of the highly
fragmented document management services industry and that it can achieve
economies of scale through volume purchasing, enhanced facility utilization and
consolidation of support staff and infrastructure. Moreover, the Company
believes that it can enhance revenues by cross-selling its full range of
services to the customer bases of these acquired companies and that it can
expand its geographic presence across the United States by acquiring document
management services providers in new geographic markets. The
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<PAGE> 35
Company's long-term strategy is to establish a series of regional hubs each
capable of providing the full range of services now provided by the Company's
Detroit area facilities.
The Company was founded in 1985 as a result of a management buyout of the
direct mail division of McKesson Corporation's 3PM subsidiary. Since then, the
Company has acquired several companies which have expanded the Company's service
offerings and increased its technological capabilities. As a result, the Company
believes it has developed a formula for successfully integrating acquired
companies into its financial, purchasing and operating systems. Since June 1995,
the Company has acquired eight companies. See "Recent Acquisitions."
In the future, the Company's acquisition strategy will target companies
that provide the opportunity for continued growth in its core service areas. The
Company's acquisition strategy will focus on companies (i) that have proven
operating track records, solid management teams, and strong customer franchises
that could benefit from Lason's technology and broad product and service
offerings; (ii) that have an existing presence in the Company's core
competencies to build economies of scale through volume purchasing and
facilities utilization; and (iii) that expand the Company's customer base and
thereby increase its cross-selling opportunities. In addition, where
appropriate, the Company intends to transform certain of its acquired facilities
into regional hubs to market the Company's services in various major North
American business markets.
PRODUCTS AND SERVICES
The Company's strategy is to offer a broad range of document management
services across a wide variety of media types and formats, thereby permitting
customers to consolidate their document management needs with a single vendor.
This broad range of document management services and capabilities enables the
Company to provide integrated solutions to its customers' complex document
management needs. Although there is significant overlap, the Company's service
offerings generally can be divided into the areas of records management,
document management and business communications.
Records Management
Companies are increasingly utilizing electronic document storage and
retrieval (DSR) systems to manage their business records as the cost of such
technology declines and the benefits become more apparent. The Company provides
electronic document conversion services to convert paper documents to a digital
format both at the time of initial implementation of a DSR program and on an
ongoing basis. The Company possesses the capability to convert documents from a
wide variety of input media or formats to a wide variety of output media or
formats, including traditional micrographic conversion services. Lason also
offers DSR system services that a customer can use as an alternative to
developing and purchasing its own DSR system. The records management area
represented approximately 16.8%, 20.1% and 19.5% of the Company's net revenues
for the years ended December 31, 1993, 1994 and 1995, respectively. Services
generally included in this area are:
- Document Conversion Services
The Company's experience and capabilities enable it to provide a broad
range of document conversion services with respect to a wide variety of
input and output formats, including digital, film, CD-ROM, optical disk,
magnetic disk, magnetic tape, aperture card and hardcopy, including
engineering drawings.
Electronic Document Conversion. A company implementing a DSR program
frequently faces the challenge of converting hundreds of thousands to
millions of paper and/or microfilm documents to digital format. These paper
and microfilm documents can be converted to indexed digital images or,
using optical character recognition technology, into electronically
recognizable text. Lason's investment in advanced document scanners and
imaging software combined with its experience in scanning and converting
documents typically enables the Company to perform this
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<PAGE> 36
document conversion process more efficiently and in significantly less time
than a potential customer. The Company's technical support staff is skilled
at assisting customers in developing customized indexing systems and
selecting optimal file formats and naming conventions.
Micrographic Document Conversions. The Company also performs
traditional micrographic conversions including the conversion of paper
documents into microfilm images, film processing, and computer-based
indexing and formatting of microfilm images. Micrographic services often
are selected as a cost competitive technology to paper based systems in
order to reduce the physical size of stored records, for their long term
(typically over 100 years) archival capabilities, and as an intermediate
step in certain imaging or reprographic applications.
- Electronic Document Storage and Retrieval
The Company has developed a flexible electronic DSR system that
enables Lason's customers to obtain the benefits of electronic document
storage and retrieval without developing and purchasing their own DSR
system. Electronic storage of documents enables customers to immediately
access large volumes of documents that would be impossible using
conventional filing systems. DSR systems also provide rapid distribution of
archived information to multiple destinations and remove the logistical
burden and cost of archiving paper documents. Lason's DSR system enables it
to store and index a customer's digital documents whether the document was
converted to digital format or was originally produced in digital format.
The system used to index and store documents produced by computers on a
laser disk is commonly referred to as a computer output to laser disk
("COLD") system. A COLD system is particularly useful for companies which
need to rapidly locate documents produced on disparate computer systems and
programs, such as are found in very large companies with multiple
independently functioning departments or companies with a high level of
customer service activity. Because stored documents can be indexed by
several criteria, a customer can use simple but exacting computer search
techniques to rapidly access individual documents or groups of documents.
For example, one customer utilizes the Company's DSR system to enable its
employees to retrieve particular invoices from the millions of invoices the
customer has stored on the system. Traditionally, such invoices were
written to microfilm and stored in file cabinets. Without a DSR system,
accessing and retrieving such invoices was a time consuming manual
operation. An additional key feature of the Lason DSR system is that it
permits total storage capacity to be incrementally increased through the
addition of modular storage units.
The Company's capability to convert documents from a wide variety of input
media or formats to a wide variety of output media or formats and its electronic
document storage and retrieval capabilities position the Company to be a single
source provider of the records management services for potential customers. The
Company plans to continue investing in and developing the capabilities and
flexibility of its DSR system in an effort to make it increasingly attractive to
potential customers to outsource their records management to the Company instead
of developing and purchasing their own DSR system.
Document Management
The Company provides a broad range of services that enable it to meet
customers' document management needs. The Company offers on-site facilities
management services to manage those document management services which are most
efficiently provided at a customer's facility. Higher volume and/or more complex
document management services are performed at the Company's centralized imaging
centers. The document management area represented approximately 40.5%, 38.3%
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<PAGE> 37
and 36.9% of the Company's net revenues for the years ended December 31, 1993,
1994 and 1995, respectively. Services generally included in this area are:
- On-Site Facilities Management
The Company can equip, staff and manage most aspects of a customer's
document management needs at a customer's facility. In addition to copying
and printing, Lason employees perform file room maintenance, engineering
drawing and record retention, decentralized copier management, facility
mail and courier services and address list maintenance. Typically, the
Company will operate its own satellite production center (called a Lason
Servicenter) on the customer's premises. By working in partnership with a
customer at the customer's facility, the Company and the customer
frequently identify additional ways the Company can help meet the
customer's document management needs both on-site and at the Company's
centralized imaging centers. In one instance, a manufacturing customer
originally engaged the Company solely to provide equipment and personnel to
manage its on-site photocopying needs at one of its facilities. Today, the
Company provides that customer with on-site supply stock, facility mail and
courier services and also provides that customer with electronic document
conversion of invoices, printing of training and product manuals using the
Document Express system, large volume mailings of promotional and product
information to customers, large format color plotting and offset printing
of forms at Lason's imaging centers. The Company established its first
Lason Servicenter in 1992 and currently provides on-site services at 40
facilities in Michigan, Illinois, Ohio and Tennessee.
- High-Volume Reprographics/Distribution
The Company through its imaging centers provides high-volume,
quick-turn reprographics services 24 hours a day, seven days a week. The
Company currently processes an average of six million pages per month. In
addition, the Company possesses the capability to handle reprographic
projects involving microfiche and engineering drawings, including
conversion services. For example, each day the Company receives on average
approximately 2,500 engineering drawings from a manufacturing customer that
the Company reproduces using various large format and small format document
duplicators. The resulting images are then distributed to approximately 50
of the customer's suppliers. These capabilities are important enablers of
other services provided by the Company, such the Lason Document Express
print on demand service and performing overnight and peak demand
reprographics services for the Company's on-site facilities management
customers.
- Lason Document Express Print On Demand System
The Lason Document Express print on demand system enables customers to
cost-effectively produce and distribute large volumes of a document on 24
hours notice. The customer supplies the Company with either an electronic
copy of a document or a hard copy of the document, which the Company
converts to an electronic copy, which is then stored on the Lason Document
Express system. The customer can then use its own computer system to place
a print order, including production amount and distribution method and
location, and the Company completes the print and distribution process.
The Lason Document Express system offers an alternative to traditional
printing methods for companies which produce documents that are subject to
frequent revision or unpredictable demand. Since conventional offset
printing requires large production runs to produce high quality documents
in a cost-effective manner, a company which utilizes offset printing to
print such documents incurs a high risk that it will find itself with a
costly inventory of outdated and useless documents. In addition, the
flexibility of the Lason Document Express system provides customers an
ability to increase the quality of their product offerings by enabling them
to make document enhancements (such as corrections or improvements to
product manuals) which would otherwise be prohibitively expensive. The
Company believes that the demand for print on demand services by
manufacturers and financial and insurance institutions will continue to
increase as technological advances create ever-shorter product life cycles
and ever-increasing product variation.
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<PAGE> 38
Customers frequently use the Lason Document Express system to print
and distribute documents such as product manuals, training manuals,
technical documentation and employee benefit books. For example, a customer
which operates computer training centers nationwide uses the Lason Document
Express system to print training manuals for its classes. When a training
class is scheduled, the customer places an order for the manuals to be used
in the class the day before the class begins, thereby ensuring that the
number of manuals printed matches closely the number of students enrolled
in the class. Another customer, which manufactures robotic systems, uses
the Lason Document Express system to produce the customized product manuals
and technical documentation which accompany each of its customized robotics
applications.
- Digital Graphics
A staff of computer graphics design and printing professionals use
advanced computer technology to provide digital graphics services,
including design and printing of high resolution full color graphics,
electronic publishing and production of camera-ready art for offset
printing. Applications range from document covers and graphics to courtroom
exhibits and promotional signage of any size. Digital graphics services are
an important component of the Company's single source strategy and are an
important enabler of other services provided by the Company.
The Company's experience in working with customers at their facilities to
manage all aspects of the customers' on-site document management needs and its
capability to fulfill almost any document copying, printing or distribution need
at its imaging centers position the Company to be a single source provider of
document management services for potential customers. The Company's continuing
investment in and development of advanced high-speed document production
hardware and software and three-shift operation of its imaging centers enables
the Company to produce high quality documents while leveraging economies of
scale and 24-hour utilization of equipment. The Company plans to continue to
develop and market products such as the Lason Document Express system which make
it easier for customers to access and use the Company's document printing and
distribution capabilities and the economies of scale the Company possesses at
its imaging centers.
Business Communications
The Company offers a variety of personalized direct response services to
its customers. The direct response services are characterized by quick
turn-around, large volume, and highly personalized business correspondence
written to invoke a response rather than create a sale. The business
communications area represented approximately 42.7%, 41.6% and 43.6% of the
Company's net revenues for the years ended December 31, 1993, 1994 and 1995,
respectively. Services generally included in this area are:
- Collection Letter Processing
The Company's Priority Gram collection letter service is a nationally
recognized multi-function program designed to accelerate payment from the
debtor to the creditor. The Company works with 15 leading software
providers to provide credit institutions with an effective system of debt
collection communications. Customers of this service have the flexibility
of using Lason's format or the customer's own letterhead and text in their
collection letters. Over 500 customers utilize the process, and 20 million
letters, including collection letters, are generated each month.
- Event-Driven Direct Mail
The Company develops customized programs for its customers to support
event-driven response requirements, such as product recall and credit card
solicitation campaigns. For example, the Company currently provides
declination letter and incomplete application letter processing with
respect to credit card applications for a leading credit card company. Such
letters can be generated on a daily basis as the status of the customer's
application file requires.
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- Co-Mingling of Mail
By combining volumes of like mail from all of its customers and
presorting such mail to United States Postal Service specifications, the
Company is able to generate significant postal discounts for its customers.
Over 95% of Lason's mail is sorted to the lowest postal discount category
available through the United States Postal Service. Each customer enjoys
the maximum postal discounts allowed for First Class Mail regardless of the
volume of mail sent by such customer. The Company can incorporate these
savings in quotes to customers on its services. Furthermore, over 90% of
all mail processed in the Company's mailing centers is directly produced by
Lason.
The Company's experience and capabilities in letter creation and mail
handling position it for continued leadership in business communications, and
the Company plans to continue investing in and developing such capabilities in
the future.
Integrated Solutions
The Company's wide range of document management, conversion and
distribution capabilities and an experienced staff of image and information
management professionals enable it to provide integrated solutions to customers'
complex document management needs.
Many of the litigation support solutions provided by the Company are based
on both its electronic document conversion and its print on demand capabilities.
The rules of discovery permit each party involved in a law suit to request
documents gathered in support of the litigation by the other party. A large
manufacturer involved in hundreds of product liability litigations concerning
the same alleged product defect engaged the Company when it experienced
difficulty in meeting court-established deadlines for production of discovery
documents and in accurately producing the documents requested. In this case, the
customer possessed millions of pages of discoverable documents. The solution
provided by the Company was to convert each of the discovered documents (in
paper form) to digital images which were then indexed and stored on the Lason
Document Express system. When a litigant requests certain discovery documents
(in many cases, hundreds of thousands of pages at a time), the customer uses the
Lason Document Express system to place an on-line order to the Company to print
the desired documents and to distribute them to the requesting litigant.
Typically, the Company can fulfill each order by the next day. The Lason
Document Express system not only ensures that every page is properly printed,
but also provides such features as automatically printing identifying
information (such as Bates numbers) on each page, printing confidential
watermarks and automatically shrinking oversized documents to fit on
standard-sized pages.
The Company has used both its electronic document conversion and
high-volume, quick turn-around printing capabilities to provide solutions for
banks engaged in mortgage lending. When one of the nation's largest mortgage
lenders decided to convert from conventional to electronic storage, it
confronted the challenge of converting approximately 60,000 mortgage files, each
containing approximately 20 to 27 documents. The bank engaged the Company to
perform this electronic document conversion project. In 10 weeks, the Company
converted approximately 60,000 mortgage loan files (or approximately five
million pages) to digital images that were stored on CD-ROM and indexed and
formatted for use on the bank's own DSR system. During the project, the bank
sold approximately 20,000 of the 60,000 mortgage loans. The loan files
representing the sold loans were randomly interspersed among the files which had
been or were about to be converted by the Company. To complete the mortgage sale
transaction, the bank needed hardcopies of certain of the original mortgage
documents for each mortgage sold, typically five documents per loan file. The
Company was able to provide the bank with a more attractive solution than
manually retrieving and copying the necessary files. The Company was able to use
the CD-ROM it had created to identify the required documents and retrieve and
transfer such documents to a separate CD-ROM for delivery to the mortgage loan
purchaser.
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CUSTOMERS
The Company currently has approximately 2,200 customers primarily in the
manufacturing, healthcare, financial services and professional services
industries. The Company services accounts of all sizes, from small business and
professional groups to Fortune 100 companies. The Company's customers include
General Motors Corporation, Ford Motor Company, Trans Union Corporation,
Chrysler Corporation, International Business Machines Corp., First Chicago NBD,
Compuware, Colonial National Bank, Oakwood Hospital and Detroit Medical Center.
Historically, a majority of the Company's revenues have been from the major
domestic automobile manufacturers. The three major domestic automobile
manufacturers accounted for approximately 76.4%, 71.1%, 65.2% and 59.1% of the
Company's net revenues for the years ended December 31, 1993, 1994 and 1995, and
for the six months ended June 30, 1996, respectively. Other than General Motors
Corporation and Ford Motor Company, which accounted for approximately 48.6% and
11.8% of the Company's net revenues, respectively, no customer accounted for
more than 10% of the Company's net revenues for the year ended December 31,
1995. On a pro forma basis, for the year ended December 31, 1995, and the six
months ended June 30, 1996, General Motors Corporation accounted for
approximately 30.7% and 27.2%, respectively, Ford Motor Company accounted for
approximately 13.5% and 13.6%, respectively, and Chrysler Corporation accounted
for approximately 3.0% and 2.8%, respectively, of the Company's net revenues.
See "Selected Consolidated Financial Information."
SALES AND MARKETING
The Company's sales efforts are handled primarily through its in-house
direct sales staff of 32 located in six states. Twenty-five sales
representatives concentrate on the sales of document and records management
services and seven sales representatives concentrate on sales of business
communications services. In addition to its direct sales force, the Company
markets its products through the efforts of its value-added-resellers, which
include FileNet Corp., Zylab International, Inc., Macro Computer Products Inc.
(MacroSoft) and Unisys Corp., and through certain of its suppliers, including
Canon Inc., Eastman Kodak Co. and Ameritech Corp. The Company also employs full
time customer service representatives to assist customers. Sales representatives
and service representatives are assigned to each major customer project.
Historically, the Company's sales representatives have focused their sales
and marketing efforts on a particular area of the Company's service offerings.
Although the Company intends to maintain sales representatives with application
specific expertise, the Company is in the process of consolidating its sales and
marketing efforts. The Company has recently hired an executive vice president of
marketing and sales to coordinate the integration of the Company's sales and
marketing efforts across service types and geographic regions. The Company
believes that an integrated sales force will enhance cross selling opportunities
within the Company's customer base. The Company's sales approach emphasizes a
high level of customer services, personal relationship development and customer
solution selling. The Company intends to maintain separate national account
managers for large customers, and sales and service personnel maintain daily
contact with major accounts and interact extensively with customer and Company
operations staff to address customer needs.
COMPETITION
The Company's businesses are highly competitive. A significant source of
competition is the in-house document handling capability of the Company's target
customer base. In addition, with respect to those services that are outsourced,
the Company competes with a variety of competitors, including large national or
multinational companies, which have greater financial resources than the
Company, and smaller regional or local companies. The Company's major
competitors, in addition to various regional competitors, include ALCO Standard
Corp., Pitney Bowes Management Services, Inc. (a subsidiary of Pitney Bowes,
Inc.) and Xerox Business Services with respect to its document management
services; Dataplex Corp., F.Y.I. Incorporated and ALCO Standard Corp. with
respect to its records management services; and First Financial Management Corp.
(First Image), Sun Guard
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Mailing Services and Diversified Data & Communications with respect to its
business communications services.
The Company believes that the principal competitive factors in document
management services include quality and accuracy, reliability and security of
service, reputation, ease of use, customer support and service, customer segment
specific knowledge, speed, capacity and price.
PROPRIETARY RIGHTS AND PROCESSES
The Company regards the systems, information and know-how underlying its
services as proprietary and relies primarily on a combination of contract, trade
secrets, confidentiality agreements and contractual provisions to protect its
proprietary rights. The Company's business is not materially dependent on any
patents. Despite the Company's efforts to protect its proprietary rights,
unauthorized parties may attempt to obtain and use information that the Company
regards as proprietary, and policing unauthorized use of the Company's
proprietary information is difficult. Litigation may be necessary for the
Company to protect its proprietary information and could result in substantial
cost to, and diversion of efforts by, the Company.
The Company is not aware that any of its proprietary rights infringe the
proprietary rights of third parties. Any infringement claims, whether with or
without merit, can be time consuming and expensive to defend or may require the
Company to enter into royalty or licensing agreements or cease the allegedly
infringing activities. The failure to obtain such royalty agreements, if
required, and the Company's involvement in such litigation could have a material
adverse effect on the Company's business, financial condition and results of
operations.
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FACILITIES
As of August 30, 1996, including the Acquisitions, the Company conducted
operations through 21 leased facilities in seven states containing in the
aggregate approximately 329,860 square feet. The Company's principal facilities
are summarized in the following table:
<TABLE>
<CAPTION>
APPROXIMATE
LOCATION SQUARE FOOTAGE USE
- ------------------------------------------------- -------------- ----------------------------
<S> <C> <C>
Livonia, MI (Amrhein Street)..................... 72,000 Business communications
Madison Heights, MI.............................. 49,900 Document and records
management
Troy, MI......................................... 47,050 Document and records
management, headquarters
Livonia, MI (Schoolcraft Road)................... 27,460 Business communications
Jacksonville, FL (Bayberry Road)................. 26,505 Document and records
management
Jacksonville, FL (Victor Street)................. 20,000 Document and records
management
Detroit, MI (Larned Street)...................... 20,000 Document and records
management
St. Clair Shores, MI............................. 16,345 Document and records
management
Detroit, MI (Eight Mile Road).................... 10,000 Retail
Rochester, NY.................................... 8,200 Document and records
management
Livonia, MI (Stark Road)......................... 5,700 Item processing and item
research
Chicago, IL...................................... 5,200 Document and records
management
</TABLE>
Leases vary in length remaining from month-to-month to 72 months and, in
some cases, include options to extend the lease term. The Schoolcraft Road
property in Livonia, Michigan is leased from an affiliate of the Company. See
"Certain Relationships and Related Transactions" and Note 8 to the Notes to the
Consolidated Financial Statements. The lease with respect to the Troy, Michigan
facility expires on December 31, 1996. The Company is currently negotiating an
extension of such lease. The Company believes it will be able to renew the
existing lease without incurring significant increases in expenses.
The Company believes that its success to date has been, and future results
of operations will be, dependent in large part upon its ability to provide
prompt and efficient services to its customers. Certain of the Company's
operations are performed at a single location and are dependent on continuous
computer, electrical and telephone service. As a result, any disruption of the
Company's day-to-day operations could have a material adverse effect upon the
Company. The Company currently has business interruption insurance intended to
mitigate the impact of floods, fire, power outages or similar disasters. In
addition, the Company has redundant telephone lines and rerouting capabilities
to separate telephone exchanges to guard against the possible temporary loss of
phone service in connection with the servicing of customers. The Company also
has a back-up generator at its Livonia facilities to serve as an alternative
power supply in the event of any power outage. Notwithstanding the foregoing,
there can be no assurance that a fire, flood, earthquake, power loss, phone
service loss or other disaster affecting one or more of the Company's facilities
would not disable these functions. Any significant damage to any such facility
or other failure that causes significant
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interruptions in the Company's operations may not be covered by insurance and
could have a material adverse effect on the Company's business, financial
condition and results of operations.
REGULATION
The Company's customers involved in debt collection and certain of the
Company's services as used by those customers, such as collection letter
processing, are subject to various consumer protection laws, including the
Federal Fair Debt Collection Practices Act ("FDCPA"). The format and wording of
many of the collection letters distributed by the Company, including its
Priority Gram, are developed by the Company. In 1977, Congress enacted the FDCPA
to curtail abusive, deceptive and unfair debt collection practices committed by
debt collectors. The FDCPA in general prohibits harassment, false
representations and unfair practices, including limitations on the acceptable
format and wording of letters, envelopes and other communications from debt
collectors to debtors. The FDCPA provides for civil liability for the violation
of its provisions. The maximum liability exposure in a class action would be
$1,000 for each named individual and such amount as the court may allow for
other class members, not to exceed the lesser of $500,000 or 1% of the net worth
of the debt collector plus costs and reasonable attorneys' fees. In addition to
the FDCPA, the Company's debt collector customers may be subject to various
state statutes and regulations. Such regulations may afford greater protection
to consumers than the FDCPA.
Although the Company believes that it is not subject to the FDCPA because
it is not a debt collector and although there are no contractual rights to
indemnification from the Company to its debt collection customers with respect
to such actions, a customer of the Company subject to, and in violation of, the
FDCPA or similar laws in connection with services provided by the Company to
such customer may ask the Company for indemnification for any losses the
customer may incur in connection with such violation. If such indemnification is
required or the Company is determined to be liable for any violation of such
laws, it could have a material adverse effect on the Company's business,
financial condition or results of operations.
LITIGATION
The Company is, from time to time, a party to legal proceedings arising in
the normal course of its business. Management believes that none of the legal
proceedings currently outstanding will have a material adverse effect on the
Company's business, financial condition or results of operations.
From time to time, certain of the Company's customers are subject to claims
or are parties to litigation under various consumer protection laws involving
services supplied by the Company for such customers. These actions sometimes
relate to the form and content of collection letters distributed by the Company,
which in many cases are developed by the Company. There can be no assurance that
the Company will not be made a party to any such litigation or that, although
there are no contractual rights to indemnification, the Company will not be
asked to indemnify such customers for losses such customers incur in connection
with any such claim or litigation. Any such occurrence could have a material
adverse effect on the Company's business, financial condition or results of
operations. See "-- Regulation."
ENVIRONMENTAL MATTERS
The Company is subject to federal, state and local laws, regulations and
ordinances that: (i) govern activities or operations that may have adverse
environmental effects, such as discharges to air and water, as well as handling
and disposal practices for solid and hazardous wastes; or (ii) impose liability
for the costs of cleaning up, and certain damages resulting from, sites of past
spills, disposal or other releases of solid wastes and hazardous substances.
The Company is not currently aware of any environmental conditions relating
to present or past waste generation at or from these facilities that would be
likely to have a material adverse effect on the business, financial condition or
results of operations of the Company. However, there can be no
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assurances that environmental liabilities in the future will not have a material
adverse effect on the business, financial condition or results of operations of
the Company.
EMPLOYEES
As of July 1, 1996, including the Acquisitions, the Company had 969
employees, 67 of which were employed primarily in management and administration.
Included in the total number of employees are 167 part-time and 31 temporary
employees. The Company also uses the services of an additional 205 people under
the terms of a personnel leasing arrangement. No employees of the Company are
represented by a labor union. The Company considers its relations with its
employees to be good.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning the Company's
Directors and executive officers as of July 31, 1996:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- --- ---------------------------------------------------
<S> <C> <C>
Robert A. Yanover.................. 60 Chairman and Director
Gary L. Monroe..................... 42 Chief Executive Officer and Director
Allen J. Nesbitt................... 49 President and Director
William J. Rauwerdink.............. 46 Executive Vice President, Chief Financial Officer,
Treasurer and Secretary
Brian E. Jablonski................. 40 Executive Vice President of Marketing and Sales
Donald M. Gleklen.................. 59 Director
Bruce V. Rauner.................... 40 Director
Joseph P. Nolan.................... 32 Director and Assistant Secretary
</TABLE>
Robert A. Yanover has served as Chairman of the Board and as Director of
the Company since its inception. Mr. Yanover also serves as president of
Computer Leasing Company of Michigan, Inc. See "Certain Relationships and
Related Transactions." Mr. Yanover is founder and former president of 3PM, the
predecessor of the Company. See "The Company." Mr. Yanover holds a B.S. degree
in Physics from Harvard College.
Gary L. Monroe has served as Chief Executive Officer of the Company since
February 1996 and as a Director of the Company since he joined the Company in
September 1995. From September 1995 to February 1996, Mr. Monroe served as
Executive Vice President of the Company. From May 1992 to September 1995, Mr.
Monroe served as President of Kodak Imaging Services, Inc., a subsidiary of
Eastman Kodak Co. From August 1990 to May 1992, Mr. Monroe served as Director of
Finance and Strategic Planning of the Health Sciences Division of Eastman Kodak
Co. Mr. Monroe holds a B.A. degree from William Patterson College and an M.B.A.
degree from Rutgers University.
Allen J. Nesbitt has served as President and as a Director of the Company
since its inception. From 1977 to 1985, Mr. Nesbitt served as Vice President of
3PM, the predecessor of the Company. See "The Company." Mr. Nesbitt holds a B.A.
degree from Central Missouri State University.
William J. Rauwerdink has served as Executive Vice President, Chief
Financial Officer, Treasurer and Secretary of the Company since he joined the
Company in May 1996. From February 1993 to April 1995, Mr. Rauwerdink served as
Executive Vice President, Chief Financial Officer and Treasurer of The MEDSTAT
Group, Inc., a publicly traded company in the healthcare information industry.
Mr. Rauwerdink was a Partner with the Detroit office of the international
accounting and consulting firm of Deloitte & Touche from 1983 to 1993. He is a
certified public accountant. Mr. Rauwerdink holds a B.B.A. degree from the
University of Wisconsin - Madison and an M.B.A. degree from Harvard University.
See "-- Certain Legal Proceedings."
Brian E. Jablonski has served as Executive Vice President of Marketing and
Sales since he joined the Company in July 1996. From 1992 until June 1996, Mr.
Jablonski served as Vice President, Sales and Marketing of Kodak Imaging
Services, Inc., a subsidiary of Eastman Kodak Co. From 1979 to 1992, Mr.
Jablonski held various positions at Eastman Kodak Co., including Branch Business
Manager, District Sales Manager and Director -- Markets Development Electronic
Printing and Publishing. Mr. Jablonski holds a B.S. degree in Business
Management from St. John Fisher College.
Donald M. Gleklen has served as a Director of the Company since August
1995. Mr. Gleklen has served as the President of Jocard Financial Services, Inc.
since February 1995. From March 1994 to February 1995, Mr. Gleklen served as the
special counsel to Robert J. Brobyn & Associates, Attorneys
44
<PAGE> 46
at Law. From September 1984 to March 1994, Mr. Gleklen served as Senior Vice
President -- Corporate Development of Mediq Incorporated, a publicly traded
company in the healthcare industry. Mr. Gleklen is also a director of Gandalf
Technologies, Inc., Nutramax Products, Inc., NewWest Eyeworks, Inc. and
Microleague Multimedia, Inc.
Bruce V. Rauner has served as a Director of the Company since January 1995.
Mr. Rauner is a principal and has been with Golder, Thoma, Cressey, Rauner, Inc.
("GTCR"), an affiliate of GTCR Fund IV, since 1981. Mr. Rauner is also a
director of ERO, Inc., COREStaff, Inc., Coinmach Laundry Corporation and Polymer
Group, Inc.
Joseph P. Nolan has served as a Director of the Company since July 1996.
Mr. Nolan is a principal and has been with GTCR since February 1994. From May
1990 to January 1994, Mr. Nolan was Vice President Corporate Finance at Dean
Witter Reynolds Inc.
The Board currently consists of six directors, divided into three classes.
At each annual meeting of the Company's stockholders, successors to the class of
directors whose term expires at such meeting will be elected to serve for
three-year terms or until their successors are duly elected and qualified.
Messrs. Monroe and Rauner are members of the class whose term expires in 1997,
Messrs. Nolan and Nesbitt are members of the class whose term expires in 1998,
and Messrs. Yanover and Gleklen are members of the class whose term expires in
1999. Within 90 days after the after the consummation of the Offering, the
Company expects to appoint an additional director who is not an employee of the
Company or any affiliate of the Company. Such additional director will be a
member of the class of directors whose term expires in 1998. The Board has the
power to appoint the officers of the Company. Each officer will hold office for
such term as may be prescribed by the Board and until such person's successor is
chosen and qualified or until such person's death, resignation or removal. Upon
consummation of the Offering, there will be three committees of the Board: the
Compensation Committee, the Option Committee and the Audit Committee. The
Compensation Committee, which will be composed of Messrs. Gleklen and Rauner,
reviews and makes recommendations to the Board regarding salaries, compensation
and benefits of executive officers and key employees of the Company. The Option
Committee, which currently exists, is composed of Messrs. Gleklen, Rauner and
Nolan. The Option Committee is responsible for administering and granting
options in accordance with the Company's 1995 Stock Option Plan. The Audit
Committee will be composed of Messrs. Gleklen, Yanover and Nolan. Among other
duties, the Audit Committee reviews the internal and external financial
reporting of the Company, reviews the scope of the independent audit, considers
comments by the auditors regarding internal controls and accounting procedures
and provides the management's response to the auditors' comments. The Company
does not have a nominating committee.
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<PAGE> 47
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning the annual and
long-term compensation for the year ended December 31, 1995, for (i) those
persons who served as the chief executive officer of the Company at any time
during 1995 and (ii) those persons who served as executive officers of the
Company as of December 31, 1995 (together, the "Named Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION COMMON STOCK
--------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION(1) SALARY(2) BONUS OPTIONS COMPENSATION
- ---------------------------------------------- --------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Robert A. Yanover............................. $ 65,000 $ 61,759 -- $ 5,929(3)
Chairman
Gary L. Monroe(4)............................. 46,723 -- $170,452 40,000(5)
Chief Executive Officer
Allen J. Nesbitt.............................. 130,000 116,071 -- 10,562(7)
President(6)
Donald L. Elland.............................. 66,149 113,894 28,410 3,080(8)
Vice President-Operations (Livonia)
Richard C. Kowalski........................... 79,799 69,818 28,410 3,080(8)
Chief Financial Officer(9)
</TABLE>
- ------------
(1) Mr. Rauwerdink became Executive Vice President, Chief Financial Officer,
Treasurer and Secretary of the Company on May 6, 1996 at a base annual
salary of $135,000. Mr. Rauwerdink also received stock options with respect
to 55,000 shares of Common Stock. See "-- Employment Agreements -- Mr.
Rauwerdink" and "-- Stock Options -- Stock Option Agreements -- Mr.
Rauwerdink." Mr. Jablonski became Executive Vice President of Marketing and
Sales of the Company on June 16, 1996 at a base annual salary of $135,000.
Mr. Jablonski also received stock options with respect to 60,000 shares of
Common Stock. See "-- Employment Agreements -- Mr. Jablonski" and "-- Stock
Options -- Stock Option Agreements -- Mr. Jablonski."
(2) Salary includes amounts deferred, if any, pursuant to the Company's 401(k)
plan.
(3) Represents expenses incurred by the Company in connection with operation of
an automobile by Mr. Yanover.
(4) Mr. Monroe began employment with the Company on September 19, 1995. His base
annual compensation is $175,000.
(5) Represents reimbursed relocation expenses paid under terms of Mr. Monroe's
employment agreement.
(6) Mr. Nesbitt served as chief executive officer of the Company until September
19, 1995.
(7) Represents expenses of $7,482 incurred by the Company in connection with
operation of an automobile by Mr. Nesbitt and a contribution of $3,080 by
the Company to Mr. Nesbitt's 401(k) account.
(8) Represents a contribution by the Company to the executive's 401(k) account.
(9) Mr. Kowalski served as Chief Financial Officer of the Company until May 6,
1996.
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<PAGE> 48
Stock Option Information
The following table sets forth certain information regarding the option
grants made pursuant to the Company's 1995 Stock Option Plan during the fiscal
year ended December 31, 1995 to each of the Named Executives:
OPTION GRANTS IN FISCAL 1995
<TABLE>
<CAPTION>
% OF TOTAL POTENTIAL REALIZABLE VALUE
NUMBER OF OPTIONS AT ASSUMED ANNUAL RATES OF
SECURITIES GRANTED TO STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES FOR OPTION TERM(2)(3)
OPTIONS IN FISCAL EXERCISE EXPIRATION ----------------------------------
NAME GRANTED(1) YEAR 1995 PRICE DATE 0% 5% 10%
- ------------------- ---------- ---------- -------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Gary L. Monroe..... 170,452 40.65% $.40 12/21/2002 $542,037 $762,701 $1,056,277
Donald L. Elland... 28,410 6.78% $.40 1/17/2002 48,581 68,468 94,605
Richard C.
Kowalski......... 28,410 6.78% $.40 1/17/2002 48,581 68,468 94,605
</TABLE>
- ------------
(1) All options granted to the Named Executives were granted under the 1995
Stock Option Plan. All such options which have not already become vested and
exercisable will become vested and exercisable upon consummation of this
Offering. See "-- Stock Options."
(2) Amounts represent hypothetical gains that could be achieved for the
respective options at the end of the seven-year option term. The assumed 5%
and 10% rates of stock appreciation are mandated by rules of the Securities
and Exchange Commission and do not represent the Company's estimate of the
future market price of the Common Stock.
(3) In calculating the potential realizable value, the Company used an estimated
market price of $2.11 per share as of the grant date for Messrs. Elland and
Kowalski and an estimated market price of $3.58 per share as of the grant
date for Mr. Monroe.
FISCAL YEAR END OPTION VALUE
No options were exercised by the Named Executives during the fiscal year
ended December 31, 1995. The following table sets forth for each of the Named
Executives certain information concerning the value of unexercised options at
the end of fiscal 1995:
<TABLE>
<CAPTION>
NUMBER OF NET VALUES OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS(2)(3)
------------------------------- ----------------------------
NAME EXERCISABLE(1) UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------- -------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Gary L. Monroe............................. 56,817 113,635 $ 180,678 $ 361,359
Donald L. Elland........................... 0 28,410 0 90,344
Richard C. Kowalski........................ 0 28,410 0 90,344
</TABLE>
- ------------
(1) Exercisable in accordance with the vesting provisions described above in
note (1) to the table entitled "Option Grants in Fiscal 1995."
(2) In calculating the value of in-the-money options, the Company used an
estimated market price of $3.58 per share.
(3) Assuming an initial public offering price of $15.50 per share, upon
consummation of the Offering, the net value of exercisable and unexercisable
in-the-money options held by Mr. Monroe would be $2,573,825 and $0,
respectively, and the net value of exercisable and unexercisable in-the-
money options held by each of Messrs. Elland and Kowalski would be $428,991
and $0, respectively.
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<PAGE> 49
EMPLOYMENT AGREEMENTS
Mr. Monroe. The Company and Mr. Monroe are parties to an employment
agreement dated as of August 7, 1996 (the "Monroe Employment Agreement"), which
has a term of two years. The Monroe Employment Agreement provides that Mr.
Monroe will serve as Chief Executive Officer of the Company at an annual salary
of $175,000 plus a bonus targeted at 50% of his annual salary and will receive
options to purchase 170,452 shares of Common Stock (see "-- Stock Options"). The
Monroe Employment Agreement also provides that if Mr. Monroe's employment is
terminated or his duties materially reduced, he would be entitled to severance
payments at an annualized rate equal to his base salary plus the greater of his
actual bonus for the preceding year or 50% of his base salary. Such severance
payments shall be paid for the greater of one year or the remaining term of the
agreement.
Mr. Rauwerdink. On April 30, 1996, Lason made a written offer of employment
to Mr. Rauwerdink, which Mr. Rauwerdink accepted. Pursuant to the offer, Lason
named Mr. Rauwerdink as its Chief Financial Officer, Executive Vice President,
Secretary and Treasurer at an annual salary of $135,000 plus a bonus targeted at
50% of his annual salary, committed to grant him an option to purchase 55,000
shares of its Common Stock (see "-- Stock Options"), and agreed to provide him
severance payments equal to 90 days' salary and bonus if Lason were to terminate
his employment without cause.
Mr. Jablonski. On June 12, 1996, Lason made a written offer of employment
to Mr. Jablonski, which Mr. Jablonski accepted. Pursuant to the offer, Lason
agreed to name Mr. Jablonski as its Vice President of Marketing and Sales at an
annual salary of $135,000 plus a bonus targeted at 50% of his annual salary,
committed to grant him an option to purchase 60,000 shares of its Common Stock
(see "-- Stock Options") and agreed to pay certain of his relocation expenses.
STOCK OPTIONS
1995 Stock Option Plan
The Company's 1995 Stock Option Plan (the "1995 Stock Option Plan") was
adopted by the Board and approved by the Company's stockholders in 1995. The
1995 Stock Option Plan is administered by a committee (the "Option Committee")
composed of non-management members of the Board who are appointed by the Board.
The Option Committee currently consists of Messrs. Gleklen, Nolan and Rauner.
The Option Committee selects certain key persons, which may include directors of
the Company, to be participants of the Plan (the "Participants") and determines
the terms and conditions of the options. The 1995 Stock Option Plan provides for
the issuance of options to Participants covering 1,000,000 shares of Common
Stock, subject to certain adjustments reflecting changes in the Company's
capitalization.
Options granted or to be granted under the 1995 Stock Option Plan may be
either incentive stock options ("ISOs") or such other forms of non-qualified
stock options ("NQOs") as the Option Committee may determine. ISOs are intended
to qualify as "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). The exercise price of
the options will be at least 100% of the fair market value of a share of Common
Stock on the date of grant, except that the exercise price of an ISO granted to
an individual who directly (or by attribution under Section 424(d) of the Code)
owns shares possessing more than 10% of the total combined voting power of all
classes of stock of the Company will be at least 110% of the fair market value
of a share of Common Stock on the date of grant.
Options granted or to be granted under the 1995 Stock Option Plan may be
subject to time vesting and certain other restrictions at the Option Committee's
sole discretion. Options to purchase shares of Common Stock shall vest and
become exercisable upon, and as a result of, the consummation of this Offering,
if the grantee is employed by Lason on such date pursuant to certain stock
option agreements pursuant to which options under the 1995 Stock Option Plan
were granted. The Board generally has the power and authority to amend the 1995
Stock Option Plan at any time without the approval of the Company's
stockholders; provided that, without the approval of the Company's stockholders,
the
48
<PAGE> 50
Board shall not amend the 1995 Stock Option Plan to cause any outstanding ISOs
to no longer qualify as ISOs. In addition, the Board shall not amend the 1995
Stock Option Plan to materially and adversely affect the rights of an option
holder under such option without the consent of such option holder.
Stock Option Agreements
Mr. Monroe. The Company and Mr. Monroe entered into an Employee Stock
Option Agreement dated December 21, 1995 (the "Monroe Stock Option Agreement")
pursuant to which the Company granted Mr. Monroe an option to purchase 170,452
shares of the Company's Common Stock for a price of $.40 per share. Under the
Monroe Stock Option Agreement, one-third of the shares covered by the option
granted to Mr. Monroe vested and became exercisable on September 19, 1995 and
one-third of the shares covered by such option vest and become exercisable on
each of the first two anniversaries of such date if Mr. Monroe is employed by
Lason on such dates. Notwithstanding the foregoing, all unvested options granted
to Mr. Monroe under the Monroe Stock Option Agreement shall vest and become
exercisable upon consummation of this Offering or upon consummation of a sale of
the Company, if Mr. Monroe is employed by Lason on such date. The option granted
under the Monroe Stock Option Agreement expires on December 21, 2002. Under the
Monroe Stock Option Agreement, if the Company issues Common Stock to any person
prior to an initial public offering or a sale of the Company, Mr. Monroe has the
right to purchase that amount of Common Stock which will maintain his percentage
ownership of the Company (assuming exercise of all of Mr. Monroe's options). Mr.
Monroe may pay for such shares by delivery of a nonrecourse promissory note,
bearing interest at the then effective applicable federal rate, payable as to
principal and interest when such shares are sold.
Mr. Rauwerdink. The Company and Mr. Rauwerdink entered into an Employee
Stock Option Agreement dated May 6, 1996 (the "Rauwerdink Stock Option
Agreement") pursuant to which the Company granted Mr. Rauwerdink an option to
purchase 55,000 shares of the Company's Common Stock for a price of $3.20 per
share. Under the Rauwerdink Stock Option Agreement, one-fifth of the shares
covered by the option granted to Mr. Rauwerdink vest and become exercisable on
the earlier of May 6, 1997, or the date of the consummation of the Offering, and
one-fifth of the shares covered by such option vest and become exercisable on
each of the first four anniversaries of such earlier date if Mr. Rauwerdink is
employed by Lason on such dates. Notwithstanding the foregoing, all unvested
shares covered by the option granted to Mr. Rauwerdink under the Rauwerdink
Stock Option Agreement shall vest and become exercisable upon consummation of a
sale of the Company, if Mr. Rauwerdink is employed by Lason on such date. The
option granted under the Rauwerdink Stock Option Agreement expires on May 6,
2003.
Mr. Jablonski. The Company and Mr. Jablonski entered into an Employee Stock
Option Agreement dated June 16, 1996 (the "Jablonski Stock Option Agreement")
pursuant to which the Company granted Mr. Jablonski an option to purchase 60,000
shares of the Company's Common Stock for a price of $3.20 per share. Under the
Jablonski Stock Option Agreement, one-fifth of the shares covered by such option
vest and become exercisable on the earlier of July 1, 1997, or the date of the
consummation of the Offering, and one-fifth of the shares covered by such stock
option vest and become exercisable on each of the first four anniversaries of
such earlier date if Mr. Jablonski is employed by Lason on such dates.
Notwithstanding the foregoing, all unvested shares covered by the option granted
to Mr. Jablonski under the Jablonski Stock Option Agreement shall vest and
become exercisable upon consummation of a sale of the Company, if Mr. Jablonski
is employed by Lason on such date. The option granted under the Jablonski Stock
Option Agreement expires on June 16, 2003.
Messrs. Elland and Kowalski. The Company entered into an Employee Stock
Option Agreement dated January 17, 1995 (the "Employee Stock Option Agreement")
with Mr. Elland and Mr. Kowalski and certain other employees of Lason pursuant
to which Messrs. Elland and Kowalski were each granted options to purchase
28,410 shares of the Company's Common Stock for a price of $.40 per share. Under
the Employee Stock Option Agreement, one-fifth of the shares covered by each
such option vest on each of the first five anniversaries of the date of such
agreement if the holder thereof is employed by Lason on such date.
Notwithstanding the foregoing, all unvested shares covered by the
49
<PAGE> 51
option granted to Messrs. Elland and Kowalski under the Employee Stock Option
Agreement shall vest and become exercisable upon consummation of this Offering
or upon consummation of a sale of the Company so long as Mr. Elland or Mr.
Kowalski, as the case may be, is employed by Lason on the date of such
occurrence. The options granted to Messrs. Elland and Kowalski under the
Employee Stock Option Agreement expires on January 17, 2002.
Mr. Gleklen. The Company entered into a Stock Option Agreement dated August
7, 1995 (the "Gleklen Stock Option Agreement") with Mr. Gleklen pursuant to
which Mr. Gleklen was granted an option to purchase 12,500 shares of the
Company's Common Stock for a price of $.40 per share. Under the Gleklen Stock
Option Agreement, one-fifth of the shares covered by the option granted to Mr.
Gleklen vest and become exercisable on each of the first five anniversaries of
the date of such agreement. The option granted to Mr. Gleklen under the Gleklen
Stock Option Agreement expires on the earlier to occur of (i) August 7, 2005,
(ii) three months from the date Mr. Gleklen is no longer a director of the
Company and (iii) the effective date of a sale of the Company as set forth in
the Gleklen Stock Option Agreement. Notwithstanding the foregoing, all shares
covered by the option granted to Mr. Gleklen vest and become exercisable during
the ten days immediately preceding any such sale of the Company or upon
termination of his directorship as a result of death, incapacity or upon the
expiration of his current term as a director in 1999.
401(K) PLAN
Lason sponsors a 401(k) profit-sharing plan and trust (the "401(k) Plan").
Each employee of Lason who is at least 21 years of age or older who has worked
for the Company for a period of twelve months during which such employee has
performed 1,000 "Hours of Service" (as such term is defined in the 401(k) Plan)
is eligible to participate in the 401(k) Plan. An eligible participant may
contribute not less than 2% and up to 15% of pretax earnings. The 401(k) Plan is
contributory and Lason is not obligated to make any contribution on behalf of
any participant in the 401(k) Plan. However, Lason has contributed, on a monthly
basis, a discretionary amount on behalf of each participant in an amount up to
33% of such participant's contribution, but not exceeding 9% of such
participant's earnings during a plan year during any plan year. Each participant
is entitled to direct the investment of such participant's own contributions and
Lason's matching contributions among several alternative investment accounts.
1996 MANAGEMENT BONUS PLAN
The Company has established a Management Bonus Plan for the 1996 fiscal
year (the "1996 Bonus Plan"). Participants in the 1996 Bonus Plan were selected
by the Company's Chief Executive Officer. Each participant in the 1996 Bonus
Plan is entitled to receive a bonus payment if the Company as a whole or, in the
case of certain participants, a defined portion of the Company with which such
participant is principally involved exceeds a predetermined financial target
with respect to a quarter. If 85% or more of the target is obtained for a
quarter, a pro rata portion of the bonus is payable, and if less than 85% of the
target is obtained, no bonus is paid with respect to that quarter. Bonuses that
are not obtained in any quarter are not carried over to any subsequent quarter.
If the targets are met for each of the quarters in the year ending December 31,
1996, Messrs. Yanover, Monroe, Nesbitt, Elland and Kowalski would be entitled to
bonuses of $64,000, $87,000, $96,000, $90,000 and $80,000, respectively, and the
aggregate bonus amounts to be paid to all eligible participants under the 1996
Bonus Plan would be approximately $811,000. Based on the Company's results for
the six months ended June 30, 1996, Messrs. Yanover, Monroe, Nesbitt, Elland and
Kowalski were awarded bonuses of approximately $32,400, $44,100, $48,600,
$40,300 and $35,800, respectively, and $428,900 in aggregate bonuses were
awarded to all eligible participants under the 1996 Bonus Plan.
DIRECTORS' COMPENSATION
Each Director who is not an employee of the Company receives $1,000 for
attendance of each meeting of the Board and for each committee meeting attended
on a day other than a Board meeting. Directors are reimbursed for out-of-pocket
expenses incurred in connection with attending meetings.
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<PAGE> 52
Directors may also be issued options pursuant to the 1995 Stock Option Plan. See
"-- Stock Options -- 1995 Stock Option Plan."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For the year ended December 31, 1995, compensation of executive officers of
the Company was determined by the Board, which included Messrs. Yanover, Monroe
and Nesbitt. The 1995 Stock Option Plan is administered by the Option Committee
consisting of Messrs. Rauner, Nolan and Gleklen.
CERTAIN LEGAL PROCEEDINGS
On December 11, 1995, Mr. Rauwerdink consented to the entry of an order
enjoining him from violating certain antifraud and tender offer provisions of
the federal securities laws. The order required him to give up profits and pay
penalties and interest totaling approximately $225,000. He neither admitted nor
denied the allegations made in the proceeding.
The proceeding involved the rollover of certain funds from a former
employer's profit sharing plan. The investment directions made in connection
with the rollover into Mr. Rauwerdink's 401(k) account at his new employer
specified that the investment of such funds be made 50% in the stock of his
employer and 50% in other investments (which was identical to the allocation he
made at the time he began his employment with respect to other investments in
his 401(k) account) and resulted in the purchase of shares of common stock of
the new employer at a time when it was alleged that the employer was engaged in
merger negotiations. The shares purchased in the rollover transaction
constituted approximately 8% of Mr. Rauwerdink's total holdings in his new
employer's common stock.
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<PAGE> 53
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ACQUISITION OF LASON SYSTEMS, INC.
On January 17, 1995, Lason Acquisition Corp., a Delaware corporation which
after the acquisition changed its name to Lason Systems, Inc., purchased
substantially all of the assets and assumed certain liabilities (the "1995
Recapitalization") of Lason Systems, Inc., a Michigan corporation ("Lason
Michigan"), pursuant to an Asset Purchase Agreement by and among Lason Systems,
Lason Michigan, The Joseph Jonathon Yanover and Jennifer D. Yanover Irrevocable
Trust dated January 5, 1993 (the "J. Yanover Trust"), the Robert A. Yanover
Living Trust u/a/d May 11, 1982 (the "R. Yanover Trust"), the Allen J. Nesbitt
Living Trust dated December 7, 1994 (the "Nesbitt Trust"), Mr. Richard C.
Kowalski, Mr. Donald L. Elland and Mr. Gregory Carey. In connection with the
1995 Recapitalization, the J. Yanover Trust, the R. Yanover Trust, the Nesbitt
Trust, Mr. Kowalski, Mr. Elland and Mr. Carey (the "Designated Stockholders")
and the Company entered into an Executive Stock Agreement dated January 17, 1995
(the "Executive Stock Agreement") pursuant to which the J. Yanover Trust, the R.
Yanover Trust, the Nesbitt Trust, Mr. Kowalski, Mr. Elland and Mr. Carey
purchased 66,074, 402,987, 469,064, 25,000, 28,815 and 8,058 shares,
respectively, of the Company's Class A-1 Common Stock for a price of $1 per
share, and GTCR Fund IV and the Company entered into a Purchase Agreement dated
January 17, 1995 (the "GTCR Purchase Agreement") pursuant to which GTCR Fund IV
purchased 1,000,001 shares of the Company's Class B Common Stock for an
aggregate purchase price of $10.0 million.
SELLER CREDIT AGREEMENTS
In connection with the 1995 Recapitalization, Lason Systems entered into
(i) a Credit Agreement dated January 17, 1995 (each, a "Seller Credit
Agreement"), with each of (i) Mr. Yanover, the J. Yanover Trust and the R.
Yanover Trust, (ii) Mr. Nesbitt and the Nesbitt Trust, (iii) Mr. Elland, (iv)
Mr. Kowalski and (v) Mr. Carey, pursuant to which Lason Systems loaned $609,778,
$609,791, $37,466, $32,487 and $10,478 to Messrs. Yanover, Nesbitt, Elland,
Kowalski and Carey (the "Borrowers"), respectively. The Company entered into the
Seller Credit Agreements to provide the respective Borrower with funds to pay
certain tax liabilities of the Borrowers and their respective affiliates in
connection with the Acquisition. If it is determined that such tax liabilities
of a Borrower and its affiliates exceed the amount loaned, Lason Systems is
obligated to a make an additional loan to such Borrower equal to such difference
(the aggregate of all such additional loans and the initial loan to such
Borrower is referred to as the "Loan"). Under the Seller Credit Agreements, each
Borrower is obligated to repay the amount of his respective Loan, together with
all unpaid accrued interest thereon, on January 17, 2005. The obligations of
Messrs. Yanover, Nesbitt, Elland, Kowalski and Carey under their respective
Seller Credit Agreements are secured by a pledge of 469,061, 469,064, 28,815,
25,000 and 8,058 shares of Class A-1 Common Stock owned by such Borrower and its
affiliates. Except for limited circumstances, Lason's sole recourse against each
Borrower for the amount of the Loan to such Borrower is to the shares of Common
Stock pledged with respect to such Seller Credit Agreement. Concurrently with
the consummation of the Offering, each of the Borrowers will repay the amounts
outstanding under his respective Seller Credit Agreement, one-half in cash and
one-half in the form of a constructive dividend from the Company to such
Borrower.
STOCKHOLDERS AGREEMENT
In connection with the 1995 Recapitalization, the Designated Stockholders,
GTCR Fund IV, Mr. Yanover, Mr. Nesbitt (the "1995 Stockholders") and the Company
entered into a Stockholders Agreement, dated January 17, 1995, which provides
for, among other things, (i) the designation of and the voting with respect to
the election of directors of the Board by the parties thereto, (ii) the approval
by the holders of at least one-third of the Common Stock purchased by the
Designated Stockholders pursuant to the Executive Stock Agreement and held by
the Designated Stockholders or their permitted transferees (the "Executive
Stock") of certain matters of corporate governance, (iii) the approval by the
holders of at least one-half of the Executive Stock of any issuance by the
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<PAGE> 54
Company of its securities to GTCR Fund IV or its affiliates (other than an
issuance used to cure or avoid a default under certain financing arrangements (a
"Designated Financing")) or for a determination by an investment banking firm
that such issuance is fair to the Company and its stockholders, (iv) each
Designated Holder to have the right to require GTCR Fund IV to purchase all (but
not less than all) of its Executive Stock at fair market value upon an issuance
of equity securities of the Company (other than any issuance pursuant to a
registered primary public offering or a Designated Financing) if such issuance
would cause the Designated Stockholders and their permitted transferees to hold
less than 20% of the outstanding Common Stock on a fully-diluted basis, (v) if
at any time prior to an initial public offering of the Company's equity
securities the Company issues any equity securities, an amount of each
Designated Stockholder's Loan under the Seller Credit Agreement to which he or
it is a party proportionate to the amount by which its percentage ownership of
the Common Stock is reduced by such issuance to be forgiven (along with the
unpaid accrued interest thereon), (vi) certain restrictions on transfer by the
parties thereto of shares of the Company, (vii) certain pre-emptive rights for
the parties thereto with respect to the issuance of capital stock of the Company
and (viii) the parties to the agreement to use their best efforts to sell the
Company if an initial public offering has not been consummated by January 17,
2005. The Stockholders Agreement will be terminated upon consummation of the
Offering.
EXECUTIVE VOTING AGREEMENT
In connection with the 1995 Recapitalization, the Nesbitt Trust, Mr.
Kowalski, Mr. Elland, Mr. Carey, Mr. Karl H. Hartig, Mr. James J. Dewan, Mr.
Lawrence C. Jones, Mr. Scott L. Christenson, Mr. Daniel J. Buckley, Mr. Paul G.
Dugan, Mr. John H. Wallanse and Mr. David J. Malosh entered into a Voting
Agreement, dated January 17, 1995 (the "Executive Voting Agreement"), pursuant
to which each party agreed to vote all of his or its stock of the Company
(including all shares subsequently acquired by such party) on any matter on
which the shareholders are entitled to vote only at the direction of the vote of
the holders of a majority of stock held by such parties and their transferees.
To give effect to such agreement, each such party executed and delivered to Mr.
Nesbitt, trustee of the Nesbitt Trust, an irrevocable proxy to vote his or its
shares. The initial term of the Executive Voting Agreement is ten years and may
be extended by the parties. During the term of the Executive Voting Agreement,
each party agreed to not transfer his or its shares without the prior written
consent of the holders of a majority of stock held by such parties and their
transferees. The Executive Voting Agreement will be terminated upon consummation
of the Offering.
REGISTRATION AGREEMENT
In connection with the 1995 Recapitalization, the Company and the 1995
Stockholders entered into the Registration Agreement. Pursuant to the
Registration Agreement, the 1995 Stockholders and their transferees, who hold in
the aggregate 4,999,997 shares of Common Stock, are entitled to certain
registration rights. Following the Offering, (i) holders of at least a majority
of the shares of Common Stock issued to GTCR Fund IV pursuant to the Purchase
Agreement and any other shares of Common Stock otherwise acquired by GTCR Fund
IV (the "GTCR Registrable Shares") and (ii) holders of at least a majority of
the shares of Common Stock issued to the Designated Stockholders pursuant to the
Executive Stock Agreement and any other shares of Common Stock otherwise
acquired by the Designated Stockholders (the "Designated Stockholder Registrable
Shares," and collectively with the GTCR Registrable Shares, the "Registrable
Shares") may each require the Company on one occasion to effect the registration
of the Registrable Shares on Form S-1 (a "Long-Form Registration") in which the
Company will pay all registration expenses. In addition to the Long-Form
Registrations, after the Offering, the holders of at least a majority of the
GTCR Registrable Shares and the holders of at least a majority of the Designated
Stockholder Registrable Shares may each require the Company to effect two
registrations of Registrable Shares on Form S-2 or S-3 (together with the
Long-Form Registrations, the "Demand Registrations") in which the Company will
pay all registration expenses. Finally, if the Company proposes to register any
of its Common Stock under the Securities Act, whether for its own account or
otherwise (a "Company Registration"), the holders of Registrable Shares are
entitled to
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<PAGE> 55
notice of such registration and, subject to certain priority provisions, are
entitled to include their Registrable Shares in such registration with all
registration expenses of the holders of Registrable Shares being paid by the
Company. Notwithstanding the foregoing, the Company will not be obligated to
effect a Demand Registration within six months after the effective date of a
prior Demand Registration or of a Company Registration in which holders of
Registrable Shares participated, and, under certain circumstances, a request may
be delayed by the Company for up to six months (but on no more than one
occasion).
VOTING AGREEMENT
The J. Yanover Trust, the R. Yanover Trust, the Joseph Jonathan Yanover and
Jennifer D. Yanover Irrevocable Trust No. 2 dated August 6, 1996 (the "J.
Yanover Trust No. 2"), the Nesbitt Trust, the James A. Nesbitt and Jennifer
Rebecca Nesbitt Trust effective as of January 1, 1996, Mr. Yanover, Mr. Nesbitt
(the "Executive Group") and GTCR Fund IV (together with the Executive Group, the
"Existing Stockholders") are parties to the Voting Agreement providing for,
among other things, the designation of and voting with respect to the election
of directors of the Board by the Existing Stockholders. Under the Voting
Agreement, the Existing Stockholders agree to vote their shares such that the
Board at all times shall consist of two directors designated by GTCR Fund IV,
two directors designated by the Executive Group, the Company's Chief Executive
Officer and two outside directors jointly designated by GTCR Fund IV and the
Executive Group. If GTCR Fund IV and the Executive Group cannot agree on the
designation of an outside director with respect to any election of directors,
one nominee will be selected by each of GTCR Fund IV and the Executive Group and
the nominee obtaining the most votes in the election of directors, with the
Existing Stockholders voting without restriction, shall be elected to the Board.
The Existing Stockholders may not vote to remove the two directors nominated by
GTCR Fund IV and the two directors nominated by the Executive Group and must
vote to remove such directors if directed to do so by GTCR Fund IV or the
Executive Group, respectively, subject to the provisions of the Company's
Amended and Restated Certificate of Incorporation. The Voting Agreement
terminates when either GTCR Fund IV or the Executive Group holds in the
aggregate less than 10% of the Common Stock on a fully diluted basis. Upon
consummation of the Offering, the Existing Stockholders will hold, in the
aggregate, 57.6% of the Common Stock (54.9% if the Underwriters' over-allotment
option is exercised in full) and will be able to elect all of the members of the
Board. The Voting Agreement may render more difficult or tend to discourage
mergers, acquisitions, tender offers, proxy contests or assumptions of control
and changes of incumbent management, even when stockholders other than the
Existing Stockholders consider such a transaction to be in their best interest.
CERTAIN AFFILIATE TRANSACTIONS
The Company leases property and a building in Livonia, Michigan, which
includes approximately 27,460 square feet of commercial space, from Mart
Associates, a Michigan general partnership ("Mart"). Mr. Yanover owns 43.34% of
Mart and is its managing partner. Mr. Nesbitt owns 33.33% of Mart and is one of
its partners. For the years ended December 31, 1993, 1994 and 1995 and for the
six months ended June 30, 1996, the Company paid $191,100, $191,100, $191,100
and $95,550, respectively, in rent for such property and building. In addition,
the Company leases certain equipment from Computer Leasing Company of Michigan,
Inc. ("Computer Leasing"). Mr. Yanover owns 50% of Computer Leasing and serves
as its president. For the years ended December 31, 1994 and 1995, and for the
six months ended June 30, 1996, the Company paid $30,100, $57,100 and $25,700,
respectively, for such operating leases. The Company believes that each of the
leases is at market terms and rates.
The Company purchases printing services from Hatteras Printing, Inc.
("Hatteras"). Hatteras is owned by the wife of Mr. Nesbitt. For the years ended
December 31, 1993, 1994 and 1995 and for the six months ended June 30, 1996, the
Company paid Hatteras $309,900, $726,000, $980,500 and $700,900, respectively,
for such printing services. The Company believes that it paid market prices for
such printing services. In addition, the Company sold copying and graphic art
services to Hatteras in the
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<PAGE> 56
amount of $21,800, $32,700, $75,200 and $33,700, respectively, for the years
ended December 31, 1993, 1994 and 1995 and the six months ended June 30, 1996.
Such services were sold at the Company's current prices.
Until August 6, 1996, Laurence B. Deitch served as trustee of the Joseph
Jonathan Yanover and Jennifer D. Yanover Irrevocable Trust dated January 5,
1993, which upon consummation of the Offering will own 5.1% of the Common Stock.
Mr. Deitch is also a shareholder in the law firm of Seyburn, Kahn, Ginn, Bess,
Deitch and Serlin, P.C. For the years ended December 31, 1993, 1994 and 1995,
and for the six months ended June 30, 1996, the Company paid Seyburn, Kahn,
Ginn, Bess, Deitch and Serlin, P.C. approximately $151,000, $74,000, $189,000
and $111,000, respectively, for legal services.
In the future, all material business transactions between the Company and
any executive officer or director of the Company or any member of their
immediate family will be subject to review and approval by a majority of the
Company's disinterested directors. In addition, the Board has determined that by
December 31, 1997, the Company shall no longer transact business with Hatteras.
THE RECAPITALIZATION
In connection with and immediately prior to the consummation of the
Offering, each share of Class A Common Stock, including the shares of Class A
Common Stock held by each of the officers and directors of the Company, will be
converted into one share of Common Stock, and each share of Class B Common
Stock, all of which is held by GTCR Fund IV, will be converted into
approximately 1.3 shares of Common Stock (assuming an initial public offering
price of $15.50 and consummation of the Offering on September 30, 1996). Each
share of Common Stock will then be split into 2.5 shares of Common Stock.
Concurrent with the consummation of the Offering, the Company shall use a
portion of the proceeds of the Offering to redeem (assuming an initial public
offering price of $15.50 and consummation of the Offering on September 30, 1996)
755,933 shares of Common Stock owned by GTCR Fund IV at an aggregate price of
approximately $11.7 million or $15.50 per share. GTCR Fund IV acquired its
interest in the Company in January 1995 for $10.0 million or approximately $3.07
per share of Common Stock. See "Use of Proceeds" and "Description of Capital
Stock -- The Recapitalization."
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<PAGE> 57
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock (i) before the Offering but after giving effect to
the Reclassification and the Stock Split (see "Description of Capital Stock --
The Recapitalization"), (ii) after the Offering but before the Redemption and
(iii) after the Redemption, by each person who is known by the Company to own
beneficially more than 5% of the Common Stock, by each current executive officer
and director of the Company and by all officers and directors of the Company as
a group. Except as otherwise indicated below, each of the persons named in the
table has sole voting and investment power with respect to the securities
beneficially owned by it or him as set forth opposite its or his name.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
BEFORE OFFERING(1) AFTER OFFERING(1) AFTER REDEMPTION(1)
-------------------- -------------------- --------------------
NUMBER PERCENT NUMBER PERCENT NUMBER PERCENT
NAME OF BENEFICIAL OWNER OF SHARES OF CLASS OF SHARES OF CLASS OF SHARES OF CLASS
- ---------------------------------------- --------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Golder, Thoma, Cressey, Rauner Fund IV,
L.P. (2)(3)........................... 3,255,935 55.0% 3,255,935 36.5% 2,500,002 30.6%
Colin W. L. Armstrong, Trustee(2)(4).... 625,185 10.6% 625,185 7.0% 625,185 7.7%
Robert A. Yanover(2)(5)................. 476,442 8.1% 476,442 5.3% 476,442 5.8%
Allen J. Nesbitt(2)(6).................. 1,101,635 18.6% 1,101,635 12.4% 1,101,635 13.5%
Gary L. Monroe(7)....................... 170,452 2.8% 170,452 1.9% 170,452 2.0%
William J. Rauwerdink(8)................ 11,000 * 11,000 * 11,000 *
Brian E. Jablonski(9)................... 12,000 * 12,000 * 12,000 *
Donald M. Gleklen(10)................... 2,500 * 2,500 * 2,500 *
Bruce V. Rauner(11)..................... 3,255,935 55.0% 3,255,935 36.5% 2,500,002 30.6%
Joseph P. Nolan(11)..................... 3,255,935 55.0% 3,255,935 36.5% 2,500,002 30.6%
All Executive Officers and Directors of
the Company as a group (9
persons)(12).......................... 5,029,969 82.3% 5,029,969 55.2% 4,274,031 51.1%
</TABLE>
- ------------
* Indicates less than 1%.
(1) The number of shares of Common Stock deemed outstanding before the Offering
but after giving effect to the Reclassification and the Stock Split is
5,918,395, the number of shares of Common Stock deemed outstanding after
the Offering but before the Redemption is 8,918,395 (9,368,395 if the
Underwriters' over-allotment option is exercised in full) and the number of
shares of Common Stock deemed outstanding after the Redemption of 755,933
shares of Common Stock (assuming an initial public offering price of $15.50
per share) is 8,162,462 (8,612,462 if the Underwriters' over-allotment
option is exercised in full) (see "Description of Capital Stock -- The
Recapitalization"). Each of these numbers includes 81,290 shares and 68,387
shares of Common Stock issuable in connection with the acquisition of IITA
and Great Lakes, respectively, assuming an initial public offering price of
$15.50 per share (see "Recent Acquisitions") and excludes the 437,990
shares of Common Stock issuable pursuant to stock options which will be
exercisable upon consummation of the Offering and, assuming an initial
public offering price of $15.50 per share, 25,806 shares of Common Stock
issuable upon conversion of a note in the amount of $400,000 issued by the
Company in connection with the acquisition of NRC (see "Recent
Acquisitions").
(2) Each of these parties has entered into an agreement providing for the
election of directors (see "Certain Relationships and Related Transactions
-- Voting Agreement"). Each such party disclaims beneficial ownership of
shares of Common Stock owned by each other such party.
(3) The address of this holder is 6100 Sears Tower, Chicago, Illinois 60606.
(4) Includes 415,185 shares of Common Stock held by the J. Yanover Trust and
210,000 shares of Common Stock held by the J. Yanover Trust No. 2 over
which Mr. Armstrong, as trustee, has investment and voting control. The
address of this holder is 116 Laurel Court, Ponte Verde Beach, Florida
32082.
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<PAGE> 58
(5) Includes 476,442 shares of Common Stock held by the Robert A. Yanover
Living Trust u/a/d May 11, 1982. The address of this holder is 133 Quayside
Drive, Jupiter, Florida 33477.
(6) Includes 881,310 shares of Common Stock held by the Allen J. Nesbitt Living
Trust dated December 7, 1994, 110,162 shares of Common Stock held by the
James A. Nesbitt and Jennifer Rebecca Nesbitt Irrevocable Trust effective
as of January 1, 1996 for the Benefit of James A. Nesbitt and 110,162
shares of Common Stock held by the James A. Nesbitt and Jennifer Rebecca
Nesbitt Irrevocable Trust effective as of January 1, 1996 for the Benefit
of Jennifer Rebecca Nesbitt. The address of this holder is 28400
Schoolcraft, Livonia, Michigan 48150.
(7) Includes 170,452 shares of Common Stock issuable upon exercise of options
exercisable within 60 days after the date of the Offering. See "Management
-- Stock Options."
(8) Includes 11,000 shares of Common Stock issuable upon exercise of options
exercisable within 60 days after the date of the Offering. See "Management
-- Stock Options."
(9) Includes 12,000 shares of Common Stock issuable upon exercise of options
exercisable within 60 days after the date of the Offering. See "Management
-- Stock Options."
(10) Includes 2,500 shares of Common Stock issuable upon exercise of options
exercisable within 60 days after the date of the Offering. See "Management
-- Stock Options."
(11) Includes 2,500,002 shares of Common Stock held by GTCR Fund IV, of which
GTCR IV, L.P. is the general partner. See footnote (3) above. Each of
Messrs. Rauner and Nolan is a principal of Golder, Thoma, Cressey, Rauner,
Inc., the general partner of GTCR IV, L.P., and therefore may be deemed to
share investment and voting control over the shares of Common Stock held by
GTCR Fund IV. Each of Messrs. Rauner and Nolan disclaims beneficial
ownership of the shares of Common Stock owned by GTCR Fund IV. The address
of each of these holders is 6100 Sears Tower, Chicago, Illinois 60606.
(12) Includes the shares of Common Stock described in footnotes (5), (6), (7),
(8), (9), (10) and (11) above.
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<PAGE> 59
DESCRIPTION OF CREDIT AGREEMENT
The Company, through its subsidiary Lason Systems, is party to a Loan
Agreement, dated January 17, 1995, as amended March 25, May 15, July 10, and
August 16, 1996 (the "Credit Agreement"), with First Union National Bank of
North Carolina as agent and as Lender (as defined in the Credit Agreement) and
each other Lender which from time to time is a party thereto, providing for a
$15 million term loan facility (the "Term Loan Facility"), a $13 million
revolving credit facility (the "Revolving Credit Facility"), an additional $10
million credit facility for acquisitions (the "Acquisition Facility") and an
$8.5 million interim term loan facility (the "Interim Facility").
Each loan (a "Loan") under a facility bears interest at a rate (with
respect to such Loan, the "Elected Rate") equal to, at the Company's option,
either (a) the prime rate publicly announced by the Agent from time to time plus
(i) 100 basis points if such Loan is under the Term Loan Facility or the
Acquisition Loan Facility, (ii) 75 basis points if such Loan is under the
Revolving Credit Facility or (iii) no basis points if such Loan is under the
Interim Facility or (b) the LIBOR Rate (as defined in the Credit Agreement)
specified for the applicable facility; provided that during the continuance of
an Event of Default (as defined in the Credit Agreement) the Company shall be
required to pay interest on each outstanding Loan at a rate equal to the Elected
Rate plus 200 basis points. Interest on the Loans is payable monthly in arrears
with respect to prime rate Loans, at the end of the applicable LIBOR period with
respect to LIBOR rate Loans and when any portion of unpaid principal is due with
respect to interest on such principal.
Under the Term Loan Facility, the Company is required to make the following
payments of principal: $375,000 at the end of each of its fiscal quarters
beginning March 31, 1995 and ending December 31, 1996; $500,000 at the end of
each of its fiscal quarters beginning March 31, 1996 and ending December 31,
1997; $625,000 at the end of each of its fiscal quarters beginning March 31,
1998 and ending December 31, 2000; and $1 million on each of March 31, 2001 and
June 30, 2001. In addition to the scheduled payments, the Company is required to
prepay no later than 90 days after the end of each fiscal year an amount of
principal outstanding under the Term Loan Facility equal to 50% of the Company's
Net Cash Flow (as defined in the Credit Agreement) for such fiscal year. The
Company may prepay at any time any amount of principal outstanding under the
Term Loan Facility without premium or penalty (so long as such amount is at
least $250,000). The Company may at any time have Loans outstanding under the
Revolving Credit Facility in an aggregate amount up to the lesser of (a) $13
million and (b) 85% of the Eligible Accounts Receivable (as defined in the
Credit Agreement) of the Company. Amounts borrowed under the Revolving Credit
Facility or the Acquisition Revolving Credit Facility may be repaid and
reborrowed. Under the Acquisition Facility, the Company is required to pay the
following amounts quarterly in arrears, expressed as a percentage of the
outstanding principal under the Acquisition Facility: 3% in 1997, 4% in 1998, 5%
in 1999, 6% in 2000 and 7% in 2001. All Loans under the Revolving Credit
Facility or the Acquisition Facility must be paid no later than June 30, 2001,
all Loans under the Interim Facility must be paid no later than March 31, 1997,
and all loans under the Acquisition Facility and the Interim Facility must be
paid upon receipt by the Company of the proceeds of this Offering if gross
proceeds exceed $35 million. During the term of the Revolving Credit Facility,
the Company is obligated to pay to the Agent on the last business day of each
month a facility fee equal to 0.5% per annum on the average daily undrawn
portion of both the Revolving Credit Facility and the Acquisition Facility
during the previous month.
The Loans are secured by a pledge by Lason of the Collateral (as defined in
the Credit Agreement, generally the stock and assets of Lason Systems and its
subsidiaries) and by a guaranty by the Company. The Credit Agreement requires
Lason to meet certain financial tests, including minimum interest coverage,
maximum debt to operating cash flow ratio and minimum operating cash flow. The
Credit Agreement also contains covenants which, among other things, prohibit or
restrict the incurrence of additional indebtedness, payment of dividends,
transactions with affiliates, sales of assets, acquisitions, investments,
dissolution or mergers, prepayments of other indebtedness, incurrence of
additional liens and encumbrances and other actions by Lason customarily
restricted in such agreements. In addition, the Credit Agreement requires the
Company to invest additional equity in
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<PAGE> 60
Lason Systems on or before March 31, 1997 in an amount, if any, necessary to
cause the ratio of Funded Debt (as defined in the Credit Agreement) to Pro Forma
Adjusted EBITDA (as defined in the Credit Agreement) to be no greater than 2.75
to 1.0 for the four fiscal quarters ending on March 31, 1997. The Credit
Agreement contains customary events of default, including payment defaults,
breach of representations and warranties, covenant defaults, cross-defaults to
other indebtedness of Lason and to any default by Lason under any agreement the
termination of which would have a Material Adverse Effect (as defined in the
Credit Agreement), certain events, bankruptcy and insolvency, the entry of a
judgment in an amount greater than $250,000 which shall not be dismissed or
stayed within 60 days, a lien in excess of $250,000 is placed on the Collateral
(as defined in the Credit Agreement) by a governmental authority, or the
acquisition of control of Lason Systems by any person other than the Company or
GTCR Fund IV.
Upon consummation of the Offering, the Company plans to repay a portion of
its outstanding indebtedness under its Credit Agreement using a portion of the
net proceeds from the Offering. The Company also expects to terminate the Credit
Agreement shortly after consummation of the Offering and to enter into the New
Credit Agreement providing for a revolving line of credit of up to $30 million
to be used to repay the remaining portion of the indebtedness outstanding under
the Credit Agreement and to finance additional acquisitions, working capital,
capital expenditures and other general corporate purposes. The New Credit
Agreement would expire on June 30, 1999. Interest on amounts outstanding, if
any, under the Acquisition Credit Facility will be calculated using rates
determined at the time of borrowing. Borrowings would bear interest at rates
ranging from a base percentage rate plus 1.25% (9.5% at June 30, 1996) to a
LIBOR plus 1.0% (6.6875% at June 30, 1996), depending upon the Company's
leverage ratio. The Company would pay a monthly fee at an annual rate of 0.25%
of the unused balance on the New Credit Agreement. The Company would not be
required to make principal payments prior to the end of the term of the proposed
loan. Borrowings, if any, under the New Credit Agreement would be collateralized
by substantially all of the Company's assets. The New Credit Agreement would
contain restrictions on the acquisition of stock or assets, disposal of assets,
incurrence of other liabilities, minimum requirements for cash flow and certain
financial ratios. There can be no assurance, however, that such New Credit
Agreement will be obtained or that, if obtained, will be on terms that are
favorable to the Company or sufficient for the Company's needs.
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<PAGE> 61
DESCRIPTION OF CAPITAL STOCK
GENERAL MATTERS
Upon consummation of the Offering, the total amount of authorized capital
stock of the Company will consist of 20,000,000 shares of common stock, par
value $0.01 per share (the "Common Stock"), and 5,000,000 shares of preferred
stock, par value $0.01 per share (the "Preferred Stock"), and 8,162,462 shares
of Common Stock will be issued and outstanding. The Company intends to adopt,
and intends to submit for approval by its stockholders, an Amended and Restated
Certificate of Incorporation and By-Laws to become effective upon consummation
of the Offering. The discussion herein describes the Company's capital stock,
Amended and Restated Certificate of Incorporation and By-Laws as anticipated to
be in effect upon consummation of the Offering. The following summary of certain
provisions of the Company's capital stock describes certain material provisions
of, but does not purport to be complete and is subject to, and qualified in its
entirety by, the Amended and Restated Certificate of Incorporation and the
By-Laws of the Company that are included as exhibits to the Registration
Statement of which this Prospectus forms a part and by the provisions of
applicable law. The Common Stock has been approved for trading on the Nasdaq
National Market under the symbol "LSON," subject to official notice of issuance.
CLASS A COMMON STOCK AND CLASS B COMMON STOCK
Immediately prior to the Reclassification, the Company's issued and
outstanding common stock consisted of 999,998 shares of Class A-1 Common Stock,
5,115 shares of Class A-2 Common Stock and 1,000,001 shares of Class B Common
Stock. Prior to the Reclassification, the holders of Class A-1 Common Stock and
Class A-2 Common Stock (collectively, the "Class A Common Stock") and Class B
Common Stock were entitled to participate in any distribution made by the
Company in the following priority: (i) first, to the holders of Class B Common
Stock, ratably, until the holders of Class B Common Stock as a class had
received, taking into consideration all prior distributions, a 10% yield
(compounded quarterly) on the Unreturned Preferred Amount (the Preferred Amount
minus any amounts distributed pursuant to clause (ii)) (the "Unpaid Yield"),
(ii) second, to the holders of Class B Common Stock, ratably, until the holders
of Class B Common Stock as a class had received, taking in to consideration all
prior distributions other than distributions pursuant to clause (i) above, the
Preferred Amount ($9.9 million), and (iii) last, to the holders of Class A
Common Stock and the holders of Class B Commons Stock, ratably, the balance of
such distribution. Prior to the Reclassification, the holders of Class A-1
Common Stock were entitled to one vote per share, the holders of Class B Common
Stock were entitled to four votes per share, and the holders of Class A-2 Common
Stock were entitled to no voting rights other than a class vote in connection
with a merger or reorganization in which the Class A-2 Common Stock would be
treated differently than the Class A-1 Common Stock.
THE RECAPITALIZATION
Immediately prior to the consummation of the Offering, each outstanding
share of Class A Common Stock shall be converted into one share of Common Stock
and each share of Class B Common Stock shall be converted into a number of
shares of Common Stock equal to (i) one plus (ii) a number of shares of Common
Stock valued at the initial public offering price of the Offering (adjusted for
the stock split) equal to the Unpaid Yield and the Unreturned Preferred Amount
with respect to such share of Class B Common Stock as of such date. Assuming an
initial public offering price of $15.50 and consummation of the Offering on
September 30, 1996, the aggregate Unpaid Yield and the aggregate Unreturned
Preferred Amount would be approximately $1.8 million and $9.9 million,
respectively, and each share of Class B Common Stock would be converted into
approximately 1.3 shares of Common Stock (the "Reclassification"). Each share of
Common Stock will then be split into 2.5 shares of Common Stock (the "Stock
Split"). Concurrent with the consummation of the Offering, the Company shall use
a portion of the proceeds of the Offering to redeem shares of Common Stock owned
by GTCR Fund IV at a price equal to the initial public offering price of the
Common Stock in the Offering (the
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"Redemption," and together with the Reclassification and Stock Split, the
"Recapitalization"). See "Use of Proceeds" and "Certain Relationships and
Related Transactions."
COMMON STOCK
Following the Recapitalization and immediately prior to consummation of the
Offering, there will be 5,162,462 shares of Common Stock outstanding held by 29
holders of record. The issued and outstanding shares of Common Stock are, and
the shares of Common Stock being offered hereby will be upon payment therefor,
validly issued, fully paid and nonassessable. Subject to the prior rights of the
holders of any Preferred Stock, the holders of outstanding shares of Common
Stock are entitled to receive dividends out of assets legally available therefor
at such times and in such amounts as the Board may from time to time determine.
See "Dividend Policy." Following consummation of the Offering, the shares of
Common Stock will not be redeemable or convertible, and the holders thereof will
have no preemptive rights (other than pursuant to the Stockholders Agreement) or
subscription rights to purchase any securities of the Company. Upon liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to receive pro rata the assets of the Company which are legally
available for distribution, after payment of all debts and other liabilities and
subject to the prior rights of any holders of Preferred Stock then outstanding.
Each outstanding share of Common Stock is entitled to vote on all matters
submitted to a vote of stockholders.
PREFERRED STOCK
The Board may, without further action by the Company's stockholders, from
time to time, direct the issuance of shares of Preferred Stock in series and
may, at the time of issuance, determine the rights, preferences and limitations
of each series. Satisfaction of any dividend preferences of outstanding shares
of Preferred Stock would reduce the amount of funds available for the payment of
dividends on shares of Common Stock. Holders of shares of Preferred Stock may be
entitled to receive a preference payment in the event of any liquidation,
dissolution or winding-up of the Company before any payment is made to the
holders of shares of Common Stock. Under certain circumstances, the issuance of
shares of Preferred Stock, while providing desirable flexibility in connection
with possible acquisitions, financings and other corporate transactions, may
render more difficult or tend to discourage a merger, tender offer or proxy
contest, the assumption of control by a holder of a large block of the Company's
securities or the removal of incumbent management. The Board, without
stockholder approval, may issue shares of Preferred Stock with voting and
conversion rights which could adversely affect the holders of shares of Common
Stock.
CERTAIN PROVISIONS OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
AND BY-LAWS AND STATUTORY PROVISIONS
The Amended and Restated Certificate of Incorporation to be effective upon
consummation of the Offering provides that the Board will be divided into three
classes, with each class, after a transitional period, serving for three years,
and one class being elected each year. A majority of the remaining directors
then in office, though less than a quorum, or the sole remaining director, will
be empowered to fill any vacancy on the Board which arises during the term of a
director or as a result of a newly created directorship. The provision for a
classified Board may be amended, altered or repealed only upon the affirmative
vote of the holders of at least 80% of the outstanding shares of the voting
stock of the Company. The classification of the Board may discourage a third
party from making a tender offer or otherwise attempting to gain control of the
Company and may have the effect of maintaining the incumbency of the Board.
The Amended and Restated Certificate of Incorporation will require that any
action required or permitted to be taken by the Company's stockholders must be
effected at a duly called annual or special meeting of stockholders and may not
be effected by consent in writing. Additionally, the Amended and Restated
Certificate of Incorporation and By-Laws will require that special meetings of
the stockholders of the Company be called only by the affirmative vote of at
least two members of the
61
<PAGE> 63
Board or by certain officers. These provisions may not be amended, altered or
repealed without the affirmative vote of at least 80% of the outstanding shares
of the voting stock of the Company.
The By-Laws will provide that stockholders seeking to bring business before
or to nominate directors at any annual meeting of stockholders must provide
timely notice thereof in writing. To be timely, a stockholder's notice must be
delivered to, or mailed and received at, the principal executive offices of the
Company not less than 60 days nor more than 90 days prior to such meeting or, if
less than 70 days' notice was given for the meeting, within 10 days following
the date on which such notice was given. The By-Laws also will specify certain
requirements for a stockholder's notice to be in proper written form. These
provisions will restrict the ability of stockholders to bring matters before the
stockholders or to make nominations for directors at meetings of stockholders.
These provisions may not be amended, altered or repealed by the stockholders
without the affirmative vote of at least 80% of the outstanding shares of the
voting stock of the Company.
Following the consummation of the Offering, the Company will be subject to
the "business combination" provisions of the Delaware General Corporation Law.
In general, such provisions prohibit a publicly held Delaware corporation from
engaging in various "business combination" transactions with any Interested
Stockholder for a period of three years after the date of the transaction in
which the person became an Interested Stockholder, unless (i) the transaction is
approved by the Board prior to the date the Interested Stockholder obtained such
status, (ii) upon consummation of the transaction which resulted in the
stockholder becoming an Interested Stockholder, the Interested Stockholder owned
at least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of determining the number of
shares outstanding those shares owned by (a) persons who are directors and also
officers and (b) employee stock plans in which employee participants do not have
the right to determine confidentially whether shares held subject to the plan
will be tendered in a tender or exchange offer, or (iii) on or subsequent to
such date the "business combination" is approved by the Board and authorized at
an annual or special meeting of stockholders by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the Interested
Stockholder.
A "business combination" is defined to include mergers, asset sales and
other transactions resulting in financial benefit to a stockholder. The statute
could prohibit or delay mergers or other takeover or change in control attempts
with respect to the Company and, accordingly, may discourage attempts to acquire
the Company. The Board intends to approve any acquisition of shares of Common
Stock by GTCR Fund IV or its affiliates that would otherwise result in GTCR Fund
IV or such affiliates becoming an Interested Stockholder. See "Risk Factors --
Anti-Takeover Effect of Certain Charter, By-Laws and Statutory Provisions."
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Amended and Restated Certificate of Incorporation limits the liability
of directors to the fullest extent permitted by the Delaware General Corporation
Law. This provision may not be amended, altered or repealed without the
affirmative vote of at least 80% of the outstanding shares of the voting stock
of the Company. In addition, the By-Laws provide that the Company shall
indemnify directors and officers of the Company to the fullest extent permitted
by such law. This provision may not be amended, altered or repealed by the
stockholders without the affirmative vote of at least 80% of the outstanding
shares of the voting stock of the Company.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock will be First Chicago
NBD.
62
<PAGE> 64
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offering, 8,162,462 shares of Common Stock will be
outstanding (8,612,462 if the Underwriters' over-allotment option is exercised
in full). The 3,000,000 shares of Common Stock sold in the Offering (plus up to
450,000 additional shares of Common Stock if the Underwriters' over-allotment
option is exercised in full) will be freely tradeable without restriction or
further registration under the Securities Act, unless such shares are held by an
"affiliate" of the Company as that term is defined in Rule 144, which shares
will be subject to the resale limitations of Rule 144. Other than the shares of
Common Stock being offered hereby, the currently outstanding shares of Common
Stock have not been registered under the Securities Act and may not be sold
unless such shares are registered or unless an exemption from registration, such
as the exemption provided by Rule 144, is available. 4,999,997 of such
unregistered shares, but for the lockup provisions described below, would be
eligible for sale not earlier than January 17, 1997, subject to certain volume
and other limitations under Rule 144.
The Company and certain of its stockholders, which as of the consummation
of the Offering will hold 4,703,265 shares of Common Stock, have agreed for the
Lockup Period not to sell or otherwise dispose of, and the Company has agreed
not to register, any shares of Common Stock or any securities of the Company
which are substantially similar to the shares of Common Stock, including, but
not limited to, any securities that are convertible into or exchangeable for, or
represent the right to receive, Common Stock or any such substantially similar
securities (other than the grant of options with respect to, and the issuance
and registration of up to 1,000,000 shares of Common Stock by the Company in
connection with, the Company's 1995 Stock Option Plan and the issuance and
registration of up to 2,500,000 shares of Common Stock by the Company for use as
consideration in further acquisitions), without the prior written consent of
Robertson Stephens & Company LLC, except for the shares of Common Stock offered
in connection with the Offering.
In general, under Rule 144 as currently in effect, a stockholder (or
stockholders whose shares are aggregated) who has beneficially owned shares
constituting "restricted securities" (generally defined as securities acquired
from the Company or an affiliate of the Company in a non-public transaction) for
at least two years, is entitled to sell within any three-month period a number
of shares that does not exceed the greater of (i) 1% of the outstanding Common
Stock (approximately 81,625 shares of Common Stock immediately after the
Offering or 86,125 shares if the Underwriters' over-allotment option is
exercised in full) or (ii) the average weekly trading volume in the Common Stock
in the over-the-counter market during the four calendar weeks preceding the date
on which notice of such sale is filed pursuant to Rule 144. Sales under Rule 144
are also subject to certain provisions regarding the manner of sale, notice
requirements and the availability of current public information about the
Company. A stockholder (or stockholders whose shares are aggregated) who is not
an affiliate of the Company for at least 90 days prior to a sale and who has
beneficially owned "restricted securities" for at least three years is entitled
to sell such shares under Rule 144 without regard to the limitations described
above.
In connection with the 1995 Recapitalization, the Company and the 1995
Stockholders entered into the Registration Agreement. Pursuant to the
Registration Agreement, the 1995 Stockholders and their transferees, who hold in
the aggregate 4,999,997 shares of Common Stock, are entitled to certain demand
and piggy-back registration rights with respect to such shares of Common Stock,
which may be exercised after the expiration of the Lockup Period. Such rights
could be used to force the Company to file a registration statement with respect
to the Common Stock owned by such persons. In addition, the holders of an
additional 149,677 shares of Common Stock (assuming an initial public offering
price of $15.50) have certain piggy-back registration rights. The existence of
the Registration Agreement and such other registration rights and the perception
that sales of Common Stock could occur thereunder could adversely effect the
market price of the Common Stock and could impair the Company's ability to raise
capital through the sale of equity securities. See "Recent Acquisitions" and
"Certain Relationships and Related Transactions -- Registration Agreement."
63
<PAGE> 65
Promptly after consummation of the Offering, the Company expects to file
with the Commission a registration statement on Form S-8 covering up to
1,000,000 shares of Common Stock with respect to the 1995 Stock Option Plan and
a registration statement covering up to 2,500,000 shares of Common Stock for use
as consideration in future acquisitions. Such shares, when registered and
issued, will be freely tradeable without restriction or further registration
under the Securities Act.
Prior to the Offering, there has been no public market for the Common
Stock, and no assurances can be given as to the effect, if any, that public
market sales of shares of Common Stock or the availability of such shares for
sale will have on the trading price prevailing from time to time. Nevertheless,
sales of substantial amounts of Common Stock in the public market, or the
perception that such sales could occur, could adversely affect the market price
of the Common Stock and could impair the Company's future ability to raise
capital through the sale of its equity securities. See "Risk Factors -- Shares
Eligible for Future Sale; Registration Rights."
64
<PAGE> 66
UNDERWRITING
The underwriters named below (the "Underwriters"), acting through their
representatives, Robertson, Stephens & Company LLC and William Blair & Company,
L.L.C. (the "Representatives"), have severally agreed, subject to the terms and
conditions of an underwriting agreement among the Company and the Underwriters
(the "Underwriting Agreement"), to purchase the number of shares of Common Stock
set forth opposite their respective names below. The Underwriters are committed
to purchase and pay for all of such shares if any are purchased.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
------------------------------------------------------------------- ---------
<S> <C>
Robertson, Stephens & Company LLC..................................
William Blair & Company, L.L.C.....................................
----------
Total......................................................... 3,000,000
==========
</TABLE>
The Representatives have advised the Company that they propose to offer the
shares of Common Stock to the public at the offering price set forth on the
cover page of this Prospectus and to certain dealers at such price less a
concession of not in excess of $ per share, of which $ may be
reallowed to other dealers. After the initial public offering, the public
offering price, concession and reallowance to dealers may be reduced by the
Representatives. No such reduction shall affect the amount of proceeds to be
received by the Company as set forth on the cover page of this Prospectus.
The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to 450,000
additional shares of Common Stock at the same price per share as the Company
will receive for the 3,000,000 shares that the Underwriters have agreed to
purchase from the Company. To the extent that the Underwriters exercise such
option, each of the Underwriters will have a firm commitment to purchase
approximately the same percentage of such additional shares that the number of
shares of Common Stock to be purchased by it shown in the above table represents
as a percentage of the 3,000,000 shares offered hereby. If purchased, such
additional shares will be sold by the Underwriters on the same terms as those on
which the 3,000,000 shares are being sold.
The Underwriting Agreement contains covenants of indemnity between the
Underwriters and the Company against certain civil liabilities, including
liabilities under the Securities Act.
Pursuant to the terms of lock-up agreements, the holders of approximately
4,703,265 shares of the Common Stock have agreed with the Representatives that
during the Lockup Period, subject to certain limited exceptions, they will not
sell or otherwise dispose of shares of Common Stock, including shares issuable
under options or warrants exercisable during the Lockup Period, any options or
warrants to purchase shares of Common Stock or any securities convertible into
or exchangeable for shares of Common Stock owned directly by such holders or
with respect to which they have the power of disposition without the prior
written consent of Robertson, Stephens & Company LLC.
The Underwriters do not intend to confirm sales of the Common Stock offered
hereby to any accounts over which they exercise discretionary authority.
Prior to the Offering, there has been no public market for the Company's
securities. The initial public offering price will be determined through
negotiations among the Company and the Representatives. Among the factors to be
considered in such negotiations will be prevailing market conditions, the net
revenues and results of operations of the Company in recent periods, market
valuations of
65
<PAGE> 67
publicly traded companies that the Company and the Representatives believe to be
comparable to the Company, estimates of the business potential of the Company,
the present state of the Company's development, the current state of the
industry and the economy as a whole and other factors deemed relevant.
VALIDITY OF COMMON STOCK
The validity of the Common Stock offered hereby will be passed upon for the
Company by Kirkland & Ellis (a partnership which includes professional
corporations), Chicago, Illinois. Certain legal matters in connection with the
Common Stock will be passed upon for the Underwriters by Winston & Strawn,
Chicago, Illinois.
EXPERTS
The consolidated financial statements and financial statement schedule of
the Company for the year ended December 31, 1995, and the financial statements
of the Predecessor for the years ended December 31, 1994 and 1993 appearing in
this Prospectus and Registration Statement have been audited by Coopers &
Lybrand LLP, independent accountants, as set forth in their reports appearing
elsewhere herein and are included in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission,
Washington, D.C. (the "Commission"), a registration statement on Form S-1
pursuant to the Securities Act with respect to the Common Stock offered hereby
(the "Registration Statement"). This prospectus (the "Prospectus") does not
contain all the information set forth in the Registration Statement and the
exhibits and schedules thereto, certain items of which are omitted as permitted
by the rules and regulations of the Commission. Statements contained in this
Prospectus concerning the provisions of any document filed with the Registration
Statement as exhibits are necessarily summaries of such documents, and each such
statement is qualified in its entirety by reference to the copy of the
applicable document filed as an exhibit to the Registration Statement. For
further information about the Company and the Common Stock offered hereby,
reference is made to the Registration Statement and to the financial statements,
schedules and exhibits filed as a part thereof.
Upon completion of the Offering, the Company will be subject to the
information requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and, in accordance therewith, will file reports and other
information with the Commission. The Registration Statement, the exhibits and
schedules forming a part thereof and the reports and other information filed by
the Company with the Commission in accordance with the Exchange Act may be
inspected without charge at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549; at its New York
Regional Office, 7 World Trade Center, 13th Floor, New York, New York 10048; and
its Chicago Regional Officer, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can be obtained from the public
reference section of the Commission, 450 Fifth Street N.W., Washington, D.C.
20549, upon payment of the prescribed rates. The Commission maintains a Web site
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission, and the
address of such site is http://www.sec.gov.
66
<PAGE> 68
INDEX TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION, FINANCIAL STATEMENTS, AND
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
LASON, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Unaudited Pro Forma Condensed Consolidated Financial Information................... F-2
Unaudited Pro Forma Condensed Consolidated Balance Sheets as of June 30, 1996...... F-3
Unaudited Pro Forma Condensed Consolidated Statements of Income for the Six Months
ended June 30, 1996............................................................. F-5
Unaudited Pro Forma Condensed Consolidated Statements of Income for the Year ended
December 31, 1995............................................................... F-7
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements........... F-9
LASON, INC.
Report of Independent Accountants.................................................. F-15
Consolidated Balance Sheets as of December 31, 1995 and June 30, 1996
(Unaudited)..................................................................... F-16
Consolidated Statements of Income for the year ended December 31, 1995 and for the
six months ended June 30, 1995 and 1996 (Unaudited)............................. F-17
Consolidated Statements of Stockholders' Equity for the year ended December 31,
1995 and for the six months ended June 30, 1996 (Unaudited)..................... F-18
Consolidated Statements of Cash Flows for the year ended December 31, 1995 and for
the six months ended June 30, 1995 and 1996 (Unaudited)......................... F-19
Notes to Consolidated Financial Statements......................................... F-20
LASON SYSTEMS, INC.
Report of Independent Accountants.................................................. F-29
Balance Sheet as of December 31, 1994.............................................. F-30
Statements of Income for the years ended December 31, 1993 and 1994................ F-31
Statements of Stockholders' Equity for the years ended December 31, 1993 and
1994............................................................................ F-32
Statements of Cash Flows for the years ended December 31, 1993 and 1994............ F-33
Notes to Financial Statements...................................................... F-34
GREAT LAKES MICROGRAPHICS CORPORATION
Report of Independent Accountants.................................................. F-37
Balance Sheets as of December 31, 1995 and June 30, 1996 (Unaudited)............... F-38
Statements of Income for the year ended December 31, 1995 and for the six months
ended June 30, 1995 and 1996 (Unaudited)........................................ F-39
Statements of Stockholders' Equity for the year ended December 31, 1995 and for the
six months ended June 30, 1996 (Unaudited)...................................... F-40
Statements of Cash Flows for the year ended December 31, 1995 and for the six
months ended June 30, 1995 and 1996 (Unaudited)................................. F-41
Notes to Financial Statements...................................................... F-42
NATIONAL REPRODUCTIONS CORP.
Report of Independent Accountants.................................................. F-44
Balance Sheets as of December 31, 1994 and 1995 and June 30, 1996 (Unaudited)...... F-45
Statements of Operations for the years ended December 31, 1994 and 1995 and for the
six months ended June 30, 1995 and 1996 (Unaudited)............................. F-46
Statements of Stockholders' Equity for the years ended December 31, 1994 and 1995
and for the six months ended June 30, 1996 (Unaudited).......................... F-47
Statements of Cash Flows for the years ended December 31, 1994 and 1995 and for the
six months ended June 30, 1995 and 1996 (Unaudited)............................. F-48
Notes to Financial Statements...................................................... F-49
</TABLE>
F-1
<PAGE> 69
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated balance sheet has
been prepared based upon the historical consolidated balance sheet of Lason as
of June 30, 1996 and the balance sheets as of June 30, 1996 of the Acquisitions
(See "Business -- Acquisition Strategy") consummated after June 30, 1996 and
gives effect to (i) such Acquisitions, (ii) the Recapitalization and (iii) the
application of the net proceeds from the Offering (after deducting underwriting
discounts and commissions and estimated expenses of the Offering, but excluding
the underwriters' over-allotment option), as if each had occurred as of June 30,
1996. The following unaudited Pro Forma Condensed consolidated statements of
income for the six months ended June 30, 1996 and for the year ended December
31, 1995 give effect to each of the above transactions and to the Acquisitions
as if each had occurred as of January 1, 1995. Pro forma adjustments are
described in the accompanying notes.
The unaudited pro forma condensed consolidated financial information should
be read in conjunction with "Capitalization" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and with the
Consolidated Financial Statements and the Notes thereto included elsewhere in
this Prospectus. The unaudited pro forma condensed consolidated statements of
income are not necessarily indicative of the actual results of operations that
would have been reported if the events described above had occurred as of
January 1, 1995, nor do such statements purport to indicate the results of
future operations of Lason. Furthermore, the pro forma results do not give
effect to all cost savings or incremental costs, if any, which may occur as a
result of the integration and consolidation of the acquisitions. In the opinion
of management, all adjustments necessary to present fairly such unaudited pro
forma condensed consolidated financial statements have been made.
F-2
<PAGE> 70
LASON, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS AS ADJUSTED FOR
PRO FORMA FOR THE ACQUISITIONS
ADJUSTMENTS AS ADJUSTED OFFERING AND
LASON ACQUISITIONS(1) FOR ACQUISITIONS FOR ACQUISITIONS AND OTHER THE OFFERING
------- --------------- ---------------- ---------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets......... $15,819 $ 4,745 $ -- $ 20,564 $ 628 G $21,192
Property, plant and
equipment, net....... 3,278 2,116 (61)F 5,333 -- 5,333
Goodwill, net.......... 18,272 134 17,454 A 35,860 -- 35,860
Other assets........... 3,315 302 238 E 3,855 (369)H 3,486
------- ------- ------- -------- -------- -------
Total assets......... $40,684 $ 7,297 $ 17,631 $ 65,612 $ 259 $65,871
======= ======= ======= ======== ======== =======
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current portion, long
term debt............ $ 2,000 $ 1,325 $ (100)B $ 3,225 $ (2,000)B $ 1,225
Other current
liabilities.......... 8,028 2,575 1,400 B 12,003 -- 12,003
------- ------- ------- -------- -------- -------
Total current
liabilities....... 10,028 3,900 1,300 15,228 (2,000) 13,228
Long term debt, less
current portion...... 19,146 928 15,851 B 35,925 (28,633)B 7,292
Minority interest and
other non current
liabilities.......... 402 -- 629 B,C 1,031 -- 1,031
------- ------- ------- -------- -------- -------
Total liabilities.... 29,576 4,828 17,780 52,184 (30,633) 21,551
Common stock with a put
option............... -- -- 1,060 B 1,060 -- 1,060
Common stock........... 50 35 (34)B 51 30 B 81
Additional paid in
capital.............. 8,622 10 1,249 B 9,881 30,603 B 40,484
Loans to
stockholders......... (628) (123) 123 D (628) 628 G --
Retained earnings...... 3,064 2,547 (2,547)B 3,064 (369)H 2,695
------- ------- ------- -------- -------- -------
Total stockholders'
equity............ 11,108 2,469 (1,209) 12,368 30,892 43,260
------- ------- ------- -------- -------- -------
Total liabilities and
stockholders'
equity............ $40,684 $ 7,297 $ 17,631 $ 65,612 $ 259 $65,871
======= ======= ======= ======== ======== =======
</TABLE>
- ------------
(1) See Schedule A for detail of the Acquisitions
The accompanying Notes are an integral part of these unaudited
pro forma condensed consolidated financial statements.
F-3
<PAGE> 71
SCHEDULE A
LASON, INC.
UNAUDITED SCHEDULE OF ACQUISITIONS
JUNE 30, 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL
GREAT LAKES NRC OTHER ACQUISITIONS
----------- ------ ------ ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets........................................ $ 1,005 $2,671 $1,069 $4,745
Property, plant and equipment, net.................... 207 1,061 848 2,116
Goodwill, net......................................... -- -- 134 134
Other assets.......................................... 8 192 102 302
------ ------ ------ ------
Total assets........................................ $ 1,220 3,924 $2,153 $7,297
====== ====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion, long term debt....................... $ -- $1,325 $ -- $1,325
Other current......................................... 760 1,087 728 2,575
------ ------ ------ ------
Total current liabilities........................... 760 2,417 728 3,900
Long term debt, less current portion.................. -- 157 771 928
------ ------ ------ ------
Total liabilities................................... 760 2,569 1,499 4,828
Common stock.......................................... 2 28 5 35
Additional paid in capital............................ -- 10 -- 10
Loans to stockholders................................. -- (123) -- (123)
Retained earnings..................................... 458 1,440 649 2,547
------ ------ ------ ------
Total stockholders' equity.......................... 460 1,355 654 2,469
------ ------ ------ ------
Total liabilities and stockholders' equity.......... $ 1,220 $3,924 $2,153 $7,297
====== ====== ====== ======
</TABLE>
The accompanying Notes are an integral part of these
unaudited pro forma condensed consolidated financial statements.
F-4
<PAGE> 72
LASON, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
AS ADJUSTED
LASON ACQUISITIONS(1) ADJUSTMENTS LASON
------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues, net of postage....................... $27,089 $14,588 $ -- $41,677
Cost of revenues............................... 17,696 11,199 -- 28,895
------- ------- ------ -------
Gross profit................................. 9,393 3,389 -- 12,782
Selling, general and administrative expenses... 5,273 2,672 (366)I 7,579
Compensatory option expense.................... 167 -- (36)J 131
Amortization of intangibles.................... 379 6 284 K 669
------- ------- ------ -------
Income from operations....................... 3,574 711 118 4,403
Other income................................... 53 148 201
Interest expense............................... (885) (91) 646 L (330)
------- ------- ------ -------
Total other income (expense)................. (832) 57 646 (129)
Income before minority interest and provision
for income taxes............................. 2,742 768 764 4,274
Minority interest in net income of
subsidiary................................... (28) -- (28)N (56)
Provision for income taxes..................... (992) -- (528)M (1,520)
------- ------- ------ -------
Net income..................................... $ 1,722 $ 768 $ 208 $ 2,698
======= ======= ====== =======
Pro forma primary and fully diluted earnings
per share.................................... $ .31 O
=======
Weighted average common shares and common share
equivalents outstanding...................... 8,640
-------
</TABLE>
- ------------
(1) See Schedule B for detail of the Acquisitions.
The accompanying Notes are an integral part of these
unaudited pro forma condensed consolidated financial statements.
F-5
<PAGE> 73
SCHEDULE B
LASON, INC.
UNAUDITED SCHEDULE OF ACQUISITIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
TOTAL
GREAT LAKES NRC OTHER ACQUISITIONS
----------- ------ ------ ------------
<S> <C> <C> <C> <C>
Revenues, net of postage.............................. $ 3,908 $7,176 $3,504 $ 14,588
Cost of revenues...................................... 3,018 5,627 2,554 11,199
------- ------ ------ --------
Gross profit..................................... 890 1,549 950 3,389
Selling, general and administrative expenses.......... 759 1,142 771 2,672
Amortization of intangibles........................... -- -- 6 6
------- ------ ------ --------
Income from operations........................... 131 407 173 711
Other income.......................................... 1 76 71 148
Interest expense...................................... -- (50) (41) (91)
------- ------ ------ --------
Total other income (expense)..................... 1 26 30 57
Income before provision for income taxes.............. 132 433 203 768
Provision for income taxes............................ -- -- -- --
------- ------ ------ --------
Net income............................................ $ 132 $ 433 $ 203 $ 768
======= ====== ====== ========
</TABLE>
The accompanying Notes are an integral part of these
unaudited pro forma condensed consolidated financial statements.
F-6
<PAGE> 74
LASON, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
AS ADJUSTED
LASON ACQUISITIONS(1) ADJUSTMENTS LASON
------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues, net of postage..................... $46,605 $28,447 $ -- $75,052
Cost of revenues............................. 31,227 22,087 -- 53,314
------- ------- ------ -------
Gross profit............................... 15,378 6,360 -- 21,738
Selling, general and administrative
expenses................................... 9,406 5,805 (951)I 14,260
Compensatory option expense.................. 308 -- 668 J 976
Amortization of intangibles.................. 817 11 568 K 1,396
------- ------- ------ -------
Income from operations..................... 4,847 544 (285) 5,106
Other income................................. 66 70 -- 136
Interest expense............................. (1,760) (177) 1,254 L (683)
------- ------- ------ -------
Total other income (expense)............... (1,694) (107) 1,254 (547)
Income before provision
for income taxes........................... 3,153 437 969 4,559
Minority interest in net income of
subsidiary................................. -- -- (29)N (29)
Provision for income taxes................... (1,139) (11) (543)M (1,693)
------- ------- ------ -------
Net income................................... $ 2,014 $ 426 $ 397 $ 2,837
======= ======= ====== =======
Pro forma primary and fully diluted earnings
per share.................................. $ .33 O
=======
Weighted average common shares and common
share equivalents outstanding.............. 8,644
-------
</TABLE>
- ------------
(1) See Schedule C for detail of the Acquisitions
The accompanying Notes are an integral part of these
unaudited pro forma condensed consolidated financial statements.
F-7
<PAGE> 75
SCHEDULE C
LASON, INC.
UNAUDITED SCHEDULE OF ACQUISITIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
TOTAL
GREAT LAKES NRC OTHER ACQUISITIONS
----------- ------- ------ ------------
<S> <C> <C> <C> <C>
Revenues, net of postage............................. $ 7,825 $14,593 $6,029 $ 28,447
Cost of revenues..................................... 6,397 11,536 4,154 22,087
------- ------- ------ --------
Gross profit....................................... 1,428 3,057 1,875 6,360
Selling, general and administrative expenses......... 1,371 2,555 1,879 5,805
Amortization of intangibles.......................... -- -- 11 11
------- ------- ------ --------
Income (loss) from operations...................... 57 502 (15) 544
Other income (expense)............................... 2 68 -- 70
Interest expense..................................... (3) (146) (28) (177)
------- ------- ------ --------
Total other income (expense)....................... (1) (78) (28) (107)
Income before provision for income taxes............. 56 424 (43) 437
Provision for income taxes........................... -- -- (11) (11)
------- ------- ------ --------
Net income (loss).................................... $ 56 $ 424 $ (54) $ 426
======= ======= ====== ========
</TABLE>
The accompanying Notes are an integral part of these
unaudited pro forma condensed consolidated financial statements.
F-8
<PAGE> 76
LASON, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
On June 1, 1995, Lason acquired certain assets of Adcom Mailers, Inc. and
an affiliated company ("Adcom"). In January 1996, Lason acquired the assets of
Mail-Away Corporation ("Mail-Away"). In February 1996, Lason acquired
substantially all of the assets of Diversified Support Services, Inc.
("Diversified"). On April 1, 1996, Lason acquired 65% of the common stock of
Delaware Legal Copy, Inc. ("Delaware Legal"). Effective July 1, 1996, Lason
acquired the common stock of the following (i) Information & Image Technology of
America, Inc. ("IITA"), (ii) (80% of the common stock) of Micro-Pro, Inc. and MP
Services, Inc., affiliated companies ("Micro-Pro"), and (iii) Great Lakes
Micrographics Corporation ("Great Lakes"); and executed an agreement to acquire
all the common stock of National Reproductions Corp. ("NRC"). The results of
operations for Adcom, Mail Away, and Diversified are included in the results of
operations of Lason from the respective date of acquisition. The unaudited pro
forma condensed consolidated financial statements have not been adjusted to
reflect the acquisition of Adcom, Mail-Away, and Diversified as though each had
been completed as of January 1, 1995 as the impact of such adjustment would not
be material. The historical balance sheet of Lason at June 30, 1996 includes
Adcom, Mail-Away, Diversified and Delaware Legal. The aggregate purchase price,
including liabilities assumed, of the foregoing acquisitions completed
subsequent to June 30, 1996 was $23.6 million.
The unaudited pro forma condensed consolidated financial statements do not
give effect to the following, with respect to the acquisitions:
(1) Contingent purchase price adjustment for IITA, the purchase price
of $3.15 million may be increased by a maximum of 30% and decreased by a
maximum of 15% based on future results of operations exceeding or failing
to meet targeted earnings, as defined in the IITA stock purchase agreement.
Contingent purchase price adjustment for Great Lakes, the purchase price
may be increased by an amount equal to 25% of the amount by which Great
Lakes earnings before interest and income taxes exceeds $1.06 million in
each calendar year over the next three years.
(2) Lason has the option to purchase, subsequent to January 1, 1998,
the minority stockholders interest in Delaware Legal and Micro-Pro. If
Lason does not exercise its option, the minority stockholders may require
Lason to purchase such shares up to January 1, 1999. The purchase of the
minority interests will be recorded at fair value at the date of
acquisition.
(3) In the event the Offering is not completed within six months of
the respective acquisition closing date, for the following thirty months
stockholders of IITA have an option to require Lason to purchase the Lason
shares received as a portion of the purchase price.
(4) If begun in the six months after the closing of the acquisition,
former IITA stockholders would be entitled to receive one-half of the net
earnings, if any, from a to be formed entity to serve specific customers.
Such payments, if any, would end after the first three years following the
commencement of such business.
(5) If a contract is awarded within six months after the closing of
the acquisition of NRC for certain incremental work for an existing
customer, the NRC purchase price will be adjusted by an amount equal to 5%
of the gross revenue derived by NRC from such incremental work for a period
of three years.
BALANCE SHEET
The excess of the purchase price and liabilities assumed over the book
value of the net assets acquired for each acquisition has been allocated to
tangible and intangible assets, based on Lason's estimate of the fair market
value of the net assets acquired. The allocations of the excess purchase
F-9
<PAGE> 77
LASON, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION -- CONTINUED
price, as illustrated below, may change upon final appraisal of the fair market
value of the net assets acquired.
ACQUISITIONS COMPLETED SUBSEQUENT TO JUNE 30, 1996: (in millions)
<TABLE>
<S> <C>
Book value of net assets acquired................................................ $ 2.5
Allocation of purchase price in excess of acquired assets:
Goodwill....................................................................... 17.4
Covenants not to compete....................................................... .2
------
Assets of Acquisitions Completed Subsequent to June 30, 1996..................... $20.1
------
Plus: Liabilities assumed........................................................ 4.4
Total Purchase Price of Completed Acquisitions................................... $24.5
======
</TABLE>
The acquisitions completed subsequent to June 30, 1996 were financed using
approximately $16.0 million of borrowings under the Company's credit facilities,
issuance of a $400,000 convertible debenture and $2.3 million from common stock
issued.
Each of the Acquisitions has been accounted for as a purchase. See
"Business -- Acquisition Strategy," "Use of Proceeds," "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and Note 15 of
Notes to Consolidated Financial Statements.
The accompanying unaudited pro forma condensed consolidated balance sheet
as of June 30, 1996 has been prepared as if the acquisitions consummated after
June 30, 1996 had all been completed as of June 30, 1996 and includes the
following adjustments:
(A) A pro forma adjustment has been made to increase intangible assets
(consisting of $17.4 million of goodwill) equal to the excess of the
applicable purchase price over the fair market values assigned to specific
acquired assets, less liabilities assumed.
F-10
<PAGE> 78
LASON, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION -- CONTINUED
(B) The pro forma adjustments to Liabilities and Stockholders' Equity
consist of the following:
<TABLE>
<CAPTION>
MINORITY
INTEREST
AND OTHER COMMON STOCK ADDITIONAL
CURRENT NONCURRENT LONG-TERM COMMON WITH PAID IN RETAINED
LIABILITIES LIABILITIES DEBT STOCK(3) PUT OPTION CAPITAL EARNINGS
----------- ----------- --------- ------ ------------ ---------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Acquisition Entries
Estimate of additional
acquisition costs............. $ 1.4 $ .5
Debt of acquired companies not
assumed....................... (0.1) $ (0.3)
Eliminate stockholders' equity
of acquired companies......... $ (2.5)
Record additional bank
borrowings and common stock
issued to finance acquisitions
closed after June 30, 1996,
including $1.1 of common stock
issued with a put option...... 15.8 -- $ 1.1 $ 1.2
Record promissory note issued in
conjunction with the
acquisition of NRC(1)......... 0.4
------ --- ------ ---- ----- ----- ------
Total Acquisition Entries... 1.3 .5 15.9 -- $ 1.1 1.2 (2.5)
------ --- ------ ---- ----- ----- ------
Use of Proceeds Entries
Estimated net proceeds.......... -- $ 42.3
Redemption of Common Stock and
unpaid yield(2)............... (11.7)
Use of proceeds to repay debt
issued to finance
acquisitions.................. $(2.0) (15.8)
Use of proceeds to repay other
debt.......................... (12.8)
------ --- ------ ---- ----- ----- ------
Total Use of Proceeds
Entries................... (2.0) (28.6) -- -- 30.6 0
------ --- ------ ---- ----- ----- ------
Total Adjustment.................. $ (.7) $ .5 $ (12.7) $ -- $ 1.1 $ 31.8 $ (2.5)
====== === ====== ==== ===== ===== ======
</TABLE>
- ------------
(1) The promissory note is payable at the earlier of (i) one year following the
effective date of the Company's equity offering or (ii) October 1, 1997. The
Seller has the option of converting the note into the Company's Common Stock
at the offering price.
(2) Redemption and retirement of Class B stock and unpaid yield.
(3) No amounts shown due to rounding. The $34,000 acquisition adjustment to
Common Stock consists of a $35,000 adjustment to eliminate the Common Stock
of acquired companies net of a $1,000 adjustment to record the issuance of
Common Stock to finance acquisitions. The $30,000 adjustment reflects the
par value of the 3,000,000 shares of Common Stock offered by the Company.
(C) Pro forma acquisition adjustment of $159,000 to record the 20
percent minority interest in Micro-Pro.
(D) The pro forma acquisition adjustment for the NRC $123,000
shareholder loan which will not be purchased as part of the acquisition.
F-11
<PAGE> 79
LASON, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION -- CONTINUED
(E) Pro forma acquisition adjustment to record the following:
<TABLE>
<C> <S>
$ 230,000 Deferred financing costs which were incurred on the
borrowings used to finance the acquisitions subsequent to
June 30
200,000 Purchase price allocated to non-compete covenants
(192,000) Eliminate assets of NRC which were not acquired
---------
$ 238,000
=========
</TABLE>
(F) Pro Forma adjustment to reduce property plant and equipment by
61,000 to eliminate assets of NRC which will not be acquired.
(G) The pro forma Offering adjustment to settle the Lason $628,000
shareholder loan to be received in cash by the Company concurrent with the
effective date of the Offering.
(H) Pro forma Offering adjustment to record the following:
<TABLE>
<C> <S>
$222,000 Write off of unamortized deferred financing costs at June
30, 1996, net of $113,000 deferred tax asset
147,000 Write off of unamortized deferred financing costs incurred
-------- on the borrowings to finance the acquisitions, net of
$83,000 deferred tax asset
$369,000
========
</TABLE>
F-12
<PAGE> 80
LASON, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION -- CONTINUED
STATEMENT OF INCOME
The accompanying unaudited pro forma condensed consolidated statements of
income for the year ended December 31, 1995 and for the six months ended June
30, 1996 presents the results as though each acquisition (other than Adcom, Mail
Away, and Diversified) had been consummated on January 1, 1995. All of the
acquisitions, except Micro-Pro, have a December 31 fiscal year end. Micro-Pro's
fiscal year end was September 30. Accordingly, Micro-Pro's results of operations
for the year ended September 30, 1995, were adjusted to the twelve months ended
December 31, 1995. A similar process was followed for the six months ended June
30, 1996. IITA commenced operations on August 1, 1995, accordingly the pro forma
results of operations for the year ended December 31, 1995, include IITA from
the date of inception.
The accompanying unaudited pro forma condensed consolidated statements of
income for the year ended December 31, 1995 and for the six months ended June
30, 1996 have been prepared by combining the historical results of the Company
and, where applicable, the Acquisitions (excluding Adcom, Mail Away, and
Diversified) for such respective periods and include the following adjustments:
(I) Pro forma adjustments for the year ended December 31, 1995 and for
the six months ended June 30, 1996 have been made to reduce selling,
general and administrative expenses by approximately $951,000 and $366,000,
respectively, to eliminate specific expenses that would not have been
incurred had the Acquisitions occurred as of January 1, 1995. Such cost
savings relate to the reduction of certain management salaries based on
signed employment agreements. Additional cost savings that the Company
expects to realize through integration of the Acquisitions into Lason
operations have not been included.
(J) Pro forma adjustment to reduce compensatory option expense for the
effects of accelerated vesting provisions which were substantially
recognized in the pro forma income statement for the year ended December
31, 1995, assuming the effective date of the Offering was January 1, 1995.
(K) Adjustments for the year ended December 31, 1995 and for the six
months ended June 30, 1996 have been made to increase amortization by
$632,000 and $316,000, respectively, related to purchase price allocated to
goodwill and noncompete covenants, as if the Acquisitions had occurred as
of January 1, 1995. Goodwill is amortized over 30 years and the covenants
have an average 4 year amortization. Such amortization expense may change
upon final appraisal of the fair value of the net assets acquired. In
addition, pro forma adjustments for the year ended December 31, 1995 and
for the six months ended June 30, 1996 have been made to reverse
amortization expense of $64,000 and $32,000, respectively, on deferred
financing charges which would have been written off when the associated
debt was extinguished using a portion of the proceeds of the Offering.
(L) Pro forma adjustments for the year ended December 31, 1995 and for
the six months ended June 30, 1996 have been made to reverse interest
expense of $1,238,000 and $623,000, respectively, on debt retired by the
Company using a portion of the estimated net proceeds of $42.3 million. In
addition, pro forma adjustments for the year ended December 31, 1995 and
for the six months ended June 30, 1996 have been made to reverse interest
expense of $16,000 and $23,000, respectively, on debt of acquired companies
not assumed.
(M) The acquisitions were S-corporations and, accordingly, were not
subject to federal or state income taxes. The pro forma provision for
income taxes has been computed as if the acquisitions were subject to
federal and state corporate income taxes for the periods presented
F-13
<PAGE> 81
LASON, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION -- CONCLUDED
based on the statutory tax rates then in effect. Additionally, the pro
forma adjustments have been tax effected at a 34% statutory rate.
(N) Pro forma adjustment to record the minority interest in net income
of Micro-Pro.
(O) Pro forma primary and fully diluted earnings per share is computed
by dividing pro forma net income by the weighted average common share and
common share equivalents outstanding. Pro forma common share and common
share equivalents include as outstanding for all periods presented the
options granted in 1995 and 1996 using the treasury stock method and the
assumed offering price of $15.50 per share.
The pro forma weighted average common shares present as outstanding at
January 1, 1995, the 3,000,000 offering shares and the 149,677 shares
issued as consideration with respect to the acquisitions of Great Lakes and
IITA. The weighted average historical common shares adjusted for the 2.5 to
1 stock split were 5,006,781 and 4,999,998 for the periods ended June 30,
1996 and December 31, 1995, respectively.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
------------- -----------------
<S> <C> <C>
Weighted average common shares outstanding..................... 8,156,458 8,149,675
Common share equivalents....................................... 483,045 494,164
---------- ----------
Pro forma common shares and common share equivalents
outstanding.................................................. 8,639,503 8,643,839
========== ==========
</TABLE>
(P) The extraordinary loss related to the write off of deferred
financing costs net of tax as the associated debt was extinguished using a
portion of the proceeds of the offering have not been recorded in the pro
forma condensed income statement. These amounts totaled $276,000 and
$147,000 for the year ended December 31, 1995 and for the six months ended
June 30, 1996, respectively.
F-14
<PAGE> 82
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Lason, Inc.:
We have audited the accompanying consolidated balance sheet of Lason, Inc. as of
December 31, 1995 and the related consolidated statements of income,
stockholders' equity, and cash flows and financial statement schedule for the
year then ended. These financial statements and financial statement schedule are
the responsibility of the company's management. Our responsibility is to express
an opinion on these financial statements and financial statement schedule based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Lason, Inc. as of
December 31, 1995 and the consolidated results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial statements
taken as a whole, presents fairly, in all material respects, the information
required to be included therein.
Coopers & Lybrand L.L.P.
Detroit, Michigan
March 31, 1996, except for Note 6, as to which the
date is July 10, 1996 and Note 15, as to which the
date is August 16, 1996.
F-15
<PAGE> 83
LASON, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARES)
<TABLE>
<CAPTION>
JUNE 30, PRO FORMA
1996 JUNE 30,
DEC. 31, ----------- 1996
1995 -----------
-------- (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash..................................................................... $ 103 $ 720 $ 720
Accounts receivable (net of allowance for doubtful accounts of $80 and
$88 at December 31, 1995 and June 30, 1996, respectively).............. 11,090 12,481 12,481
Income tax refund receivable............................................. 649 206 206
Supplies................................................................. 1,245 1,393 1,393
Prepaid expenses and other............................................... 1,372 1,019 1,019
-------- -------- -------
Total current assets................................................. 14,459 15,819 15,819
PROPERTY AND EQUIPMENT:
Computer equipment and software.......................................... 1,430 1,733 1,733
Production and office equipment.......................................... 1,237 1,941 1,941
Leasehold improvements................................................... 695 895 895
Other.................................................................... 124 173 173
-------- -------- -------
3,486 4,742 4,742
Less accumulated depreciation and amortization....................... (978 ) (1,464) (1,464)
-------- -------- -------
Net property and equipment........................................... 2,508 3,278 3,278
Deferred income taxes.................................................... 2,817 2,706 2,706
Goodwill (net of accumulated amortization of $572 and $882 at
December 31, 1995 and June 30, 1996, respectively)..................... 16,848 18,272 18,272
Other intangibles (net of accumulated amortization of $105 and $173 at
December 31, 1995 and June 30, 1996, respectively)..................... 677 609 609
-------- -------- -------
Total assets......................................................... $37,309 $40,684 $40,684
======== ======== =======
LIABILITIES
CURRENT LIABILITIES:
Cash Overdraft........................................................... $ 230 $ 600 $ 600
Current portion of long-term debt........................................ 2,000 2,000 2,000
Accounts payable to affiliates........................................... 219 209 209
Accounts payable......................................................... 2,525 2,005 2,005
Customer deposits........................................................ 914 1,307 1,307
Accrued expenses......................................................... 2,254 1,822 1,822
Accrued redemption of Common Stock....................................... -- -- 11,716
Accrued copier expenses.................................................. 750 1,429 1,429
Deferred income taxes.................................................... 656 656 656
-------- -------- -------
Total current liabilities............................................ 9,548 10,028 21,744
Long-term debt, less current portion..................................... 18,547 19,146 19,146
Minority interest and other.............................................. -- 402 402
Commitments and contingencies (Note 14).................................. -- -- --
STOCKHOLDERS' EQUITY
Class A-1 common stock, $.01 par value; 13,000,000 shares authorized,
999,998
issued and outstanding at December 31, 1995 and June 30, 1996; none
authorized, issued and outstanding Pro Forma June 30, 1996............. 10 10 --
Class A-2 common stock, $.01 par value; 4,000,000 shares authorized, none
and 5,115 issued and outstanding at December 31, 1995 and June 30,
1996, respectively; none authorized, issued and outstanding Pro Forma
June 30, 1996.......................................................... -- -- --
Class B common stock, $.01 par value, 1,000,001 shares authorized, issued
and outstanding at December 31, 1995 and June 30, 1996; none
authorized, issued and outstanding Pro Forma June 30, 1996............. 10 10 --
Common Stock, $.01 par value; none authorized, issued and outstanding
December 31, 1995 and June 30, 1996; 20,000,000 authorized, 5,012,785
issued and outstanding Pro Forma June 30, 1996......................... -- -- 50
Preferred stock, $.01 par value; 1,000,000 shares authorized, none issued
and outstanding at December 31, 1995 and June 30, 1996; 5,000,000
authorized, none issued and outstanding at Pro Forma June 30, 1996..... -- -- --
Additional paid-in capital............................................... 8,480 8,652 --
Loans to stockholders.................................................... (1,256 ) (628) (628)
Retained earnings........................................................ 1,970 3,064 (30)
-------- -------- -------
9,214 11,108 (608)
-------- -------- -------
Total liabilities and stockholders' equity........................... $37,309 $40,684 $40,684
======== ======== =======
</TABLE>
The accompanying Notes are an integral part of the consolidated financial
statements.
F-16
<PAGE> 84
LASON, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED JUNE 30,
DEC. 31, ------------------
1995 1995 1996
---------- ------- -------
(UNAUDITED)
<S> <C> <C> <C>
Revenues, net of postage of $20,672, $9,749, and $12,264 for
the year ended December 31, 1995 and for the six months ended
June 30, 1995 and 1996, respectively......................... $ 46,605 $23,695 $27,089
Cost of revenues, including supply expense to affiliate of
$1,037, $445, and $1,048 for the year ended December 31, 1995
and for the six months ended June 30, 1995 and 1996,
respectively................................................. 31,227 15,484 17,696
-------- ------- -------
Gross profit.............................................. 15,378 8,211 9,393
Selling, general and administrative expenses................... 9,406 4,563 5,273
Compensatory stock option expense.............................. 308 32 167
Amortization of intangibles.................................... 817 465 379
-------- ------- -------
Income from operations.................................... 4,847 3,151 3,574
Interest expense............................................... 1,760 764 885
Other income, net.............................................. (66) (78) (53)
-------- ------- -------
Income before income taxes................................ 3,153 2,465 2,742
Income taxes................................................... 1,139 890 992
-------- ------- -------
Income before minority interest in net income of
subsidiary.............................................. 2,014 1,575 1,750
Minority interest in net income of subsidiary.................. -- -- 28
-------- ------- -------
Net income................................................ $ 2,014 $ 1,575 $ 1,722
======== ======= =======
Primary and fully diluted earnings per share................... $ .32 $ .25 $ .28
======== ======= =======
PROFORMA:
Historical net income.......................................... $ 2,014 1,575 1,722
Proforma Compensatory stock option expense..................... 668 215 639
Proforma tax benefit........................................... (227) (73) (217)
-------- ------- -------
Proforma net income............................................ $ 1,573 $ 1,433 $ 1,300
======== ======= =======
Proforma primary and fully diluted earnings per share.......... $ .25 $ .23 $ .21
======== ======= =======
Weighted average number of common shares and common share
equivalents.................................................. 6,248 6,248 6,244
======== ======= =======
</TABLE>
The accompanying Notes are an integral part of the consolidated financial
statements.
F-17
<PAGE> 85
LASON, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1995 AND
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARES)
<TABLE>
<CAPTION>
CLASS A-1 CLASS A-2 CLASS B
COMMON STOCK COMMON STOCK COMMON STOCK ADDITIONAL
---------------- --------------- ------------------ PAID-IN LOANS TO RETAINED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL STOCKHOLDERS EARNINGS TOTAL
------- ------ ------ ------ --------- ------ ---------- ------------ -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances,
January 1, 1995..... 999,998 $ 10 1,000,001 $ 10 $8,172 $ (1,300) -- $ 6,892
Net income............ -- -- -- -- -- -- -- -- $2,014 2,014
Compensatory stock
option expense...... -- -- -- -- -- -- 308 -- -- 308
Forgiveness of
stockholder loans... -- -- -- -- -- -- -- 44 (44) --
--------- --- ------ -- --------- --- ------ ------- ------ -------
Balances,
December 31, 1995... 999,998 $ 10 -- -- 1,000,001 $ 10 $8,480 $ (1,256) $1,970 $ 9,214
Net income
(unaudited)......... -- -- -- -- -- -- -- -- 1,722 1,722
Compensatory stock
option expense
(unaudited)......... -- -- -- -- -- -- 167 -- -- 167
Issuance of common
stock (unaudited)... -- -- 5,115 -- -- -- 5 -- -- 5
Forgiveness of
stockholder loans
(unaudited)......... -- -- -- -- -- -- -- 628 (628) --
--------- --- ------ -- --------- --- ------ ------- ------ -------
Balances,
June 30, 1996
(unaudited)......... 999,998 $ 10 5,115 -- 1,000,001 $ 10 $8,652 $ (628) $3,064 $11,108
========= === ====== == ========= === ====== ======= ====== =======
</TABLE>
The accompanying Notes are an integral part of the financial statements.
F-18
<PAGE> 86
LASON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DEC. 31, --------------------
1995 1995 1996
---------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................... $ 2,014 $ 1,575 $ 1,722
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.............................. 1,817 823 864
Compensatory stock option expense.......................... 308 32 167
(Gain) loss on disposal of fixed assets.................... 23 (2) (6)
Deferred income taxes...................................... 781 895 111
Changes in operating assets and liabilities net of effects
from acquisition:
Accounts receivable..................................... (2,046) 154 (1,180)
Income tax refund receivable............................ (649) (891) 443
Supplies................................................ (384) (78) (114)
Prepaid expenses and other.............................. (698) (3) 9
Accounts payable........................................ 397 (277) (530)
Customer deposits....................................... (31) (122) 393
Accrued expenses........................................ (324) (342) (446)
Accrued copier expenses................................. 47 337 679
Minority interest and other liabilities................. -- -- 308
-------- -------- --------
Net cash provided by operating activities.......... 1,255 2,101 2,420
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of fixed assets........................... 713 5 33
Payment for assets of acquired business, net of cash
acquired................................................... (1,430) (1,430) (1,608)
Purchase of property and equipment........................... (1,126) (500) (1,202)
-------- -------- --------
Net cash used in investing activities.............. (1,843) (1,925) (2,777)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on revolving line of credit....................... 35,883 10,785 29,778
Repayments on revolving line of credit....................... (34,836) (10,460) (28,179)
Cash overdraft............................................... 229 416 370
Principal payments on term loan.............................. (1,500) (750) (1,000)
Proceeds from exercise of employee stock options............. -- -- 5
-------- -------- --------
Net cash provided by (used in) financing
activities....................................... (224) (9) 974
-------- -------- --------
Net increase (decrease) in cash.............................. (812) 167 617
Cash, beginning of period.................................... 915 915 103
-------- -------- --------
Cash, end of period.......................................... $ 103 $ 1,082 $ 720
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest..................... $ 1,329 $ 474 $ 923
======== ======== ========
Cash paid during the period for income tax................... $ 1,000 $ 700 $ 900
======== ======== ========
</TABLE>
The accompanying Notes are an integral part of the consolidated financial
statements.
F-19
<PAGE> 87
LASON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
1. FORMATION AND ACQUISITION:
Lason, Inc. (formerly Lason Holdings, Inc. the "Company"), a Delaware
corporation, was incorporated on January 5, 1995. The Company's equity was
comprised of $10 million of Class B common stock and approximately $1 million of
Class A-1 common stock. The Company contributed the funds to Lason Acquisition
Corporation, a non-operating subsidiary. On January 17, 1995, the cash, in
addition to $21 million of bank borrowings, was used to acquire the assets and
assume certain liabilities of Lason Systems, Inc. ("Predecessor Company") and
provide working capital. Subsequent to the acquisition, Lason Acquisition Corp.
changed it name to Lason Systems, Inc. ("Lason"). Prior to the acquisition,
three shareholders owned 93.8 percent of the common stock of the predecessor
company. As part of the acquisition, the same three shareholders ("continuing
shareholders") collectively acquired 93.8 percent of the Class A-1 common stock
which represents a 46.9 percent aggregate interest of all outstanding classes of
common stock in Lason, Inc.
The acquisition has been accounted for as a purchase and, accordingly, at
such date the Company recorded the assets and liabilities assumed at their
estimated fair values, adjusted for the impact of the continuing shareholders'
residual interest in the Company as described below. The excess of the purchase
price over the fair value of net assets acquired $16.8 million has been
allocated to goodwill and is being amortized over 30 years.
Pursuant to the consensus of the Emerging Issues Task Force ("EITF") Issue
Number 88-16, "Basis in Leveraged Buyout Transactions," goodwill has been
reduced by approximately $8.6 million representing the continuing stockholders'
residual interest in the Company with a corresponding charge against
stockholders' equity. The approximate $8.6 million reduction of stockholder's
equity represents a temporary difference between the tax basis and assigned book
value of goodwill that will result in future tax deductions. A deferred tax
asset of $2.9 million related to this basis difference has been credited to
stockholders' equity.
The aggregate purchase price and its allocation to the historical assets
and liabilities of the Company as of January 17, 1995 are as follows:
<TABLE>
<S> <C>
Cost to acquire net assets of the predecessor.................................. $31,445
Adjustment necessary to value continuing shareholders' interest at predecessor
basis........................................................................ (8,652)
--------
$22,793
========
ALLOCATION OF PURCHASE PRICE:
Net assets acquired............................................................ $ 5,968
Goodwill....................................................................... 16,825
--------
Total purchase price allocated............................................ $22,793
========
</TABLE>
2. OPERATIONS AND CUSTOMER CONCENTRATION:
The Company provides integrated outsourcing services for document
management, records management and business communications. These services
include high-volume optical and digital printing, facility management operations
at customer sites, converting inputs into digital formats and direct mailing.
The Company primarily serves customers in the automotive, financial
services, health care and professional services industries.
F-20
<PAGE> 88
LASON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
2. OPERATIONS AND CUSTOMER CONCENTRATION -- CONCLUDED
Transactions under separate contracts with various divisions of one
automotive manufacturer accounted for approximately 49 percent of the Company's
net revenues for the year ended December 31, 1995. Receivables from this
customer were approximately $3,400 at December 31, 1995. In addition,
transactions under separate contracts with various divisions of another
automotive manufacturer accounted for approximately 12 percent of the Company's
net revenues for the year ended December 31, 1995. Receivables from this
customer were approximately $1,652 at December 31, 1995.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a. Interim Financial Data: The unaudited interim financial statements were
prepared in a manner consistent with that of the audited financial statements.
In the opinion of management, all adjustments considered necessary for a fair
presentation have been included, and such adjustments are of a normal recurring
nature.
b. Consolidation Principles: The consolidated financial statements include
the accounts of the Company and its wholly owned subsidiary, Lason Systems, Inc.
and reflect twelve months of operating results as though the acquisition
described in Note 1 had occurred on January 1, 1995. All significant
intercompany balances have been eliminated.
c. Revenue Recognition: Revenues are recorded when the services are
rendered. Revenues are presented in the income statement net of postage because
the cost of postage is passed through to the customer.
d. Supplies: Supplies are valued at cost, which approximates market, with
cost determined using the first-in, first-out ("FIFO") method.
e. Property and Equipment: Property and equipment, including significant
improvements, are recorded at cost. Expenditures for normal repairs and
maintenance are charged to operations as incurred. Adjustments of the asset and
related accumulated depreciation accounts are made for retirements of property
and equipment with the resulting gain or loss included in operations.
Depreciation is computed using an accelerated method over the
estimated useful lives of the assets, ranging from 5 to 10 years.
f. Intangible Assets: Goodwill is amortized using the straight-line method
over a period of 30 years. A covenant-not-to-compete is being amortized using
the straight-line method over the five year term of the agreement. Deferred
financing costs are amortized using the interest method over the life of the
associated loan agreement.
Annually, the Company evaluates the net carrying value of goodwill to
determine if there has been any impairment in value. The methodology used
for this evaluation entails review of annual operating performance along
with anticipated results for the ensuing year based on operating budgets.
At December 31, 1995, the Company concluded that there had been no
impairment in the net carrying value of goodwill.
g. Accrued Copier Expense: Under various copy equipment leases, the Company
remits a per copy fee for each copy made. The costs associated with these leases
are included in cost of sales. Amounts unpaid at December 31, 1995 are reflected
as accrued copier expense.
F-21
<PAGE> 89
LASON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONCLUDED
h. Income Taxes: Income taxes are calculated using the asset and liability
method under Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes."
i. Fair Value of Financial Instruments: Statement of Financial Accounting
Standards No. 107, "Disclosures About Fair Value of Financial Instruments,"
requires disclosures about the fair value of financial instruments whether or
not such instruments are recognized in the balance sheet. Due to the short-term
nature of the Company's financial instruments, other than debt, fair values are
not materially different from their carrying values. Based on the borrowing
rates currently available to the Company, the carrying value of debt
approximates fair value.
j. Use of Estimates in the Preparation of Financial Statements: The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
k. Earnings Per Share: Earnings per share are based on the weighted average
number of common and common equivalent shares outstanding during the periods
presented, retroactively adjusted on a pro forma basis for the effect of the 2.5
for 1 stock split. The weighted average common shares and common share
equivalents outstanding include as outstanding for all periods presented the
options granted in 1995 and 1996 using the treasury stock method and the 755,933
shares which would have been sold at the assumed Offering price of $15.50 to
fund the redemption of common shares owned by the Class B Shareholders. (See
Note 15).
l. Effect of New Accounting Pronouncements: Statement of Financial
Accounting Standards ("SFAS") No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Assets to be Disposed of" is effective for fiscal
years beginning after December 15, 1995. The statement establishes standards for
measuring impairment losses of long-lived assets, certain identifiable
intangibles and goodwill related to those assets to be held and those to be
disposed of. Lason does not expect the adoption of SFAS No. 121 to have a
material effect on its financial position or results of operations. SFAS No. 123
"Accounting for Stockbased Compensation" is effective for fiscal years beginning
after December 15, 1995. SFAS No. 123 requires increased disclosures related to
stock-based compensation plans and encourages companies to adopt the fair value
method of accounting for stock options. Companies are also permitted to continue
to account for such transactions under Accounting Principles Board Opinion
("APB") No. 25 "Accounting for Stock Issued to Employees". The Company has
elected to continue to account for employee stock options under APB No. 25 and
will disclose the required pro forma effect on net income of the measurement
provisions of SFAS No. 123 in its 1996 consolidated financial statements.
4. ALLOWANCE FOR DOUBTFUL ACCOUNTS:
<TABLE>
<S> <C>
An analysis of the allowance for doubtful accounts follows:
Beginning balance, January 1, 1995.............................................. $ 239
Additions..................................................................... 151
Write-offs.................................................................... (310)
-----
Ending balance, December 31, 1995............................................... $ 80
=====
</TABLE>
F-22
<PAGE> 90
LASON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
5. STOCKHOLDER LOANS:
In connection with the acquisition described in Note 1, Lason entered into
a Credit Agreement dated January 17, 1995 with certain stockholders who were
also stockholders in the Predecessor Company. Pursuant to which Lason loaned the
stockholders' $1.3 million which was used to pay their tax liability resulting
from the sale of the assets of the predecessor company.
Lason's sole recourse is to the stockholders' Class A-1 common stock,
provided that Lason has full recourse against each stockholder with respect to
any amount by which the loans exceed the estimated additional tax due. The loans
are presented as a reduction to stockholders' equity.
In addition, an agreement with certain of these stockholders, the
"continuing stockholders" as defined in Note 1, provides that at any time prior
to an initial public offering should the Company issue any common stock or
options or other rights to acquire common stock that dilute the continuing
stockholders' common stock interest, a portion of the loan will be forgiven
based on the dilution factor times the unpaid loan balance. At December 31,
1995, $44 of such loans have been charged to retained earnings as a result of
granting options to certain employees.
The outstanding principal amounts, together with unpaid accrued interest,
are due January 17, 2005. Amounts may be prepaid without penalty. Interest on
the loans accrues at the applicable federal rate for short-term obligations
(5.51 percent at December 31, 1995).
(unaudited)
At June 30, 1996, the Company has agreed to forgive 50 percent of the
outstanding amounts of the stockholder loans concurrent with the effective date
of the Offering (see Note 15). This forgiveness is presented in the Company's
consolidated financial statements for the six months ended June 30, 1996.
6. LONG-TERM DEBT:
Long-term debt consists of the following at December 31, 1995:
<TABLE>
<S> <C>
Borrowings under revolving line of credit...................................... $ 7,047
Term bank loan................................................................. 13,500
Less current portion......................................................... (2,000)
--------
Long-term debt............................................................ $18,547
========
</TABLE>
Aggregate maturities of long-term debt are as follows:
<TABLE>
<S> <C>
YEAR ENDED DECEMBER 31:
1996......................................................................... $ 2,000
1997......................................................................... 2,000
1998......................................................................... 2,500
1999......................................................................... 2,500
2000 and thereafter.......................................................... 11,547
--------
$20,547
========
</TABLE>
Lason is party to a loan agreement, dated January 17, 1995 with a bank
which includes a $10 million revolving line of credit and a $15 million term
loan. Both expire on June 30, 2001. Interest on amounts outstanding under the
agreement is calculated using rates determined at the time of borrowing. With
each borrowing, Lason chooses the applicable interest rate. Borrowings on the
revolving line of credit bear interest at either the bank's prime plus .75
percent or LIBOR plus 2.25 percent. Borrowings on the term loan bear interest at
either the bank's prime rate plus 1.0 percent or LIBOR plus 2.50 percent.
Interest payment due dates vary depending on the rate chosen. At December 31,
1995, interest on the revolving line of credit was LIBOR plus 2.25 percent
(8.1875 percent at December 31, 1995) on $5,000 and at prime plus 1.0 percent
(9.25 percent at December 31,
F-23
<PAGE> 91
LASON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
6. LONG-TERM DEBT -- CONCLUDED
1995) on $2,047. Revolving credit availability is based on 85 percent of
eligible accounts receivable. Lason pays a monthly commitment fee at an annual
rate of 0.5 percent of the unused balance on the revolving credit facility. At
December 31, 1995, there was approximately $2.9 million of unborrowed
availability under the revolving credit agreement.
At December 31, 1995, interest on the term loan was at LIBOR plus 2.5
percent (8.4375 percent at December 31, 1995). The term loan provides for
quarterly principal payments of $500 due March 31, 1996 through December 31,
1997, $625 due March 31, 1998 through December 31, 2000 and $1,000 due March 31,
2001 and June 30, 2001. In addition, Lason is required to make a mandatory
prepayment of the term loan on an annual basis in an amount equal to 50 percent
of Lason's net cash flow, as defined in the loan agreement, each fiscal year
(or, if less, the outstanding principal amount of the term loan). Each mandatory
prepayment is due no later than 90 days after the end of each fiscal year. No
mandatory prepayment is required for the year ended December 31, 1995.
Borrowings under the loan agreement are collateralized by substantially all of
Lason's assets. The loan agreement contains covenants which, among other things,
places restrictions on the acquisition and disposal of assets, payment of
dividends and incurrence of liabilities together with minimum requirements for
free cash flow and certain financial ratios. At December 31, 1995, the loan
agreement prohibits Lason from advancing funds or paying dividends to the
Company. Subsequent to January 17, 1997, Lason may pay dividends, not to exceed,
in any fiscal year, the sum of the lessor of (1) $1,200 and (2) ten percent of
the unredeemed investment in Class B Common Stock and the unpaid yield (see Note
12). Lason accounts for substantially all the net assets of the Company.
At December 31, 1995, Lason was in violation of certain financial and
nonfinancial covenants. On March 25, 1996, the bank amended the loan agreement
to waive the borrowing base limitation for the revolving line of credit and
waive the financial covenant violations at December 31, 1995. On April 8, 1996,
Lason obtained waivers of the nonfinancial covenant violations.
The loan agreement was further amended on July 10, 1996 to provide for an
Acquisition Revolving Credit Facility in the amount of $10,000 to finance the
acquisitions discussed in Note 15. The borrowings under this facility are
payable in full from the proceeds of the equity offering (see Note 15).
(unaudited)
At June 30, 1996, Lason was in compliance with all financial and
nonfinancial covenants.
7. INCOME TAXES:
Deferred income taxes reflect the estimated future tax effect of temporary
differences between the amounts of assets and liabilities for financial
reporting purposes and such amounts as measured by
F-24
<PAGE> 92
LASON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
7. INCOME TAXES -- CONCLUDED
tax laws and regulations. The components of deferred income tax assets and
liabilities at December 31, 1995 are as follows:
<TABLE>
<S> <C>
DEFERRED TAX ASSETS:
Goodwill........................................................................ $ 2,745
Depreciation.................................................................... 146
Compensatory stock option expense............................................... 111
Allowance for doubtful accounts................................................. 27
Covenant-not-to-compete amortization............................................ 9
-------
Total deferred tax assets.................................................. $ 3,038
=======
DEFERRED TAX LIABILITIES:
Supplies........................................................................ $ 423
Prepaid expenses................................................................ 259
Goodwill........................................................................ 194
-------
Total deferred tax liabilities............................................. $ 876
=======
</TABLE>
The provision for income taxes for the year ended December 31, 1995 is as
follows:
<TABLE>
<S> <C>
Current......................................................................... $ 358
Deferred........................................................................ 781
-------
$ 1,139
=======
</TABLE>
The difference between the effective tax rate of 36.1 percent and the U.S.
Federal Income tax rate results from travel and entertainment expenses that are
nondeductible for tax purposes.
8. OPERATING LEASES:
The Company has various operating lease agreements related primarily to
equipment and buildings. At December 31, 1995, future minimum rental payments
required under noncancelable operating leases with initial or remaining lease
terms in excess of one year are as follows:
<TABLE>
<CAPTION>
EQUIPMENT BUILDINGS
--------- ---------
<S> <C> <C>
1996................................................................ $ 1,116 $ 489
1997................................................................ 994 238
1998................................................................ 730 238
1999................................................................ 527 238
2000................................................................ 133 238
------- -------
Total.......................................................... $ 3,500 $ 1,441
======= =======
</TABLE>
In addition, the Company has a number of equipment leases that are on a
month-to-month basis.
Rent expense for the year ended December 31, 1995 was $752 for buildings
which includes $191 of rent to a general partnership controlled by two of the
Company's stockholders. Rent expense for equipment for the year ended December
31, 1995 was $4,377, which includes $170 of rent to a related party.
9. ACQUISITIONS:
On June 1, 1995, Lason acquired certain assets of a corporation and
partnership for $1,430 cash. The acquisition was accounted for as a purchase.
The purchase price was allocated to the assets
F-25
<PAGE> 93
LASON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
9. ACQUISITIONS -- CONCLUDED
acquired based on their fair values at the date of acquisition. Goodwill is
being amortized on the straight-line method over 30 years. The fair values of
the assets acquired were as follows:
<TABLE>
<S> <C>
Supplies........................................................................ $ 10
Equipment....................................................................... 825
Goodwill........................................................................ 595
------
Purchase price............................................................. $1,430
======
</TABLE>
In connection with the acquisition, the Company entered into a $700
consulting agreement, which included a covenant-not-to-compete, with an
individual who served as an officer and partner of the acquired corporation and
partnership. The agreement provides for annual payments of $140 during the next
five years.
The effect of this acquisition on the results of operations for the year
ended December 31, 1995 was not material.
10. RELATED PARTY TRANSACTIONS:
At December 31, 1995, the Company had the following balances due to or from
entities related to the Company:
<TABLE>
<S> <C>
Accounts receivable.............................................................. $ 51
Accounts payable................................................................. 219
</TABLE>
Included in sales are revenues received from related parties in the amount
of $103 for the year ended December 31, 1995.
Included in production expense are supply expenses paid to related parties
in the amount of $1,037 for the year ended December 31, 1995.
11. EMPLOYEE BENEFIT PLANS:
The Company participates in a 401(k) profit-sharing plan and trust (the
"Plan"). Each employee who is 21 years of age or older who has worked for the
Company for twelve months and performed 1,000 hours of service is eligible to
participate in the Plan. Eligible participants may contribute not less than 2
percent and up to 15 percent of their pretax earnings to the Plan. The Plan is
contributory and the Company at its discretion, can match up to 33 percent of
eligible participant contributions not to exceed 9 percent of the participant's
earnings. The Company's contribution for the year ended December 31, 1995 was
$172.
12. COMMON STOCK AND PREFERENTIAL DIVIDEND:
The Company's issued and outstanding common stock consisted of 999,998
shares of Class A-1 Common Stock and 1,000,001 shares of Class B Common Stock.
The holders of Class A-1 Common Stock and Class A-2 Common Stock (collectively,
the "Class A Common Stock") and Class B Common Stock are entitled to participate
in any distribution made by the Company in the following priority: (i) first, to
the holders of Class B Common Stock, ratably, until the holders of Class B
Common Stock had received, taking into consideration all prior distributions, a
10 percent yield (compounded quarterly) on $9,900 of the amount paid with
respect to the Class B Common Stock, ($944 at December 31, 1995) (ii) second, to
the holders of Class B Common Stock, ratably, until the holders of Class B
Common Stock had received, taking into consideration all prior distributions
other than
F-26
<PAGE> 94
LASON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
12. COMMON STOCK AND PREFERENTIAL DIVIDEND -- CONCLUDED
distributions pursuant to clause (i) above, $9,900 and (iii) last, to the
holders of Class A Common Stock and the holders of Class B Common Stock,
ratably, the balance of such distribution. The holders of Class A-1 Common Stock
are entitled to one vote per share, the holders of Class B Common Stock are
entitled to four votes per share, and the holders of Class A-2 Common Stock have
no voting rights other than a class vote in connection with a merger or
reorganization in which the Class A-2 Common Stock would be treated differently
than the Class A-1 Common Stock.
13. STOCK OPTION PLAN:
The Company's 1995 stock option plan was adopted by the Board of Directors
and approved by the Company's stockholders in January 1995. A committee of the
Board of Directors selects certain key employees to be participants of the Plan.
The options are exercisable into Class A-2 non-voting common stock. At the date
of grant, the exercise price for such options was less than fair value.
Accordingly, compensation expense is recognized based on the difference between
the exercise price and fair value over the vesting period which ranges from 3 to
5 years.
At December 31, 1995, June 30, 1995, and June 30, 1996, 97 percent, 100
percent and 77 percent, respectively, of the outstanding stock options provide
for 100 percent vesting of unvested shares at the consummation of the Offering
(see Note 15). Proforma net income gives effect to the compensation expense
related to the accelerated vesting provisions.
Option prices range from $1.00 to $8.00. Information concerning the
Company's stock options is as follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED
1995 JUNE 30, 1996
------------ -------------
(UNAUDITED)
<S> <C> <C>
Options outstanding, beginning of period........................... -- 167,729
New grants......................................................... 167,729 65,000
Exercised.......................................................... -- (5,115)
Terminated......................................................... -- (6,818)
-------- --------
Options outstanding, end of period................................. 167,729 220,796
Options outstanding, not exercisable............................... (145,002) (184,546)
-------- --------
Options outstanding, exercisable................................... 22,727 36,250
-------- --------
Available for future grants........................................ 573,000 508,011
======== ========
</TABLE>
14. COMMITMENTS AND CONTINGENCIES:
The Company is from time to time, a party to legal proceedings arising in
the normal course of business, management believes that none of these legal
proceedings will have a material adverse effect on the Company's business,
financial condition and results of operations.
15. SUBSEQUENT EVENTS:
In January 1996, Lason acquired the assets of Mail Away Corporation ("Mail
Away"). In February 1996, Lason acquired substantially all of the assets of
Diversified Support Services, Inc. ("Diversified"). On April 1, 1996, Lason
acquired 65 percent of the common stock of Delaware Legal Copy, Inc. ("Delaware
Legal"). Lason acquired the common stock of, (i) Information & Image Technology
of
F-27
<PAGE> 95
LASON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONCLUDED
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
15. SUBSEQUENT EVENTS -- CONCLUDED
America ("IITA") on July 16, 1996, (ii) (80 percent of the common stock) of
Micro-Pro, Inc. and MP Services, Inc., affiliated companies ("Micro-Pro") on
July 24, 1996, (iii) Great Lakes Technologies Corporation ("Great Lakes") on
July 17, 1996.
The aggregate purchase price, excluding liabilities assumed of $1,900, was
approximately $11,700, $9,400 of which was funded by bank borrowings and $2,300
through the issuance of common stock.
On August 16, 1996, Lason acquired all the common stock of National
Reproductions Corp. for approximately $8,600, which was funded with $8,200 in
bank borrowings and the issuance of a promissory note in the amount of $400.
The Company is in the process of filing a registration statement with the
Securities and Exchange Commission in connection with the offering by the
Company of a new class of common stock for sale to the public (the "Offering").
At the consummation of the offering, each outstanding share of Class A
Common Stock and Class B Common Stock will be converted into one share and 1.3
shares, respectively, of new common stock. Concurrent with the consummation of
the offering, the Company shall redeem 755,933 shares of common stock owned by
the holders of the former Class B shares at a price of $15.50 per share ($11,700
in the aggregate) using a portion of the proceeds from the offering.
In connection with the offering, the Company's Board of Directors will
approve a 2.5 to 1 stock split and the authorized capital stock of the Company
will consist of 20,000 shares of common stock, par value $0.01 per share and
5,000 shares of preferred stock, par value $0.01 per share.
The pro forma balance sheet presents the recapitalization, the 2.5 to 1
stock split and the accrued redemption of the 755,933 shares of Common Stock as
if each had occurred on June 30, 1996.
F-28
<PAGE> 96
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Lason Systems, Inc.:
We have audited the accompanying balance sheet of Lason Systems, Inc. as of
December 31, 1994 and the related statements of income, stockholders' equity,
and cash flows for the years ended December 31, 1994 and 1993. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Lason Systems, Inc. as of
December 31, 1994 and the results of its operations and its cash flows for the
years ended December 31, 1994 and 1993 in conformity with generally accepted
accounting principles.
Coopers & Lybrand L.L.P.
Detroit, Michigan
March 17, 1995
F-29
<PAGE> 97
LASON SYSTEMS, INC.
BALANCE SHEET
DECEMBER 31, 1994
(IN THOUSANDS, EXCEPT FOR SHARES)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash............................................................................... $ 102
Accounts receivable (net of allowance for doubtful accounts of $239)............... 10,249
Accounts receivable from affiliates................................................ 42
Supplies........................................................................... 814
Prepaid expenses and other......................................................... 819
--------
Total current assets.......................................................... 12,026
PROPERTY AND EQUIPMENT:
Computer equipment and software.................................................... 2,772
Office equipment................................................................... 2,190
Leasehold improvements............................................................. 630
Other.............................................................................. 307
--------
5,899
Less accumulated depreciation and amortization................................ 3,229
--------
2,670
Goodwill (net of accumulated amortization of $179)................................. 827
Other intangibles (net of accumulated amortization of $409)........................ 169
--------
Total assets.................................................................. $15,692
========
LIABILITIES
CURRENT LIABILITIES:
Short-term borrowings.............................................................. $ 3,300
Current portion of long-term debt.................................................. 223
Accounts payable to affiliates..................................................... 132
Accounts payable................................................................... 2,130
Customer deposits.................................................................. 820
Accrued expenses................................................................... 1,377
Accrued copier expenses............................................................ 826
--------
Total current liabilities..................................................... 8,808
Long-term debt, less current portion............................................... 261
STOCKHOLDERS' EQUITY
Common stock, par value $.01 per share; authorized 1,000,000 shares; issued and
outstanding 620,500.............................................................. 6
Additional paid-in capital......................................................... 331
Retained earnings.................................................................. 6,286
--------
6,623
--------
Total liabilities and stockholders' equity.................................... $15,692
========
</TABLE>
The accompanying Notes are an integral part of the financial statements.
F-30
<PAGE> 98
LASON SYSTEMS, INC.
STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
1993 1994
------- -------
<S> <C> <C>
Revenues, net of postage of $9,595 and $15,276 in 1993 and 1994,
respectively............................................................ $31,151 $41,151
Cost of revenues, including expense to affiliate of $849 and $708, in 1993
and 1994, respectively.................................................. 20,684 27,238
------- -------
Gross profit......................................................... 10,467 13,913
Selling, general and administrative expense............................... 6,980 8,377
Amortization of intangibles............................................... 163 266
------- -------
Income from operations............................................... 3,324 5,270
Other expenses (income):
Interest expense.......................................................... 126 185
Other income, net......................................................... (21) (21)
------- -------
Net income........................................................... $ 3,219 $ 5,106
======= =======
Pro Forma:
Historical net income..................................................... $ 3,219 $ 5,106
Proforma income tax provision............................................. 1,162 1,843
------- -------
Proforma net income.................................................. $ 2,057 $ 3,263
======= =======
</TABLE>
The accompanying Notes are an integral part of the financial statements.
F-31
<PAGE> 99
LASON SYSTEMS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1994
(IN THOUSANDS, EXCEPT FOR SHARES)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
SHARES STOCK CAPITAL EARNINGS TOTAL
------- ------ ---------- -------- -------
<S> <C> <C> <C> <C> <C>
Balances, January 1, 1993..................... 605,000 $6 $163 $ 4,766 $ 4,935
Distribution to stockholders.................. -- -- -- (1,587) (1,587)
Net income.................................... -- -- -- 3,219 3,219
------- -- ---- ------- -------
Balances, December 31, 1993................... 605,000 163 6,398 6,567
6
Distributions to stockholders................. -- -- -- (5,218) (5,218)
Issuance of 15,500 shares of stock at $10.86
per share................................... 15,500 168 168
Net income.................................... -- -- -- 5,106 5,106
------- -- ---- ------- -------
Balances, December 31, 1994................... 620,500 $6 $331 $ 6,286 $ 6,623
======= == ==== ======= =======
</TABLE>
The accompanying Notes are an integral part of the financial statements.
F-32
<PAGE> 100
LASON SYSTEMS, INC.
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
1993 1994
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................. $ 3,219 $ 5,106
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation......................................................... 708 972
Amortization......................................................... 163 266
Loss on disposal of fixed assets..................................... -- 12
Provision for bad debts.............................................. 42 204
Changes in operating assets and liabilities net of effects of
acquired businesses:
Accounts receivable............................................... (2,060) (702)
Supplies.......................................................... 8 (83)
Prepaid expenses.................................................. (172) (255)
Accounts payable.................................................. 37 (523)
Customer deposits................................................. 303 454
Accrued expenses.................................................. 218 247
Accrued copier expenses........................................... 413 40
-------- --------
Net cash provided by operating activities.................... 2,879 5,738
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for assets of acquired businesses, net of cash received........ (128) (1,028)
Purchase of property and equipment..................................... (1,116) (758)
Advance to affiliate................................................... (559) --
Other.................................................................. -- (33)
-------- --------
Net cash used in investing activities........................ (1,803) (1,819)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings, net............................... 200 1,200
Issuance of stock...................................................... -- 168
Distributions to shareholders.......................................... (1,587) (5,218)
Principal payments of long-term debt................................... (214) (243)
Proceeds from long-term debt........................................... 474 203
-------- --------
Net cash used in financing activities........................ (1,127) (3,890)
Net increase (decrease) in cash........................................ (51) 29
Cash, beginning of year................................................ 124 73
-------- --------
Cash, end of year...................................................... $ 73 $ 102
======== ========
Supplemental disclosure of cash flow information, interest paid........ $ 124 $ 181
======== ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES:
Cash paid for acquired assets.......................................... $ 128 --
Reduction of accounts receivable....................................... 92 --
-------- --------
Fair value of assets acquired.......................................... $ 220 --
======== ========
Book value of assets of acquired business.............................. -- $ 1,881
Cash paid for acquired business........................................ -- (1,040)
-------- --------
Liabilities assumed.......................................... $ -- $ 841
======== ========
</TABLE>
The accompanying Notes are an integral part of the financial statements.
F-33
<PAGE> 101
LASON SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
1. OPERATIONS AND CUSTOMER CONCENTRATION:
The Company provides integrated outsourcing services for document
management, records management and business communications. These services
include high-volume optical and digital printing, facility management operations
at customer sites, converting inputs into digital formats and direct mailing.
The Company primarily serves customers in the automotive, financial
services, health care and professional services industries.
Transactions under separate contracts with various divisions of one
automotive manufacturer accounted for approximately 57 percent and 55 percent of
the Company's net revenues for the years ended December 31, 1993 and 1994
respectively. Receivables from this customer were $4,769 at December 31, 1994.
In addition, transactions under separate contracts with various divisions of
another automotive manufacturer accounted for approximately 15 percent and 12
percent of the Company's net revenues for the years ended December 31, 1993 and
1994, respectively. Receivables from this customer were $1,272 at December 31,
1994.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a. Revenue Recognition: Revenues are recorded when the products are shipped
or the services are rendered. Revenues are presented in the income statement net
of postage because the cost of postage is passed through to the customer.
b. Supplies: Supplies are valued at cost, which approximates market, with
cost determined using the first-in, first-out ("FIFO") method.
c. Property and Equipment: Property and equipment, including significant
improvements, are recorded at cost. Expenditures for normal repairs and
maintenance are charged to operations as incurred. Adjustments of the asset and
related accumulated depreciation accounts are made for retirements of property
and equipment with the resulting gain or loss included in operations.
Depreciation is computed using an accelerated method over the
estimated useful lives of the assets, ranging from 5 to 10 years.
d. Intangible Assets: The Company has intangible assets consisting
primarily of goodwill and a service contract with a major customer. The goodwill
is being amortized on a straight-line basis over ten years and the cost of the
service contract is being amortized on a straight-line basis over the three year
life of the agreement.
e. Accrued Copier Expense: Under various copy equipment leases, the Company
remits a per copy fee for each copy made. The costs associated with these leases
are included in production cost of sales. Amounts unpaid at December 31, 1994
are included as accrued copier expense.
f. Income Taxes: The Company has elected to be taxed as an S-Corporation.
As such, the Company does not pay federal income taxes; rather, the stockholders
report the taxable income or loss of the Company in their individual federal
income tax returns.
The proforma adjustments to income taxes reflect income taxes that
would have been reported had the Company been subject to federal income
taxes for the years presented.
F-34
<PAGE> 102
LASON SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(IN THOUSANDS)
3. ACQUISITIONS:
On January 1, 1994, the Company purchased the assets of a corporation owned
by the Company's majority stockholders, who had previously acquired the
corporation on March 1, 1993. The purchase price constituted the assumption of
all the liabilities of the seller. Concurrently, the Company paid the sellers
notes payable to its stockholders of $1,040. There was no step-up in basis of
the acquired corporations assets or liabilities as a result of this transaction.
Had the Company's 1993 income statement been restated to reflect the acquisition
as of March 1, 1993, net revenues and net income of the Company, on a pro forma
basis, would have been $32,848 and $3,162, respectively.
On November 30, 1994, the Company purchased the assets of another
corporation owned by the Company's majority stockholders, for approximately $98,
which equaled the net book value of the assets. The effect of this acquisition
on the results of operations for the years ended December 31, 1994 and 1993 was
not material.
4. ALLOWANCE FOR DOUBTFUL ACCOUNTS:
An analysis of the allowance for doubtful accounts for the year ended
December 31, 1994 follows:
<TABLE>
<S> <C>
Beginning, balance January 1, 1994............................................... $ 66
Additions........................................................................ 204
Write-offs....................................................................... (31)
----
Ending balance, December 31, 1994................................................ $239
====
</TABLE>
5. SHORT-TERM BORROWINGS:
At December 31, 1994, the Company has available a $8,000 line-of-credit
agreement. At December 31, 1994, outstanding borrowings under this line of
credit were $3,300. Borrowings under the line of credit are payable on demand
with interest at one-quarter of one percent above the bank's prime rate (prime
rate was 8.5 percent at December 31, 1994) and are limited to a percentage of
accounts receivable. Available and unused borrowings under the line of credit
are $4,700 at December 31, 1994. Amounts outstanding under the line of credit
were repaid on January 17, 1995 (see Note 9).
6. LONG-TERM DEBT:
Long-term debt at December 31, 1994 consists of the following:
<TABLE>
<S> <C>
Installment notes payable to bank, due through 1996
at various interest rates from 6.5 percent to 9.8 percent..................... $ 484
Less current portion.......................................................... (223)
------
Noncurrent portion of long-term debt..................................... $ 261
======
</TABLE>
Aggregate maturities of long-term debt are as follows:
<TABLE>
<S> <C>
YEAR ENDED DECEMBER 31:
1995........................................................................... $223
1996........................................................................... 221
1997........................................................................... 40
</TABLE>
The Company's notes payable are collateralized by equipment purchased with
the note proceeds.
F-35
<PAGE> 103
LASON SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONCLUDED
(IN THOUSANDS)
7. OPERATING LEASES:
The Company has various operating lease agreements related primarily to
equipment and buildings. At December 31, 1994, future minimum rental payments
required under operating leases are as follows:
<TABLE>
<CAPTION>
EQUIPMENT BUILDINGS
--------- ---------
<S> <C> <C>
1995................................................................ $ 278 $ 233
1996................................................................ 194 --
1997................................................................ 82 --
1998................................................................ 24 --
1999................................................................ 21 --
----- -----
Total.......................................................... $ 599 $ 233
===== =====
</TABLE>
In addition, the Company has a number of equipment leases that are on a
month-to-month basis.
Rent expense for 1993 and 1994 was $528 and $624, respectively, for
buildings with $191 paid to a party related through common ownership in both
1993 and 1994, respectively. Rent expenses for equipment for 1993 and 1994 was
$3,249 and $3,893, respectively.
8. RELATED PARTY TRANSACTIONS:
At December 31, 1994 the Company had the following balances due to or from
entities related to the Company:
<TABLE>
<S> <C>
Accounts receivable.............................................................. $ 42
Accounts payable................................................................. 132
</TABLE>
Included in revenues are amounts received from related parties of $166 and
$207 for 1993 and 1994, respectively.
Included in cost of sales are equipment maintenance and supply expenses to
related parties in the amount of $849 and $708 for 1993 and 1994, respectively.
9. EMPLOYEE BENEFIT PLANS:
The Company participates in a 401(k) profit-sharing plan and trust (the
"Plan"). All full-time employees, 20.5 years of age or older, with six months of
service are eligible to participate in the Plan. The Plan is contributory and
the Company will match up to 33 percent of eligible participant contributions
not to exceed 2 percent of the participant's wages. The Company's contribution
for 1993 and 1994 were $75 and $156, respectively.
10. SUBSEQUENT EVENT:
On January 17, 1995, Lason Acquisition Corp. ("LAC") acquired the assets of
the Company. The purchase price consisted of $28,000 in cash and the assumption
of certain liabilities. The current stockholders of the Company acquired
approximately 49 percent of the common stock of LAC's parent company, Lason,
Inc. Concurrent with the acquisition, LAC entered into a loan agreement which
provided term loans in the aggregated principal amount of $15,000 and revolving
credit loans in the aggregate principal amount of up to $10,000. The proceeds of
such loans will be used by LAC to finance the acquisition, to provide ongoing
working capital, to pay off existing debt and for other purposes set forth in
the loan agreement.
F-36
<PAGE> 104
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Great Lakes Micrographics Corporation:
We have audited the accompanying balance sheet of Great Lakes Micrographics
Corporation as of December 31, 1995 and the related statements of income,
stockholder's equity, and cash flows for the year then ended. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Great Lakes Micrographics
Corporation as of December 31, 1995 and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
Coopers & Lybrand L.L.P.
Detroit, Michigan
June 28, 1996, except for Note 6, as to
which the date is July 16, 1996
F-37
<PAGE> 105
GREAT LAKES MICROGRAPHICS CORPORATION
BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30,
1996
DECEMBER 31, -----------
1995
------------ (UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash................................................................ $ 18 $ 13
Accounts receivable................................................. 827 930
Inventory........................................................... 28 29
Prepaid expenses and other.......................................... 23 33
------ -------
Total current assets........................................... 896 1,005
PROPERTY AND EQUIPMENT:
Equipment........................................................... 782 782
Vehicles............................................................ 164 164
Leasehold improvements.............................................. 34 34
Furniture........................................................... 55 55
------ -------
1,035 1,035
Less accumulated depreciation and amortization................. (797) (828)
------ -------
238 207
Deposits....................................................... 8 8
------ -------
$1,142 $ 1,220
====== =======
LIABILITIES
CURRENT LIABILITIES:
Accounts payable.................................................... $ 724 $ 700
Accrued payroll, benefits and withholdings.......................... 37 7
Other liabilities................................................... 52 52
------ -------
Total current liabilities...................................... 813 759
STOCKHOLDERS' EQUITY
Common stock, par value $1 per share; authorized 50,000 shares;
2,000 shares issued and outstanding............................... 2 2
Retained earnings................................................... 327 459
------ -------
329 461
------ -------
$1,142 $ 1,220
====== =======
</TABLE>
The accompanying Notes are an integral part of the financial statements.
F-38
<PAGE> 106
GREAT LAKES MICROGRAPHICS CORPORATION
STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, --------------------------
1995 1996 1995
------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Revenues................................................. $7,825 $ 3,908 $ 4,068
Cost of revenues......................................... 6,397 3,018 3,323
------ ------- -------
Gross profit........................................ 1,428 890 745
Selling, general and administrative expenses............. 1,371 759 604
------ ------- -------
Income from operations.............................. 57 131 141
Interest expense......................................... 3 -- 2
Other income, net........................................ (2) (1) (1)
------ ------- -------
Net income.......................................... $ 56 $ 132 $ 140
====== ======= =======
</TABLE>
The accompanying Notes are an integral part of the financial statements.
F-39
<PAGE> 107
GREAT LAKES MICROGRAPHICS CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1995 AND
FOR SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
---------------- RETAINED STOCKHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
------ ------ -------- -------------
<S> <C> <C> <C> <C>
Balance, January 1, 1995................................ 2,000 $ 2 $271 $ 273
Net income.............................................. -- -- 56 56
------ ---- ---- -----
Balance, December 31, 1995.............................. 2,000 $ 2 $327 $ 329
====== ==== ==== =====
Net income (unaudited).................................. -- -- 132 132
------ ---- ---- -----
Balances, June 30, 1996 (unaudited)..................... 2,000 $ 2 $459 $ 461
====== ==== ==== =====
</TABLE>
The accompanying Notes are an integral part of the financial statements.
F-40
<PAGE> 108
GREAT LAKES MICROGRAPHICS CORPORATION
STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR SIX MONTHS ENDED
ENDED JUNE 30,
DECEMBER 31, --------------------------
1995 1996 1995
------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.............................................. $ 56 $ 132 $ 140
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and Amortization......................... 67 31 40
Changes in operating assets and liabilities:
Accounts receivable................................ (3) (103) (86)
Inventory.......................................... 20 (1) (44)
Prepaid expenses and other......................... 6 (10) (1)
Accounts payable................................... 127 (24) 152
Accrued payroll, benefits and withholdings......... (37) (30) 54
Other liabilities.................................. 32 -- (35)
------ ----- -----
Net cash provided by (used in) operating
activities.................................. 268 (5) 220
------ ----- -----
Cash flows from investing activities, purchase of
property and equipment................................ (32) -- (29)
------ ----- -----
Net cash used in investing activities......... (32) -- (29)
------ ----- -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on term loan......................... (67) -- (34)
Repayment of shareholder loans.......................... (163) -- (163)
------ ----- -----
Net cash used in financing activities......... (230) -- (197)
------ ----- -----
Net increase (decrease) in cash......................... 6 (5) (6)
Cash, beginning of period............................... 12 18 12
------ ----- -----
Cash, end of period..................................... $ 18 $ 13 $ 6
====== ===== =====
Supplemental disclosures of cash flow information,
interest paid......................................... $ 35 -- $ 9
====== ===== =====
</TABLE>
The accompanying Notes are an integral part of the financial statements.
F-41
<PAGE> 109
GREAT LAKES MICROGRAPHICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS)
1. OPERATIONS AND CUSTOMER CONCENTRATION:
Great Lakes Micrographics Corporation (the "Company") provides micrographic
film, supplies, services and microimaging equipment through facilities located
in Chicago, Illinois, Indianapolis, Indiana and Grand Rapids, Kalamazoo and
Livonia, Michigan. The majority of the micrographic film and equipment sold by
the Company is provided by a large manufacturer and producer of microfilm and
micrographic hardware.
The Company primarily serves customers in the financial services industry.
Approximately 20 percent of the Company's revenues were derived from sales
directly to a single customer in 1995 and approximately 18 percent of trade
accounts receivable at December 31, 1995 are the result of such sales.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a. Interim Financial Data: The unaudited interim financial statements were
prepared in a manner consistent with that of the audited financial statements.
In the opinion of management, all adjustments considered necessary for a fair
presentation have been included, and such adjustments are of a normal recurring
nature.
b. Revenue Recognition: Revenue is recorded when the products are shipped
or services are rendered.
c. Property and Equipment: Property and equipment, including significant
improvements, are recorded at cost. Expenditures for normal repairs and
maintenance are charged to operations as incurred. Adjustments of the asset and
related accumulated depreciation accounts are made for retirements of property
and equipment with the resulting gain or loss included in operations.
Depreciation is computed using an accelerated method over the
estimated useful lives of the assets, ranging from 5 to 10 years.
d. Inventory: Inventories are valued at cost, which approximates market,
with cost determined using the first-in, first-out ("FIFO") method.
e. Income Taxes: The Company has elected to be taxed as an S-Corporation.
As such, the Company does not pay federal income taxes, rather, the stockholders
report the taxable income or loss of the Company in their individual federal
income tax returns.
f. Fair Value of Financial Instruments: Statement of Financial Accounting
Standards No. 107, "Disclosures About Fair Value of Financial Statements,"
requires disclosures about the fair value of financial instruments whether or
not such instruments are recognized in the balance sheet. Due to the short-term
nature of the Company's financial instruments, (accounts receivable and accounts
payable) their carrying values approximate fair value.
g. Use of Estimates in the Preparation of Financial Statements: The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-42
<PAGE> 110
GREAT LAKES MICROGRAPHICS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- CONCLUDED
(AMOUNTS IN THOUSANDS)
3. OPERATING LEASES:
The Company has various operating lease agreements related primarily to
equipment and buildings. At December 31, 1995, future minimum rental payments
under operating leases are as follows:
<TABLE>
<CAPTION>
EQUIPMENT BUILDINGS
--------- ---------
<S> <C> <C>
1996................................................................ $14 $ 102
1997................................................................ 9 62
1998................................................................ 4 35
1999................................................................ 2 24
---- -----
Total.......................................................... $29 $ 223
==== =====
</TABLE>
Rent expense for 1995 was $141 for buildings. Rent expense for equipment
for 1995 was $15.
4. RELATED PARTY TRANSACTIONS:
At December 31, 1995, the Company had the following balances due to or from
entities related to the Company:
<TABLE>
<S> <C>
Accounts receivable............................................................... $ 5
Accounts payable.................................................................. 23
</TABLE>
Included in 1995 sales are revenues received from related parties in the
amount of $95.
Included in cost of sales are expenses paid to related parties in the
amount of $13 for 1995.
5. COMMITMENTS AND CONTINGENCIES:
The Company is from time to time, a party to legal proceedings arising in
the normal course of business, management believes that none of these legal
proceedings will have a material adverse effect on the Company's business,
financial condition or results of operations.
6. SUBSEQUENT EVENT:
On July 16, 1996, all of the outstanding stock of the Company was acquired
by Lason Systems, Inc., a wholly owned subsidiary of Lason, Inc. The purchase
price of $5,300 was comprised of $4,240 in cash, with the remainder payable in
common stock of Lason, Inc.
F-43
<PAGE> 111
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of National Reproductions Corp.:
We have audited the accompanying balance sheets of National Reproductions Corp.
as of December 31, 1995 and 1994, and the related statements of income,
stockholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of National Reproductions Corp. as
of December 31, 1995 and 1994, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the financial statements, the Company changed its
method of depreciation in 1994.
Coopers & Lybrand L.L.P.
Detroit, Michigan
July 17, 1996, except for Note 10, as to which the
date is August 6, 1996
F-44
<PAGE> 112
NATIONAL REPRODUCTIONS CORP.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARES)
<TABLE>
<CAPTION>
DEC 31, DEC 31, JUNE 30,
1994 1995 1996
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash.................................................................. $ 7 $ 8 --
ACCOUNTS RECEIVABLE:
Trade, less allowance for doubtful accounts of $20 in 1994, 1995 and
1996.............................................................. 2,227 2,892 $ 2,251
Inventory............................................................. 279 291 298
Prepaid expenses, deposits and other current assets................... 157 167 122
------ ------ -------
Total current assets.............................................. 2,670 3,358 2,671
Other assets, cash value of life insurance, net of policy loans of
$112, $150 and $150 in 1994, 1995 and 1996, respectively............ 182 187 192
Long-term advances, related company (net of allowance of $159, $174
and $176 in 1994, 1995 and 1996, respectively)...................... -- -- --
PROPERTY, PLANT AND EQUIPMENT:
Land.................................................................. 43 43 43
Building.............................................................. 131 131 131
Leasehold improvements................................................ 454 458 465
Production equipment.................................................. 2,145 2,112 2,132
Capital lease equipment............................................... 698 1,054 1,011
Office equipment and other............................................ 173 161 169
------ ------ -------
Total cost........................................................ 3,644 3,959 3,951
Less accumulated depreciation and amortization........................ 2,555 2,767 2,890
------ ------ -------
Net property, plant and equipment................................. 1,089 1,192 1,061
------ ------ -------
Total assets...................................................... $3,941 $4,737 $ 3,924
====== ====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable......................................................... $ 760 $1,255 $ 1,040
Current portion of long-term debt..................................... 223 285 285
Accounts payable, trade and other..................................... 1,500 1,711 1,053
Accrued and other liabilities......................................... 66 45 34
------ ------ -------
Total current liabilities......................................... 2,549 3,296 2,412
LONG-TERM DEBT:
Bank and other, net of current portion.............................. 281 291 135
Stockholders........................................................ 58 33 22
------ ------ -------
Total long-term debt.............................................. 339 324 157
STOCKHOLDERS' EQUITY:
Common stock, $1 par value; 50,000 shares authorized, 28,000 shares
issued and outstanding.............................................. 28 28 28
Additional paid-in capital............................................ 10 10 10
Retained earnings..................................................... 1,015 1,281 1,440
Loan to stockholders.................................................. -- (202) (123)
------ ------ -------
Total stockholder's equity........................................ 1,053 1,117 1,355
------ ------ -------
Total liabilities and stockholders' equity........................ $3,941 $4,737 $ 3,924
====== ====== =======
</TABLE>
The accompanying Notes are an integral part of the financial statements.
F-45
<PAGE> 113
NATIONAL REPRODUCTIONS CORP.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
DEC 31, JUNE 30,
------------------ ----------------
1994 1995 1995 1996
------- ------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues.................................................. $14,107 $14,593 $6,820 $7,176
Cost of revenues.......................................... 11,128 11,536 5,384 5,627
------- ------- ------ ------
Gross profit............................................ 2,979 3,057 1,436 1,549
Selling, general and administrative expenses.............. 2,622 2,555 1,284 1,142
------- ------- ------ ------
Operating income........................................ 357 502 152 407
Interest expense.......................................... 131 146 77 50
Other income, net......................................... (13) (68) (66) (76)
------- ------- ------ ------
Income before cumulative effect of change in accounting
principle............................................ 239 424 141 433
Cumulative effect of change in accounting method (Note
1)...................................................... (241) -- -- --
------- ------- ------ ------
Net income (loss)....................................... $ (2) $ 424 $ 141 $ 433
======= ======= ====== ======
</TABLE>
The accompanying Notes are an integral part of the financial statements.
F-46
<PAGE> 114
NATIONAL REPRODUCTIONS CORP.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995 AND
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARES)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
PAID-IN RETAINED LOANS TO STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS SHAREHOLDERS EQUITY
------ ------ ---------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1994.......... 28,000 $ 28 $ 10 $1,017 -- $ 1,055
Net loss........................... -- -- -- (2) -- (2)
------ ---- ---- ------ ------ -------
Balances, December 31, 1994........ 28,000 28 10 1,015 -- 1,053
Dividend distributions............. -- -- -- (158) -- (158)
Loans to stockholders.............. -- -- -- -- $ (202) (202)
Net income......................... -- -- -- 424 -- 424
------ ---- ---- ------ ------ -------
Balances, December 31, 1995........ 28,000 $ 28 $ 10 $1,281 $ (202) $ 1,117
Net income (unaudited)............. -- -- -- 433 -- 433
Dividend distributions
(unaudited)...................... -- -- -- (274) -- (274)
Loans to stockholders
(unaudited)...................... -- -- -- -- 79 79
------ ---- ---- ------ ------ -------
Balances, June 30, 1996
(unaudited)...................... 28,000 $ 28 $ 10 $1,440 $ (123) $ 1,355
====== ==== ==== ====== ====== =======
</TABLE>
The accompanying Notes are an integral part of the financial statements.
F-47
<PAGE> 115
NATIONAL REPRODUCTIONS CORP.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DEC. 31, JUNE 30,
--------------- ---------------
1994 1995 1995 1996
----- ----- ----- -----
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $ (2) $ 424 $ 141 $ 433
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization........................... 339 418 167 207
Cumulative effect of change in accounting principle..... 241 -- -- --
(Gain) loss on sale of equipment........................ (11) 7 (9) (32)
Changes in operating assets and liabilities:
Accounts receivable.................................. 151 (665) (11) 641
Inventory............................................ 74 (13) 7 (7)
Prepaid expenses and other current assets............ 26 (10) 10 45
Accounts payable..................................... 9 211 (211) (658)
Accrued and other liabilities........................ (98) (21) 44 (11)
------ ------ ------ ------
Net cash provided by operating activities.......... 729 351 138 618
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, plant and equipment....... 24 18 32 76
Purchase of property, plant and equipment................. (234) (149) (112) (118)
Increase in cash surrender value of life insurance........ (42) (42) (6) (6)
------ ------ ------ ------
Net cash used in investing activities.............. (252) (173) (86) (48)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (repayments of) line of credit notes
payable................................................. (400) 320 260 (140)
Proceeds from bank notes payable.......................... -- 175 -- --
Proceeds from issuance of long-term debt.................. 29 -- -- --
Principal payments under long-term debt................... (220) (325) (118) (231)
Increase in life insurance policy loans................... 32 38 -- --
Loans to stockholders..................................... (10) (457) (75) --
Repayments from stockholders.............................. 9 230 -- 79
Principal payments on loans from stockholders............. -- -- (44) (12)
Dividend distributions.................................... -- (158) (79) (274)
------ ------ ------ ------
Net cash used in financing activities.............. (560) (177) (56) (578)
------ ------ ------ ------
Net increase (decrease) in cash........................... (83) 1 (4) (8)
Cash, beginning of period................................. 90 7 7 8
------ ------ ------ ------
Cash, end of period....................................... $ 7 $ 8 $ 3 --
====== ====== ====== ======
</TABLE>
The accompanying Notes are an integral part of the financial statements.
F-48
<PAGE> 116
NATIONAL REPRODUCTIONS CORP.
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a. Organization and Business Purpose: National Reproductions Corp. (the
"Company") is engaged in the business of providing imaging, reprographics and
facilities management services. Substantially all of the Company's customers are
located in southeastern Michigan and approximately 30 percent of revenue is from
one automotive manufacturer. Receivables from this customer were approximately
$880 and $1,498 at December 31, 1994 and 1995, respectively.
b. Interim Financial Data: The unaudited interim financial statements were
prepared in a manner consistent with that of the audited financial statements.
In the opinion of management, all adjustments considered necessary for a fair
presentation have been included, and such adjustments are of a normal recurring
nature.
c. Inventory: Inventory is stated at the lower of cost or market,
determined by the first-in, first-out method and consists primarily of printing
supplies and materials.
d. Property, Plant and Equipment: Property, plant and equipment, including
significant improvements, are stated at cost. Effective January 1, 1994, the
Company changed its method of depreciating fixed assets from the straight-line
method to an accelerated method to more appropriately match depreciation expense
to revenue generated in earlier years of production lives. The cumulative effect
of the change in accounting method was recorded as a one-time charge in the
accompanying statement of operations. The effect of the changes for the year
ended December 31, 1994 was to decrease net income by approximately $5.
Depreciation and amortization are computed over the estimated useful lives of
the assets, ranging from 5 to 18 years.
Expenditures for normal repairs and maintenance are charged to
operations as incurred. Adjustments to the asset and related accumulated
depreciation accounts are made for retirements of property and equipment
with the resulting gain or loss included in operations.
e. Revenue Recognition: Revenues are recorded when the products are shipped
or the services are rendered. Revenues are presented in the income statement net
of postage because the cost of postage is passed through to the customer.
f. Income Taxes: The Company has elected to be taxed as an S-Corporation.
As such, the company does not pay federal income taxes, rather, the stockholders
report the taxable income or loss of the Company in their individual federal
income tax returns.
g. Use of Estimates in the Preparation of Financial Statements: The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
h. Fair Value of Financial Instruments: Statement of Financial Accounting
Standards No. 107, "Disclosures About Fair Value of Financial Statements,"
requires disclosures about the fair value of financial instruments whether or
not such instruments are recognized in the balance sheet. Due to the short-term
nature of the Company's financial instruments (accounts receivable and payable),
other than debt, fair values approximate their carrying values. Based on the
borrowing rates currently available to the Company, the carrying value of debt
approximates fair value.
i. Effect of New Accounting Pronouncements: Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Assets to be Disposed of," is effective for fiscal
years beginning after December 15, 1995. The statement establishes standards for
measuring impairment loss of long-lived assets, certain identifiable intangibles
and
F-49
<PAGE> 117
NATIONAL REPRODUCTIONS CORP.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(IN THOUSANDS)
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --
CONCLUDED
goodwill related to those assets to be held and those to be disposed of. The
Company does not expect the adoption of SFAS No. 121 to have an effect on its
financial position or results of operations.
2. NOTES PAYABLE:
Notes payable consist of the following at December 31, 1994 and 1995:
<TABLE>
<CAPTION>
1994 1995
---- ------
<S> <C> <C>
LINE OF CREDIT: The Company has a $1,400 line of credit payable on demand.
The note bears interest at the rate of 1 percent above the bank's prime
rate (an effective rate of 9.50 percent at December 31, 1995) and is
collateralized by accounts receivable, inventory and equipment............ $760 $1,080
NOTES PAYABLE -- BANK: The Company has a $175 note payable calling for
interest only payments through September 1996, at which time the entire
outstanding balance is due. The note bears interest at the rate of 1
percent above the bank's prime rate (an effective rate of 9.50 percent at
December 31, 1995) and is cross collateralized with the line of credit.... -- 175
---- ------
Total.................................................................. $760 $1,255
==== ======
</TABLE>
The weighted average interest rate of notes payable is 9.50 percent at
December 31, 1995.
3. LONG-TERM DEBT:
Long-term debt consists of the following at December 31, 1994 and 1995:
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Relocation loan, bank (interest at prime plus 1 percent)................... $ 58 --
Equipment loan, bank (interest at prime plus 1 percent).................... 13 --
Obligations under capital leases........................................... 372 $518
Installment loans.......................................................... 61 58
---- ----
Total................................................................. 504 576
Less current portion..................................................... 223 285
---- ----
Long-term portion..................................................... $281 $291
==== ====
</TABLE>
a. Obligations under Capital Leases: The Company has acquired production
equipment under capital leases that extend through September 1999. Terms of the
leases require the Company to pay property taxes, insurance and maintenance
costs. Future minimum lease payments under the capital leases are as follows:
<TABLE>
<S> <C>
YEARS ENDING DECEMBER 31:
1996........................................................................... $301
1997........................................................................... 159
1998........................................................................... 73
1999........................................................................... 47
----
Total minimum lease payments................................................... 580
Less amount representing interest.............................................. 62
----
Present value of minimum lease payments........................................ $518
====
</TABLE>
F-50
<PAGE> 118
NATIONAL REPRODUCTIONS CORP.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(IN THOUSANDS)
3. LONG-TERM DEBT -- CONCLUDED
The equipment purchased under the capital lease arrangements has been
capitalized as processing equipment at approximately $698 and $1,054 with
accumulated depreciation of approximately $290 and $571 at December 31,
1994 and 1995, respectively.
b. Installment Loans: Installment loans for the purchase of equipment are
payable in monthly installments totaling $3 at December 31, 1995 and mature at
various dates through October 1999. These loans are collateralized by equipment
capitalized at $100 with accumulated depreciation of $37 and bear interest at
rates ranging from 7.75 percent to 10.75 percent.
Future maturities on all long-term debt are as follows:
<TABLE>
<S> <C>
YEARS ENDING DECEMBER 31:
1996........................................................................... $285
1997........................................................................... 164
1998........................................................................... 77
1999........................................................................... 50
----
Total....................................................................... $576
====
</TABLE>
4. LEASE COMMITMENTS:
The Company leases general purpose office, branch outlet and production
facilities and equipment under noncancelable operating leases expiring on
various dates through 2002. Rent expense under such leases approximated $750 in
1994 and $625 in 1995.
Future minimum lease payments for these leases are as follows:
<TABLE>
<S> <C>
YEARS ENDING DECEMBER 31:
1996.......................................................................... $ 852
1997.......................................................................... 696
1998.......................................................................... 500
1999.......................................................................... 335
2000.......................................................................... 174
2001 and beyond............................................................... 197
------
Total...................................................................... $2,754
======
</TABLE>
The Company leases one branch office from a partnership owned by the
Company's stockholders. Rent expense under this leases approximated $110 in 1994
and 1995. Leasehold improvements of approximately $32 related to this lease are
depreciated over ten years using the straight-line method.
5. RETIREMENT PLAN:
In October 1984, the Board of Directors voted to establish a deferred
compensation plan under the provisions of Internal Revenue Code Section 401(k).
Contributions to the plan are made at the discretion of management. No
contributions were made by the Company under this plan for 1994 and 1995. The
plan covers substantially all Company personnel employed through December 31,
1993. See Note 9 regarding leased employees.
F-51
<PAGE> 119
NATIONAL REPRODUCTIONS CORP.
NOTES TO FINANCIAL STATEMENTS -- CONCLUDED
(IN THOUSANDS)
6. STOCK REPURCHASE AGREEMENT:
The Company has an agreement with its three stockholders whereby, upon the
death or disability of a stockholder, the Company shall purchase all shares of
stock not subject to separate agreements between the stockholders from the
estate of the deceased or disabled stockholder. In addition, if a stockholder
wishes to dispose of his stock during his lifetime, he shall first offer the
stock to the Company and then to the other stockholders at a price determined as
if the stockholder had died. The Company's potential obligation under this
agreement is partially funded by life insurance. The agreement will terminate
upon completion of the transaction described in Footnote 10.
7. RELATED PARTY TRANSACTIONS:
Related company advances represent an advance to a related company, whose
general partners are also the majority stockholders of the Company, in
connection with its real estate activities. The advance is classified as
long-term and outstanding balances have been fully reserved as of December 31,
1994 and 1995. The advance bears interest at a rate equal to the Company's
borrowing rate on long-term debt with the bank (an effective rate of 8.75
percent at December 31, 1995). Interest income related to these loans
approximated $12 and $14 in 1994 and 1995, respectively.
Advances to stockholders are recorded as a reduction in stockholders'
equity.
Related party leases are described in Note 3.
8. CASH FLOWS:
Cash paid during 1994 and 1995 for interest was $132 and $146,
respectively.
Significant noncash investing and financing activities are as follows:
During 1994 and 1995, the Company leased equipment under capital leases.
The capital lease obligations incurred were $42 and $352, respectively.
9. LEASED EMPLOYEES:
Effective January 1, 1994, all Company personnel became employees of an
employee leasing company and are being leased back by the Company. The leasing
agreement is a three-year cancelable agreement requiring 30 days' notice for
termination. All payroll-related responsibilities, including health insurance
and workers' compensation insurance, are no longer the responsibility of the
Company. In addition, the Company will no longer make contributions to its
401(k) deferred compensation plan. The leased employees are eligible to make
contributions to the leasing company's 401(k) deferred compensation plan.
10. SUBSEQUENT EVENT:
On August 6, 1996, the Company signed an agreement to sell all its common
stock to Lason Systems, Inc., a wholly owned subsidiary of Lason, Inc., for a
purchase price of approximately $8,600.
F-52
<PAGE> 120
[LARGE PICTURE OF SEVERAL COMPACT DISKS WITH SMALLER INSET PICTURES OF A COMPACT
DISK DRIVE, INSTRUCTION MANUALS, LETTER WITH POSTAGE METER STAMP, IMAGING
APPARATUS, PRIORITY GRAM ENVELOPE, AND COPIER/PRINTER CONTROL PANEL AND THE
COMPANY'S LOGO.]
<PAGE> 121
[LASON LOGO]
<PAGE> 122
PART II -- INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is a statement of estimated expenses, to be paid solely by
the Company, of the issuance and distribution of the securities being registered
other than underwriting compensation:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................ $ 19,630
National Association of Securities Dealers fee..................... 5,958
NASDAQ National Market fees........................................ 36,000
Blue sky fees and expenses (including attorneys' fees and
expenses)........................................................ 15,000
Printing and engraving expenses.................................... 125,000
Transfer agent's fees and expenses................................. 15,000
Accounting fees and expenses....................................... 280,000
Legal fees and expenses............................................ 400,000
Miscellaneous expenses............................................. 3,412
--------
Total......................................................... $900,000*
========
</TABLE>
- -------------------------
* Does not include expenses for directors' and officers' insurance relating to
the offering that the Company may obtain in future. If the Company does obtain
such insurance, the Company expects the cost to be between approximately
$100,000 and $400,000.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is incorporated under the laws of the State of Delaware.
Section 145 of the General Corporation Law of the State of Delaware ("Section
145") provides that a Delaware corporation may indemnify any persons who are, or
are threatened to be made, parties to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such corporation), by
reason of the fact that such person was an officer, director, employee or agent
of another corporation or enterprise. The indemnity may include expenses
(including attorneys' fees), judgments, fines, and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action
or proceeding, if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action, had no reasonable cause to believe that his
conduct was illegal. A Delaware corporation may indemnify any persons who are,
or are threatened to be made, a party to any threatened, pending or completed
action or suit by or in the right of the corporation by reason of the fact that
such person was a director, officer, employee or agent of such corporation, or
is or was serving at the request of such corporation as a director, officer,
employee or agent of another corporation or enterprise. The indemnity may
include expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action or suit,
provided such person acted in good faith and in a manner he reasonably believed
to be in or not opposed to the corporation's best interests, except that no
indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses which
such officer or director has actually and reasonably incurred. Pursuant to
Section 145, the Company may purchase insurance on behalf of its present and
former directors and officers against any liability asserted against or incurred
by them in such capacity or arising out of their status as such, including
liabilities under the Securities Act.
The Company's Amended and Restated Certificate of Incorporation and By-Laws
provide for the indemnification of directors and officers of the Company to the
fullest extent permitted by Section 145.
In that regard, the Amended and Restated Certificate of Incorporation and
By-Laws provide that the Company shall indemnify any person who was or is a
party or is threatened to be made a party to
II-1
<PAGE> 123
any threatened, pending or completed action, suit or proceeding, whether civil,
administrative or investigative (other than action by or in the right of the
corporation) by reason of the fact that he is or was a director or officer of
the Company, or is or was serving at the request of the Company as a director,
officer or member of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
such corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Indemnification in
connection with an action or suit by or in the right of such corporation to
procure a judgment in its favor is limited to payment of expenses (including
attorneys' fees) actually and reasonably incurred in connection with the defense
or settlement of such an action or suit except that no such indemnification may
be made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable for negligence or misconduct in the performance
of his duty to the indemnifying corporation unless and only to the extent that
the Court of Chancery of Delaware or the court in which such action or suit was
brought shall determine that, despite the adjudication of liability but in
consideration of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following securities of the Company were sold by the Company within the
past three years without registration:
On January 17, 1995, pursuant to a Purchase Agreement, the Company issued
1,000,001 shares of Class B Common Stock to GTCR Fund IV, for $10,000,000.
On January 17, 1995, pursuant to an Executive Stock Agreement, the Company
issued the following securities to the persons and for the consideration
described below:
(1) 402,987 shares of Class A-1 Common Stock to the R. Yanover Trust
for $402,987;
(2) 66,074 shares of Class A-1 Common Stock to the J. Yanover Trust
for $66,074;
(3) 469,064 shares of Class A-1 Common Stock to the Nesbitt Trust for
$469,064;
(4) 25,000 shares of Class A-1 Common Stock to Mr. Kowalski for
$25,000;
(5) 28,815 shares of Class A-1 Common Stock to Mr. Elland for $28,815;
and
(6) 8,058 shares of Class A-1 Common Stock to Mr. Carey for $8,058.
The foregoing sales and issuances of securities were exempt from
registration under the Securities Act by virtue of Section 4(2) thereof as
transactions not involving a public offering.
On February 26, 1996, the Company issued 1,705 shares of Class A-2 Common
Stock to Mr. Karl H. Hartig for $1,705 upon exercise by Mr. Hartig of his option
to purchase such shares granted pursuant to the Company's 1995 Stock Option
Plan.
On March 13, 1996, the Company issued 1,705 shares of Class A-2 Common
Stock to Mr. James J. Dewan for $1,705 upon exercise by Mr. Dewan of his option
to purchase such shares granted pursuant to the Company's 1995 Stock Option
Plan.
On May 2, 1996, the Company issued 1,705 shares of Class A-2 Common Stock
to Mr. Scott L. Christensen for $1,705 upon exercise by Mr. Christensen of his
option to purchase such shares granted pursuant to the Company's 1995 Stock
Option Plan.
The issuances of securities to Messrs. Hartig, Dewan and Christensen upon
exercise of their options were exempt from registration under the Securities Act
by virtue of Rule 701 thereof.
On July 16, 1996, the Company issued into escrow 1,317, 5,267, 2,632,
3,950, 2,632, 3,950, 8,977, 2,872, and 4,309 shares of Class A-1 Common Stock to
Richard J. Wolfson, the Richard Wolfson Charitable Remainder Unitrust, Donald M.
Wolfson, the Donald M. Wolfson Charitable Remainder Unitrust, Saul Wolfson, the
Saul Wolfson Charitable Remainder Unitrust, Bobby R. Stevens, Sr.,
II-2
<PAGE> 124
Dr. Eugene Wolchok, and the Eugene B. and Brenda R. Wolchok Charitable Remainder
Unitrust, respectively, as an estimated payment of a portion of the purchase
price in stock equal to $46,216.67, $184,827.60, $92,361.16, $138,611.93,
$92,361.16, $138,611.93, $315,017.54, $100,783.15, and $151,209.82,
respectively, in connection with the acquisition by the Company of Information
and Image Technology of America, Inc. The actual number of shares to be released
from the escrow will be equal to the portion of the purchase price to be paid in
stock divided by the initial public offering price of the Common Stock (adjusted
for the Stock Split). Assuming an initial public offering price of $15.50 per
share, approximately 1,193, 4,770, 2,384, 3,577, 2,384, 3,577, 8,129, 2,601 and
3,902 shares of Class A Common would be released from escrow, the remainder
would be cancelled. If the number of shares issued into escrow is inadequate,
additional shares will be issued.
On July 17, 1996, the Company issued into escrow 15,140 of Class A-1 Common
Stock to each of Robin L. Marshall and William E. Marvin as an estimated payment
of a portion of the purchase price in stock equal to $530,000 each in connection
with the acquisition by the Company of Great Lakes Micrographics Corporation.
The actual number of shares to be released from the escrow will be equal to the
portion of the purchase price to be paid in stock divided by the initial public
offering price of the Common Stock (adjusted for the Stock Split). Assuming an
initial public offering price of $15.50 per share, approximately 13,677 shares
of Class A Common Stock would be released from escrow for each of Messrs.
Marshall and Marvin, the remainder would be cancelled. If the number of shares
issued into escrow is inadequate, additional shares will be issued.
The issuance of securities described in the two prior paragraphs were
exempt from registration under the Securities Act by virtue of Section 4(2)
thereof as transactions not involving a public offering.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement
2.1 Asset Purchase Agreement and Equipment Purchase Agreement dated May 29, 1995 by and
among Lason Systems, Inc., Adcom Mailers, Inc. and its affiliated company, Linkster
Leasing+
2.2 Asset Purchase Agreement dated December 28, 1995 by and among Lason Systems, Inc. and
Mail-Away Corporation+
2.3 Asset Purchase Agreement dated February 1, 1996 by and among Lason Systems, Inc. and
Diversified Support Services, Inc.+
2.4 Stock Purchase Agreement with respect to the acquisition of Delaware Legal Copy, Inc.
dated March 25, 1996 by and among Lason Systems, Inc. and the Shareholders (as defined
therein)+
2.5 Stock Purchase Agreement with respect to the acquisition of Information & Image
Technology of America, Inc. dated July 16, 1996 by and among Lason Systems, Inc. and
the Shareholders (as defined therein)+
2.6 Stock Purchase Agreement with respect to the acquisition of Great Lakes Micrographics
Corporation dated July 17, 1996 by and among Lason Systems, Inc. and the Shareholders
(as defined therein)+
2.7 Stock Purchase Agreement with respect to the acquisition of Micro-Pro, Inc. and MP
Services, Inc. dated July 24, 1996 by and among Lason Systems, Inc. and the
Shareholders (as defined therein)+
2.8 Stock Purchase Agreement with respect to the acquisition of National Reproductions
Corp. dated August 6, 1996 by and among Lason Systems, Inc. and the Shareholders (as
defined therein)+
3.1 Form of Amended and Restated Certificate of Incorporation of the Company
3.2 Form of Amended and Restated By-Laws of the Company
4.1 Form of certificate representing Common Stock of the Company
5.1 Opinion of Kirkland & Ellis with respect to the validity of the shares of Common Stock
offered
10.1 Asset Purchase Agreement dated January 17, 1995 by and among Lason Acquisition Corp.,
Lason Systems, Inc. and the J. Yanover Trust, the R. Yanover Trust and Messrs.
Nesbitt, Kowalski, Elland and Carey+
10.2 Purchase Agreement dated January 17, 1995 by and between the Company and GTCR Fund IV+
</TABLE>
II-3
<PAGE> 125
<TABLE>
<C> <S>
10.3 Executive Stock Agreement dated January 17, 1995 by and among the Company and the J.
Yanover Trust, the R. Yanover Trust, the Nesbitt Trust and Messrs. Kowalski, Elland
and Carey+
10.4 Stockholders Agreement dated January 17, 1995 by and among the Company and certain of
its stockholders+
10.5 Registration Agreement dated January 17, 1995 by and among the Company and the 1995
Stockholders+
10.6 Credit Agreement dated January 17, 1995 by and among Lason Acquisition Corp. and the
J. Yanover Trust, the R. Yanover Trust and Mr. Yanover+
10.7 Credit Agreement dated January 17, 1995 by and among Lason Acquisition Corp. and the
Nesbitt Trust and Mr. Nesbitt+
10.8 Employment Agreement between Lason Systems, Inc. and Gary Monroe
10.9 Offer of employment dated April 30, 1996 from Lason Systems, Inc. to Mr. Rauwerdink+
10.10 Offer of employment dated June 12, 1996 from Lason Systems, Inc. to Mr. Jablonski+
10.11 1995 Stock Option Plan of the Company+
10.12 Employee Stock Option Agreements dated January 17, 1995 by and among the Company and
each of Mr. Elland, Mr. Kowalski, Mr. Carey, Karl H. Hartig, James J. Dewan, Lawrence
C. Jones, Scott L. Christensen, Daniel J. Buckley, Paul G. Dugan, John H. Wallanse and
David J. Malosh+
10.13 Employee Stock Option Agreement dated December 21, 1995 by and between the Company and
Mr. Monroe+
10.14 Stock Option Agreement dated August 7, 1995 by and between the Company and Mr.
Gleklen+
10.15 Employee Stock Option Agreement by and between the Company and Mr. Rauwerdink+
10.16 Employee Stock Option Agreement by and between the Company and Mr. Jablonski+
10.17 1996 Lason Management Bonus Plan+
10.18 Lason Systems, Inc. 401(k) Profit Sharing Plan & Trust
10.19 Amendments to Lason Systems, Inc. 401(k) Profit Sharing Plan & Trust
10.20 Loan Agreement dated January 17, 1995 by and among Lason Systems, Inc., First Union
National Bank of North Carolina, as lender and as agent, and each other lender party
thereto, including Term Note and Revolving Credit Note+
10.21 Security Agreement dated as of January 17, 1995 by and among Lason Systems, Inc. and
First Union National Bank of North Carolina, as agent for the Lenders (as defined in
the Loan Agreement)+
10.22 Guaranty Agreement dated as of January 17, 1995 given by the Company and extended to
First Union National Bank of North Carolina, as agent for the Lenders (as defined in
the Loan Agreement), and the Lenders for the benefit of Lason Systems+
10.23 Guarantor Pledge Agreement dated as of January 17, 1995 made by the Company for the
benefit of First Union National Bank of North Carolina, as agent for the Lenders (as
defined in the Loan Agreement)+
10.24 First Amendment to Loan Agreement dated as of March 25, 1996 between Lason Systems,
Inc. and First Union National Bank of North Carolina, as agent+
10.25 Second Amendment to Loan Agreement dated as of May 15, 1996 between Lason Systems,
Inc. and First Union National Bank of North Carolina, as agent+
10.26 Third Amendment to Loan Agreement dated July 10, 1996 between Lason Systems, Inc. and
First Union National Bank of North Carolina, as agent+
10.27 Lease Agreement dated as of September 3, 1985 by and between Lason Systems, Inc. and
Mart Associates as amended+
10.28 Lease Agreement dated August 3, 1995 by and between Lason Systems, Inc. and Kensington
Center, Inc.+
10.29 Lease Agreement by and between Lason Systems, Inc. and The Prudential Insurance
Company of America+
10.30 Fourth Amendment to Loan Agreement dated August 16, 1996 between Lason Systems, Inc.
and First Union National Bank of North Carolina, as agent+
10.31 First Amendment to Lease dated as of July 26, 1996 by and between Kensington Center,
Inc. and Lason Systems, Inc.+
10.32 Form of Recapitalization Agreement among the Company and certain of its stockholders,
including Plan of Recapitalization
</TABLE>
II-4
<PAGE> 126
<TABLE>
<C> <S>
10.33 Form of Voting Agreement among the Company and certain of its stockholders
10.34 Form of Termination Agreement between Lason Systems, Inc. and each of the Borrowers
10.35 Form of Redemption Agreement between the Company and Golder, Thoma, Cressey, Rauner
Fund IV, L.P.
10.36 Amendment to Employee Stock Option Agreement by and between the Company and Mr.
Gleklen
11.1 Statement re computation of per share earnings+
21.1 Subsidiaries of the Company+
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Kirkland & Ellis (included in opinion filed as Exhibit 5.1)
24.1 Powers of Attorney (included on the signature page included in Part II of the initial
filing)+
27.1 Financial Data Schedule+
</TABLE>
- ------------
+ Previously filed.
(b)Financial Statement Schedules:
<TABLE>
<CAPTION>
SCHEDULE DESCRIPTION
- -------- ----------------------------------------------------------------------------------
<S> <C>
I Condensed Financial Information of Registrant
</TABLE>
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions, are inapplicable or not material, or
the information called for thereby is otherwise included in the consolidated
financial statements or notes thereto and therefore have been omitted.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-5
<PAGE> 127
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 4 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Troy, State of Michigan on October 7, 1996.
Lason, Inc.
By: /s/ WILLIAM J. RAUWERDINK
--------------------------------------
William J. Rauwerdink
Executive Vice President
* * * *
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 4 to the Registration Statement has been signed on October 7, 1996, by the
following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
- ------------------------------------------- ---------------------------------------------
<S> <C>
ROBERT A. YANOVER* Chairman of the Board
- -------------------------------------------
Robert A. Yanover
GARY L. MONROE* Chief Executive Officer (principal executive
- ------------------------------------------- officer) and Director
Gary L. Monroe
ALLEN J. NESBITT* President and Director
- -------------------------------------------
Allen J. Nesbitt
/s/ WILLIAM J. RAUWERDINK Executive Vice President, Chief Financial
- ------------------------------------------- Officer, Treasurer and Secretary (principal
William J. Rauwerdink financial and accounting officer)
DONALD M. GLEKLEN* Director
- -------------------------------------------
Donald M. Gleklen
BRUCE V. RAUNER* Director
- -------------------------------------------
Bruce V. Rauner
JOSEPH P. NOLAN* Director
- -------------------------------------------
Joseph P. Nolan
*By: /s/ WILLIAM J. RAUWERDINK
- -------------------------------------------
Attorney-in-fact
</TABLE>
II-6
<PAGE> 128
SCHEDULE I
LASON, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEET, DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995
-------
<S> <C>
ASSETS
Investment in Subsidiaries......................................................... $12,914
Deferred Tax Asset................................................................. 105
-------
Total Assets.................................................................. $13,019
=======
LIABILITIES
Total Liabilities............................................................. --
STOCKHOLDERS' EQUITY
Common Stock....................................................................... 20
Additional Paid in Capital......................................................... 11,188
Retained Earnings.................................................................. 1,811
-------
Total Stockholders' Equity.................................................... 13,019
-------
Total Liabilities and Stockholders' Equity.................................... $13,019
=======
</TABLE>
S-1
<PAGE> 129
LASON, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
INCOME STATEMENT
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
DEC. 31,
1995
----------
<S> <C>
Revenue: ........................................................................ $ --
------
OPERATING EXPENSES:
Compensatory Stock Option Expense.............................................. 308
------
Operating Loss................................................................... (308)
Equity in Net Income of Subsidiary............................................... 2,104
------
Income before Income Taxes....................................................... 1,706
Income Tax Benefit............................................................... (105)
------
Net Income................................................................ $1,811
======
</TABLE>
S-2
<PAGE> 130
LASON, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
DEC. 31,
1995
----------
<S> <C>
Net Cash Used in Operating Activities: .......................................... $ --
--------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in Subsidiary......................................................... (10,900)
--------
Net Cash Used in Investing Activities............................................ (10,900)
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Common Stock......................................................... 10,900
--------
Net Cash Provided by Financing Activities........................................ 10,900
--------
Change in Cash................................................................... --
Cash, Beginning of Year.......................................................... --
Cash, End of Year................................................................ $ --
========
</TABLE>
S-3
<PAGE> 131
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- ------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement
2.1 Asset Purchase Agreement and Equipment Purchase Agreement dated May 29, 1995
by and among Lason Systems, Inc., Adcom Mailers, Inc. and its affiliated
company, Linkster Leasing+
2.2 Asset Purchase Agreement dated December 28, 1995 by and among Lason Systems,
Inc. and Mail-Away Corporation+
2.3 Asset Purchase Agreement dated February 1, 1996 by and among Lason Systems,
Inc. and Diversified Support Services, Inc.+
2.4 Stock Purchase Agreement with respect to the acquisition of Delaware Legal
Copy, Inc. dated March 25, 1996 by and among Lason Systems, Inc. and the
Shareholders (as defined therein)+
2.5 Stock Purchase Agreement with respect to the acquisition of Information &
Image Technology of America, Inc. dated July 16, 1996 by and among Lason
Systems, Inc. and the Shareholders (as defined therein)+
2.6 Stock Purchase Agreement with respect to the acquisition of Great Lakes
Micrographics Corporation dated July 17, 1996 by and among Lason Systems, Inc.
and the Shareholders (as defined therein)+
2.7 Stock Purchase Agreement with respect to the acquisition of Micro-Pro, Inc.
and MP Services, Inc. dated July 24, 1996 by and among Lason Systems, Inc. and
the Shareholders (as defined therein)+
2.8 Stock Purchase Agreement with respect to the acquisition of National
Reproductions Corp. dated August 6, 1996 by and among Lason Systems, Inc. and
the Shareholders (as defined therein)+
3.1 Form of Amended and Restated Certificate of Incorporation of the Company
3.2 Form of Amended and Restated By-Laws of the Company
4.1 Form of certificate representing Common Stock of the Company
5.1 Opinion of Kirkland & Ellis with respect to the validity of the shares of
Common Stock offered
10.1 Asset Purchase Agreement dated January 17, 1995 by and among Lason Acquisition
Corp., Lason Systems, Inc. and the J. Yanover Trust, the R. Yanover Trust and
Messrs. Nesbitt, Kowalski, Elland and Carey+
10.2 Purchase Agreement dated January 17, 1995 by and between the Company and GTCR
Fund IV+
10.3 Executive Stock Agreement dated January 17, 1995 by and among the Company and
the J. Yanover Trust, the R. Yanover Trust, the Nesbitt Trust and Messrs.
Kowalski, Elland and Carey+
10.4 Stockholders Agreement dated January 17, 1995 by and among the Company and
certain of its stockholders+
10.5 Registration Agreement dated January 17, 1995 by and among the Company and the
1995 Stockholders+
10.6 Credit Agreement dated January 17, 1995 by and among Lason Acquisition Corp.
and the J. Yanover Trust, the R. Yanover Trust and Mr. Yanover+
10.7 Credit Agreement dated January 17, 1995 by and among Lason Acquisition Corp.
and the Nesbitt Trust and Mr. Nesbitt+
10.8 Employment Agreement between Lason Systems, Inc. and Gary Monroe
10.9 Offer of employment dated April 30, 1996 from Lason Systems, Inc. to Mr.
Rauwerdink+
10.10 Offer of employment dated June 12, 1996 from Lason Systems, Inc. to Mr.
Jablonski+
10.11 1995 Stock Option Plan of the Company+
</TABLE>
<PAGE> 132
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- ------------------------------------------------------------------------------
<S> <C>
10.12 Employee Stock Option Agreements dated January 17, 1995 by and among the
Company and each of Mr. Elland, Mr. Kowalski, Mr. Carey, Karl H. Hartig, James
J. Dewan, Lawrence C. Jones, Scott L. Christensen, Daniel J. Buckley, Paul G.
Dugan, John H. Wallanse and David J. Malosh+
10.13 Employee Stock Option Agreement dated December 21, 1995 by and between the
Company and Mr. Monroe+
10.14 Stock Option Agreement dated August 7, 1995 by and between the Company and Mr.
Gleklen+
10.15 Employee Stock Option Agreement by and between the Company and Mr. Rauwerdink+
10.16 Employee Stock Option Agreement by and between the Company and Mr. Jablonski+
10.17 1996 Lason Management Bonus Plan+
10.18 Lason Systems, Inc. 401(k) Profit Sharing Plan & Trust
10.19 Amendments to Lason Systems, Inc. 401(k) Profit Sharing Plan & Trust
10.20 Loan Agreement dated January 17, 1995 by and among Lason Systems, Inc., First
Union National Bank of North Carolina, as lender and as agent, and each other
lender party thereto, including Term Note and Revolving Credit Note+
10.21 Security Agreement dated as of January 17, 1995 by and among Lason Systems,
Inc. and First Union National Bank of North Carolina, as agent for the Lenders
(as defined in the Loan Agreement)+
10.22 Guaranty Agreement dated as of January 17, 1995 given by the Company and
extended to First Union National Bank of North Carolina, as agent for the
Lenders (as defined in the Loan Agreement), and the Lenders for the benefit of
Lason Systems+
10.23 Guarantor Pledge Agreement dated as of January 17, 1995 made by the Company
for the benefit of First Union National Bank of North Carolina, as agent for
the Lenders (as defined in the Loan Agreement)+
10.24 First Amendment to Loan Agreement dated as of March 25, 1996 between Lason
Systems, Inc. and First Union National Bank of North Carolina, as agent+
10.25 Second Amendment to Loan Agreement dated as of May 15, 1996 between Lason
Systems, Inc. and First Union National Bank of North Carolina, as agent+
10.26 Third Amendment to Loan Agreement dated July 10, 1996 between Lason Systems,
Inc. and First Union National Bank of North Carolina, as agent+
10.27 Lease Agreement dated as of September 3, 1985 by and between Lason Systems,
Inc. and Mart Associates as amended+
10.28 Lease Agreement dated August 3, 1995 by and between Lason Systems, Inc. and
Kensington Center, Inc.+
10.29 Lease Agreement by and between Lason Systems, Inc. and The Prudential
Insurance Company of America+
10.30 Fourth Amendment to Loan Agreement dated as of August 16, 1996 between Lason
Systems, Inc. and First Union National Bank of North Carolina, as agent,
including Amended and Restated Revolving Credit Note and Interim Term Note+
10.31 First Amendment to Lease dated as of July 26, 1996, by and between Kensington
Center, Inc. and Lason Systems, Inc.+
10.32 Form of Recapitalization Agreement among the Company and certain of its
stockholders, including Plan of Recapitalization
10.33 Form of Voting Agreement among the Company and certain of its stockholders
10.34 Form of Termination Agreement between Lason Systems, Inc. and each of the
Borrowers
10.35 Form of Redemption Agreement between the Company and Golder, Thoma, Cressey,
Rauner Fund IV, L.P.
</TABLE>
<PAGE> 133
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- ------------------------------------------------------------------------------
<S> <C>
10.36 Amendment to Employee Stock Option Agreement by and between the Company and
Mr. Gleklen
11.1 Statement re computation of per share earnings+
21.1 Subsidiaries of the Company+
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Kirkland & Ellis (included in opinion filed as Exhibit 5.1)
24.1 Powers of Attorney (included on the signature page included in Part II of the
initial filing)+
27.1 Financial Data Schedule+
</TABLE>
- ------------
+ Previously filed.
<PAGE> 1
EXHIBIT 1.1
3,000,000 SHARES*
LASON, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
, 1996
ROBERTSON, STEPHENS & COMPANY LLC
WILLIAM BLAIR & COMPANY, L.L.C.,
as Representatives of the several Underwriters
(the "Representatives")
c/o Robertson, Stephens & Company LLC
555 California Street, Suite 2600
San Francisco, California 94104
Ladies and Gentlemen:
Lason, Inc., a Delaware corporation (the "Company"), addresses you as
the Representatives of each of the firms and corporations listed in Schedule A
hereto (collectively, the "Underwriters") and hereby confirms its respective
agreements with the several Underwriters as follows:
1. Description of Shares. The Company proposes to issue and sell
3,000,000 shares of the Company's authorized and unissued Common Stock to the
several Underwriters (the "Firm Shares"). The Company also proposes to grant
to the Underwriters an option to purchase up to 450,000 additional shares of
the Company's Common Stock (the "Option Shares"), as provided in Section 7. As
used in this Agreement, the term "Shares" shall include the Firm Shares and the
Option Shares. All shares of Common Stock of the Company, including the
Shares, are hereinafter referred to as "Common Stock".
2. Representations, Warranties and Agreements of the Company. The
Company represents and warrants to and agrees with each Underwriter that:
______________________
* Plus an option to purchase up to 450,000 additional shares of Common Stock
from the Company solely to cover over-allotments, if any.
<PAGE> 2
(a) A registration statement on Form S-1 (File No.
333-09799) with respect to the Shares, including a prospectus subject to
completion, has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "Act"), and the
applicable rules and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") under the Act and has
been filed with the Commission; such amendments to such registration statement
and such amended prospectuses subject to completion, as may have been required
prior to the date hereof, have been similarly prepared and filed with the
Commission; and the Company will file such additional amendments to such
registration statement and such amended prospectuses subject to completion, as
may hereafter be required. Copies of such registration statement and
amendments and of each related prospectus subject to completion (the
"Preliminary Prospectuses") have been delivered to you.
If the registration statement has been declared effective under
the Act by the Commission, the Company will prepare and promptly file with the
Commission the information omitted from the registration statement pursuant to
Rule 430A(a) of the Rules and Regulations pursuant to subparagraph (1) or (4)
of Rule 424(b) of the Rules and Regulations or as part of a post-effective
amendment to the registration statement (including a final form of prospectus).
If the registration statement has not been declared effective under the Act by
the Commission, the Company will prepare and promptly file a further amendment
to the registration statement, including a final form of prospectus. The term
"Registration Statement" as used in this Agreement shall mean such registration
statement, including consolidated financial statements, schedules and exhibits
in the form in which it became or becomes, as the case may be, effective
(including, if the Company omitted information from the registration statement
pursuant to Rule 430A(a) of the Rules and Regulations, the information deemed
to be a part of the registration statement at the time it became effective
pursuant to Rule 430A(b) of the Rules and Regulations), any registration
statement filed pursuant to Rule 462(b) of the Rules and Regulations (a "Rule
462(b) Registration Statement") and, in the event of any amendment thereto
after the effective date of such registration statement, shall also mean (from
and after the effectiveness of such amendment) such registration statement as
so amended (including any Rule 462(b) Registration Statement). The term
"Prospectus" as used in this Agreement shall mean the prospectus relating to
the Shares as included in such Registration Statement at the time it becomes
effective (including, if the Company omitted information from the Registration
Statement pursuant to Rule 430A(a) of the Rules and Regulations, the
information deemed to be a part of the Registration Statement at the time it
became effective pursuant to Rule 430A(b) of the Rules and Regulations), except
that if any revised prospectus shall be provided to the Underwriters by the
Company for use in connection with the offering of the Shares that
-2-
<PAGE> 3
differs from the Prospectus on file with the Commission at the time the
registration statement became or becomes, as the case may be, effective
(whether or not such revised prospectus is required to be filed with the
Commission pursuant to Rule 424(b)(3) of the Rules and Regulations), the term
"Prospectus" shall refer to such revised prospectus from and after the time it
is first provided to the Underwriters for such use.
(b) The Commission has not issued any order
preventing or suspending the use of any Preliminary Prospectus or instituted
proceedings for that purpose, and each such Preliminary Prospectus has
conformed in all material respects to the requirements of the Act and the Rules
and Regulations and, as of its date, has not included any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and at the time the Registration Statement became or
becomes, as the case may be, effective and at all times subsequent thereto up
to and on the Closing Date (as defined below) and on any later date on which
Option Shares are to be purchased, (i) the Registration Statement and the
Prospectus, and any amendments or supplements thereto, as of their respective
dates, contained and will contain all material information required to be
included therein by the Act and the Rules and Regulations and conformed and
will conform in all material respects to the requirements of the Act and the
Rules and Regulations, and (ii) neither the Registration Statement nor the
Prospectus, nor any amendments or supplements thereto, as of their respective
dates, included or will include any untrue statement of a material fact or
omitted or will omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that none of the
representations and warranties contained in this subparagraph shall apply to
information contained in or omitted from the Registration Statement or the
Prospectus or any such amendment or supplement in reliance upon, and in
conformity with, written information furnished to the Company by any
Underwriter through you specifically for inclusion therein.
(c) Each of the Company and its Subsidiaries (as
defined below) has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation with full power and authority (corporate and other) to own, lease
and operate its properties and conduct its business as described in the
Registration Statement; except as disclosed in the Registration Statement, the
Company owns all of the outstanding capital stock of its Subsidiaries free and
clear of any pledge, lien, security interest, encumbrance, claim or equitable
interest; each of the Company and its Subsidiaries is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the ownership or
-3-
<PAGE> 4
leasing of its properties or the conduct of its business requires such
qualification except where the failure to be so qualified or to be in good
standing would not have a material adverse effect on the condition (financial
or otherwise), earnings, operations or business of the Company and its
Subsidiaries considered as one enterprise (a "Material Adverse Effect"); each
of the Company and its Subsidiaries is in possession of and operating in
compliance with all authorizations, licenses, certificates, consents, orders
and permits from state, federal and other regulatory authorities which are
material to the conduct of the business of the Company and its Subsidiaries
considered as one enterprise, all of which are valid and in full force and
effect; each of the Company and its Subsidiaries is not in violation of its
respective charter or bylaws or in default in the performance or observance of
any obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, bond, debenture, note agreement or
other evidence of indebtedness, or any lease, contract, joint venture, or other
agreement or instrument to which the Company or any of its Subsidiaries is a
party or by which the property of the Company or any of its Subsidiaries is
bound or in violation of any law, order, rule, regulation, writ, injunction,
judgment or decree of any government, governmental agency or body or court,
domestic or foreign, except as contemplated by the Prospectus or where any such
violation or default would not have a Material Adverse Effect. The Company
does not own or control, directly or indirectly, any corporation, association
or other entity conducting material operations other than Lason Systems, Inc.,
Delaware Legal Copy, Inc., Information & Image Technology of America, Inc.,
Micro-Pro, Inc., MP Services, Inc., Great Lakes Micrographics Corporation and
National Reproductions Corp., and all references in this Agreement to
"Subsidiaries" shall be deemed to refer to the foregoing entities.
(d) The Company has full legal right, power and
authority to enter into this Agreement and perform the transactions
contemplated hereby. This Agreement has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement on the part of
the Company, enforceable in accordance with its terms, except as rights to
indemnification and contribution hereunder may be limited by applicable law and
except as the enforcement hereof may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally, or by general
equitable principles; the performance of this Agreement and the consummation of
the transactions herein contemplated will not result in a material breach or
violation of any of the terms and provisions of, or constitute a default under,
(i) any material indenture, mortgage, deed of trust, loan agreement, bond,
debenture, note agreement or other evidence of indebtedness, or any material
lease, contract, joint venture or other agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which the property of the
Company or
-4-
<PAGE> 5
any of its Subsidiaries is bound, (ii) the charter or bylaws of the Company or
any of its Subsidiaries or (iii) any law, order, rule, regulation, writ,
injunction, judgment or decree of any government or governmental agency or body
or court, domestic or foreign, having jurisdiction over the Company or any of
its Subsidiaries or over the properties of the Company or any of its
Subsidiaries, except as contemplated by the Prospectus or where such breach or
violation would not have a Material Adverse Effect; and no consent, approval,
authorization or order of any court or governmental agency or body is required
for the consummation by the Company or any of its Subsidiaries of the
transactions herein contemplated, except such as may be required under the Act,
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or under
state or other securities or Blue Sky laws or by the National Association of
Securities Dealers, Inc. (the "NASD"), all of which have been satisfied in all
material respects.
(e) There is not any pending or, to the Company's
knowledge, threatened action, suit, claim or proceeding against the Company,
any of its Subsidiaries or any of their respective officers or directors or any
of their respective properties, assets or rights before any court or
governmental agency or body or otherwise which (i) if adversely determined
would reasonably result in any material adverse change in the condition
(financial or otherwise), earnings, operations or business of the Company and
its Subsidiaries considered as one enterprise or might materially and adversely
affect their properties, assets or rights, (ii) if adversely determined would
reasonably prevent consummation of the transactions contemplated hereby or
(iii) is required to be disclosed in the Registration Statement or Prospectus
and is not so disclosed; and there are no contracts or documents of the Company
or any of its Subsidiaries that are required to be described in the Prospectus
or be filed as exhibits to the Registration Statement by the Act or by the
Rules and Regulations which have not been accurately described in all material
respects in the Prospectus and filed as exhibits to the Registration Statement.
The contracts so described in the Prospectus are in full force and effect on
the date hereof; and neither the Company nor any of its Subsidiaries, nor, to
the Company's knowledge, any other party is in breach of or default under any
of such contracts. All relationships between the Company and its Subsidiaries
and directors, executive officers and stockholders required to be described in
the Registration Statement by the Rules and Regulations have been described in
the Registration Statement as required by the Rules and Regulations.
(f) All outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, were not issued in violation of or subject to any preemptive
rights or other rights to subscribe for or purchase securities (other than such
preemptive rights or other rights to subscribe for or purchase securities as
were fully
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<PAGE> 6
complied with or expressly waived or with respect to the violation of which the
right to make claim is barred by the applicable statute of limitations), and
the authorized and outstanding capital stock of the Company conforms in all
material respects to the statements relating thereto contained in the
Registration Statement and the Prospectus; the Shares to be purchased from the
Company hereunder have been duly authorized for issuance and sale to the
Underwriters pursuant to this Agreement and, when issued and delivered by the
Company against payment therefor in accordance with the terms of this
Agreement, will be duly and validly issued and fully paid and nonassessable;
and no preemptive right, co-sale right, registration right, right of first
refusal or other similar right of stockholders exists with respect to any of
the Shares or the issuance and sale thereof other than those that have been
expressly waived prior to the date hereof. No further approval or
authorization of any stockholder, the Board of Directors or others is required
for the issuance and sale or transfer of the Shares except as may be required
under the Act, the Exchange Act or under state or other securities or Blue Sky
laws or the NASD. All issued and outstanding shares of capital stock of each
Subsidiary of the Company have been duly authorized and validly issued and are
fully paid and nonassessable. Except as disclosed in or contemplated by the
Prospectus and the financial statements of the Company (including the notes
thereto) included in the Prospectus, neither the Company nor any Subsidiary has
outstanding any options to purchase, or any preemptive rights or other rights
to subscribe for or to purchase, any securities or obligations convertible
into, or any contracts or commitments to issue or sell, shares of its capital
stock or any such options, rights, convertible securities or obligations. The
description of the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted and exercised thereunder,
set forth in the Prospectus accurately and fairly presents the information
required to be shown with respect to such plans, arrangements, options and
rights.
(g) Coopers & Lybrand LLP, who has examined certain
of the financial statements (together with related schedules and notes) of the
Company, the Company's predecessor, Lason Systems, Inc., a Michigan corporation
(the "Predecessor"), and certain of the Company's Subsidiaries filed with the
Commission as a part of the Registration Statement and which are included in
the Prospectus, are, to the Company's knowledge, independent accountants within
the meaning of the Act and the Rules and Regulations; the audited financial
statements of the Company, the Predecessor and certain of the Company's
Subsidiaries, together with the related schedules and notes, and the unaudited
financial information (including pro forma financial information), forming part
of the Registration Statement and the Prospectus, fairly present, on a
consolidated, pro forma condensed consolidated or individual basis, as the case
may be, the financial position, the results of operations and cash flows, the
changes in stockholders'
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<PAGE> 7
equity and the other information purported to be shown therein of the Company,
the Predecessor and certain of the Company's Subsidiaries at the respective
dates and for the respective periods to which they apply; and all audited
financial statements, together with the related schedules and notes, and the
unaudited financial information (including pro forma financial information),
filed with the Commission as part of the Registration Statement, have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, and all adjustments
necessary for a fair presentation of the results for such periods have been
made. The selected and summary financial and statistical data included in the
Registration Statement present fairly the information shown therein and have
been compiled on a basis consistent with the audited financial statements
presented therein. No other financial statements or schedules are required to
be included in the Registration Statement.
(h) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, there has
not been (i) any material adverse change in the business, properties or assets
described or referred to in the Registration Statement, or the results of
operations, condition (financial or otherwise) earnings, operations or
business, of the Company and its Subsidiaries considered as one enterprise,
(ii) any transaction that is material to the Company and its Subsidiaries
considered as one enterprise, except transactions in the ordinary course of
business, (iii) any obligation that is material to the Company and its
Subsidiaries considered as one enterprise, direct or contingent, incurred by
the Company or its Subsidiaries, except obligations incurred in the ordinary
course of business, (iv) any change in the capital stock of the Company or any
of its Subsidiaries, (v) any change in the outstanding indebtedness of the
Company or any of its Subsidiaries which is material to the Company and its
Subsidiaries considered as one enterprise or (vi) any dividend or distribution
of any kind declared, paid or made on the capital stock of the Company or any
of its Subsidiaries.
(i) Except as set forth in the Prospectus, (i) each
of the Company and its Subsidiaries has good and marketable title to all
properties and material assets described in the Prospectus as owned by it, free
and clear of any pledge, lien, security interest, encumbrance, claim or
equitable interest other than such as are not material to the business of the
Company and its Subsidiaries considered as one enterprise, (ii) the agreements
to which the Company or one of its Subsidiaries is a party described in the
Prospectus are valid agreements, enforceable by the Company and its
Subsidiaries (as applicable), except as the enforcement thereof may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally or by general equitable
principles and, to their knowledge, the other contracting party or parties
thereto
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<PAGE> 8
are not in material breach or in material default under any of such agreements
and (iii) the Company and its Subsidiaries have valid and enforceable leases
for the properties described in the Prospectus as leased by them, except as
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles.
(j) The Company and its Subsidiaries have timely
filed all necessary federal and state income and franchise tax returns and have
paid all taxes shown thereon as due, and there is no tax deficiency that has
been or, to the Company's knowledge, might reasonably be asserted against the
Company or any of its Subsidiaries that would reasonably be expected to have a
Material Adverse Effect. All tax liabilities are adequately provided for on
the books of the Company and its Subsidiaries.
(k) The Company and its Subsidiaries maintain
insurance of the types and in the amounts generally deemed adequate for their
respective businesses and consistent with insurance coverage maintained by
similar companies in similar businesses.
(l) To the Company's knowledge, no labor
disturbance by the employees of the Company or any of its Subsidiaries exists
or is imminent, and, except as provided in the Prospectus, the Company is not
aware of any existing or imminent labor disturbance by the employees of any of
its principal customers, suppliers or manufacturers, in either case, that would
reasonably be expected to result in any material adverse change in the
condition (financial or otherwise), earnings, operations or business of the
Company and its Subsidiaries considered as one enterprise. Except as provided
in the Prospectus, no collective bargaining agreement exists with any of the
Company's employees and, to the Company's knowledge, no such agreement is
imminent. There is no unfair labor practice complaint pending against the
Company or any of its Subsidiaries, or to the best knowledge of the Company,
threatened against any of them, before the National Labor Relations Board or
any state or local labor relations board, which if adversely determined would
have a Material Adverse Effect.
(m) Except as described in the Prospectus, each of
the Company and its Subsidiaries owns or possesses adequate and enforceable
rights to use all material patents, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, trade names and copyrights described or
referred to in the Prospectus as owned or used by it or which are necessary for
the conduct of its businesses as described in the Prospectus; the Company has
not received any notice of, and has no knowledge of, any infringement of or
conflict with asserted rights of others with respect to any patent, patent
rights, inventions, trade secrets, know-how, trademarks, service marks, trade
names or copyrights
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<PAGE> 9
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would have a Material Adverse Effect.
(n) Neither the Company nor any of its Subsidiaries
has been advised, or has reason to believe, that it is not conducting business
in compliance with all of the laws, rules and regulations of the jurisdictions
in which it is conducting business, except where failure to be so in compliance
would not have a Material Adverse Effect.
(o) The Common Stock is registered pursuant to
Section 12(g) of the Exchange Act and has been approved for quotation on the
National Association of Securities Dealers Automated Quotation National Market
System (the "NASDAQ/NMS"), subject to official notice of issuance.
(p) The Company has been advised concerning the
Investment Company Act of 1940, as amended (the "1940 Act"), and the rules and
regulations thereunder, and has in the past conducted, and intends in the
future to conduct, its affairs in such a manner as to ensure that it will not
become an "investment company" within the meaning of the 1940 Act and such
rules and regulations.
(q) Except as would not, individually or in the
aggregate, have a Material Adverse Effect, (i) neither the Company nor any of
its Subsidiaries is in violation of any federal, state, local or foreign laws
and regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata) or wildlife, including, without
limitation, laws and regulations relating to wastes, toxic substances,
hazardous substances, petroleum and petroleum products ("Materials of
Environmental Concern"), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern (collectively, "Environmental Laws"), which
violation includes, but is not limited to, noncompliance with any permits or
other governmental authorizations required for the operation of the business of
the Company or its Subsidiaries under applicable Environmental Laws, or
noncompliance with the terms and conditions thereof, nor has the Company or any
of its Subsidiaries received any written communication, whether from a
governmental authority, citizens group, employee or otherwise, that alleges
that the Company or any of its Subsidiaries is in violation of any
Environmental Laws; (ii) there is no claim, action or cause of action filed
with a court or governmental authority, no investigation with respect to which
the Company has received written notice, and no written notice by any person or
entity, alleging potential liability for investigatory costs, cleanup costs,
governmental responses costs, natural resources damages, property damages,
personal injuries, attorneys' fees or penalties
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<PAGE> 10
arising out of, based on or resulting from the presence, or release into the
environment, or any Material of Environmental Concern at any location owned or
operated by the Company or any of its Subsidiaries, now or in the past
(collectively, "Environmental Claims"), pending or, to the best knowledge of
the Company, threatened against the Company or any of its Subsidiaries or, to
the best knowledge of the Company, against any person or entity whose liability
for any Environmental Claim the Company or any of its Subsidiaries has retained
or assumed either contractually or by operation of law; and (iii) to the best
knowledge of the Company, there are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without limitation,
the release, emission, discharge, presence or disposal of any Material of
Environmental Concern, that reasonably could result in the violation of any
Environmental Law.
(r) The Company has not taken and will not take,
directly or indirectly, any action designed to or that might be reasonably
expected to cause or result in stabilization or manipulation of the price of
the Common Stock to facilitate the sale or resale of the Shares.
3. Purchase, Sale and Delivery of Shares. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company agrees to sell to the
Underwriters, and each Underwriter agrees, severally and not jointly, to
purchase from the Company, at a purchase price of $ per share, the
respective number of Firm Shares set forth opposite the name of such
Underwriter in Schedule A hereto (subject to adjustment as provided in Section
10).
Delivery of certificates for the Firm Shares to be purchased by
the Underwriters pursuant to this Section 3 shall be made against payment of
the purchase price therefor by the several Underwriters by wire transfer of
immediately available funds at the Chicago office of Winston & Strawn (or at
such other place as may be agreed upon among the Representatives and the
Company), at 11:00 A.M., local time in Chicago, Illinois, on the third (3rd)
full business day following the date of this Agreement or at such other time
and date not later than seven (7) full business days thereafter as the
Representatives and the Company may determine (or at such time and date to
which payment and delivery shall have been postponed pursuant to Section 10),
such time and date of payment and delivery being herein called the "Closing
Date".
The certificates for the Firm Shares to be so delivered will be
made available to you at such office or at such other location including,
without limitation, in New York City, as you may reasonably request for
checking at least two (2) full business days prior to the Closing Date and will
be in such names and denominations as you may request, such request to be made
at least
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<PAGE> 11
three (3) full business days prior to the Closing Date. If the Representatives
so elect, delivery of the Firm Shares may be made by credit through full fast
transfer to the accounts at The Depository Trust Company designated by the
Representatives.
It is understood that you, individually and not as the
Representatives of the several Underwriters, may (but shall not be obligated
to) make payment of the purchase price on behalf of any Underwriter or
Underwriters whose payment shall not have been received by you prior to the
Closing Date for the Firm Shares to be purchased by such Underwriter or
Underwriters. Any such payment by you shall not relieve any such Underwriter
or Underwriters of any of its or their obligations hereunder.
After the Registration Statement becomes effective, the several
Underwriters intend to offer the Firm Shares to the public as set forth in the
Prospectus, but after the initial public offering (as such term is described in
Section 11) of such Firm Shares, the several Underwriters may in their
discretion vary the public offering price.
The information set forth in the last paragraph on the front
cover page and under "Underwriting" in any Preliminary Prospectus (insofar as
such information relates to the Underwriters) and in the final form of
Prospectus filed pursuant to Rule 424(b) constitutes the only information
furnished by the Underwriters to the Company for inclusion in any Preliminary
Prospectus, the Prospectus or the Registration Statement, and you, on behalf of
the respective Underwriters, represent and warrant to the Company that the
statements made therein do not include any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make such statements, in the light of the circumstances in which they were
made, not misleading.
4. Further Agreements of the Company. The Company agrees
with the several Underwriters that:
(a) The Company will use its best efforts to cause
the Registration Statement and any amendment thereof, if not effective at the
time and date that this Agreement is executed and delivered by the parties
hereto, to become effective as promptly as possible; it will notify you,
promptly after it shall receive notice thereof, of the time when the
Registration Statement or any subsequent amendment to the Registration
Statement has become effective or any supplement to the Prospectus has been
filed; if the Company omitted information from the Registration Statement at
the time it was originally declared effective in reliance upon Rule 430A(a) of
the Rules and Regulations, the Company will provide evidence reasonably
satisfactory to you that the Prospectus contains such information and has been
filed, within the time period prescribed, with the Commission pursuant to
subparagraph (1)
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<PAGE> 12
or (4) of Rule 424(b) of the Rules and Regulations or as part of a
post-effective amendment to such Registration Statement as originally declared
effective which is declared effective by the Commission; if for any reason the
filing of the final form of Prospectus is required under Rule 424(b)(3) of the
Rules and Regulations, it will provide evidence reasonably satisfactory to you
that the Prospectus contains such information and has been filed with the
Commission within the time period prescribed; it will notify you promptly of
any request by the Commission for the amending or supplementing of the
Registration Statement or the Prospectus or for additional information;
promptly upon your request, it will prepare and file with the Commission any
amendments or supplements to the Registration Statement or Prospectus which, in
the opinion of Winston & Strawn, counsel for the several Underwriters
("Underwriters' Counsel"), may be necessary or advisable in connection with the
distribution of the Shares by the Underwriters, unless advised by its counsel,
Kirkland & Ellis (the "Company's Counsel"), that such filing is not necessary
or advisable; it will promptly prepare and file with the Commission, and
promptly notify you of the filing of, any amendments or supplements to the
Registration Statement or Prospectus which may be necessary to correct any
statements or omissions, if, at any time when a prospectus relating to the
Shares is required to be delivered under the Act, any event shall have occurred
as a result of which the Prospectus or any other prospectus relating to the
Shares as then in effect would include any untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading; in
case any Underwriter is required to deliver a prospectus nine (9) months or
more after the effective date of the Registration Statement in connection with
the sale of the Shares, it will prepare promptly upon request, but at the
expense of such Underwriter, such amendment or amendments to the Registration
Statement and such prospectus or prospectuses as may be necessary to permit
compliance with the requirements of Section 10(a)(3) of the Act; and it will
file no amendment or supplement to the Registration Statement or Prospectus
which shall not previously have been submitted to you a reasonable time prior
to the proposed filing thereof or to which you shall reasonably object in
writing, subject, however, to compliance with the Act and the Rules and
Regulations thereunder and the provisions of this Agreement.
(b) The Company will advise you, promptly after it
shall receive notice or obtain knowledge thereof, of the issuance of any stop
order by the Commission suspending the effectiveness of the Registration
Statement or of the initiation or threat of any proceeding for that purpose;
and it will promptly use its best efforts to prevent the issuance of any stop
order or to obtain its withdrawal at the earliest possible moment if such stop
order should be issued.
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<PAGE> 13
(c) The Company will use its best efforts to
qualify the Shares for offering and sale under the securities laws of such
jurisdictions as you may reasonably designate and to continue such
qualifications in effect for so long as may be reasonably required for purposes
of the distribution of the Shares, except that the Company shall not be
required in connection therewith or as a condition thereof to qualify as a
foreign corporation or to execute a general consent to service of process in
any jurisdiction or to make any undertaking with respect to the conduct of its
business. In each jurisdiction in which the Shares shall have been qualified
as provided above, the Company will make and file such statements and reports
in each year as are or may be reasonably required by the laws of such
jurisdiction.
(d) The Company has previously furnished, or will
furnish to you as soon as available, copies of the Registration Statement
(three (3) of which will be certified by the Secretary of the Company and which
will include all exhibits), each Preliminary Prospectus, the Prospectus and any
amendments or supplements to such documents, including any prospectus prepared
to permit compliance with Section 10(a)(3) of the Act, all in such quantities
as you may from time to time reasonably request.
(e) The Company will make generally available to
its stockholders as soon as practicable, but in any event not later than the
forty-fifth (45th) day following the end of the fiscal quarter first occurring
after the first anniversary of the effective date of the Registration
Statement, an earnings statement complying with the provisions of Section
11(a) of the Act and covering a twelve-month period beginning after the
effective date of the Registration Statement.
(f) During a period of five (5) years after the
date hereof, the Company will furnish to its stockholders, as soon as
practicable after the end of each respective period, annual reports (including
financial statements audited by independent certified public accountants) and
such unaudited quarterly reports of operations for each of the first three
quarters of the fiscal year as may be required by applicable law or the rules
of NASDAQ/NMS to be sent to stockholders, and will furnish to you and, upon
their request, the other several Underwriters hereunder, (i) concurrently with
furnishing such reports to its stockholders (if any), statements of operations
of the Company for each of the first three quarters in the form furnished to
the Company's stockholders; (ii) concurrently with furnishing to its
stockholders, a balance sheet of the Company as of the end of such fiscal year,
together with statements of operations, of stockholders' equity and of cash
flows of the Company for such fiscal year, accompanied by a copy of the
certificate or report thereon of independent accountants; (iii) as soon as they
are available, copies of all reports (financial or other) mailed to
stockholders; (iv) as soon as they are available, copies of all reports and
financial statements publicly filed with
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<PAGE> 14
the Commission, any securities exchange or the NASD; and (v) every material
press release and every material news item or article in respect of the Company
or its affairs which was released or prepared by the Company or any of its
Subsidiaries (excluding, in each case, customary product-related press releases
and articles).
(g) The Company will apply the net proceeds from
the sale of the Shares being sold by it in the manner set forth under the
caption "Use of Proceeds" in the Prospectus.
(h) The Company will maintain a transfer agent and,
if necessary under the jurisdiction of incorporation of the Company, a
registrar (which may be the same entity as the transfer agent) for its Common
Stock.
(i) The Company will file Form SR in conformity
with the requirements of the Act and the Rules and Regulations.
(j) The Company will use its best efforts to comply
with all criteria necessary to have its Common Stock quoted on the NASDAQ/NMS.
(k) If the transactions contemplated hereby are not
consummated solely by reason of any failure, refusal or inability on the part
of the Company to perform any agreement on its part to be performed hereunder
or to fulfill any condition of the Underwriters' obligations hereunder, or if
the Company shall terminate this Agreement under Section 11(a), the Company
will reimburse the several Underwriters for all out-of-pocket expenses
(including fees and disbursements of Underwriters' Counsel) incurred by the
Underwriters in investigating, preparing to market or marketing the Shares.
(l) During a period ending 180 days from the
effective date of the Registration Statement, the Company will not, without the
prior written consent of Robertson, Stephens & Company LLC, issue, register,
sell, offer or agree to sell, or otherwise dispose of, directly or indirectly,
any shares of Common Stock, any options, rights or warrants with respect to any
shares of Common Stock or any securities convertible into, exercisable for or
exchangeable for shares of Common Stock other than (i) the sale of the Firm
Shares and the Option Shares hereunder, (ii) the grant of options with respect
to, and the issuance and registration of up to 1,000,000 shares of Common Stock
by the Company in connection with, the Company's 1995 Stock Option Plan and
(iii) the issuance and registration of up to 2,500,000 shares of Common Stock
by the Company for use as consideration in future acquisitions. In addition,
during a period ending 180 days from the effective date of the Registration
Statement, the Company will not, without the prior written consent of
Robertson, Stephens & Company LLC, waive any contractual restrictions on the
sale of Common Stock by the former stockholders of the Company's Subsidiaries.
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<PAGE> 15
5. Expenses.
(a) The Company agrees with each Underwriter that:
(i) The Company will pay and bear all costs and
expenses in connection with the preparation, printing and filing of the
Registration Statement (including financial statements, schedules and
exhibits), Preliminary Prospectuses and the Prospectus and any amendments or
supplements thereto; the printing of this Agreement, the Agreement Among
Underwriters, the Selected Dealer Agreement, the Preliminary Blue Sky Survey
and any Supplemental Blue Sky Survey, the Underwriters' Questionnaire and Power
of Attorney, and any instruments related to any of the foregoing; the issuance
and delivery of the Shares hereunder to the several Underwriters, including
transfer taxes, if any, the cost of all certificates representing the Shares
and transfer agents' and registrars' fees; the fees and disbursements of the
Company's Counsel and any other counsel for the Company; all fees and other
charges of the Company's independent public accountants; the cost of furnishing
to the several Underwriters copies of the Registration Statement (including
appropriate exhibits), Preliminary Prospectus and the Prospectus, and any
amendments or supplements to any of the foregoing; NASD filing fees and the
cost of qualifying the Shares under the laws of such jurisdictions as you may
reasonably designate (including filing fees of Underwriters' Counsel in
connection with such NASD filing and filing fees and fees and disbursements of
Underwriters' Counsel in connection with such Blue Sky qualifications); and all
other expenses directly incurred by the Company; and
(ii) In addition to its other obligations under
Section 8(a), the Company agrees that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other proceeding
described in Section 8(a), it will reimburse the Underwriters on a monthly
basis for all reasonable legal or other expenses incurred in connection with
investigating or defending any such claim, action, investigation, inquiry or
other proceeding, notwithstanding the absence of a judicial determination as to
the propriety and enforceability of the Company's obligation to reimburse the
Underwriters for such expenses and the possibility that such payments might
later be held to have been improper by a court of competent jurisdiction. To
the extent that any such interim reimbursement payment is so held to have been
improper, the Underwriters shall promptly return it to the Company together
with interest, compounded daily, determined on the basis of the prime rate (or
other commercial lending rate for borrowers of the highest credit standing)
listed from time to time in The Wall Street Journal which represents the base
rate on corporate loans posted by the substantial majority of the nation's 30
largest banks (the "Prime Rate"). Any such interim reimbursement payments
which are not made to the Underwriters within 30 days of a request for
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<PAGE> 16
reimbursement shall bear interest at the Prime Rate from the date of such
request.
(b) In addition to their obligations under Section 8(b),
the Underwriters agree that, as an interim measure during the pendency of any
claim, action, investigation, inquiry or other proceeding described in Section
8(b), they will reimburse the Company on a monthly basis for all reasonable
legal or other expenses incurred in connection with investigating or defending
any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the Underwriters' obligation to reimburse the Company for
such expenses and the possibility that such payments might later be held to
have been improper by a court of competent jurisdiction. To the extent that
any such interim reimbursement payment is so held to have been improper, the
Company shall promptly return it to the Underwriters together with interest,
compounded daily, determined on the basis of the Prime Rate. Any such interim
reimbursement payments which are not made to the Company within 30 days of a
request for reimbursement shall bear interest at the Prime Rate from the date
of such request.
(c) It is agreed that any controversy arising out of the
operation of the interim reimbursement arrangements set forth in Sections
5(a)(ii) and 5(b), including the amounts of any requested reimbursement
payments, the method of determining such amounts and the basis on which such
amounts shall be apportioned among the reimbursing parties, shall be settled by
arbitration conducted under the provisions of the Constitution and Rules of the
Board of Governors of the New York Stock Exchange, Inc. or pursuant to the Code
of Arbitration Procedure of the National Association of Securities Dealers,
Inc. Any such arbitration must be commenced by service of a written demand for
arbitration or a written notice of intention to arbitrate, therein electing the
arbitration tribunal. In the event the party demanding arbitration does not
make such designation of an arbitration tribunal in such demand or notice, then
the party responding to said demand or notice is authorized to do so. Any such
arbitration will be limited to the operation of the interim reimbursement
provisions contained in Sections 5(a)(ii) and 5(b) and will not resolve the
ultimate propriety or enforceability of the obligation to indemnify for
expenses which is created by the provisions of Sections 8(a) and 8(b).
6. Conditions of Underwriters' Obligations. The obligations of
the several Underwriters to purchase and pay for the Shares as provided herein
shall be subject to the accuracy, as of the date hereof and the Closing Date
and any later date on which Option Shares are to be purchased, as the case may
be, of the representations and warranties of the Company herein, to the
performance by the Company of its respective obligations hereunder and to the
following additional conditions:
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<PAGE> 17
(a) The Registration Statement shall have become effective
not later than 2:00 P.M., San Francisco time, on the date following the date of
this Agreement, or such later date as shall be consented to in writing by you;
and no stop order suspending the effectiveness thereof shall have been issued
and no proceedings for that purpose shall have been initiated or, to the
knowledge of the Company or any Underwriter, threatened by the Commission, and
any request of the Commission for additional information (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been complied
with to the reasonable satisfaction of Underwriters' Counsel.
(b) All corporate proceedings and other legal matters in
connection with this Agreement, the form of Registration Statement and the
Prospectus, and the registration, authorization, issue, sale and delivery of
the Shares, shall have been reasonably satisfactory to Underwriters' Counsel,
and such counsel shall have been furnished with such papers and information as
they may reasonably have requested to enable them to pass upon the matters
referred to in this Section 6.
(c) Subsequent to the execution and delivery of this
Agreement and prior to the Closing Date, there shall not have been any change
in the condition (financial or otherwise), earnings, operations or business of
the Company and its Subsidiaries considered as one enterprise from that set
forth in the Registration Statement or Prospectus, which, in your reasonable
judgment, is material and adverse and that makes it, in your reasonable
judgment, impracticable or inadvisable to proceed with the public offering of
the Shares as contemplated by the Prospectus.
(d) You shall have received on the Closing Date and on any
later date on which Option Shares are purchased, an opinion of Kirkland & Ellis
with respect to items (viii), (ix) and (x), and an opinion of Seyburn, Kahn,
Ginn, Bess, Deitch and Serlin, P.C. with respect to all other items, in each
case dated the Closing Date or such later date, as the case may be, addressed
to the Underwriters (with reproduced copies or signed counterparts thereof for
each of the Underwriters), to the effect that:
(i) The Company has been duly organized and is
validly existing as a corporation in good standing under the laws of the State
of Delaware;
(ii) The Company and each subsidiary identified in
Exhibit 21.1 to the Registration Statement (collectively, the "Significant
Subsidiaries" and individually, a "Significant Subsidiary") have been duly
incorporated and are validly existing as corporations in good standing under
the laws of their respective jurisdictions of incorporation;
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(iii) The Company and each Significant Subsidiary
have all requisite corporate power and authority to own, lease and operate
their properties and to conduct their businesses as described in the
Prospectus;
(iv) The Company and each Significant Subsidiary are
duly qualified to do business as foreign corporations and are in good standing
in each jurisdiction, if any, in which the ownership or leasing of their
properties or the conduct of their businesses requires such qualification,
except where the failure to be so qualified or to be in good standing would not
have a Material Adverse Effect;
(v) The authorized, issued and outstanding capital
stock of the Company is as set forth in the Prospectus under the caption
"Capitalization" as of the dates stated therein; the issued and outstanding
shares of capital stock of the Company have been duly and validly authorized
and issued, are fully paid and nonassessable, and have not been issued in
violation of any preemptive right or, to such counsel's knowledge, any co-sale
right, registration right, right of first refusal or other similar right (other
than such preemptive rights or other rights to subscribe for or purchase
securities as were fully complied with or expressly waived or with respect to
the violation of which the right to make claim is barred by the applicable
statute of limitations);
(vi) The Firm Shares or the Option Shares, as the
case may be, to be issued by the Company pursuant to the terms of this
Agreement will be, upon issuance and delivery against payment therefor in
accordance with the terms hereof, duly authorized and validly issued and fully
paid and nonassessable, and have not been issued in violation of any preemptive
right or, to such counsel's knowledge, any co-sale right, registration right,
right of first refusal or other similar right and the stockholders of the
Company have no preemptive right or, to such counsel's knowledge, other rights
to purchase any of the Shares;
(vii) The Company has corporate power and authority
to enter into this Agreement and to issue, sell and deliver to the Underwriters
the Firm Shares or the Option Shares, as the case may be, to be issued and sold
by it hereunder;
(viii) This Agreement has been duly authorized by all
necessary corporate action on the part of the Company and has been duly
executed and delivered by the Company;
(ix) The Registration Statement has become effective
under the Act, and, to such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted or are currently pending or overtly
threatened under the Act;
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(x) The Registration Statement and the Prospectus,
and each amendment or supplement thereto (other than the consolidated financial
statements (including supporting schedules) and financial data derived
therefrom as to which such counsel need express no opinion) as of the effective
date of the Registration Statement, complied as to form in all material
respects with the requirements of the Act and the applicable Rules and
Regulations;
(xi) The terms and provisions of the capital stock
of the Company conform in all material respects to the description thereof
contained in the Registration Statement and Prospectus;
(xii) The information in the Prospectus under the
caption "Description of Capital Stock" to the extent that it constitutes
matters of law or legal conclusions, has been reviewed by such counsel and
accurately and fairly summarizes the matters described therein. The forms of
certificates evidencing the Common Stock complies with Delaware law;
(xiii) The description in the Registration Statement
and the Prospectus of the charter and bylaws of the Company and of statutes and
contracts are accurate and fairly present the information required to be
presented by the Act or the Rules and Regulations;
(xiv) To such counsel's knowledge, there are no
agreements, contracts, leases or documents of a character required to be
described or referred to in the Registration Statement or Prospectus or to be
filed as an exhibit to the Registration Statement which are not described or
referred to therein and filed as required;
(xv) The performance of this Agreement and the
consummation of the transactions herein contemplated (other than performance of
the Company's indemnification and contribution obligations hereunder,
concerning which no opinion need be expressed) will not (a) result in any
violation of the Company's charter or bylaws, or (b) to such counsel's
knowledge, result in the material breach or violation of any of the terms and
provisions, or constitute a default under, any material indenture, mortgage,
deed of trust, loan agreement, bond, debenture, note agreement or other
evidence of indebtedness, or any material lease, contract, joint venture or
other agreement or instrument to which the Company or any of its Subsidiaries
is a party or by which the property of the Company or any of its Subsidiaries
is bound, or any applicable statute, rule or regulation known to such counsel
or, to such counsel's knowledge, any order, writ or decree of any court or
governmental agency or body having jurisdiction over the Company or any of its
Subsidiaries, or over any of their properties or operations; provided, however,
that no opinion need be rendered concerning state securities or Blue Sky laws;
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<PAGE> 20
(xvi) No authorization, approval or consent of any
governmental authority or agency is necessary in connection with the
consummation of the transactions herein contemplated, except such as have been
obtained under the Act or such as may be required under state or other
securities or Blue Sky laws in connection with the purchase and the
distribution of the Shares by the Underwriters;
(xvii) To such counsel's knowledge, there are no legal
or governmental proceedings pending or threatened against the Company or any of
its Subsidiaries of a character which are required to be disclosed in the
Registration Statement or the Prospectus, by the Act or the applicable Rules
and Regulations, other than those described therein;
(xviii) To such counsel's knowledge, neither the
Company nor any of its Subsidiaries is presently in material breach of, or in
default under, any material indenture, mortgage, deed of trust, loan agreement,
bond, debenture, note agreement or other evidence of indebtedness, or any
material lease, contract, joint venture or other agreement or instrument to
which the Company or any of its Subsidiaries is a party or by which the
property of the Company or any of its Subsidiaries is bound that is material to
the financial condition, earnings, operations, business or business prospects
of the Company and its Subsidiaries considered as one enterprise; and
(xix) To such counsel's knowledge, except as set
forth in the Registration Statement and Prospectus, no holders of Common Stock
or other securities of the Company have registration rights with respect to
securities of the Company and, except as set forth in the Registration
Statement and Prospectus, all holders of securities of the Company having
rights to registration of such shares of Common Stock, or other securities,
because of the filing of the Registration Statement by the Company have, with
respect to the offering contemplated thereby, waived such rights or such rights
have expired by reason of lapse of time following notification of the Company's
intent to file the Registration Statement, or have included securities in the
Registration Statement pursuant to the exercise of such rights.
In addition to its opinions set forth above, Kirkland & Ellis
shall include in its opinion the following statements. Because the primary
purpose of its engagement was not to establish factual matters and because of
the wholly or partially nonlegal character of many determinations involved in
the preparation of the Registration Statement and the Prospectus, it is not
passing upon and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement and the Prospectus (except to the extent expressly set forth above)
and makes no representation that it has independently verified the accuracy,
completeness or fairness of such statements (except as aforesaid). However, it
met with and
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<PAGE> 21
participated in conferences with representatives of the Company,
representatives of the Underwriters, Underwriters' Counsel and representatives
of Coopers & Lybrand LLP, the independent accountants for the Company, during
which the contents of the Registration Statement and the Prospectus and related
matters were discussed. Based on its participation in the above-mentioned
conferences, its review of the documents described above, its understanding of
applicable law and the experience it has gained in its practice thereunder,
relying as to materiality to a large extent upon the opinions and statements of
officers of the Company, it advises the Underwriters that nothing has come to
its attention that causes it to believe that the Registration Statement (other
than the financial statements and notes thereto and supporting schedules and
other financial and statistical data derived therefrom, set forth therein or
omitted therefrom, as to which no advice is given), at the time it was declared
effective by the Commission, contained an untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading or that the Prospectus (other
than the financial statements and notes thereto and supporting schedules and
other financial and statistical data derived therefrom, set forth therein or
omitted therefrom, as to which no advice is given), as of the date of the
Prospectus included an untrue statement of a material fact or omitted to state
a material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading; and the
Registration Statement and the Prospectus (other than the financial statements
and notes thereto and supporting schedules and other financial and statistical
data derived therefrom, included therein or omitted therefrom, as to which no
advice is given) as of the effective date of the Registration Statement,
appeared on their face to be appropriately responsive in all material respects
to the requirements of the Act and the Rules and Regulations.
Counsel rendering the foregoing opinion may rely as to
questions of law not involving the laws of the United States or the State of
Delaware upon opinions of local counsel (or in lieu thereof, deliver copies of
such local counsel opinions, addressed to the Underwriters, directly to the
Underwriters), and as to questions of fact upon representations or certificates
of officers of the Company, and of government officials, in which case their
opinion is to state that they are so relying and that they have no knowledge of
any material misstatement or inaccuracy in such opinions, representations or
certificate. Copies of any opinion, representation or certificate so relied
upon shall be delivered to you, as Representatives of the Underwriters, and to
Underwriters' Counsel.
(e) You shall have received on the Closing Date and on any
later date on which Option Shares are to be purchased, as the case may be, an
opinion of Winston & Strawn, in form and substance
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<PAGE> 22
satisfactory to you, with respect to the sufficiency of all such corporate
proceedings and other legal matters relating to this Agreement and the
transactions contemplated hereby as you may reasonably require, and the Company
shall have furnished to such counsel such documents as they may have requested
for the purpose of enabling them to pass upon such matters.
(f) You shall have received on the Closing Date and on any
later date on which Option Shares are to be purchased, as the case may be, a
letter from Coopers & Lybrand LLP addressed to the Company and the
Underwriters, dated the Closing Date or such later date on which Option Shares
are to be purchased, as the case may be, confirming that they are independent
accountants with respect to the Company within the meaning of the Act and the
applicable published Rules and Regulations and based upon the procedures
described in their letter delivered to you concurrently with the execution of
this Agreement (herein called the "Original Letter"), but carried out to a date
not more than three (3) business days prior to the Closing Date or such later
date on which Option Shares are to be purchased, as the case may be, (i)
confirming, to the extent true, that the statements and conclusions set forth
in the Original Letter are accurate as of the Closing Date or such later date
on which Option Shares are to be purchased, as the case may be; and (ii)
setting forth any revisions and additions to the statements and conclusions set
forth in the Original Letter which are necessary to reflect any changes in the
facts described in the Original Letter since the date of such letter, or to
reflect the availability of more recent financial statements, data or
information. The letter shall not disclose any change, or any development
involving a prospective change, in or affecting the business or properties of
the Company and its Subsidiaries considered as one enterprise which, in your
sole judgment, makes it impracticable or inadvisable to proceed with the public
offering of the Shares as contemplated by the Prospectus. Also you shall have
received an Original Letter from Coopers & Lybrand LLP addressed to or for the
use of the Underwriters setting forth their opinion with respect to their
examination of (A) the consolidated balance sheet of the Company as of December
31, 1995 and related consolidated statements of income, stockholders' equity
and cash flows for the year ended December 31, 1995, (B) the balance sheet of
the Predecessor as of December 31, 1994 and related statements of income,
stockholders' equity and cash flows for the years ended December 31, 1993 and
1994, (C) the balance sheet of Great Lakes Micrographics Corporation as of
December 31, 1995 and related statements of income, stockholders' equity and
cash flows for the year ended December 31, 1995, (D) the balance sheets of
National Reproductions Corp. as of December 31, 1994 and 1995 and related
statements of operations, stockholders' equity and cash flows for the years
ended December 31, 1994 and 1995 and (E) certain other financial statements and
financial and statistical data contained in the Registration Statement and the
Prospectus, as well as other matters agreed upon between Coopers & Lybrand LLP
and you.
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<PAGE> 23
(g) You shall have received on the Closing Date and on any
later date on which Option Shares are purchased, as the case may be, a
certificate of the Company, dated the Closing Date or such later date on which
Option Shares are to be purchased, as the case may be, signed on behalf of the
Company by the Chief Executive Officer and Chief Financial Officer of the
Company, to the effect that, and you shall be reasonably satisfied that:
(i) The representations and warranties of the
Company in this Agreement are true and correct as if made on and as of the
Closing Date or any later date on which Option Shares are to be purchased, as
the case may be, and the Company has complied with all the agreements and
satisfied all the conditions on its part to be performed or satisfied at or
prior to the Closing Date or any later date on which Option Shares are to be
purchased, as the case may be;
(ii) No stop order suspending the effectiveness of
the Registration Statement has been issued, and no proceedings for that purpose
have been instituted or are currently pending or overtly threatened under the
Act;
(iii) When the Registration Statement became
effective and at all times subsequent thereto up to the time of delivery of
such certificate, the Registration Statement and the Prospectus and any
amendments or supplements thereto contained all statements and information
required to be included therein, and neither the Registration Statement nor the
Prospectus nor any amendment or supplement thereto included an untrue statement
of a material fact or omitted to state a material fact required to be made
therein or necessary to make the statements therein, in light of the
circumstances in which made, not misleading, and, since the effective date of
the Registration Statement, there has occurred no event required to be set
forth in an amended or supplemented Prospectus which has not been so set forth;
and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, there
has not been (A) any material adverse change in the properties or assets
described or referred to in the Registration Statement and the Prospectus or in
the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its Subsidiaries considered as one
enterprise, (B) any transaction which is material to the Company and its
Subsidiaries considered as one enterprise, except transactions entered into in
the ordinary course of business, (C) any obligation, direct or contingent,
incurred by the Company or any of its Subsidiaries which is material to the
Company and its
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<PAGE> 24
Subsidiaries considered as one enterprise, except obligations incurred in the
ordinary course of business, (D) any change in the capital stock or outstanding
indebtedness of the Company or any of its Subsidiaries which is material to the
Company and its Subsidiaries considered as one enterprise or (E) any dividend
or distribution of any kind declared, paid or made on the capital stock of the
Company or any of its Subsidiaries.
(h) The Company shall have obtained and delivered to you
prior to the date hereof a written agreement from each officer, director and
stockholder of the Company that such person will not, for a period expiring 180
days after the effective date of the Registration Statement, directly or
indirectly, offer to sell, contract to sell, sell short or otherwise sell or
dispose of any shares of Common Stock, any options or warrants to purchase any
shares of Common Stock, or any securities convertible into or exchangeable for
shares of Common Stock owned by such person or with respect to which such
person has the power of disposition otherwise than (i) as a gift or gifts,
provided the donee or donees thereof agree to be bound by this restriction or
(ii) with the prior written consent of Robertson, Stephens & Company LLC. Each
such person shall also agree and consent to the entry of stop transfer
instructions with the Company's transfer agent against the transfer of shares
of Common Stock held by such person except in compliance with the foregoing
restrictions.
(i) The Company shall have furnished to you such further
certificates and documents as you shall reasonably request (including
certificates of officers of the Company) as to the accuracy of the
representations and warranties of the Company herein, as to the performance by
the Company of its obligations hereunder and as to the other conditions
concurrent and precedent to the obligations of the Underwriters hereunder.
All such opinions, certificates, letters and documents will be
in compliance with the provisions hereof only if they are reasonably
satisfactory to Underwriters' Counsel. The Company will furnish you with such
number of conformed copies of such opinions, certificates, letters and
documents as you shall reasonably request.
7. Option Shares.
(a) On the basis of the representations and warranties
herein contained, but subject to the terms and conditions herein solely set
forth, the Company hereby grants to the several Underwriters, for the purpose
of covering over-allotments in connection with the distribution and sale of the
Firm Shares only, a non-transferable option to purchase, at the price per share
for the Firm Shares set forth in Section 3, 450,000 Option Shares. Such option
may be exercised by the Representatives on behalf of the several Underwriters
on one occasion in whole or in part during the period of 30 days from and after
the date on which the Firm Shares are initially offered to the public, by
giving written notice to the Company. The number of Option Shares to be
purchased by each Underwriter upon the exercise of such option shall be the
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<PAGE> 25
same proportion of the total number of Option Shares to be purchased by the
several Underwriters pursuant to the exercise of such option as the number of
Firm Shares purchased by such Underwriter (set forth in Schedule A hereto)
bears to the total number of Firm Shares purchased by the several Underwriters
(set forth in Schedule A hereto), adjusted by the Representatives in such
manner as to avoid fractional shares.
Delivery of certificates for the Option Shares to be purchased
by the several Underwriters pursuant to the exercise of the option granted by
this Section 7 shall be made against payment of the purchase price therefor by
the several Underwriters by wire transfer of immediately available funds. Such
delivery and payment shall take place at the Chicago office of Winston & Strawn
or at such other place as may be agreed upon among the Representatives and the
Company (i) on the Closing Date, if written notice of the exercise of such
option is received by the Company not later than three (3) full business days
prior to the Closing Date or (ii) on a later date, not later than the third
(3rd) full business day following the date the Company receives written notice
of the exercise of such option, if such notice is not received by the Company
at least three (3) full business days prior to the Closing Date.
The certificates for the Option Shares to be so delivered will
be made available to you at such office or other location including, without
limitation, in New York City, as you may reasonably request for checking at
least two (2) full business days prior to the date of payment and delivery and
will be in such names and denominations as you may request, such request to be
made at least three (3) full days prior to such date of payment and delivery.
If the Representatives so elect, delivery of the Option Shares may be made by
credit through full fast transfer to the accounts at The Depository Trust
Company by the Representatives.
It is understood that you, individually, and not as the
Representatives of the Underwriters, may (but shall not be obligated to) make
payment of the purchase price on behalf of any Underwriter or Underwriters
whose check or checks shall not have been received by you prior to the date of
payment and delivery for the Option Shares to be purchased by such Underwriter
or Underwriters. Any such payment by you shall not relieve any Underwriter or
Underwriters of any of its or their obligations hereunder.
The several Underwriters intend to make an initial public
offering (as such term is described in Section 11) of the Option Shares to be
issued upon exercise of such option at the initial public offering price for
the Firm Shares set forth in Section 3, but after the initial public offering
the several Underwriters may in their discretion vary the public offering
price.
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<PAGE> 26
(b) Upon exercise of any option provided for in Section
7(a), the obligations of the Underwriters to purchase such Option Shares will
be subject (as of the date hereof and as of the date of payment for such Option
Shares) to the accuracy of and compliance with the representations and
warranties of the Company herein, to the accuracy of the statements of the
Company and officers of the Company made pursuant to the provisions hereof, to
the performance by the Company of its respective obligations hereunder and to
the condition that all proceedings taken at or prior to the payment date in
connection with the sale and transfer of such Option Shares shall be reasonably
satisfactory in form and substance to you and to Underwriters' Counsel, and you
shall have been furnished with all such documents, certificates and opinions as
you may reasonably request in order to evidence the accuracy and completeness
of any of the representations, warranties or statements, the performance of any
of the covenants of the Company or the compliance with any of the conditions
herein contained.
8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any breach of any
representation, warranty, agreement or covenant of the Company herein contained
or any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading; and agrees to
reimburse each Underwriter for any legal or other expenses reasonably incurred
by it in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration Statement,
such Preliminary Prospectus or the Prospectus, or any such amendment or
supplement, in reliance upon and in conformity with written information
furnished to the Company by any Underwriter, directly or through you,
specifically for use in the preparation thereof and, provided further, that the
indemnity agreement provided in this Section 8(a) with respect to any
Preliminary Prospectus shall not inure to the benefit of any Underwriter from
whom the person asserting any losses, claims, charges, liabilities or
litigation based upon any untrue statement or omission or alleged omission to
state therein a material fact purchased Shares, if a copy of the Prospectus in
which such untrue
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<PAGE> 27
statement or alleged untrue statement or omission or alleged omission was
corrected has not been sent or given to such person within the time required by
the Act and the Rules and Regulations thereunder, unless such failure is the
result of noncompliance by the Company with Section 4(d).
The indemnity agreement in this Section 8(a) shall extend upon
the same terms and conditions to, and shall inure to the benefit of, each
person, if any, who controls any Underwriter within the meaning of the Act.
This indemnity agreement shall be in addition to any liabilities which the
Company may otherwise have.
(b) Each Underwriter, severally and not jointly, agrees to
indemnify and hold harmless the Company against any losses, claims, damages or
liabilities, joint or several, to which the Company may become subject under
the Act or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any breach of
any representation, warranty, agreement or covenant of such Underwriter herein
contained or any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances in which made, not misleading, in each case to the extent,
but only to the extent, that such untrue statement or alleged untrue statement
or omission or alleged omission was made in reliance upon and in conformity
with written information furnished to the Company by such Underwriter, directly
or through you, specifically for inclusion therein, and will reimburse the
Company for any legal or other expenses reasonably incurred by the Company in
connection with investigating or defending any such loss, claim, damage,
liability or action.
The indemnity agreement in this Section 8(b) shall extend upon
the same terms and conditions to, and shall inure to the benefit of, each
officer and director of the Company, and each person, if any, who controls the
Company within the meaning of the Act. This indemnity agreement shall be in
addition to any liabilities which each Underwriter may otherwise have.
(c) Within 30 days after receipt by an indemnified party
under this Section 8 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party in
writing of the commencement thereof, but the omission to so notify the
indemnifying party will not relieve it from any liability which it may have to
any indemnified party otherwise than under this Section 8. In case any such
action is
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<PAGE> 28
brought against any indemnified party, and it notified the indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate therein, and to the extent that it may elect by written notice
delivered to the indemnified party promptly after the aforesaid notice from
such indemnified party, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party; provided, however, if the defendants in
any such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there may be
legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of its election to so
assume the defense of such action and approval by the indemnified party of
counsel, such approval not to be unreasonably withheld, the indemnifying party
will not be liable to such indemnified party under this Section 8 for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next preceding sentence
(it being understood, however, that the indemnifying party shall not be liable
for the expenses of more than one separate counsel (together with appropriate
local counsel) approved by the indemnifying party, representing all the
indemnified parties under Section 8(a) or 8(b) who are parties to such action),
(ii) the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the action or (iii) the
indemnifying party has authorized in writing the employment of counsel for the
indemnified party at the expense of the indemnifying party. In no event shall
any indemnifying party be liable in respect of any amounts paid in settlement
of any action unless the indemnifying party shall have approved the terms of
such settlement; provided, however, that such consent shall not be unreasonably
withheld.
(d) In order to provide for just and equitable contribution
in any action in which a claim for indemnification is made pursuant to and in
accordance with the provisions of this Section 8, but it is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 8 provides for indemnification in
such case, all the parties hereto shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after contribution
from others) in such proportion so that the Underwriters are responsible pro
rata
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<PAGE> 29
for the portion represented by the percentage that the underwriting discount
bears to the initial public offering price, and the Company is responsible for
the remaining portion; provided, however, that (i) no Underwriter shall be
required to contribute any amount in excess of the underwriting discount
applicable to the Shares purchased by such Underwriter, and (ii) no person
guilty of a fraudulent misrepresentation (within the meaning of Section 11(f)
of the Act) shall be entitled to a contribution from any person who is not
guilty of such fraudulent misrepresentation. This subsection (d) shall not be
operative as to any Underwriter to the extent that the Company has received
indemnity under this Section 8.
9. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties, covenants and agreements of the Company herein
or in certificates delivered pursuant hereto, and the indemnity and
contribution agreements contained in Section 8, shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any Underwriter or any controlling person, or by or on behalf of the Company or
any of its officers, directors or controlling persons, and shall survive the
delivery of the Shares to the several Underwriters hereunder or termination of
this Agreement.
10. Substitution of Underwriters. If any Underwriter or
Underwriters shall fail to take up and pay for the number of Firm Shares agreed
by such Underwriter or Underwriters to be purchased hereunder upon tender of
such Firm Shares in accordance with the terms hereof, and if the aggregate
number of Firm Shares which such defaulting Underwriter or Underwriters so
agreed but failed to purchase does not exceed 10% of the Firm Shares, the
remaining Underwriters shall be obligated, severally in proportion to their
respective commitments hereunder, to take up and pay for the Firm Shares of
such defaulting Underwriter or Underwriters.
If any Underwriter or Underwriters so default and the aggregate
number of Firm Shares which such defaulting Underwriter or Underwriters agreed
but failed to take up and pay for exceeds 10% of the Firm Shares, the remaining
Underwriters shall have the right, but shall not be obligated, to take up and
pay for (in such proportions as may be agreed upon among them) the Firm Shares
which the defaulting Underwriter or Underwriters so agreed but failed to
purchase. If such remaining Underwriters do not, at the Closing Date, take up
and pay for the Firm Shares which the defaulting Underwriter or Underwriters so
agreed but failed to purchase, the Closing Date shall be postponed for 24 hours
to allow the several Underwriters the privilege of substituting within 24 hours
(including non-business hours) another underwriter or underwriters (which may
include any non-defaulting Underwriter) satisfactory to the Company. If no
such underwriter or underwriters shall have been substituted as aforesaid by
such postponed Closing Date, the Closing Date may, at the option of the
Company, be postponed for a further 24 hours, if necessary, to allow the
Company the privilege
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<PAGE> 30
of finding another underwriter or underwriters, satisfactory to you, to
purchase the Firm Shares which the defaulting Underwriter or Underwriters so
agreed but failed to purchase. If it shall be arranged for the remaining
Underwriters or substituted underwriters to take up the Firm Shares of the
defaulting Underwriter or Underwriters as provided in this Section 10, (i) the
Company shall have the right to postpone the time of delivery for a period of
not more than seven (7) full business days, in order to effect whatever changes
may thereby be made necessary in the Registration Statement or the Prospectus,
or in any other documents or arrangements, and the Company agrees promptly to
file any amendments to the Registration Statement or supplements to the
Prospectus which may thereby be made necessary, and (ii) the respective number
of Firm Shares to be purchased by the remaining Underwriters and substituted
underwriters shall be taken as the basis of their underwriting obligation. If
the remaining Underwriters shall not take up and pay for all such Firm Shares
so agreed to be purchased by the defaulting Underwriter or Underwriters or
substitute another underwriter or underwriters as aforesaid and the Company
shall not find or shall not elect to seek another underwriter or underwriters
for such Firm Shares as aforesaid, then this Agreement shall terminate.
In the event of any termination of this Agreement pursuant to
the preceding paragraph of this Section 10, the Company shall not be liable to
any Underwriter (except as provided in Sections 5 and 8) nor shall any
Underwriter (other than an Underwriter who shall have failed, otherwise than
for some reason permitted under this Agreement, to purchase the number of Firm
Shares agreed by such Underwriter to be purchased hereunder, which Underwriter
shall remain liable to the Company and the other Underwriters for damages, if
any, resulting from such default) be liable to the Company (except to the
extent provided in Sections 5 and 8).
The term "Underwriter" in this Agreement shall include any
person substituted for an Underwriter under this Section.
11. Effective Date of this Agreement and Termination.
(a) This Agreement shall become effective at the earlier of
(i) 6:30 A.M., San Francisco time, on the first full business day following the
effective date of the Registration Statement or when executed if the
Registration Statement is then effective, or (ii) the time of the initial
public offering of any of the Shares by the Underwriters after the Registration
Statement becomes effective. The time of the initial public offering shall mean
the time of the release by you, for publication, of the first newspaper
advertisement relating to the Shares, or the time at which the Shares are first
generally offered by the Underwriters to the public by letter, telephone,
telegram or telecopy, whichever shall first occur. By giving notice as set
forth in Section 12 before
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<PAGE> 31
the time this Agreement becomes effective, you, as Representatives of the
several Underwriters, or the Company, may prevent this Agreement from becoming
effective without liability of any party to any other party, except that the
Company shall remain obligated to pay costs and expenses to the extent provided
in Sections 4(k) (but only to the extent that Section 4(k) by its terms
applies), 5 and 8.
(b) You, as Representatives of the several Underwriters,
shall have the right to terminate this Agreement by giving notice as
hereinafter specified at any time at or prior to the Closing Date or on or
prior to any later date on which the Option Shares are to be purchased, as the
case may be, (i) if the Company shall have failed, refused or been unable, to
perform any agreement on its part to be performed, or because any other
condition of the Underwriters' obligations hereunder required to be fulfilled
by the Company is not fulfilled including, without limitation, any change in
the condition (financial or otherwise), earnings, operations or business of
the Company and its Subsidiaries considered as one enterprise from that set
forth in the Registration Statement or Prospectus which, in your reasonable
judgment, is material and adverse, (ii) if trading generally on the New York
Stock Exchange shall have been suspended, or minimum or maximum prices for
trading shall have been fixed, or maximum ranges for prices for securities
shall have been required on the New York Stock Exchange, by the New York Stock
Exchange or by order of the Commission or any other governmental authority
having jurisdiction, or if a banking moratorium shall have been declared by
federal or New York or California authorities, (iii) if on or prior to the
Closing Date, or on or prior to any later date on which Option Shares are to be
purchased, as the case may be, the Company shall have sustained a loss by
strike, fire, flood, earthquake, accident or other calamity of such character
as to interfere materially with the conduct of the business and operations of
the Company regardless of whether or not such loss shall have been insured,
(iv) if there shall have been a material adverse change in the general
political or economic conditions or financial markets in the United States as
in your reasonable judgment makes it inadvisable or impracticable to proceed
with the offering, sale and delivery of the Shares or (v) if on or prior to the
Closing Date, or on or prior to any later date on which Option Shares are to be
purchased, as the case may be, there shall have been an outbreak or escalation
of hostilities between the United States and any foreign power or of any other
insurrection or armed conflict involving the United States or the declaration
by the United States of a national emergency which, in the reasonable opinion
of the Representatives, makes it impracticable or inadvisable to offer or sell
the Shares. In the event of termination pursuant to subparagraph (i) above, the
Company shall remain obligated to pay costs and expenses pursuant to Sections
4(k), 5 and 8. Any termination pursuant to any of subparagraphs (ii) through
(v) above shall be without liability of
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<PAGE> 32
any party to any other party, except as provided in Sections 5 and 8.
If you elect to prevent this Agreement from becoming effective
or to terminate this Agreement as provided in this Section 11, you shall
immediately thereafter notify the Company by telephone, telecopy or telegram,
in each case confirmed by letter. If the Company shall elect to prevent this
Agreement from becoming effective, the Company shall promptly notify you by
telephone, telecopy or telegram, in each case, confirmed by letter.
12. Notices. All notices or communications hereunder, except as
herein otherwise specifically provided, shall be in writing and if sent to you
shall be mailed, delivered, telegraphed (and confirmed by letter) or telecopied
(and confirmed by letter) to you c/o Robertson, Stephens & Company LLC, 555
California Street, Suite 2600, San Francisco, California 94104, telecopier
number (415) 693-3393, Attention: Robert E. Grady; if sent to the Company, such
notice shall be mailed, delivered, telegraphed (and confirmed by letter) or
telecopied (and confirmed by letter) to Lason, Inc., 1305 Stephenson Highway,
Troy, Michigan 48083, telecopier number (810) 597-5810, Attention: Gary L.
Monroe, Chief Executive Officer.
13. Parties. This Agreement shall inure to the benefit of and be
binding upon the several Underwriters and the Company, and their respective
executors, administrators, successors and assigns. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any
person or corporation, other than the parties hereto and their respective
executors, administrators, successors and assigns, and the controlling persons,
officers and directors referred to in Section 8, any legal or equitable right,
remedy or claim in respect of this Agreement or any provisions herein
contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of the parties and
their respective executors, administrators, successors and assigns and said
controlling persons and said officers and directors, and for the benefit of no
other person or corporation. No purchaser of any of the Shares from any
Underwriter shall be construed a successor or assign by reason merely of such
purchase.
In all dealings with the Company under this Agreement, you
shall act on behalf of each of the several Underwriters, and the Company shall
be entitled to act and rely upon any statement, request, notice or agreement
made or given by you jointly or by Robertson, Stephens & Company LLC on behalf
of you.
14. Applicable law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California.
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<PAGE> 33
15. Counterparts. This Agreement may be signed in several
counterparts, each of which will constitute an original.
If the foregoing correctly sets forth the understanding among
the Company and the several Underwriters, please so indicate in the space
provided below for that purpose, whereupon this letter shall constitute a
binding agreement among the Company and the several Underwriters.
Very truly yours,
LASON, INC.
By:___________________
Gary L. Monroe
Chief Executive Officer
Accepted as of the date
first above written:
ROBERTSON, STEPHENS & COMPANY LLC
WILLIAM BLAIR & COMPANY, L.L.C.
On their behalf and on behalf of
each of the several Underwriters
named in Schedule A hereto.
ROBERTSON, STEPHENS & COMPANY LLC
By: ROBERTSON, STEPHENS & COMPANY GROUP, L.L.C.
By:________________________________
Authorized Signatory
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<PAGE> 34
SCHEDULE A
Number of
Firm Shares
Underwriters To Be Purchased
- -------------------- ---------------
Robertson, Stephens & Company LLC .............
William Blair & Company, L.L.C. ...............
_________
Total...................................... 3,000,000
=========
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
LASON, INC.
ARTICLE ONE
The name of the Corporation is Lason, Inc.
ARTICLE TWO
The address of the Corporation's registered office in the
State of Delaware is 32 Loockerman Square, Suite L-100, Dover, Delaware, County
of Kent. The name of its registered agent at such address is Corporation
Service Company. The registered office and/or registered agent of the
Corporation may be changed from time to time by action of the board of
directors.
ARTICLE THREE
The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of the State of Delaware (the
"Delaware General Corporation Law") either alone or with others through wholly
or partially owned subsidiaries, as a partner (limited or general) in any
partnership, as a member in a limited liability company, as a joint venturer in
any joint venture, or otherwise.
ARTICLE FOUR
SECTION 1. The aggregate number of shares of stock which
the Corporation has authority to issue is 25,000,000, consisting of 5,000,000
shares of Series Preferred Stock, par value
<PAGE> 2
$.01 per share (the "Series Preferred Stock"), and 20,000,000 shares of Common
Stock, par value $.01 per share (the "Common Stock"). All of such shares shall
be issued as fully paid and non-assessable shares, and the holder thereof shall
not be liable for any further payments in respect thereof.
SECTION 2. The preferences, limitations, designations
and relative rights of the shares of each class and the qualifications,
limitations or restrictions thereof shall be as follows:
A. Series Preferred Stock.
1. Authorization; Series; Provisions.
(a) The Board of Directors of the Corporation is
authorized, subject to limitations prescribed by law and the provisions of this
Article Four, to provide for the issuance of shares of the Series Preferred
Stock in series, and by filing a certificate pursuant to the General
Corporation Law of the State of Delaware, to establish from time to time the
number of shares to be included in each such series and to fix the
designations, powers, preferences and rights of the shares of each such series
and the qualifications, limitations or restrictions thereof.
(b) The Series Preferred Stock may be issued from time to
time in one or more series, the shares of each series to have such powers,
designations, preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions thereof, as are
stated and expressed herein or in a resolution or resolutions providing for the
issuance of such series, adopted by the Board of Directors as hereinafter
provided.
(c) Authority is hereby expressly granted to the Board of
Directors, subject to the provisions of this Section 2, to authorize the
issuance of one or more series of Series Preferred Stock, and with respect to
each such series to fix by resolution or resolutions providing for the issuance
of such series:
(i) the maximum number of shares to constitute such series and
the distinctive designation thereof;
(ii) whether the shares of such series shall have voting
rights, in addition to any voting rights provided by law, and, if so, the terms
of such voting rights;
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<PAGE> 3
(iii) the dividend rate, if any, on the shares of such series,
the conditions and dates upon which such dividends shall be payable, the
preference or relation which such dividends shall bear to the dividends payable
on any other class or classes or on any other series of capital stock, and
whether such dividends shall be cumulative or noncumulative;
(iv) whether the shares of such series shall be subject to
redemption by the Corporation and, if made subject to redemption, the times,
prices and other terms and conditions of such redemption;
(v) the rights of the holders of shares of such series upon
the liquidation, dissolution or winding up of the Corporation;
(vi) whether or not the shares of such series shall be subject
to the operation of a retirement or sinking fund and, if so, the extent to and
manner in which any such retirement or sinking fund shall be applied to the
purchase or redemption of the shares of such series for retirement or to other
corporate purposes and the terms and provisions relative to the operation
thereof;
(vii) whether or not the shares of such series shall be
convertible into, or exchangeable for, shares of stock of any other class or
classes, or of any other series of the same class, and if so convertible or
exchangeable, the price or prices or the rate or rates of conversion or
exchange and the method, if any, of adjusting the same;
(viii) the limitations and restrictions, if any, to be
effective while any shares of such series are outstanding upon the payment of
dividends or making of other distributions on, and upon the purchase,
redemption or other acquisition by the Corporation of, Common Stock or any
other class or classes of stock of the Corporation ranking junior to the shares
of such series either as to dividends or upon liquidation;
(ix) the conditions or restrictions, if any, upon the creation
of indebtedness of the Corporation or upon the issue of any additional stock
(including additional shares of such series or of any other series or of any
other class) ranking on a parity with or prior to the shares of such series as
to dividends or distribution of assets on liquidation, dissolution or winding
up; and
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<PAGE> 4
(x) any other preference and relative, participating, optional
or other special rights, and qualifications, limitations or restrictions
thereof as shall not be inconsistent with this Section 2.
2. Series Identical; Rank. All shares of any one series of
Series Preferred Stock shall be identical with each other in all respects,
except that shares of any one series issued at different times may differ as to
the dates from which dividends, if any, thereon shall be cumulative; and all
series shall rank equally and be identical in all respects, except as permitted
by the foregoing provisions of paragraph 1(c) hereof; and all shares of Series
Preferred Stock shall rank senior to the Common Stock both as to dividends and
upon liquidation.
3. Liquidation. In the event of any liquidation,
dissolution or winding up of the Corporation, before any payment or
distribution of the assets of the Corporation (whether capital or surplus)
shall be made to or set apart for the holders of any class or classes of stock
of the Corporation ranking junior to the Series Preferred Stock upon
liquidation, the holders of the shares of the Series Preferred Stock shall be
entitled to receive payment at the rate fixed herein or in the resolution or
resolutions adopted by the Board of Directors providing for the issue of such
series, plus (if dividends on shares of such series of Series Preferred Stock
shall be cumulative) an amount equal to all dividends (whether or not earned or
declared) accumulated to the date of final distribution to such holders; but
they shall be entitled to no further payment. If, upon any liquidation,
dissolution or winding up of the Corporation, the assets of the Corporation or
proceeds thereof, distributable among the holders of the shares of the Series
Preferred Stock shall be insufficient to pay in full the preferential amount
aforesaid, then such assets, or the proceeds thereof, shall be distributed
among such holders ratably in accordance with the respective amounts which
would be payable on such shares if all amounts payable thereon were paid in
full.
4. Voting Rights. Except as shall be otherwise stated
and expressed herein or in the resolution or resolutions of the Board of
Directors providing for the issue of any series and except as otherwise
required by the laws of the State of Delaware, the holders of shares of Series
Preferred Stock shall have, with respect to such shares, no right or power to
vote on any question
- 4 -
<PAGE> 5
or in any proceeding or to be represented at, or to receive notice of, any
meeting of stockholders.
5. Reacquired Shares. Shares of any Series Preferred
Stock which shall be issued and thereafter acquired by the Corporation through
purchase, redemption, exchange, conversion or otherwise shall return to the
status of authorized but unissued Series Preferred Stock unless otherwise
provided in the resolution or resolutions of the Board of Directors.
6. Increase/Decrease in Authorized Shares of a Series.
Unless otherwise provided in the resolution or resolutions of the Board of
Directors providing for the issuance thereof, the number of authorized shares
of stock of any such series may be increased or decreased (but not below the
number of shares thereof outstanding) by resolution or resolutions of the Board
of Directors. In case the number of shares of any such series of Series
Preferred Stock shall be decreased, the shares representing such decrease
shall, unless otherwise provided in the resolution or resolutions of the Board
of Directors providing for the issuance thereof, resume the status of
authorized but unissued Series Preferred Stock, undesignated as to series.
B. Common Stock.
Except as shall otherwise be stated herein or as otherwise
required by applicable law, all shares of Common Stock shall be identical in
all respects and shall entitle the holders thereof to the same rights and
privileges, subject to the same qualifications, limitations and restrictions.
1. Voting Rights. Except as otherwise provided in this
Section 2B of Article Four or as otherwise required by applicable law, holders
of Common Stock shall be entitled to one vote per share on all matters to be
voted on by the stockholders of the Corporation.
2. Dividends. Subject to the rights of each series of
the Series Preferred Stock, dividends may be declared and paid or set apart for
payment upon the Common Stock out of any assets or funds of the Corporation
legally available for the payment of dividends, and all holders of Common Stock
shall be entitled to participate in such dividends ratably on a per share
basis.
- 5 -
<PAGE> 6
3. Liquidation. Upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, and after the
holders of the Series Preferred Stock of each series shall have been paid in
full the amounts to which they respectively shall be entitled in accordance
with Section 2A of Article Four, the terms of any outstanding Series Preferred
Stock and applicable law, or an amount sufficient to pay the aggregate amount
to which the holders of the Series Preferred Stock of each series shall be
entitled shall have been deposited with a bank or trust company having capital,
surplus and undivided profits of at least Twenty-Five Million Dollars
($25,000,000) as a trust fund for the benefit of the holders of such Series
Preferred Stock, the remaining net assets of the Corporation shall be
distributed pro rata to the holders of the Common Stock, to the exclusion of
the holders of such Series Preferred Stock.
C. General Provisions
1. Nonliquidating Events. A consolidation or merger of
the Corporation with or into another corporation or corporations or a sale,
whether for cash, shares of stock, securities or properties, or any combination
thereof, of all or substantially all of the assets of the Corporation shall not
be deemed or construed to be a liquidation, dissolution or winding up of the
Corporation within the meaning of this Article Four.
2. No Preemptive Rights. No holder of Series
Preferred Stock or Common Stock of the Corporation shall be entitled, as such,
as a matter of right, to subscribe for or purchase any part of any new or
additional issue of stock of any class or series whatsoever or of securities
convertible into stock of any class whatsoever, whether now or hereafter
authorized and whether issued for cash or other consideration, or by way of
dividend.
ARTICLE FIVE
The Corporation is to have perpetual existence.
- 6 -
<PAGE> 7
ARTICLE SIX
The business and affairs of the Corporation shall be managed
by or under the direction of the Board of Directors, and the directors need not
be elected by ballot unless required by the By-laws of the Corporation. In
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors of the Corporation is expressly authorized to make, alter, amend,
change, add to or repeal the By-laws of the Corporation.
ARTICLE SEVEN
Meetings of stockholders may be held within or without the
State of Delaware, as the By-laws of the Corporation may provide. The books of
the Corporation may be kept outside the State of Delaware at such place or
places as may be designated from time to time by the Board of Directors or in
the By-laws of the Corporation. The Board of Directors shall from time to time
decide whether and to what extent and at what times and under what conditions
and requirements the accounts and books of the Corporation, or any of them,
except the stock book, shall be open to the inspection of the stockholders,
and no stockholder shall have any right to inspect any books or documents of
the Corporation except as conferred by the laws of the State of Delaware or as
authorized by the Board of Directors.
ARTICLE EIGHT
Subject to the rights of the holders of any series of Series
Preferred Stock, from and after the date on which the Common Stock of the
Corporation is registered pursuant to the Securities Exchange Act of 1934, as
amended, (A) any action required or permitted to be taken by the stockholders
of the Corporation must be effected at an annual or special meeting of
stockholders of the Corporation and may not be effected in lieu thereof by any
consent in writing by such stockholders, and (B) special meetings of
stockholders of the Corporation may be called only by the chairman of the
board, the chief executive officer, the president or the Board of Directors
pursuant to a resolution adopted by the affirmative vote of at least two
members then in office.
- 7 -
<PAGE> 8
ARTICLE NINE
(a) The number of directors which shall constitute the whole
board shall be such as from time to time shall be fixed by the Board of
Directors in the manner as provided in the By-laws, except that such number
shall not be less than one (1) nor more than fifteen (15), the exact number to
be determined by resolution adopted by affirmative vote of a majority of the
Board of Directors. The directors of the Corporation shall be divided into
three classes: Class I, Class II and Class III. Membership in such classes
shall be as nearly equal in number as possible. The term of office of the
initial Class I directors shall expire at the annual election of directors by
the stockholders of the Corporation in 1997, the term of office of the initial
Class II directors shall expire at the annual election of directors by the
stockholders of the Corporation in 1998, and the term of office of the initial
Class III directors shall expire at the annual election of directors by the
stockholders of the Corporation in 1999, or thereafter when their respective
successors in each case are elected by the stockholders and qualified, subject,
however, to prior death, resignation, retirement, disqualification or removal
from office for cause. At each succeeding annual election of directors by the
stockholders of the Corporation beginning in 1997, the directors chosen to
succeed those whose terms then expire shall be identified as being of the same
class as the directors they succeed and shall be elected for a term expiring at
the third succeeding annual election of directors by the stockholders of the
Corporation, or thereafter when their respective successors in each case are
elected by the stockholders and qualified. If the number of directors is
changed, any increase or decrease shall be apportioned among the classes so as
to maintain the number of directors in each class as nearly equal as possible,
and any additional director of any class elected to fill a vacancy resulting
from an increase in such class shall hold office for a term that shall coincide
with the remaining term of that class, but in no case will a decrease in the
number of directors shorten the term of any incumbent director.
Vacancies and newly created directorships resulting from any
increase in the number of directors may be filled only by the affirmative vote
of the majority of the Board of Directors then in
- 8 -
<PAGE> 9
office, although less than quorum, or by a sole remaining director. Any
director elected to fill a vacancy not resulting from an increase in the number
of directors shall have the same remaining term as that of his predecessor.
Notwithstanding the foregoing, whenever the holders of any one
or more classes or series of Series Preferred Stock issued by the Corporation
shall have the right, voting separately by class or series, to elect directors
at an annual or special meeting of stockholders, the election, term of office,
filling of vacancies and other features of such directorships shall be governed
by the terms of this Amended and Restated Certificate of Incorporation
applicable thereto, and such directors so elected shall not be divided into
classes pursuant to this Section (a) of Article Nine unless expressly provided
by such terms.
Subject to the rights of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation to elect
directors under specified circumstances, no director may be removed from office
without cause.
(b) Except to the extent prohibited by law, the Board of
Directors shall have the right (which, to the extent exercised, shall be
exclusive) to establish the rights, powers, duties, rules and procedures that
from time to time shall govern the Board of Directors and each of its members,
including without limitation the vote required for any action by the Board of
Directors, and that from time to time shall affect the directors' power to
manage the business and affairs of the Corporation; and no by-law shall be
adopted by stockholders which shall impair or impede the implementation of the
foregoing.
ARTICLE TEN
Article Eight, Article Nine and this Article Ten of this
Restated Certificate of Incorporation and Sections 2 and 11 of Article II,
Sections 2, 3, 4 and 5 of Article III and Article V of the By-laws of the
Corporation shall not be altered, amended or repealed by, and no provision
inconsistent therewith shall be adopted by, the stockholders without the
affirmative vote of the holders of at least 80% of the Common Stock, voting
together as a single class.
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<PAGE> 10
ARTICLE ELEVEN
(a) To the fullest extent permitted by the Delaware General
Corporation Law as it now exists or may hereafter be amended (but, in the case
of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than permitted prior
thereto), no director of the Corporation shall be liable to the Corporation or
its stockholders for monetary damages arising from a breach of fiduciary duty
owed to the Corporation or its stockholders.
(b) Any repeal or modification of the foregoing paragraph by
the stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
ARTICLE TWELVE
The Corporation expressly elects to be governed by Section 203
of the Delaware General Corporation Law.
ARTICLE THIRTEEN
The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Amended and Restated Certificate of
Incorporation in the manner now or hereafter prescribed herein and by the laws
of the State of Delaware, and all rights conferred upon stockholders herein are
granted subject to this reservation.
- 10 -
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED BY-LAWS
OF
LASON, INC.
A Delaware Corporation
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the
Corporation in the State of Delaware shall be located at 32 Loockerman Square,
Suite L-100, Dover, Delaware, County of Kent. The name of its registered agent
at such address is Corporation Service Company. The registered office and/or
registered agent of the Corporation may be changed from time to time by action
of the board of directors.
Section 2. Other Offices. The Corporation may also have offices at
such other places, both within and without the State of Delaware, as the board
of directors may from time to time determine or the business of the Corporation
may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place and Time of Meetings. An annual meeting of the
stockholders shall be held each year for the purpose of electing directors and
conducting such other proper business as may come before the meeting. Unless
otherwise directed by the board of directors, annual meetings of stockholders
shall be held on the fourth Tuesday in April beginning in 1997, if not a legal
holiday and, if a legal holiday, then on the first preceding regular business
day. At the annual meeting, stockholders shall elect directors and transact
such other business as properly may be
<PAGE> 2
brought before the meeting pursuant to Article II, Section 11 hereof.
Section 2. Special Meetings. Special meetings of stockholders may be
called for any purpose and may be held at such time and place, within or
without the State of Delaware, as shall be stated in a notice of meeting or in
a duly executed waiver of notice thereof. Such meetings may be called at any
time by the chairman of the board, the chief executive officer, the president,
or pursuant to a resolution adopted by the affirmative vote of at least two
members then in office. The only matters that may be considered at any special
meeting of the stockholders are the matters specified in the notice of the
meeting.
Section 3. Place of Meetings. The board of directors may designate
any place, either within or without the State of Delaware, as the place of
meeting for any annual meeting or for any special meeting called by the board
of directors. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal executive office of the
Corporation.
Section 4. Notice. Whenever stockholders are required or permitted
to take action at a meeting, written or printed notice stating the place, date,
time, and, in the case of special meetings, the purpose or purposes, of such
meeting, shall be given to each stockholder entitled to vote at such meeting
not less than ten (10) nor more than sixty (60) days before the date of the
meeting. All such notices shall be delivered, either personally or by mail, by
or at the direction of the board of directors, the chairman of the board, the
president or the secretary, and if mailed, such notice shall be deemed to be
delivered when deposited in the United States mail, postage prepaid, addressed
to the stockholder at his, her or its address as the same appears on the
records of the Corporation. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends
for the express purpose of objecting at the beginning of the meeting to the
transaction of any business because the meeting is not lawfully called or
convened.
Section 5. Stockholders List. The officer having charge of the stock
ledger of the Corporation shall make, at least 10 days before every meeting of
the stockholders, a complete list of the
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stockholders entitled to vote at such meeting arranged in alphabetical order,
showing the address of each stockholder and the number of shares registered in
the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least 10 days prior to the meeting, either
at a place within the city where the meeting is to be held, which place shall
be specified in the notice of the meeting or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 6. Quorum. The holders of a majority of the outstanding
shares of capital stock entitled to vote, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders, except as
otherwise provided by statute or by the certificate of incorporation. If a
quorum is not present, the holders of a majority of the shares present in
person or represented by proxy at the meeting, and entitled to vote at the
meeting, may adjourn the meeting to another time and/or place. When a
specified item of business requires a vote by a class or series (if the
Corporation shall then have outstanding shares of more than one class or
series) voting as a class, the holders of a majority of the shares of such
class or series shall constitute a quorum (as to such class or series) for the
transaction of such item of business.
Section 7. Adjourned Meetings. When a meeting is adjourned to
another time and place, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting the Corporation may transact
any business which might have been transacted at the original meeting. If the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
Section 8. Vote Required. When a quorum is present, the affirmative
vote of the majority of shares present in person or represented by proxy at the
meeting and entitled to vote on the subject matter shall be the act of the
stockholders, unless (i) by
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express provisions of an applicable law or of the certificate of incorporation
a different vote is required, in which case such express provision shall govern
and control the decision of such question, or (ii) the subject matter is the
election of directors, in which case Section 2 of Article III hereof shall
govern and control the approval of such subject matter, or the amendment of any
provision listed in Article VIII, in which case Article VIII hereof shall
govern and control the approval of such subject matter.
Section 9. Voting Rights. Except as otherwise provided by the
General Corporation Law of the State of Delaware or by the certificate of
incorporation of the Corporation or any amendments thereto and subject to
Section 3 of Article VI hereof, every stockholder shall at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of
common stock held by such stockholder.
Section 10. Proxies. Each stockholder entitled to vote at a meeting
of stockholders may authorize another person or persons to act for him or her
by proxy, but no such proxy shall be voted or acted upon after three years from
its date, unless the proxy provides for a longer period. A duly executed proxy
shall be irrevocable if it states that it is irrevocable and if, and only as
long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the Corporation generally. Any proxy is suspended when the person
executing the proxy is present at a meeting of stockholders and elects to vote,
except that when such proxy is coupled with an interest and the fact of the
interest appears on the face of the proxy, the agent named in the proxy shall
have all voting and other rights referred to in the proxy, notwithstanding the
presence of the person executing the proxy. At each meeting of the
stockholders, and before any voting commences, all proxies filed at or before
the meeting shall be submitted to and examined by the secretary or a person
designated by the secretary, and no shares may be represented or voted under a
proxy that has been found to be invalid or irregular.
Section 11. Business Brought Before a Meeting. At an annual meeting
of the stockholders, only such business shall be conducted
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as shall have been properly brought before the meeting. To be properly brought
before an annual meeting, business must be (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the board
of directors, (b) brought before the meeting by or at the direction of the
board of directors, or (c) otherwise properly brought before the meeting by a
stockholder. For business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing
to the secretary of the Corporation. To be timely, a stockholder's notice must
be delivered to or mailed and received at the principal executive offices of
the Corporation, not less than sixty (60) days nor more than ninety (90) days
prior to the meeting; provided, however, that in the event that less than
seventy (70) days' notice or prior public disclosure of the date of the meeting
is given or made to stockholders, notice by the stockholder to be timely must
be so received not later than the close of business on the tenth (10) day
following the date on which such notice of the date of the annual meeting was
mailed or such public disclosure was made. A stockholder's notice to the
secretary shall set forth as to each matter the stockholder proposes to bring
before the annual meeting (a) a brief description of the business desired to be
brought before the annual meeting, (b) the name and address, as they appear on
the Corporation's books, of the stockholder proposing such business, (c) the
class and number of shares of the Corporation which are beneficially owned by
the stockholder, and (d) any material interest of the stockholder in such
business. Notwithstanding anything in these by-laws to the contrary, no
business shall be conducted at an annual meeting except in accordance with the
procedures set forth in this Section 11 of Article II. The presiding officer
of an annual meeting shall, if the facts warrant, determine that the business
was not properly brought before the meeting and in accordance with the
provisions of this Section 11 of Article II; and if he should so determine, he
shall so declare to the meeting and any such business not properly brought
before the meeting shall not be transacted.
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ARTICLE III
DIRECTORS
Section 1. General Powers. The business and affairs of the
Corporation shall be managed by or under the direction of the board of
directors. In addition to such powers as are herein and in the certificate of
incorporation expressly conferred upon it, the board of directors shall have
and may exercise all the powers of the Corporation, subject to the provisions
of the laws of Delaware, the certificate of incorporation and these by-laws.
Section 2. Number, Election and Term of Office. The number of
directors which shall constitute the board shall be seven (7), but the number
of directors may be changed and established from time to time by resolution of
the board. The directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote in the election of directors; provided that, whenever the holders of any
class or series of capital stock of the Corporation are entitled to elect one
or more directors pursuant to the provisions of the certificate of
incorporation of the Corporation (including, but not limited to, for purposes
of these by-laws, pursuant to any duly authorized certificate of designation),
such directors shall be elected by a plurality of the votes of such class or
series present in person or represented by proxy at the meeting and entitled to
vote in the election of such directors. The directors shall be elected in this
manner at the annual meeting of the stockholders, except as provided in Section
4 of this Article III. Each director elected shall hold office until a
successor is duly elected and qualified or until his or her earlier death,
resignation or removal as hereinafter provided.
Section 3. Removal and Resignation. No director may be removed at
any time without cause; provided, however, that if the holders of any class or
series of capital stock are entitled by the provisions of the Corporation's
certificate of incorporation to elect one or more directors, such director or
directors so elected may be removed without cause only by the vote of the
holders of a majority of the outstanding shares of that class or series
entitled to vote. Any director may resign at any time upon written notice to
the Corporation.
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Section 4. Vacancies. Vacancies and newly created directorships
resulting from any increase in the total number of directors established by the
board pursuant to Section 2 of this Article III may be filled only by the
affirmative vote of the majority of the total number of directors then in
office, though less than a quorum, or by a sole remaining director. Any
director elected to fill a vacancy resulting from an increase in the number of
directors shall hold office for a term that shall coincide with the remaining
term of the class of directors to which he is elected. A director elected to
fill a vacancy not resulting from an increase in the number of directors shall
have the same remaining term as that of his predecessor. Each director so
chosen shall hold office until a successor is duly elected and qualified or
until his or her earlier death, resignation or removal as herein provided.
Whenever holders of any class or classes of stock or series thereof are
entitled by the provisions of the certificate of incorporation to elect one or
more directors, vacancies of directorships pertaining to such class or classes
or series may only be filled by the affirmative vote of the majority of the
total number of directors elected by such class or classes or series thereof
then in office, or by a sole remaining director so elected. If no such
directors or director remains, then the vacancy or vacancies of directorships
pertaining to such class or classes or series shall be filled by the
affirmative vote of the majority of the total number of directors then in
office, or by any sole remaining director.
Section 5. Nominations.
(a) Only persons who are nominated in accordance with the
procedures set forth in these by-laws shall be eligible to serve as directors.
Nominations of persons for election to the board of directors of the
Corporation may be made at a meeting of stockholders (i) by or at the direction
of the board of directors or (ii) by any stockholder of the Corporation who
was a stockholder of record at the time of giving of notice provided for in
this by-law, who is entitled to vote for the election of directors at the
meeting and who shall have complied with the notice procedures set forth below
in Section 5(b) of this Article III.
(b) In order for a stockholder to nominate a person for
election to the board of directors of the Corporation at a meeting of
stockholders, such stockholder shall have delivered timely
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notice of such stockholder's intent to make such nomination in writing to the
secretary of the Corporation. To be timely, a stockholder's notice shall be
delivered to or mailed and received at the principal executive offices of the
Corporation (i) in the case of an annual meeting, not less than sixty (60) nor
more than ninety (90) days prior to the first anniversary of the preceding
year's annual meeting; provided, however, that in the event that the date of
the annual meeting is changed by more than thirty (30) days from such
anniversary date, notice by the stockholder to be timely must be so received
not later than the close of business on the tenth (10) day following the
earlier of the day on which notice of the date of the meeting was mailed or
public disclosure of the meeting was made, and (ii) in the case of a special
meeting at which directors are to be elected, not later than the close of
business on the tenth (10) day following the earlier of the day on which notice
of the date of the meeting was mailed or public disclosure of the meeting was
made. Such stockholder's notice shall set forth (i) as to each person whom the
stockholder proposes to nominate for election as a director at such meeting all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required,
in each case pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected); (ii) as
to the stockholder giving the notice (A) the name and address, as they appear
on the Corporation's books, of such stockholder and (B) the class and number of
shares of the Corporation which are beneficially owned by such stockholder and
also which are owned of record by such stockholder; and (iii) as to the
beneficial owner, if any, on whose behalf the nomination is made, (A) the name
and address of such person and (B) the class and number of shares of the
Corporation which are beneficially owned by such person. At the request of the
board of directors, any person nominated by the board of directors for election
as a director shall furnish to the secretary of the Corporation that
information required to be set forth in a stockholder's notice of nomination
which pertains to the nominee.
(c) No person shall be eligible to serve as a director of
the Corporation unless nominated in accordance with the procedures set forth in
this Section 5 of Article III. The chairman of the meeting shall, if the
facts warrant, determine that
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a nomination was not made in accordance with the procedures prescribed by this
Section 5 of Article III, and if he should so determine, he shall so declare to
the meeting and the defective nomination shall be disregarded. A stockholder
seeking to nominate a person to serve as a director must also comply with all
applicable requirements of the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder with respect to the matters set forth in
this Section 5 of Article III.
Section 6. Annual Meetings. The annual meeting of the board of
directors shall be held without other notice than this by-law immediately
after, and at the same place as, the annual meeting of stockholders.
Section 7. Other Meetings and Notice. Regular meetings, other than
the annual meeting, of the board of directors may be held without notice at
such time and at such place as shall from time to time be determined by
resolution of the board. Special meetings of the board of directors may be
called by the chairman of the board or, upon the written request of at least a
majority of the directors then in office, by the secretary of the Corporation
on at least 24 hours notice to each director, either personally, by telephone,
by mail, or by telecopy.
Section 8. Chairman of the Board, Quorum, Required Vote and
Adjournment. The board of directors shall elect, by the affirmative vote of
the majority of the total number of directors then in office, a chairman of the
board, who shall preside at all meetings of the stockholders and board of
directors at which he or she is present. If the chairman of the board is not
present at a meeting of the stockholders or the board of directors, the chief
executive officer (if the chief executive officer is a director and is not also
the chairman of the board) shall preside at such meeting, and, if the chief
executive officer is not present at such meeting, a majority of the directors
present at such meeting shall elect one of their members to so preside. A
majority of the total number of directors then in office shall constitute a
quorum for the transaction of business. Unless by express provision of an
applicable law, the Corporation's certificate of incorporation or these by-
laws a different vote is required, the vote of a majority of directors present
at a meeting at which a quorum is present shall be the act of the board of
directors. If a quorum shall not be present at any meeting of the board of
directors, the directors
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present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present.
Section 9. Committees. The board of directors may, by resolution
passed by a majority of the total number of directors then in office, designate
one or more committees, each committee to consist of one or more of the
directors of the Corporation, which to the extent provided in such resolution
or these by-laws shall have, and may exercise, the powers of the board of
directors in the management and affairs of the Corporation, except as otherwise
limited by law. The board of directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. Such committee or committees shall
have such name or names as may be determined from time to time by resolution
adopted by the board of directors. Each committee shall keep regular minutes
of its meetings and report the same to the board of directors when required.
Section 10. Committee Rules. Each committee of the board of
directors may fix its own rules of procedure and shall hold its meetings as
provided by such rules, except as may otherwise be provided by a resolution of
the board of directors designating such committee. Unless otherwise provided
in such a resolution, the presence of at least a majority of the members of the
committee shall be necessary to constitute a quorum. Unless otherwise provided
in such a resolution, in the event that a member and that member's alternate,
if alternates are designated by the board of directors as provided in Section 9
of this Article III, of such committee is or are absent or disqualified, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not such member or members constitute a quorum, may
unanimously appoint another member of the board of directors to act at the
meeting in place of any such absent or disqualified member.
Section 11. Communications Equipment. Members of the board of
directors or any committee thereof may participate in and act at any meeting of
such board or committee through the use of a conference telephone or other
communications equipment by means of which all persons participating in the
meeting can hear and speak with each other, and participation in the meeting
pursuant to this Section 11 shall constitute presence in person at the meeting.
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Section 12. Waiver of Notice and Presumption of Assent. Any member
of the board of directors or any committee thereof who is present at a meeting
shall be conclusively presumed to have waived notice of such meeting except
when such member attends for the express purpose of objecting at the beginning
of the meeting to the transaction of any business because the meeting is not
lawfully called or convened. Such member shall be conclusively presumed to
have assented to any action taken unless his or her dissent shall be entered in
the minutes of the meeting or unless his or her written dissent to such action
shall be filed with the person acting as the secretary of the meeting before
the adjournment thereof or shall be forwarded by registered mail to the
secretary of the Corporation immediately after the adjournment of the meeting.
Such right to dissent shall not apply to any member who voted in favor of such
action.
Section 13. Action by Written Consent. Unless otherwise restricted
by the certificate of incorporation, any action required or permitted to be
taken at any meeting of the board of directors, or of any committee thereof,
may be taken without a meeting if all members of the board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the board or committee.
ARTICLE IV
OFFICERS
Section 1. Number. The officers of the Corporation shall be elected
by the board of directors and shall consist of a chairman of the board, chief
executive officer, president, one or more executive vice presidents or
vice-presidents, a chief operating officer, a chief financial officer, a
secretary, a treasurer and such other officers and assistant officers as may be
deemed necessary or desirable by the board of directors. Any number of offices
may be held by the same person. In its discretion, the board of directors may
choose not to fill any office for any period as it may deem advisable, except
that the offices of president and secretary shall be filled as expeditiously as
possible.
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Section 2. Election and Term of Office. The officers of the
Corporation shall be elected annually by the board of directors at its first
meeting held after each annual meeting of stockholders or as soon thereafter as
convenient. Vacancies may be filled or new offices created and filled at any
meeting of the board of directors. Each officer shall hold office until a
successor is duly elected and qualified or until his or her earlier death,
resignation or removal as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board of
directors may be removed by the board of directors at its discretion, but such
removal shall be without prejudice to the contract rights, if any, of the
person so removed.
Section 4. Vacancies. Any vacancy occurring in any office because of
death, resignation, removal, disqualification or otherwise, may be filled by
the board of directors.
Section 5. Compensation. Compensation of all officers shall be fixed
by the board of directors, and no officer shall be prevented from receiving
such compensation by virtue of his or her also being a director of the
Corporation.
Section 6. Chairman of the Board. The chairman of the board shall
preside at all meetings of the board of directors and stockholders and shall
have such other powers and perform such other duties as may be prescribed by
the board of directors or provided in these by-laws. The chairman of the board
is authorized to execute bonds, mortgages and other contracts requiring a seal,
under the seal of the Corporation, except where required or permitted by law to
be otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the board of directors to some other
officer or agent of the Corporation.
Section 7. Chief Executive Officer. The chief executive officer
shall have the powers and perform the duties incident to that position.
Subject to the powers of the board of directors, he or she shall be in the
general and active charge of the entire business and affairs of the
Corporation, and shall be its chief policy-making officer. The chief
executive officer is authorized to execute bonds, mortgages and other contracts
requiring a seal, under the seal of the Corporation, except where required or
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permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the Corporation. The chief
executive officer shall, in the absence or disability of the chairman of the
board, act with all of the powers, perform all duties and be subject to all the
restrictions of the chairman of the board. The chief executive officer shall
have such other powers and perform such other duties as may be prescribed by
the chairman of the board or the board of directors or as may be provided in
these by-laws.
Section 8. The President. The president of the Corporation shall,
subject to the powers of the board of directors, the chairman of the board and
the chief executive officer, shall have general charge of the business, affairs
and property of the Corporation, and control over its officers, agents and
employees; and shall see that all orders and resolutions of the board of
directors and the chief executive officer are carried into effect. The
president shall, in the absence or disability of the chief executive officer,
act with all of the powers and be subject to all the restrictions of the chief
executive officer. The president is authorized to execute bonds, mortgages and
other contracts requiring a seal, under the seal of the Corporation, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the board of directors to some other officer or agent of the Corporation. The
president shall have such other powers and perform such other duties as may be
prescribed by the chairman of the board, the chief executive officer or the
board of directors or as may be provided in these by-laws.
Section 9. Chief Operating Officer. The chief operating officer of
the Corporation, subject to the powers of the board of directors, the chairman
of the board and the chief executive officer, shall have general and active
management of the business of the Corporation; and shall see that all orders
and resolutions of the board of directors are carried into effect. The chief
operating officer shall have such other powers and perform such other duties as
may be prescribed by the chairman of the board, the chief executive officer or
the board of directors or as may be provided in these by-laws.
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Section 10. Chief Financial Officer. The chief financial officer of
the Corporation shall, under the direction of the chairman of the board, the
chief executive officer and the president, be responsible for all financial and
accounting matters and for the direction of the offices of treasurer and
controller. The chief financial officer shall have such other powers and
perform such other duties as may be prescribed by the chairman of the board,
the chief executive officer or the board of directors or as may be provided in
these by-laws.
Section 11. Vice-presidents. The vice-president, or if there shall
be more than one, the vice-presidents in the order determined by the board of
directors or the chairman of the board, shall, in the absence or disability of
the president, act with all of the powers and be subject to all the
restrictions of the president. The vice-presidents shall also perform such
other duties and have such other powers as the board of directors, the chairman
of the board, the chief executive officer, the president or these by-laws may,
from time to time, prescribe. The vice-presidents may also be designated as
executive vice-presidents or senior vice-presidents, as the board of directors
may from time to time prescribe.
Section 12. The Secretary and Assistant Secretaries. The secretary
shall attend all meetings of the board of directors, all meetings of the
committees thereof and all meetings of the stockholders and record all the
proceedings of the meetings in a book or books to be kept for that purpose or
shall ensure that his or her designee attends each such meeting to act in such
capacity. Under the chairman of the board's supervision, the secretary shall
give, or cause to be given, all notices required to be given by these by-laws
or by law; shall have such powers and perform such duties as the board of
directors, the chairman of the board, the chief executive officer, the
president or these by-laws may, from time to time, prescribe; and shall have
custody of the corporate seal of the Corporation. The secretary, or an
assistant secretary, shall have authority to affix the corporate seal to any
instrument requiring it and when so affixed, it may be attested by his or her
signature or by the signature of such assistant secretary. The board of
directors may give general authority to any other officer to affix the seal of
the Corporation and to attest the affixing by his or her signature. The
assistant secretary, or if there be more than one, any of the assistant
secretaries in the order determined by the board of directors, shall, in the
absence or disability of
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the secretary, perform the duties and exercise the powers of the secretary and
shall perform such other duties and have such other powers as the board of
directors, the chairman of the board, the chief executive officer, the
president, or secretary may, from time to time, prescribe.
Section 13. The Treasurer and Assistant Treasurer. The treasurer
shall have the custody of the corporate funds and securities; shall keep full
and accurate accounts of receipts and disbursements in books belonging to the
Corporation; shall deposit all monies and other valuable effects in the name
and to the credit of the Corporation as may be ordered by the chairman of the
board, the chief executive officer, the chief financial officer or the board of
directors; shall cause the funds of the Corporation to be disbursed when such
disbursements have been duly authorized, taking proper vouchers for such
disbursements; and shall render to the chairman of the board, the chief
financial officer and the board of directors, at its regular meeting or when
the board of directors so requires, an account of the Corporation; shall have
such powers and perform such duties as the board of directors, the chairman of
the board, the chief executive officer, the president, the chief financial
officer or these by-laws may, from time to time, prescribe. If required by the
board of directors, the treasurer shall give the Corporation a bond (which
shall be rendered every six years) in such sums and with such surety or
sureties as shall be satisfactory to the board of directors for the faithful
performance of the duties of the office of treasurer and for the restoration to
the Corporation, in case of death, resignation, retirement, or removal from
office, of all books, papers, vouchers, money, and other property of whatever
kind in the possession or under the control of the treasurer belonging to the
Corporation. The assistant treasurer, or if there are more than one, the
assistant treasurers in the order determined by the board of directors shall,
in the absence or disability of the treasurer, perform the duties and exercise
the powers of the treasurer. The assistant treasurers shall perform such other
duties and have such other powers as the board of directors, the chairman of
the board, the chief executive officer, the president, the chief financial
officer, treasurer or these by-laws may, from time to time, prescribe.
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Section 14. Other Officers, Assistant Officers and Agents. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these by-laws, shall have such authority and perform such
duties as may from time to time be prescribed by resolution of the board of
directors.
Section 15. Absence or Disability of Officers. In the case of the
absence or disability of any officer of the Corporation and of any person
hereby authorized to act in such officer's place during such officer's absence
or disability, the board of directors may by resolution delegate the powers and
duties of such officer to any other officer or to any director, or to any other
person selected by it.
ARTICLE V
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
Section 1. Right to Indemnification. Each person who was or is made
a party or is threatened to be made a party to or is otherwise involved
(including involvement as a witness) in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a "proceeding"),
by reason of the fact that he or she is or was a director or officer of the
Corporation or, while a director or officer of the Corporation, is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan
(hereinafter, an "indemnitee"), whether the basis of such proceeding is alleged
action in an official capacity as a director or officer or in any other
capacity while serving as a director or officer, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the Delaware
General Corporation Law, as the same exists or may hereafter be amended (but,
in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than
permitted prior thereto), against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA exercise taxes or penalties and
amounts paid in settlement) reasonably incurred or suffered by such indemnitee
in connection therewith and such indemnification shall continue as to an
indemnitee who has ceased
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<PAGE> 17
to be a director, officer, employee or agent and shall inure to the benefit of
the indemnitee's heirs, executors and administrators; provided, however, that,
except as provided in Section 2 of Article V with respect to proceedings to
enforce rights to indemnification, the Corporation shall indemnify any such
indemnitee in connection with a proceeding (or part thereof) initiated by such
indemnitee only if such proceeding (or part thereof) was authorized by the
board of directors of the Corporation. The right to indemnification conferred
in this Section 1 of Article V shall be a contract right and shall include the
right to be paid by the Corporation the expenses incurred in defending any such
proceeding in advance of its final disposition (hereinafter an "advance of
expenses"); provided, however, that, if and to the extent that the Delaware
General Corporation Law requires, an advance of expenses incurred by an
indemnitee in his or her capacity as a director or officer (and not in any
other capacity in which service was or is rendered by such indemnitee,
including, without limitation, service to an employee benefit plan) shall be
made only upon delivery to the Corporation of an undertaking (hereinafter an
"undertaking"), by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal (hereinafter a "final adjudication")
that such indemnitee is not entitled to be indemnified for such expenses under
this Section 1 of Article V or otherwise. The Corporation may, by action of
its board of directors, provide indemnification to employees and agents of the
Corporation with the same scope and effect as the foregoing indemnification of
directors and officers.
Section 2. Procedure for Indemnification. Any indemnification of a
director or officer of the Corporation or advance of expenses under Section 1
of this Article V shall be made promptly, and in any event within forty-five
(45) days (or, in the case of an advance of expenses, twenty (20) days), upon
the written request of the director or officer. If a determination by the
Corporation that the director or officer is entitled to indemnification
pursuant to this Article V is required, and the Corporation fails to respond
within sixty (60) days to a written request for indemnity, the Corporation
shall be deemed to have approved the request. If the Corporation denies a
written request for indemnification or advance of expenses, in whole or in
part, or if payment in full pursuant to such request is not made within
forty-five (45) days (or, in the case of an advance of expenses, twenty
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<PAGE> 18
(20) days), the right to indemnification or advances as granted by this Article
V shall be enforceable by the director or officer in any court of competent
jurisdiction. Such person's costs and expenses incurred in connection with
successfully establishing his or her right to indemnification, in whole or in
part, in any such action shall also be indemnified by the Corporation. It
shall be a defense to any such action (other than an action brought to enforce
a claim for the advance of expenses where the undertaking required pursuant to
Section 1 of this Article V, if any, has been tendered to the Corporation) that
the claimant has not met the standards of conduct which make it permissible
under the Delaware General Corporation Law for the Corporation to indemnify the
claimant for the amount claimed, but the burden of such defense shall be on the
Corporation. Neither the failure of the Corporation (including its board of
directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its board of
directors, independent legal counsel, or its stockholders) that the claimant
has not met such applicable standard of conduct, shall be a defense to the
action or create a presumption that the claimant has not met the applicable
standard of conduct. The procedure for indemnification of other employees and
agents for whom indemnification is provided pursuant to Section 1 of this
Article V shall be the same procedure set forth in this Section 2 for directors
or officers, unless otherwise set forth in the action of the board of directors
providing indemnification for such employee or agent.
Section 3. Service for Subsidiaries. Any person serving as a
director, officer, employee or agent of a Subsidiary shall be conclusively
presumed to be serving in such capacity at the request of the Corporation.
Section 4. Reliance. Persons who after the date of the adoption of
this provision become or remain directors or officers of the Corporation or
who, while a director or officer of the Corporation, become or remain a
director, officer, employee or agent of a Subsidiary, shall be conclusively
presumed to have relied on the rights to indemnity, advance of expenses and
other rights contained in this Article V in entering into or continuing
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<PAGE> 19
such service. The rights to indemnification and to the advance of expenses
conferred in this Article V shall apply to claims made against an indemnitee
arising out of acts or omissions which occurred or occur both prior and
subsequent to the adoption hereof.
Section 5. Non-Exclusivity of Rights. The rights to indemnification
and to the advance of expenses conferred in this Article V shall not be
exclusive of any other right which any person may have or hereafter acquire
under this Certificate of Incorporation or under any statute, by-law,
agreement, vote of stockholders or disinterested directors or otherwise.
Section 6. Insurance. The Corporation may purchase and maintain
insurance on its own behalf and on behalf of any person who is or was a
director, officer, employee or agent of the Corporation or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss asserted against him or her and incurred by him or
her in any such capacity, whether or not the Corporation would have the power
to indemnify such person against such expenses, liability or loss under the
Delaware General Corporation Law.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Form. Every holder of stock in the Corporation shall be
entitled to have a certificate, signed by, or in the name of the Corporation by
the chairman of the board, the president or a vice-president and the secretary
or an assistant secretary of the Corporation, certifying the number of shares
owned by such holder in the Corporation. If such a certificate is
countersigned (1) by a transfer agent or an assistant transfer agent other than
the Corporation or its employee or (2) by a registrar, other than the
Corporation or its employee, the signature of any such chairman of the board,
president, vice-president, secretary, or assistant secretary may be facsimiles.
In case any officer or officers who have signed, or whose facsimile signature
or signatures have been used on, any such certificate or certificates shall
cease to be such officer or officers of the Corporation whether because of
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<PAGE> 20
death, resignation or otherwise before such certificate or certificates have
been delivered by the Corporation, such certificate or certificates may
nevertheless be issued and delivered as though the person or persons who signed
such certificate or certificates or whose facsimile signature or signatures
have been used thereon had not ceased to be such officer or officers of the
Corporation. All certificates for shares shall be consecutively numbered or
otherwise identified. The name of the person to whom the shares represented
thereby are issued, with the number of shares and date of issue, shall be
entered on the books of the Corporation. Shares of stock of the Corporation
shall only be transferred on the books of the Corporation by the holder of
record thereof or by such holder's attorney duly authorized in writing, upon
surrender to the Corporation of the certificate or certificates for such shares
endorsed by the appropriate person or persons, with such evidence of the
authenticity of such endorsement, transfer, authorization, and other matters as
the Corporation may reasonably require, and accompanied by all necessary stock
transfer stamps. In that event, it shall be the duty of the Corporation to
issue a new certificate to the person entitled thereto, cancel the old
certificate or certificates, and record the transaction on its books. The
board of directors may appoint a bank or trust company organized under the laws
of the United States or any state thereof to act as its transfer agent or
registrar, or both in connection with the transfer of any class or series of
securities of the Corporation.
Section 2. Lost Certificates. The board of directors may direct a
new certificate or certificates to be issued in place of any certificate or
certificates previously issued by the Corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the
person claiming the certificate of stock to be lost, stolen, or destroyed.
When authorizing such issue of a new certificate or certificates, the
Corporation may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his or her legal representative, to give the Corporation a
bond sufficient to indemnify the Corporation against any claim that may be made
against the Corporation on account of the loss, theft or destruction of any
such certificate or the issuance of such new certificate.
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<PAGE> 21
Section 3. Fixing a Record Date for Stockholder Meetings. In order
that the Corporation may determine the stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, the board of
directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the board of
directors, and which record date shall not be more than sixty (60) nor less
than ten (10) days before the date of such meeting. If no record date is fixed
by the board of directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be the
close of business on the next day preceding the day on which notice is first
given. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the board of directors may fix a new record
date for the adjourned meeting.
Section 4. Fixing a Record Date for Other Purposes. In order that
the Corporation may determine the stockholders entitled to receive payment of
any dividend or other distribution or allotment or any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purposes of any other lawful
action, the board of directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty (60) days prior to
such action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the board of directors adopts the resolution relating thereto.
Section 5. Registered Stockholders. Prior to the surrender to the
Corporation of the certificate or certificates for a share or shares of stock
with a request to record the transfer of such share or shares, the Corporation
may treat the registered owner as the person entitled to receive dividends, to
vote, to receive notifications, and otherwise to exercise all the rights and
powers of an owner. The Corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof.
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<PAGE> 22
Section 6. Subscriptions for Stock. Unless otherwise provided for in
the subscription agreement, subscriptions for shares shall be paid in full at
such time, or in such installments and at such times, as shall be determined by
the board of directors. Any call made by the board of directors for payment on
subscriptions shall be uniform as to all shares of the same class or as to all
shares of the same series. In case of default in the payment of any
installment or call when such payment is due, the Corporation may proceed to
collect the amount due in the same manner as any debt due the Corporation.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, in accordance with applicable law. Dividends may be paid in cash, in
property, or in shares of the capital stock, subject to the provisions of the
certificate of incorporation. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
any other purpose and the directors may modify or abolish any such reserve in
the manner in which it was created.
Section 2. Checks, Drafts or Orders. All checks, drafts, or other
orders for the payment of money by or to the Corporation and all notes and
other evidences of indebtedness issued in the name of the Corporation shall be
signed by such officer or officers, agent or agents of the Corporation, and in
such manner, as shall be determined by resolution of the board of directors or
a duly authorized committee thereof.
Section 3. Contracts. In addition to the powers otherwise granted to
officers pursuant to Article IV hereof, the board of directors may authorize
any officer or officers, or any agent or agents, of the Corporation to enter
into any contract or to execute
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<PAGE> 23
and deliver any instrument in the name of and on behalf of the Corporation, and
such authority may be general or confined to specific instances.
Section 4. Loans. The Corporation may lend money to, or guarantee
any obligation of, or otherwise assist any officer or other employee of the
Corporation or of its subsidiaries, including any officer or employee who is a
director of the Corporation or its subsidiaries, whenever, in the judgment of
the directors, such loan, guaranty or assistance may reasonably be expected to
benefit the Corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the board
of directors shall approve, including, without limitation, a pledge of shares
of stock of the Corporation. Nothing in this section contained shall be deemed
to deny, limit or restrict the powers of guaranty or warranty of the
Corporation at common law or under any statute.
Section 5. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the board of directors.
Section 6. Corporate Seal. The board of directors shall provide a
corporate seal which shall be in the form of a circle and shall have inscribed
thereon the name of the Corporation and the words "Corporate Seal, Delaware."
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
Section 7. Voting Securities Owned By Corporation. Voting securities
in any other corporation held by the Corporation shall be voted by the chairman
of the board, the chief executive officer, the president or a vice-president,
unless the board of directors specifically confers authority to vote with
respect thereto, which authority may be general or confined to specific
instances, upon some other person or officer. Any person authorized to vote
securities shall have the power to appoint proxies, with general power of
substitution.
Section 8. Inspection of Books and Records. Any stockholder of
record, in person or by attorney or other agent, shall, upon written demand
under oath stating the purpose thereof, have the right during the usual hours
for business to inspect for any proper purpose the Corporation's stock ledger,
a list of its stockholders,
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<PAGE> 24
and its other books and records, and to make copies or extracts therefrom. A
proper purpose shall mean any purpose reasonably related to such person's
interest as a stockholder. In every instance where an attorney or other agent
shall be the person who seeks the right to inspection, the demand under oath
shall be accompanied by a power of attorney or such other writing which
authorizes the attorney or other agent to so act on behalf of the stockholder.
The demand under oath shall be directed to the Corporation at its registered
office in the State of Delaware or at its principal place of business. The
Corporation shall have a reasonable amount of time to respond to any such
request.
Section 9. Section Headings. Section headings in these by-laws are
for convenience of reference only and shall not be given any substantive effect
in limiting or otherwise construing any provision herein.
Section 10. Inconsistent Provisions. In the event that any provision
of these by-laws is or becomes inconsistent with any provision of the
certificate of incorporation, the General Corporation Law of the State of
Delaware or any other applicable law, the provision of these by-laws shall not
be given any effect to the extent of such inconsistency but shall otherwise be
given full force and effect.
ARTICLE VIII
AMENDMENTS
These by-laws may be amended, altered, or repealed and new by-laws
adopted at any meeting of the board of directors by the affirmative vote of the
majority of the total number of directors then in office. The fact that the
power to adopt, amend, alter, or repeal the by-laws has been conferred upon the
board of directors shall not divest the stockholders of such powers as set
forth in the certificate of incorporation; provided, that Sections 2 and 11 of
Article II, Sections 2, 3, 4 and 5 of Article III and Article V of these
By-laws of the Corporation shall not be altered, amended or repealed by, and no
provision inconsistent therewith shall be adopted by, the stockholders without
the affirmative vote of the holders of at least 80% of the Common Stock, voting
together as a single class.
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<PAGE> 1
Exhibit 4.1
NUMBER SHARES
[LASON LOGO]
Incorporated under the laws See Reverse for certain
of the state of Delaware definitions
CUSIP 51808R 10 7
This Certifies that
is owner of
Fully Paid and Non-assessable Shares of Common Stock, Par Value $.01 per share,
of
Lason, Inc.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized Attorney upon surrender of this Certificate properly
endorsed. This certificate is not valid until countersigned and registered by
the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
Secretary [LASON INC. CORPORATE SEAL 1995 DELAWARE] Chairman of the Board
Countersigned and registered:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
Transfer Agent and Registrar,
By
Authorized Signature
<PAGE> 2
[LASON, INC.]
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM- as tenants in common UNIF GIFT MIN ACT-____Custodian______
TEN ENT- as tenants by the entireties (Cust) (Minor)
JT TEN- as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act__________________________
in common (State)
Additional abbreviations may also be used though not in the above list.
For value received,_____________________________________hereby sell, assign and
transfer unto
Please insert social security or other
identifying number of assignee
/ /
_______________________________________________________________________________
(Please print or typewrite name and address, including zip code, of assignee)
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_____________________________________________________________________Attorney
to transfer the said stock on the books of the within named Company with full
power of substitution in the premises.
Dated:_____________________
________________________________________
Notice: The Signature to this Assignment
must correspond with the name
as written upon the face of the
certificate in every particular,
without alteration or enlargement
or any change whatever.
Signature(s) Guaranteed:
____________________________________________________
The Signature(s) should be guaranteed by an eligible
guarantor institution (Banks, stockbrokers, savings
and loan associations and credit unions with membership
in an approved signature guarantee medallion program),
pursuant to S.E.C. Rule 17Ad-15.
<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD OF KIRKLAND & ELLIS]
October 7, 1996
Lason, Inc.
1305 Stephenson Highway
Troy, Michigan 48083
Re: Lason, Inc.
Registration Statement on Form S-1
Registration No. 333-09799
Ladies and Gentlemen:
We have acted as special counsel to Lason, Inc., a Delaware
corporation (the "Company"), in connection with the proposed registration by
the Company of shares of the Company's Common Stock, par value $.01 per share
(the "Shares"), resulting in proceeds to the Company of $56,925,000.00 pursuant
to a Registration Statement on Form S-1 filed with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Act") (such Registration Statement, as amended or supplemented and together
with any registration statement referred to in the next sentence, is
hereinafter referred to as the "Registration Statement"). This opinion also
relates to any registration statement in connection with this offering that is
to be effective upon filing pursuant to Rule 462(b) under the Act, and the term
"Shares" as used herein includes any additional shares of the Company's Common
Stock registered pursuant to such subsequently filed registration statement.
In that connection, we have examined originals, or copies
certified or otherwise identified to our satisfaction, of such documents,
corporate records and other instruments as we have deemed necessary for the
purposes of this opinion, including (i) the form of the Amended and Restated
Certificate of Incorporation (the "Certificate of Incorporation") and By-Laws
of the Company, (ii) minutes and records of the corporate proceedings of the
Company with respect to the Shares, (iii) the Registration Statement and
certain exhibits thereto, (iv) the form of underwriting agreement (the
"Underwriting Agreement") to be entered into among the Company, Robertson,
Stephens & Company L.L.C. and William Blair & Company, L.L.C., as
representatives of the several underwriters, and (v) such other documents and
instruments as we have deemed necessary for the expression of the opinions
contained herein.
For purposes of this opinion, we have assumed the authenticity
of all documents submitted to us as originals, the
<PAGE> 2
conformity to the originals of all documents submitted to us as copies and the
authenticity of the originals of all documents submitted to us as copies. We
have also assumed the genuineness of the signatures of persons signing all
documents in connection with which this opinion is rendered, the authority of
such persons signing on behalf of the parties thereto and the due
authorization, execution and delivery of all documents by the parties thereto
other than the Company. As to any facts material to the opinions expressed
herein which we have not independently established or verified, we have relied
upon statements and representations of officers and other representatives of
the Company and others.
Our opinion expressed below is subject to the qualifications
that we express no opinion as to the applicability of, compliance with, or
effect of any laws except the General Corporation Law of the State of Delaware
(the "DGCL") and the federal laws of the United States of America.
Based upon and subject to the foregoing qualifications,
assumptions and limitations and the further limitations set forth below, we are
of the opinion that the Shares have been duly authorized for issuance and, upon
(i) the filing of the Certificate of Incorporation with the Secretary of State
of the State of Delaware, (ii) effectiveness under the Act of the Registration
Statement and (iii) payment for the Shares in accordance with the terms of the
Underwriting Agreement and issuance in accordance therewith, the Shares will be
validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion with the
Commission as Exhibit 5.1 to the Registration Statement. We also consent to
the reference to our firm under the heading "Validity of Common Stock" in the
Registration Statement. In giving this consent, we do not thereby admit that
we are in the category of persons whose consent is required under Section 7 of
the Act or the rules and regulations of the Commission.
This opinion is limited to the specific issues addressed
herein, and no opinion may be inferred or implied beyond that expressly stated
herein. We assume no obligation to revise or supplement this opinion should
the current DGCL or the current federal law of the United States be changed by
legislative action, judicial decision or otherwise.
This opinion is furnished to you solely for your benefit to be
used by you in connection with the filing of the Registration Statement and is
not to be used, circulated, quoted or otherwise relied upon by any other person
or by you for any other purpose.
Very truly yours,
/s/ Kirkland & Ellis
KIRKLAND & ELLIS
<PAGE> 1
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made this 7th day of August, 1996, between LASON
SYSTEMS, INC, a Delaware corporation, the address of which is 1305 Stephenson
Highway, Troy, Michigan, 48084 ("Corporation"), and Gary L. Monroe, whose
address is 4808 Deer Park Court, Rochester Hills, Michigan 48306 ("Employee").
R E C I T A L S:
Corporation is engaged in the business of providing a wide range of
document management, records management and business communication services.
Employee is experienced in running all aspects of such business.
The parties are desirous of entering into a contract of employment on
the terms and conditions set forth below.
THEREFORE, the parties agree as follows:
1. Engagement Of Employee. Corporation hereby employs Employee
for the term of this Agreement as set forth in Paragraph 4 and, during the term
of this Agreement, Employee agrees to provide the following services to
Corporation on the terms contained in this Agreement: Employee shall hold the
title of Chief Executive Officer and shall be responsible for providing the
services customarily required of a Chief Executive Officer including, but not
limited to, direction of both Corporation's day-to-day operations and its sales
and marketing activities. Employee shall devote his full time and attention to
discharging the duties of his position and shall report to Corporation's Board
of Directors, through its Chairman of the Board, Robert A. Yanover.
2. Base Compensation.
A. Base Salary. Corporation shall pay to Employee a base
salary of One Hundred Seventy-Five Thousand and 00/100
($175,000.00) Dollars per calendar year. Such base
salary shall be paid in equal bi-weekly installments
(less appropriate and necessary withholdings for
employment taxes), commencing on Corporation's next
regular pay day and continuing on the same day of every
other week thereafter during the term of this Agreement.
B. Bonus. Predicated on Corporation's performance,
Employee shall be entitled to an annual bonus of a
minimum of 50% of the base salary set forth in Section
2(A) above. The
1
<PAGE> 2
amount of the bonus shall be determined by
Corporation's Board of Directors.
C. Benefits. Employment shall have the right to
receive or participate in any fringe benefits,
including, but not limited to, personal days,
group term life insurance programs, disability
insurance programs, medical expense reimbursement
plans, flexible benefit plans, so-called qualified
"pension or profit sharing plans," and other
reasonable and customary fringe benefits which may
from time-to-time be made available by Corporation's
Board of Directors (and further subject to any
applicable eligibility requirements of each such
program). Further, Employee shall be entitled to an
automobile allowance and other similar benefits as
determined by Corporation's Board of Directors.
3. Grant of Options. Employee shall be eligible to participate in
the Lason Holdings, Inc. 1995 Stock Option Plan (the "Plan") pursuant to the
terms of an Employee Stock Option Agreement entered into between Employee and
Lason Holdings, Inc. dated December ___, 1995 (the "Stock Option Agreement").
4. Term and Severance.
The term of this Agreement shall be for two (2) years from and after
the date of this Agreement.
In the event that Employee is terminated during the term of this
Agreement with or without cause or in the event that he resigns because of a
material change in the scope of his duties then, and in that event, Employee
shall be entitled to receive severance pay in an amount equal to his base
salary plus his actual bonus for the preceding year or 50% of base salary,
whichever is greater. Such severance pay shall be paid for the unexpired term
of this Agreement or 12 months, whichever is greater.
5. Non-Competition/Confidentiality. In consideration of the
compensation described in this Agreement, Employee agrees that while he is
employed by Corporation and should he elect to voluntarily leave Corporation's
employ prior to the expiration of the term of this Agreement (except in the
event of a material change in his duties) then, and in that event, for the
unexpired term of this Agreement, (the "Non-Compete Period"), Employee shall
not, either directly or indirectly (and whether or not for compensation), work
for, be employed by, own, participate or engage in, or have any interest in,
any person, firm, entity, partnership, limited partnership, limited liability
company, corporation or business (whether as an employee, owner, partner,
member,
2
<PAGE> 3
shareholder, officer, director, agent, creditor, consultant or in any capacity
which calls for the rendering of personal services, advice, acts of management,
operation or control) that engages in activities in any of the counties in
which Corporation transacts business which are substantially the same as or
competitive with the activities engaged in by Corporation including but not
limited to the following: document management, records management and business
communications, so long as Corporation (or any successor) shall, directly or
indirectly, be engaged in such activity in such county. The foregoing shall
not, however, be deemed to prevent Employee from investing in any corporation
the shares of which are traded on a securities exchange or in the
over-the-counter market.
Employee further agrees that he shall not, directly or indirectly, at
any time during the Non-Compete Period: (i) divert or attempt to divert from
Corporation any business of any kind in which Corporation is engaged; (ii)
take any action that causes the termination of a business relationship between
Corporation and any customer or supplier of Corporation; or (iii) induce or
attempt to induce any person who is an employee of Corporation to leave the
employ of Corporation.
During the term of this Agreement and the Non-Compete Period, Employee
shall keep secret and inviolate and shall not divulge, communicate, use to the
detriment of Corporation or for the benefit of any other person or persons or
misuse in any way any knowledge or information of a confidential nature,
including, without limitation, all trade secrets, information, computer
programs, technical data, customer lists and unpublished matters relating to
the business, assets, accounts, books, records, customers and contracts of
Corporation which he may or hereafter come to know as a result of his
association with and which is unique to Corporation ("Confidential
Information"). Information shall not be considered Confidential Information
if: (i) the information is known by or subsequently becomes generally
available to the public through no fault or breach on the part of Employee;
(ii) the information is independently developed by Employee without the use of
any Confidential Information; or (iii) the Employee rightfully obtains the
information after the term of this Agreement from a third party that has the
right to disclose it. Employee may disclose Confidential Information if
required by any judicial or governmental request, requirement or order;
provided that Employee will take reasonable steps to give Corporation
sufficient prior notice in order to contest such request, requirement or order.
Employee has had knowledge of the affairs, trade secrets, customers,
potential customers and other proprietary information of Corporation, and
Employee acknowledges and agrees that compliance with the covenants set forth
in this Paragraph 5 is necessary for the protection of the business, goodwill
and other proprietary interests of Corporation and that any violation of this
Agreement will cause severe and irreparable injury to the business, goodwill
3
<PAGE> 4
and proprietary interests of Corporation, which injury is not compensable by
money damages. Accordingly, in the event of a breach (or threatened or
attempted breach) of this Paragraph 5, Corporation and any successor shall, in
addition to any other rights and remedies, be entitled to immediate appropriate
injunctive relief or a decree of specific performance, without the necessity of
showing any irreparable injury or special damages.
If, in any judicial proceeding, a court shall refuse to enforce
any of the covenants included herein, then said unenforceable covenant(s) shall
be deemed eliminated from these provisions for the purpose of those proceedings
to the extent necessary to permit the remaining separate covenants to be
enforced. It is the intent and agreement of Corporation and Employee that these
covenants be given the maximum force, effect and application permissible under
law.
The provisions of this Paragraph 5 shall survive the
termination of this Agreement.
6. Miscellaneous. Employee shall not assign his rights and
obligations hereunder. Corporation may assign its rights and obligations
hereunder with the consent of Employee which consent shall not be unreasonably
withheld. Subject to the foregoing, all of the terms and conditions of this
Agreement shall be binding upon and shall inure to the benefit of the heirs,
successors, administrators, legal representatives and assigns, as the case may
be, of the parties hereto.
7. Partial Invalidity. If any provision of this Agreement
is held by a court of competent jurisdiction to be invalid, void or
unenforceable in any manner, the remaining provisions of this Agreement shall
nonetheless continue in full force and effect without being impaired or
invalidated in any way. In addition, if any provision of this Agreement may be
modified by a court of competent jurisdiction such that it may be enforced, then
that provision shall be so modified and as modified shall be fully enforced.
8. Entire Agreement. This Agreement contains the entire
understanding of the parties hereto with respect to the subject matter
contained herein, supersedes all prior and contemporaneous agreements,
understandings and negotiations, and any all employment agreement(s)
between Corporation and Employee dated prior to the date hereof; and no
evidence of prior or contemporaneous agreements, understandings and
negotiations shall govern or be used to construe or modify this Agreement.
Except as provided in this Agreement, no modification or alteration hereof
shall be deemed effective unless in writing and signed by the parties hereto.
Neither this Agreement nor any of its provisions may be changed, waived, or
discharged orally, but only by an instrument duly signed by the party against
which enforcement
4
<PAGE> 5
of the change, waiver, or discharge is sought.
9. Notices. All notices, demands, and requests required or permitted
to be given under the provisions of this Agreement shall be in writing and
shall be deemed given (a) when personally delivered or sent by facsimile
transmission to the party to be given the notice or other communication or (b)
on the business day following the day such notice or other communication is
sent by overnight courier to the addresses set forth above or at such other
address as either party may designate from time to time by appropriate notice
to the other.
10. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Michigan.
11. Headings. The headings in this Agreement are for reference only
and shall not limit or otherwise affect any of the terms or provisions hereof.
12. Counterparts. This Agreement may be executed in two (2) or more
counterparts, each of which shall be considered an original, but all of which
together shall constitute one and the same instrument.
THIS AGREEMENT was executed as of date and year first set forth above.
"CORPORATION"
LASON SYSTEMS, INC., a Delaware
corporation
By: /s/ Robert A. Yanover
----------------------------------
Robert A. Yanover
Its: Chairman of the Board
----------------------------------
"EMPLOYEE"
/s/ Gary L. Monroe
---------------------------------------
GARY L. MONROE
5
<PAGE> 1
EXHIBIT 10.18
[CIGNA LOGO]
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
a CIGNA company
(a stock company)
GROUP ANNUITY CONTRACT NUMBER GA-36724 issued to:
TRUSTEES OF THE LASON SYSTEMS, INC.
401(k) PROFIT SHARING PLAN & TRUST
EFFECTIVE DATE: January 1, 1994 DATE OF ISSUE: March 15, 1994
The Insurance Company agrees to pay the benefits provided in accordance with
the terms of this Contract. This Contract is issued in consideration of the
Application and the payment of the Contributions provided for herein.
THE VARIABLE BENEFITS PROVIDED HEREUNDER WHICH ARE BASED ON THE INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT ARE VARIABLE AND NOT GUARANTEED AS TO FIXED
DOLLAR AMOUNT.
This Contract is issued and accepted subject to all the terms set forth on this
page and on the following pages, which are hereby made a part of this Contract.
IN WITNESS WHEREOF Connecticut General Life Insurance Company has caused this
Contract to be executed at its Home Office on the Date Issued to take effect on
the Effective Date.
Byron Oliver
---------------------------
Senior Vice President
GROUP ANNUITY CONTRACT
FIXED ANNUITY
GUARANTEED COST - SEPARATE ACCOUNT
<PAGE> 2
GROUP ANNUITY CONTRACT
TABLE OF CONTENTS
SECTION STARTING ON PAGE
1.............. Definitions............................................. 2
2.............. Incoming Amounts........................................ 3
3.............. Operational Agreements.................................. 5
4.............. Distributions........................................... 7
5.............. Discontinuance.......................................... 9
6.............. Miscellaneous........................................... 11
Contract Expense Schedule
Annuity Purchase Rate Table A
Annuity Purchase Rate Table B
Guaranteed Long Term Account Rider
Separate Account 55A Rider
Separate Account 55B Rider
Separate Account 55F Rider
Separate Account 55G Rider
Separate Account 55J Rider
Application
<PAGE> 3
SECTION I
DEFINITIONS
1.1 The CONTRACT is the group annuity Contract GA-36724 issued by Connecticut
General Life Insurance Company.
1.2 The CONTRACTHOLDER is Trustees of the Lason Systems, Inc. 401 (k) Profit
Sharing Plan & Trust.
The term CONTRACTHOLDER will also include any person designated by the
Contractholder or the Employer to carry out administrative functions.
1.3 The EMPLOYER is the corporation or firm named as employer in the Plan.
1.4 The INSURANCE COMPANY is the Connecticut General Life Insurance Company, a
legal reserve life insurance company incorporated in Connecticut.
1.5 The I.R.C, is the Internal Revenue Code of 1986, as amended from time to
time.
1.6 A PARTICIPANT is an individual having an account under the Plan.
1.7 The PLAN is Lason Systems, Inc, 401 (k) Profit Sharing Plan & Trust adopted
by the Employer effective September l, 1989, as constituted on January 1,
1994, as said Plan may be amended from time to time.
1.8 A RIDER is that section of the Contract describing the funding vehicle(s)
selected by the Contractholder.
<PAGE> 4
SECTION 2
INCOMING AMOUNTS
2.1 The Contractholder and the Insurance Company agree to the following:
(A) CONTRIBUTIONS. Contributions for investment under this Contract
will be transferred by the Contractholder and accepted by the
Insurance Company. The amount of Contributions for any contribution
period is equal to the amount to be contributed under the terms of the
Plan, after the effective date of this Contract, that are designated
for investment under this Contract. The amount of Contributions may
be reduced by subtracting, for such period, the amount of prospective
Plan distributions to Participants. Contributions for investment
under this Contract may not be less than one hundred fifty thousand
dollars ($150,000) in any one plan year unless the Insurance Company
agrees. Notwithstanding the above, in the event that the
Contractholder elects to have the Insurance Company provide
recordkeeping services, contributions under this Contract may not be
less than thirty five thousand dollars ($35,000) in any one plan year
unless the Insurance Company agrees. Contributions to the Guaranteed
Long Term Account may not exceed the Insurance Company's current
underwriting guidelines for such contributions for this product in any
one plan year unless the Insurance Company gives its prior written
consent.
(B) TRANSFERRED ASSETS. Amounts paid under the terms of the Plan
prior to the Effective Date of this Contract, that are designated for
investment under this Contract, will be transferred by the
Contractholder and accepted by the Insurance Company. Such amounts of
Transferred Assets combined with Contributions for the first plan year
may not exceed the Insurance Company's current underwriting guidelines
for such contributions for this product unless the Insurance Company
gives its prior written consent.
(C) PAYMENT. Such amounts will become due and payable at the
Insurance Company's home office address via the designated Insurance
Company lock box or the Pension Automated Transfer System or to any
designated agent of the Insurance Company within thirty (30) days of
the date specified in the Plan. A grace period of sixty (60) days, or
the time required by law for the contribution to be made, if less,
will be allowed for such payment. The Contractholder is responsible
for ensuring that the contributions due under the terms of the Plan
are made within the time required by law.
(D) TRANSFERS. Subject to the terms of the Plan, transfers from a
terminated plan or from a plan which qualifies under I.R.C. section
401(a) that is terminating or is being merged or consolidated into
the Plan, in accordance with I.R.C. section 401(a)(12), and which
are to be allocated to one of the funding vehicles represented by the
Rider(s), will be accepted by the Insurance Company.
Subject to the terms of the Plan, transfers from a plan which
qualifies under I.R.C. section 401(a) to the Plan, and which are to
be allocated to one of the funding vehicles represented by the
Rider(s), will be accepted by the Insurance Company.
<PAGE> 5
(E) ROLLOVERS. Subject to the terms of the Plan, amounts contributed to the
Plan by Participants pursuant to I.R.C. sections 402(a)(5) and (6), I.R.C,
section 403(a)(4) or I.R.C. section 408(d)(3)(A)(ii), and which are to be
allocated to one of the funding vehicles represented by the Rider(s), will
be accepted by the Insurance Company.
(F) With respect to any Incoming Amounts which may be payable to the
Insurance Company pursuant to this Section 2, the Insurance Company
expressly reserves the right not to accept such amounts if such acceptance
would cause the Insurance Company to take action contrary to its normal
rules and practices. The Insurance Company shall notify the
Contractholder if it will not accept Incoming Amounts hereunder, but any
such action by the Insurance Company shall not affect any other existing
obligations of the Insurance Company or the Contractholder under this
Contract as it is then in effect.
<PAGE> 6
SECTION 3
OPERATIONAL AGREEMENTS
3.1 The Contractholder agrees to the following:
(A) QUALIFICATION. The Contractholder will apply within one year
plus any filing extensions allowed by law of the Effective Date of the
Plan for a determination letter from the Internal Revenue Service that
the Plan meets the requirements of I.R.C. section 401(a). The
Contractholder will apply for a new determination letter from the
Internal Revenue Service with respect to Plan amendments within one
year plus any filing extensions allowed by law of the effective date
of any amendment which requires filing with the Internal Revenue
Service. A copy of the determination letter will be filed with the
Insurance Company within thirty (30) days of receipt by the
Contractholder.
(B) AMENDMENT. No Plan amendment will be made which would require the
Insurance Company to take action contrary to its normal rules
and practices. A certified copy of any change in or amendment to the
Plan will be filed with the Insurance Company within thirty (30) days
of its adoption by the Employer.
(C) DISQUALIFICATION. Notification will be sent to the Insurance Company
within thirty (30) days of the date the Employer receives
initial written notification from the Internal Revenue Service that
the Plan no longer meets the requirements of I.R.C. section 401(a).
When such determination becomes final, the terms of Section 5 shall
apply.
(D) COMPETING FIXED INCOME FUNDS. The Contractholder agrees not to offer
an investment vehicle which the Insurance Company considers a
competing fixed income fund, unless the use of such an investment
vehicle has been previously agreed to by the Insurance Company, or
unless the Insurance Company gives its prior written consent.
(E) TRANSFERS. When amounts are designated by Participants for transfer
between or among funding vehicles under this Contract, such
transfers represent the choice of Participants, free from corporate or
trustee announced or published suggestion or persuasion.
(F) INFORMATION. All information necessary to process Incoming Amounts,
Transfers between the funding vehicles, and Distributions will
be submitted by the Contractholder to the Insurance Company no more
frequently than monthly or every fourth week. Any information
required by the Insurance Company in order to perform any agreement or
obligation under this Contract will be properly authorized by the
Contractholder and promptly forwarded in writing to the Insurance
Company. In addition, any information required by the Insurance
Company to ensure compliance with the provisions of Sections 3.1(D)
and (E) will be promptly forwarded in writing by the Contractholder to
the Insurance Company upon the request of the Insurance Company.
<PAGE> 7
(G) EXPENSES. Expenses and charges described in the Contract Expense
Schedule attached hereto will be paid either by remitting to
the Insurance Company within thirty (30) days of the mailing date of
notice of such charges or by such other method as is otherwise
described. In the event such expenses and charges are not remitted
within thirty (30) days, the Insurance Company reserves the right to
deduct the amounts due from the Contractholder's Account upon written
authorization from the Contractholder.
(H) The Contractholder will operate its Plan to comply with all applicable
laws and regulations.
3.2 The Insurance Company agrees to the following:
(A) CONTRACTHOLDER'S ACCOUNT. An account will be established and
maintained for the Contractholder. Contributions and Transferred
Assets will be invested in accordance with the instructions filed with
the Insurance Company by the Contractholder and in accordance with the
terms of the Rider(s) selected by the Contractholder.
(B) TRANSFERS. Subject to the transfer limitations set forth in the
Rider(s), amounts may be transferred from one Plan funding
vehicle to another in accordance with the terms of the Plan.
(C) ALLOCATION DATE. Incoming Amounts will be allocated as of the
valuation date coinciding with or next following the date the
Insurance Company receives such Incoming Amounts. Transfers between
funding vehicles will be allocated as of the valuation date coinciding
with or next following the later of the date the Insurance Company
receives written instructions from the Contractholder regarding the
Transfer or the effective date of such Transfer. The determination of
the valuation date will be governed by the applicable Rider(s).
(D) REPORTS. Reports of the Contractholder's Account activity will be sent
to the Contractholder quarterly, unless the Insurance Company
agrees to report on a more frequent basis.
<PAGE> 8
SECTION 4
DISTRIBUTIONS
4.1 GENERAL DISTRIBUTIONS. The Insurance Company agrees to make
distributions from the Contractholder's Account, subject to the terms of
the Plan, and to the transfer limitations set forth in the Rider(s), in
the following manner:
(A) TRUSTEE. The Plan's trustee will be entitled to receive all cash
payments for further distribution.
(B) AMOUNT. A distribution from the Contractholder's Account will be in an
amount up to and including the value of such account on the
valuation date. The determination of the valuation date will be
governed by the applicable Rider(s).
(C) FORM. Distributions will be in one or both of the following forms:
(1) Any type of annuity which the Insurance Company agrees in writing
to issue, or
(2) A single sum cash payment.
Any distribution of $3,500 or less on behalf of a Participant will be
made in the form of a single sum cash payment.
(D) AMOUNT USED TO PURCHASE ANNUITY. The amount the Insurance Company
will apply to the purchase of an annuity will be reduced by any
amount necessary to pay applicable taxes and/or annuity purchase fees.
The annuity will be purchased at the rates then in effect for
all contracts in this class of business.
4.2 DISTRIBUTIONS AT DEATH. In the event a Participant dies prior to
distribution of his interest in the Plan, the Contractholder will
determine the appropriate beneficiary(ies), the amount of the death
benefit and the form in which it will be paid in accordance with the Plan
and applicable law, and will direct the Insurance Company to make proper
payment.
In the event a Participant dies after an annuity has been purchased on
his behalf, the death benefit, if any, will be made in accordance with the
terms of the annuity certificate.
4.3 LIMITATION. The Contractholder agrees that distributions under this
Section 4 will be subject to the limitation contained in this Section
4.3 as well as those contained in the Rider(s) attached to this Contract.
<PAGE> 9
A distribution for the benefit of a Participant from the Guaranteed
Long Term Account will not exceed a fraction of such Participant's total
share of Plan assets. The fraction will be determined by dividing-such
Participant's share of the Plan assets in the Guaranteed Long Term Account
as of the valuation date by such Participant's share of all Plan assets as
of such date. The determination of the valuation date will be governed by
the applicable Rider(s).
The determinations necessary for the limitation in this Section 4.3
will be made according to records maintained by the Contractholder.
4.4 GUARANTEES. The rates used for the purchase of a ten year certain and
life annuity will in no event be less than those in the applicable Annuity
Purchase Rate Table. Rates applied to purchase other forms of annuity
will in no event be less than the actuarial equivalent as determined by
the Insurance Company of the rates in the applicable Annuity Purchase Rate
Table.
4.5 DEFERRED PAYMENTS. The Contractholder and the Insurance Company agree
that the payment of any distribution pursuant to this Section may be
deferred for a period not exceeding six (6) months from the date otherwise
payable, subject to the appropriate Riders(s). No payment will be delayed
beyond the time permitted by applicable laws and regulations.
4.6 With this exception of Section 4.5, the distribution provisions described
in this Section 4 do not apply to disbursements made on account of
Contract Discontinuance as described in Section 5.
<PAGE> 10
SECTION 5
DISCONTINUANCE
5.1 DISCONTINUANCE. This Contract will be discontinued if:
(A) The Contractholder notifies the Insurance Company in writing that the
Contract will be discontinued; or
(B) The Insurance Company notifies the Contractholder in writing that the
Contractholder has breached a provision of Sections 2, 3, 4,
or 6 and that the Contract will be discontinued; or
(C) The Insurance Company determines that the class of business to which
this Contract belongs is no longer commercially feasible and
notifies the Contractholder in writing that the Contract will be
discontinued. This provision will not be exercised by the Insurance
Company in order to generate additional sources of income than
otherwise provided under the Contract.
5.2 DISCONTINUANCE DATE. The Discontinuance Date is the first day of the
month coinciding with or next following the date the Insurance
Company receives the notice specified in Section 5.1(A) or sends the
notice specified in Section 5.1(B) or (C). Upon discontinuance of the
Contract:
(A) The Insurance Company will no longer accept contributions as of the
Discontinuance Date; and
(B) The Insurance Company will timely notify the Contractholder of
expenses and charges due.
5.3 DISCONTINUANCE DISBURSEMENT DATE. Unless otherwise agreed,
discontinuance disbursements will be made as of the valuation date
coinciding with or next following the later of:
(A) Ninety (90) days after the date the Insurance Company receives all
information necessary to make the disbursement; or
(B) Ninety (90) days after the date the Insurance Company recovers all
expenses due under this Contract.
The determination of the valuation date will be governed by the
applicable Rider(s).
<PAGE> 11
5.4 DISBURSEMENTS. Disbursements made at discontinuance are subject to the
Discontinuance Transfer Limitation provisions contained in the Rider(s)
and the recovery of expenses and charges which are incurred up to the date
all assets under this Contract are disbursed in accordance with this
Section 5. The Insurance Company agrees to disburse the amount of each
Participant's Account attributable to Employer and Participant
contributions as follows:
(A) If the Plan continues to meet the requirements of I.R.C. section
401(a) but a new funding agent is selected, the Contractholder may
specify that such amount be transferred to the Plan's Trustees or new
funding agent. In order to transfer such amount, the Insurance
Company must receive evidence acceptable to it that the Plan will
continue to meet the requirements of I.R.C. section 401(a).
(B) If the Internal Revenue Service determines that the Plan
initially fails to meet the requirements of I.R.C. section 401(a),
such amounts will be disbursed to the Contractholder in a single sum
cash payment.
(C) If the Plan is terminated within the meaning of Income Tax
Regulations section 1.401-6 or the Internal Revenue Service determines
that the Plan no longer meets the requirements of the I.R.C. section
401(a), the Contractholder's Account will be distributed in a manner,
and at such time, as is mutually agreeable to the Contractholder and
the Insurance Company, provided appropriate governmental or regulatory
approval is first obtained.
<PAGE> 12
SECTION 6
MISCELLANEOUS
6.1 The Insurance Company and the Contractholder agree to the following:
(A) All communications will be in writing and will be submitted by first
class mail, postage prepaid.
(1) If to the Insurance Company, to:
Defined Contributions
CIGNA Retirement & Investment Services
Connecticut General Life Insurance Company
P.O. Box 2975
Hartford, CT 06104
(2) If to the Contractholder, to its principal place of business.
(B) All agreements under this Contract shall insure to the benefit of and
be binding upon the successors and assigns of the Insurance Company
and the Contractholder unless the Insurance Department of the State
of Connecticut determines that the Insurance Company has ceased doing
business of this class and kind.
(C) No distribution or disbursement payable to any Participant or
beneficiary is assignable except to the extent allowed by law and
all distributions or disbursements are exempt from the claims of
creditors to the maximum extent permitted by law.
(D) The Insurance Company may require proof that the recipient of annuity
payments is living as of each and every date on which any annuity
payment becomes payable. If such proof is not furnished when
requested, the Insurance Company may withhold payments until proof
has been received.
(E) The Insurance Company will issue an individual certificate to each
Participant for whom an annuity is purchased. If the state of issue so
requires, the Insurance Company will issue a certificate to each
Participant contributing to the Plan. Any certificate so issued will
in no way void or alter any of the terms of this Contract.
(F) If the age determining the annuity purchase rate, or any other fact
pertaining to the prurchase, of or the determination of the amount of
an annuity is found to have been misstated, or in the event of clerical
error, the following adjustments will be made:
<PAGE> 13
(1) The amount of annuity payable by the Insurance Company will be
that provided by the correct rate applied to purchase such
annuity, determined as of the date of purchase on the basis of
the correct information.
(2) Any overpayments by the Insurance Company resulting from any
misstatements or errors will be deducted from amounts thereafter
payable.
(3) Any underpayments by the Insurance Company resulting from any
misstatements or errors will be paid in full with the next payment
due.
(G) The Insurance Company agrees only to the provisions of this Contract
and is not a party to nor bound by any trust or plan. The Insurance
Company is not responsible for the status under any state or federal
revenue law of any contribution made pursuant to such Plan.
(H) Payment by the Insurance Company made pursuant to the terms of this
Contract will release the Insurance Company from all further liability
to the extent of such payment.
(I) Reports, notices, requests and other information submitted to the
Insurance Company by the Contractholder, its designated
representative, a Participant or a Beneficiary may be relied on
conclusively by the Insurance Company.
(J) If the Insurance Department or other authority of any state or other
jurisdiction determines that premium taxes are due and payable with
respect to amounts contributed prior to such determination, an
amount equal to the assessed taxes and interest may be deducted from
the Contractholder's account. If such Department or authority requires
the payment of such taxes on amounts contributed under this Contract
subsequent to such determination, the Insurance Company can deduct the
applicable amount from Incoming Amounts or in such other manner as
required by the taxing authority.
(K) In applying for the Contract, the Contractholder will select the
Riders(s) which become part of this Contract.
(L) Any change in this Contract will be subject to the following
provisions:
(1) No change will affect the amount of interest credited or accrued
prior to the effective date of such change.
(2) No change will affect the amount or terms of any annuity purchased
prior to the effective date of such change.
(3) Any change to this Contract can be made without notice to or the
consent of any Participant, beneficiary or annuitant.
<PAGE> 14
(4) The Insurance Company may, at any time, make any changes,
including retroactive changes to the provisions of this
Contract to the extent that such changes are required in order to
conform the Contract to the provisions of I.R.C. section 401(a),
any applicable law or any regulation issued by any governmental
agency to which the Plan or the Insurance Company is subject.
(5) Unless the Contractholder discontinues this Contract and selects
a new funding agent, the Insurance Company may annually review
the provisions of Sections 2, 3, 4, 5, the Contract Expense
Schedule and the Rider(s) and may change the Sections, Contract
Expense Schedule and/or the Rider(s) after ninety (90) days'
advance written notice to the Contractholder provided, however,
that any such change will apply to all contracts in the same
class of business as this Contract.
(M) For the purposes of this Contract, a copy of the death certificate, a
physician's written statement certifying as to the death of the
decedent, a copy of a certified decree of a court of competent
jurisdiction as to the finding of death or any other reasonable
evidence that may be required by the Insurance Company shall
constitute due proof of death.
(N) The laws of the State of Connecticut govern this Contract except
where its provisions may be more specifically governed by the laws of
its state of issuance.
(O) The singular includes the plural and the masculine pronoun includes
both the masculine and feminine gender unless the context indicates
otherwise.
(P) Two or more duplicate originals of this Contract constitute one and the
same instrument. The Application of the Contractholder together with
all Riders, Tables and Schedules, copies of which are attached to and
made a part of this Contract, constitute the entire Contract between
the Insurance Company and the Contractholder.
(Q) If the Insurance Company has reasonable cause to believe that any payee
is legally, physically or mentally incapable of personally receiving
and receipting for any payment due him, the Insurance Company may
make such payment or any part thereof to any person or institution
who, in the opinion of the Insurance Company, is then maintaining or
has custody of the payee, until claim is made by the duly appointed
guardian or other legal representative of the payee. Such payment
will constitute a full discharge of the liability of the Insurance
Company to the extent thereof.
<PAGE> 15
CONTRACT EXPENSE SCHEDULE
The expenses outlined in the Contract Expense Schedule of this Contract are
annual charges which will be billed in part at the end of each Plan Quarter.
Any charges based on assets or charges taken out of Participants' Accounts,
however will be billed on an annual basis.
The term, "Plan Quarter" in this Contract Expense Schedule means three (3)
months of the Plan Year or the period of time during which the Insurance
Company receives the expected number of contributions for three (3) months
based on, the frequency of contributions submitted by the Employer under the
Plan.
This Contract Expense Schedule will cover expenses and taxes incurred by the
Insurance Company in the establishment and maintenance of this Contract. In no
event will these charges cover or be amended so as to cover any fees, expenses,
taxes, or charges relating to the management of the assets held hereunder. The
Contract Expense Schedule is effective January 1, 1994, as follows:
1. ASSET CHARGE:
The Asset Charge for the coming Plan Year is determined annually as of
the asset charge valuation date and is based on the value of the
participant accounts. The charge is computed according to the following
schedule:
<TABLE>
<CAPTION>
Asset and/or Contribution Level Asset Charge (Annual Rate)
------------------------------- --------------------------
<S> <C>
Under $300,000 of assets and an annual 2.20%
contribution under $100,000
Over $300,000 and under $1.5 million of assets 1.85%
or annual contributions over $100,000
Over $1.5 million and under $3 million of 1.80%
assets
Over $3 million and under $5 million of 1.75%
assets
Over $5 million and under $10 million of 1.70%
assets
Over $10 million and under $15 million of 1.65%
assets
Over $15 million and under $20 million of 1.60%
assets
Over $20 million of assets 1.50%
</TABLE>
The asset charge valuation date is the last day of the Plan Year
provided that the Insurance Company is open to transact normal business on
such day and the New York Stock Exchange is open for unrestricted trading.
Should the last day of the Plan Year fail to occur simultaneously with
both of these events, the valuation date will be the
<PAGE> 16
next normal business day on which the New York Stock Exchange is open
for unrestricted trading.
The Asset Charge, as determined above, shall not be applied to the
value of the Contractholder's account attributable to investments held in
the Fidelity Advisor and/or Warburg Pincus Separate Account. These
amounts are included in determining the annual rate applied to assets held
under the Contract,
2. FIDELITY ADVISOR AND/OR WARBURG PINCUS:
The Fidelity Advisor and/or Warburg Pincus asset charge for the coming
year is determined annually as of the asset charge valuation date and is
assessed on the value of the Contractholder's investment in the Fidelity
Advisor and/or Warburg Pincus Separate Account. The charge is an annual
rate of 1.30%.
3. INVESCO ACCOUNT:
The Invesco Account asset charge for the coming year is determined
annually as of the asset charge valuation date and is assessed on the value
of the Contractholder's investment in the Invesco Account. The charge is
an annual rate of 1.60%.
4. Annual Base Fee
$4,600 per year
Proper adjustment shall be made for a Plan Year that is not equal to twelve
(12) months.
5. BASIC ADMINISTRATION CHARGE
The annual Basic Administration Charge is based on the number of
accounts being maintained under the Plan with an account balance greater
than zero. The annual charge is $18.00 per Participant Account.
The annual Basic Administration Charge will be increased by $5.00 per
account if the Employer submits contribution data on hard copy.
If the Employer utilizes only one active source, the above schedule
will be reduced by $2.00 per account.
The above charge will be paid out of Participants' Accounts.
6. BENEFIT PROCESSING SERVICES:
The charge for each benefit processed is $40.00 per transaction.
<PAGE> 17
A Benefit Processing Charge will apply to any Plan disbursement,
including but not limited to payment of all or a portion of a Participant's
vested account balance because of termination, retirement, death,
withdrawal or disability. Annuity purchases are not subject to this
charge.
The above charge will be paid out of Participants' Accounts.
7. BASIC DISCONTINUANCE PROCESSING CHARGE:
The Basic Discontinuance Processing Charge is determined as of the date of
discontinuance. The charge is $18.00 per Participant Account.
8. MISCELLANEOUS:
This Expenses Schedule is subject to annual review by the Insurance
Company and may be changed effectively after ninety (90) days' written
notice to the Contractbolder. This schedule will not be changed within
the first twelve (12) months following the Contract's Effective Date nor
will it be changed more frequently than once in any twelve (12) month
period except by written agreement between the Insurance Company and the
Contractholder.
9. SPECIAL SERVICES:
In addition to the expenses for the services are listed below, if
applicable, any Special Services requested by the Contractholder which are
not specified below will be charged to the Contractholder in accordance
with the fee schedule then in effect.
Additional Inactive Source
$5.00 Administrative Charge - Per Source per number of Participants
utilizing the source.
The above charge will be paid out of Participants' Accounts.
Loan Charge
The Loan Charge for each loan processed is $75.00
The above charge will be paid out of Participants' Accounts.
5500 Preparation
$1000 per Plan Year
Compliance Testing Services
$80.00 per Service for either a) determining HCE or
b) performing ADP/ACP test,
$110.00 per Service for both a) determining HCE or
b) performing ADP/ACP test,
plus:
<PAGE> 18
1st 1,000 Employees $1.10 per Employee for each
service
Excess over 1,000 Employees $.70 per Employee for each
service
If data is submitted on floppy disk or tape:
1st 1,000 Employees $.55 per Employee for each
service
Excess over 1,000 Employees $.20 per Employee for each
service
Surrender Charge
In addition to the Basic Discontinuance Processing Charge there is a
Surrender Charge in accordance with the following schedule:
Year of Discontinuance Flat Charge
- ---------------------- -----------
Within First Year $30,000
Within Second Year $20,000
Within This Year $10,000
Case Setup and Installation Fee
$3,000
<PAGE> 19
ANNUITY PURCHASE RATE TABLE A
GUARANTEED MINIMUM FIRST MONTHLY ANNUITY PAYMENT
PURCHASED BY A PREMIUM OF $1,000
FORM OF ANNUITY: 100% FIXED TEN YEAR CERTAIN
AND LIFE ANNUITY
<TABLE>
<CAPTION>
Participant's Age* Monthly Rate
- ----------------- ------------
<S> <C>
55 4.82
56 4.91
57 5.01
58 5.11
59 5.21
60 5.32
61 5.43
62 5.55
63 5.68
64 5.81
65 5.95
66 6.10
67 6.25
68 6.41
69 6.57
70 6.74
71 6.91
72 7.08
73 7.26
74 7.44
</TABLE>
* Age nearest birthday on annuity commencement date, with respect to an
annuity commencing prior to January 1, 1990. With respect to an
annuity commencing on or after January 1, 1990, the following
adjustment will be made.
Annuity commencement date Participant's age equals
- ---------------------------- -------------------------------
On or after 1/1/90 but prior Age nearest birthday or annuity
to 1/1/2000 commencement date minus 1
Rates for other ages and other forms of annuity will be furnished upon request.
This Table is subject to annual review by the Insurance Company and may be
changed after ninety (90) days' written notice to the Contractholder. This
Table will not be changed within the first twelve (12) months following the
Contract's Effective Date nor will it be changed more frequently than once in
any twelve (12) month period except by written agreement between the Insurance
Company and the Contractholder.
<PAGE> 20
ANNUITY PURCHASE RATE TABLE B
GUARANTEED MINIMUM FIRST MONTHLY ANNUITY PAYMENT
PURCHASED BY A PREMIUM OF $1,000
FORM OF ANNUITY: 100% VARIABLE TEN YEAR CERTAIN
AND LIFE ANNUITY
ASSUMED INVESTMENT RETURN: 4.5%
<TABLE>
<CAPTION>
Participant's Age* Monthly Rate
- ----------------- ------------
<S> <C>
55 5.12
56 5.21
57 5.30
58 5.39
59 5.50
60 5.60
61 5.72
62 5.84
63 5.96
64 6.09
65 6.23
66 6.38
67 6.53
68 6.68
69 6.84
70 7.01
71 7.17
72 7.35
73 7.52
74 7.70
</TABLE>
* Age nearest birthday on annuity commencement date, with respect to an
annuity commencing prior to January 1, 1990. With respect to an
annuity commencing on or after January 1, 1990, the following
adjustment will be made.
Annuity commencement date Participant's age equals
---------------------------- -------------------------------
On or after 1/1/90 but prior Age nearest birthday on annuity
to 1/1/2000 commencement date minus 1
Rates for other ages and other forms of annuity will be furnished upon request.
This Table is subject to annual review by the Insurance Company and may be
changed after ninety (90) days' written notice to the Contractholder. This
Table will not be changed within the first twelve (12) months following the
Contract's Effective Date nor will it be changed more frequently than once in
any twelve (12) month period except by written agreement between the
Insurance Company and the Contractholder.
<PAGE> 21
GUARANTEED LONG TERM ACCOUNT RIDER
R1.1 GUARANTEED LONG TERM ACCOUNT. The term Guaranteed Long Term Account
refers to that portion of the Contractholder's Account invested in the
Insurance Company's general portfolio.
R1.2 CREDITED INTEREST. Interest will be credited to the Contractholder's
Guaranteed Long Term Account daily. Interest will be credited to each
dollar in the Guaranteed Long Term Account, pursuant to the Contract
Section 3.2(C), from the Valuation Date on which it is allocated to the
Guaranteed Long Term Account until the Valuation Date as of which it is
transferred, distributed or disbursed from the Guaranteed Long Term
Account.
The rate of Credited Interest for any period of time will be determined
by the Insurance Company and may be changed from time to time. Any such
change by the Insurance Company will be declared in advance and will
become effective as of the first day of the month immediately following
the date the Contractholder is mailed notice of such change. The rate
of Credited Interest will not be reduced by more than 2.10% during any
calendar year. The rate of Credited Interest shall never be less than
zero (0) percent.
R1.3 ASSET CHARGE. The annual Asset Charge, determined according to the
Contract Expense Schedule, is reduced to a daily equivalent and is
reduced from the Credited Interest being credited to the Contractholder's
Guaranteed Long Term Account in accordance with Section R1.2.
R1.4 VALUATION. The value of the Contractholder's Guaranteed Long Term
Account is an amount equal to:
(A) The sum of:
(1) Amounts contributed or transferred to the
Insurance Company and invested in the Contractholder's
Guaranteed Long Term Account, plus
(2) Amounts transferred to the Contractholder's
Guaranteed Long Term Account from any other funding vehicle
represented by a Rider attached to this Contract, plus
(3) Credited Interest on such account;
<PAGE> 22
(B) Less:
(1) Expenses and charges, if any, plus
(2) Amounts transferred, distributed or disbursed from the
Contractholder's Guaranteed Long Term Account in accordance with
the terms of the Contract.
R1.5 VALUATION DATE. For purposes of valuing the Contractholder's Guaranteed
Long Term Account, the term Valuation Date refers to each day the
Insurance Company is open to transact normal business.
R1.6 ANNUITY PAYMENTS. To determine the amount of each fixed annuity payment,
the amount available to purchase an annuity pursuant to Contract Section
4.1(D) is multiplied by the annuity purchase rate then in effect for all
contracts in this class of business.
R1.7 DEFERRALS. Transfers, distributions or disbursements from the Guaranteed
Long Term Account may be deferred pursuant to Contract Section 4.5 if a
determination of the value of such transfer, distribution or disbursement
is not possible because the Securities and Exchange Commission has
suspended or otherwise restricted trading of securities or another
emergency situation outside the control of the Insurance Company exists.
During such deferral period amounts payable from the Guaranteed Long Term
Account will continue to receive Credited Interest.
R1.8 POOL TRANSFER LIMITATION. Whenever an amount to be transferred,
distributed or disbursed from the Contractholder's Guaranteed Long Term
Account together with all amounts previously or simultaneously
transferred, distributed or disbursed for any reason in the calendar year
of computation from the pool of Guaranteed Long Term Account assets to
which this Contract belongs would exceed ten percent (10%) of the total
assets in such pool on January 1 of the year of computation, the
transfer, distribution or disbursement may be deferred by the Insurance
Company.
This Contract belongs to the Guaranteed Long Term Account pool
established for all contracts containing this or a similar limitation
under which the initial contribution to be held in the Contractholder's
Account is received in the same calendar year. Such transfer,
distribution or disbursement will be subject to the following:
(A) No deferral will result in less than ten percent (10%)
of the Guaranteed Long Term Account portion of a Contractholder's
Account being transferred, distributed or disbursed in any one
calendar year.
(B) During a Guaranteed Long Term Account Pool Transfer Limitation
deferral, any amount deferred pursuant to this subsection will
continue to receive Credited Interest.
(C) Retirement, termination, and death or disability distributions
payable from the Guaranteed Long Term Account will be paid and not
deferred. Disbursements occurring as a result of the Plan's
termination or failure to meet the requirements of I.R.C. section
401(a) are also unaffected by this provision.
(D) This section shall not apply if the Contract discontinues pursuant to
Contract Section 5.
<PAGE> 23
R1.9 DISCONTINUANCE TRANSFER LIMITATION. In the event this Contract
discontinues pursuant to Section 5, if the amount to be disbursed from the
Contractholder's Guaranteed Long Term Account together with all amounts
previously disbursed or transferred for any reason in the calendar year of
discontinuance from the pool of Guaranteed Long Term Account assets to
which this Contract belongs does not exceed ten percent (10%) of the total
assets in such pool on January 1 of the year of computation, all amounts
credited to the Contractholder's Guaranteed Long Term Account will be
disbursed as of the Discontinuance Disbursement Date, as defined in
Contract Section 5.3. If the amounts to be disbursed exceed said 10%, the
following limitations apply:
(A) An amount equal to the difference between said 10% and the amounts
previously disbursed or transferred from the pool of Guaranteed Long
Term Account assets to which this Contract belongs, or, if greater,
one-sixth (1/6) of the value of the Contractholder's Guaranteed Long
Term Account will be disbursed as of the Discontinuance Disbursement.
Date, as defined in Contract Section 5.3.
(B) Amounts remaining credited to the Contractholder's Guaranteed
Long Term Account will be disbursed in five (5) installments as
follows:
(1) The first installment being one-fifth (1/5) of the remaining
value of said Account;
(2) The second installment being one-fourth (1/4) of the remaining
value of said Account;
(3) The third installment being one-third (1/3) of the remaining
value of said Account;
(4) The fourth installment being one-half (1/2) of the remaining
value of said Account; and
(5) The fifth installment being the remainder of the value of said
Account.
The first installment will be made as of the January 1 following the
Discontinuance Disbursement Date, as defined in Contract Section 5.3,
and each succeeding installment as of each January 1 thereafter.
(C) The Insurance Company will issue a written guarantee of the
interest rate to be credited to the unpaid balance of the
Contractholder's Guaranteed Long Term Account. That interest rate
will be an annual rate equal to the Credited Interest rate at date of
discontinuance applicable to the Guaranteed Long Term Account pool of
which this Contract is a member (hereinafter "Pool Rate") minus fifty
percent (50%) of the difference between the Credited Interest rate at
date of discontinuance for the Guaranteed Long Term Account pool
established for the calendar year of Discontinuance and the Pool
Rate. In no event will the interest rate credited be less than zero
percent (0%) per annum, or greater than the Pool Rate.
<PAGE> 24
(D) Retirement, termination, and death or disability disbursements
payable from the Guaranteed Long Term Account will be paid in
accordance with the terms of Contract Section 4 and not deferred under
this Section. Disbursements occurring as a result of plan termination
or the failure of the plan to meet the requirements of I.R.C. section
401(a) also will be paid in accordance with the terms of Contract
Sections 5.4(B) and (C) and not deferred under this Section.
(E) Notwithstanding the foregoing, the Insurance Company reserves
the right to disburse at any time the remaining balances of the
Contractholder's Guaranteed Long Term Account in a single lump sum.
(F) This Contract belongs to the Guaranteed Long Term Account pool
established for all contracts containing this or a similar limitation
under which the initial contribution to be allocated to the
Contractholder's Account is received in the same calendar year.
<PAGE> 25
SEPARATE ACCOUNT 55A RIDER
R7.1 SEPARATE ACCOUNT 55A (Fidelity Advisor Growth Opportunities Fund Separate
Account) is a pooled separate account maintained by the Insurance Company
for a portion of its assets. The only amounts which may be allocated to
Separate Account 55A are amounts contributed in accordance with the terms
of pension or profit sharing plans qualified under section 401 of the
Internal Revenue Code, as amended, governmental plans as defined in
section 414(d) of the Internal Revenue Code, as amended, or eligible
deferred compensation plans as defined in section 457 of the Internal
Revenue Code, as amended. The assets of Separate Account 55A are
segregated from other assets of the Insurance Company, and are subject
only to the claims of contracts participating in this separate account.
Separate Account 55A is maintained and operated by the Insurance Company
in accordance with the following:
(A) INVESTMENTS. The assets of Separate Account 55A are invested in
shares of the Fidelity Advisor Growth Opportunities Fund, a mutual
fund offered by Fidelity Investments. In addition, from time to
time, the Insurance Company may invest such assets in short term
money market instruments, cash or cash equivalents. Any income,
gains or losses, realized or unrealized, from the assets in
Separate Account 55A shall be credited to or charged against said
account without regard to the other income, gains or losses of
Connecticut General.
(B) EXPENSES CHARGED TO SEPARATE ACCOUNT 55A. Separate Account 55A
may be charged with (1) an investment management charge, (2)
brokerage commissions, transfer taxes and other direct charges
arising from the purchase or sale of investments or futures
instruments thereunder, (3) other taxes, charges or expenses
directly attributable to the operation of, or the assets held in,
Separate Account 55A. and (4) any expenses (including reasonable
fees and expenses for the time spent by officers or employees of the
Insurance Company) which are incurred in the course of litigation,
representation on any creditors' committees, or any other action
which the Insurance Company determines is reasonably necessary or
required to preserve or enhance the value of the assets of Separate
Account 55A. The investment management charge determined by the
Insurance Company will be charged daily based upon the value of each
Contract's share of Separate Account 55A.
The maximum aggregate annual rate of investment management charge is
one percent (1.00%).
<PAGE> 26
(C) SEPARATE ACCOUNT 55A UNIT. Separate Account 55A is divided
into units of participation with each unit being referred to as a
Separate Account 55A Unit. When an amount is allocated or
transferred to Separate Account 55A, the number of Separate Account
55A Units is increased and when an amount is withdrawn from Separate
Account 55A, the number of Separate Account 55A Units is decreased.
Such increase or decrease in the number of Separate Account 55A
Units is determined by dividing the amount allocated to or
withdrawn from Separate Account 55A by the then current Separate
Account 55A Unit Value.
(D) SEPARATE ACCOUNT 55A UNIT VALUE. A Separate Account 55A Unit
Value is determined by the Insurance Company on each Valuation Date
and is equal to the Market Value of Separate Account 55A divided by
the total number of Separate Account 55A Units on such date. The
Separate Account 55A Unit Value on any date is equal to the amount
so determined on the Valuation Date coinciding with or last
preceding such date.
(E) MARKET VALUE OF SEPARATE ACCOUNT 55A. The Insurance Company
will determine the Market Value of Separate Account 55A for each
Valuation Date. The Market Value on any Valuation Date is based
upon the market value of the assets in Separate Account 55A at the
close of the Insurance Company's business on the current day, as
determined in accordance with generally recognized accounting
procedures. The Market Value of the investments in the Fidelity
Advisor Growth Opportunities Fund will be determined by the NAV (net
asset value) of the shares plus the value of any dividends and
capital gain distributions.
R7.2 VALUATION. The value of the portion of a Participant's Account invested
in Separate Account 55A is an amount equal to the product of the number of
Accumulation 55A Units credited to such Account and the Accumulation 55A
Unit Value for the Valuation Date.
(A) ACCUMULATION 55A UNITS. When an amount is allocated to the
portion of a Contractholder's Account invested in Separate Account
55A, the Contractholder's Account is credited with the number of
Accumulation 55A Units equal to the amount allocated divided by the
Accumulation 55A Unit Value as of the Allocation Date determined
pursuant to Contract Section 3.2(C).
When an amount is transferred, distributed or disbursed from the
portion of a Contractholder's Account invested in Separate Account
55A, the Contractholder's Account is debited by the number of
Accumulation 55A Units equal to the amount transferred, distributed
or disbursed divided by the Accumulation 55A Unit Value as of the
later of the date the Insurance Company receives written
instructions from the Contractholder regarding the amounts to be
transferred or distributed or the effective date of such transfer or
distribution; or in the case of a disbursement, as of the
Discontinuance Disbursement Date determined pursuant to Contract
Section 5.3.
<PAGE> 27
NOTE: If Plan benefits are integrated with Social Security benefits and an
amendment results in the exclusion of any employees or the reduction of
any participant's benefit to zero, and the amendment alters either
contributions to the Plan or the amount of benefits paid by the Plan, the
amendment is considered to alter the Plan's coverage provisions.
DATE OF DETERMINATION OF EMPLOYEES' STATUS
You must select a date for determining which employees are interested parties.
This date must be no earlier than 5 working days before the date you provide
the Notice to Interested Parties, and no later than that date.
WHEN YOU MUST NOTIFY INTERESTED PARTIES
- - If you post the notice on a bulletin board or deliver it in person, it
must be given no less than 7 days and no more than 21 days before the date
the application is mailed to the IRS.
- - If you mail the notice, it must be postmarked no less than 10 days and no
more than 24 days before the date the application is mailed to the IRS.
If the Plan is amended while the IRS is reviewing the application for
determination and the amendment increases coverage under the Plan so that
additional employees become interested parties, the application must be
resubmitted and all interested parties must be renotified.
COMPLETING THE NOTICE AND SUPPLYING INFORMATION
The enclosed sample notice should be adapted for your Plan. As the last
paragraph in the sample notice states, you must make certain additional
material available to interested parties who request this material, which
includes:
- - An updated copy of the Plan and related trust agreement, if any.
- - A copy of the application for determination.
- - Information showing the number of individuals covered and not covered,
listed by compensation range. (You do not need to make a copy of Form
5302 available, because it shows salaries.)
- - Any additional documents dealing with the application.
For additional guidance regarding the notification of interested parties, you
may want to refer to IRS Revenue Procedure 92-6, Sections 17 and 18 and
related Exhibits.
<PAGE> 28
(B) ACCUMULATION 55A UNIT VALUE. The Accumulation 55A Unit
Value is the Separate Account 55A Unit Value adjusted to reflect
the investment management charge, if applicable.
(C) VALUATION DATE. A Valuation Date will occur on each day
that the New York Stock Exchange is open for unrestricted trading
and the Insurance Company is open to transact its normal business.
R7.3 LIMITATIONS.
(A) Any transfer, distribution or disbursement from Separate
Account 55A may be delayed for a period of up to thirty (30) days
if there is a negative cash flow into Separate Account 55A
considering all contracts with funds in Separate Account 55A on the
Valuation Date for such distribution or disbursement.
(B) Transfers, distributions or disbursements from Separate
Account 55A may be deferred pursuant to Contract Section 4.5 if
a determination of the value of such distribution or disbursement
is not possible because the Securities and Exchange Commission has
suspended or otherwise restricted trading of securities or another
emergency situation outside the control of the Insurance Company
exists.
R7.4 DISCONTINUANCE OF SEPARATE ACCOUNT 55A. Separate Account 55A may be
discontinued if the Fidelity Advisor Growth Opportunities Fund is no
longer offered by Fidelity Investments, if Fidelity Investments becomes
insolvent or files for voluntary or involuntary bankruptcy, or if
Connecticut General determines that Separate Account 55A is no longer
commercially feasible and notifies the Contractholder in writing that
the Separate Account will be discontinued.
As of the date Separate Account 55A is discontinued:
(A) No further contributions to Separate Account 55A will be
accepted by Connecticut General and no further withdrawals or
transfers will be honored except as provided in
(B) and (C) below;
(B) Connecticut General will determine an amount equal to the
expenses which are unpaid or due hereunder and withdraw such amount
from Separate Account 55A;
(C) The remaining value of this Contract's share of Separate
Account 55A will be distributed in accordance with the
Contractholder's written instructions to be effective as of the
date of discontinuance.
<PAGE> 29
SEPARATE ACCOUNT 55B RIDER
R8.1 SEPARATE ACCOUNT 55B (Fidelity Advisor Income & Growth Fund Separate
Account) is a pooled separate account maintained by the Insurance Company
for a portion of its assets. The only amounts which may be allocated to
Separate Account 55B are amounts contributed in accordance with the terms
of pension or profit sharing plans qualified under section 401 of the
Internal Revenue Code, as amended, governmental plans as defined in
section 414(d) of the Internal Revenue Code, as amended, or eligible
deferred compensation plans as defined in section 457 of the Internal
Revenue Code, as amended. The assets of Separate Account 55B are
segregated from other assets of the Insurance Company, and are subject
only to the claims of contracts participating in this separate account.
Separate Account 55B is maintained and operated by the insurance Company in
accordance with the following:
(A) INVESTMENTS. The assets of Separate Account 55B are invested in
shares of the Fidelity Advisor Income & Growth Fund, a mutual
fund offered by Fidelity Investments. In addition, from time to
time, the Insurance Company may invest such assets in short term
money market instruments, cash or cash equivalents. Any income,
gains or losses, realized or unrealized, from the assets in Separate
Account 55B shall be credited to or charged against said account
without regard to the other income, gains or losses of Connecticut
General.
(B) EXPENSES CHARGED TO SEPARATE ACCOUNT 55B. Separate Account 55B may be
charged with (1) an investment management charge, (2) brokerage
commissions, transfer taxes and other direct charges arising from the
purchase or sale of investments or futures instruments thereunder,
(3) other taxes, charges or expenses directly attributable to the
operation of, or the assets held in, Separate Account 55B, and (4)
any expenses (including reasonable fees and expenses for the time
spent by officers or employees of the Insurance Company) which are
incurred in the course of litigation, representation on any
creditors' committees, or any other action which the Insurance
Company determines is reasonably necessary or required to preserve or
enhance the value of the assets of Separate Account 55B. The
investment management charge determined by the Insurance Company will
be charged daily based upon the value of each Contract's share of
Separate Account 55B.
The maximum aggregate annual rate of investment management
charge is one percent (1.00%).
<PAGE> 30
(C) SEPARATE ACCOUNT 55B UNIT. Separate Account 558 is divided into
units of participation with each unit being referred to as a
Separate Account 55B Unit. When an amount is allocated or
transferred to Separate Account 55B, the number of Separate Account
55B Units is increased and when an amount is withdrawn from Separate
Account 55B, the number of Separate Account 55B Units is decreased.
Such increase or decrease in the number of Separate Account 55B Units
is determined by dividing the amount allocated to or withdrawn from
Separate Account 55B by the then current Separate Account 55B Unit
Value.
(D) SEPARATE ACCOUNT 55B UNIT VALUE. A Separate Account 55B Unit Value is
determined by the Insurance Company on each Valuation Date and
is equal to the Market Value of Separate Account 55B divided by the
total number of Separate Account 55B Units on such date. The
Separate Account 55B Unit Value on any date is equal to the amount so
determined on the Valuation Date coinciding with or last preceding
such date.
(E) MARKET VALUE OF SEPARATE ACCOUNT 55B. The Insurance Company will
determine the Market Value of Separate Account 55B for each
Valuation Date. The Market Value on any Valuation Date is based upon
the market value of the assets in Separate Account 55B at the close
of the Insurance Company's business on the current day, as determined
in accordance with generally recognized accounting procedures. The
Market Value of the investments in the Fidelity Advisor Income &
Growth Fund will be determined by the NAV (net asset value) of the
shares plus the value of any dividends and capital gain
distributions.
R8.2 VALUATION. The value of the portion of a Participant's Account invested
in Separate Account 55B is an amount equal to the product of the number of
Accumulation 55B Units credited to such Account and the Accumulation 55B
Unit Value for the Valuation Date.
(A) ACCUMULATION 55B UNITS. When an amount is allocated to the portion
of a Contractholder's Account invested in Separate Account 55B,
the Contractholder's Account is credited with the number of
Accumulation 55B Units equal to the amount allocated divided by the
Accumulation 55B Unit Value as of the Allocation Date determined
pursuant to Contract Section 3.2(C).
When an amount is transferred, distributed or disbursed from
the portion of a Contractholder's Account invested in Separate
Account 55B, the Contractholder's Account is debited by the number of
Accumulation 55B Units equal to the amount transferred, distributed
or disbursed divided by the Accumulation 55B Unit Value as of the
later of the date the Insurance Company receives written instructions
from the Contractholder regarding the amounts to be transferred or
distributed or the effective date of such transfer or distribution;
or in the case of a disbursement, as of the Discontinuance
Disbursement Date determined pursuant to Contract Section 5.3.
<PAGE> 31
(B) ACCUMULATION 55B UNIT VALUE. The Accumulation 55B Unit Value
is the Separate Account 55B Unit Value adjusted to reflect the
investment management charge, if applicable.
(C) VALUATION DATE. A Valuation Date will occur on each day
that the New York Stock Exchange is open for unrestricted trading
and the Insurance Company is open to transact its normal business.
R8.3 LIMITATIONS.
(A) Any transfer, distribution or disbursement from Separate
Account 55B may be delayed for a period of up to thirty (30) days if
there is a negative cash flow into Separate Account 55B considering
all contracts with funds in Separate Account 55B on the Valuation
Date for such distribution or disbursement.
(B) Transfers, distributions or disbursements from Separate
Account 55B may be deferred pursuant to Contract Section 4.5 if a
determination of the value of such distribution or disbursement is
not possible because the Securities and Exchange Commission has
suspended or otherwise restricted trading of securities or another
emergency situation outside the control of the Insurance Company
exists.
R8.4 DISCONTINUANCE OF SEPARATE ACCOUNT 55B. Separate Account 55B may be
discontinued if the Fidelity Advisor Income & Growth Fund is no longer
offered by Fidelity Investments, if Fidelity Investments becomes insolvent
or files for voluntary or involuntary bankruptcy, or if Connecticut
General determines that Separate Account 55B is no longer commercially
feasible and notifies the Contractholder in writing that the Separate
Account will be discontinued.
As of the date Separate Account 55B is discontinued:
(A) No further contributions to Separate Account 55B will be
accepted by Connecticut General and no further withdrawals or
transfers will be honored except as provided in
(B) and (C) below;
(B) Connecticut General will determine an amount equal to the
expenses which are unpaid or due hereunder and withdraw such amount
from Separate Account 55B;
(C) The remaining value of this Contract's share of Separate
Account 55B will be distributed in accordance with the
Contractholder's written instructions to be effective as of the
date of discontinuance.
<PAGE> 32
SEPARATE ACCOUNT 55F RIDER
R12.1 SEPARATE ACCOUNT 55F (the Warburg Pincus International Equity Fund
Separate Account) is a pooled separate account maintained by the Insurance
Company for a portion of its assets. The only amounts which may be
allocated to Separate Account 55F are amounts contributed in accordance
with the terms of pension or profit sharing plans qualified under section
401 of the Internal Revenue Code, as amended, governmental plans as
defined in section 414(d) of the Internal Revenue Code, as amended, or
eligible deferred compensation plans as defined in section 457 of the
Internal Revenue Code, as amended. The assets of Separate Account 55F
are segregated from other assets of the Insurance Company, and are
subject only to the claims of contracts participating in this separate
account.
Separate Account 55F is maintained and operated by the Insurance
Company in accordance with the following:
(A) INVESTMENTS. The assets of Separate Account 55F are invested in
shares of the Warburg Pincus International Equity Fund, a
mutual fund offered by Counsellors Securities, Inc. In addition,
from time to time, the Insurance Company may invest such assets in
short term money market instruments, cash or cash equivalents. Any
income, gains or losses, realized or unrealized, from the assets in
Separate Account 55F shall be credited to or charged against said
account without regard to the other income, gains or losses of
Connecticut General.
(B) EXPENSES CHARGED TO SEPARATE ACCOUNT 55F. Separate Account 55F may
be charged with (1) an investment management charge, (2)
brokerage commissions, transfer taxes and other direct charges
arising from the purchase or sale of investments or futures
instruments thereunder, (3) other taxes, charges or expenses
directly attributable to the operation of, or the assets held in,
Separate Account 55F, and (4) any expenses (including reasonable
fees and expenses for the time spent by officers or employees of the
Insurance Company) which are incurred in the course of litigation,
representation on any creditors' committees, or any other action
which the Insurance Company determines is reasonably necessary or
required to preserve or enhance the value of the assets of Separate
Account 55F. The investment management charge determined by the
Insurance Company will be charged daily based upon the value of each
Contract's share of Separate Account 55F.
The maximum aggregate annual rate of investment management
charge is one percent (1.00%).
<PAGE> 33
(C) SEPARATE ACCOUNT 55F UNIT. Separate Account 55F is divided into
units of participation with each unit being referred to as a
Separate Account 55F Unit. When an amount is allocated or
transferred to Separate Account 55F, the number of Separate Account
55F Units is increased and when an amount is withdrawn from Separate
Account 55F, the number of Separate Account 55F Units is decreased.
Such increase or decrease in the number of Separate Account 55F Units
is determined by dividing the amount allocated to or withdrawn from
Separate Account 55F by the then current Separate Account 55F Unit
Value.
(D) SEPARATE ACCOUNT 55F UNIT VALUE. A Separate Account 55F Unit Value is
determined by the Insurance Company on each Valuation Date and
is equal to the Market Value of Separate Account 55F divided by the
total number of Separate Account 55F Units on such date. The
Separate Account 55F Unit Value on any date is equal to the amount so
determined on the Valuation Date coinciding with or last preceding
such date.
(E) MARKET VALUE OF SEPARATE ACCOUNT 55F. The Insurance Company will
determine the Market Value of Separate Account 55F for each
Valuation Date. The Market Value on any Valuation Date is based upon
the market value of the assets in Separate Account 55F at the close
of the Insurance Company's business on the current day, as determined
in accordance with generally recognized accounting procedures. The
Market Value of the investment in the Warburg Pincus International
Equity Fund will be determined by the NAV (net asset value) of the
shares plus the value of any dividends and capital gain
distributions.
R12.2 VALUATION. The value of the portion of a Participant's Account
invested in Separate Account 55F is an amount equal to the product of the
number of Accumulation 55F Units credited to such Account and the
Accumulation 55F Unit Value for the Valuation Date.
(A) ACCUMULATION 55F UNITS. When an amount is allocated to the portion
of a Contractholder's Account invested in Separate Account 55F,
the Contractholder's Account is credited with the number of
Accumulation 55F Units equal to the amount allocated divided by the
Accumulation 55F Unit Value as of the Allocation Date determined
pursuant to Contract Section 3.2(C).
When an amount is transferred, distributed or disbursed from
the portion of a Contractholder's Account invested in Separate
Account 55F, the Contractholder's Account is debited by the number of
Accumulation 55F Units equal to the amount transferred, distributed
or disbursed divided by the Accumulation 55F Unit Value as of the
later of the date the Insurance Company receives written instructions
from the Contractholder regarding the amounts to be transferred or
distributed or the effective date of such transfer or distribution;
or in the case of a disbursement, as of the Discontinuance
Disbursement Date determined pursuant to Contract Section 5.3.
<PAGE> 34
(B) ACCUMULATION 55F UNIT VALUE. The Accumulation 55F Unit Value is the
Separate Account 55F Unit Value adjusted to reflect the
investment management charge, if applicable.
(C) VALUATION DATE. A Valuation Date will occur on each day that the
New York Stock Exchange is open for unrestricted trading and
the Insurance Company is open to transact its normal business.
R12.3 LIMITATIONS.
(A) Any transfer, distribution or disbursement from Separate
Account 55F may be delayed for a period of up to thirty (30)
days if there is a negative cash flow into Separate Account 55F
considering all contracts with funds in Separate Account 55F on the
Valuation Date for such distribution or disbursement.
(B) Transfers, distributions or disbursements from Separate Account 55F
may be deferred pursuant to Contract Section 4.5 if a determination
of the value of such distribution or disbursement is not possible
because the Securities and Exchange Commission has suspended or
otherwise restricted trading of securities or another emergency
situation outside the control of the Insurance Company exists.
R12.4 DISCONTINUANCE OF SEPARATE ACCOUNT 55F. Separate Account 55F may be
discontinued if the Warburg Pincus International Equity Fund is no
longer offered by Counsellors Securities, Inc., if Counsellors
Securities, Inc. becomes insolvent or files for voluntary or involuntary
bankruptcy, or if Connecticut General determines that Separate Account
55F is no longer commercially feasible and notifies the Contractholder in
writing that the Separate Account will be discontinued.
As of the date Separate Account 55F is discontinued:
(A) No further contributions to Separate Account 55F will be accepted by
Connecticut General and no further withdrawals or transfers
will be honored except as provided in (B) and (C) below;
(B) Connecticut General will determine an amount equal to the expenses
which are unpaid or due hereunder and withdraw such amount from
Separate Account 55F;
(C) The remaining value of this Contract's share of Separate Account
55F will be distributed in accordance with the Contractholder's
written instructions to be effective as of the date of
discontinuance.
<PAGE> 35
SEPARATE ACCOUNT 55G RIDER
R13.1 SEPARATE ACCOUNT 55G (the Warburg Pincus Emerging Growth Fund
Separate Account) is a pooled separate account maintained by the
Insurance Company for a portion of its assets. The only amounts which
may be allocated to Separate Account 55G are amounts contributed in
accordance with the terms of pension or profit sharing plans qualified
under section 401 of the Internal Revenue Code, as amended, governmental
plans as defined in section 414(d) of the Internal Revenue Code, as
amended, or eligible deferred compensation plans as defined in section
457 of the Internal Revenue Code, as amended. The assets of Separate
Account 55G are segregated from other assets of the Insurance Company,
and are subject only to the claims of contracts participating in this
separate account.
Separate Account 55G is maintained and operated by the Insurance
Company in accordance with the following:
(A) INVESTMENTS. The assets of Separate Account 55G are invested in
shares of the Warburg Pincus Emerging Growth Fund, a mutual
fund offered by Counsellors Securities, Inc. In addition, from time
to time, the Insurance Company may invest such assets in short term
money market instruments, cash or cash equivalents. Any income,
gains or losses, realized or unrealized, from the assets in Separate
Account 55G shall be credited to or charged against said account
without regard to the other income, gains or losses of Connecticut
General.
(B) EXPENSES CHARGED TO SEPARATE ACCOUNT 55G. Separate Account 55G may
be charged with (1) an investment management charge, (2)
brokerage commissions, transfer taxes and other direct charges
arising from the purchase or sale of investments or futures
instruments thereunder, (3) other taxes, charges or expenses directly
attributable to the operation of, or the assets held in, Separate
Account 55G, and (4) any expenses (including reasonable fees and
expenses for the time spent by officers or employees of the Insurance
Company) which are incurred in the course of litigation,
representation on any creditors' committees, or any other action
which the Insurance Company determines is reasonably necessary or
required to preserve or enhance the value of the assets of Separate
Account 55G. The investment management charge determined by the
Insurance Company will be charged daily based upon the value of each
Contract's share of Separate Account 55G.
The maximum aggregate annual rate of investment management
charge is one percent (1.00%).
<PAGE> 36
(C) SEPARATE ACCOUNT 55G UNIT. Separate Account 55G is divided into
units of participation with each unit being referred to as a
Separate Account 55G Unit. When an amount is allocated or
transferred to Separate Account 55G, the number of Separate Account
55G Units is increased and when an amount is withdrawn from Separate
Account 55G, the number of Separate Account 55G Units is decreased.
Such increase or decrease in the number of Separate Account 55G Units
is determined by dividing the amount allocated to or withdrawn from
Separate Account 55G by the then current Separate Account 55G Unit
Value.
(D) SEPARATE ACCOUNT 55G UNIT VALUE. A Separate Account 55G Unit Value
is determined by the Insurance Company on each Valuation Date
and is equal to the Market Value of Separate Account 55G divided by
the total number of Separate Account 55G Units on such date. The
Separate Account 55G Unit Value on any date is equal to the amount so
determined on the Valuation Date coinciding with or last preceding
such date.
(E) MARKET VALUE OF SEPARATE ACCOUNT 55G. The Insurance Company will
determine the Market Value of Separate Account 55G for each
Valuation Date. The Market Value on any Valuation Date is based upon
the market value of the assets in Separate Account 55G at the close
of the Insurance Company's business on the current day, as determined
in accordance with generally recognized accounting procedures. The
Market Value of the investments in the Warburg Pincus Emerging Growth
Fund will be determined by the NAV (net asset value) of the shares
plus the value of any dividends and capital gain distributions.
R13.2 VALUATION. The value of the portion of a Participant's Account
invested in Separate Account 55G is an amount equal to the product of
the number of Accumulation 55G Units credited to such Account and the
Accumulation 55G Unit Value for the Valuation Date.
(A) ACCUMULATION 55G UNITS. When an amount is allocated to the portion
of a Contractholder's Account invested in Separate Account 55G,
the Contractholder's Account is credited with the number of
Accumulation 55G Units equal to the amount allocated divided by the
Accumulation 55G Unit Value as of the Allocation Date determined
pursuant to Contract Section 3.2(C).
When an amount is transferred, distributed or disbursed from
the portion of a Contractholder's Account invested in Separate
Account 55G, the Contractholder's Account is debited by the number of
Accumulation 55G Units equal to the amount transferred, distributed
or disbursed divided by the Accumulation 55G Unit Value as of the
later of the date the Insurance Company receives written instructions
from the Contractholder regarding the amounts to be transferred or
distributed or the effective date of such transfer or distribution;
or in the case of a disbursement, as of the Discontinuance
Disbursement Date determined pursuant to Contract Section 5.3.
<PAGE> 37
(B) ACCUMULATION 55G UNIT VALUE. The Accumulation 55G Unit Value is the
Separate Account 55G Unit Value adjusted to reflect the
investment management charge, if applicable.
(C) VALUATION DATE. A Valuation Date will occur on each day that the
New York Stock Exchange is open for unrestricted trading and
the Insurance Company is open to transact its normal business.
R13.3 LIMITATIONS.
(A) Any transfer, distribution or disbursement from Separate
Account 55G may be delayed for a period of up to thirty (30)
days if there is a negative cash flow into Separate Account 55G
considering all contracts with funds in Separate Account 55G on the
Valuation Date for such distribution or disbursement.
(B) Transfers, distributions or disbursements from Separate Account 55G
may be deferred pursuant to Contract Section 4.5 if a
determination of the value of such distribution or disbursement is
not possible because the Securities and Exchange Commission has
suspended or otherwise restricted trading of securities or another
emergency situation outside the control of the Insurance Company
exists.
R13.4 DISCONTINUANCE OF SEPARATE ACCOUNT 55G. Separate Account 55G may be
discontinued if the Warburg Pincus Emerging Growth Fund is no longer
offered by Counsellors Securities, Inc., if Counsellors Securities, Inc.
becomes insolvent or files for voluntary or involuntary bankruptcy, or if
Connecticut General determines that Separate Account 55G is no longer
commercially feasible and notifies the Contractholder in writing that the
Separate Account will be discontinued.
As of the date Separate Account 55G is discontinued:
(A) No further contributions to Separate Account 55G will be accepted by
Connecticut General and no further withdrawals or transfers
will be honored except as provided in (B) and (C) below;
(B) Connecticut General will determine an amount equal to the expenses
which are unpaid or due hereunder and withdraw such amount from
Separate Account 55G;
(C) The remaining value of this Contract's share of Separate Account 55G
will be distributed in accordance with the Contractholder's
written instructions to be effective as of the date of
discontinuance.
<PAGE> 38
SEPARATE ACCOUNT 55J RIDER
R16.1 SEPARATE ACCOUNT 55J (the CIGNA Separate Account - INVESCO Industrial
Income) is a pooled separate account maintained by the Insurance
Company for a portion of its assets. The only amounts which may be
allocated to Separate Account 55J are amounts contributed in accordance
with the terms of pension or profit sharing plans qualified under section
401 of the Internal Revenue Code, as amended, governmental plans as
defined in section 414(d) of the Internal Revenue Code, as amended, or
eligible deferred compensation plans as defined in section 457 of the
Internal Revenue Code, as amended. The assets of Separate Account 55J
are segregated from other assets of the Insurance Company, and are
subject only to the claims of contracts participating in this separate
account.
Separate Account 55J is maintained and operated by the Insurance
Company in accordance with the following:
(A) INVESTMENTS. The assets of Separate Account 55J are invested in
shares of the INVESCO Industrial Income Fund, a mutual fund
offered by INVESCO Funds Group, Inc. In addition, from time to
time, the Insurance Company may invest such assets in short term
money market instruments, cash or cash equivalents. Any income,
gains or losses, realized or unrealized, from the assets in Separate
Account 55J shall be credited to or charged against said account
without regard to the other income, gains or losses of Connecticut
General.
(B) EXPENSES CHARGED TO SEPARATE ACCOUNT 55J. Separate Account 55J may
be charged with (1) an investment management/distribution
charge, (2) brokerage commissions, transfer taxes and other direct
charges arising from the purchase or sale of investments or futures
instruments thereunder, (3) other taxes, charges or expenses directly
attributable to the operation of, or the assets held in, Separate
Account 55J, and (4) any expenses (including reasonable fees and
expenses for the time spent by officers or employees of the Insurance
Company) which are incurred in the course of litigation,
representation on any creditors' committees, or any other action
which the Insurance Company determines is reasonably necessary or
required to preserve or enhance the value of the assets of Separate
Account 55J. The investment management/distribution charge
determined by the Insurance Company will be charged daily based upon
the value of each Contract's share of Separate Account 55J.
The maximum aggregate annual rate of investment
management/distribution charge is one percent (1.00%).
<PAGE> 39
(C) SEPARATE ACCOUNT 55J UNIT. Separate Account 55J is divided into
units of participation with each unit being referred to as a
Separate Account 55J Unit. When an amount is allocated or
transferred to Separate Account 55J, the number of Separate Account
55J Units is increased and when an amount is withdrawn from Separate
Account 55J, the number of Separate Account 55J Units is decreased.
Such increase or decrease in the number of Separate Account 55J Units
is determined by dividing the amount allocated to or withdrawn from
Separate Account 55J by the then current Separate Account 55J Unit
Value.
(D) SEPARATE ACCOUNT 55J UNIT VALUE. A Separate Account 55J Unit Value is
determined by the Insurance Company on each Valuation Date and
is equal to the Market Value of Separate Account 55J divided by the
total number of Separate Account 55J Units on such date. The
Separate Account 55J Unit Value on any date is equal to the amount so
determined on the Valuation Date coinciding with or last preceding
such date.
(E) MARKET VALUE OF SEPARATE ACCOUNT 55J. The Insurance Company will
determine the Market Value of Separate Account 55J for each
Valuation Date. The Market Value on any Valuation Date is based upon
the market value of the assets in Separate Account 55J at the close
of the Insurance Company's business on the current day, as
determined in accordance with generally recognized accounting
procedures. The Market Value of the investments in the INVESCO
Industrial Income Fund will be determined by the NAV (net asset
value) of the shares plus the value of any dividends and capital gain
distributions.
R16.2 VALUATION. The value of the portion of a Participant's Account invested
in Separate Account 55J is an amount equal to the product of the
number of Accumulation 55J Units credited to such Account and the
Accumulation 55J Unit Value for the Valuation Date.
(A) ACCUMULATION 55J UNITS. When an amount is allocated to the portion
of a Contractholder's Account invested in Separate Account 55J,
the Contractholder's Account is credited with the number of
Accumulation 55J Units equal to the amount allocated divided by the
Accumulation 55J Unit Value as of the Allocation Date determined
pursuant to Contract Section 3.2(C).
When an amount is transferred, distributed or disbursed from
the portion of a Contractholder's Account invested in Separate
Account 55J, the Contractholder's Account is debited by the number of
Accumulation 55J Units equal to the amount transferred, distributed
or disbursed divided by the Accumulation 55J Unit Value as of the
later of the date the Insurance Company receives written instructions
from the Contractholder regarding the amounts to be transferred or
distributed or the effective date of such transfer or distribution;
or in the case of a disbursement, as of the Discontinuance
Disbursement Date determined pursuant to Contract Section 5.3.
<PAGE> 40
(B) ACCUMULATION 55J UNIT VALUE. The Accumulation 55J Unit Value is the
Separate Account 55J Unit Value adjusted to reflect the
investment management/distribution charge, if applicable.
(C) VALUATION DATE. A Valuation Date will occur on each day that the New
York Stock Exchange is open for unrestricted trading and the
Insurance Company is open to transact its normal business.
R16.3 LIMITATIONS.
(A) Any transfer, distribution or disbursement from Separate
Account 55J may be delayed for a period of up to thirty (30) days if
there is a negative cash flow into Separate Account 55J considering
all contracts with funds in Separate Account 55J on the Valuation
Date for such distribution or disbursement.
(B) Transfers, distributions or disbursements from Separate Account 55J
may be deferred pursuant to Contract Section 4.5 if a
determination of the value of such distribution or disbursement is
not possible because the Securities and Exchange Commission has
suspended or otherwise restricted trading of securities or another
emergency situation outside the control of the Insurance Company
exists.
R16.4 DISCONTINUANCE OF SEPARATE ACCOUNT 55J. Separate Account 55J may
be discontinued if the INVESCO Industrial Income Fund is no longer offered
by INVESCO Funds Group, Inc., if INVESCO Funds Group, Inc. becomes
insolvent or files for voluntary or involuntary bankruptcy, or if
Connecticut General determines that Separate Account 55J is no longer
commercially feasible and notifies the Contractholder in writing that the
Separate Account will be discontinued.
As of the date Separate Account 55J is discontinued:
(A) No further contributions to Separate Account 55J will be accepted by
Connecticut General and no further withdrawals or transfers
will be honored except as provided in (B) and (C) below;
(B) Connecticut General will determine an amount equal to the expenses
which are unpaid or due hereunder and withdraw such amount from
Separate Account 55J;
(C) The remaining value of this Contract's share of Separate Account 55J
will be distributed in accordance with the Contractholder's
written instructions to be effective as of the date of
discontinuance.
<PAGE> 41
<TABLE>
<S><C>
Connecticut General Life Insurance Company
a CIGNA company
------------------------------------------------------------------
P.O. Box 2975
Hartford, CT 06104 [CIGNA LOGO]
JAN 13 1994
APPLICATION
Applicant's Exact Name
Trustees of the Lason Systems, Inc. 401(k) Profit Sharing Plan & Trust
------------------------------------------------------------------------------------------
Street Address
28400 Schoolcraft Road
------------------------------------------------------------------------------------------
City, State & Zip Code
Livonia, MI 48150
------------------------------------------------------------------------------------------
The Applicant hereby applies for a Group Annuity Contract from Connecticut General Life
Insurance Company with the following investment options:
/X/ Guaranteed Long-Term Account / / Fidelity Special Situations Fund*
/ / Guaranteed Short-Term Account /X/ Plymouth Growth Opportunities Portfolio*
or /X/ Plymouth Income & Growth Portfolio*
/ / Guaranteed Government Securities Account* / / Counsellors Capital Appreciation Fund*
/ / Common Stock Account /X/ Counsellors International Equity Fund*
/ / Stock Market Index Account /X/ Counsellors Emerging Growth Fund*
/ / Balanced Account /X/ INVESCO Industrial Income
/ / International Equity Account* / /
*Not available on small case
ANY VARIABLE ANNUITY PAYMENTS AND OTHER BENEFITS PROVIDED HEREUNDER WHICH ARE BASED ON THE
INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT ARE VARIABLE AND NOT GUARANTEED AS TO FIXED
DOLLAR AMOUNT.
The Applicant also hereby applies for the following plan services provided by the Connecticut
General Life Insurance Company under the Contract or a Service Agreement:
/ / Small Case: / / Investment Only; or / / Full Service
/X/ Regular Case with the following services: (Full Service must check all appropriate boxes)
/ / Investment Only
/X/ Plan Document Services /X/ Benefit Payments
/X/ Prototype Plan /X/ Plan Administration & Recordkeeping
or /X/ Compliance Testing
/ / Customer Plan Design & Document Preparation (RK)
/ / with Amendments / /
/X/ Employee Communications / /
Dated at Livonia, Michigan on Nov. (RK) , 1993 by Applicant
----------------- -----------------
(location) (date)
For the Employer For the Trustee
By Richard C. Kowalski By Richard C. Kowalski
------------------------------- -------------------------------
Title VP/CFO Title Trustee
---------------------------- ----------------------------
By By
------------------------------- -------------------------------
Title Title
---------------------------- ----------------------------
Soliciting Agent Herman Klingelhoffer
-----------------------------------------------------------------
Amount of Binding Payment $5,000.00
--------------------------------------------------------
It is agreed that the binding payment represents a non-refundable deposit to be
retained by Connecticut General and applied to the Group Annuity Contract or the
Service Agreement. In the event the Contract is not executed, Connecticut General
will refund the excess, if any, of the amount of the binding payment over the amount
of expenses which Connecticut General determines it has incurred as a result of the
application. In no event, however, will the amount of expenses charged by Connecticut
General as a result of the application exceed three thousand dollars ($3,000).
</TABLE>
<PAGE> 1
EXHIBIT 10.19
AMENDMENT TO
LASON SYSTEMS, INC. 401(K) PROFIT SHARING PLAN & TRUST
WHEREAS, Lason Systems, Inc. (hereinafter referred to as the "Employer")
established the Lason Systems, Inc. 401(k) Profit Sharing Plan & Trust
(hereinafter referred to as the "Plan") effective September 1, 1989, for the
benefit of its eligible Employees and their Beneficiaries; and
WHEREAS, the Employer reserved the right to amend the Plan under the terms
thereof; and
WHEREAS, effective January 1, 1992, the Insurance Company has amended and
restated Basic Plan Document 02 and Adoption Agreement 011 in accordance with
Revenue Procedure 92-41 of the Internal Revenue Service to comply with the
requirements of the final regulations under sections 401(k) and 401(m) of the
Internal Revenue Code (hereinafter referred to as the "Code") and the new
definition of compensation under section 414(s) of the Code which is set out
at section 1.415-2(d)(11)(i) of the Income Tax Regulations; and
WHEREAS, effective on first day of the Plan Year beginning in 1989, the
Insurance Company received IRS approval for Basic Plan Document 02 for the Tax
Reform Act of 1986 (TRA '86), the Omnibus Budget Reconciliation Act of 1986
(OBRA '86) on May 29, 1991; and
WHEREAS, the Insurance Company has amended and restated Basic Plan Document 02
and Adoption Agreement 011 effective January 1, 1993, in accordance with
Revenue Procedure 93-12 of the Internal Revenue Service to comply with the
direct rollover requirements of section 401(a)(31) of the Code; and
WHEREAS, the Employer desires to amend the Plan to provide for its funding
through a Group Annuity Contract issued by Connecticut General Life Insurance
Company;
NOW THEREFORE, the Plan is hereby amended and restated in its entirety
effective January 1, 1994, except as follows:
1. Effective on the first day of the Plan Year beginning in 1992, the
definition of Compensation shall be governed by the terms of Article I of
the Plan attached hereto.
2. Effective on the first day of the Plan Year beginning in 1992, gap period
earnings first associated with Excess Contributions shall not be
distributed.
3. Effective on the first day of the Plan Year beginning in 1992, gap period
earnings associated with Excess Aggregate Contributions shall not be
distributed.
4. Effective on the first day of the 1992 Plan Year, attributable Matching
Contributions shall be forfeited as set forth in Article IV of the Plan
attached hereto.
<PAGE> 2
5. Effective on the first day of the Plan Year beginning in 1989, the
provisions relating to withdrawals for Serious Financial Hardship shall be
amended and governed by the terms of Article X or the Plan attached
hereto. However, effective on the first day of the 1992 Plan Year, the
provisions relating to the determination of a financial need for a
Serious Financial Hardship shall be liberalized in accordance with the
rules set forth in the final 401(k) regulations.
6. Effective on the first day of the 1992 Plan Year, the provisions relating
to the correction of excess Annual Additions shall be amended and governed
by the terms of Article V of the Plan attached hereto.
7. Effective January 1, 1993, the provisions relating to Direct Rollover
shall be added to the Plan as governed by the terms of Section 8.10 of
the Plan attached hereto.
The terms of the Plan as heretofore set forth shall no longer apply with
respect to Participants under the Plan who have not terminated employment
(including termination on account of Retirement, death, or Disability); and the
terms of the Plan with respect to such Participants shall henceforth be set
forth in the Lason Systems, Inc. 401(k) Profit Sharing Plan & Trust, a copy of
which is attached to and forms part of this amendment.
The Plan as amended and restated shall represent a continuation of the prior
Plan as heretofore set forth and shall not abridge nor curtail any rights
accorded to Participants under said prior instrument.
IN WITNESS WHEREOF, the Employer, the Trustees, and the Administrator have
hereunto affixed their signatures.
Executed at 4:00 pm EST on April 8, 1994
--------------------------- -----------------------------
LASON SYSTEMS, INC.
Jacqueline J. Rose By Richard C. Kowalski
- ------------------- ------------------------
Witness Richard C. Kowalski
Title Chief Financial Officer
----------------------------
Accepted this day of ,19
---------- --------------------------- ---.
By
- ------------------------------ --------------------------------
Witness Administrator
<PAGE> 3
Jacqueline J. Rose By Richard C. Kowalski
- ----------------------- ----------------------------
Witness Trustee Richard C. Kowalski
Jacqueline J. Rose By Donald L. Elland
- ----------------------- -----------------------------
Witness Trustee Donald L. Elland
Jacqueline J. Rose By Allen J. Nesbitt
- ------------------------ -------------------------------
Witness Trustee Allen J. Nesbitt
IMPORTANT NOTE
Neither Connecticut General Life Insurance Company nor any of its employees can
provide you with legal advice in connection with the execution of this
document. Prior to execution of this document, you should consult your attorney
on whether this document is appropriate for you.
<PAGE> 4
STANDARDIZED PROFIT SHARING/THRIFT PLAN WITH 401(k) FEATURE
ADOPTION AGREEMENT NUMBER 011
This Adoption Agreement when executed by the Employer and accepted by the
Administrator, and the Trustee, if applicable, and accepted by Connecticut
General Life Insurance Company establishes the Employer's Plan and Trust, if
applicable for the benefit of its eligible Employees and their Beneficiaries.
The terms of the Connecticut General Life Insurance Company Defined
Contribution Plan are expressly incorporated therein and shall form a part
hereof as fully as if set forth herein except that if more than one election is
provided, only that election made by the Employer shall be so incorporated.
The terms of the Plan so incorporated together with the terms of this Adoption
Agreement shall constitute the sole terms of the Employer's Plan and Trust, if
applicable, and no further trust instrument or other instrument of any nature
whatsoever shall be required. The Employer's participation under the Plan shall
be subject to all the terms set forth therein and in this Adoption Agreement.
Name of Employer (Legal Name):
Lason Systems, Inc.
----------------------------------------
Address:
Street 28400 Schoolcraft Rd.
----------------------------------
City Livonia State MI Zip 48150
----------------------------------------
Type of Business:
Computer & reprographic services
----------------------------------------
Classification of Business: Employer Tax Status:
Corporation Tax Year Ends 12 31
----- ---- ----
Partnership Month Day
-----
x S Corporation Tax Basis: Cash x
----- -----
Sole Proprietorship Accrual
----- -----
Other
-----
-------------------
-------------------
-------------------
RPSTS -1- 03/19/93
<PAGE> 5
Name of Sponsoring Organization:
Connecticut General Life Insurance Company
P.O. Box 2975
Hartford, CT 06104
Authorized Representative:
Director of Underwriting
(203) 725-2004
Plan Name: Lason Systems, Inc. 401(k) Profit Sharing Plan & Trust
I. COMPENSATION, SECTION 1.13
A. Compensation means:
_____(1) 415 safe harbor compensation. (See Section 5.8(b)(4)
of Basic Plan Document 02 for the complete definition of this
term.)
__x__(2) Wages, Tips, and Other Compensation Box on Form W-2.
(See Section 5.8(b)(1) of Basic Plan Document 02 for the
complete definition of this term.)
_____(3) Modified Wages, Tips, and Other Compensation Box on
Form W-2. (See Section 5.8(b)(2) of Basic Plan Document 02 for
the complete definition of this term.)
_____(4) Section 3401(a) wages. (W-2 wages for purposes of
income tax withholding at the source. See Section 5.8(b)(3) of
Basic Plan Document 02 for the complete definition of this
term.)
Note: You must elect the same definition of
Compensation in Section XIX. C. of this Adoption
Agreement as you elected above.
B. Compensation shall be determined over the following applicable
period:
__x__(1) The Plan Year.
_____(2) A 12 consecutive month period beginning on ________ and
ending with or within the Plan Year.
_____(3) The Plan Year. However, for the Plan Year in which an
Employee's participation begins, the applicable period is the
portion of the Plan Year during which the Employee is eligible
to participate in the Plan.
C. Compensation SHALL NOT ___ SHALL _x_ include Employer
contributions, made pursuant to a salary deferral agreement,
which are not includable in the gross income of the Employee
under section 125, 402(a)(8), 402(h) or 403(b) of the Code.
-2-
RPSTS 03/19/93
<PAGE> 6
I. COMPENSATION (CONT'D)
D. The highest annual Compensation to be used in determining
allocations to a Participant's Account shall be $_________________.
(Enter dollar amount if less than the $200,000 indexed amount.)
E. The following shall be selected, and shall be effective in lieu of
all other selections in Section I, in the event an integrated
contribution formula is selected, or if the Plan is top-heavy.
(1) Compensation shall be determined over the following applicable
period:
__x__ (a) The Plan Year.
_____ (b) A 12 consecutive month period beginning on
_______________ and ending with or within the Plan
Year.
_____ (c) The Plan Year. However, for the Plan Year in which
an Employee's participation begins, the applicable
period is the portion of the Plan Year during
which the Employee is eligible to participate in
the Plan.
(2) Compensation SHALL NOT _____ SHALL __x__ include Employer
contributions, made pursuant to a salary deferral agreement,
which are not includable in the gross income of the Employee
under section 125, 402(a)(8), 402(h) or 403(b) of the Code.
________________________________________________________________________________
II. CONTRIBUTION PERIOD, SECTION 1.17
The regular Contribution Period for Matching Contributions shall be:
_____ (a) Annual.
__x__ (b) Monthly.
_____ (c) 4-Weekly.
The regular Contribution Period for Nonelective Contributions shall be:
__x__ (a) Annual.
_____ (b) Monthly.
_____ (c) 4-Weekly.
The regular Contribution Period for Elective Deferral Contributions,
Required Employee Contributions and/or Voluntary Employee Contributions
shall be:
__x__ (a) Monthly.
_____ (b) 4-Weekly.
________________________________________________________________________________
RPSTS -3- 03/19/93
<PAGE> 7
III. EARLY RETIREMENT BY PARTICIPANTS, SECTION 1.20
Early Retirement by Participants is:
_____(a) Not permitted.
__x__(b) Permitted. Participants will have a Vesting Percentage of
100% as of
Age 55 (50-64) 3 Years of Service
---- ---
(Note: Age only or age and years may be selected.)
- --------------------------------------------------------------------------
IV. EFFECTIVE DATE, SECTION 1.22
The adoption of the CONNECTICUT GENERAL LIFE INSURANCE COMPANY
Standardized Profit Sharing/Thrift Plan with 401(k) Feature shall:
_____(a) Establish a new Plan effective as of ----------------------.
Month Day Year
__x__(b) Constitute an amendment and restatement in its entirety of a
previously established Qualified Plan of the Employer which was
effective September 1, 1989 (hereinafter called the "Effective
Date"). The effective date of this amendment and restatement is
January 1, 1994.
- --------------------------------------------------------------------------
V. ELIGIBILITY REQUIREMENTS, SECTION 2.5(a), 3.1
A. To become a Participant an Employee must meet the following
requirements:
__x__(1) Service Requirement.
1
------ Year(s) of Service. (Not to exceed 1 Year if the
Plan provides for graded vesting; not to exceed 2 Years if
the Plan provides full and immediate vesting upon
participation. If the Year(s) of Service selected is or
includes a fractional year, a Participant will not be
required to complete any specified number of Hours of
Service to receive credit for such year. If an annual Entry
Date is chosen in Section VI, the Service Requirement may
not exceed 1/2 Year or 1-1/2 Years respectively.)
__x__(2) Age Requirement.
The minimum attained age is ____21____ years. (Not greater
than 21 years except if an annual Entry Date is chosen in
Section VI, minimum attained age may not exceed 20-1/2
years.)
RPSTS -4- 03/19/93
<PAGE> 8
V. ELIGIBILITY REQUIREMENTS, (CONT'D)
B. To become a Participant an Employee must NOT be a member of the
following group(s):
__x__ (1) Employees included in a unit of Employees covered by a
collective bargaining agreement between the Employer and
employee representatives, if retirement benefits were the
subject of good faith bargaining and if two percent or
less of the Employees of the Employer who are covered
pursuant to that agreement are professionals as defined
in section 1.410(b)-9(g) of the proposed regulations. For
this purpose, the term "employee representatives" does
not include any organization more than half of whose
members are Employees who are owners, officers, or
executives of the Employer.
__x__ (2) Employees who are nonresident aliens and who receive no
earned income from the Employer which constitutes income
from sources within the United States.
_______________________________________________________________________________
VI. ENTRY DATE, SECTION 1.28
An Employee who meets the eligibility requirements may become a
Participant on the Effective Date, or thereafter:
_____ (a) Immediately.
_____ (b) The first day of any month.
_______________________________________________________________________________
VI. ENTRY DATE (CONT'D)
_____ (c) Quarterly, (i.e., 3 months apart) on each
_____ _____, or _____ _____, or
Month Day Month Day
_____ _____, or _____ _____.
Month Day Month Day
__x__ (d) Semiannually, (i.e., 6 months apart) on each
__1___ __1___, or __7___ __1___.
Month Day Month Day
_____ (e) Annually, on each __________ _____.
Month Day
_______________________________________________________________________________
RPSTS -5- 03/19/93
<PAGE> 9
VII. NORMAL RETIREMENT AGE, SECTION 1.48
__x__ (a) The date the Participant attains age __65__ (not to exceed
65).
_____ (b) The later of:
(i) The date the Participant attains age _______ (not to
exceed 65).
(ii) The ____________ (not to exceed 5th) anniversary of
the participation commencement date. If, for Plan
Years beginning before January 1, 1988, Normal
Retirement Age was determined with reference to the
anniversary of the participation commencement date
(more than 5 but not to exceed 10 years), the
anniversary date for Participants who first commenced
participation under the plan before the first Plan
Year beginning on or after January 1, 1988, shall be
the earlier of (A) the tenth anniversary of the date
the Participant commenced participation in the Plan
(or such anniversary as had been elected by the
Employer, if less than 10) or (B) the fifth
anniversary of the first day of the first Plan Year
beginning on or after January 1, 1988. The
participation commencement date is the first day of
the first Plan Year in which the Participant commenced
participation in the Plan.
- --------------------------------------------------------------------------------
VIII. PLAN ADMINISTRATOR, SECTION 1.55
Name:
Lason Systems, Inc.
------------------------------------------------------
------------------------------------------------------
Address:
28400 Schoolcraft Rd.
------------------------------------------------------
Street
Livonia MI 48150
------------------------------------------------------
City State Zip
- --------------------------------------------------------------------------------
IX. PLAN YEAR, SECTION 1.56
The Plan Year will mean:
_____ (a) The 12-consecutive month period commencing on ______________
and each anniversary thereof except that the first Plan Year
will commence on ______________.
(Note: This first Plan Year election may be made only for new plans.)
__x__ (b) The 12-consecutive month period commencing on __January 1__
and each anniversary thereof.
- --------------------------------------------------------------------------------
RPSTS -6- 03/19/93
<PAGE> 10
X. NON-TRUSTEED, TRUST, AND TRUSTEE, SECTION 1.47, 1.65, 1.66
The Plan is:
_____(a) Non-Trusteed.
__x__(b) Trusteed and the Trustee(s) is (are):
Name: Title:
Allen J. Nesbitt President
______________________ ________________________
Donald L. Elland Vice President
______________________ ________________________
Richard C. Kowalski Chief Financial Officer
______________________ ________________________
Address:
28400 Schoolcraft Rd.
_______________________
Street
Livonia MI 48150
_________________________
City State Zip
RPSTS -7- 03/19/93
<PAGE> 11
XI. VESTING PERCENTAGE, SECTION 1.69
The Vesting Schedule, based on number of Years of Service, shall be as
follows:
_____(a) Years of Service Percentage
No Requirement 100%
__x__(b) Years of Service Percentage
0-3 Years 0%
3 Years 100%
_____(c) Years of Service Percentage
1 Year 20%
2 Years 40%
3 Years 60%
4 Years 80%
5 Years 100%
_____(d) Years of Service Percentage
0-3 Years 0%
3 Years 20%
4 Years 40%
5 Years 60%
6 Years 80%
7 Years 100%
_____(e) Years of Service Percentage
0-2 Years 0%
2 Years 20%
3 Years 40%
4 Years 60%
5 Years 80%
6 Years 100%
_____(f) Years of Service Percentage
0-5 Years 0%
5 Years 100%
_____(g) Years of Service Percentage
1 Year 25%
2 Years 50%
3 Years 75%
4 Years 100%
_____(h) Other
Years of Service Percentage
________ _______
________ _______
________ _______
________ _______
________ _______
________ _______
________ _______
(Note: (h) must be at least as liberal as (a) through (g).)
-8-
RPSTS 03/19/93
<PAGE> 12
XII. HOURS OF SERVICE, SECTION 2.3
Hours of Service shall be determined:
__x__ (a) On the basis of actual hours for which an Employee is paid or
entitled to payment.
_____ (b) On the basis of days worked. An Employee shall be credited
with ten (10) Hours of Service if, under Section 2.3 of the
Plan, such Employee would be credited with at least one (1)
Hour of Service during the day.
_____ (c) On the basis of weeks worked. An Employee shall be credited
with forty-five (45) Hours of Service if, under Section 2.3 of
the Plan, such Employee would be credited with at least one
(1) Hour of Service during the week.
_____ (d) On the basis of semi-monthly payroll periods. An Employee
shall be credited with ninety-five (95) Hours of Service if,
under Section 2.3 of the Plan, such Employee would be credited
with at least one (1) Hour of Service during the semi-monthly
payroll period.
_____ (e) On the basis of months worked. An Employee shall be credited
with one-hundred-ninety (190) Hours of Service if, under
Section 2.3 of the Plan, such Employee would be credited with
at least one (1) Hour of Service during the month.
- --------------------------------------------------------------------------------
XIII. EXCLUDED YEARS OF SERVICE, SECTION 2.8
The Vesting Percentage shall be based on all Years of Service (i.e.,
completion of 1000 Hours of Service) except that the following periods
shall be excluded:
_____ (a) Years of Service prior to the time the Participant attained
age 18.
_____ (b) Years of Service during which the Employer did not maintain
the Plan or a predecessor plan.
_____ (c) Years of Service during which a Participant elected not to
contribute to a Plan which required Employee Contributions.
__x__ (d) None of the above.
- --------------------------------------------------------------------------------
XIV. SERVICE WITH OTHER EMPLOYER(S)
An Employee's service with the following subsidiary or affiliated
employer(s) shall be considered as Service for the purpose of this Plan.
General Motors Photographic Division (Engineering Support Services)
-----------------------------------------------------------------------
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
RPSTS -9- 03/19/93
<PAGE> 13
XV. SOCIAL SECURITY INTEGRATION LEVEL, SECTION 1.62
__x__ Not integrated with Social Security
The Social Security Integration Level is:
_____ (a) $________ (not to exceed the Taxable Wage Base).
_____ (b) The Taxable Wage Base in effect on the first day of the Plan
Year.
_____ (c) _____% of Taxable Wage Base (not to exceed 100%).
_______________________________________________________________________________
XVI. CONTRIBUTIONS, SECTION 4.2, 4.8
A. (1) Elective Deferral Contributions
_____ Elective Deferral Contributions will NOT be allowed.
Each Participant may elect to have his Compensation actually paid
during the Plan Year reduced by:
_____ (1) _____%.
_____ (2) up to _____%.
__x__ (3) from __2__% to __15__%.
_____ (4) up to the maximum percentage allowable, not to exceed the
limits of sections 402(g) and 415 of the Code.
Cash bonuses paid within 2-1/2 months after the end of the Plan Year
SHALL NOT __x__ SHALL _____ be subject to the salary deferral
election.
(2) Modification, Section 4.2(j)(7) or 4.4(j)(7)
A Participant may change the amount of Elective Deferral
Contributions that the Participant makes to the Plan (complete (a),
(b) or (c)):
_____ (a) _____ per calendar year (may not be less frequent than
once).
__x__ (b) As of the following date(s) (day/month): January 1 and
July 1.
_____ (c) At any time during the calendar year.
B. Required Employee Contributions
__x__ Required Employee Contributions will NOT be made.
Required Employee Contributions WILL be made as a condition of
receiving an Employer contribution in the amount of:
_____ (1) _____% of Compensation actually paid during the
Contribution Period.
_____ (2) Not less than _____%, nor more than _____% of Compensation
actually paid during the Contribution Period.
RPSTS -10- 03/19/93
<PAGE> 14
XVI. CONTRIBUTIONS (CONT'D)
C. Matching Contributions
_____ The Employer will NOT make Matching Contributions.
For each $1.00 either Elective Deferral Contributions or Required
Employee Contributions, as selected above, the Employer will
contribute and allocate to each Participant's Matching Contribution
Account an amount equal to:
_____(1) $__________ (e.g., $.50).
__x__(2) A discretionary percentage, to be determined by the Employer.
The Matching Contribution on behalf of a Participant shall not
exceed:
_____(1) $__________ for the Plan Year.
_____(2) ______% of Participant's Compensation for the Contribution
Period.
_____(3) N/A
In addition, at the end of the Plan Year, the Employer may contribute
Additional Matching Contributions to be allocated in the same
proportion that the Matching Contribution made on behalf of each
Participant during the Plan Year bears to the Matching Contribution
made on behalf of all Participants during the Plan Year.
__x__ Yes
_____ No
D. Nonelective Contributions
_____(1) Will NOT be made.
_____(2) The contribution for each Contribution Period shall be
______% of Considered Net Profits.
_____(3) The contribution for each Contribution period shall be
______% of Compensation.
__x__(4) Discretionary.
(Note: Complete the following only if (2), (3) or (4) above is
selected.)
Nonelective Contributions SHALL NOT __x__ SHALL _____ be based upon
Considered Net Profits.
(Note: If you choose to make a Nonelective Contribution, each
Employee eligible to participate in the Plan and who satisfies the
Allocation Requirements of Section XVIII, MUST be given an
allocation, regardless of whether they make Elective Deferral
Contributions.)
-11-
RPSTS 03/19/93
<PAGE> 15
XVI. CONTRIBUTIONS (CONT'D)
E. Voluntary Employee Contributions
__x__(1) Voluntary Employee Contributions will NOT be
permitted.
_____(2) Voluntary Employee Contributions WILL be permitted up
to _____% of Compensation (not to exceed 10%)
actually paid during the Plan Year.
F. Rollover Contributions
_____(1) Rollover Contributions will NOT be permitted.
__x__(2) Rollover Contributions WILL be permitted.
- -------------------------------------------------------------------------------
XVII. ALLOCATION FORMULA FOR NONELECTIVE CONTRIBUTION, SECTION 4.2(f)
(Note: Complete only if response to Section XVI D. is (2) or (5).)
The Nonelective Contribution will be allocated to Participants who meet
the requirements of Section XVIII as follows:
__x__(a) In the same ratio as each Participant's Compensation bears to
the total Compensation of all Participants.
_____(b) Integrated with Social Security. (Select one of the
following.)
____Step-Rate Method
For each Plan Year, the Employer will contribute an amount
equal to ____% of each Participant's Compensation up to the
Social Security Integration Level, plus _____% of each
Participant's Compensation in excess of the Social Security
Integration Level. However, in no event will the excess
contribution percentage exceed the amount specified in Section
4.2(f)(3)(B) of the Plan.
_____Maximum Disparity Method
For each Plan Year, the Employer's Nonelective Contribution
shall be allocated in the manner stated in the Section
4.2(f)(4) of the Plan in order to maximize permitted
disparity.
- -------------------------------------------------------------------------------
XVIII. ANNUAL ALLOCATION REQUIREMENTS, SECTION 4.2(g)
_____(a) An allocation of the annual contribution made by the Employer
will be made to all Participants who are Participants on any
day of the Plan Year regardless of Hours of Service credited
during the Plan Year.
__x__(b) An allocation of the annual contribution made by the Employer
will not be made to Participants who terminate employment
during the Plan Year after having been credited with less
than 501 Hours of Service during the Plan Year and are not
employed on the last day of the Plan Year.
(Note: (b) above may be selected only if the Employer does not allow
Participants to make Elective Deferral Contributions and/or Required
Employee Contributions and/or Voluntary Employee Contributions.)
-12- 03/19/93
RPSTS
<PAGE> 16
XVIII. ANNUAL ALLOCATION REQUIREMENTS, (CONT'D)
__X__ (c) In addition, the contribution shall be allocated to any
Participant who retires, dies, or becomes disabled during the
Plan Year, regardless of Hours of Service credited during the
Plan Year.
________________________________________________________________________________
XIX. LIMITATIONS ON ALLOCATIONS, ARTICLE 5
If you maintain, or at any time maintained, another qualified retirement
plan in which any Participant in this Plan is, was, or could possibly
become a Participant, you must complete Parts A or B and C of this
section. You must also complete Parts A and C of this section if you
maintain a welfare benefit fund, as defined in section 419(e) of the
Code, or an individual medical account, as defined in section 415(1)(2)
of the Code, for which amounts are treated as Annual Additions with
respect to any Participant in this Plan.
A. If the Participant is covered by another qualified defined
contribution plan maintained by the Employer, other than a Master or
Prototype plan:
__x__ (1) N/A. The Employer has no other defined contribution
plan(s).
_____ (2) The provisions of Section 5.5 of the Plan will apply, as
if the other plan were a Master or Prototype plan.
_____ (3) Provide the method under which the plans will limit total
Annual Additions to the Maximum Permissible Amount, and
will properly reduce any Excess Amounts, in a manner that
precludes Employer discretion.
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
B. If the Participant is or ever has been a Participant in a qualified
defined benefit plan maintained by the Employer:
__x__ (1) N/A. The Employer has no defined benefit plan(s).
_____ (2) In any Limitation Year, the Annual Additions credited to
the Participant under this Plan may not cause the sum of
the Defined Benefit Plan Fraction and the Defined
Contribution Fraction to exceed 1.0. If the Employer
contributions that would otherwise be allocated to the
Participant's account during such year would cause the
1.0 limitation to be exceeded, the allocation will be
reduced so that the sum of the fraction equals 1.0. Any
contributions not allocated because of the preceding
sentence will be allocated to the remaining Participants
under the allocation formula under the Plan. If the 1.0
limitation is exceeded because of an Excess Amount, such
Excess Amount will be reduced in accordance with Section
5.4 of the Plan.
RPSTS -13- 03/19/93
<PAGE> 17
XIX. LIMITATIONS ON ALLOCATIONS (CONT'D)
_____ (3) Provide the method under which the Plan involved will
satisfy the 1.0 limitation in a manner that precludes
Employer discretion.
-----------------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
C. Compensation will mean all of each Participant's:
_____ (1) 415 safe-harbor compensation.
__x__ (2) Wages, Tips, and Other Compensation Box on Form W-2.
_____ (3) Modified Wages, Tips, and Other Compensation Box on
Form W-2.
_____ (4) Section 3401(a) wages.
- --------------------------------------------------------------------------------
XX. LIMITATION YEAR, SECTION 5.8(i)
The Limitation Year shall be:
__x__ (a) The Calendar Year.
_____ (b) A 12-month period coinciding with the Plan Year.
_____ (c) A 12-month period beginning on _________ _________ .
Month Day
(Note: If (b) or (c) is selected, a Board of Directors' resolution is
necessary.)
- --------------------------------------------------------------------------------
XXI. LIFE INSURANCE, SECTION 7.1
__x__ (a) Participants may NOT elect to purchase Life Insurance.
_____ (b) Participants MAY elect to purchase Life Insurance.
(Note: If (b) is selected, the Plan must be Trusteed.)
- --------------------------------------------------------------------------------
XXII. FORFEITURES, SECTION 10.1, 10.4
Forfeitures will occur upon a:
__x__ (a) 1-Year Break-in-Service (Cash-Out Method).
_____ (b) 5 consecutive 1-Year Breaks-in-Service.
Forfeitures will be:
__x__ (a) Used as an Employer Credit.
_____ (b) Reallocated to Participants' Accounts.
(Note: If (b) immediately above is selected and the Plan provides
Matching Contributions, the Actual Contribution Percentage Test will be
affected.)
- --------------------------------------------------------------------------------
RPSTS -14- 03/19/93
<PAGE> 18
XXIII. INVESTMENT OF PARTICIPANT'S ACCOUNT, SECTION 6.1
_____(a) The Participant shall NOT have the authority to direct
the investment of contributions made by the Employer.
__x__(b) The Participant SHALL have authority to direct the
investment of contributions made by the Employer.
- --------------------------------------------------------------------------------
XXIV. WITHDRAWALS PRECEDING TERMINATION, ARTICLE 11
A. Required Employee Contributions
_____(1) Withdrawal of Required Employee Contributions will
NOT be allowed.
_____(2) Withdrawal of Required Employee Contributions WILL
be allowed.
On the date the withdrawal election becomes effective, the
Participant will have his contributions suspended pursuant to
the terms of Article IV of the Plan for:
_____(1) N/A
_____(2) 6 months.
_____(3) 12 months.
_____(4) 24 months.
Required Employee Contributions may be withdrawn each:
_____(1) 6 months.
_____(2) 12 months.
_____(3) Other ______________.
B. Voluntary Employee Contributions
_____(1) Withdrawal of Voluntary Employee Contributions will
NOT be allowed.
_____(2) Withdrawal of Voluntary Employee Contributions WILL
be allowed.
Voluntary Employee Contributions may be withdrawn each:
_____(1) 6 months.
_____(2) 12 months.
_____(3) Other ______________.
C. Elective Deferral Contributions
_____(1) Withdrawal of Elective Deferral Contributions will
NOT be allowed.
__x__(2) Withdrawal of Elective Deferral Contributions WILL be
allowed.
(Note: Participant must have attained age 59-1/2.)
RPSTS -15- 03/19/93
<PAGE> 19
XXIV. WITHDRAWALS PRECEDING TERMINATION (CONT'D)
D. Employer Contributions (Matching and/or Nonelective
Contributions)
_____(1) Withdrawal of the vested portion of Employer
contributions, pursuant to Section 11.3 of the Plan,
will NOT be allowed.
__x__(2) Withdrawal of the vested portion of Employer
contributions, pursuant to Section 11.3 of the Plan,
WILL be allowed.
If withdrawals of Employer contributions are permitted, the
Participant must satisfy one of the following conditions:
(Note: You may select one or both. If both are selected,
withdrawals may be taken upon satisfaction of either condition,
not both.)
_____(1) The Participant must have been an Active Participant
in the Plan for no less than 60 months.
__x__(2) The Participant must have attained the age of 59-1/2.
On the date the withdrawal election under (a) immediately above
becomes effective, such Participant will have his contributions
suspended pursuant to the terms of Article IV of the Plan for:
__x__(1) N/A
_____(2) 6 months.
_____(3) 12 months.
_____(4) 24 months.
Employer contributions may be withdrawn each:
_____(1) 6 months.
__x__(2) 12 months.
_____(3) Other _____________________.
E. Serious Financial Hardship -- Elective Deferral Contributions
_____(1) Withdrawal for Serious Financial Hardship will NOT be
allowed.
__x__(2) Withdrawal for Serious Financial Hardship WILL be
allowed.
F. Serious Financial Hardship -- Other than Elective Deferral
Contributions
__x__(1) Withdrawal for Serious Financial Hardship will NOT be
allowed.
_____(2) Withdrawal for Serious Financial Hardship WILL be
allowed.
G. Rollover Contributions
_____(1) Withdrawal of Rollover Contributions will NOT be
allowed.
__x__(2) Withdrawal of Rollover Contributions WILL be
allowed.
RPSTS -16- 03/19/93
<PAGE> 20
XXIV. WITHDRAWALS PRECEDING TERMINATION (CONT'D)
If this a readoption of an existing plan, the following withdrawal
option may apply.
H. Qualified Voluntary Employee Contributions (QVEC/IRP Contributions)
_____ (1) Withdrawal of QVEC/IRP Contributions will NOT be allowed.
_____ (2) Withdrawal of QVEC/IRP Contributions WILL be allowed.
- --------------------------------------------------------------------------------
XXV. LOANS TO PARTICIPANTS, ARTICLE 12
Loans to Participants are:
(Note: If loans are permitted, the Plan must be Trusteed.)
_____ (a) Not Permitted.
__x__ (b) Permitted.
- --------------------------------------------------------------------------------
XXVI. JOINT AND SURVIVOR BENEFITS, ARTICLE 9
A. Distribution Forms
_____ (1) Cash Only
__x__ (2) Cash and Annuity
B. Qualified Preretirement Survivor Annuity, Section 9.3
__x__ (1) 100% Qualified Preretirement Survivor Annuity.
_____ (2) 50% Qualified Preretirement Survivor Annuity.
- --------------------------------------------------------------------------------
XXVII. TOP-HEAVY PROVISIONS, SECTION 20.2, 20.3
A. When a non-Key Employee is a Participant in both this Plan and a
defined benefit plan maintained by the Employer, indicate which
method shall be utilized to avoid duplication of Top-Heavy minimum
benefits. (Select one of the following.)
__x__ (1) N/A. The Employer has no other plan(s).
_____ (2) A minimum non-integrated allocation of contributions and
Forfeitures equal to ______% (not less than 5) of each
non-Key Employee's Compensation, as defined in Section
20.2(b) of the Plan, will be allocated to the non-Key
Employee's Participant Account in this Plan, as specified
in the Plan.
_____ (3) A minimum non-integrated allocation of contributions and
Forfeitures equal to 7-1/2% of each non-Key Employee's
Compensation, as defined in Section 20.2(b) of the Plan,
will be allocated to the non-Key Employee's Participant
Account in this Plan, as specified in the Plan. (The
Defined Benefit and Defined Contribution Fractions will be
computed using 125% if this choice is selected, for all
Plan Years in which this Plan is Top-Heavy, but not Super
Top-Heavy.)
RPSTS -17- 03/19/93
<PAGE> 21
XXVII. TOP-HEAVY PROVISIONS (CONT'D)
_____(4) Enter the name of the plan(s) and specify the method under
which the plans will provide Top-Heavy Minimum Benefits for
non-Key Employees that will preclude Employer discretion and
avoid inadvertent omissions (include any adjustments required
under Code section 415(e)).
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
(Note: Complete B. only if response to A. is (2), (3) or (4).)
B. Present value: For purposes of establishing present value to compute
the Top-Heavy Ratio, any benefit shall be discounted only for mortality
and interest based on the following:
Interest rate: ______% Mortality Table: _________
Valuation date: For purposes of computing the Top-Heavy Ratio, the
valuation date shall be _________________ of each year.
C. Where a non-Key Employee is a Participant in this Plan and a
Participant in another defined contribution plan(s) of the Employer,
indicate which plan will be utilized to provide the minimum Top-Heavy
contribution to avoid duplication of the Top-Heavy minimum
contribution. (Select one of the following.)
__x__(1) N/A. The Employer has no other plan(s).
_____(2) The minimum allocation shall be as provided in Section 20.2(a)
of the Plan.
_____(3) The minimum allocation applicable to Top-Heavy plans will be
met in the other defined contribution plan; (Enter the name
of the plan(s).)
_____________________________________________
_____________________________________________
RPSTS -18- 03/19/93
<PAGE> 22
XXVII. TOP-HEAVY PROVISIONS (CONT'D)
D. The Vested Interest of each Participant in his
Participant's Account attributable to Employer contributions
shall be determined on the basis of the following: (Select 1 or
2.)
__x__ (1) 100% vesting after 3 (not to exceed 3) Years
of Service.
_____ (2) ___% vesting after 1 Year of Service.
___% (not less than 20) vesting after 2 Years of Service.
___% (not less than 40) vesting after 3 Years of Service.
___% (not less than 60) vesting after 4 Years of Service.
___% (not less than 80) vesting after 5 Years of Service.
100% vesting after 6 Years of Service.
If the vesting schedule under the Plan shifts in or out of the
above schedule for any Plan Year because of the Plan's Top-Heavy
status, such shift is an amendment to the vesting schedule and
the election in Section 17.1 of the Plan applies.
- --------------------------------------------------------------------------------
XXVIII. OTHER ADOPTING EMPLOYER(S), SECTION 22.2
The following Adopting Employer(s) also adopt this Plan and have
executed this Adoption Agreement:
Lason Maintenance, Inc.
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
(Note: Adopting Employers are limited to entities defined in
Section 22.2 of the Plan.)
RPSTS -19- 03/19/93
<PAGE> 23
The Employer hereby adopts the Connecticut General Life Insurance Company Group
Pension Prototype Profit Sharing/Thrift Plan with 401(k) Feature, including all
elections made in this Standardized Adoption Agreement, and the Employer agrees
to be bound by all the terms of the Plan and by all the terms of this Adoption
Agreement and of the Annuity Contract. The Employer further agrees that it will
furnish promptly all information required by the Trustee, if applicable, the
Plan Administrator and the Insurance Company in order to carry out their
functions. The Employer shall notify the Trustee, if applicable, the Plan
Administrator and the Insurance Company promptly of any changes in the status
of the Employer which might affect the Employer's duties and responsibilities
hereunder.
The elections under this Adoption Agreement may be changed by the Employer from
time to time by a written instrument signed by the Employer, the Plan
Administrator and the Trustee, if applicable, and accepted by the Sponsor. The
Employer consents to the exercise by the Sponsor of the right to amend the Plan
and the Annuity Contract from time to time as it may deem necessary or
advisable.
By signing this Adoption Agreement, the Employer specifically acknowledges that
the Insurance Company has no authority: (1) to answer legal questions and that
all such questions shall be answered by legal counsel for the Employer; and (2)
to make determinations involved in the administration of the Plan and that all
such determinations shall be answered by the Employer's Plan Administrator or
other designated representative.
Upon execution of this Adoption Agreement by the Employer, the Plan shall be
effective with respect to that Employer as of the Effective Date specified
herein, provided the Plan Administrator and the Trustee, if applicable, shall
then or thereafter execute this Adoption Agreement to signify their acceptance
of their duties and responsibilities hereunder and provided further, the
Sponsor will indicate its acceptance of the Employer in accordance with its
usual rules and practices.
An Employer who has ever maintained or who later adopts any plan in addition to
this Plan (including a welfare benefit fund, as defined in Code section 419(e),
which provides post-retirement medical benefits allocated to separate accounts
for Key Employees, as defined in Code section 419A(d)(3) or an individual
medical account, as defined in Code section 415(1)(2)) may not rely on the
opinion letter issued by the National Office of the Internal Revenue Service as
evidence that this Plan is qualified under section 401 of the Internal Revenue
Code. If the Employer who adopts or maintains multiple plans wishes to obtain
reliance that his plan(s) are qualified, application for a determination letter
should be made to the appropriate Key District Director of Internal Revenue.
Connecticut General Life Insurance Company will inform the Employer of any
amendments made to the Plan or of the discontinuance or abandonment of such
Plan.
CAUTION: You should very carefully examine the elections you have made in this
Adoption Agreement and discuss them with your legal counsel. Failure to
properly fill out the Adoption Agreement may result in disqualification of your
plan.
RPSTS -20- 03/19/93
<PAGE> 24
This Adoption Agreement may only be used in conjunction with Basic Plan
Document Number 02.
(Note: The Employer, Plan Administrator and Trustee, if applicable, must all
sign below.)
Executed at Livonia, MI, this 8th day of February, 1994.
Lason Systems, Inc.
------------------------------------------
(Employer's Exact Name)
/s/ Jacqueline A. Rose By /s/ Richard C. Kowalski
- --------------------------- ---------------------------------------
(Witness) Richard C. Kowalski
Chief Financial Officer
------------------------------------------
(Title)
Lason Maintenance, Inc.
------------------------------------------
(Additional Adopting Employer's Exact Name)
/s/ Jacqueline A. Rose By /s/ James E. Holthus
- --------------------------- ---------------------------------------
(Witness) James E. Holthus
Vice President
------------------------------------------
(Title)
------------------------------------------
(Additional Adopting Employer's Exact Name)
By
- --------------------------- ---------------------------------------
(Witness)
------------------------------------------
(Title)
ACCEPTED this day of , 19 .
-------------------- ----------------------- -----
By Lason Systems, Inc.
- -------------------------------- ---------------------------------------
(Witness) (Administrator)
By
- -------------------------------- ---------------------------------------
(Witness) (Administrator)
By
- -------------------------------- ---------------------------------------
(Witness) (Administrator)
RPSTS -21- 03/19/93
<PAGE> 25
/s/ Richard C. Kowalski
/s/ Jacqueline A. Rose By Richard C. Kowalski
- -------------------------------- ---------------------------------------
(Witness) (Trustee)
/s/ Donald L. Elland
/s/ Jacqueline A. Rose By Donald L. Elland
- -------------------------------- ---------------------------------------
(Witness) (Trustee)
/s/ Allen J. Nesbitt
/s/ Jacqueline A. Rose By Allen J. Nesbitt
- -------------------------------- ---------------------------------------
(Witness) (Trustee)
ACCEPTED this 15th day of March, 1994.
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By: /s/ Thomas J. Quinlan
-------------------------------------
(Authorized Representative)
RPSTS -22- 03/19/93
<PAGE> 26
AMENDMENT
WHEREAS, Trustees of the Lason Systems, Inc. 401(k) Profit Sharing Plan &
Trust (hereinafter referred to as the "Contractholder") entered into Group
Annuity Contract Number GA-36724 (hereinafter referred to as the "Contract")
with Connecticut General Life Insurance Company (hereinafter referred to as the
"Insurance Company") effective January 1, 1994; and
WHEREAS, the Insurance Company reserved the right to amend said Contract; and
WHEREAS, the Insurance Company and the Contractholder mutually agree to add the
Fidelity Puritan Fund, the AIM Charter Fund and the PBHG Growth Fund as
investment vehicles; and
WHEREAS, the Insurance Company and the Contractholder mutually agree to delete
the Fidelity Advisor Income and Growth Fund Separate Account as an investment
vehicle;
NOW THEREFORE, the Contract is hereby amended effective July 1, 1996 as
follows:
1. The Contract is amended to add SA-55Q, SA-55BY and SA-55FU, which are
attached to and form a part of this amendment.
NOW THEREFORE, the Contract is hereby amended effective September 1, 1996 as
follows:
2. The Contract is amended to delete SA-55B.
Executed at the Home Office on June 21, 1996.
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
Byron Oliver
------------------------------------------
Senior Vice President
<PAGE> 27
GROUP ANNUITY CONTRACT
TABLE OF CONTENTS
SECTION STARTING ON PAGE
1.............................DEFINITIONS..................... 2
2.............................INCOMING AMOUNTS................ 3
3.............................OPERATIONAL AGREEMENTS.......... 5
4.............................DISTRIBUTIONS................... 7
5.............................DISCONTINUANCE.................. 9
6.............................MISCELLANEOUS................... 11
Contract Expense Schedule
Annuity Purchase Rate Table A
Annuity Purchase Rate Table B
Guaranteed Long Term Account Rider
Separate Account 55A Rider
Separate Account 55F Rider
Separate Account 55G Rider
Separate Account 55J Rider
Separate Account 55Q Rider
Separate Account 55BY Rider
Separate Account 55FU Rider
Application
GA 2005-1
<PAGE> 28
SEPARATE ACCOUNT 55 RIDER
R7.1 SEPARATE ACCOUNT 55 (the CIGNA Separate Account) - is a pooled separate
account maintained by the Insurance Company for a portion of its assets.
The only amounts which may be allocated to Separate Account 55 are amounts
contributed in accordance with the terms of pension or profit sharing
plans qualified under section 401 of the Internal Revenue Code, as
amended, governmental plans as defined in section 414(d) of the Internal
Revenue Code, as amended, or eligible deferred compensation plans as
defined in section 457 of the Internal Revenue Code, as amended. The
assets of Separate Account 55 are segregated from other assets of the
Insurance Company and are subject only to the claims of contracts
participating in this separate account.
Separate Account 55 is maintained and operated by the Insurance Company in
accordance with the following:
(A) INVESTMENTS. The assets of Separate Account 55 are invested in
shares of underlying mutual funds sponsored and advised by investment
companies not related to the Insurance Company. In addition, from
time to time, the Insurance Company may invest such assets in
short-term money market instruments, cash or cash equivalents. Any
income, gains or losses, realized or unrealized, from the assets in
Separate Account 55 shall be credited to or charged against said
account without regard to the other income, gains or losses of the
Insurance Company.
(B) EXPENSES CHARGED TO SEPARATE ACCOUNT 55. Separate Account 55 may be
charged with (1) an investment management charge which shall
not exceed a maximum aggregate annual rate of one percent (1%), (2)
brokerage commissions, transfer taxes and other direct charges
arising from the purchase or sale of investments or futures
instruments thereunder, (3) other taxes, charges or expenses directly
attributable to the operation of, or the assets held in, Separate
Account 55, and (4) any expenses (including reasonable fees and
expenses for the time spent by officers or employees of the Insurance
Company) which are incurred in the course of litigation,
representation on any creditors' committees, or any other action
which the Insurance Company determines is reasonably necessary or
required to preserve or enhance the value of the assets of Separate
Account 55. The investment management charge determined by the
Insurance Company will be charged daily based upon the value of each
Contract's share of Separate Account 55.
GA 2005 SA-55-2
<PAGE> 29
(C) SEPARATE ACCOUNT 55 UNIT. Separate Account 55 is divided into units
of participation with each unit being referred to as a Separate
Account 55 Unit. When an amount is allocated or transferred to
Separate Account 55, the number of Separate Account 55 Units is
increased, and when an amount is withdrawn from Separate Account 55,
the number of Separate Account 55 Units is decreased. Such increase
or decrease in the number of Separate Account 55 Units is determined
by dividing the amount allocated to or withdrawn from Separate
Account 55 by the then current Separate Account 55 Unit Value.
(D) SEPARATE ACCOUNT 55 UNIT VALUE. A Separate Account 55 Unit Value is
determined by the Insurance Company on each Valuation Date and
is equal to the Market Value of Separate Account 55 divided by the
total number of Separate Account 55 Units on such date. The Separate
Account 55 Unit Value on any date is equal to the amount so
determined on the Valuation Date coinciding with or last preceding
such date.
(E) MARKET VALUE OF SEPARATE ACCOUNT 55. The Insurance Company will
determine the Market Value of Separate Account 55 for each
Valuation Date. The Market Value on any Valuation Date is based upon
the market value of the assets in Separate Account 55 at the close of
the Insurance Company's business on the current day, as determined in
accordance with generally recognized accounting procedures. The
Market Value of the investments in Separate Account 55 will be
determined by the NAV (net asset value) of the shares plus the value
of any dividends and capital gain distributions.
R7.2 VALUATION. The value of the portion of a Participant's Account invested
in Separate Account 55 is an amount equal to the product of the number of
Accumulation 55 Units credited to such Account and the Accumulation 55
Unit Value for the Valuation Date.
(A) ACCUMULATION 55 UNITS. When an amount is allocated to the portion of
a Contractholder's Account invested in Separate Account 55, the
Contractholder's Account is credited with the number of Accumulation
55 Units equal to the amount allocated divided by the Accumulation 55
Unit Value as of the Valuation Date when such amount is allocated to
Separate Account 55.
When an amount is transferred, distributed or disbursed from
the portion of a Contractholder's Account invested in Separate
Account 55, the Contractholder's Account is debited by the number of
Accumulation 55 Units equal to the amount transferred, distributed or
disbursed divided by the Accumulation 55 Unit Value as of the
Valuation Date when such amount is transferred, distributed or
disbursed.
GA 2005 SA-55-3
<PAGE> 30
(B) ACCUMULATION 55 UNIT VALUE. The Accumulation 55 Unit Value is the
Separate Account 55 Unit Value adjusted to reflect the contract's
asset charge, if applicable.
(C) VALUATION DATE. A Valuation Date will occur on each day that the
Insurance Company is open for business and there exists an
orderly financial market for investment transactions. All
transactions processed on a Valuation Date will be based on the value
of the Account's investments as of the close of the financial
market's business day.
R7.3 LIMITATIONS.
(A) Any transfer, distribution or disbursement from Separate
Account 55 may be delayed for a period of up to thirty (30)
days if there is a negative cash flow into Separate Account 55
considering all contracts with funds in Separate Account 55 on the
Valuation Date for such distribution or disbursement.
(B) Transfers, distributions or disbursements from Separate Account 55
may be deferred pursuant to Contract Section 4.5 if a determination
of the value of such distribution or disbursement is not possible
because the Securities and Exchange Commission has suspended or
otherwise restricted trading of securities or another emergency
situation outside the control of the Insurance Company exists.
R7.4 DISCONTINUANCE OF SEPARATE ACCOUNT 55. Separate Account 55 may be
discontinued if the underlying mutual fund is no longer offered by the
investment company, if the investment company becomes insolvent or files
for voluntary or involuntary bankruptcy, or if the Insurance Company
determines that Separate Account 55 is no longer commercially feasible and
notifies the Contractholder in writing that the Separate Account will be
discontinued.
As of the date Separate Account 55 is discontinued:
(A) No further contributions to Separate Account 55 will be accepted by
the Insurance Company and no further withdrawals or transfers will be
honored except as provided in (B) and (C) below;
(B) The Insurance Company will determine an amount equal to the expenses
which are unpaid or due hereunder and withdraw such amount from
Separate Account 55;
(C) The remaining value of this Contract's share of Separate Account 55
will be distributed in accordance with the Contractholder's written
instructions to be effective as of the date of discontinuance.
GA 2005 SA-55-4
<PAGE> 31
APPENDIX
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
The mutual fund(s) made available by Connecticut General Life Insurance Company
under the Universal Separate Account 55 Rider are as follows:
<TABLE>
<CAPTION>
SEPARATE
ACCOUNT MUTUAL FUND MANAGEMENT COMPANY
- -------- ---------------------------------------- ---------------------
<S> <C> <C>
SA-55A Fidelity Advisor Growth Opportunities Fund Fidelity Investments
SA-55B Fidelity Advisor Income & Growth Fund Fidelity Investments
SA-55C Fidelity Advisor Strategic Opportunities Fund Fidelity Investments
SA-55E Warburg Pincus Capital Appreciation Fund Counsellors Securities, Inc.
SA-55F Warburg Pincus International Equity Fund Counsellors Securities, Inc.
SA-55G Warburg Pincus Emerging Growth Fund Counsellors Securities, Inc.
SA-55I Fidelity Advisor Equity Portfolio Growth Fund Fidelity Investments
SA-55J INVESCO Industrial Income Fund INVESCO Funds Group, Inc.
SA-55K INVESCO Total Return Fund INVESCO Funds Group, Inc.
SA-55L INVESCO Emerging Growth Fund INVESCO Funds Group, Inc.
SA-55M Fidelity Disciplined Equity Fund Fidelity Investments
SA-55N Fidelity Contrafund Fidelity Investments
SA-55P Fidelity Income II Fund Fidelity Investments
SA-55Q Fidelity Puritan Fund Fidelity Investments
SA-55R Fidelity Growth & Income Portfolio Fidelity Investments
SA-55S Warburg Pincus Growth & Income Fund Warburg Pincus Funds
SA-55T Vanguard Balanced Index Fund Vanguard Group
SA-55U Vanguard Quantitative Portfolios Fund Vanguard Group
SA-55V Vanguard Wellington Fund Vanguard Group
SA-55W Twentieth Century Heritage Fund Twentieth Century Investors, Inc.
SA-55X Twentieth Century Ultra Fund Twentieth Century Investors, Inc.
SA-55Y Fidelity Magellan Fund Fidelity Investments
SA-55Z Fidelity Asset Manager Fund Fidelity Investments
SA-55AZ AIM Value Fund AIM Management Group, Inc.
SA-55BY AIM Charter Fund AIM Management Group, Inc.
SA-55CX AIM Constellation Fund AIM Management Group, Inc.
SA-55DW Janus Fund Janus Capital Corporation
SA-55EV Janus Worldwide Fund Janus Capital Corporation
SA-55FU PBHG Growth Fund PBHG Funds, Inc.
SA-55GT Templeton Growth Fund, Inc. Templeton Funds, Inc.
SA-55HS Templeton Foreign Fund Templeton Funds, Inc.
SA-55JR Founders Growth Fund Founders Asset Management, Inc.
SA-55KQ Founders Balanced Fund Founders Asset Management, Inc.
SA-55LP Founders Worldwide Growth Fund Founders Asset Management, Inc.
SA-55MN Neuberger & Berman Guardian Trust Neuberger & Berman Management, Inc.
SA-55NM Neuberger & Berman Partners Trust Neuberger & Berman Management, Inc.
SA-55OL Neuberger & Berman Focus Trust Neuberger & Berman Management, Inc.
SA-55PK Twentieth Century Vista Investors Fund Twentieth Century Investors, Inc.
SA-55QJ INVESCO Dynamics Fund, Inc. INVESCO Funds Group, Inc.
SA-55RH Fidelity Advisors Equity Income Fund Fidelity Investments
</TABLE>
- ----------------
Additional information regarding these fund(s) is available upon request.
GA2005 SA-55-5
<PAGE> 32
AMENDMENT
WHEREAS, the Contractholder entered into a Group Annuity Contract (hereinafter
referred to as the "Contract") with Connecticut General Life Insurance Company
(hereinafter referred to as the "Insurance Company"); and
WHEREAS, the Insurance Company reserved the right to amend the Contract;
NOW THEREFORE, the Expense Schedule is amended effective July 1, 1996 as
follows:
EXPENSE SCHEDULE
The expenses outlined in the Expense Schedule of this Contract
are annual charges which will be billed in part at the end of each Plan
Quarter.
The term "Plan Quarter" in this Expense Schedule means three (3) months of the
Plan Year or the period of time during which the Insurance Company receives the
expected number of contributions for three (3) months based on the frequency of
contributions submitted by the Employer under the Plan.
This Expense Schedule will cover expenses and taxes incurred by the Insurance
Company in the establishment and maintenance of this Contract. In no event will
these charges cover or be amended so as to cover any fees, expenses, taxes, or
charges relating to the management of the assets held hereunder.
1. CIGNA MANAGED GUARANTEED FUNDS ASSET CHARGE:
The Asset Charge for the coming Plan Year is determined annually as of the
asset charge valuation date and is based on the value of the participant
accounts. The charge is computed according to the following schedule:
Asset Charge
Asset and/or Contribution Level (Annual Rate)
------------------------------- ------------
Under $300,000 of assets and an 2.45%
annual contribution under $100,000
Under $300,000 in assets and 2.05%
over $100,000 in annual contributions
Over $300,000 and under $1.5 million of 1.90%
assets
Over $1.5 million of assets 1.85%
The asset charge valuation date is November 1st of each year provided that
the Insurance Company is open to transact normal business on such day.
Otherwise, the asset charge valuation
GA-36724-002
<PAGE> 33
date will be the next normal business day on which the Insurance
Company is open to transact normal business.
The Asset Charge, as determined above, shall not be applied to the value
of the Contractholder's account attributable to investments held in CIGNA
Alliance Funds. However, these amounts are included in determining the
annual rate applied to assets held under the Contract.
2. FIDELITY ADVISOR FUND ASSET CHARGE:
The Fidelity Advisor Asset Charge has an annual rate of 1.30% and is
assessed on the value of the Contractholder's investment in the Fidelity
Advisor Funds.
3. INVESCO FUND ASSET CHARGE:
The Invesco Fund Asset Charge is an annual rate of 1.45% and is assessed
on the value of the Contractholder's investment in the Invesco Funds.
4. FIDELITY RETAIL FUNDS ASSET CHARGE:
The Fidelity Retail Funds Asset Charge is an annual rate of 1.80% and is
assessed on the value of the Contractholder's investment in the
Fidelity Retail Funds.
5. WARBURG PINCUS FUND ASSET CHARGE:
The Warburg Pincus Fund Asset Charge has an annual rate of 1.30% and is
assessed on the value of the Contractholder's investment in the Warburg
Pincus Funds.
6. AIM FUND ASSET CHARGE:
The AIM Fund Asset Charge has an annual rate of 1.50% and is assessed on
the value of the Contractholder's investment in the AIM Funds.
7. PBHG FUND ASSET CHARGE:
The PBHG Fund Asset Charge has an annual rate of 1.60% and is assessed on
the value of the Contractholder's investment in the PBHG Funds.
GA-36724-002
<PAGE> 34
8. ANNUAL BASE FEE:
$5,000 per year.
Proper adjustments shall be made for a Plan Year that is not equal
to twelve (12) months.
In the event that there is more than one division under this contract,
this Annual Base Fee will be prorated among all the divisions,
unless the Contractholder desires a different arrangement, and the
Insurance Company and the Contractholder agree in writing.
9. BASIC ADMINISTRATION CHARGE:
The annual Basic Administration Charge is based on the number of accounts
being maintained under the Plan with an account greater than zero.
The annual charge is $24.00 per Participant Account.
If the Employer utilizes only one active source, the above charge will be
reduced by $2.00 per account.
The above charge will be paid out of Participants' Accounts.
10. BENEFIT PROCESSING SERVICES:
The charge for each benefit processed is $30.00 per transaction.
A Benefit Processing Charge will apply to any Plan disbursement,
including but not limited to payment of all or a portion of a
Participant's vested account balance because of termination, retirement,
death, withdrawal or disability. Annuity purchases are not subject to
this charge.
The above charge will be paid out of Participants' Accounts.
However, any disbursement that is a corrective distribution required to
maintain the qualified status of the Plan, will be paid by the
Contractholder, including but not limited to correction of excess
deferrals (pre and post tax) and excess annual additions.
Direct Service Option Charge:
The annual Direct Service Option Charge is $25.00 per account.
The above charge will be paid out of Participants' Accounts.
Direct Service Option Withdrawal Charge:
The charge for each withdrawal processed from a Direct Service
Option Account is $30.00.
The above charge will be paid out of Participants' Accounts.
GA-36724-002
<PAGE> 35
ll. BASIC DISCONTINUANCE PROCESSING CHARGE:
The Basic Discontinuance Processing Charge is determined as of the date
of discontinuance. The charge is $24.00 per Participant Account.
12. MISCELLANEOUS:
This Expense Schedule is subject to annual review by the Insurance Company
and may be changed effectively after ninety (90) days' written notice to
the Contractholder. This schedule will not be changed within the
first twelve (12) months following the Contract's Effective Date nor will
it be changed more frequently than once in any twelve (12) month period
except by written agreement between the Insurance Company and the
Contractholder.
In the event that an expense (other than transaction based expense) that
would otherwise be deducted from a Participant's account is unrecoverable
due to an insufficient account balance, 25% of the account balance will be
deducted from the participant's account.
13. SPECIAL SERVICES:
In addition to the expenses for the services listed below, if applicable,
any Special Services requested by the Contractholder which are not
specified below will be charged to the Contractholder in accordance with
the fee schedule then in effect.
Loan Charge:
The Loan Charge for each loan processed is $60.00.
5500 Preparation:
$1000 per Plan Year
Compliance Testing Services:
$80.00 per Service for either a) determining HCE or
b) performing ADP/ACP test,
$110.00 per Service for both a) determining HCE and
b) performing ADP/ACP test, plus:
1st 1,000 Employees $1.10 per Employee for each service
Excess over 1,000 Employees $ .70 per Employee for each service
GA-36724-002
<PAGE> 36
If data is submitted on floppy disk or tape:
1st 1,000 Employees $.55 per Employee for each service
Excess over 1,000 Employees $.20 per Employee for each service
Executed at the Home Office on June 21, 1996.
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
Byron Oliver
-----------------------------------
Senior Vice President
GA-36724-002
<PAGE> 1
EXHIBIT 10.32
RECAPITALIZATION AGREEMENT
THIS AGREEMENT is made as of October __, 1996 between Lason, Inc., a
Delaware corporation (the "Company"), and each of the stockholders of the
Company executing a counterpart signature page hereto (collectively, the
"Stockholders"). Except as otherwise indicated herein, capitalized terms used
herein are defined in Section 6 hereof.
Each of the Stockholders owns that number of the Company's Class A-1
Common Stock, par value $.01 per share ("Class A-1 Common"), Class A-2 Common
Stock, par value $.01 per share ("Class A-2 Common" and together with the Class
A-1 Common, the "Class A Common"), and Class B Common Stock, par value $.01 per
share ("Class B Common"), set forth opposite such Stockholder's name on the
Schedule of Stockholders attached hereto. All such shares of Class A-1 Common,
Class A-2 Common and Class B Common are referred to herein as the "Exchange
Shares."
The Company has filed a Registration Statement on Form S-1 (File No.
333-09799) (the "Registration Statement") with the Securities and Exchange
Commission relating to an initial public offering (the "Initial Public
Offering") of the Company's common stock, par value $.01 per share (the "Common
Stock"), under the Securities Act. In connection with the Initial Public
Offering, the Stockholders desire to (i) cause the Company to amend and restate
its certificate of incorporation and (ii) exchange their Exchange Shares for
shares of Common Stock. Following such exchange, the Exchange Shares shall be
canceled.
The parties hereto agree as follows:
Section 1. Authorization and Exchange
1A. Restated Certificate of Incorporation. The Company's Board of
Directors has previously approved the Plan of Recapitalization attached hereto
as Exhibit A (the "Plan of Recapitalization") and has approved and authorized
of the Company's Amended and Restated Certificate of Incorporation in the form
attached hereto as Exhibit B (the "Restated Certificate"), to be filed and to
be effective as of the date of the consummation of the Initial Public Offering
(the "Closing Date"). The Stockholders have previously approved the Plan of
Recapitalization and the Restated Certificate pursuant to Section 242 of the
General Corporation Law of the State of Delaware.
1B. Authorization of the Common Stock. The Company hereby authorizes
the issuance of an aggregate of up to 5,000,000 shares of Common Stock to the
Stockholders in exchange for the Exchange Shares.
1C. Calculation of the Exchange Shares. The holders of Exchange
Shares shall receive (i) for each share of Class A-1 Common issued and
outstanding in their name, 1.00 share of Common Stock, (ii) for each share of
Class A-2 Common issued and outstanding in their name, 1.00 share of Common
Stock, and (iii) for each share of Class B Common issued and outstanding in
their name, a number of shares of Common Stock equal to (A) 1.00 plus (B) a
fraction, the numerator of
<PAGE> 2
which shall be the sum of the aggregate Unpaid Yield and the Unreturned
Preferred Amount (as such terms are defined in the Certificate of Incorporation
of the Company as currently in effect attached hereto as Exhibit C (the
"Current Certificate")) on the shares of Class B Common outstanding as of the
Closing Date and the denominator of which shall be the number of shares of
Class B Common outstanding on the Closing Date multiplied by 2.50 multiplied by
the initial price to public of the Initial Public Offering (the "IPO Price").
1D. Calculation of Shares. Prior to the Closing, the Company shall
calculate the number of shares of Common Stock to be issued to each Stockholder
as set forth above. The Company's calculations shall be conclusive and binding
upon each Stockholder absent manifest error.
1E. Exchange of the Exchange Shares. At the Closing, the Company
shall, upon the effectiveness of the Restated Certificate and subject to the
terms and conditions set forth herein, issue to each Stockholder a number of
shares of Common Stock calculated as set forth below, in exchange for the
Exchange Shares held by such Stockholder which shares shall be canceled
immediately thereafter. The Company will pay, based on the IPO Price, each
Stockholder for any fractional shares resulting from such calculation by check,
and such fractional shares will not be issued.
1F. The Closing. The closing of the transactions contemplated hereby
(the "Closing") shall take place at the offices of Winston & Strawn, 35 West
Wacker Drive, Chicago, Illinois at 9:00 a.m., Chicago time, on the Closing
Date, or at such other place as may be reasonably designated by the Company.
At the Closing, the Company shall deliver, or cause the Company's transfer
agent to deliver, to each Stockholder stock certificates evidencing the shares
of Common Stock to be issued by the Company to such Stockholder, registered in
such Stockholder's name or its nominee's name, upon presentment and delivery by
such Stockholder to the Company of the certificates representing the Exchange
Shares duly endorsed for transfer to the Company.
Section 2. Conditions of Each Stockholder's Obligation at the Closing.
The obligation of each Stockholder to exchange its Exchange Shares for the
Common Stock at the Closing is subject to the satisfaction as of the Closing of
the following conditions:
2A. Representations and Warranties. The representations and warranties
contained in Section 4 hereof shall be true and correct in all material
respects at and as of the Closing as though then made, except to the extent of
changes caused by the transactions expressly contemplated herein.
2B. Initial Public Offering. The Company shall consummate the Initial
Public Offering concurrently with the transactions contemplated hereby.
2C. Amendment of Certificate of Incorporation. The Restated
Certificate shall be in full force and effect as of the Closing under the laws
of Delaware and shall not have been further amended or modified.
-2-
<PAGE> 3
2D. Securities Law Compliance. The Company shall have made all filings
under all applicable federal and state securities laws necessary to consummate
the issuance of the Common Stock pursuant to this Agreement in compliance with
such laws.
2E. Closing Documents. The Company shall have delivered to each
Stockholder such documents relating to the transactions contemplated by this
Agreement as the holders of a majority of the Class A Common or the holders of
a majority of the Class B Common then outstanding may reasonably request.
2F. Proceedings. All corporate and other proceedings taken or
required to be taken by the Company in connection with the transactions
contemplated hereby to be consummated at or prior to the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the holders of a majority of the Class A Common and the holders of
a majority of the Class B Common then outstanding.
2G. Waiver. Any condition specified in this Section 2 may be waived
if consented to by the holders of a majority of the Class A Common and the
holders of a majority of the Class B Common then outstanding; provided that no
such waiver shall be effective against any Stockholder unless it is set forth
in a writing executed by the required Stockholders.
Section 3. Transfer of Restricted Securities
3A. General Provisions. Restricted Securities are transferable only
pursuant to (i) public offerings registered under the Securities Act, (ii) Rule
144 or Rule 144A under the Securities Act (or any similar rule or rules then in
force) if such rule is available and (iii) subject to the conditions specified
in paragraph 3B below, any other legally available means of transfer.
3B. Opinion Delivery. In connection with the transfer of any
Restricted Securities (other than a transfer described in paragraph 3A(i) or
(ii) above), the holder thereof shall deliver written notice to the Company
describing in reasonable detail the transfer or proposed transfer, together
with an opinion of Seyburn, Kahn, Ginn, Bess, Deitch & Serlin, Kirkland & Ellis
or other counsel which (to the Company's reasonable satisfaction) is
knowledgeable in securities law matters to the effect that such transfer of
Restricted Securities may be effected without registration of such Restricted
Securities under the Securities Act. In addition, if the holder of the
Restricted Securities delivers to the Company an opinion of Seyburn, Kahn,
Ginn, Bess, Deitch & Serlin, Kirkland & Ellis or such other counsel that no
subsequent transfer of such Restricted Securities shall require registration
under the Securities Act, the Company shall promptly upon such contemplated
transfer deliver new certificates for such Restricted Securities which do not
bear the Securities Act legend set forth in paragraph 7C. If the Company is
not required to deliver new certificates for such Restricted Securities not
bearing such legend, the holder thereof shall not transfer the same until the
prospective transferee has confirmed to the Company in writing its agreement to
be bound by the conditions contained in this paragraph and paragraph 7C.
3C. Rule 144A. Upon the request of any Stockholder, the Company shall
promptly supply to such Stockholder or its prospective transferees all
information regarding the
-3-
<PAGE> 4
Company required to be delivered in connection with a transfer pursuant to
Rule 144A under the Securities Act.
3D. Legend Removal. If any Restricted Securities become eligible for
sale pursuant to Rule 144(k) under the Securities Act, the Company shall, upon
the request of the holder of such Restricted Securities, remove the legend set
forth in paragraph 7C from the certificates for such Restricted Securities.
Section 4. Representations and Warranties of the Company. As a
material inducement to the Stockholders to enter into this Agreement and to
exchange their Exchange Shares for Common Stock hereunder, the Company hereby
represents and warrants that:
4A. Organization and Corporate Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of
Delaware and is qualified to do business in every jurisdiction in which the
failure to so qualify has had or would reasonably be expected to have a
material adverse effect on the financial condition, operating results, assets,
operations or business prospects of the Company and its Subsidiaries taken as a
whole.
4B. Authorization: No Breach. The execution, delivery and performance
of this Agreement and all other agreements contemplated hereby and thereby to
which the Company is a party, the Plan of Recapitalization and the Restated
Certificate have been duly authorized by the Company. This Agreement, the Plan
of Recapitalization, the Restated Certificate and all other agreements
contemplated hereby and thereby to which the Company is a party each
constitutes a valid and binding obligation of the Company, enforceable in
accordance with its terms. The execution and delivery by the Company of this
Agreement and all other agreements contemplated hereby and thereby to which the
Company is a party, the issuance of the Common Stock hereunder, the Plan of
Recapitalization, the Restated Certificate and the fulfillment of and
compliance with the respective terms hereof and thereof by the Company, do not
and shall not (i) conflict with or result in a breach of the terms, conditions
or provisions of, (ii) constitute a default under, (iii) result in the creation
of any lien, security interest, charge or encumbrance upon the Company's or any
Subsidiary's capital stock or assets pursuant to, (iv) give any third party the
right to modify, terminate or accelerate any obligation under, (v) result in a
violation of, or (vi) require any authorization, consent, approval, exemption
or other action by or notice or declaration to, or filing with, any court or
administrative or governmental body or agency pursuant to, the Current
Certificate or the certificate of incorporation of any Subsidiary, or any law,
statute, rule or regulation to which the Company or any Subsidiary is subject,
or any agreement, instrument, order, judgment or decree to which the Company or
any Subsidiary is a party or by which their respective property is bound, other
than as expressly contemplated in such agreements described above and other
than those made and obtained.
4C. Capital Stock and Related Matters. As of the Closing and
immediately thereafter, the authorized capital stock of the Company shall
consist of 20,000,000 shares of Common Stock, of which approximately 8,162,462
(or 8,612,462 if the underwriters' over-allotment option is exercised in full,
in each case assuming an Initial Public Offering price of $15.50 per share and
redemption of the Common Stock contemplated by the Registration Statement)
shares will be
-4-
<PAGE> 5
issued and outstanding, and 5,000,000 shares of preferred stock,
par value $.01 per share (none of which shall be issued and outstanding). As
of the Closing, all of the outstanding shares of the Company's capital stock
shall be validly issued, fully paid and nonassessable. There are no statutory
or contractual stockholders preemptive rights or rights of refusal with respect
to the issuance of Common Stock hereunder which have not been waived or
terminated. The Company has not violated any applicable federal or state
securities laws in connection with the offer, sale or issuance of any of its
capital stock, and the offer, sale and issuance of the Common Stock hereunder
does not require registration under the Securities Act or any applicable state
securities laws.
Section 5. Representations and Warranties of the Stockholders. Each of
the Stockholders hereby represent and warrant to the Company that, with respect
to such Stockholder:
5A. Authorization; Enforceability. The execution, delivery and
performance of this Agreement and all other agreements contemplated hereby and
thereby to which any Stockholder is a party each constitutes a valid and
binding obligation of such Stockholder, enforceable in accordance with its
terms.
5B. No Violation. Neither the execution and the delivery of this
Agreement and the other documents contemplated hereby to which each Stockholder
is a party, nor the consummation of the transactions contemplated hereby and
thereby, will (a) conflict with, result in a breach of any of the provisions
of, (b) constitute a default under, (c) result in the violation of, (d) give
any third party the right to terminate or to accelerate any obligation under,
or (e) require any authorization, consent, approval, execution or other action
by or notice to or filing with any court or administrative or governmental body
under, the provisions of the certificate of incorporation or bylaws of the
Stockholder (where the Stockholder is an incorporated entity) or any statute,
regulation, rule, judgment, order, decree or other restriction of any
government, governmental agency or court to which the Stockholder is subject.
5C. Ownership. Except as otherwise described in the Registration
Statement, each Stockholder owns the Exchange Shares being exchanged by such
Stockholder pursuant to this Agreement free and clear of any restrictions on
transfer, claims, taxes, liens, charges, encumbrances, pledges, security
interests, options, warrants, rights, contracts, calls, commitments, equities
and demands, except for applicable restrictions on transfer under securities
laws.
Section 6. For the purposes of this Agreement, the following terms
have the meanings set forth below:
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Restricted Securities" means (i) the Common Stock issued hereunder and
(ii) any securities issued with respect to the securities referred to in clause
(i) above by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular Restricted Securities, such securities
-5-
<PAGE> 6
shall cease to be Restricted Securities when they have (a) been effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them, (b) become eligible for sale pursuant to
Rule 144 (or any similar provision then in force) under the Securities Act or
(c) been otherwise transferred and new certificates for them not bearing the
Securities Act legend set forth in paragraph 7C have been delivered by the
Company in accordance with paragraph 3B. Whenever any particular securities
cease to be Restricted Securities, the holder thereof shall be entitled to
receive from the Company, without expense, new securities of like tenor not
bearing a Securities Act legend of the character set forth in paragraph 7C.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a
majority of the partnership or other similar ownership interest thereof is at
the time owned or controlled, directly or indirectly, by any Person or one or
more Subsidiaries of that Person or a combination thereof. For purposes
hereof, a Person or Persons shall be deemed to have a majority ownership
interest in a limited liability company, partnership, association or other
business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control any managing director or general partner
of such limited liability company, partnership, association or other business
entity.
Section 7. Miscellaneous
7A. Termination. This Agreement shall terminate upon the earlier of
(i) November 30, 1996, if the Initial Public Offeirng has not occurred by such
date, and (ii) the sending of notice by the Company to each Stockholder that
the Initial Public Offering will not be consummated.
7B. Remedies. Any Person having any rights under any provision of this
Agreement shall be entitled to enforce such rights specifically (without
posting a bond or other security), to recover damages by reason of any breach
of any provision of this Agreement and to exercise all other rights granted by
law.
7C. Legend. Each certificate or instrument representing Restricted
Securities shall be imprinted with a legend in substantially the following form:
"The securities represented by this certificate were originally issued
on_______ __, 1996 and have not been registered under the Securities Act
of 1933, as amended. The transfer of the securities represented by this
certificate is subject to the conditions specified in the
-6-
<PAGE> 7
Recapitalization Agreement, dated as of October __, 1996 and as amended
and modified from time to time, between the issuer (the "Company") and
certain investors, and the Company reserves the right to refuse the
transfer of such securities until such conditions have been fulfilled
with respect to such transfer. A copy of such conditions shall be
furnished by the Company to the holder hereof upon written request and
without charge."
7D. Consent to Amendments. Except as otherwise expressly provided
herein, the provisions of this Agreement may be amended and the Company may
take any action herein prohibited, or omit to perform any act herein required
to be performed by it, only if the Company has obtained the written consent of
the holders of at least two-thirds of the Common Stock held by the parties
subject to this Agreement (voting together as a single class).
7E. Survival of Representatives and Warranties. All representations
and warranties contained herein or made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by any Stockholder or on its behalf.
7F. Successors and Assigns. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not. In addition, and whether or not any express assignment has been made, the
provisions of this Agreement which are for any Stockholder's benefit as a
Stockholder or holder of Common Stock are also for the benefit of, and
enforceable by, any subsequent holder of such Common Stock.
7G. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement.
7H. Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together shall constitute
one and the same Agreement.
7I. Descriptive Headings; Interpretation. The descriptive headings of
this Agreement are inserted for convenience only and do not constitute a
substantive part of this Agreement. The use of the word "including" in this
Agreement shall be by way of example rather than by limitation.
7J. GOVERNING LAW. THE CORPORATE LAW OF DELAWARE SHALL GOVERN ALL
ISSUES CONCERNING THE RELATIVE RIGHTS OF THE COMPANY AND ITS STOCKHOLDERS. ALL
OTHER QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF
THIS AGREEMENT AND THE EXHIBITS AND SCHEDULES HERETO SHALL BE GOVERNED BY THE
INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF MICHIGAN.
-7-
<PAGE> 8
7K. Notices. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, sent to the recipient by reputable overnight courier service
(charges prepaid) or telecopied to the recipient. Such notices, demands and
other communications shall be sent to each Stockholder at the address indicated
next to such party's name on the signature pages hereto or to such other
address or to the attention of such other person as the recipient party has
specified by prior written notice to the sending party.
* * * * *
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed this
Recapitalization Agreement on the date first written above.
Address: LASON, INC.
By:___________________________________
Its:
Address: GOLDER, THOMA, CRESSEY, RAUNER
FUND IV, L.P.
By: GTCR IV, L.P.
Its: General Partner
By: Golder, Thoma, Cressey, Rauner, Inc.
Its: General Partner
By:___________________________________
Its:
Address: ROBERT A. YANOVER LIVING TRUST
U/A/D MAY 11, 1982
By:___________________________________
Its:
Address: JOSEPH JONATHAN YANOVER AND
JENNIFER D. YANOVER IRREVOCABLE
TRUST DATED JANUARY 5, 1993
By:___________________________________
Its:
<PAGE> 10
Address: JOSEPH JONATHAN YANOVER AND
JENNIFER D. YANOVER IRREVOCABLE
TRUST NO. 2 DATED AUGUST 6, 1996
By:___________________________________
Its:
Address: ALLEN J. NESBITT LIVING TRUST,
DATED DECEMBER 7, 1994
By:___________________________________
Its:
Address: JAMES A. NESBITT AND JENNIFER
REBECCA NESBITT TRUST EFFECTIVE
AS OF JANUARY 1, 1996
By:___________________________________
Its:
______________________________________
Address: Donald L. Elland
______________________________________
Address: Richard C. Kowalski
______________________________________
Address: Daniel J. Buckley
<PAGE> 11
______________________________________
Address: Gregory Carey
______________________________________
Address: James J. Dewan
______________________________________
Address: Paul G. Dugan
______________________________________
Address: Karl H. Hartig
______________________________________
Address: Scott L. Christensen
______________________________________
Address: Lawrence C. Jones
______________________________________
Address: David J. Malosh
______________________________________
Address: John H. Wallanse
<PAGE> 12
Address: ______________________________________
Richard J. Wolfson
Address: RICHARD WOLFSON CHARITABLE REMAINDER UNITRUST
By:___________________________________
Its:
Address: ______________________________________
Donald M. Wolfson
Address: DONALD M. WOLFSON CHARITABLE REMAINDER UNITRUST
By:___________________________________
Its:
Address: ______________________________________
Saul Wolfson
Address: SAUL WOLFSON CHARITABLE REMAINDER UNITRUST
By:___________________________________
Its:
Address: ______________________________________
Bobby R. Stevens, Sr.
<PAGE> 13
Address: ______________________________________
Eugene Wolchok
Address: EUGENE B. AND BRENDA R. WOLCHOK
CHARITABLE REMAINDER UNITRUST
By:___________________________________
Its
Address: ______________________________________
Robin Marshall
Address: ______________________________________
William Marvin
<PAGE> 14
Schedule of Stockholders*
<TABLE>
<CAPTION>
Class A-1 Common Class A-2 Class B Common
Common
<S> <C> <C> <C>
Golder, Thoma, Cressey, Rauner Fund IV, L.P. - - 1,000,001
Robert A. Yanover Living Trust U/A/D May 11, 1982 166,074 - -
Joseph Jonathan Yanover and Jennifer D. Yanover
Irrevocable Trust Dated January 5, 1993 84,000 - -
Jonathan Yanover and Jennifer D. Yanover Irrevocable
Trust No. 2 Dated August 6, 1996 190,577 - -
Allen J. Nesbitt Living Trust, Dated December 7, 1994 352,524 - -
James A. Nesbitt and Jennifer Rebecca Nesbitt Trust
Effective as of January 1, 1996 44,065 - -
James A. Nesbitt and Jennifer Rebecca Nesbitt Trust
Effective as of January 1, 1996 44,065 - -
Donald L. Elland 28,815 - -
Richard C. Kowalski 25,000 - -
Daniel J. Buckley 8,523 - -
Gregory Carey 10,899 - -
James J. Dewan 8,523 1,705 -
Paul G. Dugan 5,682 - -
Karl H. Hartig 8,523 1,705 -
Scott L. Christensen 8,523 1,705 -
Lawrence C. Jones 8,523 - -
David J. Malosh 2,841 - -
John H. Wallanse 2,841 - -
Richard J. Wolfson 1,193 - -
Richard Wolfson Charitable Remainder Unitrust 4,770 - -
Donald M. Wolfson 2,384 - -
Donald M. Wolfson Charitable Remainder Unitrust 3,577 - -
Saul Wolfson 2,384 - -
Saul Wolfson Charitable Remainder Unitrust 3,577 - -
Bobby R. Stevens, Sr. 8,130 - -
Eugene Wolchok 2,601 - -
Eugene B. And Brenda R. Wolchok
Charitable Remainder Unitrust 3,902 - -
Robin Marshall 13,677 - -
William Marvin 13,677 - -
</TABLE>
*Assumes an IPO Price of $15.50 per share.
<PAGE> 15
PLAN OF RECAPITALIZATION
PLAN OF RECAPITALIZATION of Lason, Inc., a Delaware corporation (the
"Corporation").
W I T H E S S E T H :
WHEREAS, the Corporation currently has authorized 19,000,002 shares of
stock consisting of: (i) 13,000,000 shares of Class A-1 Common Stock, par value
$.01 per share (the "Class A-1 Common"), (ii) 4,000,000 shares of Class A-2
Common Stock, par value $.01 per share (the "Class A-2 Common"), (iii) 1,000,002
shares of Class B Common Stock, par value $.01 per share (the "Class B Common"),
and (iv) 1,000,000 shares of Preferred Stock, par value $.01 per share (the
"Preferred Stock"), each with the terms set forth in the Corporation's
Certificate of Incorporation, as amended (the "Current Certificate"), attached
hereto as Exhibit A.
WHEREAS, the Corporation has filed a Registration Statement on Form
S-1 (File No. 333-09799) with the Securities and Exchange Commission relating to
an initial public offering (the "Initial Public Offering") of the Corporation's
Common Stock (as defined below) under the Securities Act of 1933, as amended.
WHEREAS, the Board of Directors of the Corporation (the "Board"), in
connection with the Initial Public Offering, has determined it desirable and in
the best interests of the Corporation to reclassify and exchange all shares of
Class A-1 Common, Class A-2 Common and Class B Common for shares of the
Corporation's common stock, par value $.01 per share (the "Common Stock"), with
the terms set forth in the Amended and Restated Certificate of Incorporation of
the Corporation attached hereto as Exhibit B (the "Restated Certificate") to be
filed concurrently with the closing of the Initial Public Offering.
WHEREAS, the Corporation and certain of its stockholders will execute
a Recapitalization Agreement (the "Recapitalization Agreement") in substantially
the form attached hereto as Exhibit C.
NOW, THEREFORE:
Effective concurrently with the closing of the Initial Public Offering
(the "Effective Time") and, with respect to the Stockholders (as defined in the
Recapitalization Agreement), subject to the terms and provisions of the
Recapitalization Agreement, (i) each share of Class A-1 Common issued and
outstanding shall be exchanged for 1.00 share of Common Stock, (ii) each share
of Class A-2 Common issued and outstanding shall be exchanged for 1.00 share of
Common Stock, and (iii) each share of Class B Common issued and outstanding
shall be exchanged for a number of shares of Common Stock equal to (A) 1.00 plus
(B) a fraction, the numerator of which shall be the sum of the aggregate Unpaid
Yield and the Unreturned Preferred Amount (as such terms are defined in the
Current Certificate) on the shares of Class B Common outstanding as of the
Effective Time and the denominator of which shall be the number of shares of
Class B Common outstanding as of the
<PAGE> 16
Effective Time multiplied by 2.50 by the initial price to public of the Initial
Public Offering.
This Plan of Recapitalization may be abandoned by the Board at any
time prior to the Effective Time, irrespective of the fact of its approval by
the requisite stockholders of the Corporation, if in its sound business
judgment, this Plan of Recapitalization is unsatisfactory in substance to the
Board.
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<PAGE> 1
EXHIBIT 10.33
VOTING AGREEMENT
THIS AGREEMENT is made and entered into as of this _____ day of
October, 1996, by and among LASON, INC. (formerly known as Lason Holdings,
Inc.), a Delaware Corporation (the "Company"), GOLDER, THOMA, CRESSEY, RAUNER
FUND IV, L.P., a Delaware limited partnership ("GTCR"), ROBERT A. YANOVER
LIVING TRUST U/A/D MAY 11, 1982, JOSEPH JONATHAN YANOVER AND JENNIFER D.
YANOVER IRREVOCABLE TRUST DATED JANUARY 5, 1993, JOSEPH JONATHAN YANOVER AND
JENNIFER D. YANOVER IRREVOCABLE TRUST NO. 2 DATED AUGUST 6, 1996 ("JJY & JDY
Trust No. 2"), ROBERT A. YANOVER ("Yanover"), ALLEN J. NESBITT LIVING TRUST
DATED DECEMBER 7, 1994, JAMES A. NESBITT AND JENNIFER REBECCA NESBITT
IRREVOCABLE TRUST EFFECTIVE AS OF JANUARY 1, 1996 FOR THE BENEFIT OF JAMES A.
NESBITT, JAMES A. NESBITT AND JENNIFER REBECCA NESBITT IRREVOCABLE TRUST
EFFECTIVE AS OF JANUARY 1, 1996 FOR THE BENEFIT OF JENNIFER REBECCA NESBITT,
and ALLEN J. NESBITT ("Nesbitt"). All of the foregoing persons and entities
except GTCR and the Company are hereinafter collectively referred to as the
"Original Executive Group." GTCR, the Original Executive Group and each other
person becoming a party hereto are sometimes hereinafter collectively referred
to as the "Stockholders," and individually as a "Stockholder." Certain
capitalized terms used herein are defined in paragraph 16 hereof.
WHEREAS, the Stockholders (other than JJY & JDY Trust No. 2) and Richard
C. Kowalski, Donald L. Elland and Gregory P. Carey are parties to that certain
Stockholders Agreement, dated as of January 17, 1995 (the "Stockholders
Agreement").
WHEREAS, the Company has filed a Registration Statement on Form S-1 (File
No. 333-09799) with the Securities and Exchange Commission relating to an
initial public offering (the "Initial Public Offering") of the Company's common
stock, par value $.01 per share (the "Common Stock"), under the Securities Act
of 1933, as amended (the "Securities Act").
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration the receipt and sufficiency of which
are hereby acknowledged, the parties to this Agreement agree as follows:
1. EFFECTIVE DATE. This Agreement shall automatically become effective
upon the consummation of the Initial Public Offering. On such date, the
Stockholders Agreement shall be null and void in its entirety with this
Agreement constituting the entire agreement of the parties with regard to the
subject matter hereof. Notwithstanding the foregoing, should the Initial
Public Offering not be consummated prior to November 30, 1996, then, and in
that event, the Stockholders Agreement shall remain in full force and effect
and this Agreement shall be null and void.
2. BOARD OF DIRECTORS.
(a) From and after the consummation of the Initial Public Offering and
until the provisions of this paragraph 2 cease to be effective, each Stockholder
shall vote all of his or its Shares and any other voting securities of the
Company over which such Stockholder has voting
<PAGE> 2
control and shall take all other necessary or desirable actions within his or
its control (whether in the capacity as a stockholder, director, member of a
board committee, or officer of the Company or otherwise, and including, without
limitation, attendance at meetings in person or by proxy for purposes of
obtaining a quorum and execution of written consents in lieu of meetings), and
the Company shall take all necessary and desirable actions within its control
(including, without limitation, calling special board and stockholders
meetings), so that:
(i) The authorized number of directors on the Board of Directors of
the Company (the "Board") shall be established at seven directors.
(ii) The following persons shall be elected to the Board:
(A) two individuals (the "GTCR Directors")
designated by GTCR (which individuals initially shall
be Bruce V. Rauner and Joseph P. Nolan);
(B) two individuals (the "Original
Executive Directors") designated by the holders of at
least two-thirds of the Shares held by the Original
Executive Group (which individuals initially shall be
Robert A. Yanover and Allen J. Nesbitt);
(C) the Company's Chief Executive
Officer, ex officio (initially Gary L. Monroe); and
(D) two individuals (the "Outside
Directors") that are to be mutually agreeable to GTCR
and the holders of at least two-thirds of the Shares
held by the Original Executive Group. Such persons are
not to be members of the Company's management or
employees or officers of the Company or a Subsidiary.
By the execution of this Agreement the parties
acknowledge that, unless he is removed pursuant to the
provisions of paragraph 1(a)(iv), one of the two Outside
Directors shall initially be DONALD L. GLEKLEN, and Mr.
Gleklen shall be one of the members of the class of
directors whose term expires in 1999.
(iii) In the event that GTCR and the Original Executive Group cannot
agree on the designation of one or more of the Outside Directors, each of GTCR
and the Original Executive Group (determined by the vote of two-thirds of the
Shares held by the Original Executive Group) shall have the right to nominate
that number of Outside Directors for election by all of the stockholders of the
Company at the next regularly scheduled meeting of the stockholders or at a
special meeting of the stockholders called for the purpose of electing directors
equal to the number of Outside Directors upon which GTCR and the Original
Executive Group cannot agree. All such candidates shall be presented to the
stockholders without any special designation whatsoever (e.g., "management
nominee"; "GTCR nominee"; or the like). The candidate(s) receiving the most
votes of all of the stockholders with respect to such directorship(s) shall be
elected in accordance with the Company's bylaws and applicable law, it being
understood that this Agreement shall have no effect
-2-
<PAGE> 3
on how any Shares are voted with respect to the election of such Outside
Directors.
(iv) Removal from the Board (with or without cause) of any
representative designated hereunder by GTCR under clause (ii)(A) above or by
the Original Executive Group under clause (ii)(B) above shall be at GTCR's and
at the holders of two-thirds of the Shares held by the Original Executive
Group's written request, respectively, but only upon such written request and
under no other circumstances.
(v) In the event that any representative designated hereunder by GTCR
under clause (ii)(A) above, by the Original Executive Group under clause
(ii)(B) above, or by GTCR and the Original Executive Group under clause (II)(D)
above for any reason ceases to serve as a member of the Board of the Company or
during his term of office, the resulting vacancy on the Board of the Company
shall be filled by a representative designated by GTCR, by the Original
Executive Group, or by GTCR and the Original Executive Group, respectively, as
provided hereunder.
(vi) The composition of the Board of Directors of Lason Systems, Inc.,
a Delaware corporation and a wholly-owned Subsidiary of the Company
("Systems"), and of any other direct or indirect Subsidiary of the Company
constituting at least a majority of the assets, income or investment of the
Company and its Subsidiaries as a whole (Systems and such Subsidiaries are
sometimes referred to as "Significant Subsidiaries"), shall be the same as that
of the Board.
(vii) The rights of the parties hereto shall terminate when either GTCR
and their transferees who become parties to this Agreement or the Original
Executive Group and their transferees who become parties to this Agreement hold
in the aggregate less than 15% of the Common Stock on a fully diluted basis. It
being understood that if GTCR distributes Shares to its partners or their
designees, such Shares shall not be counted in determining the shares of Common
Stock held by GTCR and their transferees who become parties to this Agreement.
(viii) If any party fails to designate a representative to fill a
directorship pursuant to the terms of this paragraph 2, the election of a
person to such directorship shall be accomplished in accordance with the
Company's articles of incorporation and bylaws and applicable law.
(ix) Each of GTCR and the Original Executive Group shall cause the
respective directors designated by each of them to enter into a confidentiality
agreement with the Company containing substantially the terms set forth in
paragraph 3 hereof, prior to or concurrent with such director's election to the
Board.
(x) Any committees of the Board or the Board of Directors of any
Significant Subsidiary are to be created and the members thereof selected only
upon approval of at least one of the GTCR Directors and one of the Original
Executive Directors.
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<PAGE> 4
(xi) The Company shall pay the reasonable out-of-pocket expenses
incurred by each director in connection with attending the meetings of the
Board, the Board of Directors of any Subsidiary set forth in clause
subparagraph (ii) above and any committees thereof.
3. CONFIDENTIAL INFORMATION.
(a) Yanover and Nesbitt (the "Designated Executives") each acknowledge
that the confidential or proprietary information, observations and data
obtained by him while employed by the Company and/or Systems, prior to the date
of this Agreement concerning the business or affairs of the Company, Systems or
any other Subsidiary of the Company or Systems ("Confidential Information") are
the property of the Company or such Subsidiary. Therefore, each of the
Designated Executives, agrees that he shall not disclose to any unauthorized
person or use for his own account any Confidential Information without the
prior written consent of the Board of the Company, unless and to the extent
that the aforementioned matters become generally known to and available for use
by the public other than as a result of his acts or omissions to act. Each of
the Designated Executives shall deliver to the Company or Systems at the
termination of his employment contract, or at any other time that the Company
or Systems may request, all memoranda, notes, plans, records, reports, computer
tapes and software and other documents and data (and copies thereof) relating
to the Confidential Information, work product or the business of the Company,
Systems, or any Subsidiary of the Company or Systems which he may then possess
or have under his control.
(b) GTCR acknowledges that the confidential or proprietary information,
observations, and data obtained by it concerning the business or affairs of the
Company, Systems, or any other Subsidiary of the Company or Systems are the
property of the Company or such Subsidiary. Therefore, GTCR agrees that it
shall not disclose to any unauthorized person any such information,
observations or data without the prior written consent of the Company, unless
and to the extent that the aforementioned matters become generally known to and
available for use by the public other than as a result of GTCR's acts or
omissions to act. GTCR shall deliver to the Company, at any time the Company
may request, all memoranda, notes, plans, records, reports, computer tapes, and
other documents and data (and copies thereof) relating to such information,
observations and data or the business of the Company, Systems or any other
Subsidiary of the Company or Systems which it may then possess or have under
its control.
4. NON-COMPETE; NON-SOLICITATION:
(a) Each of the Designated Executives acknowledges that in the course
of his ownership of stock of, and during his employment with, the Company or
Systems, he has become familiar, and in the course of this employment with the
Company or Systems, he will become familiar with the Company or Systems or any
of their Subsidiaries' trade secrets, and with other confidential information
concerning the Company and/or its subsidiaries and its predecessors, and that
his services have been and will be of special, unique and extraordinary value
to the Company and its Subsidiaries. Therefore, each Designated Executive
agrees that, during his term of employment with the Company and its
Subsidiaries and for five years thereafter (the "Non-Compete Period"), he shall
not directly or indirectly own, manage, control, participate in, consult with,
render services for, or any manner engage in, any business competing with the
businesses of the Company or its
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<PAGE> 5
Subsidiaries as such business exist or are in process on the date of the
termination of such Designated Executive's employment, within any geographical
area in which the Company or its Subsidiaries engage or plan to engage in such
businesses. Nothing herein shall prohibit a Designated Executive from being a
passive owner of not more than 2% of the outstanding stock of any class of a
corporation which is publicly traded, so long as such Designated Executive has
no active participation in the business of such corporation.
(b) During the Non-Compete Period, each Designated Executive shall not
directly or indirectly through another entity: (i) induce or attempt to induce
any employee of the Company or any Subsidiary to leave the employ of the
Company or such Subsidiary, or in any way interfere with the relationship
between the Company or any Subsidiary and any employee thereof; (ii) hire any
person who was an employee of the Company or any Subsidiary at any time during
such Designated Executive's period of employment with the Company or any
Subsidiaries, or; (iii) induce or attempt to induce any customer, supplier,
licensee, or another business relation of the Company or any Subsidiary to
cease doing business with the Company or such Subsidiary, or in any way
interfere with the relationship between any such customer, supplier, licensee,
or business relation and the Company and any Subsidiary.
(c) If, at the time of enforcement of this paragraph 4, a court shall
hold that the duration, scope or area restrictions stated herein are
unreasonable, invalid, illegal or unenforceable under circumstances then
existing, the parties agree that the maximum duration, scope or area
reasonable, valid, legal and enforceable under such circumstances shall be
substituted for the stated duration, scope or area, and that the court shall be
allowed to revise the restrictions contained herein to cover the maximum
period, scope and area permitted.
(d) In the event of a breach or a threatened breach by any Designated
Executive of any of the provisions of this paragraph 4, the Company, in
addition and supplementary to other rights and remedies existing in its
favor, may apply to any court of law or equity of competent jurisdiction for
specific performance and/or injunctive or other relief in order enforce or
prevent any violations of the provisions hereof (without posting a bond or
other security).
5. LEGEND. Each certificate evidencing voting capital stock of the
Company owned by a party hereto and each certificate issued in exchange for or
upon the transfer of any such securities (if, and only if, such shares remain
subject to the terms of this Agreement after such transfer pursuant to the
terms and conditions hereof) shall be stamped or otherwise imprinted with a
legend in substantially the following form:
"The securities represented by this certificate are subject
to a Voting Agreement dated as of October __, 1996, among
the issuer of such securities (the "Company") and certain of
its stockholders. A copy of such Voting Agreement will be
furnished without charge by the Company to the holder hereof
upon written request."
The Company shall imprint such legend on certificates evidencing Shares
outstanding on the date hereof. The legend set forth above shall be removed by
the Company or its transfer agent upon instruction from the Company from the
certificates evidencing any Shares which cease to be Shares in accordance with
the terms hereof or at such time as the provisions of paragraph 2 hereof cease
to be effective.
-5-
<PAGE> 6
6. TRANSFER. Prior to transferring any Shares (other than in an
Individual Sale, a Sale of the Company or a distribution by GTCR of Shares to
its partners or their designees), the transferring Stockholder shall cause
the prospective transferee to execute and deliver to the Company and the other
Stockholders a counterpart of this Agreement.
7. AMENDMENT AND WAIVER. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company or the Stockholders unless such modification,
amendment or waiver is approved by each of: (i) the Company; (ii) GTCR; and
(iii) the holders of two-thirds of the Shares held by the Original Executive
Group. The failure of any party to enforce any of the provisions of this
Agreement shall in no way be construed as a waiver of such provision and shall
not affect the right of such party thereafter to enforce each and every
provision of this Agreement in accordance with its terms.
8. SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision, but this Agreement shall be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein.
9. ENTIRE AGREEMENT. Except as otherwise expressly set forth herein,
this document embodies the complete Agreement and understanding among the
parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among
the parties, written or oral which may be related to the subject matter hereof
in any way. Except as otherwise provided herein, this Agreement shall bind and
inure to the benefit of and be enforced by the Company and successors and
assigns and the Stockholders and subsequent holders of Shares and the
respective successors and assigns of each of them so long as they hold Shares.
10. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, this
Agreement shall bind the Company, the Stockholders and the respective
successors and assigns of each of them.
11. COUNTERPARTS. This Agreement may be executed in separate
counterparts each of which shall be an original and all of which taken together
shall constitute one and the same Agreement.
12. REMEDIES. The Company and the Stockholders shall be entitled to
enforce their rights under this Agreement specifically to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights existing in their favor. The parties hereto agree and acknowledge
that money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that the Company or an Stockholder may in its
sole discretion apply to any court of law or equity of competent jurisdiction,
for specific performance and/or
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<PAGE> 7
injunctive relief (without posting a bond or other security) in order to enforce
or prevent any violation of the provisions of this Agreement.
13. NOTICES. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered, sent via facsimile, mailed
first class mail (postage pre-paid) or sent by reputable over-night courier
service (charges pre-paid) to the Company, to GTCR and to the Original
Executive Group at their respective addresses set forth below or to the
attention of such other person as the recipient party has specified by prior
written notice to the sending parties. Notices will be deemed to have been
given hereunder when delivered personally, upon transmitting a facsimile, three
days after deposit in the U.S. Mail and one day after deposit with a reputable
overnight courier service. Notices shall be sent to the following addresses:
IF TO THE COMPANY: Lason, Inc.
1305 Stephenson Highway
Troy, Michigan 48083
Attn: Chief Executive Officer
WITH A COPY TO: Golder, Thoma, Cressey, Rauner, Fund IV, L.P.
c/o Golder, Thoma, Cressey, Rauner, Inc.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attn: Bruce V. Rauner
Joseph P. Nolan
IF TO ORIGINAL EXECUTIVE GROUP: 133 Quayside Drive
Jupiter, Florida 33477
Attn: Robert A. Yanover
In each case, copies should be sent to the following (which copies shall
not constitute notice):
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: H. Kurt von Moltke, Esq.
and
Seyburn, Kahn, Ginn, Bess, Deitch
and Serlin, P.C.
2000 Town Center, Suite 1500
Southfield, Michigan 48075
Attn: Laurence B. Deitch, Esq.
14. GOVERNING LAW. The corporate law of Delaware shall govern all
issues concerning the relative rights of the Company and Stockholders. All of
the questions concerning the construction, validity, and interpretation of this
Agreement shall be governed by the internal law, and not the law of conflicts
of Michigan.
-7-
<PAGE> 8
15. DESCRIPTIVE HEADINGS. Descriptive headings of this Agreement are
inserted for convenience only do not constitute part of this Agreement.
16. DEFINITIONS.
"Affiliate" of a Person means any other Person, entity or investment
fund controlling, controlled by or under common control with such Person and
any partner of such Person which is a partnership or, in the case of a trust,
the trustee or any beneficiary of such trust.
"Family Group" of a Stockholder which is an individual means such
Stockholder's spouse and descendants (whether natural or adopted) and any trust
primarily for the benefit of such Stockholder and/or such Stockholder's spouse
and/or descendants.
"Individual Sale" means either (i) any sale of Shares to the public
pursuant to any offering registered under the Securities Act or to the public
through a broker, dealer or market maker pursuant to the provisions of Rule 144
under the Securities Act or (ii) any sale of Shares made pursuant to a private
sale or private placement to any Person other than where such Person or,
through a series of one or more transactions, the ultimate recipient of such
shares is either an Affiliate or a member of the Family Group of such Person.
"Person" means an individual, partnership, corporation, association,
joint stock company, trust, joint venture, unincorporated organization or
governmental entity or any department, agency or political subdivision thereof.
"Sale of the Company" means the sale of the Company pursuant to which
such party or parties acquire capital stock of the Company possessing the
voting power under normal circumstances to elect a majority of the Company's
board of directors (whether by merger, consolidation or sale or transfer of the
Company's capital stock).
"Shares" means: (i) any of the Company's capital stock purchased or
otherwise acquired by any Stockholder and (ii) any securities issued or
issuable directly or indirectly with respect to the securities referred to in
clause (i) above by way of stock dividend or stock split or in connection with
a combination of shares, recapitalization, merger, consolidation or other
reorganization.
"Subsidiary" means any corporation of which the securities having a
majority of the ordinary voting power in electing the board of directors are,
at the time as of which any determination is being made, owned by the Company
either directly or through one or more Subsidiaries.
* * * * *
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<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
LASON, INC.
By:
--------------------------------
GARY L. MONROE
Its: Chief Executive Officer
GOLDER, THOMA, CRESSEY, RAUNER FUND
IV, L.P.
By: GTCR IV, L.P.
Its: General Partner
By: GOLDER, THOMA, CRESSEY, RAUNER, INC.
Its: General Partner
By:
-------------------------------------
BRUCE V. RAUNER
Its: Principal
ROBERT A. YANOVER LIVING TRUST U/A/D
MAY 11, 1982
By:
-------------------------------------
ROBERT A. YANOVER
Its: Trustee
JOSEPH JONATHAN YANOVER AND JENNIFER
D. YANOVER IRREVOCABLE TRUST DATED JANUARY
5, 1993
By:
------------------------------------
COLIN W. L. ARMSTRONG
Its: Trustee
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<PAGE> 10
JOSEPH JONATHAN YANOVER AND JENNIFER
D. YANOVER IRREVOCABLE TRUST NO. 2 DATED
AUGUST 6, 1996
By:
-------------------------------------
COLIN W. L. ARMSTRONG
Its: Trustee
ALLEN J. NESBITT LIVING TRUST DATED
DECEMBER 7, 1994
By:
-------------------------------------
ALLEN J. NESBITT
Its: Trustee
JAMES A. NESBITT AND JENNIFER REBECCA
NESBITT IRREVOCABLE TRUST EFFECTIVE AS OF
JANUARY 1, 1996 FOR THE BENEFIT OF JAMES A.
NESBITT
By:
-----------------------------------
ROBERT S. PAVLOCK
Its: Trustee
JAMES A. NESBITT AND JENNIFER REBECCA
NESBITT IRREVOCABLE TRUST EFFECTIVE AS OF
JANUARY 1, 1996 FOR THE BENEFIT OF JENNIFER
REBECCA NESBITT
By:
-----------------------------------
ROBERT S. PAVLOCK
Its: Trustee
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<PAGE> 11
--------------------------------
ROBERT A. YANOVER
--------------------------------
ALLEN J. NESBITT
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<PAGE> 12
ACKNOWLEDGMENT
The undersigned execute this Voting Agreement for the specific limited
purpose of acknowledging their agreement to the terms and conditions of
paragraph 1 hereof.
Dated: October __, 1996
--------------------------------
GREGORY P. CAREY
--------------------------------
RICHARD C. KOWALSKI
--------------------------------
DONALD L. ELLAND
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<PAGE> 1
EXHIBIT 10.34
TERMINATION AGREEMENT
THIS AGREEMENT is made as of ________________, 1996, between
_________________ (the "Borrower") and Lason Systems, Inc., a Delaware
corporation (the "Lender"). Capitalized terms used herein and not otherwise
defined herein shall have the meaning set forth in that certain Credit
Agreement, dated as of January 17, 1995, by and between Lender and the
Borrower.
In consideration of the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties to this Agreement hereby agree as follows:
1. Repayment of Loan. Notwithstanding the provisions of
the Credit Agreement, upon the consummation by Lason, Inc. ("Lason") of the
public offering (the "Initial Public Offering") of its common stock, par value
$.01 per share, registered pursuant to its registration statement (registration
no. 333-09799), the Borrower shall pay to the Lender an amount equal to
one-half (1/2) of the aggregate unpaid principal amount of the Loans and
one-half (1/2) of the aggregate accrued and unpaid interest on the Loans.
2. Forgiveness of Balance. Concurrent with the payment
of the amounts set forth in Section 1, the Lender shall forgive the remaining
one-half (1/2) of the aggregate unpaid principal amount of the Loans and the
remaining one-half (1/2) of the aggregate accrued and unpaid interest on the
Loans, whereupon the Credit Agreement and the Stock Pledge Agreement shall be
terminated, the Promissory Note shall be canceled, marked "Paid in full" and
returned to the Borrower, and all of the Pledged Shares (as defined in the
Stock Pledge Agreement) shall be returned to the Borrower.
3. Taxes. All taxes imposed on the Borrower and
attributable to the amount of the unpaid principal and accrued and unpaid
interest forgiven pursuant to Section 2 of this Agreement shall be the
responsibility of and paid by the Borrower.
4. Governing Law. This Agreement shall be governed by,
and construed and interpreted in accordance with, the internal laws, and not
the laws of conflicts, of the State of Michigan.
5. Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited or invalid under applicable law, such provision shall, if possible,
be reformed to the extent necessary to conform with applicable law or shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Agreement.
<PAGE> 2
6. Headings. The headings used in this Agreement are
for purposes of reference only and will not affect the meaning or
interpretation of any provision of this Agreement.
7. Counterparts. The Lender and the Borrower may
execute this Agreement in separate counterparts (no one of which need contain
the signatures of each of the Lender and the Borrower), each of which will be
an original and all of which together will constitute one and the same
instrument.
8. Complete Agreement. This Agreement embodies the
complete agreement and understanding among the parties hereto with respect to
the subject matter hereof and supersedes and preempts any prior understandings,
agreements or representations by or among the parties, written or oral, which
may have related to the subject matter hereof in any way.
9. Amendment and Waiver. The provisions of this
Agreement may be amended and waived only with the prior written consent of all
of the parties hereto.
10. Termination. Notwithstanding anything to the
contrary contained herein, this Agreement may be terminated by any party hereto
if the Initial Public Offering has not occurred by December 31, 1996.
* * * *
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<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
LASON SYSTEMS, INC.
By ____________________________
Name:
Title:
______________________________
[Borrower]
<PAGE> 1
EXHIBIT 10.35
REDEMPTION AGREEMENT
THIS AGREEMENT is made as of October __, 1996 between Lason,
Inc., a Delaware corporation (the "Company"), and Golder, Thoma, Cressey,
Rauner Fund IV, L.P., a Delaware limited partnership ("GTCR"). Except as
otherwise indicated herein, capitalized terms used herein are defined in
Section 5 hereof.
The Company has filed a Registration Statement on Form S-1
(Registration No. 333-09799) (the "Registration Statement") with the Securities
and Exchange Commission relating to an initial public offering (the "Initial
Public Offering") of the Company's common stock, par value $.01 per share (the
"Common Stock"), under the Securities Act.
The parties hereto agree as follows:
Section 1. Purchase of Common Stock.
1A. Purchase of Common Stock. At the Closing, the
Company shall purchase from GTCR and, subject to the terms and conditions set
forth herein, GTCR shall sell to the Company _______ shares of Common Stock at
a price of $______ per share.
1B. The Closing. The closing of the transactions
contemplated hereby (the "Closing") shall take place at the offices of Winston
& Strawn, 35 West Wacker Drive, Chicago, Illinois, concurrently with the
closing of the Initial Public Offering (the "Closing Date"), or at such other
place as may be mutually agreeable to the Company and GTCR. At the Closing,
GTCR shall deliver stock certificates evidencing the shares of Common Stock to
be purchased by the Company, upon payment of the purchase price therefor by
wire transfer of immediately available funds to an account designated by GTCR.
Section 2. Conditions of GTCR's Obligation at the Closing.
The obligation of GTCR to sell its Common Stock to the Company at the Closing
is subject to the satisfaction as of the Closing of the following conditions:
2A. Representations and Warranties. The representations
and warranties contained in Section 3 hereof shall be true and correct in all
material respects at and as of the Closing as though then made, except to the
extent of changes caused by the transactions expressly contemplated herein.
2B. Closing Documents. The Company shall have delivered
to GTCR such documents relating to the transactions contemplated by this
Agreement as GTCR or its special counsel may reasonably request.
2C. Proceedings. All corporate and other proceedings
taken or required to be taken by the Company in connection with the
transactions contemplated hereby to be consummated at or prior to the Closing
and all documents incident thereto shall be reasonably satisfactory in form and
substance to GTCR and its special counsel.
<PAGE> 2
2D. Waiver. Any condition specified in this Section 2
may be waived if consented to by GTCR; provided that no such waiver shall be
effective against GTCR unless it is set forth in a writing executed by GTCR.
Section 3. Representations and Warranties of the
Company. As a material inducement to GTCR to enter into this Agreement and
sell its shares of Common Stock hereunder, the Company hereby represents and
warrants that:
3A. Organization and Corporate Power. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of Delaware and is qualified to do business in every jurisdiction in which
the failure to so qualify has had or would reasonably be expected to have a
material adverse effect on the financial condition, operating results, assets,
operations or business prospects of the Company and its subsidiaries taken as a
whole.
3B. Authorization; No Breach. The execution, delivery
and performance of this Agreement and the other documents contemplated hereby
to which the Company is a party have been duly authorized by the Company. This
Agreement and each of the other documents contemplated hereby to which the
Company is a party constitutes a valid and binding obligation of the Company,
enforceable in accordance with its terms. The execution and delivery by the
Company of this Agreement and the other documents contemplated hereby to which
the Company is a party, the purchase of the Common Stock hereunder and the
fulfillment of and compliance with the respective terms hereof and thereof by
the Company, do not and shall not (i) conflict with or result in a breach of
the terms, conditions or provisions of, (ii) constitute a default under, (iii)
result in the creation of any lien, security interest, charge or encumbrance
upon the Company's or any subsidiary's capital stock or assets pursuant to,
(iv) give any third party the right to modify, terminate or accelerate any
obligation under, (v) result in a violation of, or (vi) require any
authorization, consent, approval, exemption or other action by or notice or
declaration to, or filing with, any court or administrative or governmental
body or agency pursuant to, the Company's certificate of incorporation or the
certificate of incorporation of any subsidiary, or any law, statute, rule or
regulation to which the Company or any subsidiary is subject, or any agreement,
instrument, order, judgment or decree to which the Company or any subsidiary is
a party or by which their respective property is bound, other than as expressly
contemplated in such agreements described above and other than those made and
obtained.
3C. Capital Stock. As of the Closing and immediately
thereafter, the authorized capital stock of the Company shall consist of
20,000,000 shares of Common Stock, of which _________ (or __________ if the
underwriters' over-allotment option is exercised in full, in each case assuming
the redemption and cancellation of the Common Stock contemplated by this
Agreement) shares will be issued and outstanding, and 5,000,000 shares of
preferred stock, par value $.01 per share (none of which shall be issued and
outstanding).
Section 4. Representations and Warranties of GTCR. GTCR
hereby represents and warrants to the Company that:
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<PAGE> 3
4A. Authorization; Enforceability. The execution,
delivery and performance of this Agreement and the other documents contemplated
hereby to which GTCR is a party have been duly authorized by GTCR. This
Agreement and each of the other documents contemplated hereby to which GTCR is
a party constitutes a valid and binding obligation of GTCR, enforceable in
accordance with its terms.
4B. No Violation. The execution and the delivery of this
Agreement and the other documents contemplated hereby to which GTCR is a party,
the sale of the Common Stock hereunder and the consummation of the transactions
contemplated hereby and thereby, will not (a) conflict with, result in a breach
of any of the provisions of, (b) constitute a default under, (c) result in the
violation of, (d) give any third party the right to terminate or to accelerate
any obligation under, or (e) require any authorization, consent, approval,
execution or other action by or notice to or filing with any court or
administrative or governmental body under, the provisions of the certificate of
incorporation or bylaws of the GTCR or any statute, regulation, rule, judgment,
order, decree or other restriction of any government, governmental agency or
court to which GTCR is subject.
4C. Ownership. GTCR owns the Common Stock being
purchased by the Company pursuant to this Agreement free and clear of any
restrictions on transfer, claims, taxes, liens, charges, encumbrances, pledges,
security interests, options, warrants, rights, contracts, calls, commitments,
equities and demands, except for applicable restrictions on transfer under
securities laws.
Section 5. Definitions. For the purposes of this Agreement,
the following terms have the meanings set forth below:
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar federal law then in force..
Section 6. Miscellaneous.
6A. Expenses. The Company shall pay, and hold GTCR
harmless against liability for the payment of, the fees and expenses of their
special counsel arising in connection with the negotiation and execution of
this Agreement and the agreements contemplated hereby and the consummation of
the transactions contemplated hereby.
6B. Remedies. Any Person having any rights under any
provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
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<PAGE> 4
6C. Consent to Amendments. Except as otherwise expressly
provided herein, the provisions of this Agreement may be amended or waived only
upon the prior written consent of the Company.
6D. Survival of Representations and Warranties. All
representations and warranties contained herein or made in writing by any party
in connection herewith shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby,
regardless of any investigation made by GTCR or on its behalf.
6E. Successors and Assigns. Except as otherwise
expressly provided herein, all covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not.
6F. Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
6G. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need not contain
the signatures of more than one party, but all such counterparts taken together
shall constitute one and the same Agreement.
6H. Descriptive Headings; Interpretation. The
descriptive headings of this Agreement are inserted for convenience only and do
not constitute a substantive part of this Agreement. The use of the word
"including" in this Agreement shall be by way of example rather than by
limitation.
6I. GOVERNING LAW. THE CORPORATE LAW OF DELAWARE SHALL
GOVERN ALL ISSUES CONCERNING THE RELATIVE RIGHTS OF THE COMPANY AND ITS
STOCKHOLDERS. ALL OTHER QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND
INTERPRETATION OF THIS AGREEMENT AND THE EXHIBITS AND SCHEDULES HERETO SHALL BE
GOVERNED BY THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF MICHIGAN.
6J. Notices. All notices, demands or other
communications to be given or delivered under or by reason of the provisions of
this Agreement shall be in writing and shall be deemed to have been given when
delivered personally to the recipient, sent to the recipient by reputable
overnight courier service (charges prepaid) or telecopied to the recipient.
* * * * *
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have executed this
Redemption Agreement on the date first written above.
LASON, INC.
By:______________________________
Its:
GOLDER, THOMA, CRESSEY, RAUNER
FUND IV, L.P.
By: GTCR, IV, L.P.
Its: General Partner
By: Golder, Thomas, Cressey & Rauner, Inc.
Its: General Partner
By:_________________________________
Its:
<PAGE> 1
EXHIBIT 10.36
AMENDMENT TO STOCK OPTION AGREEMENT
This Amendment is made this ____ day of September, 1996 by and between Lason,
Inc. (f/k/a Lason Holdings, Inc.), a Delaware corporation (the "Company") and
Donald Gleklen (the "Optionee").
WHEREAS, the Company and Optionee entered into that certain Stock Option
Agreement dated August 7, 1995(the "Agreement"); and
WHEREAS, the Company has determined that it would be to the advantage and in
the best interest of the Company and its Shareholders to modify such Agreement
in recognition of Optionee's service as a Director of the Company.
NOW, THEREFORE, in consideration of the mutual covenants herein contained and
for other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto hereby agree to amend the Agreement as follows:
1. Acceleration of Exercisability. Section 2.3 of the Agreement is
hereby amended and restated in its entirely as follows:
The exercisability of the Option shall be accelerated as set forth
below upon the occurrence of the following events:
A) Upon termination of Optionee's service as a Director of the
Company as a result of death, incapacity or upon the expiration of his
currect term as a Director in 1999, this Option shall become
exercisable as to all of the shares covered hereby;
B) In the event of the merger or consolidation of the Company
into another corporation, or the exchange of all or substantially all
of the assets of the Company for the securities of another
corporation, or the acquisition by another corporation of eighty (80%)
percent or more of the Company's then outstanding voting stock or the
liquidation or dissolution of the Company, this Option shall become
exercisable as to all the shares covered hereby during the ten (10)
days immediately preceding the effective date of such event.
2. Existing Agreement. Except as modified by this Amendment, the terms
and conditions of the Agreement shall continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
upon the day and year first above written.
OPTIONEE: COMPANY:
Lason, Inc., a Delaware corporation
/s/ Donald Gleklen By: /s/ Gary L. Monroe
- ------------------ ------------------
Donald Gleklen Gary L. Monroe
Its: Chief Executive Officer
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form S-1, of our
report dated March 31, 1996, except for Note 6, as to which the date is
July 10, 1996, and Note 15, as to which the date is August 16, 1996, on our
audit of the consolidated financial statements and financial statement
schedule of Lason, Inc.; of our report dated March 17, 1995, on our audits of
the financial statements of Lason Systems, Inc.; of our report dated June 28,
1996, except for Note 6, as to which the date is July 16, 1996, on our audit of
the financial statements of Great Lakes Micrographics Corporation; of our
report dated July 17, 1996, except for Note 10, as to which the date is August
6, 1996, on our audits of the financial statements of National Reproductions
Corporation. We also consent to the reference to our Firm under the captions
"Selected Consolidated Financial Data" and "Experts."
Coopers & Lybrand L.L.P.
Detroit, Michigan
October 7, 1996
